State law requires annual PSPRS funding policy adoption by cities, towns
By Terrance Thornton | Digital Free Press
Scottsdale City Council has set the upcoming fiscal year financial policy to meet annual reporting requirements at the Public Safety Personnel Retirement System.
Local policymakers have made preparations for the new funding policy to take effect July 1, following a unanimous vote last month at City Hall, 3939 N. Drinkwater Blvd.
The Public Safety Personnel Retirement System or PSPRS, which was established in July 1968, is meant to provide an equitable statewide retirement program for Arizona’s public safety personnel. The PSPRS fund, which is governed by a nine-member board of trustees, is entrusted with the fiduciary responsibility to serve its members, and best protect the financial health of each pension fund the board oversees, according to state law.
Anna Henthorn, Scottsdale accounting director, in her May 16 report to Scottsdale City Council explains state law requires all cities and towns to annually adopt a pension funding policy to for PSPRS participants. Tenets of the policy, Ms. Henthorn explains, includes:
- How the city will maintain stability of the required municipal contributions;
- How and when the city’s funding requirements will be met; and
- Defining the city’s funded ratio target under PSPRS and when it will be met.
State law also requires further detail, Ms. Henthorn points out.
“The city also is required to formally accept the city’s share of the assets and liabilities based on the PSPRS actuarial report and post the pension funding policy on its website and transmit the pension funding policy to the PSPRS board,” she said. “PSPRS administers the city’s agent multiple-employer pension plan and has separate trusts for both the police and fire employees. PSPRS provides annual actuarial reports for the city’s estimated assets, liabilities, and unfunded actuarial liabilities for each plan.”
State law requires annual PSPRS funding policy adoption by cities, towns
The city of Scottsdale is at 64.8% for police and 85.9% for fire of funded retirement system liability, which equates to $156,128,607 for police and $25,043,314 for fire this upcoming fiscal year, numbers show.
“City and employee annual contribution rates vary depending upon the employee’s hire date,” Ms. Henthorn explained of changes to municipal pension programs to meet unfunded liability payments.
“The city’s police contribution rates for fiscal year 2022 were 59.02% or 55.15%, and employee rates were 7.65%, 9.73% or 11.65%.
The city’s fire contribution rates for fiscal year 2022 were 21.06% or 17.89% and employee contribution rates were 7.65%, 10.33% or 11.65%.
For fiscal year June 30, 2022, the city paid the required contributions to PSPRS for police and fire of $24,675,949 as well as a one-time payment of $40 [million] toward the unfunded liability ($35 [million] for police and $5 [million] for fire.”
Ms. Henthorn provided to City Council an explanation of the true liability city offers is exposed due to unfunded pension requirements.
“The fire pension plan also annually receives a fire premium insurance tax credit to the city’s fire trust fund to further reduce the city’s required contribution,” she explained. “The amount received in fiscal year 2022 was $2,002,461. The unfunded actuarial accrued liability is shown as a city liability; however, it will be partially paid through employee contributions and the annual allocation of the fire insurance premium tax.”
Scottsdale officials anticipate the unfunded liability at PSPRS to be funded no later than June 30, 2036.
