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Approve an Appropriation Transfer Request increasing appropriations of $8.0 million in the respective funds for an additional payment to the CalPERS unfunded accrued liability account funded by the Pension Obligation Fund (4/5 vote required)
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Published Notice Required? Yes ____ No _X _
Public Hearing Required? Yes ____ No _X _
DEPARTMENTAL RECOMMENDATION:
It is recommended that the Board of Supervisors approve an Appropriation Transfer Request (ATR) increasing appropriations of $8.0 million in the respective funds for an additional payment to the CalPERS unfunded accrued liability account funded by the Pension Obligation Fund (4/5 vote required).
SUMMARY:
The Pension Advisory Committee held a series of meetings in the Spring of 2025 to review various financial options to reduce long-term pension costs to the County. At the April 10, 2025 Pension Advisory Committee meeting, it was concluded that based on the current cash flow within the Pension Obligation Fund (Fund 306) $8.0 million can be utilized for a pre-payment/advance to the CalPERS Retirement Fund. Making one-time contributions to the CalPERS unfunded accrued liability account for the purpose of reducing interest costs and achieving long-term savings is consistent with the County’s Pension Policy.
It is therefore recommended that the Board of Supervisors approve an ATR for $8.0 million to make an additional payment to the CalPERS Miscellaneous and Safety Plans unfunded liability account. By sending a prepayment prior to July 2025, the FY2026/27 CalPERS rates will be adjusted slightly downward and the County of Solano’s unfunded liabilities for the CalPERS Plan will be reduced. This action will also reduce the current FY2025/26 unfunded liability payment due in July 2025.
FINANCIAL IMPACT:
The costs associated with preparing the agenda item are nominal and absorbed by the department’s FY2024/25 Working Budget.
DISCUSSION:
The Pension Advisory Committee (consisting of the Auditor-Controller, the Treasurer-Tax Collector-County Clerk, Director of Human Resources, and Assistant County Administrator) has recommended and the Board has approved pre-payments/advances to the CalPERS Retirement Fund in prior years. This recommendation is consistent with previous actions taken by your Board to prepay the CalPERS unfunded accrued liability.
The Pension Advisory Committee continues to review financial opportunities that will reduce the long-term pension costs to the County, with the long-term goal of achieving or maintaining a funding ratio at or above 90% in the Safety and Miscellaneous CalPERS plans. At the April 10, 2025 Pension Advisory Committee Meeting, consistent with the approved County’s Pension Policy adopted by the Board (February 2017), the Committee voted to recommend to the County Administrator and to the Board to use one-time funds in the Pension Obligation Fund (306) to prepay pension obligations in the Safety plan with CalPERS. This action will result in pre-paying a small portion of the County’s unfunded pension liabilities, reducing the interest costs to the County General Fund in FY2025/26 and beyond.
The Auditor-Controller has prepared a summary of the current pension obligations for the Board to easily review the totality of the long-term pension obligations of the County. The current balance in the CalPERS Rate Reserve as projected in the FY2025/26 Recommended Budget is $29.4 million. Also attached are the most recent valuation reports (June 2024) for the Miscellaneous and Safety CalPERS pension plans. If this recommended action is approved by the Board, the Auditor-Controller will work directly with the CalPERS actuary to apply the prepayment to one or more-line items listed on the schedule of amortization bases included in the CalPERS Valuation Reports, with the concurrence of the Pension Advisory Committee.
ALTERNATIVES:
The Board could choose not to accept the recommendation of the County Administrator and the Pension Advisory Committee to pay the $8.0 million to the County of Solano’s CalPERS Miscellaneous and Safety Plans at this time. The Board could provide other direction or ask for more information regarding the requested action.
OTHER AGENCY INVOLVEMENT:
CalPERS provided actuarial information that was used in evaluating the fiscal impacts for the County of Solano. On April 10, 2025, the County Pension Advisory Committee met and discussed future pension costs, strategies to reduce future costs, and then formulated a recommendation to the County Administrator and Board of Supervisors for consideration.
CAO RECOMMENDATION:
APPROVE DEPARTMENTAL RECOMMENDATION