LAGERS' Funding Progress
- Assets (Billions)
- Liabilities (Billions)
LAGERS is 93.7% pre-funded. This means that LAGERS has nearly 94 cents in assets for every one dollar of liabilities. LAGERS’ goal remains to reach 100% pre-funding.
LAGERS has three sources of funding for benefits.
– Sixty-seven percent is from investment returns
– Thirty percent is from employer contributions
– Three percent is from employee contributions.
The employer’s contribution is determined by an actuary and will vary from year-to-year based upon economic and demographic factors. An actuary is a business professional who is highly trained in the measurement of risk and uncertainty. It is imperative that the full contribution recommended by the actuary is put into the plan each year. Plans that receive the full annual contribution are in the best position to meet all of their obligations now and into the future. Missouri state law requires all employers participating in LAGERS to make their full contributions each month. This is the primary reason LAGERS continually ranks in the top 10% of U.S. public pension plans in terms of funding.
On average, employer contributions to LAGERS account for less than 3% of an employer’s total annual budget.
97% of LAGERS employers believe participation in the plan is a good investment for their organization.
- LAGERS Contributions
- Remaining Budget
- LAGERS is a good investment.
- LAGERS is not a good investment.
Each LAGERS employer chooses whether or not its employees will contribute to the plan. Employee contributions to LAGERS are a specific percentage of the employees’ salary. These contributions are used to help fund the future retirement benefit and do not impact the amount the employee will receive in the future. The employees’ accounts earn a set amount of interest annually. Though the employees’ money is invested in the same portfolio as the employer’s money, the employee does not take on the risk of losing their money in the markets and does not receive the same rewards for strong market performance. Instead, the employer sponsoring the plan receives the risks and rewards of investing in the markets.
The contributions received from the employers and employees are invested in the markets in order to help fund the retirement benefits of the participants. Investment returns, though they vary from year to year, are LAGERS’ largest funding source. The investment returns of the fund will vary based upon the asset allocation of the portfolio, market performance, and the talent of the professionals managing the funds. Because market returns are unpredictable, LAGERS smooths market gains and losses over a five year period in order to add stability and decrease volatility.
LAGERS’ goal is to achieve the assumed rate of return of 7.25% over the long-term, consistent with an acceptable degree of risk in relation to the nature and duration of the underlying benefits. To achieve this goal the Investment Team sets an investment strategy that is devised after analyzing the long-term view of the markets and consulting with LAGERS’ Board of Trustees.