Bel Air's pension funds remain healthy; actuary recommends study on lowering investment assumption

Town staff reported that both of Bel Air’s defined-benefit pension plans remain in solid condition but noted an actuary recommendation to analyze lowering the plans’ assumed investment return.

Lisa Grama summarized the actuarial valuations as of July 1, 2024. For the civilian (non-sworn) plan she said the market value was “a little over $11,000,000” and that the plan’s actuarial (smoothed) return was about 6.7 percent while the investment-manager return was roughly 15 percent. She reported the civilian plan’s funded ratio at 84.6 percent. The town’s current employer contribution for the civilian plan in the adopted budget is 8.7 percent of payroll; the actuary’s calculated contribution for the 2024'2025 year is 9.14 percent.

Grama told commissioners the sworn (police) plan had a market value near $10.8 million, an actuarial return near 6.8 percent and an investment-manager return of about 15.3 percent; the sworn plan’s funded ratio was 94 percent. For the sworn plan the town’s actual FY contribution is 9.4 percent of payroll, versus a required contribution near 7 percent; sworn employees currently contribute 10 percent of pay.

The actuary has recommended that trustees commission an assumption study to evaluate reducing the investment-rate assumption from 7 percent to 6.75 or 6.5 percent. Grama explained that lowering the assumed return would increase measured liabilities and therefore could raise required contribution rates; trustees plan to review the study later in the calendar year.

Discussion/next steps: trustees will consider the actuary'recommended study. No board action was taken; the report was provided for information.