Agenda Packet_2023-06-06 - Laserfiche WebLink

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Approval to Pre -Pay the City's Safety & Miscellaneous Unfunded Actuarial Obligations FY 2023-24 June 6, 2023 Page 2 pension liability. This happens when actual plan performance does not meet CalPERS 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 6/30/21 $339.4 million $234.8 million In August 2023, the City will receive the updated CalPERS net liability at June 30, 2022, reflecting receipt of pension obligation bond proceeds in September 2021. Each year, CalPERS requires the City to make a payment on the unfunded liability (UL). One way to reduce the City's cost is to pay the entire annual contribution in July, rather than spreading the contribution equally over 12 months. If the City chooses to pay the entire contribution by July 31St, the contribution is reduced as follows: Plan Type UL (Pay over 12 months) UL Pre -Pay Amount Savings Miscellaneous $9,888,635 $9,568,651 $319,984 Safety $13,207,651 $12,780,268 $427,383 Projected Savings $747,367 The FY 2023-24 budget has incorporated the assumption that the City will pre -pay its UL for the upcoming fiscal year and realize the above -referenced projected savings. FISCAL IMPACT The General Fund is the primary source for unfunded liability payments. Restricted funds pay for less than one-third of the contributions for miscellaneous employees. The proposed FY 2023-24 pre -payment will result in an estimated net savings of $747,367, which has been included in the proposed FY 2023-24 budget. After the City Council adopts the FY 2023-24 Budget, funds will be budgeted and made available in the following accounts for the specified year: City Council 11 — 2 6/6/2023