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GREENWICH, CT – With the start of a new year, it seems appropriate to share an update on the status of the Town’s Retirement System.
This past calendar year (2019) plan assets appreciated approximately 16.7%. This is an approximation because 19% of the assets are invested in Private Partnerships that lag reporting their year-end results. For the two and a half years that Neuberger Berman(NB) has assumed responsibility for managing the assets, the retirement system has experienced an annualized return of 8.1%.
To put this into better perspective, the benchmark against which NB’s performance is measured, was 16.4% for 2019, and 8.4% since inception. The benchmark is the mix of various asset classes determined by the Trustees that reflects their outlook for performance and tolerance for risk. I think it is fair to say that to date, NB has managed the plan assets in accordance with the Trustees’ tolerance for risk and they have basically captured the expected return from the asset mix designated by the Board.
As of the end of the year, plan assets were approximately $527 million, a 5.5% increase in asset value since the Actuarial Valuation as of July 1, 2019. On the date of the Actuarial Valuation, the Accrued Liability of the plan was $630 million, and the funding ratio stood at 77% on an actuarial basis, which uses smoothed asset values, and 79% on a market value basis. The funding ratio is the relationship between actuarially derived liabilities and actuarially derived asset values. Looking at the funding ratio on a market basis as of December 31, 2019, we are closer to 82% funded.
While the funding ratio is an important factor to examine when assessing the health of the plan, several other assumptions are as important. The assumed rate of return on plan assets, the choice of amortization periods, inflation and compensation assumptions, and mortality estimates all go into assessing how good our projection of future liabilities and assets will play out. When these assumptions are examined, I believe our retirement system can be viewed as quite healthy and is on track to narrow the gap between asset and liability values in the years ahead.
But having a healthy retirement system comes with a cost to the Town and the taxpayers. For the upcoming Fiscal Year ’20 – ’21, the Town is required to contribute $26.1 million and taxpayers will likely be paying into the retirement system over $100 million in the next four years.
Given the magnitude of the cost to the taxpayers for meeting the obligations of the retirement system, in addition to the attention the Board spends on the plan performance and assumptions, the Board has been diligent in improving administration of and service to the members of the system. This past year we changed the custodian, the paying agent and the record keeper in an effort to have better service at lower costs. We hired a part time associate to critically review records and make sure errors are either eliminated or prevented from happening in the first place. We undertook the first ever survey to assess our weaknesses and strengths. Finally, we implemented several policies and procedures to help the Board and the members of the system address recurring issues.
While substantial progress has been made in many areas, the Board remains diligent and committed to ensuring clear and consistent policies and procedures, enhanced service to plan members, and competitive asset performance.
Respectfully submitted,
Joseph L. Pellegrino, CFA
Chairman of the Retirement Board
For more information, contact Kenneth Berkson, Retirement Administrator to the Town of Greenwich Retirement Board, at kenneth.berkson@greenwichct.org.
cc:
Board of Estimate and Taxation
Board of Selectmen
Retirement Board