Norwalk staff reports valuation changes after new actuary review: higher discount rate and extended amortization for police and fire

Staff reported that the boardngaged a new actuary (transcript references read as "Milliman") and adopted two actuarial methodology changes in the most recent valuations. The first change raises the discount rate used in valuation calculations from 6.5% to 6.75%; staff said Milliman indicated a case could be made for 7.0% but the board took a more conservative midpoint of 6.75%. Staff said the immediate effect of the change is an increase in funded ratios across funds of about 4–6 percentage points.

The second change is a recommendation to extend amortization for police and fire unfunded liabilities from a closed 10-year schedule to a layered 15-year schedule. Staff said the change is intended to reduce funding volatility by layering new unfunded amounts into a new 15-year period rather than resetting the full amortization on every valuation.

Board members discussed the implications, including whether the city needed to approve the change; staff said the change was communicated with the Board of Estimate and Taxation as part of the budget process and that the city had been informed. Members noted that the higher discount rate improves funded status but cautioned that future market downturns could make achieving that assumed return more difficult.

No formal recorded vote on these valuation methodology items appears in the transcript; staff characterized the changes as adopted for the valuation and as having been included in budget conversations with city officials.