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Is Your Pension
Plan In Trouble?
A Message from
your Chairman
The short
answer to the above question is “No”, your pension plan is
not in trouble. Much has been written in recent months about
the alleged ‘State of Pensions’. While in some instances these
articles mention private enterprise and private pensions,
for the most part the articles are about public pensions.
Most of these articles harp on the exorbitant costs and how
generous these benefits are. In Florida the issues have been
raised principally by comments and concerns regarding the
Florida Retirement System (FRS). The participants in that
plan consist of employees of the State of Florida, Counties
and Municipalities which have chosen to join the FRS because
of a perceived notion that they cannot afford their own plan
or do not possess the knowledge or expertise to manage their
own pension plan or both. The participants in FRS have never
contributed to their pension plan. They are suffering from
financial shortfalls and the ever increasing costs are being
borne by the taxpayers throughout Florida.
When the
Pompano Beach General Employees Retirement System was
created, nearly 40 years ago, your City Fathers had the
foresight and wisdom to develop a plan which required
participants to contribute a percentage of their salaries
into the plan. Total contributions to the plan come from
three sources. The largest source is from investment income
from those investments made by your board of the funds
available, generally about 75% - 80%. The employee
contributions are added to the fund and the City has a
commitment to make up the difference of what is required,
each year, by an Actuary to make the fund actuarially sound.
Unfortunately there are many public bodies, (States, Cities
and Counties) which deem that obligation to be too much and
decide that rather than pay into the pension plan they will
delay their contribution until later, sometimes years later,
if at all. Those are the pension plans which are in trouble.
You are fortunate that our City Fathers live up to their
commitments and make their required contributions and do so
on a timely basis.
Your pension
board is obligated to do its best to ensure that its funds
are properly invested with assistance and advice of an
Investment Consultant and following generally accepted
guidelines regarding asset allocation. Our portfolio is well
diversified and we are constantly reviewing our fund
allocation and the performance of our money managers. We
also research other investment opportunities both
domestically and internationally. All of your trustees
participate in very healthy discussions regarding the types
of investments and the amount of money that goes into each
type of investment.
Many of the
articles regarding pension plans make general statements
about the plans being unfunded or underfunded. A couple of
years ago the department of Management Services came up with
a program that would require plans that were not fully
funded to close down and join FRS. Their definition of fully
funded was that the plan should have on hand, at all times,
sufficient funds equal to 115% of the ultimate required to
pay off all participants through retirement, even though
that may well be 30-40, or more years from now. That would
be the equivalent of a mortgage company or bank lending you
$200,000 to buy a home and then saying you must have
$230,000 on hand at all times to pay off the loan. I know, I
know, it doesn’t make any sense, but that is the kind of
thinking that comes out of Tallahassee and that your Board
has to deal with on a regular basis.
Your pension
board meets regularly once a month and sometimes more
frequently. Our meetings last anywhere from two to four
hours, maybe more. There are a lot of public plans that meet
quarterly or even less frequently. Your trustees are
dedicated to doing a good job and doing it the right way.
There are no time restraints on doing the right thing. Your
trustees as well as the staff are also well educated in
matters relating to public pension plans. This includes a
good working knowledge of general accounting matters
relating to public pension plans, understanding financial
statements, actuarial reports, the State of Florida Sunshine
Law, Robert’s Rules of Order and a myriad of other
documents. There are continual classes, schools, conferences
and other programs which provide opportunities to expand our
level of knowledge and understanding of these important
matters. Your trustees avail themselves of many of these
opportunities to further their education. I have often said
that the three most important factors in maintaining an
excellent pension plan are education, education, education.
Madelene
Klein, Our Executive Director and Lindsay Koehler, Assistant
Administrator are second to none in Florida and are among
the very best in the country. As always they welcome your
inquiries regarding your pension plan and your benefits.
You pension
plan is NOT in trouble. To better see how we keep it that
way you are invited to attend any of our meetings. We
regularly meet on the third Tuesday of each month at 1:30
p.m. at the pension offices. Our very knowledgeable and
professional staff is there to help you.
Respectfully
Submitted
Reg Watkins,
Chairman
March 15, 2011
Subsequent
articles will be posted on our website
www.pompgers.org
from time to time.
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