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PERS board may lower assumed earnings rate

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Friday, July 26, 2013

The Oregon Public Employees Retirement System board is considering reducing its aggressive 8% assumed earnings rate to match lower forecasted returns.

The five-member board of the Oregon Public Employees Retirement System has been circling a change in the assumed earnings rate since the last market collapse cleaved 27 percent from the pension funds' assets and left it with a $16 billion unfunded liability. The rate has been set at 8 percent since 1989. But investment consultants no longer think the pension fund's portfolio will deliver those returns. They now forecast pension fund returns between 7.5 and 7.9 percent for the foreseeable future, a reduction that hinges largely on lower expected returns in the bond market.

The conservative thing to do, then, is lower the rate. The move would help ensure employers are making adequate pension contributions to cover future obligations. The actuary, Milliman Inc., is recommending that the board lower the rate. And while the board hasn't made a public recommendation, the consensus number seems to be 7.75 percent.

Read more at OregonLive.com.

 

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