2020 Valuation Reports Approved
Good news! Based on the actuarial report for the period ending June 30, 2020, the combined funded ratio for pension and health benefits is 88.6%, up slightly from 88.5% the previous year. This marks the third consecutive year that the combined funded ratio has increased for the System. Even though the pension benefit funded ratio is now 93.2%, down from 93.6%, the health benefit funded ratio increased from 56.2% to 59.7%. The favorable results indicate that the Plan remains strong despite a volatile year marked by the COVID-19 pandemic.
Every year a valuation of the LAFPP fund is performed by the Board’s actuary. The valuation reviews the System’s assets and liabilities and establishes the City’s (including the Harbor and Airport Departments) contribution to the fund for each fiscal year. The City’s combined contribution rate for July 15, 2021 will decrease by 0.91% of sworn payroll, from 46.60% to 45.69%. The contribution rate decrease is due to loss layers from the June 30, 1990 and June 30, 2005 valuations being fully amortized, amortizing the prior year’s unfunded actuarial accrued liability over a larger than expected projected total payroll, a higher than expected return on the valuation value of assets (after smoothing), and health premiums and subsidies being lower than projected in the prior valuation. The overall unfunded liabilities have increased from $3.0 billion to $3.1 billion.
The results of the valuation reflect the changes in actuarial assumptions adopted by the Board on May 21, 2020. The assumption changes include, but are not limited to, a 7% annual investment rate of return, inflation of 2.75%, and adjustments to expected active member salary increases, retirement, termination, and disability incidence rates.
The approved 2020 actuarial reports can be found on the Financial Reports page of our website.