Title
Discussion on Annual Review for City OPEB and Pension Funding Policy
Staffreport
SUMMARY AND RECOMMENDATION
Staff recommends the Finance Committee review and recommend the City Council approve the OPEB and Pension Funding Policy. The policy statement is approved annually.
BACKGROUND
The City’s OPEB and Pension Funding Policy requires the City Council annually to review and approve the City’s trusts’ funding policy. The policy was initially approved on November 21, 2022.
A leading City Council priority is placing San Leandro on a firm foundation for long term fiscal sustainability. One component for achieving this goal is reducing the City’s unfunded liabilities related to employee benefits (i.e., retiree health care and retirement pensions). An unfunded liability is the monetary difference between the estimated future costs of future benefits and the assets set aside to pay those benefits. The City currently has unfunded OPEB and pension liabilities for past (primarily retired) and current city employees.
DISCUSSION
City unfunded liabilities fall into two categories-Other Post-Employment Benefits (OPEB) and pensions. OPEB refers to health benefits for employees who have retired from the City. The City provides its employees with a retiree health care plan that is relatively modest in scope with strict not-to-exceed monthly contribution caps, which has fortunately limited its associated long-term financial liability. Pension refers to the City employees’ pension plan that is administered by the California Public Employees Retirement System (CalPERS).
Sound funding practices are facilitated by the written governing policy. The City’s OPEB and Pension Funding policy includes guidelines calling for annual contributions, actuarial evaluations biennially, and minimizing volatility for each trust’s Actuarial Determined Contribution. Compliance with the policy is an element of fiscal discipline considered by the auditors and ratings agencies during their respective reviews.
Staff proposes no material changes for 2023-2024 to the existing funding policy.
Committee Action(s)
The OPEB and Pension Funding Policy was last reviewed by the City Council Finance Committee on November 1, 2022.
Previous City Council Action(s)
The OPEB and Pension Funding Policy is to be reviewed annually and was initially approved by the City Council on November 21, 2022.
ATTACHMENT:
• Attachment A - City of San Leandro OPEB and Pension Funding Policy
• Attachment B - OPEB and Pension Funding Policy Presentation
PREPARED BY
T. Michael Yuen, Finance Director