The Selectmen looked at termination of the town’s defined benefit pension fund during their meeting this week and decided it would be wise to close the fund and offer annuities to those covered by it.
“It is very solid defined benefit plan that basically ended in 2011 when we went to a contribution plan—something like a 401(k),” said First Selectman Matt Riiska. “We have six people who are retired who are still in the plan, and two that are still working. We will offer them annuities.”
Persons covered by the old plan will continue to receive the benefits they were promised. “They will receive payments based on their pay grade and years of service,” Riiska said, “but we can probably tap half of what is in the fund to help pay down the town’s debt service.”
There is close to $1.8 million in the fund.
Riiska explained that the fund became “way over funded” when interest rates rose.
“We decided about three years ago that it would benefit the town to offer annuities [to the pensioners] and to close it. But annuities are more expensive when interest rates are low and it wouldn’t have benefitted the town so much then.”
Faced this year with a cluster of expensive and unbudgeted expenses, the Selectmen and the Board of Finance looked again at the fund and decided to close it and pursue annuities, freeing money to reduce the town’s debt service. With the debt service reduced, Riiska said new borrowing will be sought to cover capital items such as new boilers at the elementary school, keeping taxes lower.