HomeMy WebLinkAboutCouncil Presentation 06/07/2022 - PSPRS Funding Policy UpdatePUBLIC SAFETY PERSONNEL
RETIREMENT SYSTEM
(PSPRS)
FUNDING POLICY UPDATE
Yiannis Kalaitzidis
6/1/2021
NET UNFUNDED LIABILITY
Trust Fund –FY 2021 Assets
Accrued
Liability
Unfunded Actuarial
Accrued Liability
Funded
Ratio
Tier 1 & Tier 2 Pension $ 28,703,577 $ 45,970,934 $ 17,267,357 62.4%
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$13,125,163 $14,801,652 $15,094,737 $16,424,786 $17,929,819 $17,267,357
2016 2017 2018 2019 2020 2021
FY 2023 EMPLOYER CONTRIBUTION RATES*
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FY 2022 FY 2023 FY 2023 Cost
(Estimated)
Normal Cost 13.07%13.43%$809,602
Amortization of Unfunded Liabilities 23.64%23.27%$1,402,788
Total Contribution 36.71%36.70%$2,212,390
Rate Change -0.01%
FUNDING OBJECTIVES
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
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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
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Policy Impact
Prepayment of annual employer PSPRS contributions
Additional payment above the ARC
$6 million budgeted for FY 2023 planned to be made in July
Funding will improve from 62.4% to 75.5% (Estimated)
Contribution rate will improve from 36.80% to 28.01%
(Estimated)
Benefit will be realized for FY 2025 Contributions
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DISCUSSION
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PSPRS STATUTE
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
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PSPRS FUNDING POLICY
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
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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
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DEFINITIONS
Unfunded Actuarial Accrued Liability (UAAL)
Trust Assets less Estimated Future Cost of pension earned by
employees
UAAL can vary due to differences in assumptions:
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•Interest earnings •Member mortality
•Disability rates •ARC contributions (100% or Other)
•Payroll projections
PLAN COVERED UNDER A.R.S.
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
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KEY STATISTICS
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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%58.6%1,849,948 17,929,819
2021 35.24%62.4 1,938,668 17,267,357
2022 36.71%2,062,585
NET UNFUNDED LIABILITY
Trust Fund –FY 2021 Assets
Accrued
Liability
Unfunded Actuarial
Accrued Liability
Funded
Ratio
Tier 1 & Tier 2 Pension $ 28,703,577 $ 45,970,934 $ 17,267,357 62.4%
1420172018201920202021
$14,801,652 $15,094,737 $16,424,786 $17,929,819 $17,267,357