Budget Question # 70: Please prepare a summary and graph of the City's unfunded OPEB liability and history. What is the cost to the plan to increase the stipend by $500 per month and to then add a monthly COLA to the stipend going forward? (Mayor Wilson)

Response:  The following chart appears in the City’s Comprehensive Annual Financial Report and shows the funding progress for the Other Post-Employment Benefits Fund, which is comprised of both Other Post-Employment Benefits (OPEB) and Line of Duty Benefits (LOD).

The OPEB fund was established in calendar year 2008, and the City took on funding responsibility for the LOD Act from the State in July 2012. Both are relatively new funds. Beginning in 2013, each liability was reported separately. Based on the actuarial valuation date of December 31, 2020, the most recent date of available information, the funded ratio of OPEB is at 89.12% and the Line of Duty Act Fund has a funded ratio of 96.32%. 

Each year, the budget is developed based on the actuarially determined, Annual Determined Contribution (ADC), which is calculated as a percent of the salaries of employees covered by the plan.  In recent years the Operating Budget reflects 100 percent funding of the ADC for both pension plans. 

Based on the cost study provided by the Plan’s actuary, the cost to increase the OPEB monthly stipend to from $260 per month $500 per month would increases the unfunded liability by $42 million and cost an additional $2.97 million annually. The cost to add only a COLA ($260/mo.) to the monthly stipend at the current baseline valuation is $2.33 million annually. The cost to increase the OPEB monthly stipend to $500 per month and add COLA ($500/mo) from that new level is $6.68 million annually. The projection details are included in the chart below:

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