The executive director of the Fort Worth Employees’ Retirement Fund told the City Council Tuesday that the fund lost money in 2015 because of poor market conditions and that its board is considering a more aggressive investment policy in hope of increasing returns.
Moreover, Joelle Mevi, the fund’s executive director and chief investment officer, said it may take an additional 5 percent in payroll contribution to close a gap in the amount of time the city would need to make its pension fund whole. The increase would bring the city’s liability to a more desirable 30-year amortization period, she said.
The council has been adamant about not adding more tax dollars to the pension fund.
Nearly 30 percent of payroll, both in city and employee contributions, goes to the pension fund. The fund’s only other revenue is its investment returns.
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The city’s pension liability is $3.4 billion, of which $1.3 billion is unfunded. At the end of 2014, the unfunded liability — the difference between promised benefits and what’s on hand to pay for them — stood at 55.7 years instead of “infinite,” or never being able to pay it off. Officials at the time were encouraged that benefit cuts made for the past few years were starting to pay off.
As of Dec. 31, 2015, the unfunded liability had grown to 72.5 years.
In the 12 months ending April 30, the fund lost 1.4 percent, figures show.
The fund’s value is now $2.02 billion, down from $2.09 billion a year ago.
The board of trustees continues to exercise discipline during periods of low market returns and to explore ways to construct a low-cost, risk-focused portfolio designed to achieve the target return over the long term.
Joelle Mevi, Fort Worth Employees’ Retirement Fund, executive director
“The board of trustees continues to exercise discipline during periods of low market returns and to explore ways to construct a low-cost, risk-focused portfolio designed to achieve the target return over the long term,” Mevi said. “Coordination of pension-related actions between the mayor and City Council and the board of trustees is critical to ensure long-term sustainability of the pension benefit.”
In 2015, the fund board conducted an asset/liability study for the first time, which said the plan’s financial health “has a meaningful probability of deteriorating further over the next 20 years” if more money isn’t added.
Earlier this year, Moody’s Investor Services, one of three main rating agencies, downgraded the city’s bond rating, which affects the city’s cost of borrowing money for capital projects, citing the city’s pension liability.
Last year, the council asked City Manager David Cooke to form a committee to look at the pension issues. The committee is still meeting and hasn’t issued a reported.
We do have a challenge before us. The idea is to do this very thoughtfully, and not passing a problem to a future generation or at least let’s not make it worse.
Fort Worth City Manager David Cooke
“We do have a challenge before us,” Cooke said. “The idea is to do this very thoughtfully, and not passing a problem to a future generation or at least let’s not make it worse. In the ’90s we increased benefits beyond what was sustainable by the contribution being taken and the rate of return being achieved by the fund. That’s the challenge we’re trying to fix.”
Because the city has had three consecutive years in which its pension amortization rate is greater than 40 years, the City Council and the Employees’ Retirement Fund has until November 2017 to submit a funding restoration plan to the Texas Pension Review Board.
Mayor Betsy Price called continued pension issue “a critical situation.”
The city has about 6,200 active employees and 3,900 others receiving pensions.