First, on behalf of the HPOPS board of trustees, we thank you for your dedication and hard work. For those of you that are active it was your tireless professionalism, perseverance, and unbelievable patience and tolerance that brought us through the last few weeks. To those that are retired thanks for your service and loyal support during these difficult few months. We wanted to share the status of the System with each of you.
We occasionally receive inquiries from our members as to the funded status of the Plan and the frequency of these inquiries has understandably accelerated during these turbulent times. But please remember that the 2017 restructuring of the Plan helped prepare us for times like this. When we last had an actuarial valuation in July of 2019 the System’s funded ratio was 81.7 percent which was approximately nine percent higher than it would have been absent the restructuring of the Plan in 2017. Without those changes our ability to recover would be much more difficult.
Our actuary will calculate the HPOPS funded ratio again later this year and of course it is likely that the ratio will decline due to the difficult market environment that we are experiencing. While we cannot predict what the funded ratio will be in the 2020 actuarial valuation we do have some history to go by. For some context we can look back to our approximate 18 percent investment loss in fiscal 2009 during the Great Financial Crisis. At that time our funded ratio declined by 3.4 percent and since our fiscal 2020 investment return is approximately zero as of this writing we can conclude that the decline in our funded ratio will be significantly less than the 3.4 percent mentioned above.
The City’s current budget includes a provision for fully funding the required contributions to HPOPS in the coming year as well as funding for five academy classes. As City contributions continue to be made as required by our statute then the funded ratio is anticipated to increase over time even with the periodic occurrence of challenging years like we are currently experiencing.
Yes these are volatile times, but as we have stated before this is no different from other recessions and market downturns when HPOPS never missed a benefit payment, never reduced the annual COLA, and never stopped paying interest on DROP and PROP accounts.
On a positive note, a reminder that by statute COLA’s return for all retirees 55 and over in 2021. Again, your benefit has not changed during these times and we are still in the middle of the corridor, despite these challenges. We encourage each of you not to make decisions concerning retirement and HPOPS funding based on rumors and fear. Instead, please continue to look to the HPOPS website, www.hpops.org, for up-to-date information on the status of your pension plan.
HPOPS Board of Trustees