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El Paso Employees Retirement Trust accepts actuarial valuation showing funded ratio decline to mid‑70s
Summary
Trustees accepted an actuarial valuation prepared by Gallagher showing the plan's funded ratio fell from about 79% to roughly 76% amid large salary increases and higher liabilities; trustees approved the valuation and discussed city salary policy and outreach to city leadership.
The El Paso Employees Retirement Trust on Jan. 15 accepted an actuarial valuation prepared by Gallagher that shows the plan's funded ratio declined into the mid‑70s and that unfunded liabilities rose after a period of higher salaries and increased liabilities.
The actuarial valuation presentation, delivered during the board meeting, reported that market gains in recent years have been partly offset by large salary increases and a growing retiree population. The valuation showed the funded ratio falling from roughly 79% in the prior valuation to about 76% in the interim numbers presented to the board. Gallagher reported material increases in pension liabilities driven in part by roughly $55 million of higher-than-expected salary base and other demographic factors, and said the plan's amortization period remained in the mid‑teens (about 16 years) despite the funded‑ratio decline.
Why it matters: the funded ratio and amortization period are among the primary metrics used to evaluate the plan's long-term sustainability. Trustees noted that employer decisions about wages and staffing directly affect pension liabilities and funding needs.
Key details and figures reported in the valuation presentation: total payroll used in the valuation rose to about $232 million (up from about $180 million two years earlier), the funded ratio moved from the high‑70s into the mid‑70s, and the calculated actuarial determined contribution (ADC) included both a normal cost component and an unfunded amortization component that together produce the city and member contribution rates shown in the report. The valuation also showed that, on average, salary growth assumed in the plan's experience study is roughly 3.5% per year but actual recent increases were much larger and concentrated over a two‑year period, which materially increased liabilities.
Discussion vs. direction vs. decision: trustees heard detailed actuarial assumptions and scenario analysis from the presenter and asked for clarifications on how salary growth and demographic changes affect amortization and contribution rates. Trustees and staff discussed outreach to city leadership to explain how city compensation decisions interact with pension funding. Robert Ashe, the trust's executive director, confirmed staff will offer to meet with the mayor and city manager after the audit and valuation are finalized.
Formal action: Trustee Carl moved to accept the actuarial valuation results as prepared by Gallagher; the motion was seconded by Renee (surname not specified in the transcript) and passed by voice vote. The board recorded the motion and approval at 9:31 a.m.
Context and next steps: trustees were told the city had retained its own actuarial firm (Foster & Foster) to review municipal actuarial information as required by state law; that review is separate and will be shared with city council. The board also heard that the trust will use audited financial statements for future GASB 67/68 reporting and will submit required materials to the State Pension Review Board once the audit is finalized. The board will receive the next full actuarial valuation on its statutory schedule and will revisit benefit‑increase policy (including COLA conditions set in 2019) only if the funding policy thresholds are met.
Ending: Trustees emphasized that while the trust cannot dictate city salary policy, they will continue to brief city leaders and monitor experience in future valuations and interim updates.
