PHILADELPHIA, PA — In a milestone achievement, Philadelphia’s Pension Fund has exceeded 60 percent funding, marking the highest funding percentage in over two decades. This promising development is the result of a collective effort by the Philadelphia Board of Pensions & Retirement, mayoral administrations, city council, unions, and state legislators.
Over the last seven years, the funded percentage has seen a significant leap from under 45% to over 60%. Alterations to pension benefit structures and increased contributions to the Pension System have played a key role in this progress. According to a Preliminary Actuarial Report from Cheiron, the Fund’s outside actuary, the fund is projected to reach 80% funding by FY29 and achieve full funding by FY33.
Mayor Cherelle L. Parker expressed her satisfaction with the progress, stating, “I am very pleased with the progress we are making and will continue to make to increase the health of the Pension Fund for the dedicated retirees of our city government.”
The success of the fund can be attributed to the three-pronged approach of the Road to Pension Recovery plan.
Firstly, the city and its employees have dedicated additional assets to the fund, including a portion of the Sales Tax. By increasing contributions beyond what is annually required, the fund is better positioned to weather the volatility of the stock market and pay down the unfunded liability more quickly.
Secondly, future liabilities’ growth rate has been curbed through the creation of a new mandatory “stacked hybrid” plan for new, non-uniformed employees. This initiative, agreed upon by the city and union negotiators, is less costly to the fund in the long term.
Lastly, the Pension Board has reduced the plan’s risk profile by making changes in asset management. The board has shifted towards assets with lower fees and less volatility, and has adopted more conservative plan assumptions.
The city’s comprehensive pension reform plan has not gone unnoticed. In 2020, the Government Finance Officers Association (GFOA) awarded the City of Philadelphia the 2020 Award for Excellence in Government Finance.
This progress in the Pension Fund’s health is noteworthy. It reflects a commitment to ensuring the financial security of the city’s dedicated retirees. Furthermore, it highlights the effectiveness of collective efforts and sound financial strategies in addressing complex fiscal challenges.
However, while this milestone is significant, it is important to remember that the journey towards full funding is ongoing. Continued dedication and strategic planning will be essential to maintain this positive trajectory and ensure the long-term stability of the Pension Fund.
Ultimately, the improvement of Philadelphia’s Pension Fund exemplifies the efficacy of collaborative efforts and sound financial stewardship. It provides a beacon of hope for other cities grappling with similar pension funding issues and serves as a reminder that with concerted effort and strategic planning, financial recovery is possible.
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