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MERCER COUNTY Retirement board to review portfolio



Published: Sat, January 29, 2005 @ 12:00 a.m.



Taxpayers' subsidies for county retirees are lower in Mercer and Lawrence.

Mercer County retirees and employees will find out soon how well their investors did last year as custodians of their pension money.

And Lawrence County's fund managers registered a 5 percent 2004 return, much better than other recent years but $300,000 short of actuaries' requirements.

The Mercer County Retirement Board meets Friday with Hermitage-based JFS Wealth Advisors and the firm's five fund managers to review the performance of the portfolio.

The session is a prelude to a Feb. 10 public session the board has scheduled to decide on whether retirees will receive a cost-of-living increase and whether to keep the same investment team.

The retirees haven't received an increase since 2001, the trailing edge of the 1990s stock market boom years.

The pension fund, $34.3 million at beginning of 2004, showed about a 3 percent increase through the most recent reporting period in September. But that's nowhere near the return the board's actuaries say investors must gain to keep the checks coming for present and future retirees.

Property owners' money

As of the end of the third quarter of last year, the fund managers performed fairly well in 2004, but "when you want to hit 7.5 percent, it's not that good," Tom Amundsen, Mercer County controller and secretary of the pension board said during a review of the pension fund's status with The Vindicator.

The actuaries -- calculating the number of employees and retirees, their ages, the impact of the various pension options, life expectancies and other factors -- have told the board it needs an annual return on investment of 7.5 percent or it must supplement the account from the county general fund.

The decisions of the retirement board are important to Mercer County property owners because the better the portfolio does, the less money comes out of their pockets to finance the retirements of current and former county employees.

Upbeat stock market performance meant that for more than a decade investment income covered the county's annual pension obligations.

Increasing subsidy

The post-millennium downturn in the market changed that. In 2003, the county wrote a $402,000 general fund check to the fund.

In 2004, the county's obligation from the fund was $641,000, substantially less than the $787,000 the county board earmarked for pensions.

For 2005, commissioners, on advice of actuarial firm The Hays Group of Philadelphia, set aside $918,000 -- just under 1 mill of property tax -- of its $22.3 million general fund budget to cover the gap.

The pension panel has told JFS to set target asset allocations of 30 percent in domestic large capitalization companies, 15 percent in U.S. smaller companies, 15 percent in international stocks, 37.5 percent in bonds, money market and other fixed-income investments and to hold 2.5 percent in cash to cover the monthly retiree checks.

The managers of most of the fund segments have exceeded their benchmark indexes. In other words, they outperformed the average of the managers in their sector specialties.

291 retirees

The small capitalization portion of the account has come up short of the Russell 2000 value index, the industry sector performance target.

The board will have to decide whether to make a manager change.

The members will have to take into account that the index performance is influenced by a quirk of investor behavior: The Russell's numbers are inflated by a surge of money into riskier companies that the portfolio managers' guidelines won't let them touch, Amundsen explained.

The retirement board sends checks to 291 retirees and has 354 vested employees who contribute 8 percent of their pay to the system.

The retirees are enrolled in a number of plans and collect different amounts every month but the monthly pay ranges from $12.55 to $1,888.

Lawrence County

Meanwhile in neighboring Lawrence County, 250 retirees will receive cost-of-living increases averaging 2.5 percent, Controller Maryann Reiter said.

Commissioners have budgeted $300,000 from the $27.5 million general fund to augment employee contributions to their pension fund.

Fund managers reported a rate of return of 5 percent late last year and the general fund money makes up the difference between that and the 7.5 percent annual contribution actuaries dictate.

Unlike last year, when the county covered a $372,000 pension obligation, part of a nearly 1 mill tax increase, the county is not increasing taxes in 2005, Reiter said.

Early last year, the county closed its Hillview Manor nursing home. That removed 130 employees from the pension system and damped the retirement system's demand on the general fund.

The money managers started this year with $34,451,000, about half of it in bonds and money market funds, 48 percent in stocks and the rest in cash.

The county employs 400, and each contributes at least 8 percent of pay into the retirement account and can opt to increase that to 10 percent. Pension payments to former Lawrence County employees range from $35 a month to $1,500.




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