Get Full Government Meeting Transcripts, Videos, & Alerts Forever!
Get email alerts on the Pension Valutation topic
No spam. Unsubscribe anytime.
Actuary: July 1, 2025 valuations show pension ~108% funded but town still faces net contribution
Summary
An actuary told the Retirement Plan Advisory Committee that the towns 07/01/2025 interim valuations show the pension plan is about 108% funded (just under $14 million surplus), yet the town still must make a net annual contribution because of normal cost and a 15-year amortization schedule. The OPEB trust is about 88% funded; the presenter recommended considering using the trust for benefit payments.
An actuary told the Retirement Plan Advisory Committee on Feb. 5 that interim valuations as of July 1, 2025 show the towns pension plan is "overfunded by just under $14,000,000, so it's about a 108% funded," but the town will still need to contribute to the plan in the coming fiscal year.
The presenter, who reviewed the valuation materials distributed to the committee, explained the Actuarially Determined Employer Contribution (ADEC) is made up of two parts: the normal cost (the value of benefits active employees earn in the year) and the past service amortization payment. He said the gross normal cost is roughly $2.5 million, employee contributions are estimated at about $767,000, and the amortization of the surplus (treated like a mortgage) is being calculated over a 15-year open period at a 6.625% discount rate. That amortization produces approximately a $1.4 million negative offset against the normal cost, leaving a net town normal-cost contribution on the order of $520,000.
The presenter described the valuation as an interim study: the asset values were updated to 07/01/2025, but participant data was projected forward from 07/01/2024 rather than fully updated. He also explained the actuarial value-of-assets method the town uses, which smooths gains and losses over five years to avoid volatile year-to-year swings in the ADEC.
On the OPEB (retiree medical) side, the presenter reported the trust is about 88% funded and noted the town currently pays many benefits outside of the trust. "If youre paying benefits out of the trust directly from the town," he said, "youre actually paying more than we as the actuary are saying you really need to be paying at this point." Committee members estimated that paying outside the trust costs roughly $200,000 more annually relative to the ADAC-based trust payments.
The presenter recommended an experience study later this year to re-examine demographic and economic assumptions and said he will likely recommend adopting the Society of Actuaries' Pub-2016 mortality table in the 07/01/2026 valuation. He warned that while the plans funded percentage looks strong now, contribution needs still arise from the mechanics of normal cost and amortization policies, and that the town could adjust amortization periods or other actuarial methods within accepted practice if affordability becomes a concern.
The committee and the presenter discussed peer comparisons, discount-rate effects on funded ratios, and how the five-year smoothing and open 15-year amortization moderate contribution volatility. The presenter said a full data update and valuation are scheduled for 07/01/2026 and recommended the committee consider the experience study and mortality-table update at that time.
Next steps: staff and the actuary will complete the full 07/01/2026 valuation and bring recommendations (experience-study timing and any assumption changes) back to the committee for decision; any changes that affect budgeted contributions will then be considered as part of the towns budget process.
