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Actuary recommends higher, more stable city contributions after South Beloit pension valuation
Summary
An actuarial valuation commissioned by the city recommended a higher, more conservative contribution approach for the police and fire pension funds, including a $262,024 recommended police contribution and a modest administrative reimbursement for the fire fund.
An outside actuary presented a draft actuarial valuation to the South Beloit City Council on June 2 and recommended a funding approach the firm said would make the municipal police and fire pension funds more stable over time.
Kevin Kavanaugh of Lauterbach & Amen told the council the firm calculated a recommended contribution for the police fund of $262,024 for the upcoming taxing year and recommended reimbursing the fire fund $22,745 to cover last year’s administrative expenses. He said the city's fire pension fund is "about 100.48 percent funded" and the police fund about "81.81 percent funded."
Kavanaugh said the firm is using a slightly more conservative assumption for expected investment returns — 6.75 percent — than the consolidated state funds use, and that the firm’s recommended policies would target 100 percent funding for both funds and amortize unfunded liabilities over 15 years for police. He said that change in assumptions and a city contribution made last year together explain year-over-year changes in recommended contribution amounts.
Why it matters: The actuary said the recommended approach reduces contribution volatility and helps ensure current taxpayers fund liabilities arising from active employees rather than pushing costs to future taxpayers. Kavanaugh said the difference between the state statutory minimum and the firm’s recommended contributions is in part the result of the firm explicitly loading administrative expenses for the fire fund rather than assuming them as a percent of normal cost.
Discussion vs. decision: The actuarial results were presented as draft figures and staff said final valuations will not be issued until the city’s audit is complete. There was no council vote to change any funding ordinance or to adopt the actuary’s recommendations at the meeting.
Ending: Council members and staff said the draft was useful for budget planning and would be shared with pension trustees and included in upcoming budget discussions; the actuarial report will be finalized after the audit.
