Shelton Pension Board completes interviews with potential providers
The city Pension Board has interviewed three firms that would potentially be the city’s pension plan provider.
Representatives of ICMA-RC, MassMutual and Prudential have attended recent Pension Board meetings to give presentations and answer questions.
They have discussed such issues as investment options to be offered, how they would educate pension plan participants on plan changes, and the fees they would charge.
“We need to entertain some professional management,” Christopher Gallo, Pension Board vice chairman, told the Prudential team members as they prepared to make their presentation at the most recent board meeting on April 27.
“I think we’ve had three good presentations,” board member Anthony Minopoli said.
The Pension Board — which consists of three appointed members as well as Mayor Mark Lauretti and Finance Director Paul Hiller — is expected to make a selection soon.
“I think we need to make a decision,” Gallo said at the April 27 meeting.
They will be helped by a comparison matrix being prepared for them focusing on planned education efforts, fees, and the low-risk investment vehicle (stable value fund) to be offered as one part of the overall plan.
Other proposals received
The Pension Board also received proposals from a handful of other firms that wanted to be the city’s pension plan provider.
The board was formed in 2014 to bring a higher level of expertise to decisions involving the city’s pension plan, which contains assets in the $32-million to $33-million range.
The third appointed Pension Board member is J. Allen Kosowsky, who serves as chairman. One appointed member works in the financial services field and the other two are CPAs who have worked at large accounting firms.
More active role for employees
City employees are expected to play a more active role in their pension decisions once a new company is hired. This has been the trend at most workplaces when people are part of a defined contribution plan.
Unlike most government workers, Shelton city employees do not have a defined benefits plan, in which they are guaranteed a certain pension amount based on such factors as salary and years of service. They have defined contribution plans that essentially are the government-sector equivalent of the 401(k) plans found in the private sector.
The city contributes 6% of an employee’s salary to the pension fund and participating employees contribute 3%.
Board members have stressed how important it is for whatever company is selected to offer thorough education programs for pension plan participants, to prepare them to make more decisions on their own and familiarize them with investment options.
They also want the company to offer target-date funds as part of a portfolio mix of fund investment options (that’s when a person can chose a fund based on the year he or she expects to retire).
Many employees near retirement
An unusually high percentage of city of Shelton employees are nearing retirement due to longevity.
Shelton police officers are part of a state-run program that the city pays into, and all teacher pensions in Connecticut are part of a state teacher pension system. Both of those programs are defined benefit plans.
Non-certified city Board of Education staff are part of the city pension plan.
‘Tossed and turned’
Lauretti said that before the formation of the Pension Board, he, as mayor, was given the responsibility to oversee the pension plan.
Lauretti said he didn’t think that was a good model. “This is why we made a change,” he said.
During the Bernie Madoff scandal, he said, it became clear the city would benefit from more oversight and guidance on pension matters. “It dawned on me that this was an awful lot of responsibility with the mayor having the fiduciary responsibility,” he said.
“There were nights when I tossed and turned, worried that something would go wrong,” he said.
“Forget about who the mayor is — think about how many mayors are qualified and have the time to deal with an issue so important to people’s lives,” he said.
Lauretti said having a Pension Board will work to the benefit of all city employees — and that includes himself. “I’m in this pension program, too, and we are better served by putting people in charge who have expertise in this area,” he said.