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Actuary: Palatka pension valuation shows lower unfunded liability; board keeps 7.4% return assumption
Summary
The board accepted the actuary’s valuation showing the unfunded actuarial liability fell from about $7.3M to $6.6M, explained smoothing rules, adopted no change to the 7.4% assumed investment return, and approved filing the valuation with the state.
The Palatka General Pension Board accepted a valuation report that showed the plan’s unfunded actuarial accrued liability decreased to about $6.6 million from roughly $7.3 million, the actuary told trustees at the meeting.
Patrick, the actuary, explained the valuation methodology, including a five-year smoothing of investment gains and losses that recognizes 20% of the most recent gain each year. He said the plan began the valuation period with about $22.7 million in market value and that the auditor-era smoothing resulted in a recognized actuarial gain of roughly $99,000 in the valuation. The actuary also noted that since quarter end the plan has rebounded and plan-level year-to-date performance looks positive.
The valuation incorporated a required change to the mortality assumption after the state adopted a law aligning local plans with the Florida Retirement System’s mortality table; that adjustment increased liabilities by about $275,000. The actuary also reviewed demographic experience (hires, retirements, turnover) and said turnover and retirements produced modest adverse experience while salary increases were lower than expected.
The board voted to accept the valuation report, and on recommendation of consultants declared the long-term assumed investment return at 7.4 percent for funding purposes. The actuary recommended—and the board approved—commissioning an experience study (a separate contract) to review retirement, turnover and salary assumptions; the actuary quoted a $12,000 fee for that five-year study.
What this means: The valuation will be filed with the state as required; the funding requirement for the next fiscal year was presented as roughly 31.8% of payroll (down from 33.6%), reflecting the combination of normal cost, administrative expenses and the amortization payment on the unfunded liability.
Sources: Actuary presentation and board motions at the May meeting; direct figures and assumption changes taken from the valuation discussion.
