South Carolina pension system faces $11 billion shortfall

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Myrtle Beach Online  by Cassie Cope, December 22, 2015

South Carolina should change its pension system to address a shortfall of up to $11 billion in 2043, according to a report on the state’s pension system released Monday.

The state should decrease the time it pays off new pension debt and potentially cap alternative investments — including real estate, hedge funds and private equity — which charge high fees, according to a report by the S.C. Legislative Audit Council.

“The LAC’s report reveals that our retirement and pension system’s longevity is in jeopardy and in need of immediate effective adjustments,” S.C. House Speaker Jay Lucas, R-Darlington, said in a statement. “Thousands of South Carolinians have voluntarily contributed to this program and their hard-earned dollars should always be managed in a way that produces the highest return possible.”

The state should pay off its new unfunded pension liabilities within 20 years, a decrease from the current 30-year limit, the report recommends.

Reducing the payoff period could result in greater payments each year into the system from state workers and taxpayers, said state Rep. Gary Simrill, R-York. The goal of lawmakers should be to reduce those added payments into the pension system by having it earn more on its investments and reducing its fees, Simrill said.

For the 10-year period that ended with the 2014-15 fiscal year, South Carolina’s pension investments earned a 5.2 percent rate of return, according to the report. That is below both the national average return of 6.9 percent and the state’s expectations — its “assumed rate of investment return” — of 7.5 percent, set by the General Assembly.


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