City pension plan faces increased contributions despite 10.23% investment growth

The Oklahoma City Employee Retirement System's recent actuarial valuation revealed significant insights into the city's pension plan, particularly regarding contributions and funding stability. During the meeting on November 14, 2024, actuary Louise presented key findings that highlighted the city's contribution rate for the upcoming fiscal year 2026, which is set to increase due to a combination of factors affecting the pension fund.

Louise emphasized that while the pension plan experienced a net market value return of 10.23% in 2023, the actual contributions have risen. This increase is attributed to the city's policy of utilizing surplus assets to lower contribution rates in previous years, which has now been exhausted, leaving the city to finance a growing debt between assets and liabilities. The actuary explained that the volatility in payroll has also driven up liabilities, as spikes in employee pay lead to higher projected benefits.

Despite these challenges, the funding status of the pension plan remains strong. The funding percentage, a critical measure of financial health, has consistently exceeded the national average, standing at 92% at its lowest point over the past two decades. This figure is significantly higher than the average funding percentages reported by the National Conference on Public Employee Retirement Systems, which hovered around 75% in recent years.

Additionally, a new reporting requirement introduced the Low Default Risk Obligation Measure (LDRAM), which reflects a more conservative estimate of liabilities based on treasury yields. This change indicates a shift in how pension obligations are assessed, potentially increasing the reported liabilities but also providing a clearer picture of the investment risks involved.

In summary, while the city faces an increase in pension contributions due to past practices and payroll volatility, the overall financial health of the Oklahoma City Employee Retirement System remains robust, with funding levels well above national averages. The meeting concluded with optimism for future investment performance, which could further improve the funding situation.