Missouri State Treasurer, Eric Schmitt, shared his concerns regarding the Missouri State Employees Retirement System (MOSERS) with the News Tribune. He fears that the system is in much deeper trouble than what is being reported.  He lays the system’s troubles primarily on overly optimistic return assumptions and high investment management fees.

Incredibly, MOSERS has missed its return assumption in 16 of the past 17 years despite equity and bond markets being in a prolonged bull market. The targeted return is currently 7.65%, down from 8%.  Furthermore, MOSERS is paying roughly 4 times the fees of the average public fund.  The Post-Dispatch reported that MOSERS, with $7.9 billion in assets, paid $77.8 million in investment fees during the last fiscal year.  That equates to roughly 0.98%, which seems hard to accomplish given the system’s weak results.

Based on accepted actuarial accounting (GASB) the system is only about 60% funded, but if one were to use a more realistic discount rate, the plan’s funded ratio would be more like 50%.

According to Mr. Schmitt, the pension system owes more in pensions than the entire state owes in bonds. “The crisis is no longer on the horizon,” says Schmitt. “It is at our doorstep,” the Post-Dispatch reports.