As global markets rebounded in the first half of 2023, SCERS finished its fiscal year that ended June 30, 2023, with a 6.3% investment return (6.1% net of fees). 

The return falls slightly short of the 6.75% annual investment assumption SCERS uses in its pension funding model to ensure benefit obligations are met.  Over longer time periods, SCERS has maintained strong performance, beating the 6.75% investment return assumption on average to keep the pension trust well-funded for 30,000 SCERS members and their families. SCERS’ investment performance continues to rank in roughly the top quartile of pension plans across the country.

“We maintain a highly diversified portfolio and a disciplined approach to investing through economic cycles,” said SCERS chief investment officer Steve Davis. 

Investment Assumption Stays at 6.75% 

The SCERS Board of Retirement recently reviewed the investment assumption as part of a triennial study to examine economic and demographic assumptions used to project pension liabilities and determine contribution rates. 

The biggest driver of contribution rates and plan funding—the investment return assumption—has decreased over the past two decades as inflation and interest rates decreased and the Board intentionally reduced risk within SCERS’ strategic asset allocation. Generally, if the investment assumption is lowered, contributions need to be increased to make up the difference. 

After careful consideration, the Board voted at its August 2023 meeting to maintain the 6.75% investment return assumption, given that the long-term economic outlook for several asset classes, such as fixed income, has improved as interest rates have risen. Minor adjustments to other assumptions were made but are not expected to lead to increased costs for employees or employer contribution rates. Changes to the actuarial assumptions will be reflected in 2024-25 contribution rates.