Lexington’s police and fire pension financial health took a slight dip in 2016 because of lower-than-expected investment returns.
The unfunded liability — the amount of money needed to pay all current and future beneficiaries — edged up to $184.6 million as of July 1, 2016. The unfunded liability had been $171.2 million in 2015.
An actuarial report released Wednesday showed the pension’s funded position — the amount of money it has compared with the amount of money it needs — at 77.8 percent. That’s a slight decrease from 78.4 percent the previous year.
Todd Green of Cavanaugh Macdonald Consulting, which provides the actuary assessment, told the police and fire pension board at a meeting Wednesday that lower returns contributed to the dip in both funded position and unfunded liability. More people than expected also retired during that same 12-month period, contributing to the drop in the fund.
Never miss a local story.
But Green said after Wednesday’s meeting that the city’s pension system remains on track to be 100 percent funded over the next 27 years.
“The plan is in really good shape,” he said.
He said the period that the actuarial report covers ended July 1, when the markets were down.
The police and fire pension has seen both benchmarks of pension health improve since pension reform was enacted in 2013. Before that, the unfunded liability was nearly $300 million. The pension system paid out $55 million in benefits last year. It had 1,123 active members and 1,161 retirees in 2016.
The funded position of 78.4 percent in 2015 was the highest in more than a decade. Lexington police and fire pension is one of the better-funded pension systems in the state. The Kentucky Retirement System — which covers state employees — has a funded position of 16 percent, a November actuarial report showed.
But the slight drop in funded position means the city will be required to give more money to the fund. Police and firefighters contribute 12 percent of their salaries into the fund. The city’s contribution will edge up to 35 percent from 34 percent of total payroll of police and firefighters. If total amount of payroll stays the same at $64 million, the city’s expected contribution will be close to $22.4 million.
Over the past six months, the city has given the fund an additional $700,000 because of accounting and other issues that resulted in a shortage of the city’s payment into the fund. Those errors were discovered by Lexington Police Sgt. Larry Kinnard, a pension board member who asked repeatedly for a breakdown of the city’s payments into the fund.