Actuary: separation-allowance plan for fire, ECC and five departments could cost Raleigh about $227 million over 20 years

Allison Bradshaw of the Finance Department and Greg Stump, chief actuary with Boomershine Consulting Group (BCG), presented an actuarial analysis of a possible separation allowance for fire, emergency communications (ECC) and five operations departments, outlining projected costs, funding approaches and implementation risks.

BCG modeled two packages: one for fire and ECC and a second combined group that included parks and recreation, transportation, Raleigh Water and engineering. For the fire/ECC group, BCG estimated a first-year total city contribution (normal cost plus an amortization payment for the plan’s initial unfunded liability) of roughly $5.0 million, equal to approximately 9.6% of that group’s payroll; the ongoing normal cost the consultant estimated at about 4.2% of that payroll. For the five operating departments, the consultant estimated a first-year city contribution of about $4.7 million, with a long-run normal cost near 1.8% of payroll.

Stump noted the analysis assumes a new plan would start with zero assets and that the initial shortfall must be amortized; BCG used a 20-year amortization in its principal scenario. The consultant’s key actuarial assumptions included a 5.5% investment return (discount rate) and a 5% salary-increase assumption. Under those assumptions, BCG projected combined city contributions across the modeled groups of about $227 million over 20 years, with the fund projected to reach roughly $92 million in assets at the end of that period. The report estimated the plan’s initial total pension liability for financial reporting at about $61 million (the unfunded amount given zero assets).

Stump and staff stressed that the projections are sensitive to experience: investment returns, actual salary increases, turnover and early retirements will all change contribution needs. Stump said the normal-cost component is fairly stable as a percent of payroll, while the amortization portion can change substantially year to year with investment gains or losses.

Council members asked several procedural and policy questions: whether eligibility could be restricted to Raleigh service only, how increasing staffing would affect amortization and whether payouts could be delayed while a trust grows. Ryan Bergman of the city manager’s office said the city could design local eligibility rules (for example, counting only Raleigh service) but that legal review is needed to avoid discriminatory practices. BCG said the city could delay drawing from a new trust for a period (the consultant suggested roughly a decade in an example) while making trust deposits; any retiree who met eligibility would still be entitled to the benefit under the modeled plan, but payments from trust assets could be timed per council policy decisions.

Council members and staff requested follow-up analyses: BCG agreed to run the model with separate results for fire alone and for other individual departments, and staff said they would provide historical actuals for law-enforcement separation-allowance funding and reporting. Fire Chief Herbert Griffin described recruitment and retention pressures: recent academy classes showed candidates leaving during or immediately after training, and chief leadership said a separation allowance is a recruiting and retention tool but not the only one. The work session produced no formal council decision; staff will return with department-level modeling, legal guidance on eligibility options, and financial implications for the FY26 budget process.

Less critical details from the presentation: BCG used data as of Oct. 1, 2024; eligibility modeled consistent with the state Local Government program (full benefit at age 60 with 25 years of service, or 30 years at any age); the modeled benefit formula was 0.85% times years of service times final pay, paid to age 62.