At its January 8 meeting, the San Diego City Employees’ Retirement System (SDCERS) Board of Administration reviewed preliminary annual actuarial valuations as of June 30, 2015 for the City of San Diego, the San Diego Unified Port District and the San Diego County Regional Airport Authority.
The City’s fiscal year 2017 Actuarially Determined Contribution (ADC), formerly known as the Annual Required Contribution or ARC, will be approximately $261 million, up $6.2 million from the previous year. The City’s Unfunded Actuarial Liability (UAL) remains the same as the previous valuation at $2.0 billion. The City’s actuarial value funding ratio, the ratio of the system’s actuarial value of assets to its actuarial liabilities, was 75.6% as of June 30, 2015, up from 74.2% the prior year.
The Port’s FY 2017 ADC will be approximately $14.6 million, up from $14.4 million in FY 2016. As of June 30, 2015, the Port’s UAL was $96.2 million, down $3.8 million from the prior year. The Port’s actuarial value funding ratio was 78.8%, up from 76.9% the prior year.
The Airport’s FY 2017 ADC will be approximately $3.8 million, compared to $3.7 million in FY 2016. The Airport’s UAL is $3.9 million as of June 30, 2015, down $1.3 million from the prior year. The Airport’s actuarial value funding ratio was 97.2%, up from 95.9% the prior year.
At its November 13, 2015 meeting, the SDCERS Board voted to reduce the discount rate and wage inflation assumptions by 0.25% over a two-year period. The discount rate was reduced from 7.25% to 7.125% for the June 30, 2015 valuation, and to 7.0% for the June 30, 2016 valuation. The wage inflation rate was reduced from 3.3% to 3.175% for the 2015 valuation and 3.05% for the 2016 valuation. These rates changes, together with lower than expected investment returns, account for the majority of the ADC increase for fiscal year 2017. SDCERS recorded net investment returns of 3.3% for the fiscal year ending June 30, 2015 compared to an actuarially expected return of 7.25%.
FY 2017 ADC payments for each plan sponsor are due to be paid on or after July 1, 2016. All three plan sponsors are committed to paying the full amount each year, due on July 1, to fulfill their pension commitments. This disciplined approach has continued to strengthen all three plans over the past decade.
SDCERS administers defined benefit plans for the City of San Diego, the San Diego Unified Port District, and the San Diego County Regional Airport Authority and provides service retirement, disability retirement, death and survivor benefits to more than 20,800 members. As of December 31, 2015, SDCERS had approximately $6.8 billion in net investments.