Pension hole plagues Warminster

Posted: Monday, March 10, 2014 1:00 am | Updated: 4:20 pm, Mon Mar 10, 2014.

By Gary Weckselblatt Staff Writer

When Warminster supervisors say “We can’t afford this any more” or “the numbers are so big, they might not even be resonating,” you can bet the topic is the growth of health care costs.

In this case, however, you’d be wrong, at least partially.

The culprit at Thursday night’s board of supervisors meeting was the township’s pension funds. The unfunded liability of the police plan has grown from $450,000 in 2009 to more than 10 times that amount — in excess of $5.1 million today.

But the challenge is even more pervasive as the liability is growing faster than employee contributions and performance in the stock market.

So, as Supervisor Tom Panzer said, “If we had a sugar daddy to bring us flush, we might need him again five years from now.”

Unfortunately, the township has more than a $5 million problem. When the unfunded liability of the township’s nonuniformed pension plan and retiree health care costs are added to the police fund, the shortfall grows to $17 million.

“We can’t afford this anymore,” Supervisor Leo Quinn said. “This hockey stick is so out of control. I have no idea how we’re going to get ahead of it.”

Warminster is looking for ways to manage the problem, which is plaguing municipalities, school districts, counties and states.

In 2012, it started putting all new nonunion hires on defined contributions plans as opposed to the defined benefit of a pension. AFSCME agreed to have its new hires also placed on a defined contribution plan.

Mary Eberle, the township solicitor, said the police pension, unlike other unions, is a statutory obligation. The state says “If you have a police department, this is what their pension will be,” she said.

On Thursday night, supervisors heard from Vijay Kapoor, director of workforce development for Public Finance Management of Philadelphia, who gave an overview of the impact of retiree benefits on Warminster.

He told the board there’s no “silver bullet” for a system that essentially promises too much money to beneficiaries who are living longer. Investment losses and insufficient funding have escalated the problem.

Kapoor said businesses have been trending away from pension plans in favor of retirement vehicles such as a 401(k).

By and large, he said, governments are where defined benefits can be found. “They are a thing of the past,” in the private sector, he said.

Municipalities, however, “can’t just pick up the plant and move someplace else.” A former lawyer, he said, “It’s better that you all work together than fight this out in court.”

Kapoor warned that while some so-called experts say having a pension funded at 80 percent is sufficient, “it is not true.” He called it a “mythical standard” and said the goal is 100 percent funding.

And with the market near its all-time highs these days, the funding should be higher than 100 percent.

He recommended having an actuary project the actual costs of providing pension and retiree health benefits, and put those projections into a multiyear financial plan.

“Develop a comprehensive strategy that addresses these funding issues,” Kapoor said.

After the presentation, Quinn said “it’s even worse than we thought it was … staggering.”

To combat the issue, supervisors plan to develop a pension advisory committee. It would be made up of township manager Rich Manfredi, one or two supervisors and two or three residents with a background in finance and pensions.

“Bring in people in the investment world with very specific backgrounds,” said Manfredi, who envisioned the group as an oversite committee.

“The strength of this town is we’ve got 32,000 diverse people,” Supervisor Jason Croley said. “This is another way for the public to be involved.”