Oswego actuary recommends $2.5 million contribution to police pension fund after strong 2025 investment gains

Kevin Kavanaugh, an actuary with Lauterbach and Eamon, told the Oswego Committee of the Whole on June 9 that the village’s actuarial valuation for the Police Pension Fund recommends a village contribution of $2,508,207 for the coming year, an increase of about $225,000, or 9.85%, from the prior valuation.

The recommendation comes with context: the fund’s fair value of assets was reported at about $61.5 million as of Dec. 31, 2025, with an actuarial funded percentage of 78.07% — above the Illinois police pension average of roughly 64% but down modestly from 78.41% the prior valuation. Kavanaugh said the decline is mainly attributable to actuarial experience and demographic changes rather than investment performance.

Kavanaugh emphasized two central figures: the recommended contribution of $2,508,207 and an unfunded actuarial liability of roughly $15.7 million. He said the contribution is split into a normal cost component (about $1.0 million) and a payment toward unfunded liability (about $1.5 million). The firm’s funding approach uses a 15‑year layered amortization and aims for 100% funding, which the actuary described as more aggressive and fiscally prudent than the state minimum standard.

“This year you saw a small funded‑percent drop — from 78.41% to 78.07% — driven primarily by demographic changes in the membership,” Kavanaugh said. He cited several census changes recorded for the valuation date: six new hires, one retirement, one disability, three terminations and 26 continuing active members; those changes account for nearly $74,000 of the year’s contribution increase.

Kavanaugh also highlighted unusually strong investment performance: the consolidated investments returned about 17.44% for the fiscal year, producing roughly $9.1 million in investment gains and boosting the fund’s fair value. He explained the village’s assets now sit within a consolidated downstate police pension portfolio with an approximate asset allocation of 65–70% equities and the remainder in fixed income.

The actuary presented an alternative, statutory calculation that follows the state’s minimum funding policy (targeting 90% by 2040). That statutory method would produce a lower contribution estimate of about $1,724,316 for the same valuation, but Kavanaugh recommended continuing the village’s current policy that targets full (100%) funding on a layered 15‑year basis.

Kavanaugh also described a pending state measure identified in the presentation as Senate Bill 1937. He said if the bill as drafted enacted both Tier 2 benefit enhancements and an extension of the statutory minimum funding timetable to 2055, Oswego could see approximately a 30% increase in contributions by 2055 under the village’s existing funding policy. He noted that the bill also contemplates extending statutory amortization schedules, which would change near‑term contribution dynamics and could temporarily reduce funded percent if the village followed the extended statutory ramp.

Trustees asked several questions about the sensitivity of the contribution to actuarial assumptions and census changes. Kavanaugh said a 0.25‑percentage‑point change in the assumed rate of return could alter the contribution by roughly $300,000 and reiterated that the valuation uses a December 31 census (57 active members) and does not assume future hires unless the board requests scenario analyses.

The presentation included a GASB solvency‑test projection (identified in the slides as GASB 60768) showing an 80‑year positive cash‑flow outlook; Kavanaugh said the comparison of assets to inactive liability (about $61.5 million in assets vs. $43.3 million in inactive liability) placed the fund in a low‑risk category for near‑term benefit payments. He projected annual benefit payouts could grow to roughly $4.8 million by 2035 and said continued funding at recommended levels should position the village to absorb that increase.

After questions, trustees moved on to a closed session motion for litigation, personnel and property matters; the motion carried on a roll‑call vote and the board entered closed session.

The village’s actuarial report and Kavanaugh’s recommendation give Oswego elected officials a choice between maintaining a more aggressive, 100%‑funding objective that reduces long‑term cost or following a statutory minimum schedule that would lower the near‑term contribution but could increase long‑term expense. The committee did not take a final public vote on adopting the recommended contribution at the June 9 meeting; the presentation and trustees’ questions will inform upcoming budget decisions.