Funded Status Increases to 86.6%


Los Angeles Fire & Police Pensions’ funded status increases to 86.6% As a result of the strong fiscal year investment return of 17.86% and other favorable plan experience, the funded status of Los Angeles Fire and Police Pensions (LAFPP) increased to 86.6% for pension benefits.  Additionally, the City’s combined contribution rate for pension and retiree health subsidies will decrease to 46.51% for Fiscal Year 2015-16, as compared to 47.94% for the current fiscal year.   The funded status and contribution rate are based on the results of the fund’s annual actuarial valuation performed by The Segal Company, which was presented to the Board of Fire & Police Pension Commissioners at its regular meeting on November 20, 2014. The overall funded status for both pension and health subsidy benefits will increase from 77.3% to 80.8% on an actuarial basis.  On a market basis, the Plan’s combined funded level will increase from 77.7% to 87.5%.   The improvement in the funded status was due in part to lower than expected cost-of-living increases for retirees, beneficiaries, and DROP members, as well as a greater than expected return on investments.  The valuation reflects the economic and demographic assumption changes adopted by the Board in July 2014, which included the lowering of the assumed investment rate of return to 7.5% for future liabilities.  Due to smoothing of investment gains and losses, the total unrecognized investment gain as of June 30, 2014 is $1.412 billion.  Unless offset by future investment losses or unfavorable plan experience, the $1.412 billion deferred gain will be recognized over the next several years and have a positive impact on the future funded ratio and employer contributions.