RSA's Return Assumptions: A 40-Year View

0:00Stay informed in two minutes or less with Birmingham News today from the Daily News Now. Alabama's retirement systems, known as RSA, is pushing back against the RISA report from the Reason Foundation. The report calls out RSA's 7.45% assumed rate of return on investments as too optimistic. Critics point to the past 24 years, where returns averaged just 6.4% and note that the gap between assets and liabilities. As lingered since reforms around 2011 and 2012, RSA argues for a longer view, looking back 40 years of data. They say their returns have beaten the target in most years, and since setting that rate, they've averaged 9.97% annually. This back and forth highlights ongoing debates over how pension funds project future earnings. State officials emphasize that rankings criticizing RSA's funded status used the wrong math. For instance, they apply a shorter repayment timeline than RSA's actual 27 years and rely

1:01on volatile market values instead of smooth, asset figures, which steady out-ups and downs. Recent jumps in unfunded liabilities stem from conservative updates recommended by three independent actuarial firms. These included trimming the return assumption by 0.25%, factoring in longer lifespans and shortening the repayment window toward 20 years, all moves to bolster long-term stability. Pension experts agree, these adjustments make the system stronger, and RSA plans to follow any future actuarial advice to keep things on track.