Town's pension fund rebounds after recession
By Evan Pajer - Staff Writer
East Hartford - posted Fri., Feb. 22, 2013
On Feb. 19, representatives from three financial firms met with the Town Council to confirm that the town's pension fund has begun to recover from recession and is beginning to grow again. Despite some setbacks, the pension fund has begun to rebound.
Town Treasurer Joe Carlson said that the pension fund covers town employees - including police and firefighters - who retired before 2006. Since then, Carlson said, the town has switched to a 401(k) style plan with contributions from the town. Carlson said the pension plan covers more than 600 employees, and that obtaining full funding for the pension plan has been one of the biggest goal's of the town's Retirement Commission.
Carlson said that the town's portfolio that is used to fund the pension plan has begun to recover from the recent economic downturn. "We are getting better results," he said. "In our pension plan, East Hartford meets the world. We have investments in international markets as well as some investment in developing markets." Carlson said that although the pension fund has come back, it lost 1 percent of its value over the last year, but he expects things to improve. "We're cautiously optimistic about the rest of the fiscal year," he said.
Thomas Dawidowicz, an actuary with the Segal Group, which manages the town's investments, said that the town, unlike many in the state, opted for a payment plan on the pension fund that has increasing payments each year rather than opting for a fixed payment. "At the start, the rate was low, but it's now growing by 4 percent each year," Dawidowicz said. "By 10 to 15 years into the plan it reaches the level of the fixed payment and then passes it." Dawidowicz said that at current rates, the amount the town is required to contribute increases by roughly $200,000 a year, not counting actuarial changes and actual rates of return on the town's investments.
Dawidowicz said that the pension plan currently has $174 million in assets, down from $185 million in 2007, which he attributed to an economic recession. "The town's portfolio has not hit the planned 8 percent rate of return in five years," Dawidowicz said. "If the investment income does not meet the liabilities, the town will have to find a way to come up with that money."
According to Dawidowicz, the pension plan is currently between 62 and 64 percent funded, down from 77 percent in 2006. "The town lost money in 2008 and 2009 and now the plan is funded into the high sixties," Dawidowicz said. Despite losing money, Dawidowicz said the town's portfolio is doing better than a similar pension fund run by the state. "The state is about 45 percent funded, so you are better off than the state," he said.