Actuary: Sheriff's pension returned 10.1% in 2024 but remains underfunded at 77.8%

Kevin Carey, a consulting actuary with Neihardt, told the county council on July 2 that the Vanderburgh County Sheriff's Office pension plan earned a "positive 10.1% investment return during calendar year 2024" (net of expenses) but remained underfunded on a market-value basis.

Carey said the plan's actuarially determined contribution (ADC) for the pension plan as of Jan. 1, 2025, is $2,020,487 — about 17.8% of expected payroll. He reported the pension plan's market-value funded percentage at roughly 77.8% on Jan. 1, 2025. For the related benefit plan, Carey said the computed ADC is just over $101,000 (about 0.9% of payroll) and that "the benefit plan is essentially unfunded." The benefit plan covers ancillary death and disability benefits rather than retirement annuities.

Why it matters: Carey told the council that missing the ADC would trigger continued review by a state oversight body. He said preliminary 2025 projections show the pension plan likely short of the full ADC unless the county secures additional contributions; his early estimate of the gap was roughly $145,000 for the pension plan in 2025 and about $20,000–$25,000 for the benefit plan, though Carey said quarterly statements are needed to refine the year-to-date shortfall.

Key figures Carey presented included:

- 2024 net investment return: approximately 10.1% (net of expenses). - Pension ADC (01/01/2025): $2,020,487 (~17.8% of payroll). - Market-value funded ratio (01/01/2025): ~77.8%. - Benefit-plan ADC (01/01/2025): ~ $101,000; the benefit plan is effectively pay-as-you-go.

Carey explained assumptions that drive the ADC: the actuary's baseline uses a 7.25% discount (expected investment) rate — an assumption the state oversight committee has questioned — and he showed alternate projections using a 6.5% rate. Lowering the discount rate would raise liabilities and the ADC. Carey warned that, without changes, the plan could need additional contributions of roughly 1 percentage point of payroll above current scheduled contributions in many years; under a lower discount-rate scenario the percent-of-pay contribution would be materially higher.

On long-term timing, Carey said the current amortization schedule would remove legacy unfunded liability in about 22 years, with a projected path to full funding if all assumptions hold. He cautioned that the assumed path requires investment returns and demographic experience to match expectations: "there's a lot of risk involved" from investment and demographic variance.

Council members asked about practical consequences and options. Carey said adding a cost-of-living adjustment (COLA) for retirees would increase required contributions unless new dedicated funding were provided; he described 2047 under the plan's baseline as a point where legacy liabilities would be paid down and the cash need would reflect only new benefits being earned, assuming no new unfunded liabilities.

Carey recommended the council and pension board consider options beyond ad hoc contributions, including studies to identify longer-term revenue sources to stabilize funding rather than repeatedly restoring funding after market downturns. He said quarterly financial statements now being awaited will help the county refine its 2025 shortfall estimate and will inform budgeting for 2026.

Ending: Carey said he is available for follow-up questions and that the pension board and county staff will continue to study contribution and funding-path options before the next budget cycle.