ATRS Investments
The primary mission and focus of ATRS is to remain actuarially sound and pay life-time retirement benefits by investing ATRS assets in a manner to earn the 7.25% actuarial assumed rate of return over a long-term horizon. The current estimated rate of return for the ATRS fiscal year ending June 30, 2022 is -4.2%. This estimate will change as investment valuations are finalized. It is important to remember that this year’s return will be spread across four years for the calculation of the actuarial valuation. The four-year smoothing of this year’s return helps reduce the volatility of ATRS fiscal year returns including this year’s return and the 31.9%, -1.4%, and 5.3% returns ATRS experienced the three previous years.
Global stock markets have experienced declines and it is possible that market volatility and declines could continue. The ATRS investment portfolio also experienced declines and volatility along with the global stock markets. However, it is important to note that the ATRS portfolio is well diversified across multiple asset classes and designed to weather stock market volatility. ATRS remains mindful of the volatility within the markets and is in communication with various market participants to evaluate developments.
I want to emphasize to all our members that your ATRS benefits are secure. ATRS is a long-term investor and the ATRS Board has structured a diversified investment portfolio. The ATRS Board remains committed to managing the System’s assets in a prudent manner that will ensure the viability of your pension. The ATRS Board makes decisions in terms of decades, not days, weeks, or months.
ATRS Cost-Of-Living Adjustment (COLA)
An annual cost-of-living adjustment (COLA) is given each June 30 to all retirees that have been retired for one year or more. The current COLA is 3% of the retiree’s original benefit, or 3% of the 2009 benefit for retirees that retired before 2009. The good news is that all of these retirees will see an increase in their July benefit payment this year to help offset the effect of inflation.
Due to the recent spike in inflation, some members have started to ask if ATRS plans to make any adjustments to the COLA. The short answer is that the COLA for this year will be the same as last year’s COLA. The COLA formula is set by Arkansas statutory law and can only be changed through legislative action.
In 2019, decades of low inflation combined with increased pension plan costs led to a bill that would have legislated a reduction of retirees’ COLA. The bill would have set the maximum COLA to 3% or the percentage change in the Consumer Price Index (CPI) for the year whichever is lower. Since the COLA would be capped at 3% regardless of how high inflation runs, a reduction of the retirees’ purchasing power would occur over time. With the maximum COLA limited to that year’s CPI percentage, there would be no opportunity for a retiree’s purchasing power to be restored in times of lower inflation. Since the CPI is an unpredictable future number, it was likely that the ATRS actuaries would have just used the maximum 3% COLA allowed when projecting ATRS' future liabilities out to infinity. This bill would not have helped ATRS lower the projected unfunded liabilities and it would have reduced ATRS retirees' purchasing power over time. That bill was ultimately defeated.
The current ATRS fixed 3% simple COLA protects both the ATRS system and the retiree’s purchasing power. In times of high inflation, the 3% COLA limits the liability accrued by ATRS. In times of lower inflation, any reduction to the retirees’ purchasing power due to the fixed 3% is improved.
The ATRS COLA protects the purchasing power of retirees at the cost of adding to the over-all liabilities of ATRS. Any adjustment to retirees' COLA is the fiduciary responsibility of the ATRS board of trustees, under advice from the system actuaries. The ATRS Board has to continuously balance the adequacy of ATRS member benefits against the sustainability of ATRS to continue to pay lifetime retirement benefits for hundreds of years into the future.
Stay in Touch with ATRS and View YOUR Account Information
The ATRS website allows members to have direct access to specific member account information. Now, approximately 26,900 members have direct account access to individualized account information. Here is the link to the instructions to sign up: www.artrs.gov/registration.
You can also sign up to obtain these executive director updates through your private email address. Updates are made throughout the year such as during retirement season and other times when information needs to be shared. Now, over 30,700 people have signed up to receive this executive director update by direct email delivery. It is always a great pleasure for ATRS staff to learn of more ways to provide information to ATRS members, employers, beneficiaries, government officials, and the public. The ATRS Board is committed to providing a system that is member friendly and transparent. Remember that ATRS is here to serve you.
Best regards,
Clint Rhoden
Executive Director ATRS
Office: 501-588-4367
Mobile: 501-291-1623
clintr@artrs.gov