San Diego City Employees’ Retirement System (SDCERS) announced that strong investment returns lowered the City of San Diego’s annual payment to the pension system by $8 million.
The SDCERS Board of Administration reviewed preliminary annual actuarial valuations as of June 30, 2014 for the City of San Diego, the San Diego Unified Port District and the San Diego County Regional Airport Authority at its January 9 meeting. All three plan sponsors showed improvements in their pension plan funding ratios.
The City’s fiscal year 2016 Actuarially Determined Contribution (ADC), formerly known as the Annual Required Contribution or ARC, will be approximately $255 million. Last year’s strong net investment returns of 16.8 percent served to lower the ADC from the $263.6 million paid in FY 2015. The City’s Unfunded Actuarial Liability (UAL) is $2.0 billion, a decrease from $2.2 billion in the previous valuation. The City’s actuarial value funding ratio, the ratio of the system’s actuarial value of assets to its actuarial liabilities, was 74.2 percent as of June 30, 2014, up from 70.4 percent the prior year.
The Port’s FY 2016 ADC will be approximately $14.3 million, unchanged from FY 2015. As of June 30, 2014, the Port’s UAL was $99.9 million, down $7.8 million from the prior year primarily due to strong financial returns. The Port’s actuarial value funding ratio was 76.9 percent, up from 73.7 percent the prior year.
The Airport’s FY 2016 ADC will be approximately $3.6 million, compared to $3.8 million in FY 2015. The Airport’s UAL is $5.3 million as of June 30, 2014, down $2.3 million from the prior due to strong investment returns and an additional Airport contribution above the ADC of $828,000. The Airport’s actuarial value funding ratio was 95.9 percent, up from 93.4 percent the prior year.
The SDCERS Board also voted to add an explicit actuarial assumption regarding the recognition of administrative expenses, and to phase in the impact of this change over three years. In another positive development, all three plan sponsors showed strong results in their market value funding ratio, a measurement which uses current investment values rather than actuarially smoothed investment values. With this approach, the Airport’s pension plan is actually over-funded, with a ratio of 102.4 percent as of June 30, 2014. The City passed the 80 percent mark for the first time since the 2008 financial crisis with a market value funding ratio of 80.1 percent as of June 30, 2014, and the Port’s market value funding ratio improved to 83.6 percent as of June 30, 2014.
FY 2016 ADC payments for each plan sponsor are due to be paid on or after July 1, 2015. All three plan sponsors traditionally pay the amount due each year on July 1 to fulfill their pension commitments.
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, 2014, SDCERS had approximately $6.8 billion in net investments.
Click here to view the January 9 Board presentation regarding the June 30, 2014 valuations.