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NYC will need to chip in an extra $6 billion to shore up pension funds — comptroller

New York City Comptroller Brad Lander said Tuesday that poor investment returns will require an estimated $6 billion in extra contributions by the city to the New York City Retirement Systems covering the three fiscal years beginning with the one that starts July 1, 2023, as well as a review of asset allocations.

“Going forward, it will be important to reassess the pension systems’ asset allocations to better position the funds to meet the required rate of return,” said Mr. Lander in remarks delivered at the annual meeting of the New York State Financial Control Board.

“Starting in FY 2024 the budget will start reflecting the impact of adverse financial market conditions on pension returns,” said Mr. Lander, who is the fiduciary for the five pension funds in the city pension system. Aggregate assets were $239.5 billion as of June 30.

The preliminary return of -8.65% for the fiscal year that ended June 30 will cause several years of extra city contributions, he said. “We estimate that this will translate in higher pension contributions totaling nearly $6 billion from FY 2024 to FY 2026,” he said.

A report analyzing the city’s finances for the current fiscal year predicted the city’s extra contributions to the pension system would be $874 million for fiscal year 2024, $2 billion for fiscal year 2025 and $3.05 billion for fiscal year 2026 “to phase in the shortfall in pension investment,” the report said.

The aggregate assumed rate of return for the city pension system is 7%. If the actual return falls below that rate, the city must contribute more money to the system.

The five pension funds in the city pension system “remain well-funded, and the retirement security for the city’s current and future retirees is extremely solid,” Mr. Lander said.

The system’s aggregate rate of return for the fiscal year ended June 30, 2021, was 25.8%, and its asset total was $266.1 billion.

Each of the five pension funds – which have independent boards of trustees – suffered negative returns for the fiscal year ended June 30 ranging from -7.17% to -9.77%.

For the fiscal year ended June 30, 2021, the individual pension funds’ returns ranged from 24.8% to 28%.