CEO John Flynn presented a “state of the pension” review to the Federated board that combined ten‑year membership and funding data with a proposal to use strategic planning to guide the system’s priorities.

Flynn reviewed basic plan economics and trends: fiscal‑year‑to‑date pension plan returns were cited at 4.14% and health care returns at 5.26%. Using actuarial and benefits data from the plan, Flynn said the city contributed about $218 million in 2024 while the plan paid out roughly $256 million in benefits that year. He cited a National Conference on Public Employee Retirement Systems (NCPERS) study that estimates each pension dollar can have a multiplier effect on local economic activity and said Federated‑paid benefits generate significant local activity; he gave an illustrative figure of about $1.2 billion of economic activity located in San Jose from benefits paid (the presentation layered several proration steps to reach that figure).

On membership and demographics, Flynn said the plan’s active population has grown about 40% over the prior 10‑year period, inactive members have nearly doubled, and retirees rose about 22%; total plan membership increased roughly 39% over the decade. Flynn and trustees discussed the lower support ratio that results when retirees outnumber active employees, and that such demographic trends increase the share of assets required for immunized cash flows to meet benefit payments.

Flynn reviewed contribution and benefit trends: employer contributions rose from roughly $102 million to $218 million over the 10‑year span; employee contributions also rose in nominal dollars; benefits paid increased from about $150 million to $250 million annually in that window. He noted administrative costs had grown and pointed to several drivers including wage inflation and new functions such as cybersecurity staffing.

On funded status and assumptions, Flynn said a preliminary draft funding ratio estimate for 2025 is ~65% (preliminary and subject to actuarial assumption setting). He reviewed the plan’s discount‑rate history and said the board has held the discount rate at 6 5/8% since 2020; he walked trustees through how changing the discount rate affects historical comparators.

Flynn closed by proposing strategic‑planning pillars — sustainability (investments and governance), engagement (member and stakeholder communications), education (trustee and member education), operational excellence (staffing and process improvement) and security/modernization (cybersecurity and system automation). He recommended targeted staffing for business‑led modernization and suggested the board identify priorities to feed into an annual work plan and budget process.

Why this matters: The presentation tied high‑level funding and demographic trends to near‑term operational choices — staffing, automation, and allocation to cash flows — that affect the plan’s ability to meet benefit obligations.

Follow up: Trustees asked staff to bring modeling on alternative support‑ratio scenarios and to include modernization and staffing needs in the strategic‑planning interviews and work plan.