Phila. pension fund had good year - but...

Posted: March 01, 2014

Like many investors, Philadelphia's city employee pension fund had a good year in 2013. It earned close to 11 percent in the fiscal year ended last June and kept making gains the rest of the year.

But the better-than-usual investment performance didn't dent the pension system's huge unfunded liability.

That figure actually climbed to nearly $5.2 billion as of July 1, leaving the fund with less than half (48.1 percent) of the assets it should have to meet its eventual liabilities, according to a new actuarial analysis presented Thursday to the city's retirement board.

Besides investment performance, the actuarial report takes into account other factors such as pension cash flows, retirement decisions by the city work force, and retiree mortality: If retired workers live longer than expected, the pension system spends more money.

The annual actuarial reports, prepared by Kenneth A. Kent and Anu Patel of Cheiron Inc., are used to determine how much the city must pay into the fund to keep its unfunded liability from climbing even higher.

This year, the city is paying $523 million into the fund, the minimum required under a state law. In the fiscal year that starts July 1, the city will have to provide $556 million, thanks in part to a more conservative assumption for future investment returns - reduced from 7.9 to 7.85 percent at Thursday's meeting.

Less than $90 million of those figures is to meet the future pension costs of current city workers. The bulk of the money is to make up for past shortfalls in city funding, going back to the 1950s, the unfunded liability having continued to increase under every mayor since Richardson Dilworth.

City Finance Director Rob Dubow said the Nutter administration hopes to improve the pension system's funding with the proceeds from the anticipated sale of the city-owned Philadelphia Gas Works, as well as some of the revenue from a 1 percent sales tax increase, effective July 1.



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