Appropriations/Assessments and Actuarial Valuations

Occasionally we are asked what percentage employers pay towards retirement – giving the percentage is as simple as directing you to the second column in the most current year’s spreadsheet below (between town name, and salaries).  However, describing how the percentage is determined is a longer conversation.
Every 2 years an actuary calculates the total retirement expense we will payout for the next dozens of years, and then subtracts the funds we have on hand and determines how short we are from being fully “funded” (see Funded Ratios above). They also calculate the annual expense for each of the next 30 years, and combine the two amounts and spread the payments out over the next bunch of years – that’s the basis for the assessment the employer units pay each year. Each employer’s share of the assessment is determined by its percent of total salaries (of all units), however, please note that we do a five-year averaging of your salaries (per our records) – so, the amount you see us use each year likely is not the same as your actual payroll for that year – it’s an average. Also note that your share will change if you or others increase or decrease payroll amounts (new hires, annual increases, layoffs, etc.).
Ultimately, our goal is to be fully funded and eliminate the portion of your assessment that is attributed to getting caught up. We do this by investing wisely, and minding our benefits expense. We expect the employer percentage will drop to between 4 and 6 percent when we reach “fully funded” status. The payment schedule has tended to improve over time (see page 15 of the 2014 Valuation report, and page 15 of the 2013 Valuation report (above)). Even though they both drop off the unfunded payment in the same year (2035), the annual amounts are less in the 2014 valuation, and the total is less by about 19 million.
As I said, the goal is to become fully funded, and given a stable economy there’s no reason to believe we won’t meet that goal. We’ll keep at it.  Dale
p.s. don’t be shy about reading the valuation reports.