Selectmen May Address Finance Pension Questions

By John Voket

When the Board of Selectmen meets June 15, according to its agenda, the panel is scheduled to address the town pension plan. Finance board Chairman John Kortze expects selectmen to at least begin addressing a list of questions compiled and approved one week earlier by his board.

As The Bee went to press June 11, the roller coaster ride that 380 town pensioners have experienced in recent months related to the value of their fund continued on an upward trajectory, according to human resources manager Carole Ross.

At close of business June 10, the fund stood at $22,916,822, regaining nearly 60 percent of the losses suffered between late 2008 and earlier this year, when pension committee chair Tom Murtha feared as much as a 20 percent loss would necessitate a substantial town contribution to keep the pension fully funded.

But as the global economy appeared to begin its creeping back from the abyss, so too has Newtown’s pension fund enjoyed some brighter days since an approximate $5 million loss was highlighted just a few months ago when Mr Murtha appeared before the finance board during budget deliberations.

This information, along with an avalanche of municipalities reporting devastating pension fund losses earlier this year according to Mr Kortze, prompted a deeper look into Newtown’s pension performance and the practices of the appointed pension committee that is charged with its immediate oversight.

“It’s important to note that nobody is calling anybody into question here,” Mr Kortze said following his board’s meeting June 8. “The finance board went into greater depths unilaterally this year asking for more information from everyone, including the Board of Selectmen, the Board of Education, even the charities taxpayers support.”

Calling the board’s examination of the pension performance “part and parcel” to one of the most in-depth public examinations of town budget practices in recent years, Mr Kortze said the main objective behind finance board members’ questions was to determine an appropriate course of practices as the town pension fund continues to ebb and flow through what the finance chairman describes as “a down market.”

“We may be up more than two-and-a-half million, but we were down $5 million just a few weeks ago,” he said. “I think this needs to be done regardless of the balance of the plan,” and “even if we were overfunded.”

The 13 questions were posed to the selectmen, Mr Kortze said, because they are fiduciaries of the pension plan while the pension committee acts in an advisory capacity. Those questions are:

What is the total compensation of our advisors based on? i.e., percent of funds invested, fee plus, etc.

What was the total compensation for the last three years by year?

How does this compensation compare to pensions of like size?

How do other towns select pension fund advisors? i.e., request for proposal, request for quotation, other?

What criteria/standard has been used to employ the pension administrator companies?

What annual review process has been employed to review the success of the pension administrator companies, i.e. comparisons to whom or what?

Does the Board of Selectmen implement such standards and /or review, the pension committee, or both?

Are any conflict checks included for any town board or committee members (i.e., is the name of the coordinator publicized in any manner to boards or committee members to make sure there are no conflicts, etc.?)

Your investment assumption is eight percent annually, yet your actual annualized return over the last ten years is approximately 4.5 percent. How can you continue to use an eight percent investment assumption based on your ten-year record?

What changes to your investment approach might increase your return?

How often do you review your investment policy statement?

Are your investment options too limited to reach your desired return?

Have you considered hiring firms that specialize in various asset categories (equity, bonds, international) vs Westport Resources that handles the entire fund?

Besides learning about the pension’s financial rebound from its worst-case losses of $5 million earlier this year, Mr Kortze said he has seen a memo from Mr Murtha to the selectmen explaining that anticipated gains in the fund have erased the need for extra taxpayer contributions to keep the pension fully funded in the coming year.

The 380 members of the plan include all town employees, including police officers, as well as all noncertified school district employees, excluding teachers.