Actuaries recommend raising wage-inflation assumption to 3.25%; discount rate held at 6.625%

Actuarial staff recommended that the board adopt a wage-inflation assumption of 3.25% for the pension valuation used for fiscal-year 2027 contribution calculations, up from the current 3.00%. The recommendation followed an economic-assumption review presented to trustees; the price-inflation assumption would remain at 2.5% and the board was not asked to change the discount rate, which remains at 6.625%.

Actuaries said the wage-inflation change recognizes recent bargaining agreements and labor-market wage trends; it affects projected final-average salaries and therefore active-member liabilities and normal cost. The actuary said the estimated city contribution increase from moving wage inflation to 3.25% is roughly $2 million and that member rates would rise by about 10 basis points for Tier 1 and 35–43 basis points for Tier 2 (Tier 2 members pay 50% of total normal cost under the charter, raising their sensitivity to wage assumptions).

The presenters noted plan-funded ratios would still show improvement based on market gains (estimated market-value funded ratio ~88%; actuarial-value funded ratio ~84%), but cautioned assumptions remain a matter of judgment. The board did not take immediate action on changing the discount rate and asked staff to provide preliminary results in November that will also incorporate updated census and demographic experience-study data before finalizing assumption changes.