This week, the town’s three pension boards will review a proposal that calls for the town paying back more than $21 million in unfunded liabilities over a 20-year period.
The town’s pension actuary, Foster & Foster, engaged in talks with the state’s Division of Retirement, which has already agreed to the proposal, known as the 10-20-30 plan.
Finance Director Tom Kelley said the millions of dollars in losses that occurred between 2000 and 2002 would be paid back in 20 years, instead of 30 years.
The 30-year amortization method that the town currently uses was a point of contention with former state actuary Charles Slavin, who retired this year.
Kelley said the approval from the state “is a huge break,” considering that months earlier the Division of Retirement wanted the town to pay back its losses over a period of seven years.
The 20-year amortization plan calls for the town to pay approximately $2.1 million per year until the losses are made up. The town would have been forced to pay approximately $3 million per year if losses were to be paid over seven years.
The town’s contribution to its pension plan this year, which is already accounted for in the town’s current budget, is $1.7 million.
If the 20-year plan is approved, the town will be required to pump an additional $400,000 per year into the plans, with $300,000 being used to pay off losses and $100,000 being used to fund the plans moving forward.
Kelley said that because the average remaining life of the town’s 30-year amortization method is now 23 years, the town is really only accounting for an additional three years of funding requirements.
Funding for the plans moving forward will also change if the proposal is approved.
“Instead of using 20 years to amortize unfunded liabilities going forward, you amortize over 10 years,” Kelley said. “This adds some volatility to the level of payments because you have a shorter period of time to amortize losses.”
But if the town sees gains in its plan after implementation, it could reduce its annual funding amount or continue to fund the plans aggressively to pay down unfunded liabilities.
“We saw it (the proposal) as a positive,” said Kelley, who will explain the proposal to the pension boards this week.
In the meantime, the town has stopped using the services of Merritt Island-based Chad Little Actuaries, whom the town hired as an independent actuary to review its pension situation.
The town spent approximately $8,000 for the services of Little, who was expected to come up with another pension proposal. Little has reviewed the proposal, Kelley said, and finds it acceptable.
Vice Mayor Robert Siekmann said the proposal does not solve the town’s problems.
“I’m happy to see that what is proposed has far less of an impact,” Siekmann said. “But finding an additional $400,000 for years to come tempers the relief. That’s still a big number.”
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