Pension Update
By Jim Meynard
Executive Director
By the time this article hits the stands, I will have been on the job about a year. It has been quite a year, too. We have accomplished many things at the pension office and suffered through one of the worst capital market downturns in U.S. history. We have emerged from this year in sound financial shape and with a good administrative infrastructure in place, (and continuing to develop,) which will serve our participants very well for many years to come.
When I accepted this position, I made a commitment to the Board of Trustees to attend all of the District meetings of the GSFA on behalf of the Pension Fund. I also made a commitment to the Board and to the fire service to meet with any Fire Department, with reasonable notice, to talk about the fund, answer questions and help folks with participation. To date, I have met those commitments, and not surprisingly in the process, I have met some really great people, dedicated to their community, to the fire service, and to the firefighters who serve with them. (And, I have gained about ten pounds!)
Early on, I wondered what message I should bring to participants and to candidates for the pension fund. I started talking mainly about participation and benefits. But as the year has passed, and we have dealt with issues in the office and in the service, it has become clear that there is a broader message to be conveyed than the narrow issues above. So the remainder of this article will focus on the broader issue of what this fund is, and what it is not, and just how meaningful it is in a business sense.
The Georgia Firefighters’ Pension Fund is a defined benefit plan. That is, benefits are paid as an annuity based on age at retirement and years of service. The benefit is defined in the statute, O.C.G.A. 47-7, established by the General Assembly. It is not a defined contribution plan where benefits are based on amounts contributed, nor is it a savings plan, where funds are earmarked for specific participants in separate accounts and can be withdrawn at will. It is a pooled pension plan.
It is a tax supported plan. While membership is voluntary and requires dues to belong, the dues amount is incidental to the asset pool and primarily offsets administrative costs. Benefits are funded by taxes on insurance premiums, garnered by taxing authority granted by the State statute. Ergo, at the end of the day, the Fund, the plan, is a state agency, governed by statute and regulated by state authority. That authority is exercised by a Board of Trustees, appointed by the Governor. The assets of the Fund, which are used to pay current and future benefits, are harbored in trust, under the control of the Board, protected by trust law and investment guidance statutes. (In a future article, I will discuss oversight and management of the pension assets.)
Members of the Association should recognize that the management of this Fund has become a sophisticated business, and is growing in sophistication every day. While the Fund is diminished from its peak value of year end 2000, it has returned to exceed $400 million and will exceed to $435 million when this article is published. That is a substantial asset pool. It serves over 7,700 active full-time firefighters, over 2,500 active volunteers, 1,000 inactive members and 2,800 retirees. Over 200 of our retirees are spouses of deceased firefighters, and for many of these folks, this benefit payment is their main source of income. All told, we serve more than 13,800 participants of one kind or another in this fund. And that is only about a third of the firefighters in the state!
This year, we will pay $16,350,000 in benefits to our retirees. That is about $600 per retiree, on average. Some get more; some get less. On average, it is quite a stipend, especially away from the big metro areas where the living is a little easier, the pace a little slower.
On a more prospective basis, if one were to join the Fund today and pay $15 in dues for 15 years, retiring at age 50, that participant would have paid $2,700 in total dues and would receive about $4,000 a year in benefits. In 20 years, he/she would collect $80,000 in regular benefits, unadjusted for options. If one paid dues for 25 years and retired at 55 with full benefits, that participant would have paid $4,500 in total dues and would receive about $9,000 a year in benefits. In 20 years, he/she would collect $180,000 in regular benefits, unadjusted for options. Unequivocally, this is one of the best supplemental retirement plans for full time or volunteer firefighters in the United States!
We collected $16,800,000 in taxes this year. This is the second year in a row, recently, that taxes covered current benefits, the third year taxes increased substantially. We are fortunate that we are in a state with good inward movement and growth, which promotes increases in the insurance premium tax base for us.
So, in a nutshell, this has become quite an operation. With $400+ million in assets, $16.8 million in revenue, $16.3 million in disbursements and 13,800 clients, this has become a substantial business operation. And, we are doing our best to treat it that way. We are putting a lot of effort into new systems, we are adding staff and will be moving to a new building next year. We are changing how we do business in many ways, most of which are beneath the surface, but some of which you may have noticed and will notice as time goes along. Nonetheless, our objective, our mission, will remain to provide prompt, courteous and accurate service to pension participants and those seeking information regarding our Fund.
New Hire
Along these lines, please welcome Christian Campen to the pension staff. Christian has been hired to fill the position of Assistant Treasurer, Financial Matters. He will be responsible for cash management, accounting, portfolio accounting and measurement, and coordination with the investment consultant and managers. Christian was most recently employed with the Emory Investment Office of the Endowment, and prior to that was a cost accountant with Motorola. He is a graduate of Emory University with a double major in finance and accounting.