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Richmond pension plan squeezed by soft financial markets

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20220629_MET_RICH

City council members take their seats before a meeting where labor unions were expected to speak on a collective bargaining issue on Tuesday, June 28, 2022, in Richmond.

Softening financial markets hit Richmond’s traditional retirement plan — the one available to employees hired before July 1, 2006 — for the 12 months that ended June 30, though it fared better than most other city and state plans.

The city still needs to keep making big contributions — more than $50 million a year through 2032 — to make sure its resources are large enough to meet its obligations, said Richmond Retirement System Executive Director Leo Griffin.

He said the city should continue to show restraint when it comes to enhancing retirement benefits.

The city’s defined benefit plan, which promises a set payout no matter how its investments do, lost 6.4% from those investments in fiscal year 2022, net of any fees paid — a big swing from fiscal 2021’s positive return of 23.7%.

But it did better than 95% of comparable public plans. That dropped its funded status to 64.5% from 71.8% in fiscal year 2021, though this ratio is up from 59.2% the year before. The plan is still on track to hit a 90% funded status — that is, to have assets equal to 90% of its obligations to retirees — by 2031.

Those obligations stood at $340 million as of June 30.

While the Richmond plan’s funded status was below a national average of 74% for public pension plans, its 7.3 percentage point decline was less than the national average’s 11-point drop.

The plan’s target for its funded status is above a commonly accepted benchmark of 80% as the mark of a pension plan’s health, although the American Academy of Actuaries says there’s no one benchmark that really shows the health of a plan, adding that plans ought to be aiming for 100%.

Boosting funded status depends on how well a plan’s investments do and on how much an employer contributes, as well as on how much its retirement benefits might increase.

A total of 4,214 retirees now receive benefits under the traditional plan, and 1,541 former employees are fully vested but haven’t yet reached an age where they can claim benefits. A total of 1,379 current employees are contributing to the traditional, defined benefit plan.

The city ended eligibility for the traditional plan for employees hired after July 1, 2006, in an effort to hold down soaring costs for that kind of benefit.

For newer employees, it offered instead a defined contribution plan, where it contributes to the plan but benefits received after retirement depends on how well the investments do.

A total of 2,518 city employees participate in that plan.

dress@timesdispatch.com

(804) 649-6948

Twitter: @daveress1

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