PSPRS Pension Funding Policy 2025-26

Town of Wickenburg
Public Safety Personnel Retirement System
Pension Funding Policy 2025-26
The intent of this policy is to clearly communicate the Council’s pension funding objectives
and its commitment to our employees and the sound financial management of the Town
and to comply with new statutory requirements of ARS §38-863.01.
Several terms are used throughout this policy:
Unfunded Actuarial Accrued Liability (UAAL) – Is the difference between trust assets
and the estimated future cost of pensions earned by employees. This UAAL results from
actual results (interest earnings, member mortality, disability rates, etc.) being different
from the assumptions used in previous actuarial valuations.
Annual Required Contribution (ARC) – Is the annual amount required to pay into the
pension funds, as determined through annual actuarial valuations. It is comprised of two
primary components: normal pension cost – which is the estimated cost of pension
benefits earned by employees in the current year; and, amortization of UAAL – which is
the cost needed to cover the unfunded portion of pensions earned by employees in
previous years. The UAAL is collected over a period of time referred to as the
amortization period. The ARC is a percentage of the current payroll.
Funded Ratio – Is a ratio of fund assets to actuarial accrued liability. The higher the
ratio the better funded the pension is with 100% being fully funded.
Intergenerational equity – Ensures that no generation is burdened by substantially
more or less pension costs than past or future generations.
The Town’s police and fire employees who are regularly assigned hazardous duty
participate in the Public Safety Personnel Retirement System (PSPRS).
Public Safety Personnel Retirement System (PSPRS)
PSPRS is administered as an agent multiple-employer pension plan. An agent multiple-
employer plan has two main functions: 1) to comingle assets of all plans under its
administration, thus achieving economy of scale for more cost efficient investments, and
invest those assets for the benefit of all members under its administration and 2) serve as
the statewide uniform administrator for the distribution of benefits.
Under an agent multiple-employer plan each agency participating in the plan has an
individual trust fund reflecting that agencies’ assets and liabilities. Under this plan all
contributions are deposited to and distributions are made from that fund’s assets, each fund
has its own funded ratio and contribution rate, and each fund has a unique annual actuarial
valuation. The Town of Wickenburg has two trust funds, one for police employees and one
for fire employees.

Council formally accepts the assets, liabilities, and current funding ratio of the Town’s
PSPRS trust funds from the June 30, 2024, actuarial valuation, which are detailed below.
Trust Fund
Assets
Accrued
Liability
Unfunded
Actuarial Accrued
Liability
Funded
Ratio
Wickenburg Police
9,376,937
9,742,242
365,305
96.3%
Wickenburg Fire
5,962,670
6,489,224
526,554
91.9%
Town of Wickenburg
Totals
15,339,607
16,231,466
891,859
94.5%
PSPRS Funding Goal
Pensions that are less than fully funded place the cost of service provided in earlier periods
(amortization of UAAL) on the current taxpayers. Fully funded pension plans are the best
way to achieve taxpayer and member intergenerational equity. Most funds in PSPRS are
significantly underfunded and falling well short of the goal of intergenerational equity.
Council established this goal for the following reasons:

The PSPRS trust funds represent only the Town of Wickenburg’s liability.

A fully funded pension is the best way to achieve taxpayer and member
intergenerational equity.
Council plans to:

Make annual payments to fund the Unfunded Actuarial Accrued Liability. This will
be done following receipt of the Annual Actuarial Report from PSPRS through the
budget process.
Based on these actions the Council plans to maintain a 100% funded ratio annually