DATE: March 13, 2018
TO: Board of Mayor and Aldermen
FROM: Eric Stuckey, City Administrator
Kristine Tallent, Assistant City Administrator/CFO
SUBJECT:
*Consideration of Resolution 2018-21 entitled, “A Resolution of the Board of Mayor and Aldermen to Amend the Actuarial Assumption of the City of Franklin Employees’ Pension Plan”.
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Purpose
The purpose of this resolution is to reduce the investment rate assumption for actuarial reporting purposes of the City of Franklin Employees’ Pension Plan over a five-year time period beginning in 2018.
Background
Staff reviews on an annual basis the actuarial assumptions for the City’s Employees’ Pension Plan in an endeavor to remain current with economic conditions, best practices, and legal requirements. The investment assumption for the Plan was reduced from 8.0% to 7.75% in 2006 and again to 7.50% in 2009. Since that time, industry trends and best practices have been for reasonable yet deliberate reductions in the investment rate to more closely match actual returns over a long period of time. In September 2017, the Board of Trustees of the Tennessee Consolidated Retirement System (“TCRS”) reduced their investment rate assumption from 7.50% to 7.25%.
Financial Impact
Staff proposed to the Pension Committee on 3/12/18 an annual reduction of 10 basis points in the investment assumption rate over a five-year period beginning in 2018, which will reduce the rate from 7.50% in 2017 to 7.0% in 2022. The committee unanimously approved the recommendation as presented by Staff.
Recommendation
Approval of Resolution 2018-21 is recommended.