Town benefit from WRRS transfer to state fund will be long term
By Catie Foertsch Community Reporter

Westborough - Currently, the town deposits its retirement funds in the Worcester Regional Retirement System (WRRS), one of 106 municipal retirement systems in the commonwealth. In September, the WRRS will transfer its $300 million to the state's much larger pension fund, which has been earning a better return on investments.

While that increased return will eventually translate into savings for Westborough taxpayers, the savings won't be seen for some time, WRRS Acting Chair Roger Dubois said, as the increase will be applied to WRRS's unfunded liability.

State pension versus Social Security

Town employees do not pay into the Social Security (SS) system, as do workers in the private sector. Instead, they must deposit up to 11 percent of their earnings in the town's retirement fund. While 11 percent seems steep compared to the 6.2 percent they'd pay to SS, upon retirement they receive a much bigger benefit of up to 80 percent of their highest three years' pay, depending on years worked and age at retirement. By contrast, SS is not designed as a full pension but rather as supplemental retirement income. The average retired worker received about $1,000 per month in 2006, according to the SS Administration.

Town payments

Each year the town must also pay an assessment to the WRRS, to fund payments to current retirees and to fund the system's unfunded liability. The assessment for fiscal year (FY) 2007 was $1.4 million. Full funding of the system's unfunded liability was estimated to happen in 2026.

According to Dubois, the additional amount earned by the state pension fund will be applied to the WRRS unfunded liability, so that the date the system is fully funded will come sooner. Once that date arrives, the town's assessment will drop.

Westborough taxpayers benefit from having town employees enrolled in the state retirement system. Employers whose employees participate in SS must match the SS employee contribution of 6.2 percent, and according to Assistant Town Coordinator Maryanne Bilodeau, the town would have had to pay $2 million in FY 2007. By contrast, the $1.4 million it paid to WRRS was 4.3 percent of total wages.

State fund

The state pension fund, called the Pension Reserves Investment Trust (PRIT), has been out-performing WRRS by about 2 percent per year on average over the last few years.

A direct comparison is not easy, as the state measures performance in fiscal years and the WRRS in calendar years. But averaging both funds over the past four years shows an average annual return of 13.1 percent for PRIT, while WRRS returned an average of 11.1 percent.

State versus regional performance

Dubois said the one of the reasons for PRIT's higher returns is that, with about $50 billion in assets, PRIT can aff ord to invest in highreturn funds that require an investment of $50 million or more. Another reason, he said, is that the state fund has 22 full-time investment advisors, where WRRS has just one.

The diff erence may also be due to WRRS's conservative approach.

"None of our board members feel like being cowboys" and putting WRRS money in higher risk investments, Dubois said.

Ninety-five central Massachusetts groups invest their retirement money in WRRS, including 46 towns and cities, school systems, water departments, and sewer departments. The WRRS currently pays monthly pensions to about 3,000 retirees.