Other Post-Employment Benefits (OPEB)
Funding Goal Discussion
Finance Committee Meeting | April 5, 2022
Proactive Strategies to Fund Unfunded
Liabilities
2 Adoption of the
PULL Plan in
September 2015
01 Large contributions
into the OPEB Trust
02 Trust Generated
significant
investment
earnings
03 Retiree health care
plan achieved a
healthy funding
ratio
04 PULL Plan = Prioritizing Unfunded Liability Liquidation Plan New Opportunity Resulted from Healthy Funding Level
3 Finance Committee recommended the establishment
of a Pension Trust
Annual OPEB budget allocation be redirected to the
Pension Trust
City Council approved the recommendation in June
2021
Pension Trust established in current fiscal year
Contributions
to Pension
Trust
• The goal is to pay down unfunded pension liability and achieve savings
• The City’s net pension liability totaled $204M at the end of June 30, 2021
• $6.5M in initial contributions to Pension Trust
• Additional contributions approved by the Council in
March 2022:
o $0.6M to the Penson Trust
o $3.0M to CalPERS
• Policy decision in the fall about pension funding strategy 4 Description Amount
FY21 Budget Allocation $0.75M
FY22 Budget Allocation $0.75M
One-Time Contribution $5.0M
Total $6.5M
Continuous
Evaluation
of Funding
Strategies
5 Committee
requested an
analysis of the
OPEB Plan
Bartel and
Associates
conducted an
actuarial
valuation study
Consultant
presented the
funding
scenarios
Committee
directed staff
to develop a
funding goal
Review of
Actuarial
Obligations
(000’s Omitted)
• Funded position typically measured by relationship
of Assets to Actuarial Accrued Liability (AAL) since
AAL is a target asset value
• Present Value of Benefits (PVB) is the amount that
would pay for all benefits (for current
employees/retirees) if all assumptions are met
• Difference between PVB and AAL will be
recognized in future costs via the Normal Cost
(cost of benefits accruing during the year for active
employees)
6 Review of
Funding
Goal
Scenarios
• City Pay-Go: the City pays benefit payments
outside of the OPEB Trust, with no further
contributions to the trust.
• Full Actuarial Determined Contribution (ADC): the
City pays the full ADC annually, with a 10-, 12-, or
15-year amortization of the unfunded liability.
• 90% Funded Target: contributions determined so
that 90% funded status is expected in 20 years.
7 Staff
Recommendation
- OPEB Plan
(000’s Omitted)
• Full Actuarial Determined Contribution/100%
Funding Goal, with a 12-year amortization of the unfunded liability • Investment income is expected to be sufficient to
cover the annual ADC
• Continue to fund the pay-go amount outside of the
trust
8 Year
Pay
Go
ADC (10 yr
amort)
ADC (12 yr
amort)
ADC (15 yr
amort)
22/23 $1,186 $1,171 $1,154 $1,137
23/24 1,181 1,204 1,186 1,169
24/25 1,161 1,238 1,220 1,202
25/26 1,207 1,273 1,255 1,236
26/27 1,237 1,309 1,290 1,271
27/28 1,300 1,347 1,327 1,307
28/29 1,375 1,385 1,364 1,344
29/30 1,443 1,424 1,403 1,382
30/31 1,486 1,464 1,443 1,421
31/32 1,535 1,506 1,483 1,461
32/33 1,582 1,401 1,525 1,502
33/34 1,648 1,440 1,568 1,544
34/35 1,669 1,480 1,480 1,588
35/36 1,740 1,522 1,522 1,632
36/37 1,723 1,564 1,564 1,678
37/38 1,793 1,608 1,608 1,608
38/39 1,888 1,654 1,654 1,654
39/40 1,902 1,700 1,700 1,700
40/41 1,989 1,748 1,748 1,748
41/42 2,095 1,796 1,796 1,796
Staff
Recommendation
– Pension Plan
• Continue to evaluate funding strategies to fund
pension obligation
• Continue to follow the goals and objectives of the
PULL Plan*
o Direct up to 50% of all annual General Fund carryover toward the PULL Plan
o Direct up to 50% of all General Fund land sales toward PULL Plan where applicable
*The PULL Plan supports funding unfunded liabilities through proactive funding strategies such as a pension trust and OPEB trust 9 Next Steps
10 OPEB FUNDING POLICY
DEVELOPMENT
COMMITTEE REVIEW COUNCIL
CONSIDERATION
PENSION STUDY AND
POLICY DECISION
Thank You!
11