LETTER TO THE EDITOR: Missouri's teacher retirement system remains healthy

Wednesday, March 28, 2012 | 6:00 a.m. CDT

This letter is in reference to the negative rhetoric that has been printed throughout Missouri on teacher retirement. I would like to set the record straight.

The funding status of Missouri's teacher retirement system is pre-funded at 85 percent. This is extremely good considering two major economic downturns in the past 10 years. Missouri is ranked 47th in teacher salaries as the legislature has failed to fully fund the schools in recent years. It is the decent retirement benefits Missouri offers to educators that keeps experienced educators in the classroom and allows for us to have a very good public education system in Missouri at a very low cost. We all should be in favor of American workers and teachers having an adequate retirement. 

The Public School & Education Employee Retirement System of Missouri is a great example of a system providing adequate pension benefits for its employees and puts $1.9 billion into the Missouri economy each and every year. As mentioned, Missouri teacher retirement is 85 percent pre-funded. The funded status of a pension plan provides an indication of the overall health of the plan. An 80 percent level of funding is generally considered the standard for adequate funding.

The continued financial strength of the Missouri teachers' retirement system is a result of outstanding investment returns over the last two fiscal years, updated actuarial assumptions based on a recent five-year experience study and a new funding policy adopted by the retirement system's board in August 2011.

The system achieved record high investment returns in fiscal year 2011.  The public school system and the education employee system earned returns of 21.8 percent and 21.4 percent, respectively, for the fiscal year ending June 30, 2011, which were the highest fiscal year returns for both systems in more than 20 years. The total assets of both the public school and education employee retirement programs were approximately $29.5 billion on Oct. 31, 2011, making the combined entity larger than all other public retirement plans in Missouri, and the 42nd largest defined benefit plan in the United States.

Jim Kreider is the executive director of Missouri Retired Teachers Association.

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Richard Saunders March 28, 2012 | 5:51 p.m.

While 85% pre-funding is above par as compared to other plans, that ONLY means it is a bit farther away from insolvency than most others.

However, what the author fails to point out, most importantly, is what is the expected rate of return to ensure the funding level does not slip further? (Many plans have expectations of returns of at least 6% (with some at 8-9%), a level that is no longer attainable without investing in high-risk junk bonds.)

Also, what other holdings are exposed to market risk, such as equities? These alone can drastically alter the pre-funded percentage as stock prices can decline (along with the overall economy).

Honestly, ALL retirement programs are in jeopardy (so is your insurance company (oh, and your bank)), as government borrowing has displaced the formerly safe investment method of earning a decent return with little risk.

In other words, thanks to the Zero Interest Rate Policy (ZIRP) of the not-Federal, not-Reserve "System," earning interest on loaning money to others is going away, fast.

Look at your savings accounts. Is anyone coming out ahead of inflation when they only earn 1-2% on deposits? Of course not. Not when groceries and energy costs rise far faster.

These days holding a US Treasury bond is a guaranteed loser, and is rightfully known as a "certificate of confiscation." Now, who would hold these pieces of paper to maturity knowing they'll have diminished purchasing power? Why your retirement fund manager, that's who. See, they don't have to worry about purchasing power, but only solvency using the nominal numbers. What's worse, is that this action supports the predation of the Fed against the manager's own best interest of earning a return to the fund, as he is the one loaning other's money at below market rates. (The US Treasury would have to pay a far higher price if the Fed did not buy up everything in order to keep up the appearance of a functional financial system.)

So people like Mr. Krieder will defend their institutions against the "negative rhetoric" focusing on one single statistic while fully ignoring the facts that the capital formation market has been murdered by the easy money policies of Rome on the Potomac (and it's Wall St. attack dog).

Simply put, Mr. Krieder, reality has nothing at all to do with what "people deserve," but rather, with what people have. Or don't have.

What we don't have now, is a sound financial monetary system (i.e. commodity backed money), but rather an unsound one where IOUs issued by a wholly unaccountable private bank syndicate have usurped our formerly sound and legal money.

But hey, one doesn't have to believe me. You are free to trust your retirement to the professionals who choose to ignore these warnings, calling them "negative rhetoric."

Question is, do you really trust them enough to bet your future on it?

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