Finance Committee
November 28, 2023

OPEB and
Pension
Funding Policy
Finance Committee
November 28, 2023
Objectives
• Review a formal funding policy for OPEB and pension
liabilities
• Key Elements:
• PULL Program
• OPEB Trust
• Pension Trust
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
Comparison of OPEB and
Pension Liabilities and Trusts
OPEB Pension
Net Liability $4.7 M $240.9 M
Percent Funded 82% 65%
Amount in Trust $19.4 M $17.9 M
Actuarial Terms in Policy
• 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 by 2035
• 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: continued greater focus on funding pension liability since PULL contributions are no longer needed for OPEB
Comments & Questions