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Committee reviews CalPERS modeling; staff to return with finalized actuarial numbers in January
Summary
Committee members heard staff modeling showing an unfunded CalPERS liability falling from about $9.3 million to roughly $7.6 million after recent payments and returns; staff modeled a possible $3.7 million discretionary payment that could save an estimated $3.1 million in interest and will return in January with finalized figures.
Finance staff presented the committee with CalPERS actuarial results and multiple payment scenarios but did not request action on Oct. 30.
Staff reported that before recent adjustments the combined classic and PEPRA plans showed a total unfunded liability of about $9,300,000 and a funded ratio near 75.9 percent. Factoring fiscal-year investment returns and a $2,000,000 payment made last March, staff said the remaining unfunded liability is roughly $7,600,000 with an about 81.2 percent funded ratio.
Staff explained modeling that showed making an additional discretionary payment of $3,700,000 to CalPERS could yield approximately $3,100,000 in interest savings over the amortization period. "It's obviously a good investment if we feel comfortable making $3,700,000 to CalPERS," staff said, but they cautioned that actuarial numbers remained preliminary and recommended returning in January with finalized actuarial reports and updated budget forecasts before committing to any additional payment.
Committee members discussed phasing payments over multiple installments to mitigate market timing risk and asked about the effect on the city—s annual unfunded actuarial liability (UAL) payment if a $3.7 million ADP were made; staff said the UAL payment would decline and that staff would cost out long-term projections to peg a more predictable annual payment. No formal motion or vote was taken on the discretionary payment; staff will bring a follow-up item to the January meeting with the actuary—s finalized assumptions.
The presentation also included context on the city—s funding policy target (at least 90% funded by fiscal year 2028) and the role of the city—s Section 115 trust in reaching funding goals. Staff noted that PEPRA hires and the two-tier plan structure make longer-term funding more stable and predictable.
