FINANCIAL ADVISORY BOARD AGENDA ITEM
ACTION REQUESTED:
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Review the Public Safety Pension Fund's Actuarial Experience Studies
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DEPARTMENT: Finance Department
SUBMITTED BY: Rachel Mayer, Finance Director
BOARD/COMMISSION REVIEW:
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BACKGROUND:
The amount that the City contributes to the Public Safety Pension Plans is defined by the annual Actuarial Valuation Report prepared by Foster & Foster, Inc. The 2019 contributions are: $9,030,567 and $7,110,130, for Fire and Police, respectively. The deciding factors to determine the contributions come from assumptions made on many factors related to the demographics of the Plan Members and to the economic environment, as a whole.
On an annual basis, the assumptions are reviewed to ensure that they are consistent with the anticipated experience of the plan and provide an accurate representation of the Plan's financial status. In addition, as new information becomes available, it can be incorporated into the valuations.
DISCUSSION:
Foster & Foster, Inc. has prepared an Experience Study to evaluate the assumptions used to calculate the 2020 contribution to the Public Safety Pension Plans.
The result of the study is a recommendation to increase the 2020 contribution by $916,230 and $410,527 for Fire and Police, respectively. Of the 16 assumptions evaluated, the following seven have been revised.
- The return on assets is currently being calculated assuming a 7.0% rate of return. While the seven-year average is 6.93% (Fire) and 6.89% (Police), the future expectation based on capital market assumptions is 6.58%. Therefore, it is recommended that the rate of return be decreased to 6.75%. This rate change will be implemented over three (3) years, with the rate decreasing from 7.00% to 6.90% in 2020. The impact is to increase the contribution by $352,086 (Fire) and $328,870 (Police).
- The Salary Increase Assumption determines how an individual's salary will increase over the memb...
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