Actuary recommends $10.5 million transition contribution for Rock Island police and fire pensions in 2025

Kevin Kavanaugh of Lauterbach and Aument presented the city’s 2025 actuarial valuation for the consolidated police and fire pension funds, recommending employer contributions of $5,405,512 for the fire fund and $6,271,466 for the police fund and a combined transition contribution of $10,527,442 for the current contribution year.

Kavanaugh said the city is phasing in a recent large increase from when his firm took over as actuary, using a five-year transition plan "instead of taking that big leap." He told the council the transition amount is intended to ease the city toward the full recommended contribution.

The valuation shows substantial unfunded liabilities: about $58 million for the fire fund and about $69 million for the police fund. Funded ratios reported by Kavanaugh were roughly 33% for fire and 39.62% for police. He said the funds are "mature" in that they have more inactive members drawing benefits than active contributors, which increases the near-term share of payments that go to retirees rather than to asset growth.

Kavanaugh detailed the drivers of this year’s recommended changes: higher-than-expected salary increases (particularly on the fire side), an assumed 2.25% cost-of-living adjustment tied to a forthcoming collective bargaining agreement, demographic experience (hires, retirements, terminations and deaths), and differing asset returns. Those elements produced a net increase of about $276,000 in the recommended fire contribution and about $370,000 for police compared with last year’s recommendation.

He highlighted retirement-eligibility risk: "as of December 31, there were 12 of your 57 active firefighters retirement eligible," about 21%, which he said could produce a spike in retirements; by contrast, seven of 79 active police officers (about 9%) were retirement eligible at the same date.

Investment performance improved funded-position pressure in 2023: Kavanaugh said the fire fund returned approximately 14.53% and the police fund about 13.27% for calendar 2023, producing nearly $9 million in combined investment gains that year. Still, he warned of structural risks: the ratio of annual benefit payments to fund assets was high (about 18.34% for fire and 14.35% for police), which limits the funds’ ability to grow on investment returns alone.

Kavanaugh also noted a state-level plan change that can make spouses of retired police officers eligible for survivor benefits in certain cases; he said that change added roughly $15,000 to this year’s recommended police contribution.

He compared the firm’s recommendations with the statutory alternative contribution that follows state minimum funding policy (aiming for 90% funding by 2040). Under that statutory basis, Kavanaugh said the alternative contribution would be about $4,745,000 for fire (roughly $660,000 less than the firm’s recommendation) and about $5,294,776 for police (roughly $1 million less than the recommendation).

No council action or vote on the valuations was recorded during the presentation; Kavanaugh said staff will provide both the statutory-minimum figures (provided by Foster and Foster for the state) and the firm’s recommended contribution numbers in a memo in an upcoming council packet, and he invited questions (none were raised). The actuarial presenter said he would stay briefly but might need to leave by 7 p.m.