HomeMy WebLinkAboutCouncil Presentation 07/21/2020-PSPRS Funding PolicyPUBLIC SAFETY PERSONNEL RETIREMENT SYSTEM (PSPRS)
FUNDING POLICY UPDATE
YIANNIS KALAITZIDIS, FINANCE DIRECTOR
July 21, 2020
NET UNFUNDED LIABILITY
$0
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
$16,000,000
$18,000,000
2014 2015 2016 2017 2018 2019
Trust Fund –FY2019 Assets
Accrued
Liability
Unfunded Actuarial
Accrued Liability
Funded
Ratio
Tier 1 & Tier 2 Pension $ 23,331,393 $ 39,756,179 $ 16,424,786 58.7%
FY 2021 EMPLOYER CONTRIBUTION RATES *
FY 2020 FY 2021 FY 2021 Cost
(Estimated)
Normal Cost 13.86%13.79%$727,233
Amortization of Unfunded Liabilities 20.78%21.45%$1,211,435
Total Contribution 34.64%35.24%$1,938,668
Rate Change 0.6%
* Tier I & Tier II Plans Only
FUNDING OBJECTIVES TOPICS
Maintain Stability
•Contribute 100% of ARC
Define Funded Target Ratio
•Actuarial report funded target ratio is at 100%
How and when funding requirement will be met
•Determined based on Funded ratio determination
•Determined on decision to contribute additional funding over ARC
•Determined based on accuracy of actuarial report assumptions
STAFF RECOMMENDATION
•Accept actuarial report’s funded target ratio and date (100% by
2036)
•Always contribute 100% of ARC from operating revenues
•Authorize Town Manager to propose additional measures as
part of the annual budget process based on projected financial
conditions and Town operational needs
–Prepayment of annual employer PSPRS contributions
–Additional payment above the ARC
DISCUSSION
PSPRS FUNDING POLICY
ARS 38-863.01
Beginning on or before July 1, 2019, and on an annual basis
required to:
•Adopt a pension funding policy for the system for employees
who were hired before July 1, 2017
•Formally accept the employee’s share of the assets and
liabilities under the system based on the system’s actuarial
valuation report
•Post the pension funding policy on the Town’s website
PSPRS FUNDING POLICY CONT’D
Policy should include funding objectives that address:
•How to maintain stability of the Town’s contributions to the
system
•How and when the Town’s funding requirement of the system
will be met
•Defining the Town’s funded ratio target under the system and
the timeline for reaching the targeted funded ratio
DEFINITIONS
Funded Ratio
Ratio of Plan assets to actuarial accrued liability
Annual Required Contribution (ARC)
Amount to pay into pension fund determined through annual actuarial valuations. Comprised of:
•Current year estimated cost of pension benefits earned by employees
•Amortization of UAAL –cost needed to cover unfunded portion of pensions earned by employees in previous years
DEFINITIONS CONT’D
Unfunded Actuarial Accrued Liability (UAAL)
Trust Assets less Estimated Future Cost of pension earned by
employees
UAAL can vary due to differences in assumptions:
•Interest earnings •Member Mortality
•Disability rates
•Payroll projections
•ARC Contributions (100% or Other)
PLAN COVERED UNDER ARS
Police Employees hired before July 1, 2017
•PSPRS (Police) –Tier 1 & Tier 2 Pension
Not Covered:
•PSPRS (Police) –Tier 1 & Tier 2 Health
•PSPRS (Police) –Tier 3 Pension & Health
KEY STATISTICS
Fiscal Year
Employer
Contribution
Rate
Plan Funded
Ratio
Annual
Required
Contribution
Unfunded
Liability
2013 17.25%72.4%809,091 5,495,792
2014 18.02%61.3%896,540 9,109,376
2015 19.39%61.5%952,433 9,865,743
2016 24.80%57.7%1,244,194 13,125,163
2017 24.97%57.3%1,323,524 14,801,652
2018 32.69%58.0%1,832,503 15,094,737
2019 34.69%58.7%1,976,948 16,424,786
2020 34.64%1,849,948
2021 35.24%1,938,668