Administration info on retirement reform agreement savings
From Chris Hand, chief of staff for Mayor Alvin Brown:
As you know, the actuarial report that we published last Wednesday (6/4/14) shows that the tentative retirement reform agreement between the City of Jacksonville (COJ) and the Police and Fire Pension Fund (PFPF) will save $1.83 billion over the next 35 years. Since there are always a lot of numbers flying around on these matters, we wanted to make sure you had the savings in perspective.
- Each year, the COJ makes an actuarially required contribution (ARC) to the Police and Fire Pension Fund as part of the annual general fund budget.
- The $1.83 billion savings number reflects the difference in the COJ’s total ARC payments over 35 years under the current pension plan and the total ARC payments over 35 years under the proposed retirement reform agreement. This savings number includes significant interest savings from paying down the unfunded liability more quickly.
- Under the agreement, the COJ will provide an additional $40 million annually to accelerate the payment of the Pension Fund’s more than $1.6 billion unfunded liability. That $40 million annual contribution will continue until the end of the agreement (September 30, 2024) or until the PFPF reaches an 80% funded status, whichever is earlier.
- In the agreement, we have secured $61 million from PFPF reserve accounts to help the COJ make all of its first year additional contribution ($40 million) and most of its second year contribution ($21 million).
- Some people have asked us for a “net savings” number – in other words, the amount of savings minus the additional amounts that the COJ would put into the plan to help lower the unfunded liability.
- Under the Mayor’s plan to partner with JEA – where the COJ would help JEA achieve its own pension savings (plus any other savings opportunities JEA identifies), and in exchange JEA would provide the City’s additional unfunded liability payment – the annual $40 million would come from a funding source outside the general fund. So in the JEA scenario, the savings to the general fund would continue to be $1.83 billion over 35 years.
- Nonetheless, if one were to subtract the additional contributions regardless of the funding source, the net savings of the retirement reform plan would be $1.49 billion over 35 years. This calculation takes the $1.83 billion and reduces it by the $339 million that the City would pay over the next 10 years (the $400 million total minus the $61 million received from the PFPF reserve accounts as part of this agreement).
I hope that provides some perspective and clarity on the savings in the proposed retirement reform agreement. As always, please let us know if you have any questions or concerns.