TO: HONORABLE MAYOR
AND CITY COUNCIL
FROM: John Flynn
SUBJECT: See Below DATE: April 21, 2026
COUNCIL DISTRICT: # Citywide
SUBJECT: Re view of the Retirement Plans’ Pension and Postemployment Healthcare Plan Actuarial Valuations as of June 30, 2025
RECOMMENDATION
It is recommended that the Council review the following actuarial valuation reports (links to the reports are included):
1. Federated City Employees’ Retirement System Actuarial Valuation (Pension) as of June 30, 2025 Federated 2025 Pension AVR; and
2. Federated City Employees’ Retirement System Postemployment Healthcare Plan Actuarial Valuation (OPEB) as of June 30, 2025 Federated 2025 OPEB AVR; and
3. Police and Fire Department Retirement Plan Actuarial Valuation (Pension) as of June 30, 2025 Police and Fire 2025 Pension AVR; and
4. Police and Fire Department Postemployment Healthcare Plan Actuarial Valuation (OPEB) as of June 30, 2025 Police and Fire 2025 OPEB AVR .
COUNCIL AGENDA: 4/2 1/2026
FILE: 26-431
ITEM: 3.3
HONORABLE MAYOR AND CITY COUNCIL
April 21, 2026
Subject: Review of the Retirement Plans’ Pension and Postemployment Healthcare Plan Actuarial Valuations as of June 30, 2025
SUMMARY AND OUTCOME
C
ouncil review of the Federated City Employees’ Retirement System Actuarial Valuations for the Pension Plan and Postemployment Healthcare Plan as of June 30, 2025 and the Police and Fire Department Retirement Plan Actuarial Valuations for the Pension Plan and Postemployment Healthcare Plan as of June 30, 2025 (collectively “Valuations”) will provide relevant financial information to the Council for the two retirement plans and ensure the Council is properly informed on the retirement plans’ funding status and retirement benefit costs for the City.
BACKGROUND
T
he Valuations provide detailed information regarding the actuarial value of the assets and pension and OPEB liability of the Retirement Plans as of June 30, 2025. The information is used to determine the employee and employer’s contribution rates in the next fiscal year and are generally divided into the following sections:
• A
Summary Section intended to recap the most important information of the report;
• Risk and Certification Sections to identify, explain and assess the risks to the plans, as well as certify the report;
• An Asset Section that details the calculation of the actuarial value of the plans’ assets;
• A Liability Section that discloses the present value of all future benefits, normal cost and changes in unfunded actuarial liabilities;
• A Contribution Section that details the effects of assumption changes on the contribution rates and amortization of unfunded liabilities; and • An Actuarial Section of the Annual Comprehensive Financial Report (“ACFR”) which contains schedules that are required reporting by the Governmental Accounting Standards Board for the ACFR.
ANALYSIS
T
he Valuations were prepared by the Boards’ Actuarial Consultant, Cheiron Inc. The report and its contents have been prepared in accordance with generally recognized and accepted actuarial principles and practices which are consistent with the Code of Professional Conduct and applicable Actuarial Standards of Practice set out by the Actuarial Standards Board. The credentialed actuaries who prepared the reports meet the Qualification Standards of the American Academy of Actuaries to render the opinion contained in the reports.
HONORABLE MAYOR AND CITY COUNCIL
April 21, 2026
Subject: Review of the Retirement Plans’ Pension and Postemployment Healthcare Plan Actuarial Valuations as of June 30, 2025
For the Pension Valuations as of June 30, 2025, the following are the key actuarial results, as compared to the results from the June 30, 2024 Valuations. Funding ratio on an actuarial valuation basis increased for both plans for pension. The increase in the funded status is mainly due to the increases in the actuarial value, which is due to the asset smoothing method recognizing 20% of the gains from the most recent fiscal year.
$ Amounts in millions Federated Police and Fire
PENSION Valuation Date 2025 2024 2025 2024
Actuarial Liability $5,330.0 $5,137.9 $6,336.5 $6,132.8 Actuarial Value $3,409.9 $3,116.8 $5,348.8 $5,013.6
Unfunded Actuarial Liability
(UAL)
$1,920.1 $2,021.1 $987.7 $1,119.2
Funded Ratio 64.0% 60.7% 84.4% 81.8%
The following is a summary of the contribution rates shown in the pension actuarial valuations. Both Boards will approve contribution rates at their May meetings. Amounts shown below are contribution amounts throughout the year.
PENSION Federated Police Fire
FY26-27 FY26-27 FY26-27
Member Contribution Rates
Tier 1 Member 6.49% 11.47% 11.88%
Tier 2 Member 8.56% 14.64% 14.55%
City Contributions
Tier 1 UAL Payment $181.5 million
$152.1 million $49 thousand
Tier 1 Admin Expenses $5.9 million
$4.4 million $3.7 million
Tier 1 Normal Cost $22.1 million
18.43%
$20.7 million
31.48%
$20.7 million
31.93%
Tier 2 Contribution $34.7 million
8.56%
$18.7 million
14.64%
$7.8 million
14.55%
Total City Contribution $244.2 million
46.44%
$195.9 million
101.35%
$32.3 million
27.24%
The funding ratio for all pension and OPEB plans increased from the Valuations as of June 30, 2024 to the Valuations as of June 30, 2025, except for the Federated OPEB plan. While the actuarial liability for all plans increased, the asset sizes increased at a greater rate, thus resulting in a decrease in UAL and an increase in the funded ratios.
The only exception was the Federated OPEB plan where the assets did not increase at the same rate as the actuarial liability, thus resulting in a reduced funded ratio.
HONORABLE MAYOR AND CITY COUNCIL
April 21, 2026
Subject: Review of the Retirement Plans’ Pension and Postemployment Healthcare Plan Actuarial Valuations as of June 30, 2025
$ Amounts in
thousands
Federated Police Fire
OPEB Valuation
Date – Explicit
Subsidy Only
2025 2024 2025 2024 2025 2024
Actuarial Liability $722.2 $643.6 $524.8 $501.9 $308.2 $297.8 Assets $461.6 $413.5 $250.6 $218.9 $146.5 $125.3
UAL $260.6 $230.1 $274.2 $283.0 $161.7 $172.5
Funded Ratio 63.9% 64.3% 47.8% 43.6% 47.5% 42.1%
With the implementation of Measure F in 2017, health contribution rates were fixed at
7.5% of pensionable pay for Federated members and 8.0% of pensionable pay for Police and Fire members. The City’s contribution toward the explicit subsidy is actuarially determined on an annual basis; and the City will also pay the implicit subsidy based on a pay-as-you-go basis as a part of active health premiums. In addition, the City has an option to limit its contribution to 14% of pensionable payroll for Federated and 11% of pensionable payroll for Police and Fire.
OPEB Federated Police Fire
FY26-27 FY26-27 FY26-27
Member Contribution Rates
Federated Member 7.50% N/A N/A
Police and Fire Member N/A 8.0% 8.0%
Explicit Subsidy Members $8.0 million $4.5 million $4.5 million City Contribution Rates
Estimated City Optional Cap
(Explicit Subsidy – 14% for Fed
and 11% for PF of pensionable
payroll)
$68.7 million $34.3 million
Actuarially Determined Amount
(Explicit Subsidy)
$24.5 million $21.2 million $13.0 million
City’s Implicit Subsidy Payment $7.0 million $4.4 million $2.1 million City’s Total Payment for
Healthcare (Explicit + Implicit
Subsidy)
$31.5 million $25.6 million $15.1 million
HONORABLE MAYOR AND CITY COUNCIL
April 21, 2026
Subject: Review of the Retirement Plans’ Pension and Postemployment Healthcare Plan Actuarial Valuations as of June 30, 2025
EVALUATION AND FOLLOW-UP
The Office of Retirement Services staff will present the Retirement Plans’ Valuations on an annual basis to the 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.
COORDINATION
Production of the Valuations was coordinated with the Board of Administration for the Federated City Employees Retirement System, the Board of Administration for the Police and Fire Department Retirement Plan, the City Manager’s Office, and the Office of Employee Relations.
PUBLIC OUTREACH
This memorandum will be posted on the City Council Agenda website for the April 21, 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 Valuations and audits of the Valuations were presented to the Federated System and Police and Fire Boards at their meetings from October through February, which were open to the public.
BOARD, COMMISSION, COMMITTEE RECOMMENDATION AND INPUT
No board, commission, or committee 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.
HONORABLE MAYOR AND CITY COUNCIL
April 21, 2026
Subject: Review of the Retirement Plans’ Pension and Postemployment Healthcare Plan Actuarial Valuations as of June 30, 2025
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.
John Flynn,
CEO, Office of Retirement Services
For questions, please contact Benjie Chua Foy, Accounting Division Manager, Office of Retirement Services, at [email protected] or 408- 794-1030.