Philadelphia pension fund lost $149 million in 2016

Philadelphia City Hall from South Broad Street. The city’s struggling pension fund suffered a $149 million net asset loss in fiscal year 2016, according the latest actuarial figures presented to the Board of Pensions this week.

The city’s struggling pension fund suffered a $149 million net asset loss in fiscal year 2016, according the latest actuarial figures presented to the Board of Pensions this week.

The 2016 loss was due to market investments that went south, losing 3.17 percent of the fund’s value, and a reduction in the assumed rate of return from 7.8 percent to 7.75 percent. The city's 2016 fiscal year was from July 1, 2015 to June 30, 2016. 

Helping reverse a little bit of that loss was the sales tax revenue. Nearly $10 million from city sales tax revenue went into the pension fund last year and more of that tax money is expected to be pumped into the fund in coming years.

The fund ended fiscal year 2016 with just $4.35 billion in the bank and a $11.56 billion liability. When using the city’s 10-year smoothing accounting method, the fund maintained a 45 percent funding ratio.

The board voted Wednesday to lower the assumed rate of return to 7.7 percent, which will lead to a slight drop in the funding ratio but is considered to reduce investment risk and “lower negative cash flow,” according to the actuarial valuation presentation given to the board.

The Kenney administration implemented new pension changes last year that are expected to accelerate the pension fund reaching a healthy 80 percent funding rate. If all goes according to plan, the fund is expected to reach 80 percent funding by 2031.

In addition, the pension board has also moved nearly half of its investment portfolio to index funds, which so far have provided favorable returns.

The start of fiscal year 2017 has been positive. City spokesman Mike Dunn said that the fund's investment return for calendar year 2016 was 6.7 percent. 

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