More than 200,000 teachers, state-government workers and other public-sector employees in Arizona will need to make modestly higher payroll contributions into their pension system. That could even continue for several years into the future, all because of diminished long-term expectations for the stock market and economy. The Arizona State Retirement System, the state’s largest public pension fund, has reduced its long-term outlook, citing modest expected long-term economic growth that makes big investment gains less likely. Pension funds face long-term obligations: The Arizona pension fund (and others like it) pay retirement income and health benefits to members, mainly after they stop working. The Arizona fund currently distributes about $3.3 billion annually. Funding starts with worker and employer contributions: Pension funds receive payroll contributions made by both workers and their employers; in the case of the Arizona State Retirement System, these include cities, towns, counties, school districts, public universities, community colleges and the state government. For the Arizona fund, contributions total about $2.2 billion annually. Investment returns make up the rest. Pension funds receive an important boost from the income and gains generated by their investments, which typically include a mix of stocks, bonds, real estate, commodities and other assets. Changes in investment outlooks can alter the need for higher or lower contributions: When a fund’s management cuts its… Read full this story
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