PSPRS Pension Funding Policy 2026-27
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Town of Wickenburg Public Safety Personnel Retirement System Pension Funding Policy FY2026-27 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, 2025 actuarial valuation, which are detailed below. Trust Fund Assets Accrued Liability Unfunded Actuarial Accrued Liability Funded Ratio Wickenburg Police 10,204,265 10,047,611 (156,654) 101.6% Wickenburg Fire 7,136,189 7,237,687 101,498 98.6% Town of Wickenburg Totals 17,340,454 17,285,298 (55,156) 100.3% 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 ration annually.