slides: Providence Pension Crisis by the Numbers
Thursday, February 06, 2014
Stephen Beale, GoLocalProv News Contributor
Providence’s unfunded pension liability now stands at $831.5 million and is 31.3 percent funded. It will take decades for the city to pay off the unfunded liability, according to a new report.
Related Slideshow: Providence Pension Liability
A new report shows that Providence’s pension fund—even after the recent reform—is still in trouble. The below slides break out the key numbers for the pension fund, including the unfunded liability, the assumed and actual rates of return, the current level of benefits, and how long it will take the city to pay off the unfunded liability. Figures are current as of July 1, 2013 and are taken from the new Jan. 31 actuarial report from Segal Consulting.
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Unfunded Liability in 2013
Total Liability: $1.2 billion
Actuarial Assets: $380.4 million
Unfunded Liability: $831.5 million
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Unfunded Liability in 2011
Total Liability: $1.2 billion
Actuarial Assets: $380.4 million
Unfunded Liability: $831.5 million
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Percent Funded in 2013
Funding Ratio: The ratio of the amount of actuarial assets to the amount owed.
Funding ratio in 2013: 31.39%
Percent unfunded in 2013: 68.61%
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Percent Funded in 2011
Funding Ratio: The ratio of the amount of actuarial assets to the amount owed.
Funding ratio in 2011: 31.94%
Percent unfunded in 2011: 68.06%
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Rate of Return
Former Assumed Rate of Return: 8.5%
New Assumed Rate of Return: 8.25%
What the state’s assumed rate of return is: 7.5%
What Moody’s Investors Service says the assumed rate of return should be: 5.5%
What investor Warren Buffet says the assumed rate of return should be: 6%
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Actual Return on Investment
Actual Market Return in FY 2012: 1.49%
Actual Market Return in FY 2013: 11.35%
Current Assumed Rate of Return: 6.42%
Average Market Rate of Return for FY 12 and FY 13: 8.25%
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Impact of Lower Rates of Return
$72 million:The city unfunded liability increased by this amount when the city lowered its assumed rate of return by a quarter of a percentage point, from 8.5% to 8.25%
$506.2 million: The estimated increase in the unfunded liability were the city to use the 6% assumed rate of return recommended by Moody’s Investors Service.
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Retiree Pay – Fire and Police
Number on Active Duty: 834
Average Annual Pay: $61,325
Number of Retirees: 587
Average Retiree Age: 65.3
Average Retiree Annual Pay: $40,512
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Disability Pensions – Fire and Police
Number on Disability: 418
Average Age: 64.8
Average Annual Pay: $59,028
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Retiree Pay – Other City Workers
Number of City Workers: 2,164
Average Annual Pay: $38,687
Number of Retirees: 1,453
Average Retiree Age: 72
Average Retiree Annual Pay: $18,252
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Disability Pensions – Other City Workers
Number on Disability: 88
Average Age: 66.8
Average Annual Pay: $18,684
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Current Cost of Pension Fund
For 2013
City Contribution: $58.1 million
Employees Contribution: $10.9 million
Net Investment Return: $18.1 million
Cost of Retiree Benefits: $95.4 million
Note: Net investment return is the return on investments after investment and administrative fees have been paid.
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Cost of Pension Fund in 10 Years
Normal Cost: $9.8 million
Additional Cost Because
of Unfunded Liability: $84 million
Total Annual Cost: $94.3 million
Note: Total figure for the year includes a small second payment for the deferred liability.
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Cost of Pension Fund in 20 Years
Normal Cost: $13.9 million
Additional Cost Because
of Unfunded Liability: $118.5 million
Total Cost: $132.4 million
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Paying Off Unfunded Liability
Average annual increase: 3.5%
Number of additional years to pay off: 27
Fiscal year unfunded liability to be paid off by: 2040
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