On July 16, Yellowhammernews.com published an article by senior editor Elizabeth BeShears criticizing the Retirement Systems of Alabama for investing in a now bankrupt company. No investor always picks winners, and like all investors, the RSA has made investments that have lost money. The important fact is that the RSA picks more winners than losers and has been achieving annual gains which have exceeded its 8% assumed rate of return. In fact, the RSA’s overall annual returns for the last five years have averaged almost 11 percent.
The most disturbing part of the article, however, is the citation to a debunked “study” published by the Johnson Center for Political Economy at Troy University. The conclusions asserted in the Johnson Center report are patently and demonstrably false. The most egregious of these mischaracterizations is that the RSA “will actually run out of money in 2023.”
This conclusion was calculated using the RSA’s 2009 asset valuation of $24 billion at the low point of the market meltdown. The Johnson Center report does not update earlier erroneous projections or take into account what has happened to the RSA investments and valuations since then. Between 2009 and now, the RSA has paid out about $15 billion in benefits to its members and increased its assets by 46% to approximately $35 billion. Thus, today the RSA has $11 billion more in assets after meeting all of its obligations than it did in 2009. RSA is NOT running out of money.
The article also asserts that “taxpayer money currently props up the RSA…” In 2014, the RSA had a total of $5.5 billion in income. Of that, $3.7 billion, or about 67%, came from earnings on investments. The remainder came from employees’ and employers’ contributions. The entire state’s contribution for the year comprised just 16.4 % of the RSA’s income.
The reckless perpetuation of these falsehoods only serves to confuse people and make hundreds of thousands of RSA members and their families feel uncertain about their financial security. That is wrong.
The RSA has the fiduciary responsibility of paying lifetime benefits for its members and the many generations of future members who come after them. History shows that the average return for the RSA’s funds for the last 25 years is over 8%, a period which included the worst stock market performance episodes in modern history.
Nonetheless, in recognition of the historically bad market conditions, the RSA has worked with the legislature to help it make changes to our system to improve its sustainability. The RSA is ever mindful of its legal and moral responsibilities to its members and the public, and, in tandem with the legislature, continually seeks to improve and strengthen its operations. Specifically, the RSA is committed to working with the newly formed Joint Committee on Alabama Public Pensions, a legislative committee tasked with studying RSA pension benefits. The RSA looks forward to working with the Committee to examine ways to further enhance the soundness of the RSA.
