Tampa Retirement Fund Lowers Assumed Rate of Return

Reduction to be phased in over five years.

The city of Tampa’s General Employees’ Retirement Fund has voted to lower its assumed rate of return to 7.5% from 8%, according to recently released minutes from its August board of trustees meeting.

The board agreed to phase in the reduction. As of January 1, 2018, the rate of return will be set at 7.9%, after which it will be lowered an additional 10 basis points per year over the next five years until it reaches 7.5%.

Aon Hewitt had been hired to provide a quantitative analysis on reducing the actuarial rate of return assumption, and the impact various scenarios would have on the unfunded liability, funded ratio of the pension fund, and projected employer contributions. Representatives from the company reviewed multiple scenarios with the board concerning the impact of lowering the assumed rate of return in a single year, versus phasing the reduction.

One of the reasons cited for phasing in the reduction was because increased contributions in the upcoming years would be difficult for the city from a budgetary standpoint.

The decision to lower the rate of return assumption came just after the fund reported a one-year return of 15.26% gross of fees, and 14.65% net of fees as of June 30. As of July 31, the total fund value stood at approximately $705.6 million, which was up approximately $10 million from the previous month. Through July 31, the fund is up 12.09% gross of fees on a fiscal year to date basis. Over the five-year period ending July 31, 2017, the fund is up 9.8% gross of fees annualized compared to the policy index of 9.1% for the same time period. The current funded ratio of the fund is 89%.

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