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Upper Milford Moves Pension Funds

Township supervisors voted to move employee pension funds to a plan with a higher rate of return, some more risk.

Here's the dilemma: Should a municipality leave its employee pension money in the most conservative fixed-rate fund with no risk but low return? Or should it go with a balanced fund that is half fixed investments and half stocks, with a higher rate of return but more risk?

Upper Milford supervisors chose the second option at the board's Dec. 27 meeting after finding out the fixed rate fund had a 3.84 percent return that could end up underfunding the pensions. Currently, the township has a total pension fund of less than $600,000, Township Manager Dan DeLong said. Upper Milford has 13 employees. 

At that time, Township Supervisor Robert Sentner said he was concerned that if Congress and President Obama don't make a budget deal to avoid the so-called "fiscal cliff" it could scuttle the stock market.

The township pension board recommended switching the pension funds to the balanced fund account with the Pennsylvania State Association of Boroughs Municipal Retirement Trust. The supervisors voted to do that.    

ted.dobracki January 10, 2013 at 01:16 PM
Long term bonds are not risk free either. If interest rates went up just 1%, even a 30 yr T-bill could lose more than 20% of its market value (or financial present value).. No one knows when that will happen. It either could be very soon (because of the excessive deficits, government borrowing, and cash infusions that all create inflationary pressures) or it could be quite a while (if the economy remains stagnant, like Japan's has been for more almost two decades, which would create deflationary pressure).

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