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REQUEST FOR <br />COUNCIL ACTION j <br />CITY COUNCIL MEETING DATE: CLERK OF COUNCIL USE ONLY: <br />JUNE 4, 2019 <br />TITLE: <br />APPROVE $22.6 MILLION PRE -PAYMENT <br />FOR THE CITY'S CONTRIBUTION TO THE <br />SAFETY EMPLOYEE PENSION UNFUNDED <br />LIABILITY FOR FY 2019-20 <br />(STRATEGIC PLAN NO. 4, 1) <br />RECOMMENDED ACTION <br />APPROVED <br />❑ As Recommended <br />❑ As Amended <br />❑ Ordinance on 1s' Reading <br />❑ Ordinance on 2nd Reading <br />❑ Implementing Resolution <br />❑ Set Public Hearing For <br />CONTINUED TO <br />FILE NUMBER <br />Approve a $22,644,532 pre -payment for the City's annual Unfunded Actuarial Liability to California <br />Public Employees Retirement System (CaIPERS) — Safety Plan for Fiscal Year 2019-20. <br />DISCUSSION <br />The employee pension plan accrues an unfunded liability when CaIPERS investment earnings are <br />less than the actuarial assumptions, and employees live longer than assumed. The safety plan <br />had an unfunded liability of $344.3 million at June 30, 2017. The City will receive updated <br />information for June 30, 2018 in summer 2019. Each year, CaIPERS requires the City to reduce <br />the unfunded liability with a payment. One way to reduce the City's cost is to pay the contribution <br />at the beginning of the fiscal year, rather than spreading the contribution equally over 12 months. <br />The actuarial required contribution for the safety plan (police and fire) unfunded liability is <br />$23,451,034 for FY 19-20. If the City chooses to pre -pay the contribution by July 31 st for the safety <br />plan, the contribution is reduced to $22,644,532, which saves the City 3.4% or $806,502 on its <br />annual contribution. Below is the break-out of the safety contribution (pre -paid) amount by <br />Department: <br />Department Amount <br />Police $15,081,258 <br />Fire $7,563,274 <br />The City continues to owe an unfunded liability for the previous Santa Ana Fire Department, as a <br />result of the former members accrued pension benefits while employed with the City. <br />If the City were to make 12 equal payments over the fiscal year, the City would not save $806,502; <br />but may earn more investment income of approximately $176,944. <br />75A-3-1 <br />