Pension administrator outlines 2023 proposed budgets, RFP for pension software and accounting fee changes

The pension administrator presented the proposed 2023 budgets for the General Employees, Police Officers and Firefighters pension plans, reviewed key assumptions and identified administrative items for the boards to note.

Key assumptions: the administrator said investment-earnings assumptions used for budget projections are 7 percent for planning conservatism (the presentation referenced using recent actuals to project the 7% figure), and that member contribution rates remain at 7.95 percent as codified in the city ordinance. He reported city contributions had changed year over year in the presentation: a roughly 2 percent decrease for the general plan, a 9 percent increase for police, and a 4 percent increase for fire, with the police increase reflecting the timing of using reserves in the prior year.

Software and accounting: the administrator reported that the city will run the RFP for pension administration software and that, after discussions with city consultants, the city will pay for implementation because most users are active employees. The RFP was open at the time of the meeting with an expected implementation target by year-end. The administrator also noted a substantial adjustment in accounting charges billed to the plans: historically the municipal accounting allocation had been a relatively small fixed amount, but an updated allocation methodology produced a larger charge closer to the actual costs municipalities incur. The presentation compared the historical plan charge (stated in the meeting as a lower amount) with a higher, more accurate equivalent (presented as approximately $64,000 for the comparable item versus the older figure); the administrator said trustees should expect that number to be closer to actual city operating allocations going forward.

Expenses and investment management: the administrator described management and custodial fees declining after a shift to lower-cost managers (citing an overall plan expense ratio around 0.44 percent) and noted that ANCO’s contract includes annual increases (a 3 percent contract escalator). He also summarized pension benefit projections, which are driven by retirements, deaths and the board’s benefit structure.

Why it matters: the budget assumptions and administrative cost allocations determine plan expense forecasts and influence employer contributions and the plans’ administrative capacity. The city’s decision to pay for the pension software implementation reduces the near-term capital burden for the pension plans but not ongoing software costs.

Next steps: trustees reviewed the documents and then approved the budgets by board vote during the meeting; staff said they will incorporate these assumptions into the plans’ financials and coordinate with the city’s budget office and the software RFP process.