Like many local governments, the city of Burlington, Vermont, has seen its funded status slip and its annual required contributions grow over the last decade. City leaders held a pension forum on November 5 to talk about the issues.
Former City Attorney Joe McNeill noted that the city had enhanced pension benefits in 2000, but two years later, it began to realize that it had taken on a commitment that would be difficult to sustain. The problem was magnified by the investment losses sustained during two recessions.
Keynote speaker Elizabeth Kellar, president and CEO of the Center, told attendees that Burlington would need to decide what changes to make to its retirement system based on its own needs and values. She said the city should keep employee recruitment and retention in view while crafting plan changes.
“You’re 70 percent funded. Most cities right now are about 73 percent funded, so you’re a little below average,” Kellar said. “It’s not a problem that can’t be solved. Small changes, in many cases, can make a big difference over time.”
Kellar emphasized the importance of a clear pension funding policy that shows how and when pensions will be funded. She noted that well-funded pension plans follow certain practices. They:
- take a long-term approach to estimating investment returns
- have employers that consistently pay the full annual required contribution
- adjust their demographic and other assumptions as needed
- have realistic full retirement ages
- accumulate reserves when investments are strong
- do not allow extraordinary income to be included in pension formulas
- use long-term financial modeling to analyze pension benefits
- have annual briefings from the plan sponsor and actuary
To learn more, read the Burlington Free Press story on the forum.