Public safety pension fund underperforms

Public safety pension fund underperforms

PAWTUCKET – The city’s police and fire pension fund badly underperformed expectations from July of 2015 to July of 2016, and city taxpayers could be on the hook to pay the resulting bill.

Finance Director Joanna L’Heureux said the total assets of the plan dropped from $103,696,681 to $103,469,741 during that period, or a loss of $226,940. The plan’s funded ratio fell from 42.2 percent to 40.1 percent because the fund did not earn the expected 7.5 percent return but instead suffered a loss of 1.2 percent, said L’Heureux in a letter to the City Council.

Because of the poor performance of the plan, the city’s annual required contribution into the fund is set to grow from $13,646,297 this year to $15,036,289, said L’Heureux, a bump of about $1.4 million.

City actuary Daniel Sherman has recommended an alternative strategy called asset smoothing to ease the burden on the city, said L’Heureux. Most pension plans use the strategy to smooth the gains and losses of the fund assets over five years rather than taking the hit of the gain or loss all in one year, she said. The city had several good years before last year, she said, meaning a smaller impact if officials go with the smoothing method. If Pawtucket officials choose to adopt the smoothing method, she said, the payment next year would jump to only about $14.6 million, lessening the hit to taxpayers by about $400,000.

An added bill of $900,000 equals about 27 cents on the city’s tax rate. A $1.4 million increase in the contribution would equal about 42 cents on the tax rate. Whether the overall hit is $900,000 or $1.4 million, the impact is still significant, said L’Heureux. An increase of $1 million into the pension fund equals about one-quarter of the entire cap the city has on how much it can increase its tax levy.

City Council members last week sent the letter from L’Heureux to their finance subcommittee for further consideration on what to do about the problem.

Mayor Donald Grebien must present a budget proposal to the City Council that includes at least 95 percent of the city’s annual required contribution into its pension fund, leaving little flexibility for the city to save money.

L’Heureux said it’s difficult to say exactly why the city’s diversified police and fire pension fund underperformed so badly.

Comments

First some simple questions: Who invests the funds and how much are they paid What is the penalty if any to the investor if the fund underperforms Ms L'Heureux states she doesn't know why the fund underperformed? M am you are the chief financial officer for the city you should have answers. This administration handed out 70 percent pensions after they were informed that the system was in critical status. So scare the taxpayers that the cops and firefighters are responsible for a tax increase not the fact that the city has done a very poor job of managing the plan to the point of not putting any monies into the plan and now want to lay blame. Maybe the extra 150 grand hanging around for a safety director should be redirected into the fund . The timing of this article is perfect considering the fact that the city is due in court to answer to taking contractual benefits from retirees. Hey Ethan nice headline Taxpayers on the hook Should read City officials on the hook for failing there fiduciary responsibility.

When you take the cola' s from the retired members and the boost the pensions for active from 60-70% pretty simple to figure out.

A 1.2 % loss is small and merely a normal fluctuation. You are dealing with an account that has over 103 million dollars in it. Unfortunately, sometimes you have good years and sometimes you have bad years. But most importantly, this fund could be much more solvent if prior administrations had made the annual contributions they were required to make or had not withdrawn millions of dollars from the fund to pay an insurance claim against the City that had absolutely nothing to do with either the Police or Fire Department. Imagine what the fund would would look like if those moneys had been in there for all of these years compounding! Place blame where blame is due, not on the Police or Fire Fighters!

Were there reports on the fund in this "newspaper" all the times the fund made money or just this lil bump in the road? And a question thats been asked before, how funded would the pension plan be if the city didn't take millions out of it to pay a lawsuit? Better yet, what would it be worth if the city took the money the employees contributed towards the pension plan, under a different administration, and contributed it to the plan as the should have, not elsewhere?

Just go back to The Metiver administration,he was the one that made ZERO contributions while taking monies to pay for lawsuits.

Why do taxpayers have to pay for pensions anyway. Taxpayers who work in private industries don't have pensions anymore but have to pay for city employees. The city should think about lowering the pensions and place the burden of saving money on the employees, eventually getting rid of them. Let the city employees contribute to a 401k. Someone should start publishing how much our retired city employees are getting. Giving pensions of 60-70k a year is too much of a burden on the taxpayers.

Just to inform you that the city a long time ago elected to have a pension plan rather that put people in the social security system ( they would have had to make the ss payments ) and employees had no choice so the working employees pay for the retired employees so ending it for new hires wont stop the city from having to fund the system. Employees contribute to the plan its not free for them If the city managed the fund properly and didn't fail to fund it or worse take large sums out of it there would be NO ISSUE the plan would support itself. So next time you vote for city leaders remember this. And lowering pensions is against the law there are contracts the city taxpayers agreed to through the city leadership.

The pensions are part of a negotiated pay plan, most city employees historically have received lower pays then the private sector ( which helps keep taxes lower) in return for other benefits such as health insurance and pensions, these pensions are not free the employee by contract and by law pay into the plan for most it's about 9% of their gross pay. They have no say in the amount or how it's invested. The city by contract is also supposed to pay into the fund however a lot of times they chose to either not pay the full amount or not pay at all. That and numerous politicians who pay into the system at very low rates then get city or state jobs from their friends that pay well for a few years collect higher pensions way exceeding what they paid it ( a few examples judges get full pay yet never paid a dime in. Mr Pires who paid in at his State Representative salary for a number of years but who now has a high paying city job that his pension payout will be based on. The new DPW head in Pawtucket who needs a few more years to be eligible for a pension etc etc etc etc. So please before you blame the poor working stiff look at the fat guy in the suit who you elected to see where the pension shortage really comes from

I have read your comments and concerns to see that we are all in agreement. This old outdated pension system is not working and benefiting it's participants. Something new needs to replace it to protect everyone's interest.

Sir it will work if the city does what it promised to do there are contracts changing is not an option operating it properly is all that needs to happen putting a different coat on it and not maintaining it will solve nothing a contract is a contract fail to pay your car payment mortgage or rent what happens you break a contract as taxpayers you are being duped by your elected officials I held up my end now its time for the city to do the same.

My idea would take employees' contributions out of the hands of our city leaders and have them managed by an outside firm, ie. Fidelity, T Rowe Price, etc. This would protect their funds from the city and protect the taxpayers from having to pay for any shortfalls from mismanaging the employees funds. Win, Win for everyone.