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Roseville Finance Commission Agenda Item Page 1 of 2 Memo To: Roseville Finance Commission From: Chris Miller, Finance Director Date: February 14, 2017 Re: Item #7: Review City Pension Obligations Background As part of the Annual Work Plan discussion, the Finance Commission expressed an interest in reviewing the City’s long-term pension obligations. For purposes of this discussion, I will exclude the legally- separate Fire Relief Association Pension Plan which covers some of the City’s paid-on-call firefighters. This Plan is currently funded at 127%. Over the past decade or so there has been an increasing amount of media coverage regarding underfunded public-sector pension plans. Most of the attention has centered on larger distressed cities or States that have been economically hit hard. However, other local governments including the City of Roseville are likely to face higher financial impacts in the future due to past financial commitments to current and future retirees. Like most cities in Minnesota, Roseville does not have a stand-alone pension fund; rather we participate in the Statewide Public Employees Retirement Association (PERA) Plan which is managed and directed by State Officials in accordance with State Statutes. Under the PERA Plan, the State Legislature has sole authority to establish both employer and employee pension contribution and benefit rates. As a result they are ultimately responsible for ensuring that the Plan is adequately funded. Under this governance structure, the City of Roseville is mandated to make exact contributions for its proportionate share – not a single dollar less, or more. Even if the City desired to eliminate its proportionate share of the liability, we have no mechanism to do so. Current PERA Pension Plan Funding Status There are two separate pension plans that City employees belong to. Police and most firefighters belong to the Public Employees Police & Fire Fund (PEPFF) while all other city employees belong to the General Employees Retirement Fund (GERF). The current funding status as of June 30, 2016 for the PEPFF Plan was 87.7% while the GERF Plan was at 75.5%; which leaves a significant unfunded liability for both plans. As of 12/31/15, the City of Roseville’s proportionate share of the PEPFF net pension liability amounts to 0.494% or $5,612,996; while the share of the GERF net pension liability amounts to 0.138% or $7,151,786. It should be noted that these amounts reflect the long-term funding shortfall and are not an indicator of what the Plan needs to cover near-term obligations. PERA’s net assets have a fair market value of $25.7 billion as of June 30, 2016.