Farmington retirement board briefs council on pension health, long‑range cost projections

The Town of Farmington’s retirement board on Oct. 28 told the Town Council that the town’s defined‑benefit pension plan is mature, largely closed to new general‑town hires and being managed to reduce long‑term funding risk.

"The plan is what we call a defined benefit plan," said Joe, a retirement board presenter, explaining the pension guarantees a benefit based on credited service and formulaic calculations. He said the single employer plan contains five subgroups — police, fire, town employees, board of education non‑certified staff and the library — and that the rules are codified in town ordinances.

The board emphasized that both employees and the town contribute to the plan and that contribution rules differ by subgroup. "Most town employees contribute 6 percent," Joe said, while firefighters contribute at an 8 percent rate; employee contributions generally stop after 32.5 years of service. For employees hired after the plan closure dates, the town uses a defined contribution plan with mandatory employee 6 percent contributions and a town match up to 6 percent, he said.

Why it matters: With a growing retiree population and fewer active contributors, the town’s required annual contribution — the actuarially determined contribution (ADC) — will change over time. Joe said the combined contribution from the town, the water pollution control authority (WPCA) and the library for 2025–26 totaled about $6.3 million.

The board described three primary roles that drive funding decisions: the investment advisor (named in the transcript as Fiduciant Advisors), the plan actuary and the plan custodian (named in the transcript as Principal Custody Solutions). The board said it moved to hard‑dollar fee agreements with its advisor to reduce perceived conflicts of interest, and that the advisory fee has been about $52,000 annually since 2013. Custodial services, the board said, average roughly $3,700 per month (about $44,000 per year).

On investments, the board reported roughly $116.8 million in plan assets as of mid‑October, with an asset mix that includes cash, fixed income, domestic and international equities and a modest real estate allocation. Joe said the board’s assumed long‑term return target is 6.625 percent and that the board has been lowering higher historic assumptions gradually to be more realistic.

The board also described a decision to reduce exposure to commercial real estate: about $5 million remains in a redemption queue and will be realized over several years as properties are sold, rather than in a single transaction.

Long‑range outlook: The presentation included actuarial forecasts showing the town contribution rising under current assumptions and peaking near $10.3 million by about 2041, followed in the model by a sharp decline toward zero in 2042. Joe repeatedly cautioned this is an actuarial projection contingent on many assumptions, including investment returns, mortality and salary growth.

Councilmembers asked follow‑up questions. Brian asked whether the plan would be "self‑funding" if town contributions reached zero; Joe said employee contributions for any remaining active participants would continue and the board would manage assets to meet obligations. Patty asked whether the increase to roughly $10.3 million would be gradual; Joe said the rise would likely be gradual over roughly 18 years, but emphasized it depends on market performance and any changes to actuarial assumptions. Other questions clarified library participation and the eligibility threshold for plan membership (commonly 30–37 hours depending on position).

Procedural notes: The meeting record shows a motion to allow the retirement board presentation was made and seconded early in the meeting; the mover later withdrew that motion after the presentation. The council then approved a motion to adjourn by voice vote; the chair declared the motion passed.

What’s next: The retirement board will continue quarterly meetings and will return with valuation‑driven ADC figures during budget season; council members were urged to watch actuarial reports and budget impacts as assumptions and market conditions evolve.