By JOHN HOWELL
In what is considered the biggest year-over-year gain since their inception, the city’s four pension funds collectively appreciated by $ 130.1 million, a whopping 31.8 percent, to the year ending June 30, 2021.
As of June 2020, the funds had a total value of $ 508.1 million. In June, they totaled $ 638.2 million.
“These are historic returns,” said Al Marciano, who chairs the Retirement City Council.
The fund’s return, which totaled $ 172,535,226 as of June 30, has exceeded benchmarks. The same is true of the other three funds managed by Fiducient: Fire and Police I, a closed fund with assets of $ 79.6 million; Police II at $ 268 million; and Fire II at $ 118 million.
Marciano, an accountant who plays a volunteer role, credits the outstanding performance of the market, fund management and committee oversight. Mayor Frank Picozzi observed that the return of 31.8% exceeded that of the state pension system with returns of 25.6% for the year.
“As mayor, a top priority is securing the future benefits of all retirees and current employees in the city while keeping costs as low as possible for our taxpayers,” Picozzi said in a statement.
City Treasurer Lynne Prodger and City Finance Director Peder Schaefer serve as police and fire planning trustees. Schaefer said the four plans are managed collectively.
The role of the Pension Board is to review plan management, target asset allocation and policy setting. As Marciano explained, investments are made in different sectors of the market, from bonds to domestic and foreign stocks to stocks of small, medium and large companies. A total of 17 separately managed accounts, depending on the investment sector, make up the portfolio.
Anthony Tranghese of Fiducient acts as financial advisor and reports to Schaefer, Prodger and the Pension Board.
Does the exceptional performance of the past year mean that the city can increase pension benefits?
For starters, Schaefer explains, the city’s actuary examines fund performance over a five-year period to determine whether the segregated funds are adequately funded to pay for the benefits set by contracts and ordinances. Taking into account the past financial year, over the past five years the average fund return is 11.4%, which exceeds the investment return of 6.9% assumed by the actuary.
“It is premature to think that we have come out of the woods and that we could cut contributions,” Schaefer said, referring to the overall level of unfunded pension liabilities, the worst being Fire & Police I. “This is no time to think about improved benefits. “
However, there will be some changes for the benefit of retirees.
Municipal retirees, Schaefer said, are expected to receive a COLA, or cost of living adjustment, because of the return on investment next year, because the current year is based on the previous year. Without going through each of the plans and orders, he could not immediately define the impact on payments of the other plans.
He pointed out that the 31.8% growth in assets across all plans represents growth in invested funds. Overall, when city and employee contributions as well as payments are calculated, funds have increased by approximately 26%.
“Our job is to manage funds and comply with orders,” Schaefer said.
So far, the investment of plan funds continues to follow the market.
According to the most recent quarterly report released in August by Fiducient, the funds reflect similar percentage appreciation rates.