June 24, 2014 / 10:16 PM / 4 years ago

Illinois public pension fund lowers investment return rate

CHICAGO, June 24 (Reuters) - Illinois’ biggest state pension fund on Tuesday lowered its expected investment return rate, a move that will increase its unfunded liability.

The Teachers’ Retirement System (TRS) board of trustees lowered the rate to 7.5 percent from 8 percent, calling the reduction prudent following a recent review of its asset liability model and revised capital market assumptions.

“The board’s decision takes into consideration extensive input from our actuaries and investment consultants,” TRS Executive Director Dick Ingram said in a statement. “It is one of the most important elements of the fiduciary duty we have to keep the system as strong as possible.”

The lower rate will increase the system’s unfunded liability, which was $54 billion at the end of fiscal 2013, but the amount of the increase is not yet known, according to TRS spokesman Dave Urbanek.

A $100 billion collective unfunded liability in Illinois’ five state pension funds led to the passage in December of comprehensive reforms aimed at saving nearly $145 billion over 30 years. However, a state judge in May suspended the law until lawsuits brought by labor unions, retirees and others challenging the constitutionality of the reforms are resolved.

TRS, whose 390,000 members are current and retired teachers, administrators and other public school workers, had assets of $44.2 billion as of the end of May. The system does not include the Chicago Public Schools, which has its own retirement system. (Reporting by Karen Pierog; Editing by Eric Walsh)

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