Segal Consulting
From presentation at Monday evening’s council meeting.
The Hamden pension fund has improved more in the last six months than in the three years before that.
The fund jumped to 40 percent funded in the first six months of fiscal year 2021 after stagnating at about 36 percent in fiscal years 2018 through 2020.
Henry Nearing of Segal Consulting presented that information along with the findings of the fiscal year 2020 pension valuation, as well as a sneak peek into the first half of fiscal year 2021, Monday night at a Hamden Legislative Council meeting.
Segal Consulting’s analysis estimates that the pension fund will become 100 percent funded by 2044 if the town continues to pay the state-mandated amount each year. This amount is known as the actuarially recommended amount, or ARC.
In fiscal year 2020, the town contributed 82.7 percent of ARC, totaling $19,210,000. It is required to pay 100 percent of ARC in fiscal year 2021.
While some members of the council touted reaching 100 percent as an accomplishment, Representative Brad Macdowall reminded them that they have no other choice.
“We are at 100 percent of ARC because we are now legally required to,” Macdowall said. “This is not the first time the council has decided to fund ARC at 100 percent. We decided to do that in 2018 – 2019.”
Macdowall said that Mayor Curt Leng’s administration withheld bills necessary to fund the fire department and other essential town services until the last minute in 2019. Therefore, the plans to fund 100 percent of ARC fell through because the council decided to transfer money from the pension to other town departments.
Nearing said the council should be cautiously pleased about the increase to 40 percent funding in the last six months.
“While we haven’t gained a lot of ground in the last three fiscal years, the silver lining here is that halfway through the fiscal year that is a pretty big pickup,” Nearing said.
Other Key Numbers
Accrued Actuarial Liability: This number refers to the promised value of pension benefits, or how much is left to pay out to retirees. At the end of fiscal year 2020, this number was $467.2 million and as of Dec. 31, 2020 it was $468.4 million.
Market Value of Assets: This number refers to the real value of the plan’s total assets. This number increased from $168.8 million to $187.3 million six months later. This increase is how the plan jumped from being 36 percent funded to 40 percent.
Active Participants: Active participants are people currently employed by the Town of Hamden who are paying into the pension fund. The number of plan participants is expected to drop by 67 percent over the next 10 years as people retire.
Total annual benefits: This number refers to the amount of money required to be paid to retirees each year. This number is expected to climb until 2037 and then decline as the number of retirees still living declines.
The Road Ahead
Reaching the goal of funding the pension by 2044 assumes a 2 percent annual increase in payments based on Hamden budget increases.
Representative Horsley said she does not see the council electing to put more money into the pension fund than required, because of budget constraints.
“We just don’t have the money,” Horsley said. “We already increased taxes so much and we just have to keep up with the current employees and the pay raises we need to pay them — it’s balancing that with putting more into the pension plan.”
What's the assumed discount rate?