Oklahoma City’s pension actuary presented the system’s annual actuarial valuation on Oct. 9, reporting a $56,582,000 unfunded actuarial liability and a funded ratio of 94.3% as of Dec. 31, 2024.

The valuation, presented by Francois, the plan’s actuarial consultant, found the system’s total present value of future benefits near $1.2 billion and calculated a total contribution requirement of 14.4% of payroll. Francois said the normal cost for active members is 12.09% and the unfunded-amortization portion is 2.31%, producing the 14.4% figure; active members pay 6% of payroll, leaving the city with an estimated 8.4% obligation starting July 1, 2026.

The actuary explained that the fund had a market value of $906.3 million at Dec. 31, 2024, with about $566.8 million in equities, $201.8 million in fixed income and $106.9 million in real estate. After $9.7 million in accounts payable, the market value available for benefits was $896.6 million.

Francois told trustees that smoothing of gains and losses produced a valuation (funding) asset calculation different from market value. He said, “If you achieve your 7% assumed rate of return exactly, next year, $46,000,000 in losses will be recognized, and that will have upper pressure on your contribution requirement.” He added that the plan’s assumed investment return is 7% and that the market rate of return for 2024 was 7.7%, while the recognized/valuation return reflecting prior years’ losses was about 3.77%.

The consultant attributed most of this year’s actuarial loss—about $36.4 million—to deferred investment losses from 2022 that are still being recognized. Francois said a $29.6 million phased-in investment loss is included in this year’s figures and that roughly $41.1 million in losses remains unrecognized and will largely be recognized next year if returns meet the 7% assumption.

Trustees asked about the amortization schedule. A trustee asked, “I could. I noticed that each year we've been decreasing that the number of years that that's amortized over. Is there a target that we're trying to get to on that?” Francois replied that the technical target is to amortize to zero but noted that many systems adopt layered amortization once the remaining period gets short to limit volatility. He said the current unfunded amount is being amortized over 17 years, one year shorter than the prior schedule, and that the board will be given examples of layered amortization if the period approaches about 10 years.

Francois reviewed other plan demographics used in the valuation: 2,866 active members (total payroll slightly above $200 million), 201 inactive vested members with a combined estimated annual allowance of about $2.27 million, and 1,802 retirees and beneficiaries receiving about $48.6 million annually. He noted the membership skews toward employees with fewer than 15 years of service and most active members are younger than 60, meaning the plan is not fully mature.

The board voted to approve the actuarial valuation (item 3a). At the meeting a staff member, Gina, said staff would coordinate with the actuary about scheduling a new experience study; Francois noted the last experience study had been completed in 2019 and that experience studies are normally done every three to five years for a system this size.

Why it matters: the valuation sets the official actuarial basis for accounting and for the board’s decisions about contribution policy. The unfunded liability and the schedule for amortizing it directly affect the city’s future payroll contribution and the potential volatility of that cost if large losses are recognized in a short amortization period.

What’s next: trustees and staff said they will discuss timing and methods for a new experience study and will review amortization alternatives (including layered amortization) as examples are prepared by the actuary.