PROVIDENCE – Trending in line with states’ pension funds across the county, a report of the annual performance of the Employees’ Retirement System of the State of Rhode Island released Friday showed a net loss of $620 million in assets in fiscal year 2022.
The audit, performed by the Office of the Auditor General and released by the Joint Committee on Legislative Services, reported the fund, which collects and disperses retirement and disability benefits to more than 73,00 members including state employees, public school teachers, public safety employees, state police officers and judges, lost approximately 5% in value from fiscal year 2021, decreasing from $12.2 billion to $11.6 billion.
Benefits paid out to beneficiaries from the defined benefit plans during fiscal 2022 totaled $1 billion; distributions from the defined contribution plan totaled $46.3 million, according to the audit, which listed total investment expenses of $166.7 million.
“The decrease was largely due to negative investment returns and the normally expected payment of benefits,” it stated. “Along with the decrease across most asset classes, fiscal year 2022 saw significant market changes as inflationary pressures and rising interest rates heightened the market’s assessment of recession risk.”
The report comes on the heels of the transition at the state treasury after the exit of former R.I. General Treasurer and current U.S. Rep. Seth Magaziner, D-R.I. The office is now led by James Diossa, the former Central Falls mayor.
In his final press release issued on Dec. 15, Magaziner touted the retirement fund’s performance in fiscal year 2021, noting 7% returns on average between 2015 and 2022, beating out the “traditional portfolio” strategy of holding 60% in stocks and 40% in bonds that averaged 5% in the same period.
The fund drop did not come as a complete surprise. Assets have declined nationwide. The state retirement fund in Massachusetts lost $3.3 billion in 2022, according to the Statehouse News Service. And Connecticut’s two largest pension plans for retired state workers and teachers lost 15% in value in the 2022 calendar year.
In minutes from the last meeting of the State Investment Commission held on Nov. 21, Chief Investment Officer Eric Baggesen noted multiple “indicators[s] of economic turmoil,” such as rising interest rates.
Benefits paid to retirees and beneficiaries from the defined benefit plans during fiscal 2022 totaled $1 billion, and distributions from the defined contribution plan totaled $46.3 million.
In its summary the state auditor recommends an enhancement of “oversight of the defined contribution plan” and am modification of data collection procedures to better define employer and employee contributions.
The report was the last signed by former Auditor General Dennis Hoyle, who recently retired after 42 years of service.
Interim Auditor General David Bergantino said Friday the dip was “not unexpected.”
“The global markets were trending that way. [The fund] is subject to periodic declines,” he said. “Everybody had a bad year.”
Bergantino added that while one-year snapshots are important, retirement and pension managers plan out strategies long-term.
“They are looking at a long-term rate,” he said. And you are always going to have peaks and valleys.”
Christopher Allen is a PBN staff writer. You may contact him at Allen@PBN.com.
