BERLIN – Berlin is looking at upcoming police and town employee retirements in the near future that will rely on a pension fund that is currently less than three percent funded.
“It’s a unique plan,” said Kevin Delaney, town finance director.
The town closed the pension plan in 2000 but offered employees still on the plan a lump sum option instead of monthly payments. Currently four employees on the plan have over $1 million in liability each.
Delaney said best practices call for 60 percent to be funded with 80 percent being ideal. At the end of the last fiscal year, the town was sitting on $9 million in under-funded liability.
“The town has legal obligations to fund it,” Delaney said.
Members of the Board of Finance discussed the growing issue at a recent meeting after two presentations on the pension plan by actuaries from a local firm and auditors.
The town funded just under $1.5 million for fiscal year 2017-2018 with $700,000 funded in fiscal year 2016-2017. Last year, the town paid out $1.35 million for two retirements.
Through June 2019, payouts are estimated to be $1.6 million.
Delaney will request $1.6 million to be funded in the upcoming budget. The funds will need to be approved by the Town Manager to include in his own proposed budget.
Mayor Mark Kaczynski said besides the pension fund increase, there was a negative growth on the town side last year. The town is currently facing a cash flow issue depending on which participants in the plan elect to retire.
Pension benefits are also being paid monthly for 21 participants who have already retired.
It is projected that there will be several retirements that will opt for lump sums in the next few years.