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8.B. - Page 21 of 122 As shown in the chart below, if the City were to fund only required annual pension payments, the City's unfunded pension liability will be paid off (fully funded) in 19 years, or FY 2037-38, for the Miscellaneous Plan, and 22 years, or FY 2040-41, for the Safety Plan. When will the Pension Plans he Fully Funded? (paying only mandated annual pension payments and no additional payments) If the City were able to accelerate payments toward unfunded liabilities, the City would realize interest savings over time, much like making additional payments on a home mortgage. The City has engaged the actuary firm of Bartel Associates, LLC to assess options to pay off unfunded liabilities over a shorter timeframe. As previously mentioned, the Preliminary Ten -Year Forecast includes a strategy to make annual additional payments to CalPERS of $500,000, and annual contributions of $1.1 million to the City's Section 115 pension trust account, which can be used to fund the City's annual payments in future years. These additional annual payments of $1.6 million are expected to shorten the number of years required to pay off the total unfunded liability by one year: the unfunded liability for the Miscellaneous Plan would be paid off in 18 years instead of 19 years, and the unfunded liability for the Safety Plan would be paid off in 21 years instead of 22 years. This shorter timeline would save the City $27 million in interest payments. The City Council could consider a more ambitious funding strategy as an aspirational goal. In contrast to the 19 -year (Miscellaneous Plan) and 22 -year (Safety Plan) current estimated payoff periods using the pay -go method, the City could elect to make even higher additional annual contributions directly to CalPERS over the next 15 years to accelerate the payoff period. Doing so would be a challenge, given the projected deficits, but may be advantageous. Staff will discuss options and tradeoffs with the City Council City of Redwood City 1017 Middlefield Road, Redwood City, CA. 94063 Tel: 650-780-7000 www.redwoodcity.org 247 118% 120% 113% 110% 106% 101% 113% 108% 100% 94% 101% 88% 9096 94% 81% 7896 Miscellaneous 80% 7 4% 87% Safety 69% 80% 70% 74% 100% Funding 70% 60% 66% 63% 50% ,y(o '�°' ,,r4 ,�`' , 0 If the City were able to accelerate payments toward unfunded liabilities, the City would realize interest savings over time, much like making additional payments on a home mortgage. The City has engaged the actuary firm of Bartel Associates, LLC to assess options to pay off unfunded liabilities over a shorter timeframe. As previously mentioned, the Preliminary Ten -Year Forecast includes a strategy to make annual additional payments to CalPERS of $500,000, and annual contributions of $1.1 million to the City's Section 115 pension trust account, which can be used to fund the City's annual payments in future years. These additional annual payments of $1.6 million are expected to shorten the number of years required to pay off the total unfunded liability by one year: the unfunded liability for the Miscellaneous Plan would be paid off in 18 years instead of 19 years, and the unfunded liability for the Safety Plan would be paid off in 21 years instead of 22 years. This shorter timeline would save the City $27 million in interest payments. The City Council could consider a more ambitious funding strategy as an aspirational goal. In contrast to the 19 -year (Miscellaneous Plan) and 22 -year (Safety Plan) current estimated payoff periods using the pay -go method, the City could elect to make even higher additional annual contributions directly to CalPERS over the next 15 years to accelerate the payoff period. Doing so would be a challenge, given the projected deficits, but may be advantageous. Staff will discuss options and tradeoffs with the City Council City of Redwood City 1017 Middlefield Road, Redwood City, CA. 94063 Tel: 650-780-7000 www.redwoodcity.org 247