City pension still faces large liability
The City of Minot employees pension fund continues to carry a sizable unfunded liability as it moves toward eventual closure, according to the city’s actuarial firm.
Doug Anderson with Gallagher Benefit Services presented the city pension board Tuesday with an annual report showing $60 million in assets and about $7 million in benefit payments last year.
Unfunded liability varies depending on calculation method, but the actuarially accrued liability was listed at $116.2 million. At that amount, the pension account is 51.7 percent funded, Anderson said. A year ago, the fund was only 49 percent funded in terms of meeting its liabilities over 30 years.
“The fund has been trending down. This is the first indication that it’s moving forward,” Anderson said. But he added, “There’s a long way to go.”
The standard recommendation has been to have pension accounts at least 80 percent funded.
The city closed the plan to new enrollees in 2013 and went to a defined benefit retirement plan for future employees. On Jan. 1, there were 357 active participants in the pension plan with an average age of 41.4 years, average service of 8.5 years and average salary of $48,961. The plan has 238 retirees and beneficiaries.
Anderson said that going forward, a couple of the key variables in keeping the pension fund in good shape will be pay raises and investment returns. Most employees saw recent pay raises of more than 10 percent, which added $3 million to the fund liability last year, he said.
Investment gain to the fund in 2013 was 11.4 percent, which exceeded the 7.5 percent projection. Investment income exceeded projections by about 4 percent each of the past two years.
“But when you look at the net cash flow contributions minus benefit payments it’s actually a negative in the cash flow every year,” Anderson said.
He listed the current annual cost to maintain the plan at $7.6 million, of which the city’s share would be $4.8 million.