Get Full Government Meeting Transcripts, Videos, & Alerts Forever!
Get email alerts on the Pension Liability topic
No spam. Unsubscribe anytime.
Negative CalPERS return raises cityunfunded liability; staff recommends pausing discretionary payment
Summary
Staff reported CalPERS returned -6.1% in FY22, raising the city's combined unfunded pension liability from about $4.3M to roughly $8.3M and lowering the funded ratio; staff outlined options including a $2M discretionary payment to CalPERS (ADP) that could save interest but recommended revisiting the decision in January given market volatility.
City staff told the Financial Review Committee on Oct. 25 that a negative CalPERS return in fiscal year 2022 has materially increased the city’s combined unfunded pension liability and lowered the funded ratio.
Staff said the FY21 CalPERS return of 21.3% previously improved the funded ratio to about 88.2% with a $4.3 million unfunded liability. With CalPERS’ reported negative 6.1% return for FY22, staff used the CalPERS pension outlook tool to estimate the city’s combined unfunded liability would rise to approximately $8.3 million and the funded ratio would fall to about 78.2%, assuming other actuarial factors hold.
Staff described two broad options under city policy: (1) make an additional discretionary payment (ADP) to CalPERS to pay down amortization bases — staff illustrated scenarios for $1 million, $1.5 million and $2 million ADPs and estimated that a $2 million ADP could produce roughly $2.3 million in interest savings over time; or (2) invest additional funds in the city’s section 115 trust (about $4 million currently held), which is subject to different liquidity constraints and expected to be held for multiple years.
Staff cautioned that timing matters: making an ADP in a year when CalPERS posts another loss reduces the expected benefit. Given market volatility and continuing interest-rate uncertainty, staff recommended waiting until the FRC meets again in January to revisit whether to make an ADP or direct additional funds to the trust.
Committee members requested a more detailed amortization table showing market values in CalPERS, accrued liability, unfunded liability, funded status, and trust assets; staff agreed to provide the expanded table. One member said the material remains informational; staff said the city council previously set an initial $2 million set-aside for this purpose and staff will bring options back in January for further committee consideration.
