Actuarial update: new SOA mortality table raises Portsmouth pension liabilities; projected contribution to rise then ease
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Summary
John Hancock presented the June 30 actuarial valuation to the Portsmouth Retirement Board and recommended a contribution of about $8.9 million; an updated SOA public‑plan mortality table increases liabilities and raises the near‑term contribution estimate.
John Hancock presented the pension valuation for Portsmouth’s fire, police and supplemental plans and explained how actuarial smoothing, mortality assumptions and cash flows affect near‑term contribution requirements.
John (John Hancock) said the plans are largely closed to new entrants and predominantly “in‑pay,” meaning most participants are retirees drawing benefits. The actuary reported benefit payments of about $29 million annually and said the plan’s funded ratio is approximately 75 percent. For the 2025 valuation the firm recommended an actuarially determined contribution of about $8.9 million.
The presentation noted a methodological change: John Hancock incorporated the Society of Actuaries (SOA) updated public‑plan mortality table and a recent mortality improvement scale (MP‑2021). That change increases the plan’s liabilities by roughly 2 percent and raises the annual contribution by about $750,000 across the two plans relative to using the prior table, the actuary said.
Hancock also described how the actuarial five‑year smoothing of asset returns affects the contribution path. A large deferred market loss from 2022 remains in the actuarial value and will be recognized before some strong gains from 2023–25 are fully recognized. John said the smoothing mechanics mean the actuarially determined contribution may rise toward about $10 million in the next plan year before declining under the base‑case 7.25 percent long‑term return assumption.
Board members asked for the smoothing calculations so the city can normalize budget projections. The actuarial firm agreed to provide the calculation details and noted that, because the plans are small and predominantly in‑pay, Portsmouth lacks the plan population size needed for an internal mortality study; public tables are therefore the appropriate benchmark.
John Hancock recommended the contribution level and said the amortization of the unfunded liability is currently scheduled over 11 years; under the presented assumptions the plan’s unfunded liability declines over the long run as contributions are made and returns are realized.
The board did not take a vote on the valuation at the meeting; John Hancock will supply supporting calculations and follow up as requested.