New Castle News


April 13, 2013

New Castle Finances: Stocks help city’s pension fund to rebound

NEW CASTLE — The city of New Castle’s pension fund had a good year in 2012.

Due largely to a strong showing in the stock market, the fund increased in value by $2.6 million, or 11.28 percent, over the course of the year.

The increase boosted the fund’s value to $25,905,576, a level not seen since 2008 when the stock market took a nosedive during the recession. The value dropped all the way to $19,462,724 in March 2009 before rebounding to its current figure.

The fund — which covers pension plans for police, fire and nonuniform employees — has approximately 120 active members, full-time employees who contribute to their respective plans. The number of beneficiaries as of March 31 was 178.

Despite the improvement in the pension fund’s value, it is far from being sound, according to the city’s actuary, Mockenhaupt Benefits Group.

As of Jan. 1, 2011, the most recent actuarial report, the fund had an unfunded liability of $15,889,316. The figure is the difference between the accrued liability of $43,478,595 — the cost of benefits for current and former employees — and the fund’s assets of $27,589,279.

Broken down by departments, the unfunded liability for police was $7,405,978, for fire $5,397,185 and for non-uniform, representing all other employees, $3,086,153.

Although the unfunded liability is huge, the city is able to pay current beneficiaries. However, it’s the long-term picture that the actuary addresses.

Actuarial reports are performed every two years with the next one covering a two-year period ending Dec. 31, 2012. The next report is expected to be released in the summer, said Colleen Deer, vice president of Mockenhaupt.

Even though the investments are doing well, it’s the unfunded liability that is creating the most significant impact on the city’s finances and is a major reason the state declared New Castle financially distressed under Act 47 in 2007.

Last year, the city’s minimum municipal obligation to the pension fund was approximately $1.6 million. This year’s is $1.9 million, about 10 percent of the city’s budget. And based on Mockenhaupt’s projections, the city’s MMO as it is called, will increase to $3.2 million in 2015 and $3.3 million in 2017.

New Castle’s Act 47 coordinator said in the city’s financial recovery plan that meeting this obligation “is the biggest financial challenge the city will face” through 2015.

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