In our blog post titled "Who Funds The Fund?," we described APERS as a defined benefit plan and explained how it is funded through contributions from employers and members, which are then invested in a diverse portfolio. This constitutes the APERS trust fund, which is the heart of the system. So let’s look at how this fund is used.
First, the fund has to pay for the operation of the agency itself, which includes everything from the salaries and benefits for about 75 employees to the production and distribution of this newsletter. During fiscal 2018, this cost about $11.5 million or 2% of our overall expenses.
In 2018, we also paid out more than $13.7 million in refunds. Most of these go to contributory members who leave public employment and withdraw their employee contributions. This also sounds like a lot of money, but APERS currently has more than 46,000 active (working) members with new people being hired and others moving on every day. Those who leave before earning five years of service and becoming vested in the system are the most likely to request a termination refund.
By far the largest expense for APERS is our benefit payments. During fiscal 2018, we paid out almost $531 million in benefits to retirees, DROP participants, PAW recipients, beneficiaries, and survivors. This comprises more than 95% of our overall expenses, which is as it should be. As the state’s population increases and our system expands, APERS’ obligations to its members continues growing year by year. As the chart below illustrates, in the last ten years our benefit payments have increased by 77% from $299.8 million to $530.8 million.
This steady increase in benefit payments presents both challenges and opportunities for APERS and our members. It is important to remember that the benefits we pay not only support our members but also provide a tremendous economic boost to the state overall. Almost 95% of the retirement benefits paid by APERS in fiscal 2018 went to Arkansas residents, as the vast majority of our public employees remain in the state after they retire, where their pensions support businesses, workers, schools, and tax bases in every corner of Arkansas.
Article from "APERSpective" Active Members Newsletter - Summer 2019