Town Commission approves changes to staff retirement fund

The Longboat Key Town Commission unanimously approved a change to the town’s consolidated retirement system's investment policy on Monday, which will increase the town's expenses by more than $100,000, beginning in the 2024 fiscal year.

At its Aug. 17 quarterly meeting, the Consolidated Retirement System Board of Trustees voted to lower the assumed rate of return from 7% to 6.75% after analyzing performance during their last three quarterly meetings. 

“The general trend is down,” board Chair Steven Branham told commissioners. “If you talk to our investment managers, they all agree that performance is not going to be what it has been over the last two or three years, or the six years that we have had this account consolidated.”

The change in the town’s pension contribution expectation will increase the town’s expenses by about $122,000 annually under current conditions. As the fiscal year 2023 budget is already nearing approval, the change would not take effect until the fiscal year 2024 budget season starting Oct. 1, 2023. 

The town’s unfunded actuarial accrued liability will also increase to $1.5 million. 

According to the memorandum to the commission, the liability will increase because future benefit payments are discounted to today’s dollars using the new rate and, therefore, requires larger contributions today to cover payments of future benefits. 

The board uses a four-year smoothing approach to minimize potential spikes and dips associated with a single year of returns. 

The review of the investment allocation was done with the help of an investment consultant. The new rate that was decided upon by the board, approved by Town Manager Tom Harmer and Finance Director Sue Smith, was per recommendation of the town’s actuary, Doug Lozen. 

The adjustment made to the assumed rate of return was deemed appropriate for the current market conditions, along with fund risk tolerance and near-term cash needs, according to Branham’s presentation to the commission. 

The board’s recommendation follows urging from the Florida Department of Management’s Division of Retirement indicating to the board the need for the adjustment. Many Florida municipalities have already adjusted ARR figures downward or are in the process of making the adjustment, Branham said.

At the inception of the consolidated fund, the account held about $33 million. Now, after the inclusion of paying pensions and other expenses, the frozen account holds about $44 million.

Currently 117 individuals are retired or terminated town employees receiving benefits from the plan. Twenty-three individuals are active employees unable to accumulate additional benefits due to the town's frozen account.