75A-3 - PRE-PAYMENT UNFUNDED LIABILITY

Home Browse Search

REQUEST FOR COUNCIL ACTION CITY COUNCIL MEETING DATE: JUNE 16, 2020 U11 TITLE: APPROVE PRE -PAYMENT FOR THE CITY'S CONTRIBUTION TO BOTH THE MISCELLANEOUS AND SAFETY EMPLOYEE PENSION UNFUNDED LIABILITY FOR FY 2020-21 FOR A TOTAL AMOUNT NOT TO EXCEED $47,964,199 (GENERAL FUND AND NON -GENERAL FUND) CLERK OF COUNCIL USE ONLY: APPROVED ❑ As Recommended As Amended ❑ Ordinance on 1s' Reading ❑ Ordinance on 2i1 Reading ❑ Implementing Resolution ❑ Set Public Hearing For CONTINUED TO /s/ Kristine Ridge FILE NUMBER CITY MANAGER RECOMMENDED ACTION 1. Approve a $22,612,766 pre -payment for the City's annual Unfunded Actuarial Liability to California Public Employees Retirement System (CaIPERS) — Miscellaneous Plan for Fiscal Year 2020-21, to save $778,061. 2. Approve a $25,351,433 pre -payment for the City's annual Unfunded Actuarial Liability to California Public Employees Retirement System (CaIPERS)— Safety Plan for Fiscal Year2020- 21, to save $872,293. DISCUSSION The City provides a defined benefit pension plan to its employees, managed by CaIPERS. As employees provide service and accrue service credit, the City incurs a liability. Contributions from both the City and employees offset the liability. When the contributions (plan assets) are less than the accrued liability, there is an unfunded pension liability. This happens when actual plan performance does not meet CaIPERS assumptions, such as the investment earnings rate and retiree mortality. The unfunded liability is a debt of the City, as the defined benefit plan is a promise of future pension payments to employees. The unfunded liability for both plans are as follows: Plan Type Safety (Police and former Fire) Miscellaneous (all other employees) Unfunded Liability Amount at 6/30/18 $388.0 million $293.1 million The City will receive an update on its Unfunded Liability amount as of June 30, 2019 during the summer of 2020. Each year, CaIPERS requires the City to make a payment on the unfunded 75A-3-1