AUSTIN (March 19, 2020) – The association representing Texas pension systems for public employees has confirmed that retirement checks for retirees will be delivered on time as expected in coming months and will serve to bolster local economies in the recession likely to occur because of the COVID-19 pandemic.
“Defined benefit plans are the best retirement system for retired public employees, as we are clearly seeing now,” said Art Alfaro, the executive director of the Texas Association of Public Employee Retirement Systems. “Public sector retirees across the state can count on the monthly retirement checks they earned after decades of service to their communities. Our system members – the 80+ plans for police, firefighters and municipal employees – would report any foreseeable problems to us and so far we have heard of no interruptions to their payments.”
The association keeps tabs on its 80+ member systems’ investment portfolios through a yearly survey of asset allocations. Last year’s study found that typically the pension systems keep about 1.5 percent of their total portfolio in cash and short-term securities and another 20 percent in bonds.
“Many of our systems’ bond portfolios saw 10 percent returns last year, and recent weeks’ flight to income-producing investments have seen their bond portfolios appreciate by yet another 8-12 percent in some cases,” Alfaro said. “In all likelihood many systems’ investment managers are selling some of their bond holdings in order to rebalance portfolios and to raise cash for other investment opportunities or reserves.”
Alfaro served as Treasurer for the City of Austin for 13 years before becoming TEXPERS executive director in July 2019. He had served as a Trustee on Austin’s three pension systems for police, firefighters and municipal employees. Alfaro was most proud of Austin’s receiving and maintaining a AAA municipal bond rating since 2010.
While many people believe that the oil price deflation and COVID-19 economic slowdown could dramatically affect Texas, Alfaro pointed to reassurances in a study by the National Institute on Retirement Security, “Pensionomics 2018: Measuring the Economic Impact of Defined Benefit Pension Expenditures.” Using 2016 data for Texas, the research organization found that the average Texas pension benefit of $1,956 per month, for 684,826 residents, added $16.1 billion to the state’s economy. Retirees’ expenditures supported 185,087 jobs and supported $9.7 billion in income to other state residents.
“NIRS found that in a normal economic cycle, pension income accounted for $29.4 billion in direct, indirect, and induced impact to the Texas economy. As we head into recession, these steady, consistent retirement earnings will support our retirees’ families and their local economies,” Alfaro said.
In related matters, Alfaro said that several of the state’s largest pension funds were keeping their offices open but postponing board meetings and member events. Many were also asking members to use online resources or to call with questions about their retirement earnings.