West Hartford Pension Fund's Deficit Widens

The level at which the town’s pension plan is funded fell 2.7 percent, from 44.2 percent last year to 41.5 percent this year, according to the Hartford Courant.

The town’s actuary - Milliman - said in a report that West Hartford’s pension plan is underfunded by $204.13 million, the Courant reported.

But despite the news, Mayor Scott Slifka said in a telephone interview that the report, which was calculated as of July 1 of this year, was not surprising.

“We expected that to happen, because the gains and losses of the pension fund are amortized over a 5-year period,” he said.

That means that 2008 - the year of the economic crisis - and fallout from the following years are factored into the calculation, while last year’s gains were not, Slifka said.

What’s more, the news does not change how the town is approaching the underfunded pension, Slifka said.

“It does not change the overall plan,” Slifka said. “What it does is help to dictate what numbers that we will use when we prepare the budget for the coming year. But it doesn’t change the strategy.”

According to the Courant, the town’s pension plan was funded at 120 percent just over 10 years ago. But, due to the economic downturn, the town had to start paying into the fund every year.

“The town's annual contribution has grown from $1.16 million in 2002-2003 to $15.95 million for the 2013-2014 fiscal year,” the Courant reported.

Slifka said that the Town Council has made the full actuarial contribution to the pension fund for the last 12 years, and the town continues to seek changes in contracts to lower the benefit spectrum going forward.

“What the report reflects in large part is the performance of the market and the long-term variables we don’t control [such as] benefits to retirees whose contracts were settled in many cases many decades ago. It’s a legacy that cannot be changed going forward.”

Town Council Minority Leader Denise Hall said that this is further evidence of the "the unsustainable nature of defined benefit plans and the need to move to defined contribution plans." 

"We have followed the actuarial recommendations and yet we are still in the bottom 20 percent of similar plans in the state in terms of funded status," Hall said. "Our taxpayers will be on the hook for the $204 million unfunded liability as we make increasingly larger annual contributions and hope for consistent positive annual market returns to resolve the problem."

It’s a situation that the town has a plan for but will take years to rectify.

Slifka made a comparison, saying that the current situation is like a mortgage.

“It will take us about 20 years to pay off 100 percent [of the deficit],” Slifka said. “Within four to five years … we will flatten out the growth of the liability going forward. Within four years, we anticipate the arc will flatten out. The contributions will not be increasing on an annual basis. At that point - you’re not paying interest, you’re paying down the principal.