Monday, March 2, 2015

Despite investment gains, pension fund liability stagnates

Despite higher-than-expected investment returns, the city's pension fund remains less than half-funded, an actuary told the city today.

Despite investment gains, pension fund liability stagnates

Finance Director Rob Dubow (left) and Mayor Nutter. (David Swanson/Inquirer)
Finance Director Rob Dubow (left) and Mayor Nutter. (David Swanson/Inquirer)

Despite higher-than-expected investment returns, the city's pension fund remains less than half-funded, an actuary told the city today. 

In July, the end of the last fiscal year, the pension system had enough money to cover 48.1 percent of its liabilities - the same ratio as last year - Kenneth Kent, of the actuarial firm Cheiron, said at a meeting of the city Board of Pensions and Retirement. 

But later in the meeting, the board voted to lower its expected rate of investment returns, which will have the effect of increasing the unfunded liability. City Finance Director Rob Dubow said the new liability ratio hasn't been calculated yet. (To learn more about why the assumption rate is important, read this story.)

With about $4.5 billion in assets, the pension fund grew 10.9 percent in the last fiscal year (exceeding an expectation of 7.95 percent), the actuary said. Part of the reason the good returns didn't increase the funding ratio is that the city is still making up for major losses during the recession. The fund lost $1.2 billion in 2008 alone. 

Dubow noted that, despite the stagnant unfunded ratio, the investments are now healthier from an actuarial perspective and the fund is now closer to a position where future gains will cut the unfunded liability. 

The move to lower the investment assumption rates (from 7.95 percent to 7.85 percent for most investments) will also increase the city's required payment into the pension fund, which will be $556 million next year across all budgets (up from $523 million). Thats about 37 percent of expected payroll costs.

 

About this blog
William Bender, a Drexel graduate who landed at the Daily News in 2007, has covered everything from South Philly mobsters to doomsday hucksters. He occasionally writes about local food trucks and always eats everything on his plate, whether it be a bloody rib eye or a corrupt politician. E-mail tips to benderw@phillynews.com
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David Gambacorta, has been a reporter with the Daily News since 2005, covering crime, police corruption and all of the other bizarre things that happen in Philadelphia. Now he’s covering the 2015 mayor’s race, because he enjoys a good circus just as much as the next guy. He’s always looking to get a cup of coffee. Send news tips and other musings on life to gambacd@phillynews.com
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