City Retirement Plan Squeezed Despite Wall Street’s Strong Performance

City employees’ retirement savings are growing thanks to a strong stock market. But the program that manages those accounts is running low on cash.

The Pasadena Deferred Compensation Oversight Committee will review this financial puzzle Tuesday, Nov. 4, at City Hall.

Wall Street posted impressive gains in recent months, according to the Fiduciary Consulting Group’s market overview. Stocks climbed more than 8% in the summer quarter.

That’s good news for city workers who save through the deferred compensation plan.

But managing the plan costs money. And those costs are rising faster than the fees collected to cover them, budget documents show.

The plan is projected to spend $1,298 more than it brings in next year, according to the budget.

The city charges workers a small fee to cover administrative costs. That fee equals about $6 for every $10,000 in savings.

Officials already lowered that fee six years ago. Budget documents indicate they may need to raise it again.

“The current 6bps fee may need to be raised based on future budget expectations,” the budget states.

The biggest expense increase comes from investment consulting services, according to the budget. Those costs will jump from $27,750 to $46,250.

A staff coordinator’s salary accounts for more than half of all expenses at $70,000, the budget shows.

Interest rates have been falling, the market overview notes. The Federal Reserve cut rates in September and officials projected more cuts through year-end.

The plan has $143,800 in reserves to cover shortfalls, according to budget documents. But repeated deficits could drain those funds over time.

The committee meets Tuesday from noon to 1:30 p.m. in Conference Room S347.

The meeting will include a detailed Market Review prepared by the Fiduciary Consulting Group.