Actuary presents preliminary valuations; recommends PUB-2010 mortality tables, flags $1.3M MMO impact

Chiron, the board's actuarial advisor, presented preliminary 01/01/2025 valuation results on May 20 and recommended the Allentown Pension Board consider updating mortality assumptions to the PUB-2010 public-sector tables (below-median, generational basis) and adopting the MP-2021 mortality-improvement scale at a 50% factor.

Karen of Chiron told trustees that moving from the plan's current RP-2000-derived assumptions to PUB-2010 B across the police, fire and O&E plans would raise actuarial liabilities by roughly 2% for the police and fire plans and about 3% for O&E, increasing the combined plan liability and adding an estimated $1.3 million to the city's projected minimum municipal obligation (MMO) for the next valuation cycle if the board adopts the change. "To fully understand the cost of the plan, we recommend changing the table," Karen said.

Key findings in Chiron's presentation: the police plan had preliminary liabilities near $268 million with an unfunded actuarial liability around $27 million; the fire plan's preliminary liability was about $107 million with an unfunded liability near $13 million; O&E liability was about $7.7 million with a funded ratio just under 90% on a market basis. Chiron also reported that much of the recent change in liabilities reflected higher-than-expected pay and more retirements over the two-year valuation window.

Why it matters: Mortality assumptions determine how long pension payments are expected to be paid and therefore drive the liabilities and the city's MMO. Chiron advised trustees that many public-sector plans have moved to public-sector mortality tables because they better reflect plan experience than older private-sector tables.

Trustee discussion and process: Trustees asked about timing and the practical effect on the city's budget. Karen reminded the board that council must be notified of MMOs by September and that any actuarial assumption change could be considered before the final 2025 valuation is adopted. Trustees also asked about data credibility: Chiron said Allentown does not have sufficient deaths per year to construct a credible plan-specific mortality table and therefore recommended following the public-sector trend.

Next steps: Chiron presented the mortality recommendation for discussion; the board did not take a final vote on the mortality tables at the May meeting. Trustees were invited to submit follow-up questions to board staff and to consider the proposal ahead of the next actuarial reporting cycle.