Yorba
Linda – along with the many other governmental agencies in
California– is grappling with unfunded liabilities related to
pensions and other post-employment employee benefits.
And
– as is the case with some of the other public bodies – this city
is working on solutions to the problem, with an array of answers
scheduled to be presented for discussion and potential action at a
City Council meeting in June during a mid-point review of a two-year
budget.
Yorba
Linda has an unfunded pension liability of $14.9 million, according
to the most recent actuarial study from the state Public Employees
Retirement System, Finance Director Scott Catlett stated in a report
to council members earlier this month.
The
CalPERS study pegs the city's pension plan as 75.1 percent funded,
representing a drop in the unfunded liability by $952,000 and a boost
in the funded percentage from 71.2 per cent from just a year ago,
Catlett reported.
“CalPERS
has completed a multi-year process of mitigating various risks
inherent in the actuarial factors that influence rates,” Catlett
noted. The changes increased what would have been a $12.5 million
unfunded liability and dropped a 78.3 percent funded ratio to the
current figures.
The
changes “account for anticipated increases in employee and retiree
mortality in the years ahead, lower anticipated investment earnings
and amortizing losses in a more direct and accelerated fashion,”
Catlett stated.
He
added: “All of these changes will increase the health of the city's
pension plan in the long-term and over time decrease the likelihood
of a repeat of the challenges experienced by CalPERS during the last
decade.”
Another
result of the changes will be to increase the current rate of 20.1
percent of the city's payroll paid to CalPERS to a projected 26.6
percent by 2020-21. The higher rate will lead to the city's plan
reaching 100 percent funding in about 30 years, Catlett noted.
Catlett
also indicated the city is studying methods of targeting the unfunded
liability “at an accelerated rate” by shortening amortization to
20 or 15 years, “which would increase the city's costs during
the repayment period but could save as much as $7.9 million in
total.”
Other
options would be for the city to make larger, elective payments in
city-selected years or start paying the higher rates now rather than
phasing them in during the next five-year period.
An
unfunded liability for post-employment benefits stands at $15.3
million, and “is the result of the city's current practice of
funding medical contributions for retirees on a pay-as-you go basis,”
Catlett stated.
Financing
alternatives scheduled to be presented to the council in June include
establishing city-funded trust or reserve accounts, modifying
benefits for future employees to reduce city contributions and/or
adding a vesting period for employees to be eligible for city
contributions to retiree medical insurance.