Executive Director Joelle Mevi Testifies at Texas House Pensions Committee Hearing
Joelle Mevi, Executive Director/Chief Investment Officer of the Fort Worth Employees’ Retirement Fund, testified at The Texas House of Representatives Pensions Committee hearing held at the University of Texas in Arlington on Sept. 29.
At this interim committee hearing, members of the Pensions Committee heard both public and invited testimony on Interim Charge #5: Evaluate the investment performance benchmarks utilized by the state’s pension funds and the impact portfolio diversification and short- and long-term market assumptions have had on achieving expected investment returns. Analyze the fee structure and investment strategy for various investment classes to ensure the costs are reasonable and competitive versus other large public and private pension trust funds.
Ms. Mevi gave an overview of pension funding for the Fort Worth Employees’ Retirement Fund, including:
- Funded Ratio –60.6% at Dec. 31, 2015.
- Amortization Period –72.5 years at Dec. 31, 2016.
- Unfunded actuarial accrued liability is $1.4 billion.
- Changes in Actuarial Target Rate of Return – The Board lowered the actuarial rate of return assumption from 8.0% to 7.75% in early 2016. Lowering the assumed rate of return, without a corresponding funding contribution, causes the unfunded liability to increase.
- Actual Contributions vs. Actuarially Determined Contributions – In 2015, the City and employees paid 27.97% of overall salary into the Fund, while the required contribution (what’s actuarially determined to pay for the cost of the City-approved benefits) was 33.07% of overall salary, representing a 5.10% shortfall.
- Of the 27.97% total contribution rate, the City contributes 19.98% and the employee contributes 8.41% of salary.
- The market value of the Fund as of Aug. 31, 2016 is $2.1 billion.
- The Fund’s investments have earned 6.2% so far in calendar year 2016 and 8.77% since inception of the pension fund.
Demographics of the Fund as of Dec. 31, 2015, were also included for the benefit of the committee:
- 4,380 retired members
- 6,295 active members
- 385 terminated vested members
- The average age of a Retirement Fund retiree is 68 years.
- The average age of an active Retirement Fund member is 44.6 years.
- The average gross monthly retirement benefit is $3,350 or $42,360 annually.
Ms. Mevi spoke briefly about the key distinctions in the authoritative roles governing the Fort Worth Employees’ Retirement Fund, separated by Mayor/City Council and Retirement Fund Board. The Mayor and City Council are responsible for making changes to the pension benefit structure; setting the pension contribution rate; and, developing a Funding Policy Statement. They also appoint five Fort Worth residents, in addition to designating the City’s Chief Financial Officer, to serve as Trustees of the Fund. Whereas, the Retirement Fund Board of Trustees is responsible of administering retirement benefits/checks, investing fund assets and adopting actuarial assumptions. The Board also conducts elections for seven members to serve as Trustees.
Fort Worth City Manager David Cooke also spoke to the committee about the pension plan. He stated that pension viability and sustainability is important to the leadership of the city. He mentioned that the City’s Pension Review Task Force is made up representatives from the active and retired Fund membership and representatives of the taxpaying community, along with Ms. Mevi as head of the Retirement Fund. He Task Force has met regularly in 2016 to address pension concerns. He also said that the City has made many changes over the past five years to improve the health of the pension fund and that those changes have been tested through the state and federal courts and found to be legal.
The Fort Worth Employees’ Retirement Fund website, www.fwretirement.org, contains the demographic and investment information Ms. Mevi used in her presentation under Financial/Dashboard.