Farmington firefighters' pension fund is improving
After a couple years of financial ups and downs, the Farmington Fire Department Relief Association's pension plan might finally see some relief of its own.
It's been a rocky couple of years for just about everyone who carries investments. A stock market crash left investors hurting. Add to that eight retirements for the local department and the dollars add up. Or down, depending on how you look at it.
For the past couple of years, the Farmington Fire Relief Association has had to turn to the Farmington City Council for financial assistance. But Farmington Fire Relief Association president Jeff Albee said this week the FFRA's return on investments looks to be on the rise. The return on investments hit an all-time low of -36.80 percent in 2008, but has increased to 14.24 percent in 2010.
In 2011, the Farmington City Council has had to contribute $183,000 to the fund. While that's down from a $196,802 contribution in 2010, Farmington City Council members have questioned the contributions. Two weeks ago, an accounting error by the city's auditing firm of KDV meant the city had to find an additional $56,500 to meet its obligation.
How it works
The FFRA is a nonprofit corporation that provides retirement incentive and disability or death reimbursement for the Farmington Fire Department's firefighters.
Governed by a nine-member board of trustees, the relief association oversees two funds -- the "special fund" which is funded by public money (taxes); and the "general fund" which is funded through fundraisers like turkey Bingo or ads on the annual fire department calendar.
The special fund is the one that receives contributions from the city of Farmington. The money there is invested and allocated to pension payouts. The Farmington Fire Pension is a one-time payout for vested members. Members do not receive full retirement until they have served 20 years.
According to Albee, when the time comes for a member to retire, the fire relief association is required to make that full payout, and to have the funding there to do so. Members are given a stipend of $4,575 for every year of service. For someone who retires after 20 years, that's a one-time payout of $91,500 before taxes. If a firefighter has served more than 20 years, an additional $4,575 is added on for every year of service.
Problems arose when the stock market crashed, and then eight long-time, fully vested members retired, all over the same year or so.
That meant a lot of pension funding went out in a short of time. Couple that with the rapid decrease in the relief association's investment portfolio, and things got tight.
In 2007, the Farmington Fire Relief Association required no contribution to maintain its special fund balance. The following year, the stock market had fallen. By 2008, the return on investments was at -36.80 percent, and the city made a contribution of $73,200, although the city was not required to make a contribution that year because the fund was still almost at an additional $62,000.
But then the eight firefighters retired, and the extra in the account dropped to just over $1,500. By 2009, the return on investment rate was going up again, but the city of Farmington -- also facing budget restrictions -- opted not to make a payment. By the time 2010 rolled around, the special fund was coming up short and the city of Farmington had to help out by contributing nearly $197,000.
Albee is optimistic the fire relief association's special fund is on the mend.
"Hopefully 2012 will be another increase, because our stocks are on the rise," he said.
The city of Farmington originally allocated approximately $131,000 for its 2011 contribution, but had to increase that contribution two weeks ago after the accounting error was found.
Albee says the Farmington Fire Relief Association meets with a financial advisor quarterly to review its investment options. Usually, the association is presented with three or four options, he said. City administrator Peter Herlofsky and city finance director Teresa Walters sit in on those conversations and give feedback.
"Teresa has showed up to every board meeting since she's been director and given her input, which we find very valuable," Albee said.
Council members made the adjustment at the Feb. 7 meeting, but had concerns. Member Christy Jo Fogarty suggested the relief association take a cut to the amount it receives for the pension fund, while council member Julie May expressed frustration that council has no say in the association's investment policies.
To help address some of the concerns, Albee attended this week's council meeting. He provided council members with a detailed packet that explained the policies and numbers involved in the FFRA special fund. Albee also asked for an opportunity to sit down and work through concerns. Council members indicated they would like to meet with the relief association for a workshop in April.