FORT WORTH -- Boosted by a one-year investment return of 11 percent, the public pension fund for Fort Worth city employees is well off the state's list of unsound funds, city pension officials said Friday.
But city officials said new calculations also show financial vulnerabilities that will need to be addressed for years to come. The rosier outlook for the Employees' Retirement Fund, they note, is based on a number of assumptions, which aren't guarantees.
"There's a long way to go,'' City Actuary Doug Anderson said. "All these assumptions, which still aren't all that conservative, have to be met."
Still at issue: a low funding ratio, growth in unfunded liabilities and a discount rate above the norm for many state and local public pension plans.
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City and retirement fund officials have been working for several years to improve the health of the fund, which serves 10,000-plus active and retired police, fire and general employees.Fund Executive Director Ruth Ryerson said it has improved significantly thanks to increases in the city's contribution rate. The rate has almost doubled since 2007.
"The changes the city has made has gotten the plan back on the right track to be healthy and be able to pay promised benefits,'' she said. "We're within a decent funding period now."
The combined city and employee contribution is roughly 28.38 percent of an employee's pay, records show.
As of Jan. 1, the $1.7 billion fund could pay off all its obligations in 19.5 years, the fund's actuary reported. That is an improvement from a year ago, when the amortization period was 40.5 years.
The previous amortization period was troublesome to city and state officials because it exceeded the 30-year recommendation of government accounting standards.
But Ryerson said the 19-year payout is likely temporary. Because of continuing funding demands, she said, the amortization next year will likely grow to 30 years as continued losses from the 2008 stock market debacle are "smoothed in" or incorporated into future projections.
The fund lost 29 percent of its asset value during the 2008 market crash.
Anderson said a 30-year amortization period is more what he expected to see in this year's valuation. The city's doubling of its contribution was the primary reason for the improvement, he said. Another reason: Salary increases were at record lows last year. Still, he was surprised by the reported improvement.
"I don't understand it yet," he said.
He said he expects to meet with the fund's actuary, Leon F. "Rocky" Joyner, in coming weeks, to ask about the study.
He also pointed to red-flag financial indicators that the state oversight board also believes demand immediate attention.
For example, the plan's funding ratio, 69.9 percent, is an issue. Chris Hanson, executive director of the Texas Pension Review Board, has said the board likes funding ratios above 80 percent.
Anything less catches the board's attention, he said.
The funding ratio compares the plan's market value to its liabilities.
Another concern: Fort Worth's "unfunded liability" -- the money it lacks to pay off long-term obligations -- has increased to $578 million from $431 million about a year ago, records show.
One of the city's biggest criticisms of the retirement fund's calculations has been its method of calculating asset values. The fund, like other pension funds, uses a value that assumes that is will hit a hypothetical rate of return on its investments, called a discount rate.
According to city officials, that "assumed rate" of return is guesswork. Anderson said the calculation of market value of assets is a more dependable measure of funding status because "market value is the actual dollars you have available for benefits.''
The assumed rate of return issue is crucial for the city, Assistant City Manager Karen L. Montgomery said. It has been estimated that a 1/4 percent drop in the "assumed" return means $60 million in losses to the fund, Anderson said.
"We were trying to illustrate how fragile the fund's financial health is and can vary dramatically even with those small, relatively small changes in the assumed rate of return,'' Montgomery said.
This year, the pension fund, after several years, reduced its discount rate to 8.25 percent from 8.5 percent. That largely explains the increase in its unfunded liabilities, officials say.
Officials said that as collective bargaining kicks off this year for police and firefighters, the pension fund will likely be a hot topic of debate. One likely issue is having employees contribute more to the fund.
Employee rates have stayed the same in recent years. A vote of employees to increase contributions is expected in the summer.
In addition, the city is proposing a host of benefit cuts to employees hired on or after July 1.
Cuts in pension benefits could lessen the strain on the fund.
Ryerson, who was hired about five years ago to get the fund back on track, said her role is safeguarding the assets.
"The whole goal and why we exist is to make sure our employees are taken care of when they retire,'' she said.
Yamil Berard, 817-390-7705