SUMMARY OF FINDINGS AND RECOMMENDATIONS
The creation of the Task Force was prompted by the growing concern of several legislators and the Office of Policy and Management about the increasing unfunded pension liabilities of Connecticut municipalities. Prior to the existence of this Task Force, there had been no systematic study of the funding methods and practices of Connecticut’s municipal retirement systems.
During its data gathering stage, the Task Force used the services of an actuarial consultant, instituted a state-wide survey, conducted a public hearing, and met with representatives from rating agencies, and the investment, banking, and actuarial communities. A complete list of the Task Force findings include the following:
There are no Federal or State requirements for funding of municipal pension plans in accordance with actuarial determined levels. Statutes do not require towns to fund their pension plan; governance of pension funding is left to the individual entity.
Municipalities with a funding level of 40% and under are considered to be severely underfunded.
Although the problem of Unfunded Pension Obligation is significant in size, only (13) thirteen of the communities that responded to the survey have pension plans that are more than 60% unfunded.
Most of the underfunded municipalities do not make contributions equal to actuarially recommended levels.
The majority of the members of the Task Force felt that municipalities should fund their retirement obligations in accordance with sound actuarial principles. However, the Task Force declined to recommend that this be mandated by law. There was sensitivity to the issue of imposing mandates.
The Task Force submits its recommendations for the consideration of the Governor and the General Assembly. The entire set of recommendations include:
Clarify the State’s General Statutes as they relate to the establishment and funding of pension plans.
Study the establishment of a new state administered cost-sharing plan or expansion/ revision of the state Municipal Employees Retirement System (MERS) to offer alternative benefit structures that would increase its attractiveness to municipalities and provide ways of dealing with the distinction between old liabilities and new costs.
Develop a voluntary, centrally managed system for the investment of local pension funds which could provide opportunities for additional income and reduced costs.
Require municipalities to file annual (biennial) valuations with the State. This will aid in the fiscal monitoring currently conducted by O.P.M. and the Treasurer and enable the State to maintain the database developed by this study.
Create statutory authority to allow municipalities the ability to issue pension obligation bonds under certain guidelines and conditions, including state oversight.
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