Finance Committee
November 1, 2022

OPEB and
Pension
Funding Policy
Finance Committee
November 1, 2022
Objectives
• Consider a formal funding policy for OPEB and pension liabilities
• Review:
• PULL Program
• OPEB Trust
• Pension Trust
• ACFD Set aside
Liabilities
• OPEB
• Health benefits
• Trust established in 2009
• Unfunded liability: $4.5 M
• Pension
• Retirement pension through CalPERS
• Trust established in 2021
• Unfunded Liability: $141.2 M
Prioritizing Unfunded Liabilities
Liquidation (PULL)
• Enacted in 2015
• 5-Year goal of allocating additional $5 M toward unfunded liabilities
• 50% of General Fund carryover funds
• 50% of General Fund land sales
PULL Success for OPEB Trust
• 2014-2020: annual allocations of $750 K
• Additional one-time allocations
• OPEB Trust currently totals $19.1 M
• OPEB liability is 81% funded
Pension Trust
• Established in September 2021
• Total liability is $141.2 M
• Only 4% of liability is funded
ACFD Unfunded OPEB Liability
• In 2015, $8.2 M was set aside
• Historically, actual costs were not paid by City
• Contractual language does not place this liability on the City • City sought ACFD services to seek economies of scale with a regional model to reduce City costs
• City and ACFD have agreed that City will pay the fully burdened cost each fiscal year
Review of Liability Terms
• Normal Cost: the costs of benefits for current employees • Actuarial Determined Contribution (ADC): a payment to cover Normal Cost plus an unfunded liability amount
• Pay-As-You-Go (Pay-Go): the cost of benefits for current retirees
OPEB and
Pension Funding
Policy
• OPEB Trust: investment returns to fully fund over 12-year schedule • Investment earnings will likely cover Actuarial Determined Contribution (ADC)
• City will pay annual Pay-Go costs
• Once liability is fully funded:
• City pays only Normal Cost (if investment earnings are not sufficient to pay it)
• Pay-Go costs would be paid from trust
• Pension Trust: greater focus on funding pension liability since PULL contributions are no longer needed for OPEB
• ACFD set aside: move funds to pension trust since agreement is in place for city to pay fully burdened cost annually
Questions