Greenwich Retirement Board Chairman Announces Pension Plan Updates

Statement release on Wednesday, Jan 24, 2018 from Joseph L. Pellegrino, CFA, Chairman of the Town of Greenwich Retirement System

As we enter the Fiscal Year 2018-2019 budget cycle, I thought it would be constructive to share some facts as they pertain to the Town of Greenwich Retirement System.

After Healthcare and Debt Service, the Retirement System is the third largest fixed charge in the Town’s budget at approximately $22 million per year.

This represents approximately 5% of the total Town budget.

To the extent we have a healthy, competitive, and a high performing Retirement Plan (the Plan), everyone benefits—the members of the Retirement System and the taxpayers.

2017 was a year of change for the Retirement System.  I would like to take a moment and share with you the changes that have taken place, the performance of the Retirement Plan, and the challenges ahead.

After extensive discussions by both the Retirement Board and the Board of Estimate and Taxation (the BET), the Retirement Board selected Neuberger Berman to manage the assets of the Plan using their discretion subject to guidelines (the Investment Policy Statement) established by the Trustees of the Retirement System. The BET approved this decision unanimously, and Neuberger Berman has been acting accordingly since the beginning of the current Fiscal Year (July 1, 2017).

Concurrent with the change in investment management, the Retirement Board elected new leadership, and shortly thereafter, a new member (Mike Wacek) was selected and appointed by the First Selectman, the RTM Moderator, and the BET Chairman to join the Retirement Board. Mike’s background as an actuary and reinsurance executive has been a welcome skill set to the Retirement Board’s deliberations.

In addition to the two appointed citizens, the Retirement Board consists of the Town Comptroller, Peter Mynarski, and two employee-members elected by the membership of the Retirement System—Captain Mark Kordick and Firefighter Kevin Coyner.

Both Mark and Kevin have given their time and talents to the Retirement Board for many years.

For calendar year 2017 the Plan Assets were up 15.8%. The benchmark against which we measure performance this past year was up 14.7%, so it is fair to say the active management of the assets added 1.1% more value than would have been expected had they simply been invested in passive indexes in accordance with benchmark weights for each asset class.

Looking back, the Plan Assets over the past three years are up 7.9% annualized compared to the benchmark of 7.6%; and for the past five years the Plan Assets are up 8.7% annualized compared to the benchmark of 8.6%.  Where the Plan has been challenged, is when one looks back to a longer period.  For ten years, the Plan Assets are up 5.2% annualized compared to the benchmark of 5.4%, and over this period the actuarial assumed return was 7.4%.

With a new Investment Policy Statement, which contains new policy benchmarks, and with Neuberger Berman managing the day-to-day investment decisions for the Plan Assets, the discussion now needs to move to the financial health of the Plan itself and future funding requirements.  It is the intention of the Retirement Board to lead this discussion in the months ahead.  A review of the underlying assumptions behind the Plan’s assets and liabilities, the appropriate rate to discount future earnings to meet future liabilities (the discount rate), and the funding ratio (the relationship of asset values to liabilities) are some of the topics I expect the Trustees to discuss with input from our actuary, investment manager, BET liaisons and RTM representatives.

As it stands now, I believe the Town of Greenwich Retirement System is a model for other municipal plans: We have one of the lowest municipal discount rates in the nation at 6.75% with seasoned and consistent assumptions, and a funded ratio of assets to liabilities of 77.3%.  And our service to the members of the Plan is first class.

While looking back a decade ago, performance lagged expectations, it should be clear that in the most recent years, and last year in particular, that is no longer the case. It is my expectation that a civil discourse on these topics will lead to an even better Retirement System for all constituents—retirees, employees in the Retirement System, and the taxpayers at large who fund the Retirement System—in the years ahead.