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Staff and actuary discuss using surplus to fund an immunized cash‑flow tranche to reduce volatility if plan reaches full funding
Summary
Actuarial and investment staff discussed a proposal: if the plan reaches or exceeds full funding, use surplus assets to fund an immunized (bond‑matching) tranche to reduce asset‑volatility exposure for retiree payouts while keeping normal‑cost contributions unchanged.
Actuarial and investment staff presented a conceptual framework for reducing pension volatility once funded status reaches or exceeds 100%: use surplus assets to seed a dedicated, immunized cash‑flow tranche (high‑quality bonds sized to match near‑term retiree benefit payments) and calculate contributions on the remaining diversified portfolio. The objective is to lower downside risk to city and member contributions without increasing normal‑cost obligations.
Staff explained the current practice of maintaining several years of liquidity (a five‑year immunized matching sleeve to pay benefits) and how approaching full…
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