The rate of return is one of the most important factors used in projecting the health of the fund. It is the presumed return on all of the investments made by PERA. Depending on the market and other conditions, the return on investment will vary year to year; however, it is the number that establishes the long-term average.
In life, we’re all taught to avoid assumptions. But you can’t run a massive financial engine without them because it helps PERA project how much income it will generate and, in turn, how the fund will grow over time.
So, here’s how the PERA Board seeks advice on making decisions about the rate of return:
In November 2016, the Board changed the rate of return from 7.5 percent to 7.25 percent based on current market conditions. Previously, the Board lowered the rate in 2013 from 8.0 percent to 7.5 percent. The Board makes these adjustments to ensure PERA projections are accurately reflecting the economic climate today and in the future.