- April 23, 2024
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The police and fire department pension funds saw significant increases in their respective rate of return during the 2012 fiscal year.
BY MATT MENCARINI | STAFF WRITER
There may be a reason to be optimistic about the city’s unfunded-liability problem.
The Ormond Beach police and fire departments' pension trust fund actuarial and valuation reports, from Oct. 1, showed significant increases in the rate of return compared to their previous three years. The return was one of the items discussed at the pension board's first meeting of 2013, Jan. 4.
For last fiscal year, the police fund posted a 20.1% rate of return, a big jump from its previous three years, when the return rates came in at 2.4%, 7.54% and -.73%.
The fire department fund posted a return of 19.34%, also a spike from rates of 3.38%, 7.28% and -.66% the past three years.
Those increases, city officials hope, will help stabilize its contributions, lessening, to some degree, the $40 million accumulated in unfunded liabilities. Unfunded liabilities represent the amount the city owes in pension payments to all employees either retired or currently on payroll over the next 30 years.
Both funds saw similar results, according to Ormond Beach Finance Director Kelly McGuire, because both funds were similarly managed.
And McGuire is “optimistic” the strong return rates will help stabilize or reduce the city's liability contribution, since the rate of return has an inverse relationship with contribution levels. Being a long-term investment, the pension fund's return rates for the past four years are averaged annually by the city to determine contribution amounts.
She added that the current target annualized rate is set at 7.5%. Anything above 7.5%, she said, is good for the city.
The annualized rate for the previous four years, for the police department, was 7.04%. This year, it's 7.33%.
The fire department’s previous annualized rate was 7.08%. This year, it's 7.34%.
But the positive upswing is not due to any specific investment shifts, McGuire said. It reflects the market, and the market's always changing. Those shifts will be on city officials' minds, she added, as they continue the process of negotiating collective bargaining agreements.
During negotiations for the last CBA, for both police department and general employees, changes to pension plans were a focus.
The general employees fund was switched from a pension to a type-defined contribution plan, known as a 401A, similar to a 401K.
The city is also currently negotiating a new CBA with the fire department. The last agreement expired in 2011, and once again, there will be changes to the pension plan; however, they won’t be as drastic as they were to the general employees fund.
State legislation also plays a role in the city’s pension planning, and since police and fire pensions receive state funds, they come with more state rules.
“(But) the governor has a little different interpretation for some of the laws,” McGuire said, “(which) could assist the city in its pensions problem.”
