Plymouth county retirement contributions strain Hanover budget

HANOVER — As the town prepares its fiscal year 2027 budget, it must account for the $6.46 million owed to the Plymouth County Retirement Association (PCRA) due in July, a constraint the Select Board says puts it in a “stranglehold.”

The Plymouth County Retirement System “provides retirement, disability, and survivor benefits to approximately 11,500 participants,” according to the Plymouth County Retirement Board. Its 52 member units have to make annual contributions to the system so that its retirement payments to government employees are funded by 2031. As of the last actuarial variation in January 2024, Hanover’s total unfunded liability is nearly $35 million.

In a letter to the PCRA Board, the Hanover Select Board said that the current payment schedule is too much of a burden on the operating budget and requested two alternate schedules that could fully fund the pension system by fiscal year 2040. 

“The annual pension contribution currently eats up a large percentage of available levy—placing our ability to continue providing services in a stranglehold,” the Select Board wrote. “This has wide ranging consequences with respect to the services we are able to provide with respect to public education, police and fire protection, road maintenance, and more.

Budget Director James Hoyes pointed out that the PCRA payment is more than the town proposed to appropriate for the police department ($4.57 million) and the fire department ($4.53 million).

Hanover paid the PCRA $5.3 million in fiscal year 2025 and appropriated $6 million for it in fiscal year 2026. Its payment due this year is up by 7.5% from its last payment, and the Select Board said increases of 7-10% are expected to continue until at least fiscal year 2031. If the yearly increase remained at 7.5%, Hanover would owe $8.65 million in fiscal year 2031.

Plymouth County Treasurer, and Chairman of the PCRA, Thomas O’Brien said that the cost to towns of funding the PCRA will drop “dramatically” after it is fully funded in 2031.

In a December 15 presentation to the Select Board, O’Brien cautioned that extending the funding schedule is a measure that should be reserved for financial or local crises. 

“I can’t tell you when we’re going to have another financial crisis, but I can tell you that we will likely have one,” O’Brien said. “We, the retirement board, need to be prepared if that were to happen tomorrow to have room to extend the funding schedule.”

PCRA has never extended the funding schedule due to a request from a member unit. They have extended it three times, but only in response to financial crises and the Covid-19 pandemic.

O’Brien added that extending the schedule would increase the total payment due by the end of the schedule and potentially have a negative impact on some members’ bond ratings. 

“It's very costly to kick the can down the road, and while there may be some short-term savings, the long-term cost in terms of real dollars, time, budget and bond rating, are significant,” O’Brien said. “So we believe, as we continue to get information out to communities, they will realize that it's not a good long-term decision to extend the funding schedule.”

PCRA will not send a formal response to the letter until March, when they will finish receiving and processing all of the necessary data from their member units from 2025. PCRA’s actuary will review the data and present options to the board, and the board will make decisions from there.

To extend Hanover’s timeline, PCRA would have to extend the timeline for all of its other member units. O’Brien said that East Bridgewater sent a similar request to PCRA, but that several other towns requested that PCRA not extend the timeline.

Select Board Member Vanessa O’Connor said that other towns in the region, including Whitman, Norwell and Rockland, are also struggling with the current payment schedule amid rising utilities and insurance costs and decreasing state funding.

“While PCRA's aggressive pension obligation funding schedule very well may be a reasonable course of action for PCRA, towns like Hanover cannot rely on the Fiscal Year 2031 end date to make financial and budget decisions between now and then because a market correction could easily spell disaster even for the most conservative long term municipal plans,” the Select Board wrote in the letter.

O’Brien said that PCRA is on track to be one of the first country retirement associations to be fully funded, which he sees as a benefit to its members: “In my humble opinion, Hanover is one of the towns that should not be asking for an extension because of the benefit to them if they can get this paid off.”

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