Needham Retirement Board recommends 'schedule 2' after actuarial valuation shows ~82% funding

The Needham Retirement Board voted July 15 to recommend a funding schedule described in the actuarial valuation as "schedule 2," forwarding the recommendation to the town manager and planning to finalize the board's formal adoption at its August meeting if the manager concurs.

The decision followed an annual valuation presentation by Linda Bonneville, the actuary who told the board the system’s funded ratio has improved to "almost at 82%" and that the unfunded liability dropped from about $68.5 million to roughly $62.7 million. "Chapter 32 requires full funding by 2040," Bonneville said, noting Needham’s locally adopted target of reaching full funding by 2032 and that the system remains on a generally favorable trajectory.

Bonneville reviewed the sources of year‑to‑year change: investment returns (a net investment loss of about $1.5 million in the latest year, offset in part by prior gains recognized under the actuarial smoothing method), demographic experience (a roughly $4.4 million demographic loss driven by new entrants and rehired staff), and one‑time salary changes. She explained the plan uses a smoothed actuarial value of assets — recognizing portions of gains and losses over several years — and that the board’s long‑term investment return assumption (6.25%) is more conservative than the statewide average, which increases reported liabilities but provides a prudential margin.

The board considered three funding schedules presented by Bonneville: a front‑loaded option (schedule 1), a modest‑increase option that continues current policy (schedule 2), and a longer amortization (schedule 3). Bonneville said the minimum annual increase needed to maintain the current full‑funding trajectory rose from 8.01% in last year’s materials to 8.58% under the new data and assumption set. She described the "cost of deferral": choosing a more gradual schedule or extending the full‑funding date would increase the plan’s long‑term cost by millions of dollars.

After brief discussion and a request to seek town manager input, Tatiana Swanson moved that the board recommend schedule 2 to the town manager; John Kowicki seconded the motion. The chair called a roll‑call vote and the transcript records the motion as approved by the members present. The board agreed to return in August to finalize the funding schedule after the town manager reviews the recommendation and the finance office provides any feedback needed for submission to PERAC by the statutory deadline.

Why it matters: the funding schedule sets the town’s required appropriation trajectory. Bonneville told the board that while the system’s funded status has improved, even modest market reversals or changes in demographic experience can shift the funded percentage; choosing schedule 2 preserves the board’s conservative assumptions while moderating next year’s budgetary impact compared with the most front‑loaded option.

The board’s next meeting is scheduled for Aug. 12, when the board expects to take a final vote if the town manager concurs.