HomeMy WebLinkAbout2023-09-12; City Council; Resolution 2023-239RESOLUTION NO. 2023-239
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD,
CALIFORNIA, APPROVING THE AMENDMENT OF CITY COUNCIL POLICY NO.
86 FOR PENSION FUNDING
WHEREAS, the City Council of the City of Carlsbad, California has determined that financial
policies are central to a strategic, long-term approach to financial management; and
WHEREAS, the city's Pension Funding Policy, City Council Policy No. 86, was adopted by the City
Council on June 18, 2019; and
WHEREAS, the city wishes to amend the policy for purposes of including assets, contributed to
the city's Section 115 Pension Trust, in the city's overall pension funded ratio or status calculation.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as
follows:
1.That the above recitations are true and correct.
2.That the City Council of the City of Carlsbad, California accepts the Pension Funding
Policy dated September 12, 2023 (Attachment A).
PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of
Carlsbad on the 12th day of September, 2023, by the following vote, to wit:
AYES:
NAYS:
ABSTAIN:
ABSENT:
Blackburn, Bhat-Patel, Acosta, Burkholder, Luna.
None.
None.
None.
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KEITH BLACKBURN, Mayor
SHERRY FREISINGER, City Clerk
(SEAL)
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City Council
POLICY STATEMENT
Subject: Pension Funding Policy
Purpose
Policy No. 86
Date Issued Sept. 12,2023
Resolution No. 2023-239
The purpose of this policy is to provide reasonable assurance that the costs of the city's defined benefit
pension plans will be funded in an equitable and sustainable manner. It codifies the city's commitment
to fund these benefits based on regular actuarial valuations, and to measure and report them i11
accordance with generally accepted accounting principles (GAAP). Adhering to a funding policy that
embodies these funding and accounting principles is a prudent governance practice, and helps achieve
intergenerational equity among those who financially support the plan. It also ensures that resources
are available to fulfill the city's contractual promises to its employees, and minimizes the chance that
funding of these benefits will interfere with the city's ability to provide essential services to the public.
Background
The city provides defined benefit retirement benefits through the California Public Employees'
Retirement System (Cal PERS). Cal PERS is a multiple-employer public employee defined benefit pension
plan.
All full-time and certain part-time employees hired and all city safety employees, are eligible to
participate in Cal PERS. CalPERS provides retirement and disability benefits, annual cost of living
adjustments, and death benefits to plan members and their beneficiaries. Benefits are based on years
of credited service, equal to one year of full time employment. CalPERS acts as a common investment
and administrative agent for participating public entities within the State of California. Benefit
provisions and all other requirements are established by State of California statute and city resolution.
Pension Funding: A Guide for Elected Officials, issued by eleven national groups including the U.S.
Conference of Mayors, the International City/County Management Association, and the Government
Finance Officers Association, established the following five general policy objectives for a pension
funding policy:
1.Actuarially Determined Contributions -a pension funding plan should be based
upon an actuarially determined contribution (ADC) that incorporates both the cost
of benefits in the current year and the amortization of the plan's unfunded actuarial
accrued liability.
2.Funding Discipline -a commitment to make timely, actuarially determined
contributions to the retirement system is needed to ensure that sufficient assets are
available for all current and future retirees.
3.Intergenerational equity -annual contributions should be reasonably related to the
expected and actual cost of each year of service, so the cost of employee benefits
is paid by the generation of taxpayers who receives services from those employees.
Attachment A
Pension Funding Policy
Sept. 12, 2023
Page 2
4.Contributions as a stable percentage of payroll -contributions should be
managed so that employer costs remain consistent as a percentage of payroll over
time.
5.Accountability and transparency -clear reporting of pension funding should
include an assessment of whether, how, and when the plan sponsor will ensure
sufficient assets are available for all current and future retirees.
The financial objective of a defined benefit pension plan is to fund the long-term cost of benefits
provided to the plan participants. To assure that the plan is financially sustainable, the plan should
accumulate adequate resources in a systematic and disciplined manner over the active service life of
benefitting employees. This funding policy outlines the method the city will utilize to determine its
actuarially determined contributions to fund the long-term cost of benefits to the plan participants and
annuitants.
Statement of policy
The city will ensure the costs of the city's defined benefit pension plans will be funded in an
equitable and sustainable manner. The city commits. to fund these benefits based on regular
actuarial valuations and commits to maintaining no less than an 80% funded ratio, with a target
funded ratio of 80% to 85%. The city will ensure that resources are available to both fulfill the
city's contractual promises to its employees and minimize the chance that funding these
benefits will interfere with the city's ability to provide essential services to the public.
Procedure
To achieve the purpose of this policy, the city will take the following actions:
1.The city will use the actuarially determined contribution (ADC) provided by CalPERS annually to
serve as the basis for its pension contributions. The ADC will include the normal cost for current
service (variable cost) and the amortization of any unfunded amount (fixed cost). The normal
cost will be calculated using the entry age normal cost method using economic and non
economic assumptions approved by the CalPERS Board of Administration.
2.The city will review the CalPERS annual actuarial valuations to validate the completeness and
accuracy of the member census data and the reasonableness of the actuarial assumptions.
3.The city supports a policy of funding the full amount of the actuarially determined contribution
each year and making the full contribution as determined by CalPERS. In the event the city is
unable to fund the full amount of the actuarially determined contribution in each year with
current resources (i.e., without borrowing or using reserves), the administrative services Finance
Director or Deputy City Manager of Administrative Services will identify a reasonable period to
return to full funding.
4.The city will commit to a combined (both the city's miscellaneous and safety plans) pension
funded ratio of no less than a minimum of 80%, with a target funded ratio range of 80% to 85%.
For the purposes of this policy, the term "funded ratio" refers to the level of the pension plans
Pension Funding Policy
Sept. 12, 2023
Page 3
assets, at market value, in proportion to the pension plans accrued liability. This is an annual
point-in-time measure, as of the valuation date. Assets contributed to the city's Section 115
Pension Trust shall be counted towards the calculation of this point-in-time measure.
5.Contributions to and withdrawals from the city's Section 115 Pension Trust shall require
authorization by the City Council.
6.In the event the city is unable to meet the minimum combined pension funded ratio of 80% with
current resources (i.e., without borrowing or using reserves), the Finance Director or Deputy
City Manager of Administrative Services will identify a reasonable period to return to a
minimum 80% funded ratio status.
7.The city will demonstrate accountability and transparency by communicating all information
necessary for assessing the city's progress toward meeting its pension funding objectives. This
will be achieved, in part, by ensuring full and accurate implementation of Governmental
Accounting Standards Board No. 68, effective fiscal year 2014-15.
8.As part of the annual budget adoption process, the City Manager or Deputy City Manager of
Administrative Services will report to the City Council on the following:
a.most recent actuarially determined pension contribution
b.most recent actuarially funded ratio and its compliance with either #4 or #5 above
c.any other significant issues associated with funding the defined benefit pension in a
stable and equitable manner as described above.
9.Staff will monitor changes to and expansions of pension funding best practices, as well as any
additional guidance provided by the Government Finance Officers Association that relate to the
funding of defined benefit pensions. Staff will return to City Council with modifications to this
policy as needed.