Pismo Beach announced earlier this month that it will pay $1 million to the city’s unfunded pension liability debt — a move that is expected to save the city approximately $670,000 in future retirement payments and taxpayers close to $300,000.
On March 17, the Pismo Beach City Council unanimously approved the $1 million payment from its debt and pension reduction reserve. The reserve was created last year with funds from the General Fund’s unassigned fund balance with the intent of reducing the city’s ongoing debt costs.
The city of Pismo Beach provides retirement benefits for full-time employees through the California Public Employees Retirement System.
The unfunded liability is the difference between the estimated cost to pay retirement obligations and the market value of the assets currently set aside to fund them. The interest rate on the unfunded pension liability is 7.5 percent over 11 years.
The payment is expected to reduce Pismo Beach’s annual payments to CalPERS by about $200 starting in fiscal year 2018-19, according to a news release. It will also reduce the number of years the city will have to make payments from 11 years to five.