Wichita’s primary retirement plans for public employees are in unusually strong shape, a financial consultant told the City Council on Tuesday.
Pat Beckham, an actuary with Cavanaugh Macdonald Consulting, told city officials the city’s contribution rates for the Wichita Employees Retirement System and the Police and Fire Retirement System will drop at least a percentage point in 2015, beneficiaries of improved investment performance.
Council member James Clendenin said the report is a testament to the council’s fiscal conservatism, with other public employee retirement funds – including the Kansas Public Employees Retirement System – suffering financially.
“Instead of this being a train wreck, we’re getting close to the end of the tunnel,” he said after the meeting. “There are other cities not doing nearly as well as we are.”
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The retirement fund investments earned a little more than 9 percent, Beckham said. As a result, the city will save almost $1.4 million – $1.2 million from the general fund, approximately $130,000 from the water and sewer utility and $45,000 from the airport fund, City Manager Robert Layton said.
The city contribution rate to the city retirement system will drop from 13.2 percent to 12.2 percent this year. That’s still higher than the 10.2 percent rate in 2009 or the 10.6 percent rate in 2010, before recession-fueled investment losses began to take their toll.
The employer contribution rate to the police and fire plan will drop to 21.3 percent, down from 22.4 percent in 2012. That’s the lowest contribution rate since the recession, city officials said.
The unfunded liabilities in both plans will drop into the single digits – 6.9 percent for the city employees plan and 7.5 percent for the police and fire plan. Significant amounts of the city’s contribution — a third in the city plan and a fourth in the police and fire plan — are designed to buy down the unfunded liabilities.
Beckham presented a slide that shows the average municipal retirement system nationwide is saddled with a little more than 20 percent in unfunded liabilities.
“You should be extremely proud of what you’ve done,” Beckham said. “Very few systems are that strongly funded.”
Nonetheless, such retirement programs are shrouded in uncertainty, she said, since they require future predictions of how long city employees will work and then live.
The city still is considering moving new employees away from the two defined benefit plans, possibly into the type of defined contribution plan popular in the private sector.