Massachusetts Treasurer Sees 8% Pension Gains Shunned by Calpers

Reductions of investment assumptions sparks discussion

Aug. 10 (Bloomberg) -- Massachusetts Treasurer Steven Grossman wants to reduce the assumed rate of return on the state’s $50 billion in pension-fund assets, currently at 8.25 percent and among the highest for U.S. public retirement plans.

Grossman, a former Democratic National Committee chairman, said he’s gathering legislative support for a cut to 8 percent, with an option to go lower. That would put Massachusetts more in line with other states, yet the move would cost taxpayers and covered workers $1.7 billion to maintain funding commitments.

While a lower rate of return may better reflect current market trends, the change may stir controversy. It can increase the Massachusetts system’s unfunded liability, or the difference between projected assets and amounts owed to beneficiaries, pegged at about $19 billion in January 2011. A lower return assumption can also force higher contributions from the state, cities and workers to meet funding commitments.

Confidence Booster

The state pension board, led by Grossman, meets today in Boston to discuss investment returns for the past fiscal year. It is also set to consider matters including whether to place assets with Steadfast Capital Management, a hedge fund.

Traditional Pensions

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