2020 Actuarial Valuation available online
The Fund’s actuarial consultant presented this year’s valuation to the Board of Trustees at their regular meeting on April 28, 2021. The overall indication from the valuation is that the Fund is staying on track to eliminate its unfunded actuarial accrued liabilities (UAAL) in 42 years. This remains consistent with last year’s valuation that indicated a 43-year period.
Actuaries have a very specialized financial role, to make predictions about the future, based on as much definitive information as possible from the past and present. The Fund’s actuaries look at a wide range of variables and estimate how all the relevant factors are likely to interact over time. The Fund’s Board and staff use the information in the actuarial valuation to make decisions for the long-term stability of the Fund, and one of the key pieces of information from the valuation is the UAAL.
The UAAL is the difference between the actuarial value of the Fund's current assets and its actuarial accrued liability, which is what it expects to owe current and future retirees over their lifetimes, based on the pensions they have already earned. The UAAL changes each year as all of the individual factors in the calculation change. One of the actuary’s goals is to predict what that change may look like over a long period of time.
The UAAL increased as anticipated from 2019 to 2020, and the actuary’s projections indicate it will likely increase for the next 20 years as the corrective actions from recent pension changes gradually shift the equation. After about 20 years, the UAAL is expected to decrease until reaching zero.
The following chart was presented to the Board to show how the UAAL is projected to change:
The total payroll for members covered by the City Plan increased by approximately 1.5%, which was comprised of a 1.6% decrease for General Employees, a 3.8% increase for Police Officers, and a 6.3% increase for Firefighters. The Fund’s projections assume an overall increase in total payroll of 3.0% (regardless of how much each individual group changes). The difference between the actual 1.5% total increase and the assumed 3.0% does not directly impact today’s UAAL, but it can have an impact on future contributions and the amount of time it will take to eliminate the UAAL.
During 2020, there were approximately 15% more deaths than the average number of deaths over the previous three years. The total number of deaths during 2020 was 115, which is approximately 2.4% of the total retirees.
The valuation also calculated that the Ad Hoc COLAs are not expected to be paid in the City Plan until 2042. Prior to recent reforms, however, the Ad Hoc COLA was not expected to ever be paid again.
The complete actuarial valuation is available on the Fund’s website. View it here.