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Council hears scenarios for pension funding; consultant says $1.3M annual ADP would accelerate reaching 90% funded status
Summary
Consultants told Palos Verdes Estates council that under CalPERS assumptions the city could reach a 90% funded ratio by about 2034 with no extra payments, and two to four years earlier with $1.3 million in additional discretionary payments starting FY 2026/27.
Palos Verdes Estates council received a detailed briefing on the city's long-term pension obligations and options for additional discretionary payments (ADPs) on April 14.
Deputy City Manager George Gabriel framed the discussion as a council-directed deeper analysis of unfunded actuarial liabilities (UAL) and the potential effects of extra payments. Dan, a consultant with TrueComp/GovInvest, laid out how actuarial assumptions and investment returns drive liabilities and then presented multiple scenarios for the city.
Under the baseline scenario that assumes CalPERS meets its long-term expected return of 6.8%, the consultant said the city would reach the council'adopted goal of 90% funding by roughly 2034 without any ADPs. Accounting for a recent favorable investment year (reported returns in 2025 of about 11.6% to 12.1%, depending on reporting methodology), Dan said, "You'd be at 91.52% funded status by 2034."
Dan also described an alternative approach the city's long-range plan contemplates: $1.3 million in additional discretionary payments starting in fiscal year 2026/27. "If you applied those ADPs to the front end, you could drive that debt down," he said during the presentation, noting that front-loaded payments reduce early cash-flow pressure later and shorten the time to the funding target. Under some ADP scenarios and slightly different investment assumptions, the 90% threshold could be reached around 2030'2032.
Council members pressed the consultant on trade-offs: whether to use scarce cash to make ADPs or retain liquidity to respond to infrastructure or revenue shocks. The consultant emphasized uncertainty in markets and recommended a measured approach tied to the city's cash-flow capacity. He noted that CalPERS phases in gains and losses over multiple years, producing a multi-year tail effect on local UAL payments.
Council did not take a formal action on the ADP level that night; staff presented the analysis as an informational item to inform future budget and policy choices. Staff highlighted that final decisions about ADPs are a council prerogative and depend on available reserves, revenue forecasts and the city's tolerance for risk and volatility.
Next steps: staff will keep the pension analysis in hand for budget planning and can return with options for a possible ADP schedule if the council wishes to further consider front-loaded contributions.
