Yavapai County holds study session on PSPRS funding, actuarial assumptions

YAVAPAI COUNTY, Ariz. ' County officials and a senior consultant from the Public Safety Personnel Retirement System (PSPRS) met in a study session to review the pension system's fiscal status and to discuss factors that have driven unfunded liabilities and contribution trends.

Clark Partridge, PSPRS senior executive consultant, told the Board that PSPRS's funding comes only from employer and employee contributions and investment returns, and that recent funded-status swings reflected both volatile market returns and the effect of a now-eliminated permanent benefit increase (PBI). "You're doing one of the most important things that you can do in managing your pension liability today by having a periodic discussion and evaluation," Partridge said.

The session focused on the sheriff's plan, where the June 30, 2024 actuarial valuation showed the plan was about 69.6% funded. Partridge summarized the plan's numbers: the estimated present value of benefits was roughly $101 million and the actuarial accrued liability (the portion earned as of June 30, 2024) was about $94.7 million. He reiterated the plan's assumed investment return, currently 7.2 percent, and described how investment shortfalls must be made up through additional contributions.

Nut graf: The study session was intended to refresh the Board on how actuarial assumptions, historical benefit features and investment returns combine to determine contribution needs. Supervisors asked questions about the causes of volatility, recent investment performance and the county's options for managing future contribution pressure.

Partridge reviewed how the PBI, which previously paid half of returns above 9 percent as an ongoing benefit, amplified the system's liability when markets later corrected. "That permanent benefit increase ' it took some of that money from investment returns and . . . also increased the benefits," Partridge said, describing how the policy created a "double whammy" effect when markets fell.

He described changes adopted after the 2010s reforms: the PBI was removed and replaced by a cost-of-living adjustment capped at 2 percent per year. The consultant also explained amortization practice changes adopted by PSPRS and employers: in 2019 the system moved toward layered 15-year amortization for new gains and losses rather than reamortizing the entire unfunded liability, and some employers (including Yavapai County) earlier selected longer amortization schedules under the reform. Partridge said the layered approach helps ensure older layers decline to zero rather than continually resetting the amortization term.

Supervisors pressed Partridge on the investment strategy, fees and whether the system's recent returns were meeting expectations. Partridge said PSPRS retains a mixture of in-house and external investment expertise, that long-term returns have trended lower since the 1980s, and that the recent 7-year recalculated return (smoothed) is close to the assumed 7.2 percent. "Based upon the last 7 years of investment returns, there's been a lot of ups and downs, but they're basically almost spot on," he said.

Board members also raised operational questions and scheduling for follow-up. Supervisor Check said it "would have been helpful" to review the material in advance and requested a copy of the presentation. Several supervisors asked that staff return with more detailed, plan-specific information, including a closer look at the correctional officers' retirement plan and disparities noted in that plan.

Ending: County Manager Maury Thompson and Partridge said staff would continue the dialogue and return with follow-up analysis and answers to supervisors' questions; no formal action or vote was taken during the study session.