Credit: Tyler Prahm / Unsplash.com
Financial advisors for Ambler Borough presented where finances stand as 2024 nears its end.
The Ambler Borough Council spent time in its last Committee Meeting learning more about the borough’s pension plan for its employees. Joe Duda, of Duda Actuarial Consulting Inc., in Fort Washington, and Scott Repke, of AllianceBernstein, were on hand to review the highlights with the council.
Duda joked with the council that he would not be boring them with an actuarial presentation before explaining “MMOs.” MMO stands for “Minimum Municipal Obligation.”
“They were prepared and presented to the chief administrative officer, and adopted, I believe, as part of your budget for 2025,” said Duda. “They’re a little bit higher than they were in 2024, because this was the first time we were using the 1-1-23 [Jan. 1, 2023] valuation.”
According to the Pennsylvania Municipal Retirement System, an MMO is “the smallest amount an employer must contribute to any pension plan established for its employees.”
“The amount is calculated using actuarial valuation to ensure that employer pension plans are sufficiently funded,” said the PMRS website.
Duda said that because 2022 was a “negative market,” the valuations used were skewed. With 2023 and 2024 as far more positive years, the next valuation slated for Jan. 1, 2025, should show much better figures.
“We should have some better results, so hopefully you won’t get mad at Duda next year when he presents,” said Duda of himself. The figures he did bring to council’s attention included the 2025 MMO figures of:
Duda said that, because the borough has had a defined contribution in place now for around 10 years, as people retire from the defined benefit plan, MMO costs will be shrinking. However, they may go up in the defined contribution plan.
“But the good thing about the defined contribution plan is you don’t have an unfunded liability,” said Duda. “The participant gets whatever they have in their account, and you’re done. You don’t have to worry about funding like the police pension plan or a non-uniformed DB plan.”
While figures are up from the previous year, Duda said, the borough is covered, as both plans are “still overfunded.” The Ambler Borough’s state aid was “about eight or nine percent higher,” according to Duda. Duda estimated the state funding to be around $275,000.
“So, the $275 [thousand] can go against these MMOs,” said Duda. “I was happy to see the state aid went up.”
Repke, who has spent 22 of his 24 professional years in the business working directly with Ambler Borough, he said.
“You have been clients here for 38 years,” said Repke of Ambler’s time with AllianceBernstein. “Thank you for all of those years.”
“So 2022 was not a very good year on the market,” he said. “That is when the federal reserve took the interest rate from zero to five percent. The market reacted negatively.”
Repke said, at the time, “inflation was roaring,” hovering around nine percent, while today it has balanced back to around 2.8.
“The positive is, the next two years have been very good, including today, and hopefully 2025 is good, so when you do the valuations those numbers will look a lot better,” he said. “In my 24 years, you just never know what’s going to happen tomorrow, so we’ll see what happens in 2025.”
Repke said that, as of October’s figures, the Borough “passed the $20 million mark.”
“Thirty-five percent of the portfolio is in bonds, and the rest is in stocks,” he said. “We made some changes.”
Repke said that, with the borough’s portfolio, around three years ago, the money managers opted to “increase the equities exposure, decreased bonds, and we increased the U.S. exposure.”
“That has worked out very, very well,” he said. “The U.S. market has done a lot better than the overseas market, and stocks have done a lot better than fixed income.”
He said that the rough plan will likely continue in the coming year.
“We do not buy the speculative,” he said. “These are more of those singles and doubles that make you more money than going for those home runs.”
Repke said, overall, figures are up around 15 percent, to date (with figures at the close of September).
“I’m kind of a data freak,” he said. “I wanted to look at this, and we’ve had seven down years out of 38, which goes to show you, as exhausting as the market can be sometimes, you do get rewarded by being in the market.”
