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East End Financial Group presents a report on Southampton Village's LOSAP portfolio.
Southampton Village’s Length of Service Award Program — which is like a small pension for volunteer firefighters — is nearly fully funded, with a number of Southampton Fire Department firefighters just a few years away from reaching entitlement age.
East End Financial Group, which manages the village’s LOSAP investment portfolio, delivered that positive report to the Village Board on Tuesday, November 23.
“The funded ratio, which is a measure of the plan assets to plan liabilities, is 94 percent,” East End Financial Group lead analyst Jeffrey Connolly told the board. He explained the funded ratio, determined by an actuary, looks at what percentage of benefits could be paid out if the plan stopped on that date.
On January 1, 2020, the funded ratio was 85 percent, and back in 2018, it was just 66 percent, according to Connolly. He said investment returns and additional contributions from the village brought the ratio up.
“Being 100 percent funded is the goal,” Connolly said, noting that the village is headed in that direction.
The village’s LOSAP portfolio balance as of November 17 is $5.81 million. The year-to-date gain on investment is 8.52 percent, or $444,346. That far exceeds that assumed rate of return of 5 percent.
Currently, 54 percent of the assets are in stocks and 46 percent are in bonds. The firm has the discretion to increase the amount of the portfolio that is in stocks, or equities, by up to 60 percent or decrease it to as low as 40 percent based on its outlook, Connolly said.
“Our outlook going forward is that stocks will continue to trend a little bit higher,” he said. As far as bonds, or fixed income, he said the outlook is negative due to rising interest rates, which he noted is typically bad for bond prices.
The program will pay out $167,680 this year and another $198,830 in 2022.
“Like every other fire district or LOSAP plan that’s run by a town or village, you have a lot of members that are getting to entitlement age and they have been a volunteer for 20, 30 years,” Connolly said. “So the benefits are accruing pretty quickly. By 2025, it almost doubles to $322,000.”
Annmarie Zilnicki, the president of East End Financial Group, added that the firm sees the same thing happening across many fire districts and villages: “2025 is the year.”
The entitlement age for Southampton Fire Department volunteers is 65. The benefit amount is $30 per month for each year of service starting in 2006. For service prior to 2006, the benefit is $20 per month per year of service. The maximum number of years of service credit is 30, though Connolly said state legislation allows districts and villages to increase the service credit cap to 40 years.
The village’s annual contribution requirement will drop next year before it is expected to creep back up again slowly. The contribution for 2021 is $318,358. In 2022 the requirement falls to $211,314. It is projected to tick back up to $223,000 in 2025.
East End Financial Group senior wealth advisor Joe Kosinski suggested that once the village hits 100 percent funded the Village Board could discuss offering a different benefit tier or lower entitlement age.
“Obviously, the purpose of the LOSAPs from their inception in 1990 was to entice enrollment, to lock in those firemen,” Zilnicki said. “So again, if you can lower than entitlement age, it makes it more attractive to those volunteers.”
Mayor Jesse Warren asked if the investment portfolio considered climate change and sustainability. Connolly said there is no such mandate at the moment but it could be implemented if the Village Board decides to go that route.
