What would be the budget savings if the pension contribution was based on the recommended actuarial rate rather than the Board policy that provides for a constant annual contribution rate of 5.73 percent of salaries? What would be the impact on achieving the 80 percent level for the Retirement and Pension system?
Based on the latest actuarial valuation, the recommended actuarial rate for the pension contribution for FY 2016 is 5.01 percent. On January 14, 2014, the Board authorized that the contribution rate to the pension fund would not be reduced below FY 2015 levels (5.73 percent) until the funding status of the plan reached 80 percent on an actuarial value method. The chart below shows the amount of savings if the contribution rate was based on the actuarial rate.
|FY 2016 Local Salaries
At the close of FY 2014, the funding level for the Retirement and Pension System reached 73.26 percent. By maintaining a pension contribution rate of 5.73 percent, it is expected that an 80 percent funding level will be achieved by FY 2017.
However, if the rate applied to salaries was based on the actuarial valuation of 5.01 percent for FY 2016 only, then the Retirement and Pension System may not reach 80 percent funding until FY 2018 or beyond.