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Is My Pension Safe? - Updated 12-03-08
We understand the concern amongst our members caused by the recent turmoil in the financial markets, which is at historic levels. We want to emphasize that your pensions are a defined benefit and are protected by law.
We want to assure you that, despite the recent volatility within the global stock markets, the LAFPP defined benefit pension plan provides a life-long benefit based on the member's final pay or pay average (depending on tier) and years of service. Monthly pension benefits are calculated using this formula, not member contributions. According to the Charter, it is a general obligation of the City to provide funds to meet the needs of the Fire and Police Pension Plan. As such, your retirement benefits are among the most secure in the country.
The fund portfolio utilizes an investment strategy that seeks to provide long-term, risk-adjusted returns. The Fire and Police Pension system has been in existence since 1899 and has been able to withstand past crises in the financial market, such as the Great Depression, the 2000-2003 decline of the dot.com industry and the 9/11/2001 terrorist attacks. The following table provides information on our fund over the last twenty years.
Year-End |
Market Value |
Rates of Return |
Funded Status |
06/30/1989 |
$3.3 billion |
16.00% |
45.2% |
06/30/1990 |
$3.4 billion |
10.50% |
48.2% |
06/30/1991 |
$4.0 billion |
4.80% |
51.6% |
06/30/1992 |
$4.6 billion |
14.00% |
54.7% |
06/30/1993 |
$5.4 billion |
16.00% |
59.5% |
06/30/1994 |
$5.6 billion |
3.50% |
61.5% |
06/30/1995 |
$6.3 billion |
14.50% |
66.6% |
06/30/1996 |
$7.3 billion |
14.60% |
74.6% |
06/30/1997 |
$8.66 billion |
18.52% |
81.3% |
06/30/1998 |
$10.08 billion |
17.48% |
94.2% |
06/30/1999 |
$11.50 billion |
16.04% |
104.7% |
06/30/2000 |
$13.02 billion |
16.30% |
114.4% |
06/30/2001 |
$11.38 billion |
-10.00% |
118.9% |
06/30/2002 |
$10.07 billion |
-7.97% |
108.3% |
06/30/2003 |
$10.20 billion |
5.47% |
104.3% |
06/30/2004 |
$11.60 billion |
16.92% |
103.0% |
06/30/2005 |
$12.30 billion |
10.07% |
94.1% |
06/30/2006 |
$13.50 billion |
12.48% |
94.6% |
06/30/2007 |
$15.55 billion |
18.50% |
99.2% |
06/30/2008 |
$14.41 billion |
-4.58% |
99.1% |
Actuarial studies are conducted every year to determine whether plan assets and contributions are sufficient to provide member benefits. According to the latest study, the Plan is 99.1% funded for pension benefits on an actuarial basis for the period ending June 30, 2008.
As of December 2, 2008, our assets totaled $10.6 billion after all the recent market declines. However, since we are long-term, institutional investors with a professionally managed asset allocation plan, we are not making rash decisions in reaction to the events in the financial markets. Rather, we are methodically reviewing the asset allocation plan on an on-going basis and making adjustments that are prudent given our long-term strategies.
If you should have any questions or concerns on this matter, please contact the Communications and Special Projects Section at (213) 978-4530 or (800) 787-CITY, ext. 84530.
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