Interim actuarial valuation shows 77.8% funded ratio; board accepts report but COLA conditions unmet
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Summary
Actuary David Kirschner told trustees the plan’s interim funded ratio is 77.8%, below the 80% threshold in the board’s funding policy; the board accepted the interim valuation and authorized its release.
The City of El Paso Employees Retirement Trust board heard an interim actuarial valuation prepared by Gallagher on Jan. 31 and voted to accept the report and authorize its release.
David Kirschner, the presenting actuary, said the interim valuation (as of Sept. 1, 2025) uses projected liabilities from the last full valuation and updates asset values; because the plan uses a five‑year asset smoothing method, lingering losses from fiscal year 2022 still reduce the actuarial value of assets. Kirschner reported the funded ratio on an actuarial (smoothed) basis at about 77.8% and an actuarially determined contribution (ADC) of 11.92% for the city, compared with the city’s fixed statutory contribution of 14.05% of pay. He said the combination of a stronger market return in 2025 (about 8.7% actual versus 7.25% assumed) and the city’s above‑ADC contributions improved key metrics since the prior valuation.
Kirschner also reviewed the trust’s funding policy, adopted in 2019, which requires two conditions to grant a cost‑of‑living adjustment (COLA) or thirteenth check: (1) the funded ratio after the benefit increase must be at least 80% and (2) the decrease in funded ratio caused by the increase cannot exceed 1%. Under the interim results the funded ratio would remain below 80% after modest increases (a 1% COLA would lower the funded ratio from 77.8 to about 77.4), so Kirschner said those funding‑policy conditions are not met and a benefit increase would not be permitted under the policy’s thresholds.
Trustees discussed the difference between the actuarial (smoothed) basis and the auditors’ market basis and asked about the effect of recent city salary increases on liabilities. Kirschner cautioned that the full valuation next year — which will incorporate updated census and payroll data — will better reflect the salary changes and could change the funded ratio and ADC.
Following discussion the board voted to accept the interim actuarial evaluation (motion moved by Carl, seconded by Mister Kirk). The decision stores the interim valuation in the trust record and authorizes its release to interested parties; no benefit changes or policy changes were adopted at the meeting.
The actuary advised trustees that absent significant negative market results the fund is on a path toward improved funded status over time but that recent salary increases and the remaining FY22 smoothing exposure merit close monitoring.
