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MCPS pension funded ratio rises; actuary recommends closed 20‑year amortization
Summary
GRS actuaries reported MCPS' pension funded ratio rose to 86.5% as asset gains reduced unfunded liability to about $398 million; the board adopted a closed 20‑year amortization policy for the pension unfunded and projects improved funded status over five years if assumptions hold.
Actuaries from GRS presented valuation results that showed an improved funded position for the Montgomery County Public Schools pension plan and recommended continued adherence to the district’s funding policy, a presentation the Fiscal Management Committee received Dec. 2.
GRS reported that FY25 asset performance (a strong investment year) produced approximately $247 million of investment gains that outpaced liability growth, reducing the unfunded liability to about $398 million and yielding a funded ratio of roughly 86.5% on the actuarial (smoothed) value of assets. The actuary said the employer’s total contribution (normal cost plus amortization) stands at approximately 33.87% of payroll, down from the prior valuation cycle largely because of asset gains.
A key policy change noted to the committee is that the pension unfunded is now amortized on a closed 20‑year basis, rather than an open period. Under the closed 20‑year approach adopted this year, current unfunded amounts are scheduled to be paid down over the fixed horizon so the amortization base shrinks each valuation cycle.
On OPEB (post‑employment health benefits), the valuation showed movement from roughly 43.2% to 48.8% funded on a valuation basis; the reported employer contribution for OPEB is approximately 6.61% of payroll under current assumptions and funding practice, with projections showing greater funded improvement if contributions increase.
Why it matters: the pension policy and contribution rates determine budgetary commitments and the long‑term solvency of retiree benefits. GRS emphasized the sensitivity of projections to investment returns and demographic assumptions and noted the actuarial results assume the plan’s 6.75% return assumption.
Next steps: staff and trustees will continue monitoring performance, and actuarial projections presented scenarios that could raise the pension funded ratio to more than 90% within five years if investment returns and other assumptions materialize as projected.
