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Board accepts city pre‑funding offer after staff explains discount‑rate methodology and 15% reduction this year
Summary
Investment staff explained a three‑trigger discount‑rate methodology that would reduce the plan’s offered discount by 15% this year; the board accepted the city’s pre‑funding offer by roll call vote.
San Jose — The board accepted the city’s offer to pre‑fund its contribution after staff described the discount‑rate setting methodology and why staff recommended applying a 15% haircut to the plan’s default discount rate for the year.
Staff presentation: The investment staff explained their discount‑rate methodology has three triggers: time since an NBER‑dated recession, time since a 30% market drawdown in the S&P 500, and an elevated cyclically adjusted price‑earnings (CAPE) ratio for U.S. equities. Under the methodology one trigger hit this year (valuation trigger), leading staff to recommend reducing the default 6.625% discount by 15%. Staff explained the practical effect: a smaller discount rate increases the actuarial cost and therefore the amount the city would need to pay if it elects to pre‑fund.
Board questions and public comment: Trustees asked for clarification about the triggers and how the haircut phases in over multiple years (staff explained up to three years of 15% reductions could hit a 45% maximum). A public commenter asked Brown Act questions about trustees attending conferences; board counsel replied that attendance alone does not violate the Brown Act unless a quorum discusses board business outside an agendized meeting.
Vote and outcome: Trustee Linder moved and Trustee Abbott seconded a motion to accept the pre‑funding offer; roll call recorded unanimous ayes. Outcome: board accepted the pre‑funding offer; staff to apply the methodology for actuarial calculations and notify city finance staff.
Speakers (selected): Investment staff presenter (prefunding overview); Trustee Linder; Trustee Abbott; public commenter Brad Imamura; board counsel (Brown Act clarification).
