The Somerville Retirement System is one of 105 contributory retirement systems for public employees in Massachusetts. A Retirement Board governs each system, and all boards, although operating independently, are bound together under one Retirement Law, Chapter 32 of the Massachusetts General Laws. Chapter 32 establishes benefits, contribution requirements, and an accounting and funds structure for all systems. The Somerville Retirement Board is the Administrator of the Somerville Retirement System. The Public Employee Retirement Administration Commission (PERAC) is the state regulatory authority that oversees all retirement systems in the Commonwealth.
PERAC is required by Chapter 32 to oversee an actuarial valuation of each retirement system every three years. Actuarial funding determines the annual cost to fund a retirement system’s cost of benefits that accrue during the current year (normal cost) as well as the costs associated with any past service liability (unfunded actuarial accrued liability). The funding schedule derived from the actuarial valuation determines the series of payments to pay the annual normal cost as well as to amortize the unfunded accrued liability over a period of years. In accordance with Chapter 32, each retirement system’s unfunded accrued liability must be fully paid off by 2040. The City is required to pay into the Retirement System the actuarially determined contribution. The budgeted appropriation is the actuarially determined contribution for FY22.
The Non-Contributory Pension Appropriation funds the pension costs for city retirees predating the adoption of Chapter 32 and for special situations requiring home-rule exemption from Chapter 32.