There are no big prizes for success managing a County pension fund. No equivalent to the Gold Medal Award for Excellence in Park and Recreation Management. Nothing like the National Planning Excellence Award for a Planning Agency. No career-enshrining equivalent to the Water Industry Hall of Fame.
Your efforts have to speak for themselves. For the Arlington County Employees’ Retirement System, the results say “well done.”
This year the plan climbed to “99 percent funded,” meaning there are enough assets to pay virtually all of the retirement benefits earned to date by retirees and current employees. That’s a remarkable feat in the wake of the Great Recession, when many local governments were forced to declare a “funding holiday” and suspend retirement contributions. Even through the worst economic downturn since the Great Depression, Arlington County consistently met the necessary contribution requirements, a critical factor in the system’s success.
“You will have your pension. It’s safe and will help in future years,” says Michelle Cowan, acting deputy County manager and retirement system trustee.
And what does it mean for the County as a whole?
Cowan points out that the County’s thriving, well-funded pension plan has helped Arlington maintain the highest possible bond ratings for 15 straight years – making it possible to borrow money at the lowest possible rates. “That’s about it” in terms of retirement-fund accolades, she says with a laugh.
Arlington’s sound fiscal management meant that during the big recession, when many states and localities were slashing or delaying contributions, Arlington’s contribution rate increased to make up for lower returns on investments. That peaked at 24 percent in Fiscal Year 2015, meaning 24 percent of all the regular compensation paid to employees by the County, excluding items like overtime. In dollar terms, those County contributions totaled $58 million. Subsequent strong investment returns have served to lower the contribution rate to 22 percent for the current fiscal year.
The trick to managing the fund, says Danny Zito, the retirement system’s executive director, is “a long-term perspective. The portfolio [of stocks and bonds] is simple, not ‘flavor-of-the-month.’” The goal is to provide a guaranteed monthly lifetime retirement benefit for each employee based on his or her number of years on the job.
Currently, general County employees put in a mandatory 4 percent of their pay on a pre-tax basis. Public safety employees contribute 7.5 percent.
The County Board reviews the fund’s performance quarterly. Zito says investments might be reallocated two or three times a year while maintaining that “long-term outlook” that seeks to balance the potential for appreciation down the road with risk control.
You can never be too prepared for retirement. County employees are also encouraged to take advantage of the County’s 457 tax-deferred compensation plan, which they can set themselves at an aggressive, moderate or low risk.
Arlington Public Schools teachers and staff participate in a separate retirement plan run by the state.