HomeMy WebLinkAbout75A-3 - PH UNFUNDED PENSION LIABILITYREQUEST FOR
COUNCIL ACTION j
CITY COUNCIL MEETING DATE: CLERK OF COUNCIL USE ONLY:
JUNE 4, 2019
TITLE:
APPROVE $22.6 MILLION PRE -PAYMENT
FOR THE CITY'S CONTRIBUTION TO THE
SAFETY EMPLOYEE PENSION UNFUNDED
LIABILITY FOR FY 2019-20
(STRATEGIC PLAN NO. 4, 1)
RECOMMENDED ACTION
APPROVED
❑ As Recommended
❑ As Amended
❑ Ordinance on 1s' Reading
❑ Ordinance on 2nd Reading
❑ Implementing Resolution
❑ Set Public Hearing For
CONTINUED TO
FILE NUMBER
Approve a $22,644,532 pre -payment for the City's annual Unfunded Actuarial Liability to California
Public Employees Retirement System (CaIPERS) — Safety Plan for Fiscal Year 2019-20.
DISCUSSION
The employee pension plan accrues an unfunded liability when CaIPERS investment earnings are
less than the actuarial assumptions, and employees live longer than assumed. The safety plan
had an unfunded liability of $344.3 million at June 30, 2017. The City will receive updated
information for June 30, 2018 in summer 2019. Each year, CaIPERS requires the City to reduce
the unfunded liability with a payment. One way to reduce the City's cost is to pay the contribution
at the beginning of the fiscal year, rather than spreading the contribution equally over 12 months.
The actuarial required contribution for the safety plan (police and fire) unfunded liability is
$23,451,034 for FY 19-20. If the City chooses to pre -pay the contribution by July 31 st for the safety
plan, the contribution is reduced to $22,644,532, which saves the City 3.4% or $806,502 on its
annual contribution. Below is the break-out of the safety contribution (pre -paid) amount by
Department:
Department Amount
Police $15,081,258
Fire $7,563,274
The City continues to owe an unfunded liability for the previous Santa Ana Fire Department, as a
result of the former members accrued pension benefits while employed with the City.
If the City were to make 12 equal payments over the fiscal year, the City would not save $806,502;
but may earn more investment income of approximately $176,944.
75A-3-1
Approval to Pre -Pay the City's Safety Plan Unfunded Actuarial Obligations
June 4, 2019
Page 2
STRATEGIC PLAN ALIGNMENT
Approval of this item assists the City in meeting Goal #4, - City Financial Stability, Objective #1 —
(maintain a stable, efficient and transparent financial environment).
FISCAL IMPACT
The proposed FY19-20 budget includes an assumption that the City will make the pre -payment,
resulting in an estimated net savings of $629,558 ($806,502 savings, less approximately $176,944
reduced investment income). The contribution to reduce the unfunded liability is a General Fund
expenditure.
Accounting Unit 01105020-61103 for police - $15,081,258
Accounting Unit 01105020-61104 for fire - $7,563,274
APPROVED AS TO FUNDS AND ACCOUNT:
Kathryn D�CPA Tyv\,
Executive Director
Finance and Management Services Agency
ZFWX l
75A-3-2