Despite the market volatility of the past few years, NYSTRS remained among the best funded public pension systems in the nation and possibly the best funded teachers' system, according to the National Association of State Retirement Administrators.
NYSTRS remains fully funded – meaning the assets on hand are sufficient to pay all current and future benefits of the System's 130,000 retirees, as well as the accrued benefits of its almost 300,000 active members.
NYSTRS' stability is attributable to many factors, including prudent long-term investing in a highly diversified portfolio. Often overlooked, however, are the economic efficiencies associated with pooled funds and low management fees. While it costs only about 7 cents to manage each $100 of NYSTRS assets, 401-k style plans cost about $1.25 to $2 per $100 of assets.
And, despite media reports to the contrary, a NYSTRS-style defined benefit pension plan is cost effective for taxpayers who fund them. NYSTRS employer contribution rates, for example, have been in single digits for 21 consecutive years. In six of those years, the rates were below 1.5%.
To put it in perspective, for the 20-year period ending June 30, 2009, NYSTRS collected $13.3 billion in member and employer contributions. During the same period, NYSTRS paid out $53.5 billion in benefits. At the same time, the market value of System assets rose from $30 billion to $72 billion.
Also not to be overlooked is the economic impact of a NYSTRS pension. The System paid out more than $5 billion in benefits for the fiscal year ended June 30, 2009. Of that total, more than $4 billion were paid to people living in New York. Those payments created a ripple effect through the state economy, as one person's spending became another's income. According to a study by the non-profit National Institute on Retirement Security, each dollar "invested" in public pensions by New York taxpayers supports nearly $10 in total economic activity.
This article appeared in the Winter 2010 edition of Resource.