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Maryland employee pension fund reports record earnings

Maryland’s pension system for state government workers earned a record-setting 26.7% return on investments over the past year.

Buoyed by a resurgent stock market and other investments, the pension system sailed past its targeted rate of return of 7.4%. It’s the best rate of return in at least 35 years, according to Andrew C. Palmer, chief investment officer for the Maryland State Retirement and Pension System.

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Palmer said in a statement that the investment markets were affected by the pandemic in ways that weren’t always clear in real-time. He said the retirement system was able to pivot and “fully participate in the very strong returns available in most markets.”

The performance of the pension system is also remarkably better than the year prior, when the rate of return was just 3.57%.

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That’s in part because the investment year runs from July through June, and the 2019-2020 year included the first few months of the coronavirus pandemic, when the economy faltered — but before it began to rebound.

The 2020-2021 investment year included a significant rebound in economic markets. Many other government pension funds also benefited from strong financial markets over the past year, including New York, which had a 33.6% rate of return, and California, with a 21% rate of return.

The investment income translates to $13.3 billion more worth of assets in Maryland’s pension system, for a total of $67.9 billion in assets. The pension system’s strongest returns were in private investment funds and stocks.

The money in the system is a combination of employee contributions, investments and taxpayer-funded contributions from participating agencies.

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The Maryland State Retirement and Pension System, like most state government pension systems, is not fully funded, meaning it does not have enough money on hand to cover all of the future benefits earned by retirees and active workers.

Last year, the pension system was 72.9% funded, and an updated calculation taking into account the record returns will be made this fall. The pension system has a goal of reaching 100% funding by 2039.

The state pension system covers more than 400,000 current workers and retirees from state agencies, teachers in public schools, judges and state police.

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