Pension Success Achieved on Backs of Retirees
In its May newsletter, Mass Retirees Association President Frank Valeri’s message “The Truth About Leominster’s Pension Funding” calls our payoff a “publicity stunt,” and for good reason. City hall’s financial wizardry occurred at the expense of our retirees. Leominster’s comptroller, also chairman of the city’s Retirement Board, chose an arbitrary investment assumption rate of 5.5 percent, the lowest in the nation. This unrealistic rate overstated Leominster’s pension debt by $20 million.
By combining the fund’s investment gains and denying retirees a cost-of- living increase (COLA) for 7 years, Leominster’s pension fund earned $7 million. Valeri states, “These are not taxpayer savings, but trust fund assets that should have been shared with retirees and their beneficiaries.”
When the new Government Accounting Standards Board’s timeline was adopted, cities were given 30 years to fully fund. Wealthier cities chose the GASB’s longer timeframe, balancing their priorities and giving retirees a fair COLA increase. There was pain as Leominster raced to be first; no new police station, schools on accreditation warning, and lack of infrastructure upgrades — all accompanied by tax increases.
Leominster made over $46 million in investment earnings during this period. Much of it came from contributions made by those retirees who were denied a $2,250 COLA increase over those 7 years. Had the city used a realistic investment assumption rate and not 5.5 percent, retirees could have received a COLA increase for each of those 7 years and Leominster would still be first in the state to be fully funded. Imagine that!