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Detroit Police and Fire Retirement System exceeds performance expectations for Fiscal Year 2017, holds assets of $3.1 billion

Posted on: Wednesday, February 07, 2018

DETROIT – February 1, 2018 -- The Police and Fire Retirement System for the City of Detroit earned a 12-percent return, net of fees, in fiscal year 2017 on its portfolio investments and ended the year with assets of $3 billion despite paying out nearly $300 million in annual pension benefits.

 

“The pension fund benefited from a robust stock market and overall well balanced and managed portfolio,” said PFRS Chairman John Serda. “It is important to note that the only contributions being made to the fund are approximately $18 million per year.

 

Under the City’s bankruptcy exit plan called the Plan of Adjustment, the City is relieved from making an annual contribution to the first responder retirement “legacy plan” until 2024. A separate retirement plan was established for new hires in the bankruptcy process.

 

Serda said what that means is the pension fund portfolio returns as of its fiscal year ending June 30, 2017, exceeded the monthly and annual payout of retirement benefits owed to first responders and their beneficiaries. With increased earnings, the fund has not had to dip into reserves to make benefit payments.

 

“The largest single factor impacting the system is the performance of the investment markets,” Serda said. “The stock market and overall investment market was up in calendar 2017 and the PFRS investments have benefited from the bullish market. We have taken action to balance our portfolio and we are experiencing better returns than projected.”

 

Under the Plan of Adjustment the Pension Fund is projected to have an assumed rate of return of 6.75 percent annually on its investments. The only new money coming into the legacy plan, other than investments, is $18 million of Grand Bargain funds from the state of Michigan and local foundations.

 

While the City of Detroit is not required to put any money into the fund until 2024, the City has recognized the need to establish a separate Pension Trust to shore up a projected shortfall in contributions. Those funds exceed $105 million and are placed in a separate trust to be used only for pension funding in the future,

 

“There is an excellent spirit of cooperation between the City and the Pension System to address the projected pension fund shortfall,” said Serda. “While it would be our preference to have those funds paid directly into the system now to allow those funds to grow with our other investment assets, we understand the decision to place these funds in an irrevocable trust.”

 

 

 

 

We applaud Mayor Mike Duggan, his administration and the City Council for addressing the issue of a projected pension funding shortfall in 2024. By addressing the issue proactively the City agreed to create a special trust fund projected to reach some $377 million by the end of fiscal 2023.

 

“We look forward to mitigating the potential shortfall and preserving the pension system for the benefit of retired first responders, their beneficiaries and other city workers for decades to come,” said Serda. He added that a new hybrid pension system has been established for first responder hires since 2015.

 

The PFRS Board is currently comprised of a 16-member Board of Trustees. The Board includes six elected active duty police and fire personnel (3 each); and two elected retired personnel (one each police and fire); one City Council designee appointed and seven ex-officio appointees of the City of Detroit, appointed by the duly elected Mayor.  The Board oversees the $3 billion fund serving some 8,000 retired police and fire and approximately 3,000 active duty first responders. 

 

Twice a month public meetings of the PFRS are held on Thursdays at 9 a.m. Minutes and meeting records are posted on the PFRS website at www.PFRSDetroit.org.

 

The Police and Fire Retirement System of the City of Detroit was founded under City Charter and is the fiduciary for the pensions of all police and fire personnel. The PFRS is a separate entity from the city’s General Retirement System. For more information please visit www.PFRSDetroit.org.

 

Media Contact:

BAB Associates, LLC

Bruce Babiarz, Spokesperson

248-890-5030

Babiarz@BABpr.com

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