AgdaPkt 2017-05-22 Joint SA PFA - Laserfiche WebLink

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Page 3 of 7 $110.0 million for the Safety Plan, totaling $194.2 million. As the table below shows, the total unfunded liability is projected to grow to $255.0 million as of June 30, 2017. Unfunded Actuarial Accrued Liability (millions) Miscellaneous Safety 6/30/15 Projected 6/30/17 6/30/15 Projected 6/30/17 Actuarial Accrued Liability $282.3 $317.0 $327.8 $371.0 Market Value of Assets $198.1 $206.0 $217.8 $227.0 Unfunded AAL $ 84.2 $111.0 $110.0 $144.0 Funded Ratio 70% 65% 66% 61% The unfunded liability primarily is related to retired or inactive1 employees: 61% of the unfunded liability for the Miscellaneous Plan is associated with retired or inactive employees, and 70% of the unfunded liability for the safety plan is associated with retired or inactive employees. The General Fund’s share of the total unfunded liability is approximately $152.5 million, or 78.5 percent. The City’s unfunded liability reflects two primary factors: pension commitments made to now-retired employees under inaccurate assumptions, and decisions by CalPERS to amortize investment losses over a long period of time. Assumptions that turned out to be inaccurate include lower-than-anticipated investment returns, longer-than-anticipated lifespans, and underestimating the cost of benefit enhancements negotiated in the past. Past investment losses were amortized over a 30-year period, which had the positive benefit of limiting annual contribution increases, but which did not adequately pay down unfunded liabilities. As a result, the City now needs to substantially increase annual payments to CalPERS to fully fund benefits. In order to assess the City’s long-term pension obligations, the City engaged John Bartel, President, Bartel Associates, LLC, to model the actuarial valuations of the City’s pension plans over the next thirty years. Mr. Bartel’s projections illustrate that the City’s annual contributions will increase significantly. For example, the City’s annual PERS payment in FY 2021-22 is projected to be approximately $33.0 million, $13.4 million more than it is today, a 68 percent increase. Costs are expected to continue to grow through FY 2030-31, when annual costs will be more than double what they are today. These projections are at a 50 percent confidence level, meaning there is a 50 percent likelihood that the cost could be lower, and a 50 percent likelihood that the cost could be higher. 1 Inactive employees are employees who have earned benefits based on their service to the City but are not currently employed by or retired from the City of Redwood City 9.A. - Page 3