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Actuary: 2025 valuation shows plan still funded at about 100% after strong market gains
Summary
Office of the State Actuary staff told the board the 06/30/2025 preliminary valuation shows a funded ratio of about 100.3%, with a 9.53% market return and roughly $1.1 billion in deferred gains still to be recognized; calculated contribution rates rose overall because salary and retirement experience outpaced assumption changes.
The Office of the State Actuary presented preliminary results from the 06/30/2025 valuation, showing the plan remains funded at roughly 100.3% despite mixed experience. Mitch DeCamp, of the Office of the State Actuary, said, “Good news for the plan for 2025, the investment return was 9.53%,” and explained that the actuarial (smoothed) value recognized $440,000,000 of past deferred investment gains while deferring about $1,100,000,000 to be recognized over the next three years.
DeCamp told the board the valuation incorporates two experience studies. He said demographic assumption updates—adopted last December and including 18 changes—pushed calculated contribution rates up, while economic assumption changes (including the investment rate of return) pushed them down; overall, “the increases were bigger than the decreases and the contribution rates went up.” He emphasized all results are preliminary and currently under audit.
On membership experience, OSA reported continuing active-member growth of roughly 550300 per year, average salary increases for continuing active members around 9.5% (versus an assumed ~6%), and more retirements than expected (about 567 versus 445 expected). DeCamp said those trends reduced the funded ratio by about 1.7 percentage points, partly offset by positive investment experience.
DeCamp reviewed the contribution-rate framework used by the board: the calculated contribution rate equals the greater of the aggregate rate (full actuarial cost) and the minimum rate (stability-focused). He noted the board previously adopted a four-year rate schedule for fiscal 20262029 but can adjust adopted 20282029 step-ups at next months meeting.
Board members asked whether finalized fiscal-year investment returns (reported in September) would change this valuation; DeCamp replied the 06/30/2025 valuation stands on that valuation date and later returns will be reflected in the 06/30/2026 valuation and the next rate-setting valuation on 06/30/2027.
DeCamp summarized: funded ratio remains just over 100%, contribution rates rose overall compared with the prior valuation because salary and retirement experience exceeded expectations, and deferred investment gains provide a short-term buffer that is expected to be fully realized by 2028 unless additional gains occur.
Next steps: the board will see a final audited valuation report and a contribution-rate adoption item is scheduled for the July meeting.
