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Disappointing returns on stock-market investments are having a chilling effect on the town's retirement system.

Town Councilman Robert Wildrick brought the matter before the Town Council on Thursday, when he urged the town to take action to put the system on a sound financial footing.

The council agreed to have its Finance and Taxation Committee delve into the issue.

The plan's unfunded liability -- the portion where the town falls short of fully covering its obligations -- has zoomed to $78 million, up from $65 million, over the 30-year period upon which the plan is based, Wildrick said.

"This $78 million is money we owe," he said. "While it may be nice to give benefits and all, we have to pay for them."

The town's assumption of a 7.5 percent return on long-term market investments is unrealistic in today's market, Wildrick said. Lowering the assumption would not be painless; the town would have to cover a resulting gap by stepping up annual contributions into the fund.

This year, the actual return looks to be between zero and 2 percent, said Gerry Goldmith, chairman pro tem of the town's Retirement Board of Trustees.

Retirement Plan Administrator Bill Hanes said the town should expect returns to be much lower than 7.5 percent over the next decade.

Hanes said other municipalities and every state in the nation have under-funded their retirement systems, and most are worse off than Palm Beach.

But Hanes said he is concerned about the town's system.

The town pays the pensions through a trust fund at a cost of more than $18 million a year, Hanes said. At the same time, the town's contribution to the fund was about $6.7 million in 2015 and about $7.5 million for the budget year that begins Oct. 1.

"My concern is the negative cash flow," he said. "Over time, the funding is going to erode, so the gap just gets bigger."

The trust fund stands at $207 million, Hanes said.

Mandatory contributions?

Hanes said the town may have to step up mandatory employee contributions into the plan -- a move that could prove to be unpopular with town employees who saw sharp cuts to their benefits in 2012.

The town's system is a hybrid of a defined contribution plan, similar to the 401k used in the private sector, and a defined benefit that is a guaranteed payment. Currently, employees contribute 2.47 percent of their pay into the defined benefit system and a minimum of 4 percent (with a 4 percent match by the town) into the defined contribution portion. The only exception is members of the firefighters' union, who pay 4.82 percent into the defined benefit and 2 percent (with a 2 percent match by the town) into the defined contribution part.

Wildrick said he's concerned about the town's overall financial picture, considering the under-funded retirement plan, and escalating coastal costs and plans to spend $85 million to bury all utilities town-wide.

Thursday's discussion came weeks after council members discussed surveying employee retirement benefit packages paid by other municipalities in the area to see if the town's should be increased so that it is more competitive. The town has faced a rash of early retirements in the last few years after enacting the pension cuts.

But Councilwoman Penny Townsend said that, given the diminishing return on investments, now is not the time to be thinking about boosting benefits.

"I think this is more pressing and supersedes any discussion of the value of our present benefit package," Townsend said.