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City hears actuarial update on legacy pension plans; staff to model derisking scenarios
Summary
Principal Financial Group presented actuarial and investment updates for two closed Hallandale Beach pension plans and recommended funding scenarios and potential derisking steps; the commission asked staff to run scenarios on pre‑funding and lower discount rates to evaluate longer‑term options.
City finance and pension advisors told the Hallandale Beach City Commission on March 19 that the city’s two legacy pension plans — the general employees plan and the professional/management plan — are largely funded but still carry unfunded liabilities and may be candidates for staged derisking.
Representatives from Principal Financial Group led the presentation. Dave Stockless, the plan actuary, reported the professional plan is effectively closed (one remaining active at retirement age) with a funded ratio roughly in the high 80s (actuarial basis) and an unfunded liability near $3.07 million. The general employee plan is larger, roughly $81 million in liabilities with an unfunded liability in the neighborhood of $15 million and funded ratios in the high 70s to low 80s depending on measure.
Principal’s investment consultant described portfolio allocations and recent returns: the general‑employee plan is approximately 50 percent equities/50 percent fixed income; the management plan is a bit more aggressive. Staff and consultants discussed the effect of recent market gains, actuarial smoothing of asset gains/losses, and how declining interest rates can lower liability valuations and change available options.
Consultants and city staff recommended analyzing specific scenarios: (a) modestly increasing prefunding contributions to accelerate amortization of the unfunded liabilities; (b) lowering the actuarial discount rate in a measured way; and (c) staged derisking (moving portions of assets into fixed income or purchasing annuities) once funding levels reach thresholds. Commissioners asked staff to run modeled exercises showing budget impacts of different contribution rates and discount‑rate assumptions over 10–20 years.
Commissioners and consultants noted the professional/management plan — with almost no active earners — is the nearer candidate for risk transfer or annuity purchase, while the general employee plan will likely require longer steady funding and strategy adjustments before derisking is recommended. The commission directed staff to prepare scenarios for the next budget cycle showing the fiscal impact of increased prefunding and discount‑rate changes.
Ending
Staff and the pension actuary will produce modeled scenarios of contribution levels and discount‑rate changes for commission review; any decision to pursue risk transfer or annuity purchases will follow further study and a formal commission action.
