Category: Newsroom

A Mural Proposal Meeting for the upcoming artwork on the LAFPP building will be taking place on March 28, 2017 at 6:30 p.m., at LAFPP Headquarters, 701 E. 3rd Street, STE 400.

The mural will be titled “Bloom” to commemorate Joel Bloom. In his lifetime, Bloom dedicated twenty years of his personal time and energy into creating the Arts District. A bouquet of flowers blooming and breathing with movement, creates a living wall symbolizing the vibrant arts community that continues to grow.

REFERENCED DOCUMENTS: 

Public Notice – Mural Proposal Meeting

A new Rockefeller Institute pension model report on the Los Angeles Fire and Police Pension Plan (LAFPP) found that “LAFPP is much better funded than most public pension plans with a funded ratio of 91%” and is well positioned financially given the conservative amortization policies and contribution policy by the City of Los Angeles.

The Rockefeller Institute pension model report on LAFPP finds that even with volatility in annual returns, the risks of severe underfunding for pension funds are greatly reduced if contribution policy is conservative and participating governments pay their full actuarially determined contributions in all years. LAFPP was one of five public plans selected for detailed study by Rockefeller researchers. This is the sixth report of the Pension Simulation Project at the Rockefeller Institute, which examines the potential consequences of investment-return risk for public pension plans, governments, and stakeholders in government.

As highlighted in the study, LAFPP spreads its investment gains and losses over fixed 20-year amortization periods in accordance with the LAFPP Board’s funding policy, which is a more conservative funding methodology when compared to agencies that may amortize gains and losses over periods of 30+ years.  Researchers also acknowledge the City of Los Angeles for its diligence in paying the full contributions determined by LAFPP’s actuaries, in contrast to many other public agencies.  This disciplined funding approach is one of the items noted in the study to minimize a plan’s chance of facing a funding crisis even if investment returns are quite volatile.  In spite of this finding, the study notes that governments still face a risk of substantial contribution increases, particularly if the plan benefits are relatively expensive, when investment volatility is greater.

The detailed study examined the potential implications of investment return volatility for public pension plans by modeling the finances of LAFPP and contributions from the City under six different investment return scenarios (both deterministic, where the Plan achieves its investment return assumption each year, and stochastic, where returns are random but follow a specific distribution).  Researchers examined the six investment return scenarios under LAFPP’s current funding policy, as well as their impact under hypothetical policies that would arise if California voters were to approve statewide pension reform initiatives similar to previously proposed initiatives which would limit employer pension contributions for new hires (see former San Jose Mayor Chuck Reed’s proposed “Government Pension Cap Act of 2016” which failed to qualify for the ballot on June 17, 2016).

The study concludes that “if LAFPP’s investment return assumption is approximately correct over the long run, the plan has very little risk of becoming severely underfunded in the next thirty years, even if investment returns vary significantly from year to year.  The main reasons for this are LAFPP’s good current funded status, its relatively conservative method of determining contributions, and our assumption that the City of Los Angeles will continue its good track record of fully paying actuarially determined contributions.”  

A general election to select the Fire Department Employee Member of the Board of Fire and Police Pension Commissioners (Board) is scheduled on Tuesday, April 25, 2017.  All active, sworn members of the Fire Department are encouraged to participate.  The candidate elected will serve a five-year term beginning July 1, 2017 and ending June 30, 2022.

BOARD MEMBER DUTIES – The Board exercises the prudent person standard in the discharge of its duties.  It has sole and exclusive fiduciary responsibility to administer the Fire and Police Pension System (System) and its assets; has the authority to set and adopt investment policies for over $19 billion in fund assets; and has the duty to establish actuarial assumptions and adopt rules and regulations necessary to administer the System.

Preparation for regular and special meetings requires an individual to commit hours of advanced reading of Board Reports and disability cases.  The Board normally meets on the first and third Thursdays at 8:30 a.m.  Most meetings are from two to four hours.

CANDIDATE PROCESS – Only active, sworn Los Angeles Fire Department members of the System are eligible to run and vote for this Board seat.  Members who are interested in becoming a candidate are required to complete and submit a Notice of Intent form, with optional Occupational Ballot Designation and Statement of Qualifications, that will be mailed to all eligible members with further instructions. Due to recent changes to the election process, signature gathering by eligible members is no longer required to run as a candidate.

To qualify, candidates must mail or hand deliver the completed Notice of Intent, with optional Occupational Ballot Designation and Statement of Qualifications, to the Office of the City Clerk – Election Division, Piper Technical Center, 555 Ramirez Street, Space 300, Los Angeles, CA 90012. The completed Notice of Intent must be received by mail or in person by the Office of the City Clerk – Election Division by 5:00 p.m. on March 17, 2017.  Candidates who wish to hand deliver their Notice of Intent may start on March 9, 2017, seven (7) business days preceding the above due date, and between the hours of 8:00 a.m. – 5:00 p.m. 

VOTING PROCESS – After the candidates are determined, eligible voters will receive a ballot in the mail.  Voters can begin submitting their ballots starting April 17, 2017.  All completed ballots must be received by mail or in-person, by the Office of the City Clerk – Election Division by 5:00 p.m. on April 25, 2017 to be counted.  The ballots will be tallied on April 27, 2017 in the presence of the observers designated by each candidate. 

QUESTIONS – Inquiries regarding the election process may be directed to the Office of the City Clerk at (213) 978-0440 or the Administrative Services Section of the Department of Fire and Police Pensions at (213) 279-3080.

The 2016 Annual Report​ for Los Angeles Fire and Police Pensions is available online!

LAFPP is pleased to present the 2016 Annual Report. This report provides financial information such as the department’s budget summary, investment performance, asset allocation data, plan actuarial data, statistical information, and a summary of plan provisions for the fiscal year ending June 30, 2016.

Some of the highlights in this report are:

• The System serves approximately 25,997 members, including active, DROP, and retired members and beneficiaries.
• Pension benefits were actuarially funded at 93.9 percent and health subsidy benefits were funded at 48.1 percent, an increase of 2.4 percent and 2.7 percent respectively over the prior year. The combined funding status is 87.4 percent.
• System assets totaled over $18.5 billion on a market basis.
• The investment rate of return for Fiscal Year 2015-16 was 1.18 percent, which is less than our actuarial assumed rate of return of 7.5 percent. However, over the 3- and 5-year periods, the System’s return was 7.49 percent and 7.42 percent, respectively.
• An Asset Liability Study was completed by the Plan’s investment consultant, RVK, which was used by the Board to help establish the appropriate asset allocation for the Fund.
• LAFPP relocated to a new headquarters facility in the Downtown Arts District in March 2016 after residing in Little Tokyo for almost 30 years.

We continue to refine and update our Strategic and Business Plan goals to build upon our prior achievements and meet new challenges. These achievements ultimately support our mission – To advance the health and retirement security of those who dedicate their careers and risk their lives to protect the people of Los Angeles.

In addition to this report, our historical annual reports, actuarial valuations, and financial statements are available from the Financial Reports link in the About LAFPP section of our website.

The Dallas Police and Fire Pension System (DPFP) has received a lot of press attention recently.  As a result of poor investment performance and consistent underfunding, the Dallas Police and Fire fund went from having enough assets to cover 82% of its liabilities in January 2010 to having only 45% in January 2016 (which means that DPFP’s pension assets are sufficient to pay less than half of future anticipated benefits). Obviously concerned that retirement benefits could be impacted and/or modified due to the steep decline in asset values, many participants in Dallas’ Deferred Retirement Option Plan (DROP) started withdrawing their money, exacerbating the problem. Between August and December, DPFP’s participants withdrew approximately $500 million in DROP funds, representing 23% of the plan’s total net assets of approximately $2.2 billion.

On December 5, 2016, Dallas Mayor Mike Rawlings sued to have DROP account withdrawals frozen and the Dallas Police and Fire Pension Board of Trustees took their own action on December 8, 2016 to temporarily cease all DROP distributions. These measures were taken to prevent further insolvency of the DPFP fund.

As the financial situation unfolded in Dallas over the last several months, LAFPP has received many inquiries by our membership about the status of the City of Los Angeles Fire and Police Pension Plan’s (LAFPP) DROP program. Given the status of Dallas Police and Fire Pension System, many negative news articles have been written in general about DROP programs.

LAFPP’s DROP Program was established in 2002 and was designed to be cost neutral, improve employee morale and retention, and lengthen the careers of public safety personnel. The Program has been reviewed twice since its inception and was determined to be actuarially cost neutral. The following are just some of the key factors that differentiate LAFPP’s DROP Program from other DROP programs:

LAFPP’s DROP program is designed to be cost-neutral. The City of Los Angeles must complete an actuarial study of DROP every 5 years to determine if it continues to be cost neutral and is meeting the City’s goal of lengthening the careers of police and fire sworn personnel.

LAFPP does not allow members to enter DROP retroactively – you cannot backdate your entry effective date. Only active members with at least 25 years of service (and age 50, depending on the tier) are eligible to enter DROP.

Participants continue to pay mandatory member contributions until they reach the maximum years of service for their tier. This contribution goes into the fund and is not part of the member’s DROP account.

The DROP account interest rate of 5% is lower than the LAFPP fund’s assumed investment earnings rate of 7.5%. Other pension systems may pay interest on DROP accounts at rates ranging from 6% to as high as 8%.

Participants can remain in DROP for a maximum of 5 years. At the end of the 5-year period, participants must retire and take distribution (total withdrawal from LAFPP) of their entire DROP account. Interest does not accrue after a member exits DROP.

As of March 1, 2017, total DROP account balances make up less than 2% of LAFPP’s total assets of approximately $20.0 billion.

In terms of the overall health of our Plan, the most recent actuarial study determined that, as of June 30, 2016, our pension plan is 93.9% funded, a 2.4% increase over last fiscal year. In addition, the City consistently makes its Annual Required Contribution (as determined by the Plan’s actuary) to LAFPP. An asset/liability study is conducted periodically which carefully monitors the cohesion between the benefits the Plan is obligated to pay to our pensioners and the long-term investment strategies in place. The most recent study of the Plan concluded that LAFPP’s funding level was “unquestionably strong” relative to most other public pension plans.

For more information on LAFPP’s DROP program, please visit the Member’s page for Active/DROP Members, under Plan Details.

UPDATE (3/15/17)

The Dallas Police and Fire Pension Board of Trustees (DPFP) released a statement that a revised DROP policy was adopted on January 17, 2017 to provide Dallas’ retired DROP members with equitable and impartial monthly access to some funds. The DPFP Board’s approval was conditioned upon a receipt from DPFP’s actuary that the revised policy, together with approximately $11 million in additional DROP distributions authorized, does not accelerate the insolvency of DPFP based upon current assumptions.  Monthly minimum distributions are expected to begin on March 31, 2017.  Additional pro-rata monthly distributions to members with outstanding DROP lump sum requests will only be permitted if the total liquid assets exceed the reserve amount for a given month.

On March 9, 2017, the DPFP Board adopted a resolution certifying the reserve amount resulted in no excess liquidity for the month of March.  Pro-Rata DROP distributions would not be permitted for March.  However, monthly minimum distributions will proceed uninterrupted as installments with the March 31, benefit payments.

The DPFP Board and staff continue to work with City of Dallas officials on proposed legislation to provide a long-term solution to secure retirement funds for Dallas’ first responders.

For more information on the Dallas DROP program, visit their website at https://www.dpfp.org/.

Based on the actuarial report for the period ending June 30, 2016, the pension benefit funded ratio has increased from 91.5% to 93.9%. The combined funded ratio for pension and health benefits is 87.4%, up from 85% the previous year. This marks the third consecutive year that the combined funded ratio has increased for the System.

Every year a valuation of the LAFPP fund is performed by an actuary. The valuation reports the System’s assets and liabilities and establishes the City’s contribution to the fund for each fiscal year. The positive outcome for the year ending June 30, 2016 was the result of approximately $337 million in net actuarial gains for the year. The City’s combined contribution rate for July 15, 2017 will decrease by 0.28% of sworn payroll, from 44.54% to 44.26%. This contribution rate decrease is due to lower than expected COLA increases for retirees, beneficiaries and DROP members, lower than expected salary increases for active members, and a slightly higher than expected rate of return on the valuation value of assets (after smoothing). The overall unfunded liabilities have decreased from $3.2 billion to $2.8 billion.

On a market value basis, the combined funded ratio is 84.7%, with retirement benefits funded at 91% and health subsidy benefits at 46.6%.

The new maximum standard Medicare Part B premium will increase from $121.80 in 2016 to $134.00, effective January 1, 2017. The Centers for Medicare and Medicaid Services (CMS) estimates that about 30% of Medicare beneficiaries will pay this higher rate. The remaining 70% of Medicare beneficiaries will see their Medicare Part B premium increase from $104.90 in 2016 to an average of about $109.00 per month in 2017, due to the statutory “hold harmless” provision designed to protect seniors and the 0.3% cost-of-living-adjustment (COLA) for Social Security benefits in 2017.

Medicare beneficiaries subject to the “hold harmless” provision currently have their Medicare Part B premiums deducted from their Social Security checks and have incomes of $85,000 or less ($170,000 or less for joint tax filers). However, those who are: 1) new Medicare Part B beneficiaries in 2017, 2) beneficiaries who do not currently have the Medicare Part B premium withheld from their Social Security benefit, or 3) higher-income beneficiaries, will pay the standard monthly premium amount of $134.00. The Social Security Administration will inform Medicare beneficiaries who are subject to the “hold harmless” provision the exact amount they will pay for Medicare Part B in 2017.

If you are currently eligible to receive a reimbursement for your Medicare Part B premium, you will need to provide LAFPP with documentation indicating how much you will pay for your Part B premium in 2017 in order for us to apply the correct reimbursement amount in your pension check. We expect to apply the new Part B premium reimbursements to the February 2017 pension check. You will continue to be reimbursed at your current 2016 reimbursement rate until we receive adequate proof of your 2017 premium paid. You will have up to a year to submit your documentation and you will receive reimbursement retroactively to January 1, 2017.

Retired Members and Qualified Survivors can receive a Part B reimbursement if they are eligible for a health subsidy and are enrolled in both Medicare Parts A and B. Please refer to the “Frequently Asked Questions” below on how to submit proof of your 2017 Part B premium. You may also contact the Medical and Dental Benefits Section by calling (213) 279-3115 or toll free at (844) 88-LAFPP ext. 93115 if you have any questions.

Frequently Asked Questions (FAQs)

1) My Medicare Part B premium is deducted from my monthly Social Security payment. What document do I need to submit to receive my correct Part B reimbursement amount?

The Social Security Administration (SSA) is in the process of mailing the Form SSA-4926 SM Statement (“Your New Benefit Amount” Statement) to all Social Security beneficiaries who are enrolled in Medicare.

Please make a copy of the statement and either: (1) Scan or take a picture of the statement and email it to: mdbsection@lafpp.com; (2) Fax a copy of the statement to (213) 628-7782 “Attn. MDB Section”; or (3) Mail it to LAFPP, Attn: Medical & Dental Benefits, 701 E. 3rd Street, Suite 200, Los Angeles, CA 90013. Remember, you may submit your documentation at any time during 2017 and retroactively receive your full 2017 Part B basic premium reimbursement.

2) I receive a monthly Social Security payment, but I received a letter that informed me that I pay a higher Part B premium based on my income level (Income-Related Monthly Adjustment Amount, i.e. IRMAA). May I send in the letter as proof of my Part B premium?

Yes, you may submit a copy of the first page of the letter that contains your name, address and 2017 monthly Medicare Part B premium deduction to LAFPP as proof in the manner described in the answer to FAQ #1 above and will be reimbursed at the maximum $134.00 / month.

3) I receive a monthly Social Security payment, but I did not receive / cannot locate my “New Benefit Amount” Statement. What can I do?

The easiest way to acquire proof of your 2017 Medicare Part B basic premium is to create a “My Social Security” account on the SSA website: https://www.ssa.gov/myaccount/. After creating your SSA account, you can request that a Benefit Verification Letter that serves as proof of your current Medicare coverage be generated and mailed to you (it may take up to 10 days for delivery). You may then submit it to LAFPP in the manner described in FAQ #1.

4) I am billed for my Medicare Part B premiums by the Centers for Medicare & Medicaid Services (CMS). What document do I need to submit to receive my correct 2017 Part B reimbursement amount?

If you do not qualify for Social Security income, but qualify for Medicare and pay your premiums directly, you need to submit the following:

A copy of your 2017 quarterly invoice statement (CMS 500 – Notice of Medicare Premium Payment Due) that has a 2017 monthly coverage date to the right of “Current amount due for Part A and/or Part B”. A sample copy of Form CMS 500 is provided in the link below on page 2 of the attachment with the coverage date period location highlighted in yellow. If your most recent statement shows 2016 coverage dates, wait until you receive your next statement showing 2017 coverage dates before submitting a copy to LAFPP in the same manner described in the answer to FAQ #1.

5) My spouse (non-LAFPP member) is currently enrolled in Medicare Parts A and B. Does he/she need to submit Medicare Part B premium documentation?

No, only the pensioner who is currently receiving a Medicare Part B premium reimbursement needs to submit documentation to LAFPP.