Based on the actuarial report for the period ending June 30, 2016, the pension benefit funded ratio has increased from 91.5% to 93.9%. The combined funded ratio for pension and health benefits is 87.4%, up from 85% the previous year. This marks the third consecutive year that the combined funded ratio has increased for the System.
Every year a valuation of the LAFPP fund is performed by an actuary. The valuation reports the System’s assets and liabilities and establishes the City’s contribution to the fund for each fiscal year. The positive outcome for the year ending June 30, 2016 was the result of approximately $337 million in net actuarial gains for the year. The City’s combined contribution rate for July 15, 2017 will decrease by 0.28% of sworn payroll, from 44.54% to 44.26%. This contribution rate decrease is due to lower than expected COLA increases for retirees, beneficiaries and DROP members, lower than expected salary increases for active members, and a slightly higher than expected rate of return on the valuation value of assets (after smoothing). The overall unfunded liabilities have decreased from $3.2 billion to $2.8 billion.
On a market value basis, the combined funded ratio is 84.7%, with retirement benefits funded at 91% and health subsidy benefits at 46.6%.