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Actuaries present pension experience study to Seaford council; recommendation raises contribution by about $70,000
Summary
Gallagher Benefit Services presented an experience study and valuation showing improved asset returns but a recommended assumption change that increases the city's recommended annual contribution by about $70,000, largely due to a higher salary-increase assumption.
Seaford council heard a presentation Nov. 11 from Gallagher Benefit Services on the results of a long-overdue experience study and the latest pension valuation. The presentation outlined changes to actuarial assumptions and the funding implications for the city's general employee pension plan.
Bob Wright, Gallagher's Delmarva practice leader, said Gallagher recommended retaining a 7% long-term investment-return assumption but adopting a "select-and-ultimate" salary-increase model that raises the near-term rate and sets an ultimate salary-increase assumption at 4.5%. Updating mortality tables from a 2010 to a 2016 study and other demographic adjustments also factored into the recommendation. Wright said the combined effect of recommended assumption changes increased the recommended city contribution by roughly $70,000, with the salary assumption the single largest driver.
Jeff Walton, the plan's lead actuary, presented valuation highlights: an 11% market return in the most recent year improved funded status; actuarial funded status was shown moving from roughly the low 70s (about 71%) to about 72.5% on a smoothed actuarial basis; demographic experience decreased unfunded liabilities slightly while the experience-study assumption adjustments increased unfunded liabilities in the near term. Walton described how the actuarial valuation is a point-in-time snapshot that measures accrued liabilities and assets as of the valuation date and explained the plan's amortization of unfunded liabilities (~$443,000 referenced as an annual amortization component).
Council members asked what funded percentage the consultants considered healthy; Gallagher said higher is preferable and that improving funded status is a positive sign but added there is no single right answer because private-sector funding requirements differ from public plans. Council discussed Wilmington Trust's custodial role and confirmed that the city reviews investment policy and meets with the custodian annually.
No formal council action was taken; this was an informational presentation to inform budgeting and contribution decisions in coming fiscal planning.
