LEONARDTOWN — Strong investment returns have pushed the St. Mary’s County Sheriff’s Office retirement plan to its healthiest level in more than a decade, and taxpayers will pay a little less into it as a result.
The plan was 83% funded as of June 30, up from 66% in 2014, the plan’s actuary told the Sheriff’s Office Retirement Plan Board on Oct. 22. The county’s required yearly contribution dropped to $7,216,786, and the actuary projected the plan will be fully funded within about a decade if the county keeps making its full payments and investments earn what the plan assumes.
The board, chaired by County Administrator David Weiskopf, voted without opposition to accept the valuation. It also approved a $1.5 million commitment to an infrastructure fund and moved $1 million out of cash and into bonds.
The plan is funded by employee contributions, investment earnings and a yearly payment from the county. Its assets stood just under $200 million, according to the board’s investment consultant.
Why the bill went down
Gregory Stump of Boomershine Consulting Group, the plan’s actuary, said the county’s cost has two parts. The first is the “normal cost” of benefits workers earn each year, which rose with payroll. The second is the payment to pay down the plan’s shortfall, known as the unfunded liability. That part fell.
Between the June 2024 and June 2026 valuations, the plan’s assets grew by about $48 million while its liabilities grew by a little less than $21 million. Stump said the result was an experience gain of a little more than $11 million. Spread over 20 years, that gain lowers the county’s yearly payment by about $800,000, which he called the main reason the contribution fell.
“That’s really what’s happened over the past few years, is investment gains,” Stump said. “That’s been the big story.”
The unfunded liability now stands at about $38 million. That is a good deal lower than at the last valuation, but higher than in 2014. Stump said the plan itself is roughly 50% larger than it was then, so it can carry a bigger dollar shortfall even while being better funded.
83% now, 91% on the way
The 83% figure uses “smoothed” asset values, which spread each year’s investment gains and losses over several years so one good or bad year doesn’t whipsaw the county’s budget. Measured at market value, without smoothing, the plan was 91% funded.
“83% is where we are, 91% is where we’re going,” Stump said.
The gap exists because of how the plan has recovered from 2022. That year’s returns came in about $22 million below expectations, a loss that drove up costs for several years and has now been fully absorbed. Every year since has been a gain. Counting the 2022 loss, the net gain is about $9 million, and about $18 million in gains has not yet been counted toward funding.
Those banked gains can either keep pushing the county’s contribution down or cushion the plan against another bad year, Stump said. They also explain why the actuary’s projections show the funding ratio rising steeply in the next few years.
Under those projections, the plan reaches about 90% funding within a few years and 100% within a decade, with the county’s contribution staying near current levels until then. Once the shortfall is gone, the payment to cover it disappears and the county would pay only the normal cost.
Stump stressed two conditions. The projection assumes the county pays the full recommended amount every year, and that investments earn exactly the assumed 7.25% a year, which rarely happens. “As long as the county makes contributions, we’re in good shape,” he said.
The 7.25% question
The plan’s 7.25% return assumption is higher than many public plans use. The Maryland State Retirement and Pension System assumes 6.8%, and it returned 13.19% in fiscal 2026. Stump noted that some other county-sponsored plans also use lower assumptions.
He showed the board what would happen if the plan dropped its assumption to 7%. The funding ratio would fall, the unfunded liability would rise and the county’s contribution would go up, because less of the cost would be expected to come from the market.
That choice is coming. With data now available from 2022 through 2026, Boomershine plans an experience study next year. It will compare the plan’s assumptions on mortality, retirement ages, turnover and pay raises with what has actually happened, and it will revisit the return assumption. The board would discuss the results in the off year, and new assumptions would be used in the next full valuation in 2028.
One board member warned against easing up on contributions just because the plan is doing well, saying the better funded the plan is in a good market, the faster the shortfall shrinks. The member also asked how often a plan this size is usually valued. Stump said all of his clients of this size or larger do it every year, though it is not required. The St. Mary’s plan has been valued every two years for as long as he knows. The member suggested revisiting annual valuations after the experience study.
Membership is stable and growing slightly. Active members and those in the plan’s Deferred Retirement Option Program, or DROP, rose to 222 from 206 two years ago, with average age and service about the same. Stump said more active members is generally good for funding.
Where the money goes next
The board’s investment consultant, Marquette Associates, recommended two moves, and the board approved both without opposition.
The first is an additional $1.5 million commitment to the IFM Global Infrastructure Fund, which the plan has held since January 2024. Last year the board raised its long-term target for infrastructure to 6% of the portfolio from 4%, as older private equity and real estate investments wind down. The plan sits at about 3.5% in infrastructure, with a $3.5 million commitment to Brookfield still waiting to be drawn.
Mr. Wing of Marquette said IFM, which normally takes nine to 12 months to call committed money, told investors that commitments made this quarter would be called Feb. 1. Together with Brookfield, the new commitment should put the plan at its target by about mid-2027, he said.
The second move shifts $1 million out of cash, $800,000 from a government money market fund and $200,000 held outside the main custodian, into a Fidelity U.S. bond index fund. Wing said investment-grade bonds now yield about 5.3% to 5.4%, roughly three-quarters of the plan’s assumed return, in a conservative asset class where yields that high have not been seen in about 20 years.
He also told the board that late-arriving private-market statements will lift the plan’s second-quarter return from the 7.8% first reported to about 8.2% or 8.3%, led by real estate. The current fiscal year has started slowly, with stock gains roughly offset by bond losses as interest rates rose, he said.
The plan administrator’s report listed $15,368.50 paid to Boomershine for valuation work, benefit statements and the member portal, plus $3,000 for an independent medical exam and disability rating for one employee.
The board meets next on Dec. 3, when Marquette is expected to review third-quarter investment results.
