Fort Worth pension improves but has a ways to go

The Fort Worth Employees’ Retirement Fund board and the City Council learned Tuesday that pension benefit cuts made three years ago are starting to pay off.

A review of the fund shows the city can pay off its unfunded liability within about 55 years instead of never being able to. But the amount that needs to be paid down keeps growing, and that worries some council members.

Councilman Sal Espino said he is still not pleased with the fund’s direction and called on the city manager to put together a committee to review best practices in other cities and to look for other possible improvements.

Employees deserve a good pension fund, he said, but taxpayers don’t deserve to be strapped with an underperforming system.

“Clearly we made changes, but we’re not there yet. Fifty-five years is a long time,” Espino said. “The average citizen and taxpayer will look at these numbers and say, ‘We’re on the hook for that?’ The taxpayers are the guarantor of the pension fund. We still have huge numbers.”

The actuarial review is the first to account for the fixed 2 percent cost-of-living-adjustment increase selected by many city employees, benefit cuts and changes to actuarial procedures implemented over the past five years. It shows that the city can pay off its unfunded liability in 55.7 years.

Without the cuts, the time would have reverted to an “infinite” amortization period, meaning the liabilities would never be paid off, Doug Anderson, with Gallagher Benefit Services, told a joint meeting of the board and council. That was last forecast in 2009.

The city contributes about 20 percent to the pension fund, and city employees contribute 8 percent.

The new report shows, though, that the cuts have continued to reduce the cost of benefits in the past five years.

In 2015, the combined contribution going toward those costs was 11.7 percent, compared with 12.5 percent a year ago. The rest is used to pay down the unfunded liability, meaning that 16.3 percent of the money will be used to do that this year.

In 2009, 17.8 percent of the contributions were used pay benefit costs, and only 10.2 percent went to the unfunded liability.

The unfunded liability — the difference between promised benefits and what’s on hand to pay for them — was $1.27 billion as of Jan. 1, up from $1.12 billion in 2014, a 13 percent increase.

The city’s pension commitment stands at $3.36 billion, but the fund has only $2.09 billion, putting the funded ratio, or the measure of current assets as a share of liabilities, at 62.2 percent. That ratio is expected to climb going forward, to 64.1 percent by 2025, as a result of the cuts, the report shows.

In 2014, the funded ratio was 63.9 percent and the amortization period was 49.3 years. A fiscally sound pension fund should have about a 30-year amortization and an 80 percent funded ratio.

Deborah Brigham with Segal Actuarial Services said the fund is still recovering from market losses in 2008 in the Great Recession. That year, the fund lost nearly 30 percent of its value.

Mayor Betsy Price said that the report offered no surprises and that the challenges are not over.

“We know we have to continue to work on it,” Price said. “This system has to be stable and be sustainable.”

The city has about 6,200 active employees and 3,900 others receiving pensions. An additional 300 former employees are also entitled to pensions but are not retired. The average pension benefit is about $3,100 a month.

This story was originally published July 21, 2015 at 5:48 PM with the headline "Fort Worth pension improves but has a ways to go."