New Orleans Pension Trustees Debate Ways to Reduce City Contributions

Last month, the board of the New Orleans Municipal Employees Retirement System (NOMERS) produced a list of potential benefit cuts and changes that could reduce pension costs for the city.

The suggestions were the result of mounting pressure on the pension fund to work with the city to reduce its annual payments, which totaled $20 million in 2014.

At a more recent meeting on Wednesday, board members debated ways to reduce costs without changing benefits. Ideas were tossed around regarding tweaking actuarial assumptions and amending the fund’s amortization period, according to the Times-Picayune.

From NOLA.com:

Edgar Chase, the chairman, said the board needs to find ways to reduce, or possibly cap, the city’s annual contribution. He suggested tinkering with the fund’s actuarial assumptions as one way to achieve that.

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Pension systems have some flexibility in terms of how quickly they plan to pay down their unfunded liabilities. Since longer amortization periods mean lower annual payments, cities have an incentive to stretch them out as long as possible.

The municipal employees’ pension fund currently assumes an amortization period of 15 years, making it one of the most conservative pension systems in the country in that regard. Actuarial standards permit stretching the period up to 30 years.

Given the pressure to keep costs in check, it may be time for the NOMERS board to consider taking a more liberal stance, Chase said.

Tweaks to actuarial assumptions can ease a city’s financial burden and are common practice across the country, but they aren’t without risk, according to fiscal hawks.

Critics have long said such actuarial wizardry can mask systemic problems.

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The municipal employees board did not move to amend its amortization period Wednesday, but the conversation speaks to the pressure members feel to reduce costs for the city.

NOMERS manages $372 million in assets.