City pension plan shows improvement
By Josh O'Gorman
staff writer | March 18,2013
The city's pension plan fund is on the mend, with annual returns beating the state's pension program thanks to a newly negotiated contract with city firefighters.
During a recent meeting of the Pension Board, Lazaro Guzman, vice president of Prudential Management — which manages the pension fund — told board members the fund saw a return of 18.3 percent for the year ending Sept. 30.
The Vermont Pension Investment Committee — which invests assets from retirement plans for the State Employees Retirement System, the State Teachers' Retirement System, the City of Burlington pension, and the Vermont Municipal Employees Retirement System — saw returns of 16.1 percent during the same period.
“Our investment results have been pretty good, and in fact, we beat the state results, which I was quite pleased about,” said Wendy Wilton, city treasurer and chairwoman of the Pension Board. “It was great to see our plucky little fund beat the big boys.”
As of Dec. 31, the city's pension fund was valued at $61.8 million, while the state's pension fund is valued at $3.5 billion.
Peter Amons, business manager for Rutland City Public Schools, asked Guzman if cash flowing into the fund was equal to money flowing out. Guzman said the two were about equal, with disbursements totaling between $4 million and $5 million annually.
The pension fund still has a shortfall of about $23 million, a gap that will grow smaller over time with a new contract with the city's firefighters that goes into effect July 1.
Under the contract, both the city and the firefighters will pay a greater percentage of the employee's base pay, which is pretax income minus any overtime or other changes to the employee's pay schedule.
Currently, the city contributes 7.54 percent of an employee's base income, while the employee contributes 5 percent. Effective July 1, employees will contribute 7.23 percent and the city will contribute 9.77 percent.
The increases will continue incrementally over the next three years, and by fiscal year 2016-17, the city will contribute 10.9 percent and employees will contribute 8.4 percent.
“I'm happy to see the city and the firefighters step up and do this,” said Peter Fagan, a member of both the Pension Board and the Rutland City School Board. “They're insuring their retirement will be there when they retire.”
Wilton said she would like to see other employee groups follow the lead of the firefighters, and the teachers, who previously reached a similar agreement with the city.
“I think this set the stage for other negotiations,” Wilton said. “I think this is part of the slow walk to get this fund back on track.”