City of Birmingham Pension Recap March 2021
City of Birmingham, Alabama, pension insights including the funded ratio, net pension liability, debt outstanding, total indebtedness, credit rating, and system funding history. Explore the key financial data and learn about sustainable funding practices for pension plans.
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The City of Birmingham, Alabama The City of Birmingham, Alabama Pension Recap Pension Recap MARCH 2021 MARCH 2021 0
According to the Government Finance Officers Association (GFOA) in their Best Practice, Sustainable Funding Practices of Defined Benefit Pension Plans , municipalities public pension plans should target a 100% funded ratio. Pension Funded Level Pension Funded Level 100.0% 90.0% 79% 80.0% 75% 73% 69% 69% 68% 70.0% 63%61%60% 56% 60.0% 53% 49% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 2
Net Pension Liability Net Pension Liability 2019 $1,200 5,000 $4,561 $4,561 Millions 4,500 $1,000 4,000 3,500 $800 3,000 Per Capita $600 2,500 $2,071 $2,071 2,000 $1,569 $1,569 $1,480 $1,480 $1,438 $1,438 $1,437 $1,437$1,253 $1,253$1,377 $1,377 $400 1,500 $945 $945 $751 $751 $748 $748 $728 $728 1,000 $200 500 $0 0 Net Pension Pension per Capita 3
Debt Outstanding Debt Outstanding Bonds, Warrants and Leases $1,800 7,000 $1,600 $5,786 $5,786 6,000 $1,400 5,000 $1,200 $3,889 $3,889 4,000 $1,000 Axis Title $3,002 $3,002$2,775 $2,775 $800 3,000 $2,224 $2,224 $600 $1,582$1,685 $1,685 2,000 $1,328$1,582 $1,572 $1,572$1,328 $1,259 $1,259 $400 1,000 $200 $0 $0 $0 0 Total Debt ($millions) Total Debt per Capita 4
Total Indebtedness Total Indebtedness Bonds, Warrants, Pension, OPEB and Compensated Absences $1,800 9,000 7,962 7,962 Millions 7,484 7,484 $1,600 8,000 $1,400 7,000 $1,200 6,000 5,421 5,421 4,688 4,688 $1,000 5,000 Per Capita 3,631 4,076 4,076 3,779 3,779 3,631 $800 4,000 2,859 3,135 3,135 2,561 2,859 2,561 $600 3,000 1,927 1,927 1,520 1,520 $400 2,000 $200 1,000 $0 0 Debt Net Pension OPEB $ per Capita 5
Citys Credit Rating City s Credit Rating Fitch Fitch Downgrades Birmingham Fitch
Brief History of the Retirement and Relief System Funding Brief History of the Retirement and Relief System Funding 7
Pension Funding Pension Funding Brief History of Retirement & Relief System Funding Since FY2004, the total contributions have been less than the required amount. Shortfall was mostly the result of investment returns lower than assumed. Since 2017: Since 2017: City Contribution Rate has doubled from 7.0% to 14.5% City Contribution Rate has doubled from 7.0% to 14.5% Employee Contribution Rate has stayed flat at 7.0% Employee Contribution Rate has stayed flat at 7.0% 25% 23.1% 23.1% 21.5% 21.5% 20% 15% 67% 67% 6.5% 6.5% 12.9% 12.9% 10% 7.0% 7.0% 7.0% 7.0% 8.5% 8.5% 12.0% 12.0% 6.5% 6.5% 7.25% 7.25% 14.5% 14.5% 6.5% 6.5% 33% 33% 5% 6.5% 6.5% 6.5% 6.5% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 0% 2003200420052006200720082009201020112012201320142015201620172018201920202021 Employee Employer Total Required Rate Note: Graph shows Fiscal Year ending June 30. The required rate is based on a rolling 30-year amortization as a level % of pay. FY2021 shows proposed budget. 7.0% 7.0% 8
City Contribution Rates City Contribution Rates 25.0% 25.0% 23.0% 23.0% 21.0% 21.0%20.6% 20.6% 20.0% 20.0% 19.0% 19.0% 17.0% 17.0% 14.5% 14.5%14.0% 15.0% 15.0% 14.0% 14.0% 14.0% 13.0% 13.0% 12.0% 12.0% 10.0% 10.0% 9.0% 9.0% 9.0% 9.0% 8.0% 8.0% 5.0% 5.0% 0.0% 0.0% 9
$14 Million $14 Million Increase since Increase since 2017 2017 10
Pension Funding vs. Contribution Rates Pension Funding vs. Contribution Rates As of 2019, except where noted 85% 80% Tuscaloosa Mobile 75% Hoover Net Pension Liability % of Total Vestavia 70% Mtn Brook Huntsville 65% Homewood Montgomery (2021) 60% Gadsden Opelika 55% Birmingham Montgomery Birmingham (2021) 50% Dothan 45% 40% 5% 10% 15% 20% 25% Employer Contribution (% of Payroll) 11
Employee Pension Contributions Employee Pension Contributions As of 2019 8.0% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.0% 7.0% 7.0% 6.0% 5.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Source 2019 CAFRs. 12
Changes in Plan Assets Changes in Plan Assets 13
City of Birmingham, Alabama Required Supplementary Information Year ended June 30, 2020 Schedule of the Employer's Contributions Retirement and Relief System 2020 2019 2018 2017 2016 2015 2014 Actuarially Determined Contributions $32,151,230 $31,146,931 $30,063,990 $30,564,212 $29,898,918 $30,398,187 $30,553,712 Contributions in Relation to the Actuarially Determined Contributions 28,550,642 19,652,651 17,276,073 16,554,808 16,370,100 14,464,552 14,039,103 Contribution Deficiency (Excess) 3,600,588 11,494,280 12,787,917 14,009,404 13,528,818 15,933,635 16,514,609 Covered Payroll 201,581,514 197,988,943 202,117,529 200,441,743 197,758,400 188,116,077 184,380,800 Contributions as a Percentage of Covered Payroll 14.16% 9.93% 8.55% 8.26% 8.28% 7.69% 7.61% 14
Pension Funding Pension Funding 2021 Budget Increasing pension funding to 14.5% in 2021 budget ~90% of expected actuarily determined contribution rate Brings amortization period from infinite to ~75 years 16.1% funding brings amortization down to ~40 years 1.56% 1.56% 16.1% 16.1% 14.50% 14.50% City Contribution Gap 19
End of Presentation End of Presentation Thank You 23
