Public Employee Press

Annuity Fund: costs down, earnings up

By GREGORY N. HEIRES

Administrative changes and a new investment strategy have raised the earnings of the DC 37 Annuity Fund. The improvements follow a study and recommendations by a special subcommittee, which the DC 37 Executive Board set up a year ago in response to rank-and-file concern about fund losses.

The losses occurred because administrative expenses ate into members’ accounts and investment gains, which were already low due to the stock market downturn. The Annuity Fund earned 7.94 percent between July 1, 2002, and June 30, 2003, compared with only 1.13 percent in the previous fiscal year.

“We were able to trim costs and ensure that the fees we are paying are reasonable,” said Sewage Treatment Workers Local 1320 President James Tucciarelli. DC 37 Executive Director Lillian Roberts assigned Mr. Tucciarelli, who chairs the DC 37 Pension Committee, to head the subcommittee after several local presidents in August 2002 raised the alarm over fund losses.

The other committee members include DC 37 Secretary Edward W. Hysyk, the president of Electronic Data Processing Personnel Local 2627, Walthene Primus of Local 957, Maf Misbah Uddin of Accountants Local 1407 and Joan Reed of College Assistants Local 2504.

Changes cut costs
Part of the savings have resulted from administrative changes implemented by the DC 37 Health and Security Plan, which is the administrator of the Annuity Fund.

The investment manager, Amalgamated Bank, has also helped reduce costs. Previously, the bank actively managed the fund as a separate account. But the fund is now included with a larger, passively-managed investment account. The switch has cut down bank fees.

The annuity fund’s allocations remain the same. Its targeted allocation is 75 percent in equities and 25 percent in fixed income investments. The union won the annuity in negotiations for the 1995-2000 economic agreement. Eligible workers received up to $522 in city contributions toward personal annuity accounts, which they can only withdraw when they leave city employment.

When the annuity was negotiated, the hope was to provide an extra nest egg for members after they retire. While the 1995-2000 economic agreement didn’t include ongoing contributions, it and the successor contract gave locals the option of using additional compensation funds to provide recurring contributions. Some local unions have done that, but today less than 10,000 account holders have recurring annuities.

“We feel we have put the fund back on track for now,” Mr. Tucciarelli said. “But over the long term, the only way you can really make an annuity produce a substantial nest egg is to have it funded on a regular basis with annual or daily contributions.”