Luzerne County’s annual employee pension fund subsidy is estimated at $11.3 million in 2016 and expected to continue rising through 2025, the fund’s actuary told the county Retirement Board Wednesday.

Last year’s pension subsidy was $10.2 million.

The problem stems from a $50 million gap between the fund’s projected future assets and liabilities, said actuary Greg Stump, of Boomershine Consulting Group LLC.

The fund relies on investment earnings and employee contributions to cover present and future obligations. Taxpayers must pick up the slack when revenue falls short because the pensions are guaranteed by law.

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Stump presented a chart showing the county’s annual contributions may increase steadily until reaching a high of more than $16 million in 2025 before dropping off. The taxpayer contribution is estimated at around $10 million in 2035, the year the plan may be near fully funded, his chart shows.

He stressed his projections are based on future variables that likely will change, comparing the exercise to a weather forecaster trying to predict the temperature years from now.

County officials have been wrestling with the gap — officially known as an “unfunded accrued liability” — for years. Taxpayers started shoring up the fund in 2002.

Many factors contributed to the liability, including early retirement incentives years ago and downsizing that reduced employee contributions into the fund, officials said.

Stump said the fund suffered a major blow last year on the investment side with a $20 million loss.

Retirement Board Member Eugene Kelleher, a county councilman, blamed that loss on the market.

“It was a down year. The markets were down. It is not a fault of the people who were investing our money,” he said.

Stump said many pension plans experienced losses last year.

“Every board meeting is the same story,” he said.

The county’s plan is 84 percent funded, which he described as “good” compared to many public pension plans that are in the low 70-percent range.

Investment advisor Richard J. Hazzouri said his team aggressively pursues all promising investment options while honoring the board’s directive to avoid those that are too risky or inappropriate for a public pension.

As of March 31, the fund was up 1.13 percent for the year with a value of $203.5 million, said Hazzouri, of Morgan Stanley.

The fund had dropped to $151.8 million when Hazzouri’s company took over as pension advisor in September 2008, replacing Merrill Lynch.

Hazzouri told the board Wednesday that expectations of returns over 7 percent may be unrealistic. He predicted an increase in alternative investments in the county portfolio to deal with the “sideways market” but cautioned such investments are more expensive, which would impact the other goal of controlling costs.

The discussion made it unlikely the board will recommend a cost-of-living adjustment for retirees — something county Councilman Stephen A. Urban, a former county commissioner, has been pushing. Urban said at a Tuesday council meeting he receives a county pension but is seeking the adjustment on behalf of numerous retirees who have approached him — not for his own benefit.

The county last provided a cost-of-living adjustment in 2008.

Stump said a 1-percent increase for retirees would cost $1.4 million. Because the pension fund is not self-sustaining, taxpayers would be forced to cover that expense, though they could spread the cost over five years.

The county has about 1,200 retirees, said county Retirement Coordinator Rick Hummer.

The average annual county government pension was around $900 per month in 2013, said Hummer, who is in the process of updating that calculation.

The pension fund’s liability will play a role in the county’s 2015 audit because the Government Accounting Standards Board, commonly known as GASB, now requires government entities to incorporate pension fund liabilities into their overall bottom lines, the county’s auditor warned in February.

Official: payments will continue to rise through 2025

By Jennifer Learn-Andes

jandes@timesleader.com

Reach Jennifer Learn-Andes at 570-991-6388 or on Twitter @TLJenLearnAndes.