Saturday, November 28, 2015 – 11:00 a.m.

Even though San Bernardino County, California has been ponying up tens of millions of dollars more in annual pension contributions each of the past several years, the funding situation hasn’t significantly changed.

The latest actuarial valuation report from consulting firm Segal and Company isn’t filled with good news for the county or its pension fund, the San Bernardino County Employees Retirement Association (SBCERA).

To read the current report, click the following link: SBCERA – Actuarial Valuation Report 06302015

The report places great emphasis in differentiating between actuarial analysis and market value analysis regarding the funds investment returns and unfunded liability.

For our purposes, market value is all that matters.

In the pension fund world, losses are amortized over 20 years, while any gains are recognized over a few years, as long as those gains hold.

When one delves into the latest 139-page report, the following is clear:

  • The Market Value Analysis (MVA) shortfall increased from -$1.70 billion to -$1.94 billion. The number is pretty much equal to the Actuarial Valuation Analysis (AVA) shortfall number.
  • The funding ratio on an MVA basis decreased from 82.47% to 80.98%.
  • The funding ratio would have dropped further if the annual cost-of-living adjustment (COLA), for 2015, had not fallen for a large group of retirees.
  • Market Value of Assets increased from $7.80 billion to $8.27 Billion.
  • The fund returned $319 million less than projected.
  • County employer contributions totaled  a record $178.3 million for 2014-15.
  • The 10-year annualized investment return is 5.74%. (The current target return is 7.5%)

A volatile stock market, potentially rising interest rate environment has complicated the pension fund’s ability to meet its 7.5% investment return target. It’s a situation unlikely to change anytime soon.

County supervisors should plan on increasing the amount they dole out for pensions in the coming years.