County pension account takes hit
Market uncertainty, larger withdrawals lead to fund’s woes
By Kay Stephens
HOLLIDAYSBURG — Stock market uncertainty and bigger withdrawals are taking a toll on Blair County’s pension plan.
Pension investments lost $267,477 in the first three months of the year when the stock market was volatile and the Standard & Poors index posted its first negative quarter since 2015.
But the bigger drop in the fund’s assets — which started the year at $35.1 million and fell $1.5 million to $33.6 million by April 30 — has been linked to higher-than-typical withdrawals by retiring and departing employees or by their estates and beneficiaries.
Blair County’s pension fund has incurred some significant withdrawal requests so far this year, investment counselor Pat Wing of Marquette Associates told the county retirement board during its recent monthly meeting.
And because of those withdrawals, county Controller A.C. Stickel asked during this month’s meeting for $255,000 in cash investments to cover the fund’s payments.
That request was similar to one Stickel made in April, for a $280,000 allocation of invested funds to cover the fund’s payments.
Both requests, Stickel said, reflect higher-than-typical withdrawals, which created the need for money to cover the fund’s payments.
As for needing more cash in the future for the same reason, that likely will depend on pension fund revenue and future withdrawal requests.
The county, to meet its pledge of providing $4 million from the general fund, is contributing $333,333 monthly to the pension fund. In addition, employee contributions are made monthly, typically about $68,000 from two payrolls. Through mid-May of this year, employees have contributed $337,352 to the pension fund.
“We are hopeful that the county contribution and employee contributions are enough to cover regular monthly distributions, but we never know from month to month,” Stickel said. “That was the case for almost all of 2017.”
But higher-than-typical withdrawals between January and April pushed the county’s pension fund distribution to $2.9 million, based on a report provided to the retirement board.
Besides contributions from the county and its employees, the pension fund also benefits from investment earnings. In 2017, the fund realized 14.7 percent return on investments, which helped the fund grow to $35.1 million.
Despite the first quarter investment loss, Wing advised retirement board members that he expects the county’s pension fund to realize a positive return this year on its investments.
He based that prediction, he said, on the nation’s economic growth, “which seems to be on solid footing” at this time. Wing also linked his prediction to increases in corporate earnings in light of tax cuts enacted earlier in the year.
County leaders have recognized the pension as underfunded, something that developed during years of no or minimal county contributions from the general fund. A report late last year indicated that the pension had $35.27 in assets for every $100 in liabilities. Another report concluded that if commissioners set aside $4 million in 2018 toward the pension fund and continued to do that in the years thereafter, the fund would then be on track to remain solvent through 2041.
The retirement board also, late last year, directed that non-union personnel hired after Jan. 1, 2018, to be directed into a new pension classification that will lead to lesser pensions. In addition, those same employees will have the option, upon retiring, to receive an annuity calculated at 4 percent. The annuity calculation for employees hired before
Jan. 1 remains at 7 percent.
Commissioners, at their May 1 meeting, acknowledged that these changes have been accepted by the United Mine Workers of America, representing two groups of unionized employees. The changes, using the same effective date of Jan. 1, 2018, were approved through a memorandum of understanding to the union contacts valid through December.
Mirror Staff Writer Kay Stephens is at 946-7456.