Get Full Government Meeting Transcripts, Videos, & Alerts Forever!
Get email alerts on the Pensions topic
No spam. Unsubscribe anytime.
Fremont council ends automatic 10% pension over‑payments, will pay CalPERS actuarial UAL
Summary
Finance staff told the council the city has reached a 'stabilized' level of CalPERS contributions and recommended removing the automatic 10% supplemental contribution; the council voted unanimously to accept the staff recommendation while retaining the option to make additional payments if funds permit.
Finance Director Dave Pursland told the Fremont City Council that the city has reached a stable level of CalPERS unfunded‑liability contributions and recommended removing the policy that required an automatic additional payment equal to 10% of the unfunded accrued liability (UAL).
"If they earn less than their assumed rate," Pursland said, "then that additional contribution actually means that we will have lost money." He explained that extra contributions are effectively a risky ‘‘lend’’ to CalPERS rather than cash the city can use to provide services, and that the city’s prior strategy of extra payments was intended to prevent large future spikes in required contributions after CalPERS lowered its assumed return in 2016.
The council’s action modifies the city policy so staff will incorporate the unfunded liability contributions specified by CalPERS into the proposed operating budget each year and will not be required to make the fixed 10% supplemental payment. Staff told the council the current actuarially determined contribution is roughly $46 million a year; removing the automatic 10% would avoid a required additional contribution several times larger in some years while leaving the council able to approve extra payments if resources allow.
Councilmembers pressed staff on the tradeoffs: several used a mortgage analogy to ask whether making larger payments today is always better than using the money for current services. Pursland and other staff explained that CalPERS’ investment returns can vary widely from year to year and that gains and losses are amortized over a 20‑year period with a five‑year phase‑in, meaning any benefit from an over‑payment is phased into future contribution calculations rather than immediately available to the city.
Councilmember Campbell moved to accept staff’s recommendation; Councilmember King seconded. The motion passed unanimously. Staff said the change will be incorporated into the city’s budget process; additional contributions may still be proposed in future budgets if council decides to allocate one‑time or recurring funds to pensions.
The council did not record a roll‑call tally in the transcript; staff recorded the result as unanimous approval. The staff report and presentation noted nine prior additional contributions totaling $44.8 million and cited recent investment returns that helped stabilize projected UAL contributions.
