Important Message - SCERS

 Message to SCERS Participants: Your SCERS Benefits Remain Secure 

With everything that has been happening in the financial markets, and the economy generally, over the last several months, it is understandable if SCERS participants might be concerned about the impact of these events on SCERS and your SCERS retirement benefits. Accordingly, I will go right to the bottom line: SCERS remains financially strong and your SCERS benefits are secure.

Whether you are a retiree or beneficiary already receiving a monthly SCERS benefit, an active employee nearing retirement, or someone just starting your career, the answer is the same: Your SCERS benefits are secure and will be paid as promised

I can say this with confidence for several reasons:

  • SCERS is a defined benefit pension plan, in which your benefits are fixed by law based on your years of service, your final average salary, and your age at retirement. Your SCERS benefits are not based on an individual account balance like under a defined contribution plan. Your SCERS benefits are not determined by how the investment markets are performing now or in the future. Once your SCERS benefits have been earned, they cannot be reduced or eliminated.
  • SCERS is designed for the long haul and built to ride out disruptions in the financial markets.
    • Your SCERS benefits are pre-funded and are not ‘pay as you go.’ This means SCERS does not have to struggle each year to find the funds to pay benefits.
    • SCERS’ assets far exceed what SCERS will pay in benefits this year, next year, and for many years to come. This means that even if investment performance is poor for several years, SCERS will remain financially strong and the benefits will be paid.
    • SCERS has a positive annual cash flow. The annual income SCERS receives exceeds what SCERS pays in benefits each year. Contributions SCERS receives from participating employers and employees plus income SCERS receives from its real estate, stock and bond investments exceeds what SCERS pays in benefits and administrative expenses each year. This positive cash flow means that SCERS does not have to sell assets in order to pay benefits.
  • SCERS has a broadly diversified investment program designed to help mitigate bad investment performance in one or more areas of the financial markets.
    • SCERS invests in a wide variety of asset categories that do not all move in the same direction, at the same rate, at the same time. This means that SCERS’ investment performance is not controlled by one segment of the financial markets, such as the stock market. It also means that poor performance in one part of the market is often offset by better performance in another part of the market.
  • SCERS utilizes widely recognized actuarial practices to help control the impact of the financial markets on the fund.
    • Rather than ‘recognize’ annual investment performance all at once, SCERS phases-in investment experience – both good and bad – over a five year period. This five year ‘smoothing’ helps to neutralize investment market volatility.
    • If investment performance falls short of investment targets, the funding shortfall is paid off over an extended period, much like a mortgage. This means that the ‘bill’ for a bad period in the market does not come due all at once, but instead, is paid over time at a steady, but manageable rate.
  • SCERS entered the current, difficult period in very strong financial condition.
    • As of June 30, 2008 (the date of the most recent actuarial valuation), SCERS was more than 93% funded.
    • As a result of the five year smoothing process, SCERS had $569 million in investment gains from the past several good investment years that had not yet been recognized. As these ‘deferred gains’ are phased-in they will help reduce the impact of the investment losses in the current period.
  • SCERS has successfully weathered difficult financial market experiences in the past and rebounded strongly when the investment markets recovered.
    • The recent performance of the investment markets, while dramatic, is no worse than the experience in the investment market crash in 1987 or the fallout after the tech stock bubble burst in 2000.
    • Historically, after a major downturn, the financial markets have rebounded substantially.
    • SCERS came back strongly after these and other past market disruptions because SCERS was, and remains, a long term investor. This means that SCERS patiently rides out the storm and is in a position to capitalize on the investment opportunities that follow.
  • In the end, SCERS participants have the security of knowing that, by law, your benefits are ultimately guaranteed by your employer.

There can be no question that events in the financial markets and the economy have hit everyone hard, and SCERS is no exception. That being said, because of the way SCERS is designed, SCERS remains financially strong and your SCERS benefits remain secure. It is also clear that there will be challenging times ahead for everyone, including SCERS. However, SCERS has successfully weathered similar difficulties in the past and will do so again.

I hope this information has helped put your mind at ease about the security of your SCERS benefits.

On behalf of the SCERS Board of Retirement, and the rest of the staff at SCERS, I will close by saying that we look forward to continuing to address your retirement questions and needs, and to paying your benefits as promised.

Richard Stensrud

SCERS Chief Executive Officer

Updated May 2010 

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Contact Us

Sacramento County Employees' Retirement System
980 9th Street, Suite 1900, Sacramento, CA 95814
Telephone: (916) 874-9119
Facsimile: (916) 874-6060
Email: SacRetire@saccounty.net
Mail Code 10-204