Despite a 32% investment return in the last fiscal year, Marin County’s public pension fund is playing it safe.
The board of the Marin County Employees’ Retirement Association decided to factor in the extraordinary gain over four years rather than immediately when assigning annual employer contributions.
The association includes Marin County and eight other public entities. Its net investment return was $829.8 million for the fiscal year that ended June 30.
Last year, when the association’s board voted to cut the fund’s assumed annual rate of return from 7% to 6.75%, Block advocated reducing it to 6%. At that time, the association also lowered its assumed annual rate of inflation from 2.75% to 2.5%.
The Cheiron actuaries, however, said the association’s assumptions regarding inflation and the annual rate of return remain valid.
The town of Corte Madera is moving toward refinancing its $21.4 million pension liability to help manage its budget more effectively while still coping with a loss of revenue from the pandemic.
“We’re not out of the woods yet,” Mayor Eli Beckman said. “We are doing quite well relative to our worst fears and what we are seeing other municipalities get hit with. Corte Madera has been lucky.”
The town’s annual payments to the California Public Employees’ Retirement System, known as CalPERS, have ballooned from $733,000 in 2015 to $1.37 million this year, according to a Nov. 17 staff report. The town projects the annual payments will grow to $2.1 million by 2025 and $2.26 million by 2031.
The combination of reality and responsible caution is getting expensive for Marin public agencies that provide their workers with generous pensions.
The member agencies in the Marin County Employees’ Retirement Association are getting the latest dose and the association’s board voted to reduce its annual assumption rate on investment returns to 6.75%. It is a quarter of one percent reduction, but one that will cost agencies such as the county and the city of San Rafael thousands of dollars every year.
It recognizes a combination of expected returns on its stock market and real estate investments and that the number of pensioners is not only growing, but they are living longer and drawing more from the fund.
Living longer may be great news for the retirees, but it is an increased cost for MCERA.