Seattle’s “Actuarial Valuation” of City Pension Plan Sinks to 62% Funded; I say it’s Far Wors
by ilene - July 12th, 2010 3:34 am
Seattle’s "Actuarial Valuation" of City Pension Plan Sinks to 62% Funded; I say it’s Far Worse
Courtesy of Mish
A new Seattle report says the city will have to increase pension contributions to keep its plan solvent. Please consider Seattle’s retirement investments plunge deeply.
The City of Seattle will have to substantially increase the amount of money it pays into its employees’ retirement system to cover future obligations because its related investments took big hits during the economic meltdown, according to a report presented to the City Council Friday.
This situation will put further pressure on a city budget that is already fracturing.
As of Jan. 1, 2008, the city’s retirement "actuarial valuation" funding ratio was 92.4 percent, the report said. That’s the ratio of the assets the city had compared to what it owes for benefits earned by employees. As of Jan. 1 of this year, the funding ratio had dropped to 62 percent – mainly because the city’s stock market holdings tied to retirement accounts dropped 20 percent and other factors.
The study prepared for Seattle by Milliman says the city will have to increase its retirement contribution rates make sure its retirement plans are fully funded. Workers and the city contribute to the plan, but rate hikes for employees are limited to 2 percent, said the report.
City Councilman Mike O’Brien said it’s unrealistic to wait and hope that a Wall Street surge solves the city’s retirement funding problem.
O’Brien said City Councilmembers, who will consider the matter in earnest during fall budget talks, will have to determine whether 1 percent bumps are enough to right the retirement ship.
City of Seattle Pension Results
Inquiring minds are digging into the City of Seattle Pension Plan Funding Report.
An increase in contribution rates is needed to maintain actuarial balance.
- Employees and employer share rate increases, but rate increase for employees is limited to 2.00% (10.03% total).
- As of January 1, 2011, employer rate increase needed is 6.97% of payroll.
- Total employer portion would increase from 8.03% to 15.00% of payroll.
Worse Than It Looks
Note the huge increase in payroll funding. Also note that the study was done on January 1, 2010. The stock market is now down on the year. Thus, it is highly likely that 62% is actuarially overstated .
Is the city going to raise