Thursday, March 1, 2007 Older Editions

Tackling the pension issue

Andover does not yet have enough money socked away to pay all of the benefits it will owe its retirees. Currently its retirement system can cover about 80 percent of the town's pension liability - and that figure does not take into consideration the millions that will be needed for health care. As baby boomers with 21st Century salaries retire, this problem will hit home harder and harder.

That's why Andover should give heavy consideration to a recommendation by Finance Committee member Richard Howe to place the management of its retirement fund assets with the state's Pension Reserves Investment Trust. Because of its size, the PRIT fund has more investment clout. During the past 10 years, the PRITFund has ranked first nationally among 85 public pension funds with more than $1 billion, according to Howe's report.

Andover's own retirement fund has done quite well. It ranked 18th out of 106 retirement systems in the Commonwealth. But if you have the chance to join with the best, why not do it?

The PRIT fund outperformed Andover's fund in 14 of the 20 years inclusive between 1986 and 2005. Its returns were 2.5 percent higher in 2006, too. The town would have earned $734,280 more each year if it had been fully invested in the state plan. That would cover more than a few retirees' pensions. On average, the PRIT fund had an annual return more than 1.7 percent greater. This despite the fact that in 1991, Andover's fund had an enormous 43 percent increase that helps inflate its numbers.

Throughout the country, citizens are being obligated to support benefit packages for state and municipal employees that are much more generous than the ones they will receive. The cost of closing the gap between the amount owed in pensions and the amount of money currently on hand, is putting increasing pressure on state and local budgets.

Any plan with a proven 20-year track record of better results is worth serious consideration. Once the Legislature finishes its debates on the retirement-fund issue, Andover should give Howe's proposal that kind of attention.