Lexington's police and fire pension fund shows improvement since city approved reforms

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Lexington's police and fire pension fund continues to show financial improvement two years after pension reform was passed.

An actuarial report released Wednesday shows an unfunded liability of $180 million as of July 1. That's down more than $20 million from the previous year, when the unfunded liability was $204 million.

The unfunded liability is the additional amount the city would need to pay all of its current and future beneficiaries.

Before pension reform was passed in 2013, the unfunded liability was nearly $300 million.

Todd Green, of the actuarial firm Cavanaugh and MacDonald, told the police and fire pension board Wednesday that the funding ratio — the amount of money it has versus the amount of money it needs — is 76.2 percent. That's a bump from 72.3 percent from the previous year.

The pension's highest funded ratio during the past 14 years was 77.7 percent, in 2000.

Green gave the presentation during the police and fire pension board meeting. Afterward, he said the changes that city officials and Lexington police and fire agreed to were "the most effective pension reform in the country."

Green said the reforms had helped cut the system's unfunded liability. He also said the fund's investments did better than expected, which helped with the overall financial health of the fund.

The reforms included asking current and new police and fire employees to contribute more money into the fund. The city agreed to increase its payments by $9 million a year and pledged to pay down the unfunded liability over 30 years.

The actuarial report also sets the amount of money the city must contribute to the fund. Last year, the report showed the city had to put in more money than what it had set aside in its budget. This year, the city will not need to contribute more money than already budgeted, said Bill O'Mara, the city's finance commissioner.

If pension reform had not been approved, city taxpayers would be paying much, much more into the pension fund, Mayor Jim Gray said.

"Next budget year, instead of paying approximately $36 million, we will pay $21 million," Gray said. "That's a win for taxpayers."