Pension Increases Won't Break the Bank

Town pensioners will be getting bigger payouts starting Jan. 1. The cost of living adjustments worth just over $100,000 annually are expected to be fully paid for by New Canaan's pension fund and won't cut in to the operating budget or general fund.

Town Council last week approved the plan for an increase of 2 percent to accommodate for the cost of living in 2007 and 1 percent for 2008; there will be no increase for 2009.

The increases are modest compared to social security cost adjustments of 2.3 percent, 5.8 percent, and 0 percent respectively over the same three years; the federal Department of Labor's Consumer Price Index showed that the actual cost of living went up 4.08 percent, .09 percent, and 2.73 percent in those years.

Effectively pensioners who retired by Dec. 31, 2006 will see an additional 3 percent next year—$55.65 more on top of the average pension of $1,855 a month; Those who retired in 2007 will get an additional 1 percent, or $18.55 a month on average.

Chief Financial Officer Gary Conrad had originally suggested increases of 3 percent, 2 percent, and 1 percent to cover 2007, 2008, and 2009 respectively—effectively 6 percent for all but the most recent retirees—but the Board of Finance revised the proposal downward over concerns that the town's pension fund could go into the red.

According to Conrad's memo to the Board of Finance and Town Council, the pension fund had a market value of about $96 million as of Oct. 31. As of July 1, 2008 the town's benefit obligations to 202 retirees were estimated to be about $72 million (before the increases that will add another estimated $961,000), well within what the fund would cover. But the value of projected benefits could be as much as $110 million, assuming everyone who is now employed by the town takes advantage of a pension.

"We are this close to being under-funded," said Board of Finance member Paul Giusti at their Dec. 8 meeting as he got the caution he asked for.

The town will next revaluate pension payments in 2012.