Needham retirement board reviews 2025 actuarial valuation, delays vote on funding schedule while weighing COLA options

The Town of Needham Retirement Board on Oct. 15 reviewed a Jan. 1, 2025 actuarial valuation showing the system—s unfunded liability fell to about $66.1 million and discussed funding-schedule options, administrative-cost assumptions and whether to raise the pension cost-of-living-adjustment (COLA) base. The board took no final vote and agreed to reconvene before Oct. 31 so the administrator and the town—s account manager can review schedules and any COLA proposal.

The actuarial presentation, delivered by Linda of KMS (the board—s actuary), compared the 2025 snapshot with results through Jan. 1, 2024 and noted asset gains for calendar 2024. The retirement system—s market assets rose during the year, and the smoothing method the actuary uses recognizes only 20% of the most recent gain in the actuarial value of assets. That smoothing produced an actuarial value close to market value while tempering appropriation swings.

KMS reported the plan—s assets were roughly $275 million in the most recent PRIM reporting and that actuarial assumptions now include a 6.25% long-term investment return. KMS recommended two relatively modest assumption changes: (1) increase the board—s administrative-expense assumption to reflect current budgets (KMS cited an administrative-expense figure in the low hundreds of thousands and described a modest annual budget-based increase), and (2) raise the net 3(8)(c) transfer assumption slightly (KMS said net 3(8)(c) transfers historically averaged roughly $620,000 and recommended increasing the assumption by about $25,000 per year). The actuary emphasized these are standard actuarial funding assumptions and showed how the assumptions flow into normal cost, administrative costs, 3(8)(c) transfers and the payment to amortize the unfunded liability.

On benefit changes, KMS reminded the board that the last valuation anticipated an $18,000 COLA base and that the board began funding for that change in the 2024 valuation. Board members asked KMS to produce two "what if" runs showing the impact of raising the COLA base to $20,000 with two separate effective dates: July 1, 2026 and July 1, 2027. KMS said it would deliver the additional funding schedules quickly and that the board must decide a schedule prior to PERAC——s (the state retirement oversight body) October 31 deadline for filing the chosen funding schedule.

KMS presented several model funding schedules (A1 through A4). The actuary recommended schedule A3 to preserve the board—s previously stated full-funding target of 2032 and to cap any year-to-year appropriation increase at 8 percent when the calculation permitted that cap. KMS said an alternative schedule (A2) would have produced a larger near-term increase (roughly a mid-teens percent increase from the prior appropriation), which the firm labeled harder for the town to manage. The board asked the actuary to provide A3 plus the two COLA-timing "what if" scenarios and to circulate them to the town account manager and board members for review.

Board Chair Michelle Veil LaCourt led the discussion and several board members pressed for involvement from the town—s account/finance staff before adopting a schedule. The board agreed to hold a short follow-up meeting in late October so the account manager ("Katie" in the meeting record) and the town manager could review the numbers; the actuary said she would send the funding schedule options as soon as they were ready.

No formal vote on a funding schedule took place. The board did adopt routine administrative items during the meeting (minutes, membership changes, payroll and expense warrants) and scheduled the reconvened session to consider the valuation—s funding-schedule recommendation and the COLA timing options.

The board requested that the actuary also produce a schedule that would show the effect of each COLA option while holding the full-funding date at 2032 (rather than extending the amortization period). KMS cautioned that keeping the 2032 target while adding COLA costs could require higher near-term appropriations or hitting the 8 percent cap in some years; the actuary said it would model multiple caps if requested.

The board—s next steps: KMS will send the A3 baseline plus two alternative schedules showing a $20,000 COLA effective either July 1, 2026, or July 1, 2027. The board will circulate materials to the town account manager and hold a short special meeting before Oct. 31 to select a funding schedule to file with PERAC.