Two important assumptions involving the town employee pension funds have been adjusted by the Board of Selectmen to make them more realistic.
But Finance Director Robert Tait said the two factors cancel each other out, so he doesn’t expect that to affect the amount of town’s contribution to the funds next year.
The assumptions were the expected rate of return on the investments, which was lowered from 7.75 percent to 7.5 percent, and the annual salary assumption, which was also reduced from 4 percent to 3 percent.
The investment rate of return means the fund managers will project a lower rate of return on the fund investments going forward. Tait said reducing the rate of return to 7.5 percent brings it closer to the assumption used by other communities:
- 7 percent for Ridgefield and Easton
- 7.5 percent for Trumbull
- 6.5 percent for Brookfield
However, the lower salary assumption means the managers will reduce the total pension liability for retirees, which is based on a percentage of their salaries. So reducing the salary assumption cancels out the effect of reducing the rate of return assumption.
What might affect the contribution is the actual performance of the funds’ investment. Tait said the funds lost about 2 percent of their value. That might require a higher contribution next year to make up for it, although he said that won’t be known until the annual audit is done in December.
Pension Fund Comparisons
During the meeting on Tuesday, Tait showed the selectmen comparison figures that indicated Newtown’s pension funds are in good shape compared with other similar communities.
Newtown’s pension funds held their value in 2008 and 2009 when other towns saw losses, Tait said. "We did really well in the downturn," he added.
Percent Funded for Pension Funds
- Newtown — 93.6%
- Ridgefield — 88.1%
- Easton — 85.9%
- Brookfield — 75.2%
- Trumbull — 42.9%