South Burlington pension fund posts strong 2024 returns; actuarial report shows funded status improving, recommended FY26 contribution just under $1.1 million

The City Council on Jan. 13 received investment and actuarial updates on the city‑sponsored pension plan from Daniel Capel of SEI (investment manager) and Eric Shave of Newport Group (actuary). SEI reported that, as of Dec. 31, 2024, the pension plan’s market value stood at about $47.3 million and produced a 1‑year return of 10.43%.

SEI highlighted that the equity sleeve returned 23.78% in 2024 and that diversification in fixed income (including limited‑duration and high‑yield exposures) contributed to a 4.14% fixed‑income return that outperformed the broad U.S. aggregate index. The presentation noted that real estate has lagged (–5.47% in 2024) but that overall multi‑asset diversification contributed to positive performance. SEI also described its role as an outsourced chief investment officer (OCIO), including periodic manager changes; staff noted manager terminations and hires in some fixed‑income sleeves over the last year.

On the liability side, Newport Group’s actuarial study reported the plan’s funded status at roughly 99.8% on a unit‑credit measure and about 89% on an entry‑age normal basis, both improved from the prior year. Newport said the recommended FY26 employer contribution (the normal cost plus an amortization payment toward the unfunded liability) is roughly $1.1 million (the actuarial presentation described the total employer payment as “just under $1,100,000”). Actuarial details the consultant provided included:

- Normal cost (new benefits being earned in the year): about $441,000. - Amortization payment toward the unfunded liability: about $570,000. - Employee contributions (anticipated for the year): roughly $250,000. - Employer contribution expressed as a percent of payroll: about 23.3% (slightly higher than last year’s 23.04% figure, mainly because the active employee population is shrinking).

The actuarial presentation also noted that a pension loan of $8,160,000 taken in 2011 (refinanced) remains outstanding and is scheduled to be paid off in 2031; the city’s plan closed to new hires in staggered years (2013, 2018 and 2019 across unions) so the active population is declining and the plan is moving toward a mature, retiree‑heavy profile.

Council discussion and financial governance

Councilors asked about the reasonableness of the assumed long‑term investment return (7.25%) and how that compares to historical returns; the consultants said assumptions are reviewed annually and are intended to be forward‑looking rather than purely backward‑looking. The consultants discussed the lifecycle of a pension plan and noted that, at a later stage when the plan reaches a high funded level and the retiree population dominates, the city may consider annuity placement (insurer buy‑out) though that option typically carries a higher price from insurers.

No change to the pension contribution was acted on at the meeting; the actuarial report feeds the FY26 budget process and the council will be asked in future budget work to confirm required employer contributions through normal budget votes. Staff also described how pension administration (benefit payments and custody services) is provided through SEI and Newport and included a transparency discussion of OCIO fees (SEI presented a consolidated fee summary; total blended fee reported around 62 basis points on public markets plus alternatives costs, with illustrative annual fee in the vicinity of $290,000 based on current aggregated assets).

Why it matters

Councilors and staff framed the presentations as reaffirmation that the city’s pension plan is on a stronger funding trajectory than many public plans, noting the plan’s relatively high funded ratio compared with several peer public sector plans. The actuarial and investment updates are inputs to the municipal budgeting process that determine how much the city will contribute in the coming fiscal year to keep the plan on a sustainable path.