REPORT TO COUNCIL
SUBJECT
Title
Authorization to Establish a Pension Trust Fund, Authorize the City Manager to Negotiate and Execute an Agreement with PFM Asset Management, LLC, and U.S. Bank National Association for the Sunnyvale Post-Employment Pension and Retiree Healthcare Benefits Program, Authorize the City Manager or his/her designee to serve as the Benefits Administrator, and Adopt an Investment Policy Statement for the Pension Trust Fund
Report
BACKGROUND
The City of Sunnyvale provides pension benefits to eligible employees through the California Public Employees' Retirement System (CalPERS). Pensions are funded through a combination of contributions from both employees and the City, with a majority of the cost being paid by the City.
Over the past ten years, the City's required payments to CalPERS for pensions have increased dramatically, rising approximately 65% from $24 million per year to $40 million per year. These increases have been caused by a variety of factors that include investment losses at CalPERS, benefit enhancements by the City, and strategies by CalPERS to stabilize the agency's ability to ensure future benefits are funded.
Sunnyvale has had a strong tradition of taking actions to address its long-term pension costs and liabilities. Strategies included carrying a Pension Uncertainty Reserve to address pension cost volatility, closing the amortization period on a significant portion of the City's unfunded liabilities, and making additional one time payments to pay down the unfunded liability.
On December 6, 2016, the City Council considered the creation of a Pension Trust Fund during a study session, which represents an additional new strategy to stabilize the City's pension expense. On May 19, 2017, during the Budget Workshop for the FY 2017/18 Recommended Budget, the City Council provided feedback to City staff to move forward with the creation of a Pension Trust Fund.
EXISTING POLICY
Fiscal Sub-Element E.2.6 An Actuarial Retir...
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