An actuary firm the Longboat Key Firefighters Pension Board hired in December to investigate the actions of pension actuary Foster & Foster believes the firm has acted appropriately.
The Segal Group’s Vice President and actuary Jeannette Cooper told the board at a special pension meeting Wednesday, March 23 that actuary reports from October 1999 to October 2009 “are more than reasonable.”
“We agree with what the actuary has done over the years,” Cooper said. “I will say that straight up.”
The board hired the Segal Group for $15,000 to research the firm’s actuarial decisions. The board also hired Benchmark Financial Services to investigate the rest of the pension plan decisions made by its board, attorneys and investment managers at a cost of $50,000.
Firefighters Pension Board members Keith Tanner, Brandon Desch and Michael Murphy believe the studies need to be performed, because suspicions about the underfunded pension plan have continued to grow, and its members want closure on the issues raised. Tanner has said the town is using the pension’s unfunded liability as a contract negotiation tactic.
Tanner has stated for months that he believes the majority of the issues reside with pension actuary firm Foster & Foster and a decision in 2003 to spread out investment losses from 15 years to 30 years.
But Cooper said that’s not the case.
“The changes made were reasonable,” Cooper said. “The actuary accounted for changes correctly and the assumptions made were common. Methodology and amortization periods were updated appropriately.”
Cooper noted that in 2003, employee salaries and benefits increased and a number of pension modifications led to larger than normal unfunded liability.
“But 2003 was an anomaly for your plan,” Cooper said. “If you remove that year, your plan comes close to reaching its (8% investment) benchmark.”
Tanner said that the plan’s losses were spread out, over 30 years because the town requested relief from a huge pension payment that would have to be made otherwise.
“My question from day one was why the actuary recommended this ‘pay me now, pay me later’ plan, when they knew it would cause huge unfunded liability later on,” Tanner said.
But pension board attorney Robert Sugarman told the board that no one was responsible for any wrongdoing due to that decision.
“What this report shows is everyone went into this with their eyes wide open,” Sugarman said. “We knew payments would spike later on. We were in partnership with the town to solve the problem the town told us they needed relief for at that time.”
Sugarman noted that the plan is not in dire shape, despite the $13 million in unfunded liabilities the plan contains.
“What we know is the unfunded liability is going down, the town is making its contributions and the investments are starting to do their part again,” Sugarman said.
The comments and the report led pension board member Shannon Gault to state that the actuary’s report means that Benchmark Financial Services President Edward Siedle will not be able to find any wrongdoing with the pension plan.
“I’m not very confident at all now that Mr. Siedle can find anything,” Siedle said. “There is no silver bullet to find now.”
In a preliminary report, Siedle revealed he has issues with investment manager Morgan Stanley and a $209,000 payment made to the company in 2004 that was a conflict of interest and could have resulted in the plan’s underperformance by at least 1% annually for the past 10 years.
“To date, Mr. Siedle has only found a $209,000 payment that the board’s attorney had already investigated,” Gault said.
Siedle believes the final report could be issued to the board when it holds its quarterly meeting in May.
To download a PDF of the Segal Group's 44-page report, click here.
Contact Kurt Schultheis at firstname.lastname@example.org.
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