CalPERS actuary says Laguna Beach pension funding improved; council weighs prepayment trade‑offs
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Summary
CalPERS' supervising actuary presented membership trends, improved funded ratios and options to reduce unfunded actuarial liability, while council discussed timing and tradeoffs between prepayments and capital projects; no policy changes were adopted at the session.
The city's finance director and a CalPERS supervising actuary briefed Laguna Beach council members on the status of the city's pension plans and options to manage unfunded liabilities.
Michelle Banigan, the city's finance director, introduced Kerry Worgan, CalPERS supervising actuary, who reviewed membership trends, investment returns, inflation impacts and the unfunded actuarial liability (UAL). "The number to focus on here is the unfunded liability," the actuary said, and presented funded‑ratio improvements in recent years driven by strong investment returns.
The actuary reported that the miscellaneous plan's funded ratio improved from the mid‑70s toward the high 70s and low 80s in model estimates and that safety plans showed similar gains. She explained main cost drivers: investment returns (the largest), inflation and pay increases, and mortality improvements that extend expected benefit durations. The presentation noted county‑wide pay increases in 2024 — roughly 8.4% for miscellaneous and 8.8% for safety plans — which contribute to higher liabilities when they exceed earlier assumptions.
CalPERS outlined options to address UALs: continue the standard 20‑year amortization schedule; make discretionary additional payments (ADPs) to accelerate paydown; consider a 'fresh start' shorter amortization (higher near‑term payments but lower long‑term interest), and establish a Section 115 trust to set aside reserves in good years. The actuary showed modeled scenarios with improved funded status after recent strong investment years and noted the pension outlook tool is publicly available for agencies to run 'what‑if' scenarios.
Council members asked about valuation timing and tradeoffs between prepayment and pressing capital needs. One council member framed the question in CIP terms: whether prepaying pension liabilities would reduce available funds for projects such as a fire station. The actuary confirmed the typical timing for the '25 actuarial valuation (available by August) and recommended using the outlook tool to compare scenarios.
What happens next: no formal action was taken; councilors indicated interest in weighing prepayment options against capital priorities during strategic planning and budget discussions.
