Newton Retirement Board approves Mayor Fuller’s pension funding proposal

The Newton Retirement Board convened a special meeting on Thursday, April 6 to discuss Mayor Fuller’s proposal that the Board’s Pension Trust payment schedule be completed by 2031-2032 rather than 2030, as originally planned. At the same time, the Mayor proposed that the City increase the base pay on which Cost of Living Adjustments (COLA) are computed – increasing the base by $1000 per year for three years, thereby raising the annual base from $12,000 to $13,000 in FY24, to $14,000 in FY25, and to $15,000 in FY26. The Mayor had promised to reach out to Kathy Riley, an actuary working for the City, to meet with the Retirement Board on April 6th to discuss the financial options for the Board.

Retirement Board chair Thomas Lopez convened the meeting, invited everyone to introduce themselves, and explained that only Retirement Board members and Kathy Riley would be speaking. About fifteen of the attendees were retirees, and there were several PTO leaders as well. The Mayor’s plan would reduce the amount of money to be paid into the Pension Trust and be available for renovating the Horace Mann Elementary School. City Council President Susan Albright and Newton School Committee member Chris Brezski were present at the April 6th meeting. At the March 30 Retirement Board meeting, they presented a plan to extend the full Retirement Pension Fund beyond 2030 by reducing the annual amount the City contributes, at the same time ensuring that it is fully capitalized before 2040 state-mandated deadline.

Kathy Riley, Senior Vice President and Chief Actuary at Segal, the city’s actuarial consultant, reviewed Newton’s COLA proposal to provide an increase of $1000 per year at the $12,000 base beginning on July 1, 2023 and increasing at the same rate through July 1, 2025. She explained, “Each $1,000 increase in COLA base increases the normal cost for FY24 by approximately $76,000 and the July 1, 2023 unfunded liability by $3.8 million.”

“The System’s Market value of assets decreased from $526.3 million as of January 1, 2022, to $473.8 million as of December 31, 2022. The return for the year was -10.7%. We determined an actuarial value of assets of $500.3 million as of December 31, 2022, an increase from the $472.1 million actuarial value of assets at the beginning of the year. Although the actuarial value of assets increased during the year, it did not increase as much as expected. The loss on an actuarial basis was $8.8 million.”

She offered alternatives for the rate of increase in appropriations to the pension funding schedule that would fully fund the pension liability by various years:

• Full funding 2031 at 8.6% growth
• Full funding 2032 at 6.2% growth   
• Full funding 2033 at 4.4% growth
• Full funding 2034 at 3.1% growth
• Full funding 2035 at 2.1% growth

These are preliminary estimates, however, since the completed actuarial report will not be available until May. Tony Logalbo urged his colleagues to approve the Mayor’s plan.

Kelly Byrne, a Retirement Board member, who stipulated that any plan to extend the pension funding deadline must include the COLA, moved that the Board approve Ms. Riley’s plan using 6.2% as the FY24 rate of increase to replace the current 9.6% increase, thereby freeing additional money to be used for the Horace Mann project. Stephen Curley, Newton Deputy Comptroller, who is an ex-officio Retirement Board member, suggested an amendment to the motion, increasing the percentage of the appropriation to 6.6% going forward, which he said creates a buffer against fluctuations. The Board agreed to his amendment and passed the motion.

Chairman Lopez announced that the next Retirement Board meeting is scheduled for April 25 at 9AM.