Milliman Inc., an international independent actuarial and consulting firm, provided valuation reports of the city’s retirement plan for 2016-2018. At councilman John Nicholson’s urging, a representative from Milliman Inc. will be at the July 9 council meeting to review their audits.
The net value of the retirement plan decreased by over $22.3 million from Dec. 31 , 2017 to year end 2018. That is a decline of 11.3% in one year. In that same period, the unfunded liability increased by $25 million. That’s an increase of 5.7% in one year.
Looking at the big picture, the pension plan was only 41.82% funded on Dec. 31, 2018. At the end of 2017, the plan was 47.49% funded. This despite an increase in total contributions by the city and plan members of more than $2.1 million.
To its credit, the city has substantially increased contributions as percentage of payroll. In 2009, this was 13.83%. In 2018, the contribution percentage had increased to 23.98%.
As is typical with stock market investments, the money-weighted rate of return varies year to year. This is the internal rate of return on the pension plan investments, net of investment expenses. Here is the rate for the last 6 years:
2013--- 18.92%
2014---6.09%
2015---0.20%
2016---9.31%
2017---13.87%
2018---(3.76%).
The administrative expenses the last three years for retirement system have varied:
2018 $ 1,568,752
2017 $ 1,154,171
2016 $ 61,796
In an effort to narrow the funding gap, contributions by the city and city employees have been increased. In 2015 the city contributed 16.5% of the employee pay. The city’s contribution this year is 26% . It contribution will rise to 28% next year and then to 30% in 2021. The employee contribution was 10% in 2015. It is now 12% and will stay at that level through 2021.
The audit review will be helpful for the council and Shreveport citizens. More changes may need to be made in the city’s retirement to improve the plan’s solvency.