Pension valuation shows funding progress; employer contribution rate falls slightly

Mendocino County Employees’ Retirement Association presented its 6/30/2025 actuarial valuation to the board and reported improved funding metrics driven primarily by investment returns.

Key findings: The actuary said the plan’s smoothed investment return for the year was about 7.61%, producing a decrease in the system’s unfunded liability and a valuation funded ratio that rose to about 76.4% (smoothed basis). MCERA’s average employer contribution rate declined by roughly 1.55 percentage points — from 41.82% to about 40.27% of payroll — reflecting gains and payroll changes. The actuary cautioned that a large portion of the employer rate still covers legacy unfunded liabilities and that payroll growth assumptions materially affect future amortization rates.

Why it matters: Pension contributions are a major component of county personnel costs and affect near‑term budgets. Supervisors asked how changes in staffing levels or salary patterns would influence actuarial liabilities and requested scenarios to inform budget planning. Todd Talzer of the actuary firm said the plan carries a sizable unfunded liability (~$235 million after the valuation) but noted deferred investment gains of about $31.5 million will be recognized over upcoming valuations and could provide relief.

Next steps: MCERA staff will provide additional information to county budget staff and noted an experience study of actuarial assumptions is scheduled before the 2026 valuation.