FORT WORTH -- The city's employee pension fund, which put up a 9.85 percent return for the year's first 11 months, is on track to post an 11 percent return for the year, the fund's director said.
"It's been a good December," Ruth Ryerson, Fort Worth Employees' Retirement Fund executive director, said in an interview.Representatives of the city's police officers and firefighters associations said the numbers show the fund is performing well.The fund's board is set early next year to consider lowering its assumed rate of investment return, following the market's volatility and disappointing returns in recent years.But the police and fire association representatives say the year's strong numbers suggest lowering the assumptions on return is unnecessary. Lowering the assumed rate of return will increase the pension's unfunded liability. City Council members this fall approved significant cuts in pension benefits for future service to rein in the fund's burgeoning liability."The economy is headed in an upward direction," Sgt. Steve Hall, president of the Fort Worth Police Officers Association, said Friday. "The fund is obviously still healthy and growing despite what some would say."Jim Tate, president of the Fort Worth Professional Firefighters Association, maintained his assertion that the pension cuts, due to take effect next year, are a step in the direction of a 401(k)-style plan that offers less benefits. The council has committed to maintaining the pension but has said it must be affordable and sustainable."We're not looking at defined contribution here now, but I think it's a step in that direction," said Tate, who has also maintained that the business community nationally wants to move toward 401(k)s and away from pensions to direct management fees to investment firms.The police and firefighter associations also maintain that the pension changes make the unfunded liability look artificially worse, by booking the impact of a cost-of-living adjustment not currently included in the calculations.Including the cost-of-living adjustment increases the unfunded liability to $997 million from $748 million. The $997 million would go higher if the pension fund lowers its assumed rate of return.The city several years ago offered two versions of the COLA -- a fixed 2 percent adjustment, and a variable one that pays only when the number of years to extinguish the plan's unfunded liability falls below a certain level. The city, as part of the pension changes, next year will offer employees who originally chose the variable rate an opportunity to switch to the fixed rate.The reasoning: Lock in a fixed liability so the city can confront it. And, with the big funding gap, the variable adjustment isn't expected to pay off again for 21 years."Back in 2007, all city employees were given a choice of a one-time irrevocable selection, and I would just like to look at a definition of irrevocable," Tate said.Bill Leonard, a retired Fort Worth certified public accountant who led a Fort Worth Chamber of Commerce group that pressed the city to pare pension benefits, said the 2012 numbers don't change the fund's underlying problems. The City Council and fund set the pension down the path it's on in the 1990s, raising investment assumptions and increasing benefits.The fund, through November, had earned 8.87 percent since Sept. 1, 1983, according to the latest report. Over the past 10 years, it has returned 6.95 percent on average annually. Over the past five years, it has earned only 0.83 percent on average annually.The chamber group says a 7.5 percent assumed rate of return annually is a realistic target to shoot at, compared with the current 8.25 percent.The reported return since 1983 includes "the greatest market ramp-up in history," Leonard said.The fund's actuary dropped the assumed rate of return by a quarter point two years ago and indicated that more reduction would be necessary.The actuary also next year is expected to raise assumptions for retiree longevity, which will increase the pension's unfunded liabiility.The strong 2012 "is just one year out of many, many years," Ryerson said. "They'll take this into account, but it's just one piece."The changes go into effect Jan. 1 for new police officers and Oct. 1 next year for the future service of police and general employees. The city is in contract talks with the police and firefighters, but the police agreement -- unlike the firefighters' -- doesn't cover the pension.Under an 8.25 percent return, it would take the city 29.4 years to pay off the $997 million liability. Lowering the rate to 7.5 percent would mean a 50.3-year payoff.Under the pension changes, the city will reduce the multiplier used in calculating benefits, raise the number of years used in figuring base retirement pay and eliminate overtime in calculations.Police officers voted overwhelmingly to increase their contributions to the pension in exchange for keeping their benefits formula; the council rejected that.Scott Nishimura,817-390-7808Twitter: @JScottNishimuraHave more to add? News tip? Tell us
