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Pension unhappiness brews in Athol; State to take over fund, one of worst-performing.

Byline: Shaun Sutner

ATHOL - The town's municipal pension fund, one of the worst-performing in Massachusetts over the last three decades, is about to be taken over by the state.

But even as Gov. Deval L. Patrick is poised this week to sign legislation authorizing the takeover of the $15.3 million fund and about 24 other underperforming local funds, officials of the Athol Contributory Retirement System say they would rather remain independent than have their money managed by the Public Retirement Investment Trust.

"Unfortunately, we don't have much of a choice," said Gene A. Ferrari Jr., the town accountant and a member of the pension system's board, who acted as administrator of the fund for the last four years. "The only thing that concerns us with PRIT is we lose any kind of input."

The board is expected to discuss the measure at its meeting next Wednesday and vote on the issue at its August meeting. By voluntarily joining PRIT before Oct. 1, it would have the option of withdrawing after five years.

Also slated to be captured by the legislation are two other Central Massachusetts funds: the Worcester County Regional Retirement System's and Fitchburg's. Both have recently opted voluntarily to join PRIT, joining other major local pension funds such as Newton's and Middlesex County's that have moved to the state in the last few years.

The Athol fund, which covers 365 town and school district employees and retirees, has ranked in the bottom 10 of the state's 106 public pension funds over five-, 10- and 22-year periods. And the Athol fund has 49.4 percent of its pension liabilities covered. Only eight other systems had lower liability coverage.

In 2006, one of its best years ever, the fund turned in an investment return of 11.5 percent, which qualified it as 10th worst of the 106 funds. Over five years, from 2001 to 2006, its performance ranked fourth from the bottom. Over 10 years, from 1996 to 2006, it ranked the third worst. And for the years since 1985, when legislators required that all public pensions be fully funded by 2028, it ranked second from last.

Cyndi Roy, a spokeswoman for the governor, said the move will help local taxpayers, who must make up the difference for poor pension fund investment returns by paying higher property taxes.

"For cities and towns with underperforming pension funds that have lost billions of dollars over the years, this is real money that taxpayers have had to provide through property taxes," Ms. Roy said. "Investing those underperforming funds in the consistently strong-performing state fund will ensure that retirees receive the benefits they deserve and that communities have the resources they need for education, public safety and public infrastructure improvements."

Mr. Ferrari said that until three years ago the system invested all its money with the former Fleet Bank, which he said maintained an essentially static portfolio with about 60 percent in stocks and 40 percent in bonds.

Just over three years ago, the pension board hired a pension consultant, the de Burlo Group of Boston, which moved to diversify the fund's holdings, and as a result the fund started producing better returns, Mr. Ferrari said.

Because of its small size, however, the Athol fund is largely barred from high-yielding and consistent asset classes such as hedge funds, real estate and some alternative investments. So it still remains much less diversified than the state fund or most of the 78 local funds that have their assets invested with PRIT.

"Our retirement board is pretty much hands-off, and Fleet Bank was plodding along making 2 percent," Mr. Ferrari said. "This guy (de Burlo) has done closer to 12 percent, and lately we've been doing fine. Ultimately, the sins of the past are killing us."

This year, the Athol fund, under pressure from the Public Employee Retirement Administration Commission, which loosely oversees local pension boards, moved for the first time to hire a part-time administrator.

PERAC, in its most recent audit of the system, covering the period between Jan. 1, 2003, and Dec. 31, 2005, also noted that one board member missed 83 percent of the meetings held in 2003, 58 percent in 2004 and 58 percent in 2005. An absentee rate of more than 25 percent is considered excessive, the audit noted.

The audit also revealed various accounting and administrative shortcomings. They included a $29,327 underpayment for fiscal 2005 by the Athol-Royalston Regional School District.

Mr. Ferrari, until he was replaced as the board's administrator this year by Lynne Barilone, was the last town accountant in the state to administer a pension board. He said that while he and other board members realize that going under state control is inevitable, the board still views the state with suspicion.

"The other concern is that some board members feel that (the governor) might borrow against PRIT to bail out the state," Mr. Ferrari said.

Ms. Roy, the governor's spokeswoman, said Mr. Patrick has no hidden plans for the state pension fund. And she noted that local boards will still own their assets and will continue to determine pension eligibility for their members and distribute retirement checks.

"The communities still have control of their boards, but this allows these funds to be included in a much larger fund that has a greater diversity of assets," Ms. Roy said. "This isn't about anything other than this."

Contact Shaun Sutner by e-mail at ssutner@telegram.com.

ART: GRAPH

PHOTOG: T&G Staff

CUTLINE: Comparing pension fund returns
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Publication:Telegram & Gazette (Worcester, MA)
Date:Jul 18, 2007
Words:918
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