Actuarial consultants told the Arapahoe County retirement board on the 01/01/2025 valuation that the county’s defined‑benefit retirement plan showed modest progress in 2024 but remains far from fully funded.

Consultants from Gabriel, Roeder, Smith & Company (GRS) and investment advisor CapTrust said the plan’s actuarial value of assets rose slightly and the funded ratio improved to about 63% from 62% a year earlier, reducing the unfunded actuarial accrued liability to roughly $246,000,000. The presenters said favorable payroll growth and investment returns were the main drivers of the improvement but that the plan still carries substantial interest costs at the plan’s 7.25% actuarial interest assumption.

The consultants described several pieces of recent experience that improved results: county contributions increased from 9.5% to 9.75% of pay (adding roughly $500,000 to plan funding in 2025), plan payroll grew faster than expected because of above‑forecast new hires, and market returns exceeded the actuarial assumption on a market‑value basis (about an 8.5% market return versus a 7.25% assumption). Because Arapahoe County uses an actuarial smoothing method, consultants said the actuarial value of assets rose by a smaller amount (about 7.4% on the actuarial basis) as recent losses remain amortized into the actuarial value.

GRS actuaries said the plan’s total actuarial accrued liability is about $668,000,000 and the actuarial (smoothed) value of assets is about $422,000,000, producing the $246,000,000 unfunded figure and the 63% funded ratio. They emphasized the plan has had two consecutive valuation years of improving funded ratios — an unusual turn after many years of weaker experience — and called that a positive sign but not a signal to halt contribution increases.

Consultants outlined the board’s current funding strategy: continue annual county contribution increases of 0.25 percentage point of pay until reaching an ultimate county contribution of roughly 10.75% of pay. Under current projections the board said the county reaching 10% in 2026 (the next scheduled step) would keep the plan on a path to reduce the unfunded liability in the mid‑2020s; reaching the 10.75% target is the modeled level that would put the plan on a faster 15‑year recovery path and provide a buffer against adverse experience.

Board members and staff discussed alternatives, including making a one‑time lump‑sum payment to reduce the unfunded liability. Consultants said a one‑time payment directly reduces the liability dollar for dollar and thus lowers future interest costs, but a single lump sum has less long‑term impact than sustained higher contributions because the phase‑in of a higher ongoing rate has the larger effect on the funding trajectory. The consultants noted the plan treats the unfunded liability like a mortgage: paying more now reduces future interest but the long‑term reduction in years‑to‑full‑funding is mostly driven by the ultimate ongoing contribution rate, not a single-year payment.

The retirement board also reported a governance decision implemented July 1 to reduce the plan’s vesting requirement from eight years to five years; GRS presented that change as having a minimal cost impact (about $20,000 against $668 million in liabilities) while improving the benefit’s recruitment value for new hires.

A CapTrust representative described the plan’s investment approach: a diversified blend of public and private assets intended to meet the 7.25% long‑term assumption with lower volatility than in past decades. CapTrust said asset allocation changes made in the last decade have reduced performance swings compared with peers: the plan is less extreme in both very good and very bad years. Investment performance reporting and the current investment policy statement are posted on the county retirement website, the presenter said.

Board members asked for—and were told they will receive—additional communications and education materials explaining the funding plan and the impact of contribution increases for county employees, especially given ongoing labor negotiations. Staff said the retirement office is expanding and will implement a communications plan this summer to better explain the plan, vesting change and the long‑term funding strategy.

Though consultants described 2024 as a good year and the board voiced optimism, they urged continuing the planned incremental county contribution increases to preserve progress and reach the modeled 10.75% target that puts the plan on a more resilient funding path.