TO: HONORABLE MAYOR
AND CITY COUNCIL
FROM: John Flynn
SUBJECT: See Below DATE: January 29, 2026
COUNCIL DISTRICT: Citywide
SUBJECT: Acceptance of the Retirement Plans’ Annual Comprehensive Financial Reports for Fiscal Years Ending June 30, 2025 and June 30, 2024
RECOMMENDATION
a) Accept the Police and Fire Department Retirement Plan Annual Comprehensive Financial Report for the Fiscal Years ended June 30, 2025 and June 30, 2024; and
b) Accept the Federated City Employees’ Retirement System Annual Comprehensive Financial Report for the Fiscal Years ended June 30, 2025 and June 30, 2024.
SUMMARY AND OUTCOME
To provide an overview of the Police and Fire Department Retirement Plan (“Plan”) Annual Comprehensive Financial Report for the fiscal years ended June 30, 2025 and June 30, 2024 and the Federated City Employees’ Retirement System (“System”) Annual Comprehensive Financial Report (“ACFRs”) for the fiscal years ended June 30, 2025 and June 30, 2024. The ACFRs provide relevant financial information to the Council of the two retirement plans and ensure the Council is fully informed on the retirement plans’ performance, the impact of reforms, and pension costs as recommended in the City Auditor’s report on pension sustainability.
BACKGROUND
The ACFRs provide detailed descriptions of the Retirement Plans’ financial activity, for Pensions and Other Postemployment Benefits (“OPEB”) for the period of July 1, 2024 through June 30, 2025 compared to the period of July 1, 2023 through June 30, 2024, and are generally divided into the following sections:
COUNCIL AGENDA: 2/10/26
FILE: 26-108
ITEM: 2.8
HONORABLE MAYOR AND CITY COUNCIL
January 29, 2026
Subject: Acceptance of the Retirement Plans’ Annual Comprehensive Financial Reports for Fiscal Years Ending June 30, 2025 and June 30, 2024
• An Introductory Section intended to familiarize the reader with the organizational structure of the retirement plans;
• A Financial Section which contains the retirement plans’ audited financial statements, notes, required and other supplementary information; • An Investment Section which contains the investment policy statement, performance, and asset allocation information in greater detail than the financial section;
• An Actuarial Section which contains information on the retirement plan’s pension and other postemployment benefit actuarial valuations as of June 30, 2024; and • A Statistical Section which contains current and historical information on plan beneficiaries.
The ACFRs can be viewed at the following links:
Police and Fire: Police and Fire FY25 ACFR
Federated: Federated FY25 ACFR
ANALYSIS
The ACFRs are prepared by the Accounting Division, with the assistance of the other divisions, of the Office of Retirement Services (“ORS”). The ACFRs are submitted to the Mayor and Council for consideration and acceptance and to provide relevant financial information to the Council, as well as the active, non-active and retired members of the System and Plan and other interested parties.
The ORS contracted with Macias Gini & O’Connell LLP (“MGO”), a firm of Certified Public Accountants licensed to practice in the State of California, to perform the annual independent audit. The auditors expressed an opinion that the Retirement Plans’ financial statements for Fiscal Year 2024-2025 are fairly stated in conformity with accounting principles generally accepted in the United States of America. This is the most favorable conclusion and is commonly known as an “unmodified” or “clean” opinion. The independent auditor’s report is included in the Financial Section of the ACFRs.
For the fiscal year ended June 30, 2025, the following are the key financial results:
• Total net positions on June 30, 2025 were $5.966 billion, comprised of $5.569 billion of Pension and $397.1 million of OPEB assets for the Police and Fire Plan and $3.948 billion, comprised of $3.486 billion of Pension and $461.6 million of OPEB assets for the Federated System, which represents an increase of $526 million or 9.7% and $380 million or 10.7%, respectively. The primary reason for the increase was due to the investment gains realized during the fiscal year.
HONORABLE MAYOR AND CITY COUNCIL
January 29, 2026
Subject: Acceptance of the Retirement Plans’ Annual Comprehensive Financial Reports for Fiscal Years Ending June 30, 2025 and June 30, 2024
The fiscal year resulted in a net of investment fees rate of return of 10.0% and
9.6% for the pension plans of the Police and Fire Plan and Federated System, respectively.
• Total contributions of $295.2 million for the Police and Fire Plan show an increase of $14.1 million or 5.0% compared to fiscal year 2024. Total contributions of $313.5 million for the Federated System show an increase of $26.0 million or 9.1% compared to fiscal year 2024. The increase in contributions is attributed to numerous factors including an increase in covered payroll for Tier 2, some increases in the contribution rates for some tiers, no prefunding savings for Federated, as well as the timing for the year-end accruals.
• The increase in contributions and increase in investment returns resulted in an increase in additions or sources of funds of about $123.8 million for Police and Fire and $106.3 million for Federated. Deductions increased by $17.9 million to $348.6 million for Police and Fire, which includes $304.6 million in pension benefits, $34.1 million in health insurance premiums, $2.0 million in refund of contributions, and $7.9 million in administrative expenses. Deductions increased by $12.2 million to $308.4 million for Federated, which includes $265.2 million in pension benefits, $34.9 million in health insurance premiums, $1.4 million in refund of contributions, and $6.9 million in administrative expenses.
• The actuarial funded status for the Pension plans increased from 80.2% to
81.8% for the Police and Fire Plan, with an Unfunded Accrued Liability (“UAL”) of $1.119 billion; while the actuarial funded status increased from 58.2% to 60.7% for the Federated System with a UAL of $2.021 billion as of the June 30, 2024 actuarial valuations.
• The actuarial funded status for the Healthcare (OPEB) trusts increased from
34.8% to 39.3% for the Police Plan with a UAL of $338.7 million and from 33.0% to 38.3% for the Fire Plan with a UAL of $202.2 million and increased from 52.5% to 57.4% for the Federated System with an UAL of $306.8 million as of the June 30, 2024 actuarial valuations.
EVALUATION AND FOLLOW-UP
Retirement Services staff will present the Retirement Plans’ ACFRs on an annual basis to the City Council per the recommendation of the City Auditor’s report on Pension Sustainability (Audit #10-10) to update the Council on the financial status of the Retirement Plans.
HONORABLE MAYOR AND CITY COUNCIL
January 29, 2026
Subject: Acceptance of the Retirement Plans’ Annual Comprehensive Financial Reports for Fiscal Years Ending June 30, 2025 and June 30, 2024
COORDINATION
Production of the ACFRs was coordinated with the City Attorney’s Office, City Auditor, Finance Department, Actuary and External Auditors.
PUBLIC OUTREACH
This memorandum will be posted on the City’s Council Agenda website for the February 10, 2026 City Council meeting.
Outreach was undertaken for this item in addition to the agenda posting described above. These outreach efforts are described below.
These ACFRs were presented to the Federated System and Police and Fire Boards at their November 2025 meetings, which were open to the public. In addition, an announcement regarding the availability of the ACFRs on the ORS website was disseminated through social media.
COMMISSION RECOMMENDATION AND INPUT
No commission recommendation or input is associated with this action.
CEQA
Not a Project, File No. PP17-009, Staff Reports, Assessments, Annual Reports, and Informational Memos that involve no approvals of any City action. (Retirement Services)
PUBLIC SUBSIDY REPORTING
This item does not include a public subsidy as defined in section 53083 or 53083.1 of the California Government Code or the City’s Open Government Resolution.
HONORABLE MAYOR AND CITY COUNCIL
January 29, 2026
Subject: Acceptance of the Retirement Plans’ Annual Comprehensive Financial Reports for Fiscal Years Ending June 30, 2025 and June 30, 2024
John Flynn
CEO, Office of Retirement Services
For questions, please contact Benjie Chua Foy, Accounting Division Manager, Office of Retirement Services, at email [email protected] or (408) 794-1030.