Adoption of the Public Safety Personnel Retirement System (PSPRS) FY2024 Pension Funding Policy.

Adopt the Public Safety Personnel Retirement System FY2024 Pension Funding Policy. (Doug Sandstrom, Finance Director)

Adoption of this policy maintains all of our current budgetary practices related to pension funding.

With the 2018 passing of House Bill 2097 every governing body of a PSPRS plan is required to pass a Pension Funding Policy no later than June 30th of each year and post the policy on the governing body’s website. Council has adopted the Pension funding polices for each year beginning with FY2019.  As presented the pension policy mirrors the prior year policy with one addition clarifying that all unapplied contributions remaining at year end will be applied towards the unfunded balance. The City of Goodyear pension funding policy is based upon the model policy created by the League of Arizona Cities and meets all requirements of state law.

The proposed City of Goodyear PSPRS FY2024 Pension funding policy continues to commit the city to funding annual contributions from operating revenues and further commits us to pre-pay all employer and a portion of employee contributions.  These pre-payments maximize interest earnings which increases the financial strength and sustainability of our public safety pensions.  Included in the pre-payment of 100% of budgeted city funds are all amounts budgeted for vacant positions, as well as funds budgeted for employees in the DROP program for which no city contribution is required, less alternative 457 contributions. By committing 100% of all budgeted funds the City of Goodyear is actively reducing the unfunded liabilities of the system and increasing the long-term sustainability of our public safety pensions.

In FY2021 the City paid $24.0 million towards the unfunded liabilities of the PSPRS plans. This payment has led to a reduction in our annual rates and has increased our total funded ratio to 97% for Fire and 89% for Police.  Required rate contributions for both Fire and Police have dropped for FY2024 reflecting each plans’ increased level of funding.

To fulfill the statutory requirement of Laws 2018, Chapter 122 the City must annually enact a policy to outline and communicate the Council’s pension funding objectives as follows:
Beginning on or before July 1, 2019, each governing body of an employer shall annually:
1. Adopt a pension funding policy for the system for employees who were hired before July 1, 2017. The pension funding policy shall include funding objectives that address at least the following:
a) How to maintain stability of the governing body's contributions to the system.
b) How and when the governing body's funding requirements of the system will be met.
c) Define the governing body's funded ratio target under the system and the timeline for reaching the targeted funded ratio.
2. Formally accept the employer's share of the assets and liabilities under the system based on the system's actuarial valuation report.
3. Post the pension funding policy on the governing body's public website.