Mass. needs more realistic goal for pension fund returns
24 June 2012
Photo courtesy of DINA RUDICK/GLOBE STAFF
In some ways, lowering expectations for returns on the state’s pension fund investments is an easy call. Current state law requires the Massachusetts pension board to assume an 8.25 percent annualized rate of return, but in recent years that has come to seem too optimistic. Massachusetts needs to start stepping its pension expectations down — but in a deliberate way, to limit the impact on government agencies that will need to contribute more.
State Treasurer Steve Grossman is now asking lawmakers to trim the target to 8 percent, the number used by many public pensions in the country. This is a reasonable first step. Setting too high a target lets policymakers off the hook; in effect, they can promise public workers benefits funded with money that probably won’t materialize. A more cautious target reduces the risk that future taxpapers will be left with the tab for today’s pension promises.
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