HomeMy WebLinkAboutStaff Report 8509
City of Palo Alto (ID # 8509)
Finance Committee Staff Report
Report Type: Action Items Meeting Date: 9/19/2017
City of Palo Alto Page 1
Summary Title: Review and Discuss CalPERS Pension Annual Valuation
Reports
Title: Review and Discuss CalPERS Pension Annual Valuation Reports as of
June 30, 2016 Including Assumptions, Financial Disclosures and Next Steps
From: City Manager
Lead Department: Administrative Services
RECOMMENDATION
Staff Recommends the Finance Committee:
1. Review and discuss the June 30, 2016 CalPERs Valuation Reports for the Miscellaneous
and Safety Pension Plans; and
2. Provide feedback and direction for the next scheduled discussion (October 2017)
regarding the City’s options related to pension funding.
BACKGROUND
The City of Palo Alto offers its employees and retirees a defined pension benefit plan which is
managed and administered by the California Pensions Retirement System (CalPERS) a State of
California Pension Trust program. Annually staff provides the CalPERS actuarial reports detailing
the latest status of the City of Palo Alto Pension trust plans for employees and retirees. These
actuarial reports are used to calculate the annual required contribution to the trust for the
pension obligations. In addition, updates on the rate of return, funding status, and changes to
the trust based on various impacts are detailed in the report.
The City of Palo Alto provides a defined pension benefit to its employees through the State of
California Pension Retirement System (CalPERS), which manages and administers the program.
The CalPERS program maintains two trust accounts: 1) a plan for safety employees (sworn fire
and police personnel); and 2) a plan for miscellaneous employees (all other non-safety
personnel employed by the City such as field personnel, administrative support, and managers).
These annual reports provide updated actuarial information for both pension plans as of June
30, 2016.
City of Palo Alto Page 2
As a refresher on the CalPERS benefits, there are three tiers of benefits within the two plans
described above and it takes City employees five (5) years of service to vest in the pension
program. Table 1 below outlines the current pension plans and the different benefits levels by
tier. Attachment A outlines in further detail the participation levels in each of these tiers by
pension plan and employee group as of March 2017.
Table 1: City of Palo Alto Pension Benefit Plans and Tiers
Miscellaneous Safety: Fire Safety: Police
Tier 1 2.7%/service year
worked; eligibility starting
at the age of 55 (2.7% @
55)
3.0%/service year
worked; eligibility starting
at the age of 50 (3.0% @
50)
3.0%/service year
worked; eligibility starting
at the age of 50 (3.0% @
50)
Tier 2 Effective July 16, 2010 –
2.0%/service year worked,
eligibility starting at age
60 (2.0% @ 60)
Effective June 7, 2012 –
3.0%/service year
worked, eligibility starting
at age 55 (3.0% @ 55)
Effective December 6,
2012 – 3.0%/service year
worked, eligibility starting
at age 55 (3.0% @ 55)
Tier 3
“PEPRA”*
Effective January 1, 2013:
2.0%/service year
worked; eligibility starting
at age 62 (2.0% at 62)
Effective January 1, 2013:
2.7%/service year
worked; eligibility starting
at age 57 (2.7% at 57)
Effective January 1, 2013:
2.7%/service year
worked; eligibility starting
at age 57 (2.7% at 57)
* Under PEPRA, the benefit calculation is maxed at a salary of $142,530 for both Miscellaneous and Safety benefit plans,
therefore it is calculated based on service years but cannot exceed $142,530. Also, the final salary calculation is based on the
average of highest three years.
In addition, as part of the adoption of the City’s FY 2018 Budget, the City Council referred to the
Finance Committee the task of identifying funding options to further address the City’s
unfunded pension.
Specifically, the City Council directed staff to:
Return to the Finance Committee beginning August to review the citywide implications of: 1)
Structural revenue and expense growth ensuring expense growth remains at or below that of
revenues; and 2) Unfunded pension liability.
Some specific areas to address include:
1. Look first at current public safety growth rate of 10 to 12 percent in relation to
citywide growth rate of 6 percent. Include a review of staffing levels and
alternative models.
2. Review of the financial reporting of the unfunded pension liability
This is the first in a series of meetings staff anticipates scheduling over the coming fiscal year in
order to begin to address this referral from the City Council.
City of Palo Alto Page 3
DISCUSSION
CalPERS prepares an annual actuarial analysis to determine the City’s pension liability and
annual required contribution for the two trusts – update on the funding status, results of
assumptions such as rate of return (ROR), the new fiscal year Annual Required Contribution
(ARC) and projected future ARC as a percentage of payroll. The actuarial analysis is based on
current employees’ accrued benefit, and former employees that are vested but have yet to
retire as well as retired employees as of June 30, 2016. The CalPERS actuarial analysis is
completed two years in arrears by practice.
On December 21, 2016, the CalPERS Board of Administration lowered the discount rate (or rate
of return) from 7.5 percent to 7.0 percent using a three-year phase-in beginning in FY 2019.
The reports were prepared prior to CalPERS staff finalizing the ROR as of June 30, 2017, which
CalPERS estimated to be 11.2 percent. Overall, this ROR of 11.2 percent is a significant
improvement over the prior year’s rate of return of only 0.61 percent. Exceeding the assumed
rate of return of 7.375 percent is a positive short-term result and is estimated to bring CalPERS
overall funding status up by approximately 3 percent. The use of the actual 11.2 percent ROR
instead of the assumed rate of return of 7.375 percent will decrease the unfunded pension
liability in both trusts compared to the levels reported in these valuations, however, this will be
offset by the lowering of the ROR to 7.0 percent in future years, which will result in an increase
of the unfunded pension liability for both trusts.
CalPERS Projected Contribution levels
As of 2017, CalPERS has designated two components to the annual billing of the employer
portion of pension contributions, 1) the Normal Cost, and 2) the Unfunded Accrued Liability
(UAL).
- Normal Cost: This reflects a rate of contribution for the plan of retirement benefits
provided to current employees based on the current set of assumptions.
- Employer Amortization of Unfunded Accrued Liability: This is an annual payment
calculated by CalPERS to pay down an agency’s unfunded accrued pension liability.
Assuming every assumption in the actuarial valuation stayed perfectly in place, an
organization would eliminate its unfunded pension liability if it made these payments
annually for 30 years. The liability grows when the assumptions goals, such as rate of
return, are not met.
This ARC for FY 2019 is $26.8 million for the Miscellaneous Plan and $12.9 million for the Safety
Plan. These payments reflect the blended or combined cost of both the “Normal Cost” and the
“Unfunded Accrued Liability” and are within the staff estimated payment based on CalPERS
projections provided earlier this calendar year. Future ARCs are estimated to grow from 32.6
percent to 44.1 percent of payroll by FY 2025 for miscellaneous and from 55.6 percent to 76.2
percent of payroll for safety. This is based on a 7.375 percent ROR for FY 2019, 7.25 percent for
FY 2020, and 7.00 percent for future years starting in FY 2021.
City of Palo Alto Page 4
The tables below, Table 2 through Table 4, summarize the projected percentage of payroll
required for each plan to fund the ARC as well as the individual components that make up this
rate.
- Table 2: Reflects the estimated percentage of payroll that is necessary for the City of
Palo Alto as an employer to fund both the Normal Cost and the annual payment of the
Unfunded Accrued Liability. It should be noted that the majority of employee groups
have agreed to pick-up between 1% and 3% of this employer contribution rate.
- Table 3: Reflects the projected percentage of payroll for the Normal Cost employer
contribution. This rate increases as the phase in of the change in ROR is realized.
- Table 4: Reflects the estimated annual contribution to pay down the Unfunded Accrued
Liability. This cost also increases as the phase-in of the change in ROR is realized.
Staff anticipates providing additional implications of the increasing cost of providing current
service levels on the City of Palo Alto in future discussions.
TABLE 2: CalPERS Projected Employer Contribution Rates (blended both UAL and Normal
Cost)*
FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Miscellaneous 28.89% 30.20% 32.56% 35.9% 38.8% 40.9% 42.6% 43.5% 44.1%
Safety 45.43% 49.69% 55.63% 61.6% 66.3% 70.3% 73.5% 75.2% 76.2%
* In the most recent negotiations between the City and the represented labor units, the parties agreed to Memoranda of
Agreement (MOAs) that include provisions for employees to accept a greater share of pension costs to assist in curtailing the
City’s growing pension expense. For all Miscellaneous Plan employees, a 1% employee pick-up of the employer contribution
(excluding UMPAPA) and for all Safety employees a 3% employee pick-up of the employer contribution are anticipated to be
executed.
TABLE 3: CalPERS Projected Normal Cost Employer Rate*
FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Miscellaneous 10.33% 10.04% 10.22% 10.7% 11.7% 11.7% 11.7% 11.7% 11.7%
Safety 18.98% 18.90% 19.40% 20.2% 21.9% 21.9% 21.9% 21.9% 21.9%
* In addition to the employer contributions, employees contribute the employee share of pension costs based on the plan and
benefit tier. Miscellaneous employees in Tier 1 contribute 8 percent, Tier 2 contribute 7 percent and Tier 3 are 50 percent of
the Normal Cost. Safety employees in Tiers 1 and 2 contribute 9 percent and Tier 3 contribute 50 percent of the Normal Cost
percent.
TABLE 4: CalPERS Projected Annual Employer Amortization of Unfunded Accrued Liability
($’s in 000’s)
FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Miscellaneous 13,748 15,765 18,393 21,368 23,620 26,268 28,624 30,328 31,816
Safety 6,149 7,128 8,421 9,894 10,943 12,295 13,495 14,345 15,080
TOTAL $19,897 $22,893 $26,814 $31,262 $34,563 $38,563 $42,119 $44,673 $46,896
% Change from Prior Yr 15.1% 17.1% 16.6% 10.6% 11.6% 9.2% 6.1% 5.0%
City of Palo Alto Page 5
CalPERS Projected Unfunded Accrued Pension Liability
Included in the annual valuation report is a status of both plans “Funded Status.” Overall,
CalPERS is funded at 68 percentage. This is higher than the City’s funded status of 63.6 percent
for Safety, and 64.2 percent for miscellaneous. The Table 5 below outlines the City’s Funded
Status for both the Miscellaneous and Safety Plans with an assumed ROR of 7.375 as of June 30,
2017. The unfunded pension liability increased from $338.4 million as of June 30, 2015 to
$404.7 million as of June 30, 2016 an increase of $66.2 million or 19.6%. Again the actual ROR
was 11.2 percent and if this was used in the reports it would have lowered the unfunded
liability number that was provided.
TABLE 5: CalPERS Projected Unfunded Accrued Liability for the City of Palo Alto
As of
June 30, 2014
As of
June 30, 2015
As of
June 30, 2016
Miscellaneous 191,411,633 219,668,121 261,680,231
Miscellaneous Funded Ratio 71.3% 68.5% 64.2%
Safety 103,333,634 118,764,933 143,025,193
Safety Funded Ratio 71.9% 68.6% 63.6%
TOTAL UNFUNDED PENSION LIABILITY $249,745,267 $338,433,054 $404,705,424
% Change from Prior Yr 14.8% 19.6%
CalPERS recognizes the varying assumptions that may impact a plans unfunded accrued liability
and therefore a pension plan’s funding status, especially the implications of the discount rate
assumption. Therefore, in addition to the actuarial assumptions used to develop this annual
evaluation, CalPERS includes an Analysis of Discount Rate Sensitivity Section in their reports in
order to provide some level of sensitivity analysis of the pension plans. This analysis can be
found on page 22 of each respective plan report. The following analysis provided by CalPERS
looks at the June 30, 2016 unfunded accrued liability alternative discount rates. At 6.0 percent
ROR, the plans are estimated to have a total unfunded accrued liability of $609 million. This
represents an approximate 54 percent funding level of each plan. This analysis gives an
indication of the potential plan impacts if the Public Employees Retirement Fund were to realize
investment returns of 3.0% to 8.0% over the long-term. This type of analysis provides a sense of
the long-term risk of the employer contribution rates.
TABLE 6: CalPERS Alternative Scenarios Sensitivity Analysis (as of June 30, 2016)
3% Discount
Rate
6% Discount
Rate
7% Discount
Rate
8% Discount
Rate
Miscellaneous $681,675,340 $394,930,155 $294,639,684 $211,566,099
Miscellaneous Funded Ratio 40.7% 54.3% 61.4% 68.9%
Safety $388,794,232 $214,495,451 $160,646,230 $116,295,910
Safety Funded Ratio 39.1% 53.8% 60.9% 68.2%
TOTAL UNFUNDED PENSION LIABILITY $1.1 billion $609 million $455 million $328 million
City of Palo Alto Page 6
Conclusion
The City of Palo Alto has already proactively anticipated this increased need for funding and
worked on two strategies successfully to mitigate these growing funding needs. First, in the
most recent negotiations between the City and the represented labor units, the parties agreed
to Memoranda of Agreement (MOAs) that include provisions for employees to accept a greater
share of pension costs to assist in curtailing the City’s growing pension expense. For all
Miscellaneous Plan employees, a 1% employee pick-up of the employer contribution (excluding
UMPAPA) and for all Safety employees a 3% employee pick-up of the employer contribution are
anticipated to be executed. Second, the City Council has established an irrevocable 115
Pension Trust Fund with funding of approximately $3.1 million contributed through FY 2018
from all funds. This represents approximately 10% of the ARC.
Staff anticipates a continuation of this discussion in October 2017 including bringing back
potential funding options, methods of mitigating the implications in these reports, and
timelines for policy decisions in the context of the FY 2019 Budget development. It is through
this continued discussion staff anticipates further policy direction to be developed and
ultimately include in the annual budget process including the Long Range Financial Forecast.
RESOURCE IMPACT SECTION
Implications will be determined based on policy direction in subsequent conversations. The FY
2019 projects discussed in the Adopted of the FY 2018 Budget are consistent with these values.
ENVIRONMENTAL IMPACT
This report is not a project for the purposes of the California Environmental Quality Act.
Environmental review is not required.
Attachments:
Attachment A: Pension Tiers Table March 2017
Attachment B: CalPERS Safety Valuation June 30, 2016
Attachment C: CalPERS Misc. Valuation June 30, 2016
Mar 2017 Mar 2016 Mar 2017 Mar 2016
Tier 14 6 Tier 16770
Tier 22 2 Tier 267
Tier 34 3 Tier 31110
Sub‐total 10 11 Sub‐total 84 87
Tier 1 102 106 Tier 155
Tier 248 49 Tier 200
Tier 345 35 Tier 300
Sub‐total 195 190 Sub‐total 55
Tier 1 321 352 Tier 144
Tier 266 64 Tier 200
Tier 3 170 125 Tier 300
Sub‐total 557 541 Sub‐total 44
Tier 143 45 Tier 15059*
Tier 2 ‐ ‐ Tier 234
Tier 32 2 Tier 32410
Sub‐total 45 47 Sub‐total 77 73
Tier 176
Tier 211
Tier 300
Sub‐total 87
Tier 101
Tier 200
Tier 300
Sub‐total 01
Total Tier 1 470 509 Total Tier 1 133 145
Tier 2 116 115 Tier 21012
Tier 3 221 165 Tier 33520
Grand Total Misc Plans 807 789 Grand Total Safety Plans 178 177
%Tier 1 58% 65%%Tier 1 75% 82%
Tier 2 14% 15%Tier 26%7%
Tier 3 27% 21%Tier 3 20% 11%
Tier 1 2.7% @ 55 Tier 13% @ 50
Tier 22% @ 60 Tier 23% @ 55
Tier 32% @ 62 Tier 3 2.7% @ 57
*Excludes police trainees (4/2)
Police Management
Association
Police Management
Fire Management
PAPOA
Service Employees
International Union
Utilities Management
Miscellaneous Plans Safety Plans
Fire Chiefs Association
Employee Group
IAFFCity Council and Council
Appointed Officers
Employee Group
Management and
Professional
# of Employees # of Employees
Attachment A:
City of Palo Alto Pension Plan Benefit Levels Enrollment by Plan and Employee Group
California Public Employees’ Retirement System
Actuarial Office
P.O. Box 942701
Sacramento, CA 94229-2701
TTY: (916) 795-3240
(888) 225-7377 phone • (916) 795-2744 fax
www.calpers.ca.gov
July 2017
SAFETY PLAN OF THE CITY OF PALO ALTO (CalPERS ID: 6373437857)
Annual Valuation Report as of June 30, 2016
Dear Employer,
As an attachment to this letter, you will find a copy of the June 30, 2016 actuarial valuation report of your pension
plan. Your 2016 actuarial valuation report contains important actuarial information about your pension plan at CalPERS.
Your CalPERS staff actuary, whose signature appears in the “Actuarial Certification” section on page 1, is available to
discuss the report with you after August 31, 2017.
Required Contributions
The exhibit below displays the minimum required employer contributions and the Employee PEPRA Rate for Fiscal Year
2018-19 along with estimates of the required contributions for Fiscal Years 2019-20 and 2020-21. Member
contributions other than cost sharing (whether paid by the employer or the employee) are in addition to the results
shown below. The required employer contributions in this report do not reflect any cost sharing arrangement you may have with your employees.
Fiscal Year Employer Normal Cost Rate Employer Amortization of Unfunded Accrued Liability Employee PEPRA Rate
2018-19 19.397% $8,421,191 10.75%
Projected Results
2019-20 20.2% $9,894,000 TBD
2020-21 21.9% $10,943,000 TBD
The actual investment return for Fiscal Year 2016-17 was not known at the time this report was prepared. The
projections above assume the investment return for that year would be 7.375 percent. If the actual investment
return for Fiscal year 2016-17 differs from 7.375 percent, the actual contribution requirements for the projected years will differ from those shown above.
Moreover, the projected results for Fiscal Years 2019-20 and 2020-21 also assume that there are no future plan
changes, no further changes in assumptions other than those recently approved, and no liability gains or losses. Such
changes can have a significant impact on required contributions. Since they cannot be predicted in advance, the
projected employer results shown above are estimates. The actual required employer contributions for Fiscal year
2019-20 will be provided in next year’s report.
For additional details regarding the assumptions and methods used for these projections please refer to the “Projected
Employer Contributions” in the “Highlights and Executive Summary” section.
The required contributions shown above include a Normal Cost component expressed as a percentage of payroll and a
payment toward Unfunded Accrued Liability expressed as a dollar amount. Actual contributions for Fiscal Year 2018-19
and all future years will be collected on that basis. For illustrative total contribution requirements expressed as
percentages of payroll, please see pages 4 and 5 of the report.
The “Risk Analysis” section of the valuation report on page 21 also contains estimated employer contributions in future
years under a variety of investment return scenarios.
SAFETY PLAN OF THE CITY OF PALO ALTO
(CalPERS ID: 6373437857)
Annual Valuation Report as of June 30, 2016
Page 2
Changes since the Prior Year’s Valuation
On December 21, 2016, the CalPERS Board of Administration lowered the discount rate from 7.50 percent to 7.00
percent using a three year phase-in beginning with the June 30, 2016 actuarial valuations. The minimum employer
contributions for Fiscal Year 2018-19 determined in this valuation were calculated using a discount rate of 7.375
percent. The projected employer contributions on Page 5 are calculated assuming that the discount rate will be lowered to 7.25 percent next year and to 7.00 percent the following year as adopted by the Board.
Beginning with Fiscal Year 2017-18 CalPERS began collecting employer contributions toward the plan’s unfunded
liability as dollar amounts instead of the prior method of a contribution rate. This change addresses potential funding
issues that could arise from a declining payroll or reduction in the number of active members in the plan. Funding the
unfunded liability as a percentage of payroll could lead to the underfunding of the plans. Due to stakeholder feedback
regarding internal needs for total contributions expressed as a percentage of payroll, the reports have been modified to include such results in the contribution projection on page 5. These results are provided for information purposes only.
Contributions toward the unfunded liability will continue to be collected as dollar amounts.
The CalPERS Board of Administration adopted a Risk Mitigation Policy which is designed to reduce funding risk over
time. This Policy has been temporarily suspended during the period over which the discount rate is being lowered.
More details on the Risk Mitigation Policy can be found on our website.
Besides the above noted changes, there may also be changes specific to the plan such as contract amendments and funding changes. Further descriptions of general changes are included in the “Highlights and Executive Summary” section and in
Appendix A, “Actuarial Methods and Assumptions.” The effects of the changes on the required contributions are
included in the “Reconciliation of Required Employer Contributions” section.
We understand that you might have a number of questions about these results. While we are very interested in
discussing these results with your agency, in the interest of allowing us to give every public agency their results, we ask that you wait until after August 31 to contact us with actuarial questions. If you have other questions, you may call
the Customer Contact Center at (888)-CalPERS or (888-225-7377).
Sincerely,
SCOTT TERANDO Chief Actuary
ACTUARIAL VALUATION
as of June 30, 2016
for the
SAFETY PLAN
of the
CITY OF PALO ALTO
(CalPERS ID: 6373437857)
(Rate Plan ID: 5080)
REQUIRED CONTRIBUTIONS
FOR FISCAL YEAR
July 1, 2018 – June 30, 2019
TABLE OF CONTENTS
ACTUARIAL CERTIFICATION 1
HIGHLIGHTS AND EXECUTIVE SUMMARY
Introduction 3
Purpose of the Report 3
Required Contributions 4
Plan’s Funded Status 5 Projected Employer Contributions 5
Cost 6
Changes Since the Prior Year’s Valuation 7
Subsequent Events 7
ASSETS
Reconciliation of the Market Value of Assets 9
Asset Allocation 10
CalPERS History of Investment Returns 11
LIABILITIES AND CONTRIBUTIONS
Development of Accrued and Unfunded Liabilities 13 (Gain) / Loss Analysis 06/30/15 - 06/30/16 14
Schedule of Amortization Bases 15
30-Year Amortization Schedule and Alternatives 16
Reconciliation of Required Employer Contributions 18
Employer Contribution History 19
Funding History 19
RISK ANALYSIS
Analysis of Future Investment Return Scenarios 21
Analysis of Discount Rate Sensitivity 22 Volatility Ratios 23
Hypothetical Termination Liability 24
PLAN’S MAJOR BENEFIT PROVISIONS
Plan’s Major Benefit Options 26
APPENDIX A – ACTUARIAL METHODS AND ASSUMPTIONS
Actuarial Data A-1
Actuarial Methods A-1
Actuarial Assumptions A-3
Miscellaneous A-21
APPENDIX B – PRINCIPAL PLAN PROVISIONS B-1
APPENDIX C – PARTICIPANT DATA
Summary of Valuation Data C-1 Active Members C-2
Transferred and Terminated Members C-3
Retired Members and Beneficiaries C-4
APPENDIX D – DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION RATE D-1
APPENDIX E – GLOSSARY OF ACTUARIAL TERMS E-1
(CY) FIN PROCESS CONTROL ID: 496858 (PY) FIN PROCESS CONTROL ID: 480105 REPORT ID: 104049
CALPERS ACTUARIAL VALUATION - June 30, 2016
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 1
ACTUARIAL CERTIFICATION
To the best of our knowledge, this report is complete and accurate and contains sufficient information to
disclose, fully and fairly, the funded condition of the SAFETY PLAN OF THE CITY OF PALO ALTO. This
valuation is based on the member and financial data as of June 30, 2016 provided by the various CalPERS databases and the benefits under this plan with CalPERS as of the date this report was produced. It is our
opinion that the valuation has been performed in accordance with generally accepted actuarial principles, in
accordance with standards of practice prescribed by the Actuarial Standards Board, and that the
assumptions and methods are internally consistent and reasonable for this plan, as prescribed by the
CalPERS Board of Administration according to provisions set forth in the California Public Employees’
Retirement Law.
The undersigned is an actuary for CalPERS, a member of the American Academy of Actuaries and the
Society of Actuaries and meets the Qualification Standards of the American Academy of Actuaries to render
the actuarial opinions contained herein.
DAVID CLEMENT, ASA, MAAA, EA
Senior Pension Actuary, CalPERS
HIGHLIGHTS AND EXECUTIVE SUMMARY
INTRODUCTION
PURPOSE OF THE REPORT
REQUIRED CONTRIBUTIONS
PLAN’S FUNDED STATUS
PROJECTED EMPLOYER CONTRIBUTIONS
COST
CHANGES SINCE THE PRIOR YEAR’S VALUATION
SUBSEQUENT EVENTS
CALPERS ACTUARIAL VALUATION - June 30, 2016
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 3
Introduction
This report presents the results of the June 30, 2016 actuarial valuation of the SAFETY PLAN OF THE CITY
OF PALO ALTO of the California Public Employees’ Retirement System (CalPERS). This actuarial valuation
sets the required employer contributions for Fiscal Year 2018-19.
Purpose of the Report
The actuarial valuation was prepared by the CalPERS Actuarial Office using data as of June 30, 2016. The purpose of the report is to:
Set forth the assets and accrued liabilities of this plan as of June 30, 2016;
Determine the required employer contributions for the fiscal year July 1, 2018 through June 30, 2019;
Provide actuarial information as of June 30, 2016 to the CalPERS Board of Administration and other
interested parties.
The pension funding information presented in this report should not be used in financial reports subject to Governmental Accounting Standards Board (GASB) Statement No. 68 for an Agent Employer Defined Benefit
Pension Plan. A separate accounting valuation report for such purposes is available from CalPERS and
details for ordering are available on our website.
The measurements shown in this actuarial valuation may not be applicable for other purposes. The
employer should contact their actuary before disseminating any portion of this report for any reason that is
not explicitly described above.
Future actuarial measurements may differ significantly from the current measurements presented in this
report due to such factors as the following: plan experience differing from that anticipated by the economic
or demographic assumptions; changes in economic or demographic assumptions; changes in actuarial
policies; and changes in plan provisions or applicable law.
California Actuarial Advisory Panel Recommendations
This report includes all the basic disclosure elements as described in the Model Disclosure Elements for
Actuarial Valuation Reports recommended in 2011 by the California Actuarial Advisory Panel (CAAP), with
the exception of including the original base amounts of the various components of the unfunded liability in
the Schedule of Amortization Bases shown on page 15.
Additionally, this report includes the following “Enhanced Risk Disclosures” also recommended by the CAAP
in the Model Disclosure Elements document:
A “Deterministic Stress Test,” projecting future results under different investment income
scenarios
A “Sensitivity Analysis,” showing the impact on current valuation results using alternative discount
rates of 6.0 percent, 7.0 percent and 8.0 percent.
CALPERS ACTUARIAL VALUATION - June 30, 2016
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 4
Required Contributions
Fiscal Year
Required Employer Contribution 2018-19
Employer Normal Cost Rate 19.397%
Plus Either
1) Monthly Employer Dollar UAL Payment $ 701,766
Or
2) Annual UAL Prepayment Option $ 8,126,844
Required PEPRA Member Contribution Rate
10.75%
The total minimum required employer contribution is the sum of the Plan’s Employer Normal Cost Rate
(expressed as a percentage of payroll) plus the Employer Unfunded Accrued Liability (UAL) Contribution
Amount (billed monthly in dollars).
Only the UAL portion of the employer contribution can be prepaid (which must be received in full no
later than July 31). Plan Normal Cost contributions will be made as part of the payroll reporting
process. If there is contractual cost sharing or other change, this amount will change.
§20572 of the Public Employees’ Retirement Law assesses interest at an annual rate of 10 percent if a
contracting agency fails to remit the required contributions when due.
For additional detail regarding the determination of the required contribution for PEPRA members, see Appendix D. Required member contributions for Classic members can be found in Appendix B.
Fiscal Year Fiscal Year
2017-18 2018-19
Normal Cost Contribution as a Percentage of Payroll
Total Normal Cost 28.029% 28.571%
Employee Contribution1 9.129% 9.174%
Employer Normal Cost 18.900% 19.397%
Projected Annual Payroll for Contribution Year $ 23,150,815 $ 23,240,148
Estimated Employer Contributions Based On
Projected Payroll
Total Normal Cost $ 6,488,942 $ 6,639,943
Employee Contribution1 2,113,438 2,132,051
Employer Normal Cost 4,375,504 4,507,892
Unfunded Liability Contribution 7,127,885 8,421,191
% of Projected Payroll (illustrative only) 30.789% 36.236%
Estimated Total Employer Contribution $ 11,503,389 $ 12,929,083
% of Projected Payroll (illustrative only) 49.689% 55.633%
1 For classic members, this is the percentage specified in the Public Employees Retirement Law, net of any reduction from
the use of a modified formula or other factors. For PEPRA members, the member contribution rate is based on 50 percent of the normal cost. A development of PEPRA member contribution rates can be found in Appendix D. Employee
cost sharing is not shown in this report.
CALPERS ACTUARIAL VALUATION - June 30, 2016
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 5
Plan’s Funded Status
This measure of funded status is an assessment of the need for future employer contributions based on the
selected actuarial cost method used to fund the plan. The UAL is the present value of future employer
contributions for service that has already been earned and is in addition to future normal cost contributions
for active members. For a measure of funded status that is appropriate for assessing the sufficiency of plan assets to cover estimated termination liabilities, please see “Hypothetical Termination Liability” in the “Risk
Analysis” section.
Projected Employer Contributions
The table below shows the required and projected employer contributions (before cost sharing) for the next
six fiscal years. Projected results reflect the adopted changes to the discount rate described in Appendix A,
“Actuarial Methods and Assumptions.” The projections also assume that all actuarial assumptions will be
realized and that no further changes to assumptions, contributions, benefits, or funding will occur during the
projection period. The projected normal cost percentages in the projections below do not reflect that the
normal cost will decline over time as new employees are hired into PEPRA or other lower cost benefit tiers.
Required
Contribution
Projected Future Employer Contributions
(Assumes 7.375% Return for Fiscal Year 2016-17)
Fiscal Year 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25
Normal Cost % 19.397% 20.2% 21.9% 21.9% 21.9% 21.9% 21.9%
UAL Payment 8,421,191 9,894,000 10,943,000 12,295,000 13,495,000 14,345,000 15,080,000
Total as a % of Payroll* 55.6% 61.6% 66.3% 70.3% 73.5% 75.2% 76.2%
Projected Payroll 23,240,148 23,937,353 24,655,474 25,395,138 26,156,992 26,941,702 27,749,953
*Illustrative only and based on the projected payroll shown.
Changes in the UAL due to actuarial gains or losses as well as changes in actuarial assumptions or methods
are amortized using a 5-year ramp up. For more information, please see “Amortization of the Unfunded
Actuarial Accrued Liability” under “Actuarial Methods” in Appendix A. This method phases in the impact of
unanticipated changes in UAL over a 5-year period and attempts to minimize employer cost volatility from
year to year. As a result of this methodology, dramatic changes in the required employer contributions in
any one year are less likely. However, required contributions can change gradually and significantly over the next five years. In years where there is a large increase in UAL the relatively small amortization payments
during the ramp up period could result in a funded ratio that is projected to decrease initially while the
contribution impact of the increase in the UAL is phased in.
Due to the adopted changes in the discount rate for the next two valuations in combination with the 5-year
phase-in ramp, the increases in the required contributions are expected to continue for seven years from
Fiscal Year 2018-19 through Fiscal Year 2024-25.
For projected contributions under alternate investment return scenarios, please see the “Analysis of Future
Investment Return Scenarios” in the “Risk Analysis” section.
June 30, 2015 June 30, 2016
1. Present Value of Projected Benefits $ 433,980,861 $ 448,048,891
2. Entry Age Normal Accrued Liability 377,934,524 392,911,774
3. Market Value of Assets (MVA) $ 259,169,591 $ 249,886,581
4. Unfunded Accrued Liability (UAL) [(2) – (3)] $ 118,764,933 $ 143,025,193
5. Funded Ratio [(3) / (2)] 68.6% 63.6%
CALPERS ACTUARIAL VALUATION - June 30, 2016
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 6
Cost
Actuarial Cost Estimates in General
What is the cost of the pension plan?
Contributions to fund the pension plan are comprised of two components:
The Normal Cost, expressed as a percentage of total active payroll.
The Amortization of the Unfunded Accrued Liability (UAL), expressed as a dollar amount.
For fiscal years prior to FY 2017-18, the Amortizations of UAL component was expressed as percentage of
total active payroll. Starting with FY 2017-18, the Amortization of UAL component will be expressed as a dollar amount and will be invoiced on a monthly basis. There will be an option to prepay this amount during
July of each fiscal year.
The Normal Cost component will continue to be expressed as a percentage of active payroll with employer
and employee contributions payable as part of the regular payroll reporting process.
The determination of both components requires complex actuarial calculations. The calculations are based on a set of actuarial assumptions which can be divided into two categories:
Demographic assumptions (which includes mortality rates, retirement rates, employment
termination rates, disability rates)
Economic assumptions (which includes future investment earnings, inflation, salary growth rates)
These assumptions reflect CalPERS best estimate of the future experience of the plan and are long term in nature. We recognize that all the assumptions will not be realized in any given year. For example, the
investment earnings at CalPERS have averaged 7.0 percent over the 20 years ending June 30, 2016, yet
individual fiscal year returns have ranged from -24 percent to +21.7 percent. In addition, CalPERS reviews
all the actuarial assumptions on an ongoing basis by conducting in depth experience studies every four
years.
CALPERS ACTUARIAL VALUATION - June 30, 2016
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 7
Changes since the Prior Year’s Valuation
Benefits
The standard actuarial practice at CalPERS is to recognize mandated legislative benefit changes in the first annual valuation following the effective date of the legislation. Voluntary benefit changes by plan
amendment are generally included in the first valuation that is prepared after the amendment becomes
effective, even if the valuation date is prior to the effective date of the amendment.
This valuation generally reflects plan changes by amendments effective before the date of the report. Please
refer to the “Plan’s Major Benefit Options” and Appendix B for a summary of the plan provisions used in this
valuation. The effect of any mandated benefit changes or plan amendments on the unfunded liability is shown in the “(Gain)/Loss Analysis” and the effect on the employer contribution is shown in the
“Reconciliation of Required Employer Contributions.” It should be noted that no change in liability or
contribution is shown for any plan changes which were already included in the prior year’s valuation.
Actuarial Methods and Assumptions
On December 21, 2016, the CalPERS Board of Administration lowered the discount rate from 7.50 percent to
7.00 percent using a three year phase-in beginning with the June 30, 2016 actuarial valuations. The minimum employer contributions for Fiscal Year 2018-19 determined in this valuation were calculated using
a discount rate of 7.375 percent. The projected employer contributions on Page 5 are calculated assuming
that the discount rate will be lowered to 7.25 percent next year and 7.00 percent the following year as
adopted by the Board. The decision to reduce the discount rate was primarily based on reduced capital
market assumptions provided by external investment consultants and CalPERS investment staff. The specific
decision adopted by the Board reflected recommendations from CalPERS staff and additional input from
employer and employee stakeholder groups. Based on the investment allocation adopted by the Board and capital market assumptions, the reduced discount rate assumption provides a more realistic assumption for
the long term investment return of the fund.
Notwithstanding the Board’s decision to phase into a 7.0 percent discount rate, subsequent analysis of the
expected investment return of CalPERS assets or changes to the investment allocation may result in a
change to this three year discount rate schedule. A comprehensive analysis of all actuarial assumptions and
methods including the discount rate will be conducted in 2017.
Subsequent Events
The contribution requirements determined in this actuarial valuation report are based on demographic and financial information as of June 30, 2016. Changes in the value of assets subsequent to that date are not
reflected. Declines in asset values will increase the required contribution, while investment returns above
the assumed rate of return will decrease the actuarial cost of the plan.
This actuarial valuation report reflects statutory changes, regulatory changes and CalPERS Board actions
through January 2017. Any subsequent changes or actions are not reflected.
ASSETS
RECONCILIATION OF THE MARKET VALUE OF ASSETS
ASSET ALLOCATION
CALPERS HISTORY OF INVESTMENT RETURNS
CALPERS ACTUARIAL VALUATION - June 30, 2016
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 9
Reconciliation of the Market Value of Assets
1. Market Value of Assets as of 6/30/15 including Receivables $ 259,169,591
2. Change in Receivables for Service Buybacks (93,759)
3. Employer Contributions 9,403,268
4. Employee Contributions 2,014,877
5. Benefit Payments to Retirees and Beneficiaries (21,629,407)
6. Refunds (39,964)
7. Lump Sum Payments 0
8. Transfers and Miscellaneous Adjustments 136,139
9. Net Investment Return 925,836
10. Market Value of Assets as of 6/30/16 including Receivables $ 249,886,581
CALPERS ACTUARIAL VALUATION - June 30, 2016
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 10
Asset Allocation
CalPERS adheres to an Asset Allocation Strategy which establishes asset class allocation policy targets and
ranges, and manages those asset class allocations within their policy ranges. CalPERS Investment Belief No.
6 recognizes that strategic asset allocation is the dominant determinant of portfolio risk and return. On February 19, 2014, the CalPERS Board of Administration adopted changes to the current asset allocation as
shown in the Policy Target Allocation below expressed as a percentage of total assets.
The asset allocation and market value of assets shown below reflect the values of the Public Employees’
Retirement Fund (PERF) in its entirety as of June 30, 2016. The assets for CITY OF PALO ALTO SAFETY
PLAN are part of the PERF and are invested accordingly.
(A)
Asset Class
(B)
Market Value
($ Billion)
(C)
Policy Target
Allocation
Public Equity 153.1 51.0%
Private Equity 26.4 10.0%
Global Fixed Income 59.9 20.0%
Liquidity 4.5 1.0%
Real Assets 31.8 12.0%
Inflation Sensitive Assets 17.8 6.0%
Other 1.6 0.0%
Total Fund $295.1 100.0%
Global Equity
51.9%
Private Equity
9.0%
Global Fixed
Income
20.3%
Liquidity
1.5%
Real Assets
10.8%
Inflation
6.0%
Other
0.5%
Asset Allocation at 6/30/2016
CALPERS ACTUARIAL VALUATION - June 30, 2016
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 11
CalPERS History of Investment Returns
The following is a chart with the 20-year historical annual returns of the Public Employees Retirement Fund
for each fiscal year ending on June 30. Beginning in 2002, the figures are reported as gross of fees.
The table below shows historical geometric mean annual returns of the Public Employees Retirement Fund
for various time periods ending on June 30, 2016, (figures are reported as gross of fees). The geometric
mean rate of return is the average rate per period compounded over multiple periods. It should be
recognized that in any given year the rate of return is volatile. The portfolio has an expected volatility of 11.8 percent per year based on the most recent Asset Liability Modelling study. The volatility is a measure of
the risk of the portfolio expressed in the standard deviation of the fund’s total return distribution, expressed
as a percentage. Consequently, when looking at investment returns, it is more instructive to look at returns
over longer time horizons.
History of CalPERS Geometric Mean Rates of Return and Volatilities
1 year 5 year 10 year 20 year 30 year
Geometric Return 0.6% 6.6% 5.0% 7.0% 8.2%
Volatility – 8.1% 14.0% 11.8% 10.1%
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
20
.
1
%
19
.
5
%
12
.
5
%
10
.
5
%
-7.
2
%
-6.
1
%
3.
7
%
16
.
6
%
12
.
3
%
11
.
8
%
19
.
1
%
-5.
1
%
-24
.
0
%
13
.
3
%
21
.
7
%
0.
2
%
13
.
2
%
17
.
7
%
2.
4
%
0.
6
%
LIABILITIES AND CONTRIBUTIONS
DEVELOPMENT OF ACCRUED AND UNFUNDED LIABILITIES
(GAIN) / LOSS ANALYSIS 06/30/15 - 06/30/16
SCHEDULE OF AMORTIZATION BASES
30-YEAR AMORTIZATION SCHEDULES AND ALTERNATIVES
RECONCILIATION OF REQUIRED EMPLOYER CONTRIBUTIONS
EMPLOYER CONTRIBUTION HISTORY
FUNDING HISTORY
CALPERS ACTUARIAL VALUATION - June 30, 2016
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 13
Development of Accrued and Unfunded Liabilities
June 30, 2015 June 30, 2016
1. Present Value of Projected Benefits
a) Active Members $ 145,227,338 151,548,026
b) Transferred Members 7,219,815 7,805,314
c) Terminated Members 2,371,428 2,453,933
d) Members and Beneficiaries Receiving Payments 279,162,280 286,241,618
e) Total $ 433,980,861 448,048,891
2. Present Value of Future Employer Normal Costs $ 37,166,396 36,656,902
3. Present Value of Future Employee Contributions $ 18,879,941 18,480,215
4. Entry Age Normal Accrued Liability
a) Active Members [(1a) - (2) - (3)] $ 89,181,001 96,410,909
b) Transferred Members (1b) 7,219,815 7,805,314
c) Terminated Members (1c) 2,371,428 2,453,933
d) Members and Beneficiaries Receiving Payments (1d) 279,162,280 286,241,618
e) Total $ 377,934,524 392,911,774
5. Market Value of Assets (MVA) $ 259,169,591 249,886,581
6. Unfunded Accrued Liability (UAL) [(4e) - (5)] $ 118,764,933 143,025,193
7. Funded Ratio [(5) / (4e)] 68.6% 63.6%
CALPERS ACTUARIAL VALUATION - June 30, 2016
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 14
(Gain)/Loss Analysis 6/30/15 – 6/30/16
To calculate the cost requirements of the plan, assumptions are made about future events that affect the
amount and timing of benefits to be paid and assets to be accumulated. Each year, actual experience is
compared to the expected experience based on the actuarial assumptions. This results in actuarial gains or losses, as shown below.
1. Total (Gain)/Loss for the Year
a) Unfunded Accrued Liability (UAL) as of 6/30/15 $ 118,764,933
b) Expected Payment on the UAL during 2015-16 5,004,190 c) Interest through 6/30/16 [.075 x (1a) - ((1.075)½ - 1) x (1b)] 8,723,105
d) Expected UAL before all other changes [(1a) - (1b) + (1c)] 122,483,848
e) Change due to plan changes 0
f) Change due to assumption change 5,599,395
g) Expected UAL after all other changes [(1d) + (1e) + (1f)] 128,083,243
h) Actual UAL as of 6/30/16 143,025,193
i) Total (Gain)/Loss for 2015-16 [(1h) - (1g)] $ 14,941,950
2. Contribution (Gain)/Loss for the Year
a) Expected Contribution (Employer and Employee) $ 11,142,461
b) Interest on Expected Contributions 410,288
c) Actual Contributions 11,418,145 d) Interest on Actual Contributions 420,440
e) Expected Contributions with Interest [(2a) + (2b)] 11,552,749
f) Actual Contributions with Interest [(2c) + (2d)] 11,838,585
g) Contribution (Gain)/Loss [(2e) - (2f)] $ (285,836)
3. Asset (Gain)/Loss for the Year
a) Market Value of Assets as of 6/30/15 $ 259,169,591
b) Prior Fiscal Year Receivables (739,213)
c) Current Fiscal Year Receivables 645,454
d) Contributions Received 11,418,145
e) Benefits and Refunds Paid (21,669,371) f) Transfers and Miscellaneous Adjustments 136,139
g) Expected Int. [.075 x (3a + 3b) + ((1.075)½ - 1) x ((3d) + (3e) + (3f))] 19,009,820
h) Expected Assets as of 6/30/16 [(3a) + (3b) + (3c) + (3d) + (3e) + (3f) + (3g)] 267,970,565
i) Market Value of Assets as of 6/30/16 249,886,581
j) Asset (Gain)/Loss [(3h) - (3i)] $ 18,083,984
4. Liability (Gain)/Loss for the Year
a) Total (Gain)/Loss (1i) $ 14,941,950
b) Contribution (Gain)/Loss (2g) (285,836)
c) Asset (Gain)/Loss (3j) 18,083,984
d) Liability (Gain)/Loss [(4a) - (4b) - (4c)] $ (2,856,198)
CALPERS ACTUARIAL VALUATION - June 30, 2016
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 15
Schedule of Amortization Bases
There is a two-year lag between the valuation date and the start of the contribution fiscal year.
The assets, liabilities, and funded status of the plan are measured as of the valuation date: June 30, 2016.
The required employer contributions determined by the valuation are for the fiscal year beginning two years after the valuation date: Fiscal Year 2018-19.
This two-year lag is necessary due to the amount of time needed to extract and test the membership and financial data, and the need to provide public agencies
with their required employer contribution well in advance of the start of the fiscal year.
The Unfunded Accrued Liability (UAL) is used to determine the employer contribution and therefore must be rolled forward two years from the valuation date to the first day of the fiscal year for which the contribution is being determined. The UAL is rolled forward each year by subtracting the expected payment on the UAL for
the fiscal year and adjusting for interest. The expected payment on the UAL for a fiscal year is equal to the Expected Employer Contribution for the fiscal year minus
the Expected Normal Cost for the year. The Employer Contribution for the first fiscal year is determined by the actuarial valuation two years ago and the contribution
for the second year is from the actuarial valuation one year ago. The Normal Cost Rate for each of the two fiscal years is assumed to be the same as the rate
determined by the current valuation. All expected dollar amounts are determined by multiplying the rate by the expected payroll for the applicable fiscal year, based
on payroll as of the valuation date.
Reason for Base
Date
Established
Amorti-zation
Period
Balance
6/30/16
Expected Payment
2016-17
Balance
6/30/17
Expected Payment
2017-18
Balance
6/30/18
Scheduled Payment for
2018-19
FRESH START 06/30/04 18 $(928,572) $(70,112) $(924,403) $(72,216) $(917,746) $(73,518)
BENEFIT CHANGE 06/30/05 8 $141,689 $17,674 $133,824 $18,204 $124,831 $18,618
ASSUMPTION CHANGE 06/30/09 13 $7,356,998 $674,413 $7,200,737 $694,645 $7,011,987 $708,757
SPECIAL (GAIN)/LOSS 06/30/09 23 $8,903,104 $588,446 $8,949,949 $606,099 $8,981,956 $615,760
SPECIAL (GAIN)/LOSS 06/30/10 24 $4,238,306 $274,129 $4,266,823 $282,353 $4,288,922 $286,741
ASSUMPTION CHANGE 06/30/11 15 $6,174,876 $518,759 $6,092,725 $534,322 $5,988,389 $544,679
SPECIAL (GAIN)/LOSS 06/30/11 25 $2,401,190 $152,183 $2,420,583 $156,749 $2,436,675 $159,124
PAYMENT (GAIN)/LOSS 06/30/12 26 $1,549,288 $96,335 $1,563,724 $99,225 $1,576,230 $100,690
(GAIN)/LOSS 06/30/12 26 $44,343,046 $2,757,260 $44,756,220 $2,839,977 $45,114,153 $2,881,919
(GAIN)/LOSS 06/30/13 27 $41,497,881 $1,133,854 $43,383,429 $1,751,805 $44,767,703 $2,370,921
ASSUMPTION CHANGE 06/30/14 18 $19,725,680 $375,729 $20,791,111 $774,001 $21,522,421 $1,182,639
(GAIN)/LOSS 06/30/14 28 $(26,317,755) $(370,160) $(27,875,123) $(762,530) $(29,140,765) $(1,160,282)
(GAIN)/LOSS 06/30/15 29 $13,398,115 $(183,242) $14,576,105 $205,251 $15,438,408 $416,097
ASSUMPTION CHANGE 06/30/16 20 $5,599,395 $(172,182) $6,190,769 $(177,347) $6,831,109 $128,758
(GAIN)/LOSS 06/30/16 30 $14,941,952 $(97,946) $16,145,414 $0 $17,336,138 $240,288
TOTAL $143,025,193 $5,695,140 $147,671,888 $6,950,538 $151,360,411 $8,421,191
CALPERS ACTUARIAL VALUATION - June 30, 2016
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 20 Page 16
30-Year Amortization Schedule and Alternatives
The amortization schedule on the previous page shows the minimum contributions required according to
CalPERS amortization policy. There has been considerable interest from many agencies in paying off these unfunded accrued liabilities sooner and the possible savings in doing so. As a result, we have provided
alternate amortization schedules to help analyze the current amortization schedule and illustrate the
advantages of accelerating unfunded liability payments.
Shown on the following page are future year amortization payments based on 1) the current amortization
schedule reflecting the individual bases and remaining periods shown on the previous page, and 2) alternate “fresh start” amortization schedules using two sample periods that would both result in interest savings
relative to the current amortization schedule. Note that the payments under each alternate scenario
increase by 3 percent per year. The schedules do not reflect the impact of adopted discount rate
changes that will become effective beyond June 30, 2016. Therefore, future amortization
payments displayed in the Current Amortization Schedule on the following page will not match
projected amortization payments shown in connection with Projected Employer Contributions
provided elsewhere in this report.
The Current Amortization Schedule typically contains individual bases that are both positive and negative.
Positive bases result from plan changes, assumption changes or plan experience that result in increases to
unfunded liability. Negative bases result from plan changes, assumption changes or plan experience that
result in decreases to unfunded liability. The combination of positive and negative bases within an
amortization schedule can result in unusual or problematic circumstances in future years such as:
A positive total unfunded liability with a negative total payment,
A negative total unfunded liability with a positive total payment, or Total payments that completely amortize the unfunded liability over a very short period of time
In any year where one of the above scenarios occurs, the actuary will consider corrective action such as
replacing the existing unfunded liability bases with a single “fresh start” base and amortizing it over a
reasonable period.
The Current Amortization Schedule on the following page may appear to show that, based on the current amortization bases, one of the above scenarios will occur at some point in the future. It is impossible to
know today whether such a scenario will in fact arise since there will be additional bases added to the
amortization schedule in each future year. Should such a scenario arise in any future year, the actuary will
take appropriate action based on guidelines in the CalPERS amortization policy. For purposes of this display,
total payments include any negative payments. Therefore, the amount of estimated savings may be
understated to the extent that negative payments appear in the current schedule.
CALPERS ACTUARIAL VALUATION - June 30, 2016
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 17
30-Year Amortization Schedule and Alternatives
* This schedule does not reflect the impact of adopted discount rate changes that will become effective
beyond June 30, 2016. For Projected Employer Contributions, please see Page 5.
Alternate Schedules
Current Amortization
Schedule* 20 Year Amortization 15 Year Amortization
Date Balance Payment Balance Payment Balance Payment
6/30/2018 151,360,410 8,421,191 151,360,410 11,314,568 151,360,410 13,767,113
6/30/2019 153,797,041 9,886,419 150,798,869 11,654,005 148,257,495 14,180,126
6/30/2020 154,895,077 10,803,156 149,844,184 12,003,625 144,497,768 14,605,530
6/30/2021 155,124,154 11,757,856 148,456,807 12,363,734 140,019,949 15,043,696
6/30/2022 154,380,847 12,525,958 146,593,960 12,734,646 134,757,856 15,495,007
6/30/2023 152,786,799 12,901,734 144,209,381 13,116,685 128,640,026 15,959,857
6/30/2024 150,685,803 13,288,788 141,253,064 13,510,186 121,589,319 16,438,653
6/30/2025 148,028,785 13,687,451 137,670,965 13,915,491 113,522,486 16,931,812
6/30/2026 144,762,708 14,074,490 133,404,701 14,332,956 104,349,702 17,439,767
6/30/2027 140,854,703 14,496,722 128,391,215 14,762,945 93,974,073 17,962,960
6/30/2028 136,220,958 14,931,625 122,562,422 15,205,833 82,291,099 18,501,848
6/30/2029 130,794,820 15,379,572 115,844,827 15,662,008 69,188,099 19,056,904
6/30/2030 124,504,332 15,840,963 108,159,111 16,131,868 54,543,594 19,628,611
6/30/2031 117,271,818 15,275,357 99,419,696 16,615,824 38,226,643 20,217,469
6/30/2032 110,091,996 15,137,335 89,534,264 17,114,299 20,096,130 20,823,993
6/30/2033 102,525,688 14,128,693 78,403,253 17,627,728
6/30/2034 95,446,537 13,713,340 65,919,305 18,156,560
6/30/2035 88,275,692 13,260,351 51,966,680 18,701,256
6/30/2036 81,045,396 12,892,998 36,420,623 19,262,294
6/30/2037 73,662,521 13,054,009 19,146,687 19,840,163
6/30/2038 65,568,318 13,213,079
6/30/2039 56,712,335 13,609,471
6/30/2040 46,792,475 14,017,755
6/30/2041 35,717,955 12,053,231
6/30/2042 25,862,365 11,413,248
6/30/2043 15,943,089 10,555,614
6/30/2044 6,180,964 3,028,946
6/30/2045 3,498,158 1,666,411
6/30/2046 2,029,381 1,575,523
6/30/2047 546,462 566,254
Totals 347,157,540 304,026,674 256,053,346
Interest Paid 195,797,130 152,666,264 104,692,936
Estimated Savings 43,130,866 91,104,194
CALPERS ACTUARIAL VALUATION - June 30, 2016
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 18
Reconciliation of Required Employer
Contributions
Normal Cost (% of Payroll)
1. For Period 7/1/17 – 6/30/18
a) Employer Normal Cost 18.900%
b) Employee Contribution 9.129%
c) Total Normal Cost 28.029%
2. Changes since the prior year annual valuation
a) Effect of changes in demographics results (0.244%)
b) Effect of plan changes 0.000%
c) Effect of changes in assumptions 0.786%
d) Net effect of the changes above [sum of (a) through (c)] 0.542%
3. For Period 7/1/18 – 6/30/19
a) Employer Normal Cost 19.397%
b) Employee Contribution 9.174%
c) Total Normal Cost 28.571%
Employer Normal Cost Change [(3a) – (1a)] 0.497%
Employee Contribution Change [(3b) – (1b)] 0.045%
Unfunded Liability Contribution ($)
1. For Period 7/1/17 – 6/30/18 7,127,885
2. Changes since the prior year annual valuation
a) Effect of (gain)/loss during prior year1 240,288
b) Effect of plan changes 0
c) Effect of changes in assumptions2 128,758
d) Changes to prior year amortization payments3 924,260
e) Effect of changes due to Fresh Start 0
f) Effect of elimination of amortization base 0
g) Net effect of the changes above [sum of (a) through (f)] 1,293,306
3. For Period 7/1/18 – 6/30/19 [(1)+(2g)] 8,421,191
1 The unfunded liability contribution for the (gain)/loss during the year prior to the valuation date is 20 percent of the
“full” annual requirement due to the 5-year ramp. Increases to this amount that occur during the ramp period will be included in line d) in future years.
2 The unfunded liability contribution for the change in assumptions is 20 percent of the “full” annual requirement due to the 5-year ramp. Increases to this amount that occur during the ramp period will be included in line d) in future years.
3 Includes changes due to 5-year ramp, payroll growth assumption, and re-amortization under new discount rate.
The amounts shown for the period 7/1/17 – 6/30/18 may be different if a prepayment of unfunded actuarial
liability is made or a plan change became effective after the prior year’s actuarial valuation was performed.
CALPERS ACTUARIAL VALUATION - June 30, 2016
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 19
Employer Contribution History
The table below provides a recent history of the required employer contributions for the plan, as determined
by the annual actuarial valuation. It does not account for prepayments or benefit changes made during a fiscal year.
Required By Valuation
Fiscal
Year
Employer
Normal Cost
Unfunded Rate
Unfunded Liability
Payment ($)
2013 - 14 18.658% 14.786% N/A
2014 - 15 18.874% 20.654% N/A
2015 - 16 18.627% 23.305% N/A
2016 - 17 18.977% 26.449% N/A
2017 - 18 18.900% N/A 7,127,885
2018 - 19 19.397% N/A 8,421,191
Funding History
The table below shows the recent history of the actuarial accrued liability, the market value of assets, the
funded ratio and the annual covered payroll.
Valuation
Date
Accrued
Liability
Market Value
of Assets
(MVA)
Unfunded
Liability
Funded
Ratio
Annual
Covered
Payroll
06/30/11 $ 313,183,690 $ 225,015,089 $ 88,168,601 71.8% $ 22,774,462
06/30/12 327,608,300 215,605,457 112,002,843 65.8% 20,919,846
06/30/13 338,666,499 233,417,363 105,249,136 68.9% 21,258,082
06/30/14 367,478,634 264,145,000 103,333,634 71.9% 21,274,021
06/30/15 377,934,524 259,169,591 118,764,933 68.6% 21,186,275
06/30/16 392,911,774 249,886,581 143,025,193 63.6% 21,268,028
RISK ANALYSIS
ANALYSIS OF FUTURE INVESTMENT RETURN SCENARIOS
ANALYSIS OF DISCOUNT RATE SENSITIVITY
VOLATILITY RATIOS
HYPOTHETICAL TERMINATION LIABILITY
CALPERS ACTUARIAL VALUATION - June 30, 2016
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 21
Analysis of Future Investment Return Scenarios
Analysis was performed to determine the effects of various future investment returns on required employer
contributions. The projections below provide a range of results based on five investment return scenarios assumed to occur during the next four fiscal years (2016-17, 2017-18, 2018-19 and 2019-20). The
projections also assume that all other actuarial assumptions will be realized and that no further changes to
assumptions, contributions, benefits, or funding will occur.
Each of the five investment return scenarios assumes a return of 7.375 percent for fiscal year 2016-17. For
fiscal years 2017-18, 2018-19, and 2019-20 each scenario assumes an alternate fixed annual return. The fixed return assumptions for the five scenarios are -3.0 percent, 3.0 percent, 7.0 percent (7.25 percent for
2017-18), 11.0 percent and 17.0 percent.
The alternate investment returns were chosen based on stochastic analysis of possible future investment
returns over the four year period ending June 30, 2020. Using the expected returns and volatility of the
asset classes in which the funds are invested, we produced ten thousand stochastic outcomes for this
period. We then selected annual returns that approximate the 5th, 25th, 50th, 75th, and 95th percentiles for
these outcomes. For example, of all of the 4-year outcomes generated in the stochastic analysis, approximately 25 percent of them had an average annual return of 3.0 percent or less.
Required contributions outside of this range are also possible. In particular, while it is unlikely that
investment returns will average less than -3.0 percent or greater than 17.0 percent over this four year
period, the possibility of a single investment return less than -3.0 percent or greater than 17.0 percent in
any given year is much greater.
Assumed Annual Return From 2017-18 through 2019-20
Projected Employer Contributions
2019-20 2020-21 2021-22 2022-23
(3.0%)
Normal Cost 20.2% 21.9% 21.9% 21.9%
UAL Contribution $9,894,000 $11,335,000 $13,461,000 $15,815,000
3.0%
Normal Cost 20.2% 21.9% 21.9% 21.9%
UAL Contribution $9,894,000 $11,106,000 $12,782,000 $14,478,000
Assumed Discount Rate
Normal Cost 20.2% 21.9% 21.9% 21.9%
UAL Contribution $9,894,000 $10,943,000 $12,295,000 $13,495,000
11.0%
Normal Cost 20.2% 21.9% 22.3% 22.7%
UAL Contribution $9,894,000 $10,799,000 $11,820,000 $12,533,000
17.0%
Normal Cost 20.2% 21.9% 23.1% 24.4%
UAL Contribution $9,894,000 $10,569,000 $11,062,000 $11,004,000
Given the temporary suspension of the Risk Mitigation Policy during the period over which the discount rate
assumption is being phased down to 7.0 percent, the projections above were performed without reflection
of any possible impact of this Policy for Fiscal Years 2019-20 and 2020-21.
The projected normal cost percentages do not reflect that the normal cost will decline over time as new
employees are hired into PEPRA or other lower cost benefit tiers.
CALPERS ACTUARIAL VALUATION - June 30, 2016
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 22
Analysis of Discount Rate Sensitivity
Shown below are various valuation results as of June 30, 2016 assuming alternate discount rates. Results
are shown using the current discount rate of 7.375 percent as well as alternate discount rates of 6.0
percent, 7.0 percent, and 8.0 percent. The alternate rate of 7.0 percent was selected since the Board has adopted this rate as the final discount rate at the end of the three year phase-in of the reduction in this
assumption. The rates of 6.0 percent and 8.0 percent were selected since they illustrate the impact of a 1
percent increase or decrease to the 7.0 percent assumption. This analysis shows the potential plan impacts
if the PERF were to realize investment returns of 6.0 percent, 7.0 percent, or 8.0 percent over the long-
term.
This type of analysis gives the reader a sense of the long-term risk to required contributions. For a measure of funded status that is appropriate for assessing the sufficiency of plan assets to cover estimated
termination liabilities, please see “Hypothetical Termination Liability” in the “Risk Analysis” section.
Sensitivity Analysis
As of June 30, 2016 Plan’s
Normal Cost
Accrued
Liability Unfunded
Accrued Liability Funded
Status
7.375% (current discount rate) 28.571% $392,911,774 $143,025,193 63.6%
6.0% 39.221% $464,382,032 $214,495,451 53.8%
7.0% 31.093% $410,532,811 $160,646,230 60.9%
8.0% 24.890% $366,182,491 $116,295,910 68.2%
CALPERS ACTUARIAL VALUATION - June 30, 2016
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 23
Volatility Ratios
The actuarial calculations supplied in this communication are based on a number of assumptions about
long-term demographic and economic behavior. Unless these assumptions (terminations, deaths, disabilities,
retirements, salary growth, and investment return) are exactly realized each year, there will be differences on a year-to-year basis. The year-to-year differences between actual experience and the assumptions are
called actuarial gains and losses and serve to lower or raise required employer contributions from one year
to the next. Therefore, employer contributions will inevitably fluctuate, especially due to the ups and downs
of investment returns.
Asset Volatility Ratio (AVR)
Plans that have higher asset-to-payroll ratios experience more volatile employer contributions (as a
percentage of payroll) due to investment return. For example, a plan with an asset-to-payroll ratio of 8 may
experience twice the contribution volatility due to investment return volatility than a plan with an asset-to-
payroll ratio of 4. Shown below is the asset volatility ratio, a measure of the plan’s current volatility. It
should be noted that this ratio is a measure of the current situation. It increases over time but generally
tends to stabilize as the plan matures.
Liability Volatility Ratio (LVR)
Plans that have higher liability-to-payroll ratios experience more volatile employer contributions (as a
percentage of payroll) due to investment return and changes in liability. For example, a plan with a liability-
to-payroll ratio of 8 is expected to have twice the contribution volatility of a plan with a liability-to-payroll
ratio of 4. The liability volatility ratio is also included in the table below. It should be noted that this ratio
indicates a longer-term potential for contribution volatility. The asset volatility ratio, described above, will
tend to move closer to the liability volatility ratio as the plan matures. Since the liability volatility ratio is a long-term measure, it is shown below at the current discount rate (7.375 percent) as well as the discount
rate the Board has adopted to determine the contribution requirement in the June 30, 2018 actuarial
valuation (7.00 percent).
Contribution Volatility As of June 30, 2016
1. Market Value of Assets without Receivables $ 249,241,127
2. Payroll 21,268,028
3. Asset Volatility Ratio (AVR) [(1) / ( 2)] 11.7
4. Accrued Liability (7.375% discount rate) $ 392,911,774
5. Liability Volatility Ratio (LVR) [(4) / (2)] 18.5
6. Accrued Liability (7.00% discount rate) 410,532,811
7. Projected Liability Volatility Ratio [(6) / (2)] 19.3
CALPERS ACTUARIAL VALUATION - June 30, 2016
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 24
Hypothetical Termination Liability
The hypothetical termination liability is an estimate of the financial position of the plan had the contract with
CalPERS been terminated as of June 30, 2016. The plan liability on a termination basis is calculated
differently compared to the plan’s ongoing funding liability. For this hypothetical termination liability calculation, both compensation and service are frozen as of the valuation date and no future pay increases
or service accruals are assumed. This measure of funded status is not appropriate for assessing the need for
future employer contributions in the case of an ongoing plan, that is, for an employer that continues to
provide CalPERS retirement benefits to active employees.
A more conservative investment policy and asset allocation strategy was adopted by the CalPERS Board for
the Terminated Agency Pool. The Terminated Agency Pool has limited funding sources since no future employer contributions will be made. Therefore, expected benefit payments are secured by risk-free assets
and benefit security for members is increased while limiting the funding risk. However, this asset allocation
has a lower expected rate of return than the PERF and consequently, a lower discount rate assumption. The
lower discount rate for the Terminated Agency Pool results in higher liabilities for terminated plans.
The effective termination discount rate will depend on actual market rates of return for risk-free securities
on the date of termination. As market discount rates are variable the table below shows a range for the
hypothetical termination liability based on the lowest and highest interest rates observed during an approximate 2-year period centered around the valuation date.
Market
Value of
Assets (MVA)
Hypothetical
Termination
Liability1,2
@ 1.75%
Funded
Status
Unfunded
Termination
Liability
@ 1.75%
Hypothetical
Termination
Liability1,2
@ 3.00%
Funded
Status
Unfunded
Termination
Liability
@ 3.00%
$249,886,581 $737,420,442 33.9% $487,533,861 $638,680,813 39.1% $388,794,232
1 The hypothetical liabilities calculated above include a 7 percent mortality contingency load in accordance with Board
policy. Other actuarial assumptions can be found in Appendix A. 2 The current discount rate assumption used for termination valuations is a weighted average of the 10-year and 30-year
U.S. Treasury yields where the weights are based on matching asset and liability durations as of the termination date.
The discount rates used in the table are based on 20-year Treasury bonds, rounded to the nearest quarter percentage point, which is a good proxy for most plans. The 20-year Treasury yield was 1.75 percent on June 30, 2016, and was
2.75 percent on January 31, 2017.
In order to terminate the plan, you must first contact our Retirement Services Contract Unit to initiate a
Resolution of Intent to Terminate. The completed Resolution will allow the plan actuary to give you a
preliminary termination valuation with a more up-to-date estimate of the plan liabilities. CalPERS advises
you to consult with the plan actuary before beginning this process.
PLAN’S MAJOR BENEFIT PROVISIONS
CALPERS ACTUARIAL VALUATION – June 30, 2016
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Plan’s Major Benefit Options
Shown below is a summary of the major optional benefits for which your agency has contracted for this plan. A description of principal standard and optional
plan provisions is in Appendix B of this report.
Contract Package
Active
Police
Active
Fire
Active
Fire
Active
Police
Active
Fire
Active
Police
Active
Fire
Benefit Provision
Benefit Formula 3.0% @ 50 3.0% @ 50 3.0% @ 50 2.7% @ 57 3.0% @ 55 3.0% @ 55 2.7% @ 57
Social Security Coverage No No No No No No No Full/Modified Full Full Full Full Full Full Full
Employee Contribution Rate 9.00% 9.00% 9.00% 10.75% 9.00% 9.00% 10.75%
Final Average Compensation Period One Year One Year One Year Three Year Three Year Three Year Three Year
Sick Leave Credit No No No No No No No
Non-Industrial Disability Standard Standard Standard Standard Standard Standard Standard
Industrial Disability Yes Yes Yes Yes Yes Yes Yes
Pre-Retirement Death Benefits
Optional Settlement 2W No Yes Yes No Yes No Yes 1959 Survivor Benefit Level Level 1 Level 1 Level 1 Level 1 Level 1 Level 1 Level 1
Special Yes Yes Yes Yes Yes Yes Yes
Alternate (firefighters) No No No No No No No
Post-Retirement Death Benefits
Lump Sum $500 $500 $500 $500 $500 $500 $500
Survivor Allowance (PRSA) No No No No No No No
COLA 2% 2% 2% 2% 2% 2% 2%
Page 26
CALPERS ACTUARIAL VALUATION – June 30, 2016
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Plan’s Major Benefit Options
Shown below is a summary of the major optional benefits for which your agency has contracted. A description of principal standard and optional plan provisions
is in the following section of this Appendix.
Contract Package
Receiving
Fire
Receiving
Police
Benefit Provision
Benefit Formula
Social Security Coverage
Full/Modified
Employee Contribution Rate
Final Average Compensation Period
Sick Leave Credit
Non-Industrial Disability
Industrial Disability
Pre-Retirement Death Benefits
Optional Settlement 2W
1959 Survivor Benefit Level
Special
Alternate (firefighters)
Post-Retirement Death Benefits
Lump Sum $500 $500
Survivor Allowance (PRSA) No No
COLA 2% 2%
Page 27
APPENDICES
APPENDIX A – ACTUARIAL METHODS AND ASSUMPTIONS
APPENDIX B – PRINCIPAL PLAN PROVISIONS
APPENDIX C – PARTICIPANT DATA
APPENDIX D – DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION RATES
APPENDIX E – GLOSSARY OF ACTUARIAL TERMS
APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
ACTUARIAL DATA
ACTUARIAL METHODS
ACTUARIAL ASSUMPTIONS
MISCELLANEOUS
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-1
Actuarial Data
As stated in the Actuarial Certification, the data which serves as the basis of this valuation has been
obtained from the various CalPERS databases. We have reviewed the valuation data and believe that it is
reasonable and appropriate in aggregate. We are unaware of any potential data issues that would have a
material effect on the results of this valuation, except that data does not always contain the latest salary
information for former members now in reciprocal systems and does not recognize the potential for unusually large salary deviation in certain cases such as elected officials. Therefore, salary information in
these cases may not be accurate. These situations are relatively infrequent, however, and when they do
occur, they generally do not have a material impact on the required employer contributions.
Actuarial Methods
Actuarial Cost Method
The actuarial cost method used is the Entry Age Normal Cost Method. Under this method, projected benefits are determined for all members and the associated liabilities are spread in a manner that produces level
annual cost as a percentage of pay in each year from the member’s entry age to their assumed retirement
age on the valuation date. The cost allocated to the current fiscal year is called the normal cost.
The actuarial accrued liability for active members is then calculated as the portion of the total cost of the
plan allocated to prior years. The actuarial accrued liability for members currently receiving benefits and for
members entitled to deferred benefits is equal to the present value of the benefits expected to be paid. No
normal costs are applicable for these participants.
Amortization of Unfunded Actuarial Accrued Liability
The excess of the total actuarial accrued liability over the market value of plan assets is called the unfunded
actuarial accrued liability (UAL). Funding requirements are determined by adding the normal cost and an
amortization payment toward the unfunded liability. The unfunded liability is amortized as a “level percent
of pay”. Commencing with the June 30, 2013 valuation, all new gains or losses are amortized over a fixed 30-year period with a 5-year ramp up at the beginning and a 5-year ramp down at the end of the
amortization period. All changes in liability due to plan amendments (other than golden handshakes) are
amortized over a 20-year period with no ramp. Changes in actuarial assumptions or changes in actuarial
methodology are amortized over a 20-year period with a 5-year ramp up at the beginning and a 5-year
ramp down at the end of the amortization period. Changes in unfunded accrued liability due to a Golden
Handshake will be amortized over a period of five years.
The 5-year ramp up means that the payments in the first four years of the amortization period are 20
percent, 40 percent, 60 percent and 80 percent of the “full” payment which begins in year five. The 5-year
ramp down means that the reverse is true in the final four years of the amortization period.
Exceptions for Inconsistencies:
An exception to the amortization rules above is used whenever their application results in inconsistencies. In
these cases, a “fresh start” approach is used. This means that the current unfunded actuarial liability is projected and amortized over a set number of years. For example, a fresh start is needed in the following
situations:
1) When a positive payment would be required on a negative unfunded actuarial liability (or
conversely a negative payment on a positive unfunded actuarial liability); or
2) When there are excess assets, rather than an unfunded liability. In this situation, a 30-year fresh
start is used.
It should be noted that the actuary may determine that a fresh start is necessary under other
circumstances. In all cases of a fresh start, the period is set by the actuary at what is deemed appropriate;
however, the period will not be greater than 30 years.
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-2
Exceptions for Inactive Plans:
The following exceptions apply to plans classified as Inactive. These plans have no active members and no
expectation to have active members in the future.
Amortization of the unfunded liability is on a “level dollar” basis rather than a “level percent of pay”
basis. For amortization layers which utilize a ramp up and ramp down, the “ultimate” payment is
constant.
Actuarial judgment will be used to shorten amortization periods for Inactive plans with existing
periods that are deemed too long given the duration of the liability. The specific demographics of
the plan will be used to determine if shorter periods may be more appropriate.
Asset Valuation Method
It is the policy of the CalPERS Board of Administration to use professionally accepted amortization methods
to eliminate a surplus or an unfunded accrued liability in a manner that maintains benefit security for the
members of the System while minimizing substantial variations in required employer contributions. On April
17, 2013, the CalPERS Board of Administration approved a recommendation to change the CalPERS
amortization and rate smoothing policies. Beginning with the June 30, 2013 valuations that set the employer
contribution for Fiscal Year 2015-16, CalPERS employs a policy that amortizes all gains and losses over a fixed 30-year period. The increase or decrease in the rate is then spread directly over a 5-year period. This
method is referred to as “direct rate smoothing.” CalPERS no longer uses an actuarial value of assets and
only uses the market value of assets. The direct rate smoothing method is equivalent to a method using a 5
year asset smoothing period with no actuarial value of asset corridor and a 25-year amortization period for
gains and losses.
PEPRA Normal Cost Rate Methodology
Per Government Code Section 7522.30(b) the “normal cost rate” shall mean the annual actuarially
determined normal cost for the plan of retirement benefits provided to the new member and shall be
established based on actuarial assumptions used to determine the liabilities and costs as part of the annual
actuarial valuation. The plan of retirement benefits shall include any elements that would impact the
actuarial determination of the normal cost, including, but not limited to, the retirement formula, eligibility
and vesting criteria, ancillary benefit provisions, and any automatic cost-of-living adjustments as determined by the public retirement system.
Each non-pooled plan is considered to be stable with a sufficiently large demographic of actives. It is
preferable to determine normal cost using a large active population ongoing so that this rate remains
relatively stable. The total PEPRA normal cost will be calculated using all active members within a non-
pooled plan until the number of members covered under the PEPRA formula meets either:
1. 50 percent of the active population, or
2. 25 percent of the active population and 100 or more PEPRA members
Once either of the conditions above are met for a non-pooled plan, the total PEPRA normal cost will be
based on the active PEPRA population in the plan.
Accordingly, the total normal cost will be funded equally between employer and employee based on the
demographics of the employees of that employer.
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-3
Actuarial Assumptions
In 2014, CalPERS completed a 2-year asset liability management study incorporating actuarial assumptions
and strategic asset allocation. On February 19, 2014, the CalPERS Board of Administration adopted relatively
modest changes to the asset allocation that reduced the expected volatility of returns. The adopted asset
allocation was expected to have a long-term blended return that continued to support a discount rate
assumption of 7.5 percent at that time. The Board also approved several changes to the demographic assumptions that more closely aligned with actual experience. The most significant of these is mortality
improvement to acknowledge the greater life expectancies we are seeing in our membership and expected
continued improvements. These new actuarial assumptions were first used in the June 30, 2014 valuation to
set the Fiscal Year 2016-17 contribution for public agency employers.
On December 21, 2016, the CalPERS Board of Administration lowered the discount rate from 7.50 percent to
7.00 percent using a three year phase-in beginning with the June 30, 2016 actuarial valuations. The
minimum employer contributions for Fiscal Year 2018-19 determined in this valuation were calculated using a discount rate of 7.375 percent. The projected employer contributions on Page 5 are calculated assuming
that the discount rate will be lowered to 7.25 percent next year and 7.00 percent the following year as
adopted by the Board. The decision to reduce the discount rate was primarily based on reduced capital
market assumptions provided by external investment consultants and CalPERS investment staff. The specific
decision adopted by the Board reflected recommendations from CalPERS staff and additional input from
employer and employee stakeholder groups. Based on the investment allocation adopted by the Board
and capital market assumptions, the reduced discount rate schedule provides a more realistic assumption
for the long term investment return of the fund.
Notwithstanding the Board’s decision to phase into a 7.0 percent discount rate, subsequent analysis of the
expected investment return of CalPERS assets or changes to the investment allocation may result in a
change to this three year discount rate schedule. A comprehensive analysis of all actuarial assumptions and methods including the discount rate will be conducted in 2017.
For more details and additional rationale for the selection of the actuarial assumptions, please refer to the
CalPERS Experience Study and Review of Actuarial Assumptions report from January 2014 that can be found
on the CalPERS website under: “Forms and Publications”. Click on “View All” and search for Experience
Study.
All actuarial assumptions (except the discount rates used for the hypothetical termination liability) represent an estimate of future experience rather than observations of the estimates inherent in market data.
Economic Assumptions
Discount Rate
The prescribed discount rate assumption adopted by the Board on December 21, 2016 is 7.375 percent compounded annually (net of investment and administrative expenses) as of 6/30/2016.
The Board also prescribed that the assumed discount rate will reduce to 7.25 percent compounded
annually (net of expenses) as of 6/30/2017, and 7.0 percent compounded annually (net of
expenses) as of 6/30/2018. These further changes to the discount rate assumption are not
reflected in the determination of required contributions determined in this report for Fiscal Year
2018-19.
Termination Liability Discount Rate The current discount rate assumption used for termination valuations is a weighted average of the
10-year and 30-year U.S. Treasury yields where the weights are based on matching asset and
liability durations as of the termination date.
The hypothetical termination liabilities in this report are calculated using an observed range of
market interest rates. This range is based on the lowest and highest 20-year Treasury bond observed during an approximate 2-year period centered around the valuation date. The 20-year
Treasury bond has a similar duration to most plan liabilities and serves as a good proxy for the
termination discount rate. The 20-year Treasury yield was 1.75 percent on June 30, 2016.
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-4
Salary Growth
Annual increases vary by category, entry age, and duration of service. A sample of assumed
increases are shown below.
Public Agency Miscellaneous
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1220 0.1160 0.1020
1 0.0990 0.0940 0.0830
2 0.0860 0.0810 0.0710
3 0.0770 0.0720 0.0630
4 0.0700 0.0650 0.0570
5 0.0640 0.0600 0.0520
10 0.0460 0.0430 0.0390
15 0.0420 0.0400 0.0360
20 0.0390 0.0380 0.0340
25 0.0370 0.0360 0.0330
30 0.0350 0.0340 0.0320
Public Agency Fire
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.2000 0.1980 0.1680
1 0.1490 0.1460 0.1250
2 0.1200 0.1160 0.0990
3 0.0980 0.0940 0.0810
4 0.0820 0.0780 0.0670
5 0.0690 0.0640 0.0550
10 0.0470 0.0460 0.0420
15 0.0440 0.0420 0.0390
20 0.0420 0.0390 0.0360
25 0.0400 0.0370 0.0340
30 0.0380 0.0360 0.0340
Public Agency Police
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1500 0.1470 0.1310
1 0.1160 0.1120 0.1010
2 0.0950 0.0920 0.0830
3 0.0810 0.0780 0.0700
4 0.0700 0.0670 0.0600
5 0.0610 0.0580 0.0520
10 0.0450 0.0430 0.0370
15 0.0450 0.0430 0.0370
20 0.0450 0.0430 0.0370
25 0.0450 0.0430 0.0370
30 0.0450 0.0430 0.0370
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-5
Salary Growth (continued)
Public Agency County Peace Officers
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1770 0.1670 0.1500
1 0.1340 0.1260 0.1140
2 0.1080 0.1030 0.0940
3 0.0900 0.0860 0.0790
4 0.0760 0.0730 0.0670
5 0.0650 0.0620 0.0580
10 0.0470 0.0450 0.0410
15 0.0460 0.0450 0.0390
20 0.0460 0.0450 0.0380
25 0.0460 0.0450 0.0380
30 0.0460 0.0440 0.0380
Schools
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.0900 0.0880 0.0820
1 0.0780 0.0750 0.0700
2 0.0700 0.0680 0.0630
3 0.0650 0.0630 0.0580
4 0.0610 0.0590 0.0540
5 0.0580 0.0560 0.0510
10 0.0460 0.0450 0.0410
15 0.0420 0.0410 0.0380
20 0.0390 0.0380 0.0350
25 0.0370 0.0350 0.0330
30 0.0350 0.0330 0.0310
The Miscellaneous salary scale is used for Local Prosecutors.
The Police salary scale is used for Other Safety, Local Sheriff, and School Police.
Overall Payroll Growth
3.00 percent compounded annually (used in projecting the payroll over which the unfunded liability
is amortized). This assumption is used for all plans with active members.
Inflation
2.75 percent compounded annually.
Non-valued Potential Additional Liabilities
The potential liability loss for a cost-of-living increase exceeding the 2.75 percent inflation
assumption, and any potential liability loss from future member service purchases are not reflected
in the valuation.
Miscellaneous Loading Factors
Credit for Unused Sick Leave
Total years of service is increased by 1 percent for those plans that have accepted the provision
providing Credit for Unused Sick Leave.
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-6
Conversion of Employer Paid Member Contributions (EPMC)
Total years of service is increased by the Employee Contribution Rate for those plans with the
provision providing for the Conversion of Employer Paid Member Contributions (EPMC) during the
final compensation period.
Norris Decision (Best Factors)
Employees hired prior to July 1, 1982 have projected benefit amounts increased in order to reflect
the use of “Best Factors” in the calculation of optional benefit forms. This is due to a 1983
Supreme Court decision, known as the Norris decision, which required males and females to be
treated equally in the determination of benefit amounts. Consequently, anyone already employed
at that time is given the best possible conversion factor when optional benefits are determined. No loading is necessary for employees hired after July 1, 1982.
Termination Liability
The termination liabilities include a 7 percent contingency load. This load is for unforeseen
improvements in mortality.
Demographic Assumptions
Pre-Retirement Mortality
Non-industrial death rates vary by age and gender. Industrial death rates vary by age. See sample
rates in table below. The non-industrial death rates are used for all plans. The industrial death
rates are used for safety plans (except for Local Prosecutor safety members where the
corresponding miscellaneous plan does not have the Industrial Death Benefit).
Non-Industrial Death Industrial Death (Not Job-Related) (Job-Related)
Age Male Female Male and Female
20 0.00031 0.00020 0.00003
25 0.00040 0.00023 0.00007
30 0.00049 0.00025 0.00010
35 0.00057 0.00035 0.00012
40 0.00075 0.00050 0.00013
45 0.00106 0.00071 0.00014 50 0.00155 0.00100 0.00015
55 0.00228 0.00138 0.00016
60 0.00308 0.00182 0.00017
65 0.00400 0.00257 0.00018
70 0.00524 0.00367 0.00019
75 0.00713 0.00526 0.00020
80 0.00990 0.00814 0.00021
Miscellaneous plans usually have industrial death rates set to zero unless the agency has specifically
contracted for industrial death benefits. If so, each non-industrial death rate shown above will be
split into two components; 99 percent will become the non-industrial death rate and 1 percent will
become the industrial death rate.
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-7
Post-Retirement Mortality
Rates vary by age, type of retirement, and gender. See sample rates in table below. These rates
are used for all plans.
Healthy Recipients
Non-Industrially Disabled Industrially Disabled
(Not Job-Related) (Job-Related)
Age Male Female Male Female Male Female
50 0.00501 0.00466 0.01680 0.01158 0.00501 0.00466
55 0.00599 0.00416 0.01973 0.01149 0.00599 0.00416
60 0.00710 0.00436 0.02289 0.01235 0.00754 0.00518
65 0.00829 0.00588 0.02451 0.01607 0.01122 0.00838 70 0.01305 0.00993 0.02875 0.02211 0.01635 0.01395
75 0.02205 0.01722 0.03990 0.03037 0.02834 0.02319
80 0.03899 0.02902 0.06083 0.04725 0.04899 0.03910
85 0.06969 0.05243 0.09731 0.07762 0.07679 0.06251
90 0.12974 0.09887 0.14804 0.12890 0.12974 0.09887
95 0.22444 0.18489 0.22444 0.21746 0.22444 0.18489
100 0.32536 0.30017 0.32536 0.30017 0.32536 0.30017
105 0.58527 0.56093 0.58527 0.56093 0.58527 0.56093 110 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000
The post-retirement mortality rates above include 20 years of projected on-going mortality
improvement using Scale BB published by the Society of Actuaries.
Marital Status
For active members, a percentage who are married upon retirement is assumed according to member category as shown in the following table.
Member Category Percent Married
Miscellaneous Member 85% Local Police 90%
Local Fire 90%
Other Local Safety 90%
School Police 90%
Age of Spouse
It is assumed that female spouses are 3 years younger than male spouses. This assumption is used for all plans.
Terminated Members
It is assumed that terminated members refund immediately if non-vested. Terminated members
who are vested are assumed to follow the same service retirement pattern as active members but
with a load to reflect the expected higher rates of retirement, especially at lower ages. The
following table shows the load factors that are applied to the service retirement assumption for active members to obtain the service retirement pattern for separated vested members:
Age Load Factor Miscellaneous Load Factor Safety
50 190% 310%
51 110% 190% 52 110% 105%
53 through 54 100% 105%
55 100% 140%
56 and above 100% (no change) 100% (no change)
Termination with Refund Rates vary by entry age and service for miscellaneous plans. Rates vary by service for safety plans.
See sample rates in tables below.
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-8
Public Agency Miscellaneous
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45
0 0.1742 0.1674 0.1606 0.1537 0.1468 0.1400
1 0.1545 0.1477 0.1409 0.1339 0.1271 0.1203
2 0.1348 0.1280 0.1212 0.1142 0.1074 0.1006
3 0.1151 0.1083 0.1015 0.0945 0.0877 0.0809
4 0.0954 0.0886 0.0818 0.0748 0.0680 0.0612
5 0.0212 0.0193 0.0174 0.0155 0.0136 0.0116
10 0.0138 0.0121 0.0104 0.0088 0.0071 0.0055
15 0.0060 0.0051 0.0042 0.0032 0.0023 0.0014
20 0.0037 0.0029 0.0021 0.0013 0.0005 0.0001
25 0.0017 0.0011 0.0005 0.0001 0.0001 0.0001
30 0.0005 0.0001 0.0001 0.0001 0.0001 0.0001
35 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001
Public Agency Safety
Duration of Service Fire Police County Peace Officer
0 0.0710 0.1013 0.0997
1 0.0554 0.0636 0.0782
2 0.0398 0.0271 0.0566
3 0.0242 0.0258 0.0437
4 0.0218 0.0245 0.0414
5 0.0029 0.0086 0.0145
10 0.0009 0.0053 0.0089
15 0.0006 0.0027 0.0045
20 0.0005 0.0017 0.0020
25 0.0003 0.0012 0.0009
30 0.0003 0.0009 0.0006
35 0.0003 0.0009 0.0006
The police termination and refund rates are also used for Public Agency Local Prosecutors, Other
Safety, Local Sheriff, and School Police.
Schools
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45
0 0.1730 0.1627 0.1525 0.1422 0.1319 0.1217
1 0.1585 0.1482 0.1379 0.1277 0.1174 0.1071
2 0.1440 0.1336 0.1234 0.1131 0.1028 0.0926
3 0.1295 0.1192 0.1089 0.0987 0.0884 0.0781
4 0.1149 0.1046 0.0944 0.0841 0.0738 0.0636
5 0.0278 0.0249 0.0221 0.0192 0.0164 0.0135
10 0.0172 0.0147 0.0122 0.0098 0.0074 0.0049
15 0.0115 0.0094 0.0074 0.0053 0.0032 0.0011
20 0.0073 0.0055 0.0038 0.0020 0.0002 0.0002
25 0.0037 0.0023 0.0010 0.0002 0.0002 0.0002
30 0.0015 0.0003 0.0002 0.0002 0.0002 0.0002
35 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-9
Termination with Vested Benefits
Rates vary by entry age and service for miscellaneous plans. Rates vary by service for safety plans.
See sample rates in tables below.
Public Agency Miscellaneous
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40
5 0.0656 0.0597 0.0537 0.0477 0.0418
10 0.0530 0.0466 0.0403 0.0339 0.0000
15 0.0443 0.0373 0.0305 0.0000 0.0000
20 0.0333 0.0261 0.0000 0.0000 0.0000
25 0.0212 0.0000 0.0000 0.0000 0.0000
30 0.0000 0.0000 0.0000 0.0000 0.0000
35 0.0000 0.0000 0.0000 0.0000 0.0000
Public Agency Safety
Duration of
Service Fire Police
County Peace
Officer
5 0.0162 0.0163 0.0265
10 0.0061 0.0126 0.0204
15 0.0058 0.0082 0.0130
20 0.0053 0.0065 0.0074
25 0.0047 0.0058 0.0043
30 0.0045 0.0056 0.0030
35 0.0000 0.0000 0.0000
When a member is eligible to retire, the termination with vested benefits probability is set to zero.
After termination with vested benefits, a miscellaneous member is assumed to retire at age 59
and a safety member at age 54.
The Police termination with vested benefits rates are also used for Public Agency Local
Prosecutors, Other Safety, Local Sheriff, and School Police.
Schools
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40
5 0.0816 0.0733 0.0649 0.0566 0.0482
10 0.0629 0.0540 0.0450 0.0359 0.0000
15 0.0537 0.0440 0.0344 0.0000 0.0000
20 0.0420 0.0317 0.0000 0.0000 0.0000
25 0.0291 0.0000 0.0000 0.0000 0.0000
30 0.0000 0.0000 0.0000 0.0000 0.0000
35 0.0000 0.0000 0.0000 0.0000 0.0000
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-10
Non-Industrial (Not Job-Related) Disability
Rates vary by age and gender for miscellaneous plans. Rates vary by age and category for safety
plans.
Miscellaneous Fire Police County Peace Officer Schools
Age Male Female Male and Female Male and Female Male and Female Male Female
20 0.0002 0.0001 0.0001 0.0001 0.0001 0.0003 0.0003
25 0.0002 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001
30 0.0002 0.0002 0.0001 0.0002 0.0001 0.0001 0.0002
35 0.0005 0.0008 0.0001 0.0003 0.0004 0.0005 0.0004
40 0.0012 0.0016 0.0001 0.0004 0.0007 0.0015 0.0010
45 0.0019 0.0022 0.0002 0.0005 0.0013 0.0030 0.0019
50 0.0021 0.0023 0.0005 0.0008 0.0018 0.0039 0.0024
55 0.0022 0.0018 0.0010 0.0013 0.0010 0.0036 0.0021
60 0.0022 0.0014 0.0015 0.0020 0.0006 0.0031 0.0014
The miscellaneous non-industrial disability rates are used for Local Prosecutors.
The police non-industrial disability rates are also used for Other Safety, Local Sheriff, and
School Police.
Industrial (Job-Related) Disability Rates vary by age and category.
Age Fire Police County Peace Officer
20 0.0001 0.0000 0.0004
25 0.0003 0.0017 0.0013
30 0.0007 0.0048 0.0025
35 0.0016 0.0079 0.0037
40 0.0030 0.0110 0.0051
45 0.0053 0.0141 0.0067
50 0.0277 0.0185 0.0092
55 0.0409 0.0479 0.0151
60 0.0583 0.0602 0.0174
The police industrial disability rates are also used for Local Sheriff and Other Safety.
Fifty percent of the police industrial disability rates are used for School Police.
One percent of the police industrial disability rates are used for Local Prosecutors.
Normally, rates are zero for miscellaneous plans unless the agency has specifically contracted for industrial disability benefits. If so, each miscellaneous non-industrial disability rate will be
split into two components: 50 percent will become the non-industrial disability rate and 50
percent will become the industrial disability rate.
Service Retirement
Retirement rates vary by age, service, and formula, except for the safety ½ @ 55 and 2% @ 55
formulas, where retirement rates vary by age only.
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-11
Service Retirement
Public Agency Miscellaneous 1.5% @ 65
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.008 0.011 0.013 0.015 0.017 0.019
51 0.007 0.010 0.012 0.013 0.015 0.017
52 0.010 0.014 0.017 0.019 0.021 0.024
53 0.008 0.012 0.015 0.017 0.019 0.022
54 0.012 0.016 0.019 0.022 0.025 0.028
55 0.018 0.025 0.031 0.035 0.038 0.043
56 0.015 0.021 0.025 0.029 0.032 0.036
57 0.020 0.028 0.033 0.038 0.043 0.048
58 0.024 0.033 0.040 0.046 0.052 0.058
59 0.028 0.039 0.048 0.054 0.060 0.067
60 0.049 0.069 0.083 0.094 0.105 0.118
61 0.062 0.087 0.106 0.120 0.133 0.150
62 0.104 0.146 0.177 0.200 0.223 0.251
63 0.099 0.139 0.169 0.191 0.213 0.239
64 0.097 0.136 0.165 0.186 0.209 0.233
65 0.140 0.197 0.240 0.271 0.302 0.339
66 0.092 0.130 0.157 0.177 0.198 0.222
67 0.129 0.181 0.220 0.249 0.277 0.311
68 0.092 0.129 0.156 0.177 0.197 0.221
69 0.092 0.130 0.158 0.178 0.199 0.224
70 0.103 0.144 0.175 0.198 0.221 0.248
Public Agency Miscellaneous 2% @ 60
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.010 0.013 0.015 0.018 0.019 0.021
51 0.009 0.011 0.014 0.016 0.017 0.019
52 0.011 0.014 0.017 0.020 0.022 0.024
53 0.010 0.012 0.015 0.017 0.020 0.021
54 0.015 0.019 0.023 0.025 0.029 0.031
55 0.022 0.029 0.035 0.040 0.045 0.049
56 0.018 0.024 0.028 0.033 0.036 0.040
57 0.024 0.032 0.038 0.043 0.049 0.053
58 0.027 0.036 0.043 0.049 0.055 0.061
59 0.033 0.044 0.054 0.061 0.068 0.076
60 0.056 0.077 0.092 0.105 0.117 0.130
61 0.071 0.097 0.118 0.134 0.149 0.166
62 0.117 0.164 0.198 0.224 0.250 0.280
63 0.122 0.171 0.207 0.234 0.261 0.292
64 0.114 0.159 0.193 0.218 0.244 0.271
65 0.150 0.209 0.255 0.287 0.321 0.358
66 0.114 0.158 0.192 0.217 0.243 0.270
67 0.141 0.196 0.238 0.270 0.301 0.337
68 0.103 0.143 0.174 0.196 0.219 0.245
69 0.109 0.153 0.185 0.209 0.234 0.261
70 0.117 0.162 0.197 0.222 0.248 0.277
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-12
Service Retirement
Public Agency Miscellaneous 2% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.014 0.018 0.021 0.025 0.027 0.031
51 0.012 0.014 0.017 0.020 0.021 0.025
52 0.013 0.017 0.019 0.023 0.025 0.028
53 0.015 0.020 0.023 0.027 0.030 0.034
54 0.026 0.033 0.038 0.045 0.051 0.059
55 0.048 0.061 0.074 0.088 0.100 0.117
56 0.042 0.053 0.063 0.075 0.085 0.100
57 0.044 0.056 0.067 0.081 0.091 0.107
58 0.049 0.062 0.074 0.089 0.100 0.118
59 0.057 0.072 0.086 0.103 0.118 0.138
60 0.067 0.086 0.103 0.123 0.139 0.164
61 0.081 0.103 0.124 0.148 0.168 0.199
62 0.116 0.147 0.178 0.214 0.243 0.288
63 0.114 0.144 0.174 0.208 0.237 0.281
64 0.108 0.138 0.166 0.199 0.227 0.268
65 0.155 0.197 0.238 0.285 0.325 0.386
66 0.132 0.168 0.203 0.243 0.276 0.328
67 0.122 0.155 0.189 0.225 0.256 0.304
68 0.111 0.141 0.170 0.204 0.232 0.274
69 0.114 0.144 0.174 0.209 0.238 0.282
70 0.130 0.165 0.200 0.240 0.272 0.323
Public Agency Miscellaneous 2.5% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.004 0.009 0.019 0.029 0.049 0.094
51 0.004 0.009 0.019 0.029 0.049 0.094
52 0.004 0.009 0.020 0.030 0.050 0.095
53 0.008 0.014 0.025 0.036 0.058 0.104
54 0.024 0.034 0.050 0.066 0.091 0.142
55 0.066 0.088 0.115 0.142 0.179 0.241
56 0.042 0.057 0.078 0.098 0.128 0.184
57 0.041 0.057 0.077 0.097 0.128 0.183
58 0.045 0.061 0.083 0.104 0.136 0.192
59 0.055 0.074 0.098 0.123 0.157 0.216
60 0.066 0.088 0.115 0.142 0.179 0.241
61 0.072 0.095 0.124 0.153 0.191 0.255
62 0.099 0.130 0.166 0.202 0.248 0.319
63 0.092 0.121 0.155 0.189 0.233 0.302
64 0.091 0.119 0.153 0.187 0.231 0.299
65 0.122 0.160 0.202 0.245 0.297 0.374
66 0.138 0.179 0.226 0.272 0.329 0.411
67 0.114 0.149 0.189 0.229 0.279 0.354
68 0.100 0.131 0.168 0.204 0.250 0.322
69 0.114 0.149 0.189 0.229 0.279 0.354
70 0.127 0.165 0.209 0.253 0.306 0.385
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-13
Service Retirement
Public Agency Miscellaneous 2.7% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.004 0.009 0.014 0.035 0.055 0.095
51 0.002 0.006 0.011 0.030 0.050 0.090
52 0.006 0.012 0.017 0.038 0.059 0.099
53 0.010 0.017 0.024 0.046 0.068 0.110
54 0.032 0.044 0.057 0.085 0.113 0.160
55 0.076 0.101 0.125 0.165 0.205 0.265
56 0.055 0.074 0.093 0.127 0.160 0.214
57 0.050 0.068 0.086 0.118 0.151 0.204
58 0.055 0.074 0.093 0.127 0.161 0.215
59 0.061 0.082 0.102 0.138 0.174 0.229
60 0.069 0.093 0.116 0.154 0.192 0.250
61 0.086 0.113 0.141 0.183 0.225 0.288
62 0.105 0.138 0.171 0.218 0.266 0.334
63 0.103 0.135 0.167 0.215 0.262 0.329
64 0.109 0.143 0.177 0.226 0.275 0.344
65 0.134 0.174 0.215 0.270 0.326 0.401
66 0.147 0.191 0.235 0.294 0.354 0.433
67 0.121 0.158 0.196 0.248 0.300 0.372
68 0.113 0.147 0.182 0.232 0.282 0.352
69 0.117 0.153 0.189 0.240 0.291 0.362
70 0.141 0.183 0.226 0.283 0.341 0.418
Public Agency Miscellaneous 3% @ 60
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.012 0.018 0.024 0.039 0.040 0.091
51 0.009 0.014 0.019 0.034 0.034 0.084
52 0.014 0.020 0.026 0.043 0.044 0.096
53 0.016 0.023 0.031 0.048 0.050 0.102
54 0.026 0.036 0.045 0.065 0.070 0.125
55 0.043 0.057 0.072 0.096 0.105 0.165
56 0.042 0.056 0.070 0.094 0.103 0.162
57 0.049 0.065 0.082 0.108 0.119 0.180
58 0.057 0.076 0.094 0.122 0.136 0.199
59 0.076 0.100 0.123 0.157 0.175 0.244
60 0.114 0.148 0.182 0.226 0.255 0.334
61 0.095 0.123 0.152 0.190 0.214 0.288
62 0.133 0.172 0.211 0.260 0.294 0.378
63 0.129 0.166 0.204 0.252 0.285 0.368
64 0.143 0.185 0.226 0.278 0.315 0.401
65 0.202 0.260 0.318 0.386 0.439 0.542
66 0.177 0.228 0.279 0.340 0.386 0.482
67 0.151 0.194 0.238 0.292 0.331 0.420
68 0.139 0.179 0.220 0.270 0.306 0.391
69 0.190 0.245 0.299 0.364 0.414 0.513
70 0.140 0.182 0.223 0.274 0.310 0.396
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-14
Service Retirement
Public Agency Miscellaneous 2% @ 62
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.000 0.000 0.000 0.000 0.000 0.000
51 0.000 0.000 0.000 0.000 0.000 0.000
52 0.010 0.013 0.016 0.019 0.022 0.024
53 0.013 0.017 0.020 0.024 0.027 0.031
54 0.021 0.027 0.033 0.039 0.045 0.050
55 0.044 0.056 0.068 0.080 0.092 0.104
56 0.030 0.039 0.047 0.055 0.063 0.072
57 0.036 0.046 0.056 0.066 0.076 0.086
58 0.046 0.059 0.072 0.085 0.097 0.110
59 0.058 0.074 0.089 0.105 0.121 0.137
60 0.062 0.078 0.095 0.112 0.129 0.146
61 0.062 0.079 0.096 0.113 0.129 0.146
62 0.097 0.123 0.150 0.176 0.202 0.229
63 0.089 0.113 0.137 0.162 0.186 0.210
64 0.094 0.120 0.145 0.171 0.197 0.222
65 0.129 0.164 0.199 0.234 0.269 0.304
66 0.105 0.133 0.162 0.190 0.219 0.247
67 0.105 0.133 0.162 0.190 0.219 0.247
68 0.105 0.133 0.162 0.190 0.219 0.247
69 0.105 0.133 0.162 0.190 0.219 0.247
70 0.125 0.160 0.194 0.228 0.262 0.296
Service Retirement
Public Agency Fire ½ @ 55 and 2% @ 55
Age Rate
Age Rate
50 0.0159 56 0.1108
51 0.0000 57 0.0000
52 0.0344 58 0.0950
53 0.0199 59 0.0441
54 0.0413 60 1.00000
55 0.0751
Public Agency Police ½ @ 55 and 2% @ 55
Age Rate
Age Rate
50 0.0255 56 0.0692
51 0.0000 57 0.0511
52 0.0164 58 0.0724
53 0.0272 59 0.0704
54 0.0095 60 1.0000
55 0.1667
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-15
Service Retirement
Public Agency Police 2% @ 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.005 0.005 0.005 0.005 0.017 0.089
51 0.005 0.005 0.005 0.005 0.017 0.087
52 0.018 0.018 0.018 0.018 0.042 0.132
53 0.044 0.044 0.044 0.044 0.090 0.217
54 0.065 0.065 0.065 0.065 0.126 0.283
55 0.086 0.086 0.086 0.086 0.166 0.354
56 0.067 0.067 0.067 0.067 0.130 0.289
57 0.066 0.066 0.066 0.066 0.129 0.288
58 0.066 0.066 0.066 0.066 0.129 0.288
59 0.139 0.139 0.139 0.139 0.176 0.312
60 0.123 0.123 0.123 0.123 0.153 0.278
61 0.110 0.110 0.110 0.110 0.138 0.256
62 0.130 0.130 0.130 0.130 0.162 0.291
63 0.130 0.130 0.130 0.130 0.162 0.291
64 0.130 0.130 0.130 0.130 0.162 0.291
65 1.000 1.000 1.000 1.000 1.000 1.000
These rates also apply to Local Prosecutors, Local Sheriff, School Police, and Other Safety.
Service Retirement
Public Agency Fire 2% @ 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.009 0.009 0.009 0.009 0.013 0.020
51 0.013 0.013 0.013 0.013 0.020 0.029
52 0.018 0.018 0.018 0.018 0.028 0.042
53 0.052 0.052 0.052 0.052 0.079 0.119
54 0.067 0.067 0.067 0.067 0.103 0.154
55 0.089 0.089 0.089 0.089 0.136 0.204
56 0.083 0.083 0.083 0.083 0.127 0.190
57 0.082 0.082 0.082 0.082 0.126 0.189
58 0.088 0.088 0.088 0.088 0.136 0.204
59 0.074 0.074 0.074 0.074 0.113 0.170
60 0.100 0.100 0.100 0.100 0.154 0.230
61 0.072 0.072 0.072 0.072 0.110 0.165
62 0.099 0.099 0.099 0.099 0.152 0.228
63 0.114 0.114 0.114 0.114 0.175 0.262
64 0.114 0.114 0.114 0.114 0.175 0.262
65 1.000 1.000 1.000 1.000 1.000 1.000
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-16
Service Retirement
Public Agency Police 3% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.004 0.004 0.004 0.004 0.015 0.086
51 0.014 0.014 0.014 0.014 0.034 0.114
52 0.026 0.026 0.026 0.026 0.060 0.154
53 0.038 0.038 0.038 0.038 0.083 0.188
54 0.071 0.071 0.071 0.071 0.151 0.292
55 0.061 0.061 0.061 0.061 0.131 0.261
56 0.072 0.072 0.072 0.072 0.153 0.295
57 0.065 0.065 0.065 0.065 0.140 0.273
58 0.066 0.066 0.066 0.066 0.142 0.277
59 0.118 0.118 0.118 0.118 0.247 0.437
60 0.065 0.065 0.065 0.065 0.138 0.272
61 0.084 0.084 0.084 0.084 0.178 0.332
62 0.108 0.108 0.108 0.108 0.226 0.405
63 0.084 0.084 0.084 0.084 0.178 0.332
64 0.084 0.084 0.084 0.084 0.178 0.332
65 1.000 1.000 1.000 1.000 1.000 1.000
These rates also apply to Local Prosecutors, Local Sheriff, School Police, and Other Safety.
Service Retirement
Public Agency Fire 3% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.001 0.001 0.001 0.006 0.016 0.069
51 0.002 0.002 0.002 0.006 0.018 0.071
52 0.012 0.012 0.012 0.021 0.040 0.098
53 0.032 0.032 0.032 0.049 0.085 0.149
54 0.057 0.057 0.057 0.087 0.144 0.217
55 0.073 0.073 0.073 0.109 0.179 0.259
56 0.064 0.064 0.064 0.097 0.161 0.238
57 0.063 0.063 0.063 0.095 0.157 0.233
58 0.065 0.065 0.065 0.099 0.163 0.241
59 0.088 0.088 0.088 0.131 0.213 0.299
60 0.105 0.105 0.105 0.155 0.251 0.344
61 0.118 0.118 0.118 0.175 0.282 0.380
62 0.087 0.087 0.087 0.128 0.210 0.295
63 0.067 0.067 0.067 0.100 0.165 0.243
64 0.067 0.067 0.067 0.100 0.165 0.243
65 1.000 1.000 1.000 1.000 1.000 1.000
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-17
Service Retirement
Public Agency Police 3% @ 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.050 0.050 0.050 0.099 0.240 0.314
51 0.034 0.034 0.034 0.072 0.198 0.260
52 0.033 0.033 0.033 0.071 0.198 0.259
53 0.039 0.039 0.039 0.080 0.212 0.277
54 0.045 0.045 0.045 0.092 0.229 0.300
55 0.052 0.052 0.052 0.105 0.248 0.323
56 0.042 0.042 0.042 0.087 0.221 0.289
57 0.043 0.043 0.043 0.088 0.223 0.292
58 0.054 0.054 0.054 0.109 0.255 0.333
59 0.054 0.054 0.054 0.108 0.253 0.330
60 0.060 0.060 0.060 0.121 0.272 0.355
61 0.048 0.048 0.048 0.098 0.238 0.311
62 0.061 0.061 0.061 0.122 0.274 0.357
63 0.057 0.057 0.057 0.115 0.263 0.343
64 0.069 0.069 0.069 0.137 0.296 0.385
65 1.000 1.000 1.000 1.000 1.000 1.000
These rates also apply to Local Prosecutors, Local Sheriff, School Police, and Other Safety.
Service Retirement
Public Agency Fire 3% @ 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.020 0.020 0.020 0.040 0.130 0.192
51 0.008 0.008 0.008 0.023 0.107 0.164
52 0.023 0.023 0.023 0.043 0.136 0.198
53 0.023 0.023 0.023 0.043 0.135 0.198
54 0.027 0.027 0.027 0.048 0.143 0.207
55 0.043 0.043 0.043 0.070 0.174 0.244
56 0.053 0.053 0.053 0.085 0.196 0.269
57 0.054 0.054 0.054 0.086 0.197 0.271
58 0.052 0.052 0.052 0.084 0.193 0.268
59 0.075 0.075 0.075 0.116 0.239 0.321
60 0.065 0.065 0.065 0.102 0.219 0.298
61 0.076 0.076 0.076 0.117 0.241 0.324
62 0.068 0.068 0.068 0.106 0.224 0.304
63 0.027 0.027 0.027 0.049 0.143 0.208
64 0.094 0.094 0.094 0.143 0.277 0.366
65 1.000 1.000 1.000 1.000 1.000 1.000
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-18
Service Retirement
Public Agency Police 2% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.011 0.011 0.011 0.011 0.020 0.036
51 0.009 0.009 0.009 0.009 0.016 0.028
52 0.018 0.018 0.018 0.018 0.034 0.060
53 0.037 0.037 0.037 0.037 0.067 0.119
54 0.049 0.049 0.049 0.049 0.089 0.159
55 0.063 0.063 0.063 0.063 0.115 0.205
56 0.045 0.045 0.045 0.045 0.082 0.146
57 0.064 0.064 0.064 0.064 0.117 0.209
58 0.047 0.047 0.047 0.047 0.086 0.154
59 0.105 0.105 0.105 0.105 0.130 0.191
60 0.105 0.105 0.105 0.105 0.129 0.188
61 0.105 0.105 0.105 0.105 0.129 0.188
62 0.105 0.105 0.105 0.105 0.129 0.188
63 0.105 0.105 0.105 0.105 0.129 0.188
64 0.105 0.105 0.105 0.105 0.129 0.188
65 1.000 1.000 1.000 1.000 1.000 1.000
These rates also apply to Local Prosecutors, Local Sheriff, School Police, and Other Safety.
Service Retirement
Public Agency Fire 2% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.005 0.005 0.005 0.005 0.008 0.012
51 0.006 0.006 0.006 0.006 0.009 0.013
52 0.012 0.012 0.012 0.012 0.019 0.028
53 0.033 0.033 0.033 0.033 0.050 0.075
54 0.045 0.045 0.045 0.045 0.069 0.103
55 0.061 0.061 0.061 0.061 0.094 0.140
56 0.055 0.055 0.055 0.055 0.084 0.126
57 0.081 0.081 0.081 0.081 0.125 0.187
58 0.059 0.059 0.059 0.059 0.091 0.137
59 0.055 0.055 0.055 0.055 0.084 0.126
60 0.085 0.085 0.085 0.085 0.131 0.196
61 0.085 0.085 0.085 0.085 0.131 0.196
62 0.085 0.085 0.085 0.085 0.131 0.196
63 0.085 0.085 0.085 0.085 0.131 0.196
64 0.085 0.085 0.085 0.085 0.131 0.196
65 1.000 1.000 1.000 1.000 1.000 1.000
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-19
Service Retirement
Public Agency Police 2.5% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.014 0.014 0.014 0.014 0.025 0.045
51 0.012 0.012 0.012 0.012 0.021 0.038
52 0.025 0.025 0.025 0.025 0.046 0.081
53 0.047 0.047 0.047 0.047 0.086 0.154
54 0.063 0.063 0.063 0.063 0.115 0.205
55 0.076 0.076 0.076 0.076 0.140 0.249
56 0.054 0.054 0.054 0.054 0.099 0.177
57 0.071 0.071 0.071 0.071 0.130 0.232
58 0.057 0.057 0.057 0.057 0.103 0.184
59 0.126 0.126 0.126 0.126 0.156 0.229
60 0.126 0.126 0.126 0.126 0.155 0.226
61 0.126 0.126 0.126 0.126 0.155 0.226
62 0.126 0.126 0.126 0.126 0.155 0.226
63 0.126 0.126 0.126 0.126 0.155 0.226
64 0.126 0.126 0.126 0.126 0.155 0.226
65 1.000 1.000 1.000 1.000 1.000 1.000
These rates also apply to Local Prosecutors, Local Sheriff, School Police, and Other Safety.
Service Retirement
Public Agency Fire 2.5% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.007 0.007 0.007 0.007 0.010 0.015
51 0.008 0.008 0.008 0.008 0.012 0.018
52 0.016 0.016 0.016 0.016 0.025 0.038
53 0.042 0.042 0.042 0.042 0.064 0.096
54 0.057 0.057 0.057 0.057 0.088 0.132
55 0.074 0.074 0.074 0.074 0.114 0.170
56 0.066 0.066 0.066 0.066 0.102 0.153
57 0.090 0.090 0.090 0.090 0.139 0.208
58 0.071 0.071 0.071 0.071 0.110 0.164
59 0.066 0.066 0.066 0.066 0.101 0.151
60 0.102 0.102 0.102 0.102 0.157 0.235
61 0.102 0.102 0.102 0.102 0.157 0.236
62 0.102 0.102 0.102 0.102 0.157 0.236
63 0.102 0.102 0.102 0.102 0.157 0.236
64 0.102 0.102 0.102 0.102 0.157 0.236
65 1.000 1.000 1.000 1.000 1.000 1.000
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-20
Service Retirement
Public Agency Police 2.7% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.0138 0.0138 0.0138 0.0138 0.0253 0.0451
51 0.0123 0.0123 0.0123 0.0123 0.0226 0.0402
52 0.0249 0.0249 0.0249 0.0249 0.0456 0.0812
53 0.0497 0.0497 0.0497 0.0497 0.0909 0.1621
54 0.0662 0.0662 0.0662 0.0662 0.1211 0.2160
55 0.0854 0.0854 0.0854 0.0854 0.1563 0.2785
56 0.0606 0.0606 0.0606 0.0606 0.1108 0.1975
57 0.0711 0.0711 0.0711 0.0711 0.1300 0.2318
58 0.0628 0.0628 0.0628 0.0628 0.1149 0.2049
59 0.1396 0.1396 0.1396 0.1396 0.1735 0.2544
60 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506
61 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506
62 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506
63 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506
64 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506
65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
These rates also apply to Local Prosecutors, Local Sheriff, School Police, and Other Safety.
Service Retirement
Public Agency Fire 2.7% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.0065 0.0065 0.0065 0.0065 0.0101 0.0151
51 0.0081 0.0081 0.0081 0.0081 0.0125 0.0187
52 0.0164 0.0164 0.0164 0.0164 0.0254 0.0380
53 0.0442 0.0442 0.0442 0.0442 0.0680 0.1018
54 0.0606 0.0606 0.0606 0.0606 0.0934 0.1397
55 0.0825 0.0825 0.0825 0.0825 0.1269 0.1900
56 0.0740 0.0740 0.0740 0.0740 0.1140 0.1706
57 0.0901 0.0901 0.0901 0.0901 0.1387 0.2077
58 0.0790 0.0790 0.0790 0.0790 0.1217 0.1821
59 0.0729 0.0729 0.0729 0.0729 0.1123 0.1681
60 0.1135 0.1135 0.1135 0.1135 0.1747 0.2615
61 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618
62 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618
63 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618
64 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618
65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-21
Service Retirement
Schools 2% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.005 0.009 0.013 0.015 0.016 0.018
51 0.005 0.010 0.014 0.017 0.019 0.021
52 0.006 0.012 0.017 0.020 0.022 0.025
53 0.007 0.014 0.019 0.023 0.026 0.029
54 0.012 0.024 0.033 0.039 0.044 0.049
55 0.024 0.048 0.067 0.079 0.088 0.099
56 0.020 0.039 0.055 0.065 0.072 0.081
57 0.021 0.042 0.059 0.070 0.078 0.087
58 0.025 0.050 0.070 0.083 0.092 0.103
59 0.029 0.057 0.080 0.095 0.105 0.118
60 0.037 0.073 0.102 0.121 0.134 0.150
61 0.046 0.090 0.126 0.149 0.166 0.186
62 0.076 0.151 0.212 0.250 0.278 0.311
63 0.069 0.136 0.191 0.225 0.251 0.281
64 0.067 0.133 0.185 0.219 0.244 0.273
65 0.091 0.180 0.251 0.297 0.331 0.370
66 0.072 0.143 0.200 0.237 0.264 0.295
67 0.067 0.132 0.185 0.218 0.243 0.272
68 0.060 0.118 0.165 0.195 0.217 0.243
69 0.067 0.133 0.187 0.220 0.246 0.275
70 0.066 0.131 0.183 0.216 0.241 0.270
Miscellaneous
Internal Revenue Code Section 415
The limitations on benefits imposed by Internal Revenue Code Section 415 are taken into account in this
valuation. Each year the impact of any changes in this limitation since the prior valuation is included and
amortized as part of the actuarial gain or loss base. This results in lower contributions for those employers
contributing to the Replacement Benefit Fund and protects CalPERS from prefunding expected benefits in
excess of limits imposed by federal tax law.
Internal Revenue Code Section 401(a)(17)
The limitations on compensation imposed by Internal Revenue Code Section 401(a)(17) are taken into
account in this valuation. Each year, the impact of any changes in the compensation limitation since the
prior valuation is included and amortized as part of the actuarial gain or loss base. The compensation limit
for classic members for the 2016 calendar year is $265,000.
APPENDIX B
PRINCIPAL PLAN PROVISIONS
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX B
SAFETY PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-1
The following is a description of the principal plan provisions used in calculating costs and liabilities. We have
indicated whether a plan provision is standard or optional. Standard benefits are applicable to all members while
optional benefits vary among employers. Optional benefits that apply to a single period of time, such as Golden
Handshakes, have not been included. Many of the statements in this summary are general in nature, and are
intended to provide an easily understood summary of the Public Employees’ Retirement Law. The law itself governs in all situations.
Service Retirement
Eligibility
A classic CalPERS member or PEPRA Safety member becomes eligible for Service Retirement upon attainment of age
50 with at least 5 years of credited service (total service across all CalPERS employers, and with certain other
retirement systems with which CalPERS has reciprocity agreements). For employees hired into a plan with the 1.5
percent at 65 formula, eligibility for service retirement is age 55 with at least 5 years of service. PEPRA miscellaneous
members become eligible for service retirement upon attainment of age 52 with at least 5 years of service.
Benefit
The service retirement benefit is a monthly allowance equal to the product of the benefit factor, years of service, and
final compensation.
The benefit factor depends on the benefit formula specified in your agency’s contract. The table below shows
the factors for each of the available formulas. Factors vary by the member’s age at retirement. Listed are the
factors for retirement at whole year ages:
Miscellaneous Plan Formulas
Retirement
Age
1.5% at
65 2% at 60 2% at 55 2.5% at
55
2.7% at
55 3% at 60
PEPRA
2% at 62
50 0.5000% 1.092% 1.426% 2.000% 2.000% 2.000% N/A
51 0.5667% 1.156% 1.522% 2.100% 2.140% 2.100% N/A
52 0.6334% 1.224% 1.628% 2.200% 2.280% 2.200% 1.000%
53 0.7000% 1.296% 1.742% 2.300% 2.420% 2.300% 1.100%
54 0.7667% 1.376% 1.866% 2.400% 2.560% 2.400% 1.200%
55 0.8334% 1.460% 2.000% 2.500% 2.700% 2.500% 1.300%
56 0.9000% 1.552% 2.052% 2.500% 2.700% 2.600% 1.400%
57 0.9667% 1.650% 2.104% 2.500% 2.700% 2.700% 1.500%
58 1.0334% 1.758% 2.156% 2.500% 2.700% 2.800% 1.600%
59 1.1000% 1.874% 2.210% 2.500% 2.700% 2.900% 1.700%
60 1.1667% 2.000% 2.262% 2.500% 2.700% 3.000% 1.800%
61 1.2334% 2.134% 2.314% 2.500% 2.700% 3.000% 1.900%
62 1.3000% 2.272% 2.366% 2.500% 2.700% 3.000% 2.000%
63 1.3667% 2.418% 2.418% 2.500% 2.700% 3.000% 2.100%
64 1.4334% 2.418% 2.418% 2.500% 2.700% 3.000% 2.200%
65 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.300%
66 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.400%
67 & up 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.500%
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX B
SAFETY PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-2
Safety Plan Formulas
Retirement
Age ½ at 55 * 2% at 55 2% at 50 3% at 55 3% at 50
50 1.783% 1.426% 2.000% 2.400% 3.000%
51 1.903% 1.522% 2.140% 2.520% 3.000%
52 2.035% 1.628% 2.280% 2.640% 3.000%
53 2.178% 1.742% 2.420% 2.760% 3.000%
54 2.333% 1.866% 2.560% 2.880% 3.000%
55 & Up 2.500% 2.000% 2.700% 3.000% 3.000%
* For this formula, the benefit factor also varies by entry age. The factors shown are for members with an entry age
of 35 or greater. If entry age is less than 35, then the age 55 benefit factor is 50 percent divided by the difference
between age 55 and entry age. The benefit factor for ages prior to age 55 is the same proportion of the age 55
benefit factor as in the above table.
PEPRA Safety Plan Formulas
Retirement Age 2% at 57 2.5% at 57 2.7% at 57
50 1.426% 2.000% 2.000%
51 1.508% 2.071% 2.100%
52 1.590% 2.143% 2.200%
53 1.672% 2.214% 2.300%
54 1.754% 2.286% 2.400%
55 1.836% 2.357% 2.500%
56 1.918% 2.429% 2.600%
57 & Up 2.000% 2.500% 2.700%
The years of service is the amount credited by CalPERS to a member while he or she is employed in this group
(or for other periods that are recognized under the employer’s contract with CalPERS). For a member who has
earned service with multiple CalPERS employers, the benefit from each employer is calculated separately
according to each employer’s contract, and then added together for the total allowance. An agency may contract
for an optional benefit where any unused sick leave accumulated at the time of retirement will be converted to
credited service at a rate of 0.004 years of service for each day of sick leave.
The final compensation is the monthly average of the member’s highest 36 or 12 consecutive months’ full-time
equivalent monthly pay (no matter which CalPERS employer paid this compensation). The standard benefit is 36 months. Employers had the option of providing a final compensation equal to the highest 12 consecutive months
for classic plans only. Final compensation must be defined by the highest 36 consecutive months’ pay under the
1.5% at 65 formula. PEPRA members have a cap on the annual salary that can be used to calculate final
compensation for all new members based on the Social Security contribution and benefit base. For employees
that participate in Social Security this cap is $118,775 for 2016 and for those employees that do not participate
in Social Security the cap for 2016 is $142,530. Adjustments to the caps are permitted annually based on
changes to the CPI for all urban consumers.
Employees must be covered by Social Security with the 1.5% at 65 formula. Social Security is optional for all
other benefit formulas. For employees covered by Social Security, the modified formula is the standard benefit.
Under this type of formula, the final compensation is offset by $133.33 (or by one third if the final compensation
is less than $400). Employers may contract for the full benefit with Social Security that will eliminate the offset
applicable to the final compensation. For employees not covered by Social Security, the full benefit is paid with
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX B
SAFETY PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-3
no offsets. Auxiliary organizations of the CSUC system may elect reduced contribution rates, in which case the offset is $317 if members are not covered by Social Security or $513 if members are covered by Social Security.
The miscellaneous and PEPRA safety service retirement benefit is not capped. The classic Safety service
retirement benefit is capped at 90 percent of final compensation.
Vested Deferred Retirement
Eligibility for Deferred Status
A CalPERS member becomes eligible for a deferred vested retirement benefit when he or she leaves employment,
keeps his or her contribution account balance on deposit with CalPERS, and has earned at least 5 years of credited
service (total service across all CalPERS employers, and with certain other retirement systems with which CalPERS
has reciprocity agreements).
Eligibility to Start Receiving Benefits
The CalPERS classic members and PEPRA safety members become eligible to receive the deferred retirement benefit
upon satisfying the eligibility requirements for deferred status and upon attainment of age 50 (55 for employees
hired into a 1.5% @ 65 plan). PEPRA miscellaneous members become eligible to receive the deferred retirement
benefit upon satisfying the eligibility requirements for deferred status and upon attainment of age 52.
Benefit
The vested deferred retirement benefit is the same as the service retirement benefit, where the benefit factor is
based on the member’s age at allowance commencement. For members who have earned service with multiple
CalPERS employers, the benefit from each employer is calculated separately according to each employer’s contract,
and then added together for the total allowance.
Non-Industrial (Non-Job Related) Disability Retirement
Eligibility
A CalPERS member is eligible for Non-Industrial Disability Retirement if he or she becomes disabled and has at least 5 years of credited service (total service across all CalPERS employers, and with certain other retirement systems
with which CalPERS has reciprocity agreements). There is no special age requirement. Disabled means the member is
unable to perform his or her job because of an illness or injury, which is expected to be permanent or to last
indefinitely. The illness or injury does not have to be job related. A CalPERS member must be actively employed by
any CalPERS employer at the time of disability in order to be eligible for this benefit.
Standard Benefit
The standard Non-Industrial Disability Retirement benefit is a monthly allowance equal to 1.8 percent of final
compensation, multiplied by service, which is determined as follows:
Service is CalPERS credited service, for members with less than 10 years of service or greater than 18.518 years
of service; or
Service is CalPERS credited service plus the additional number of years that the member would have worked
until age 60, for members with at least 10 years but not more than 18.518 years of service. The maximum benefit in this case is 33 1/3 percent of final compensation.
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX B
SAFETY PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-4
Improved Benefit
Employers have the option of providing the improved Non-Industrial Disability Retirement benefit. This benefit
provides a monthly allowance equal to 30 percent of final compensation for the first 5 years of service, plus 1 percent
for each additional year of service to a maximum of 50 percent of final compensation.
Members who are eligible for a larger service retirement benefit may choose to receive that benefit in lieu of a
disability benefit. Members eligible to retire, and who have attained the normal retirement age determined by their
service retirement benefit formula, will receive the same dollar amount for disability retirement as that payable for
service retirement. For members who have earned service with multiple CalPERS employers, the benefit attributed to
each employer is the total disability allowance multiplied by the ratio of service with a particular employer to the total
CalPERS service.
Industrial (Job Related) Disability Retirement
All safety members have this benefit. For miscellaneous members, employers have the option of providing this benefit. An employer may choose to provide the increased benefit option or the improved benefit option.
Eligibility
An employee is eligible for Industrial Disability Retirement if he or she becomes disabled while working, where
disabled means the member is unable to perform the duties of the job because of a work-related illness or injury,
which is expected to be permanent or to last indefinitely. A CalPERS member who has left active employment within
this group is not eligible for this benefit, except to the extent described below.
Standard Benefit
The standard Industrial Disability Retirement benefit is a monthly allowance equal to 50 percent of final
compensation.
Increased Benefit (75 percent of Final Compensation)
The increased Industrial Disability Retirement benefit is a monthly allowance equal to 75 percent final compensation
for total disability.
Improved Benefit (50 percent to 90 percent of Final Compensation)
The improved Industrial Disability Retirement benefit is a monthly allowance equal to the Workman’s Compensation Appeals Board permanent disability rate percentage (if 50 percent or greater, with a maximum of 90 percent) times
the final compensation.
For a CalPERS member not actively employed in this group who became disabled while employed by some other
CalPERS employer, the benefit is a return of accumulated member contributions with respect to employment in this
group. With the standard or increased benefit, a member may also choose to receive the annuitization of the
accumulated member contributions.
If a member is eligible for service retirement and if the service retirement benefit is more than the industrial disability
retirement benefit, the member may choose to receive the larger benefit.
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX B
SAFETY PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-5
Post-Retirement Death Benefit
Standard Lump Sum Payment
Upon the death of a retiree, a one-time lump sum payment of $500 will be made to the retiree’s designated
survivor(s), or to the retiree’s estate.
Improved Lump Sum Payment
Employers have the option of providing an improved lump sum death benefit of $600, $2,000, $3,000, $4,000 or $5,000.
Form of Payment for Retirement Allowance
Standard Form of Payment
Generally, the retirement allowance is paid to the retiree in the form of an annuity for as long as he or she is alive.
The retiree may choose to provide for a portion of his or her allowance to be paid to any designated beneficiary after
the retiree’s death. CalPERS provides for a variety of such benefit options, which the retiree pays for by taking a
reduction in his or her retirement allowance. Such reduction takes into account the amount to be provided to the
beneficiary and the probable duration of payments (based on the ages of the member and beneficiary) made subsequent to the member’s death.
Improved Form of Payment (Post-Retirement Survivor Allowance)
Employers have the option to contract for the post-retirement survivor allowance.
For retirement allowances with respect to service subject to the modified formula, 25 percent of the retirement
allowance will automatically be continued to certain statutory beneficiaries upon the death of the retiree, without a reduction in the retiree’s allowance. For retirement allowances with respect to service subject to the full or
supplemental formula, 50 percent of the retirement allowance will automatically be continued to certain statutory
beneficiaries upon the death of the retiree, without a reduction in the retiree’s allowance. This additional benefit is
referred to as post-retirement survivor allowance (PRSA) or simply as survivor continuance.
In other words, 25 percent or 50 percent of the allowance, the continuance portion, is paid to the retiree for as long
as he or she is alive, and that same amount is continued to the retiree’s spouse (or if no eligible spouse, to unmarried child(ren) until they attain age 18; or, if no eligible child(ren), to a qualifying dependent parent) for the
rest of his or her lifetime. This benefit will not be discontinued in the event the spouse remarries.
The remaining 75 percent or 50 percent of the retirement allowance, which may be referred to as the option portion
of the benefit, is paid to the retiree as an annuity for as long as he or she is alive. Or, the retiree may choose to
provide for some of this option portion to be paid to any designated beneficiary after the retiree’s death. Benefit
options applicable to the option portion are the same as those offered with the standard form. The reduction is calculated in the same manner but is applied only to the option portion.
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX B
SAFETY PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-6
Pre-Retirement Death Benefits
Basic Death Benefit
This is a standard benefit.
Eligibility
An employee’s beneficiary (or estate) may receive the basic death benefit if the member dies while actively
employed. A CalPERS member must be actively employed with the CalPERS employer providing this benefit to be
eligible for this benefit. A member’s survivor who is eligible for any other pre-retirement death benefit may choose to
receive that death benefit instead of this basic death benefit.
Benefit
The basic death benefit is a lump sum in the amount of the member’s accumulated contributions, where interest is
currently credited at 7.5 percent per year, plus a lump sum in the amount of one month's salary for each completed
year of current service, up to a maximum of six months' salary. For purposes of this benefit, one month's salary is
defined as the member's average monthly full-time rate of compensation during the 12 months preceding death.
1957 Survivor Benefit
This is a standard benefit.
Eligibility
An employee’s eligible survivor(s) may receive the 1957 Survivor benefit if the member dies while actively employed,
has attained at least age 50 for classic and safety PEPRA members and age 52 for miscellaneous PEPRA members,
and has at least 5 years of credited service (total service across all CalPERS employers and with certain other
retirement systems with which CalPERS has reciprocity agreements). A CalPERS member must be actively employed
with the CalPERS employer providing this benefit to be eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married at least one year before death or, if there is no eligible spouse,
to the member's unmarried child(ren) under age 18. A member’s survivor who is eligible for any other pre-retirement
death benefit may choose to receive that death benefit instead of this 1957 Survivor benefit.
Benefit
The 1957 Survivor benefit is a monthly allowance equal to one-half of the unmodified service retirement benefit that the member would have been entitled to receive if the member had retired on the date of his or her death. If the
benefit is payable to the spouse, the benefit is discontinued upon the death of the spouse. If the benefit is payable to
dependent child(ren), the benefit will be discontinued upon death or attainment of age 18, unless the child(ren) is
disabled. The total amount paid will be at least equal to the basic death benefit.
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX B
SAFETY PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-7
Optional Settlement 2W Death Benefit
This is an optional benefit.
Eligibility
An employee’s eligible survivor may receive the Optional Settlement 2W Death benefit if the member dies while
actively employed, has attained at least age 50 for classic and safety PEPRA members and age 52 for miscellaneous
PEPRA members, and has at least 5 years of credited service (total service across all CalPERS employers and with
certain other retirement systems with which CalPERS has reciprocity agreements). A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An eligible survivor means the
surviving spouse to whom the member was married at least one year before death. A member’s survivor who is
eligible for any other pre-retirement death benefit may choose to receive that death benefit instead of this Optional
Settlement 2W Death benefit.
Benefit
The Optional Settlement 2W Death benefit is a monthly allowance equal to the service retirement benefit that the
member would have received had the member retired on the date of his or her death and elected Optional
Settlement 2W. (A retiree who elects Optional Settlement 2W receives an allowance that has been reduced so that it
will continue to be paid after his or her death to a surviving beneficiary.) The allowance is payable as long as the
surviving spouse lives, at which time it is continued to any unmarried child(ren) under age 18, if applicable. The total
amount paid will be at least equal to the basic death benefit.
Special Death Benefit
This is a standard benefit for safety members. An employer may elect to provide this benefit for miscellaneous
members.
Eligibility
An employee’s eligible survivor(s) may receive the special death benefit if the member dies while actively employed
and the death is job-related. A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married prior
to the onset of the injury or illness that resulted in death. If there is no eligible spouse, an eligible survivor means the
member's unmarried child(ren) under age 22. An eligible survivor who chooses to receive this benefit will not receive
any other death benefit.
Benefit
The special death benefit is a monthly allowance equal to 50 percent of final compensation, and will be increased whenever the compensation paid to active employees is increased but ceasing to increase when the member would
have attained age 50. The allowance is payable to the surviving spouse until death at which time the allowance is
continued to any unmarried child(ren) under age 22. There is a guarantee that the total amount paid will at least
equal the basic death benefit.
If the member’s death is the result of an accident or injury caused by external violence or physical force incurred in
the performance of the member’s duty, and there are eligible surviving child(ren) (eligible means unmarried child(ren) under age 22) in addition to an eligible spouse, then an additional monthly allowance is paid equal to
the following:
if 1 eligible child: 12.5 percent of final compensation
if 2 eligible children: 20.0 percent of final compensation
if 3 or more eligible children: 25.0 percent of final compensation
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX B
SAFETY PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-8
Alternate Death Benefit for Local Fire Members
This is an optional benefit available only to local fire members.
Eligibility
An employee’s eligible survivor(s) may receive the alternate death benefit in lieu of the basic death benefit or the
1957 Survivor benefit if the member dies while actively employed and has at least 20 years of total CalPERS service.
A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An
eligible survivor means the surviving spouse to whom the member was married prior to the onset of the injury or illness that resulted in death. If there is no eligible spouse, an eligible survivor means the member's unmarried
child(ren) under age 18.
Benefit
The Alternate Death benefit is a monthly allowance equal to the service retirement benefit that the member would
have received had the member retired on the date of his or her death and elected Optional Settlement 2W. (A retiree who elects Optional Settlement 2W receives an allowance that has been reduced so that it will continue to be paid
after his or her death to a surviving beneficiary.) If the member has not yet attained age 50, the benefit is equal to
that which would be payable if the member had retired at age 50, based on service credited at the time of death.
The allowance is payable as long as the surviving spouse lives, at which time it is continued to any unmarried
child(ren) under age 18, if applicable. The total amount paid will be at least equal to the basic death benefit.
Cost-of-Living Adjustments (COLA)
Standard Benefit
Retirement and survivor allowances are adjusted each year in May for cost of living, beginning the second calendar year after the year of retirement. The standard cost-of-living adjustment (COLA) is 2 percent. Annual adjustments
are calculated by first determining the lesser of 1) 2 percent compounded from the end of the year of retirement or
2) actual rate of inflation. The resulting increase is divided by the total increase provided in prior years. For any
particular year, the COLA adjustment may be less than 2 percent (when the rate of inflation is low), may be greater
than the rate of inflation (when the rate of inflation is low after several years of high inflation) or may even be
greater than 2 percent (when inflation is high after several years of low inflation).
Improved Benefit
Employers have the option of providing a COLA of 3 percent, 4 percent, or 5 percent, determined in the same
manner as described above for the standard 2 percent COLA. An improved COLA is not available with the 1.5% at 65
formula.
Purchasing Power Protection Allowance (PPPA)
Retirement and survivor allowances are protected against inflation by PPPA. PPPA benefits are cost-of-living adjustments that are intended to maintain an individual’s allowance at 80 percent of the initial allowance at
retirement adjusted for inflation since retirement. The PPPA benefit will be coordinated with other cost-of-living
adjustments provided under the plan.
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX B
SAFETY PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-9
Employee Contributions
Each employee contributes toward his or her retirement based upon the retirement formula. The standard employee
contribution is as described below.
The percent contributed below the monthly compensation breakpoint is 0 percent.
The monthly compensation breakpoint is $0 for full and supplemental formula members and $133.33 for
employees covered by the modified formula.
The percent contributed above the monthly compensation breakpoint depends upon the benefit formula, as
shown in the table below.
Benefit Formula Percent Contributed above the
Breakpoint
Miscellaneous, 1.5% at 65 2%
Miscellaneous, 2% at 60 7%
Miscellaneous, 2% at 55 7%
Miscellaneous, 2.5% at 55 8%
Miscellaneous, 2.7% at 55 8%
Miscellaneous, 3% at 60 8%
Miscellaneous, 2% at 62 50% of the Total Normal Cost
Miscellaneous, 1.5% at 65 50% of the Total Normal Cost
Safety, 1/2 at 55 Varies by entry age
Safety, 2% at 55 7%
Safety, 2% at 50 9%
Safety, 3% at 55 9%
Safety, 3% at 50 9%
Safety, 2% at 57 50% of the Total Normal Cost
Safety, 2.5% at 57 50% of the Total Normal Cost
Safety, 2.7% at 57 50% of the Total Normal Cost
The employer may choose to “pick-up” these contributions for classic members (Employer Paid Member Contributions
or EPMC). EPMC is prohibited for new PEPRA members.
An employer may also include Employee Cost Sharing in the contract, where employees agree to share the cost of the employer contribution. These contributions are paid in addition to the member contribution.
Auxiliary organizations of the CSUC system may elect reduced contribution rates, in which case the offset is $317 and
the contribution rate is 6 percent if members are not covered by Social Security. If members are covered by Social
Security, the offset is $513 and the contribution rate is 5 percent.
Refund of Employee Contributions
If the member’s service with the employer ends, and if the member does not satisfy the eligibility conditions for any of the retirement benefits above, the member may elect to receive a refund of his or her employee contributions,
which are credited with 6 percent interest compounded annually.
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX B
SAFETY PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-10
1959 Survivor Benefit
This is a pre-retirement death benefit available only to members not covered by Social Security. Any agency joining
CalPERS subsequent to 1993 is required to provide this benefit if the members are not covered by Social Security.
The benefit is optional for agencies joining CalPERS prior to 1994. Levels 1, 2 and 3 are now closed. Any new agency
or any agency wishing to add this benefit or increase the current level may only choose the 4th or Indexed Level.
This benefit is not included in the results presented in this valuation. More information on this benefit is available on
the CalPERS website at www.calpers.ca.gov.
APPENDIX C
PARTICIPANT DATA
SUMMARY OF VALUATION DATA
ACTIVE MEMBERS
TRANSFERRED AND TERMINATED MEMBERS
RETIRED MEMBERS AND BENEFICIARIES
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX C
SAFETY PLAN OF THE CITY OF PALO ALTO
PARTICIPANT DATA
C-1
Summary of Valuation Data
June 30, 2015 June 30, 2016
1. Active Members
a) Counts 179 174
b) Average Attained Age
40.91 41.61
c) Average Entry Age to Rate Plan 29.21 29.31
d) Average Years of Service 11.70 12.30
e) Average Annual Covered Pay $ 118,359 $ 122,230
f) Annual Covered Payroll 21,186,275 21,268,028
g) Projected Annual Payroll for Contribution Year 23,150,815 23,240,148
h) Present Value of Future Payroll 205,334,914 199,470,322
2. Transferred Members
a) Counts 59 63
b) Average Attained Age 43.87 42.96
c) Average Years of Service 3.22 3.34
d) Average Annual Covered Pay $ 109,275 $ 114,053
3. Terminated Members
a) Counts 39 38
b) Average Attained Age 42.63 43.22
c) Average Years of Service 3.54 3.61
d) Average Annual Covered Pay $ 89,331 $ 87,206
4. Retired Members and Beneficiaries
a) Counts 414 417
b) Average Attained Age 67.81 68.24
c) Average Annual Benefits $ 51,863 $ 52,760
5. Active to Retired Ratio [(1a) / (4a)] 0.43 0.42
Counts of members included in the valuation are counts of the records processed by the valuation. Multiple
records may exist for those who have service in more than one valuation group. This does not result in
double counting of liabilities.
Average Annual Benefits represents benefit amounts payable by this plan only. Some members may have
service with another agency and would therefore have a larger total benefit than would be included as part
of the average shown here.
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX C
SAFETY PLAN OF THE CITY OF PALO ALTO
PARTICIPANT DATA
C-2
Active Members
Counts of members included in the valuation are counts of the records processed by the valuation. Multiple records
may exist for those who have service in more than one valuation group. This does not result in double counting of
liabilities.
Distribution of Active Members by Age and Service
Years of Service at Valuation Date
Attained
Age 0-4 5-9 10-14 15-19 20-25 25+ Total
15-24 1 0 0 0 0 0 1
25-29 13 3 0 0 0 0 16
30-34 15 9 4 0 0 0 28
35-39 7 13 9 2 0 0 31
40-44 6 4 7 18 2 0 37
45-49 1 1 7 9 6 3 27
50-54 1 1 5 6 7 8 28
55-59 0 1 0 1 0 2 4
60-64 0 0 0 0 0 1 1
65 and over 0 0 0 0 0 1 1
All Ages 44 32 32 36 15 15 174
Distribution of Average Annual Salaries by Age and Service
Years of Service at Valuation Date
Attained
Age 0-4 5-9 10-14 15-19 20-25 25+ Average
15-24 $85,500 $0 $0 $0 $0 $0 $85,500
25-29 96,376 109,816 0 0 0 0 98,896
30-34 102,167 117,615 116,867 0 0 0 109,233
35-39 114,032 119,919 128,323 154,720 0 0 123,275
40-44 111,805 115,909 137,179 134,200 135,680 0 129,235
45-49 118,622 127,278 113,807 118,795 128,696 167,814 125,456
50-54 218,930 124,923 110,502 120,124 137,058 133,545 130,174
55-59 0 121,321 0 147,465 0 194,438 164,415
60-64 0 0 0 0 0 122,334 122,334
65 and over 0 0 0 0 0 126,294 126,294
All Ages $106,307 $118,253 $122,868 $129,511 $133,529 $147,287 $122,230
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX C
SAFETY PLAN OF THE CITY OF PALO ALTO
PARTICIPANT DATA
C-3
Transferred and Terminated Members
Distribution of Transfers to Other CalPERS Plans by Age, Service, and average Salary
Years of Service at Valuation Date
Attained
Age 0-4 5-9 10-14 15-19 20-25 25+ Total
Average
Salary
15-24 1 0 0 0 0 0 1 $103,645
25-29 1 0 0 0 0 0 1 120,404
30-34 5 1 0 0 0 0 6 109,662
35-39 14 2 0 0 0 0 16 100,832
40-44 9 2 0 0 0 0 11 108,583
45-49 9 6 2 0 0 0 17 124,976
50-54 7 0 1 0 0 0 8 120,946
55-59 0 2 0 0 0 0 2 126,592
60-64 0 1 0 0 0 0 1 150,271
65 and over 0 0 0 0 0 0 0 0
All Ages 46 14 3 0 0 0 63 114,053
Distribution of Terminated Participants with Funds on Deposit by Age, Service, and average Salary
Years of Service at Valuation Date
Attained Age 0-4 5-9 10-14 15-19 20-25 25+ Total Average Salary
15-24 0 0 0 0 0 0 0 $0
25-29 2 0 0 0 0 0 2 91,679
30-34 1 1 0 0 0 0 2 88,888
35-39 10 3 1 0 0 0 14 93,175
40-44 0 3 0 0 0 0 3 107,289
45-49 6 2 1 0 0 0 9 85,994
50-54 5 0 0 0 0 0 5 54,434
55-59 1 1 0 0 0 0 2 86,896
60-64 0 1 0 0 0 0 1 106,475
65 and over 0 0 0 0 0 0 0 0
All Ages 25 11 2 0 0 0 38 87,206
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX C
SAFETY PLAN OF THE CITY OF PALO ALTO
PARTICIPANT DATA
C-4
Retired Members and Beneficiaries
Distribution of Retirees and Beneficiaries by Age and Retirement Type*
Attained
Age
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Total
Under 30 0 0 0 0 0 0 0
30-34 0 0 0 0 0 0 0
35-39 0 0 2 0 0 0 2
40-44 0 0 7 0 0 0 7
45-49 0 1 5 0 0 0 6
50-54 25 0 15 0 1 0 41
55-59 38 1 20 0 2 0 61
60-64 30 1 19 0 0 4 54
65-69 33 1 20 0 0 4 58
70-74 31 0 17 0 0 9 57
75-79 33 2 25 0 0 5 65
80-84 16 0 12 0 0 7 35
85 and Over 17 0 7 0 0 7 31
All Ages 223 6 149 0 3 36 417
Distribution of Average Annual Disbursements to Retirees and Beneficiaries by Age
and Retirement Type*
Attained
Age
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Average
Under 30 $0 $0 $0 $0 $0 $0 $0
30-34 0 0 0 0 0 0 0
35-39 0 0 54,436 0 0 0 54,436
40-44 0 0 59,398 0 0 0 59,398
45-49 0 83 42,136 0 0 0 35,127
50-54 79,097 0 71,792 0 52,644 0 75,779
55-59 84,777 32,929 70,873 0 36,504 0 77,786
60-64 58,918 2,048 52,903 0 0 44,160 54,655
65-69 72,548 17,352 46,687 0 0 35,800 60,144
70-74 46,376 0 30,498 0 0 38,584 40,410
75-79 48,114 11,533 34,877 0 0 29,016 40,428
80-84 42,630 0 31,537 0 0 24,496 35,200
85 and Over 28,738 0 24,075 0 0 21,909 26,143
All Ages $60,792 $12,580 $47,691 $0 $41,884 $31,584 $52,760
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX C
SAFETY PLAN OF THE CITY OF PALO ALTO
PARTICIPANT DATA
C-5
Retired Members and Beneficiaries (continued)
Distribution of Retirees and Beneficiaries by Years Retired and Retirement Type*
Years
Retired
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Total
Under 5 Yrs 49 1 17 0 0 7 74
5-9 41 1 22 0 0 5 69
10-14 48 0 16 0 1 9 74
15-19 22 1 19 0 1 9 52
20-24 29 0 13 0 0 1 43
25-29 18 1 19 0 0 4 42
30 and Over 16 2 43 0 1 1 63
All Years 223 6 149 0 3 36 417
Distribution of Average Annual Disbursements to Retirees and Beneficiaries by Years Retired and
Retirement Type*
Years
Retired
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Average
Under 5 Yrs $77,313 $2,048 $77,780 $0 $0 $21,308 $71,106
5-9 75,538 83 77,762 0 0 35,334 72,240
10-14 64,157 0 63,687 0 52,644 43,771 61,420
15-19 40,377 32,929 44,117 0 46,601 30,307 39,977
20-24 50,346 0 41,507 0 0 25,841 47,104
25-29 40,215 17,352 34,169 0 0 29,306 35,897
30 and Over 32,469 11,533 23,881 0 26,406 1,417 25,354
All Years $60,792 $12,580 $47,691 $0 $41,884 $31,584 $52,760
* Counts of members do not include alternate payees receiving benefits while the member is still working.
Therefore, the total counts may not match information on page 25 of the report. Multiple records may exist for
those who have service in more than one coverage group. This does not result in double counting of liabilities.
APPENDIX D
DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION
RATES
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX D
SAFETY PLAN OF THE CITY OF PALO ALTO
PARTICIPANT DATA
D-1
Development of PEPRA Members Contribution Rates
The table below shows the determination of the Member contribution rates based on 50 percent of the Total Normal
Cost for each respective plan on June 30, 2016.
Assembly Bill (AB) 340 created PEPRA that implemented new benefit formulas and a final compensation period as
well as new contribution requirements for new employees. In accordance with Section Code 7522.30(b), “new
members … shall have an initial contribution rate of at least 50 percent of the normal cost rate.” The normal cost for
the plan is dependent on the benefit levels, actuarial assumptions and demographics of the plan particularly the entry
age into the plan. Should the total normal cost of the plan change by one percent or more from the base total normal
cost established for the plan, the new member rate shall be 50 percent of the new normal cost rounded to the
nearest quarter percent.
Basis for Current Rate Rates Effective July 1, 2018
Rate Plan
Identifier Plan
Total
Normal Cost
Member
Rate
Total
Normal Cost Change Change
Needed
Member
Rate
25006 Safety Fire PEPRA 21.276% 10.750% 21.856% 0.580% No 10.750%
25007 Safety Police PEPRA 21.276% 10.750% 21.856% 0.580% No 10.750%
For a description of the methods used to determine the Total Normal Cost for this purpose, please see the “PEPRA
Normal Cost Rate Methodology” section in Appendix A.
APPENDIX E
GLOSSARY OF ACTUARIAL TERMS
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX E
SAFETY PLAN OF THE CITY OF PALO ALTO
GLOSSARY OF ACTUARIAL TERMS
E-1
Glossary of Actuarial Terms
Accrued Liability (also called Actuarial Accrued Liability or Entry Age Normal Accrued Liability)
The total dollars needed as of the valuation date to fund all benefits earned in the past for current members.
Actuarial Assumptions
Assumptions made about certain events that will affect pension costs. Assumptions generally can be broken
down into two categories: demographic and economic. Demographic assumptions include such things as
mortality, disability and retirement rates. Economic assumptions include discount rate, salary growth and
inflation.
Actuarial Methods
Procedures employed by actuaries to achieve certain funding goals of a pension plan. Actuarial methods include funding method, setting the length of time to fund the Accrued Liability and determining the Value of Assets.
Actuarial Valuation
The determination, as of a valuation date of the Normal Cost, Accrued liability, and related actuarial present
values for a pension plan. These valuations are performed annually or when an employer is contemplating a
change to their plan provisions.
Amortization Bases
Separate payment schedules for different portions of the Unfunded Liability. The total Unfunded Liability of a
Risk Pool or non-pooled plan can be segregated by "cause,” creating “bases” and each such base will be
separately amortized and paid for over a specific period of time. However, all bases are amortized using
investment and payroll assumptions from the current valuation. This can be likened to a home having a first
mortgage of 24 years remaining payments and a second mortgage that has 10 years remaining payments. Each
base or each mortgage note has its own terms (payment period, principal, etc.)
Generally, in an actuarial valuation, the separate bases consist of changes in unfunded liability due to contract
amendments, actuarial assumption changes, actuarial methodology changes, and/or gains and losses. Payment
periods are determined by Board policy and vary based on the cause of the change.
Amortization Period
The number of years required to pay off an Amortization Base.
Classic Member (under PEPRA)
A classic member is a member who joined CalPERS prior to January, 1, 2013 and who is not defined as a new
member under PEPRA. (See definition of new member below)
Discount Rate Assumption
The actuarial assumption that was called “investment return” in earlier CalPERS reports or “actuarial interest
rate” in Section 20014 of the California Public Employees’ Retirement Law (PERL).
Entry Age
The earliest age at which a plan member begins to accrue benefits under a defined benefit pension plan. In
most cases, this is the age of the member on their date of hire.
Entry Age Normal Cost Method
An actuarial cost method designed to fund a member's total plan benefit over the course of his or her career.
This method is designed to yield a rate expressed as a level percentage of payroll. (The assumed retirement age less the entry age is the amount of time required to fund a member’s total benefit.
Generally, the older a member on the date of hire, the greater the entry age normal cost. This is mainly because
there is less time to earn investment income to fund the future benefits.)
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX E
SAFETY PLAN OF THE CITY OF PALO ALTO
GLOSSARY OF ACTUARIAL TERMS
E-2
Fresh Start
A Fresh Start is when multiple amortization bases are collapsed to one base and amortized together over a new
funding period.
Funded Status
A measure of how well funded, or how "on track" a plan or risk pool is with respect to assets versus accrued
liabilities. A ratio greater than 100 percent means the plan or risk pool has more assets than liabilities and a ratio
less than 100 percent means liabilities are greater than assets.
GASB 68
Statement No. 68 of the Governmental Accounting Standards Board. The accounting standard governing a state
or local governmental employer’s accounting and financial reporting for pensions. GASB 68 replaces GASB 27
effective the first fiscal year beginning after June 15, 2014.
New Member (under PEPRA) A new member includes an individual who becomes a member of a public retirement system for the first time on
or after January 1, 2013, and who was not a member of another public retirement system prior to that date, and
who is not subject to reciprocity with another public retirement system.
Normal Cost
The annual cost of service accrual for the upcoming fiscal year for active employees. The normal cost should be
viewed as the long term contribution rate.
Pension Actuary
A business professional that is authorized by the Society of Actuaries, and the American Academy of Actuaries to
perform the calculations necessary to properly fund a pension plan.
PEPRA
The California Public Employees’ Pension Reform Act of 2013
Prepayment Contribution
A payment made by the employer to reduce or eliminate the year’s required employer contribution.
Present Value of Benefits (PVB)
The total dollars needed as of the valuation date to fund all benefits earned in the past or expected to be earned
in the future for current members.
Unfunded Accrued Liability (UAL)
When a plan or pool’s Value of Assets is less than its Accrued Liability, the difference is the plan or pool’s
Unfunded Accrued Liability (or unfunded liability). If the unfunded liability is positive, the plan or pool will have
to pay contributions exceeding the Normal Cost.
California Public Employees’ Retirement System
Actuarial Office
P.O. Box 942701
Sacramento, CA 94229-2701
TTY: (916) 795-3240
(888) 225-7377 phone • (916) 795-2744 fax
www.calpers.ca.gov
July 2017
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO (CalPERS ID: 6373437857)
Annual Valuation Report as of June 30, 2016
Dear Employer,
As an attachment to this letter, you will find a copy of the June 30, 2016 actuarial valuation report of your pension
plan. Your 2016 actuarial valuation report contains important actuarial information about your pension plan at CalPERS.
Your CalPERS staff actuary, whose signature appears in the “Actuarial Certification” section on page 1, is available to
discuss the report with you after August 31, 2017.
Required Contributions
The exhibit below displays the minimum required employer contributions and the Employee PEPRA Rate for Fiscal Year
2018-19 along with estimates of the required contributions for Fiscal Years 2019-20 and 2020-21. Member
contributions other than cost sharing (whether paid by the employer or the employee) are in addition to the results
shown below. The required employer contributions in this report do not reflect any cost sharing arrangement you may have with your employees.
Fiscal Year Employer Normal Cost Rate Employer Amortization of Unfunded Accrued Liability Employee PEPRA Rate
2018-19 10.217% $18,392,618 6.25%
Projected Results
2019-20 10.7% $21,368,000 TBD
2020-21 11.7% $23,620,000 TBD
The actual investment return for Fiscal Year 2016-17 was not known at the time this report was prepared. The
projections above assume the investment return for that year would be 7.375 percent. If the actual investment
return for Fiscal year 2016-17 differs from 7.375 percent, the actual contribution requirements for the projected years will differ from those shown above.
Moreover, the projected results for Fiscal Years 2019-20 and 2020-21 also assume that there are no future plan
changes, no further changes in assumptions other than those recently approved, and no liability gains or losses. Such
changes can have a significant impact on required contributions. Since they cannot be predicted in advance, the
projected employer results shown above are estimates. The actual required employer contributions for Fiscal year
2019-20 will be provided in next year’s report.
For additional details regarding the assumptions and methods used for these projections please refer to the “Projected
Employer Contributions” in the “Highlights and Executive Summary” section.
The required contributions shown above include a Normal Cost component expressed as a percentage of payroll and a
payment toward Unfunded Accrued Liability expressed as a dollar amount. Actual contributions for Fiscal Year 2018-19
and all future years will be collected on that basis. For illustrative total contribution requirements expressed as
percentages of payroll, please see pages 4 and 5 of the report.
The “Risk Analysis” section of the valuation report on page 21 also contains estimated employer contributions in future
years under a variety of investment return scenarios.
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
(CalPERS ID: 6373437857)
Annual Valuation Report as of June 30, 2016
Page 2
Changes since the Prior Year’s Valuation
On December 21, 2016, the CalPERS Board of Administration lowered the discount rate from 7.50 percent to 7.00
percent using a three year phase-in beginning with the June 30, 2016 actuarial valuations. The minimum employer
contributions for Fiscal Year 2018-19 determined in this valuation were calculated using a discount rate of 7.375
percent. The projected employer contributions on Page 5 are calculated assuming that the discount rate will be lowered to 7.25 percent next year and to 7.00 percent the following year as adopted by the Board.
Beginning with Fiscal Year 2017-18 CalPERS began collecting employer contributions toward the plan’s unfunded
liability as dollar amounts instead of the prior method of a contribution rate. This change addresses potential funding
issues that could arise from a declining payroll or reduction in the number of active members in the plan. Funding the
unfunded liability as a percentage of payroll could lead to the underfunding of the plans. Due to stakeholder feedback
regarding internal needs for total contributions expressed as a percentage of payroll, the reports have been modified to include such results in the contribution projection on page 5. These results are provided for information purposes only.
Contributions toward the unfunded liability will continue to be collected as dollar amounts.
The CalPERS Board of Administration adopted a Risk Mitigation Policy which is designed to reduce funding risk over
time. This Policy has been temporarily suspended during the period over which the discount rate is being lowered.
More details on the Risk Mitigation Policy can be found on our website.
Besides the above noted changes, there may also be changes specific to the plan such as contract amendments and funding changes. Further descriptions of general changes are included in the “Highlights and Executive Summary” section and in
Appendix A, “Actuarial Methods and Assumptions.” The effects of the changes on the required contributions are
included in the “Reconciliation of Required Employer Contributions” section.
We understand that you might have a number of questions about these results. While we are very interested in
discussing these results with your agency, in the interest of allowing us to give every public agency their results, we ask that you wait until after August 31 to contact us with actuarial questions. If you have other questions, you may call
the Customer Contact Center at (888)-CalPERS or (888-225-7377).
Sincerely,
SCOTT TERANDO Chief Actuary
ACTUARIAL VALUATION
as of June 30, 2016
for the
MISCELLANEOUS PLAN
of the
CITY OF PALO ALTO
(CalPERS ID: 6373437857)
(Rate Plan ID: 8)
REQUIRED CONTRIBUTIONS
FOR FISCAL YEAR
July 1, 2018 – June 30, 2019
TABLE OF CONTENTS
ACTUARIAL CERTIFICATION 1
HIGHLIGHTS AND EXECUTIVE SUMMARY
Introduction 3
Purpose of the Report 3
Required Contributions 4
Plan’s Funded Status 5 Projected Employer Contributions 5
Cost 6
Changes Since the Prior Year’s Valuation 7
Subsequent Events 7
ASSETS
Reconciliation of the Market Value of Assets 9
Asset Allocation 10
CalPERS History of Investment Returns 11
LIABILITIES AND CONTRIBUTIONS
Development of Accrued and Unfunded Liabilities 13 (Gain) / Loss Analysis 06/30/15 - 06/30/16 14
Schedule of Amortization Bases 15
30-Year Amortization Schedule and Alternatives 16
Reconciliation of Required Employer Contributions 18
Employer Contribution History 19
Funding History 19
RISK ANALYSIS
Analysis of Future Investment Return Scenarios 21
Analysis of Discount Rate Sensitivity 22 Volatility Ratios 23
Hypothetical Termination Liability 24
PLAN’S MAJOR BENEFIT PROVISIONS
Plan’s Major Benefit Options 26
APPENDIX A – ACTUARIAL METHODS AND ASSUMPTIONS
Actuarial Data A-1
Actuarial Methods A-1
Actuarial Assumptions A-3
Miscellaneous A-21
APPENDIX B – PRINCIPAL PLAN PROVISIONS B-1
APPENDIX C – PARTICIPANT DATA
Summary of Valuation Data C-1 Active Members C-2
Transferred and Terminated Members C-3
Retired Members and Beneficiaries C-4
APPENDIX D – DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION RATE D-1
APPENDIX E – GLOSSARY OF ACTUARIAL TERMS E-1
(CY) FIN PROCESS CONTROL ID: 494678 (PY) FIN PROCESS CONTROL ID: 480029 REPORT ID: 103789
CALPERS ACTUARIAL VALUATION - June 30, 2016
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 1
ACTUARIAL CERTIFICATION
To the best of our knowledge, this report is complete and accurate and contains sufficient information to
disclose, fully and fairly, the funded condition of the MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO.
This valuation is based on the member and financial data as of June 30, 2016 provided by the various CalPERS databases and the benefits under this plan with CalPERS as of the date this report was produced.
It is our opinion that the valuation has been performed in accordance with generally accepted actuarial
principles, in accordance with standards of practice prescribed by the Actuarial Standards Board, and that
the assumptions and methods are internally consistent and reasonable for this plan, as prescribed by the
CalPERS Board of Administration according to provisions set forth in the California Public Employees’
Retirement Law.
The undersigned is an actuary for CalPERS, a member of the American Academy of Actuaries and the
Society of Actuaries and meets the Qualification Standards of the American Academy of Actuaries to render
the actuarial opinions contained herein.
DAVID CLEMENT, ASA, MAAA, EA
Senior Pension Actuary, CalPERS
HIGHLIGHTS AND EXECUTIVE SUMMARY
INTRODUCTION
PURPOSE OF THE REPORT
REQUIRED CONTRIBUTIONS
PLAN’S FUNDED STATUS
PROJECTED EMPLOYER CONTRIBUTIONS
COST
CHANGES SINCE THE PRIOR YEAR’S VALUATION
SUBSEQUENT EVENTS
CALPERS ACTUARIAL VALUATION - June 30, 2016
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 3
Introduction
This report presents the results of the June 30, 2016 actuarial valuation of the MISCELLANEOUS PLAN OF
THE CITY OF PALO ALTO of the California Public Employees’ Retirement System (CalPERS). This actuarial
valuation sets the required employer contributions for Fiscal Year 2018-19.
Purpose of the Report
The actuarial valuation was prepared by the CalPERS Actuarial Office using data as of June 30, 2016. The purpose of the report is to:
Set forth the assets and accrued liabilities of this plan as of June 30, 2016;
Determine the required employer contributions for the fiscal year July 1, 2018 through June 30, 2019;
Provide actuarial information as of June 30, 2016 to the CalPERS Board of Administration and other
interested parties.
The pension funding information presented in this report should not be used in financial reports subject to Governmental Accounting Standards Board (GASB) Statement No. 68 for an Agent Employer Defined Benefit
Pension Plan. A separate accounting valuation report for such purposes is available from CalPERS and
details for ordering are available on our website.
The measurements shown in this actuarial valuation may not be applicable for other purposes. The
employer should contact their actuary before disseminating any portion of this report for any reason that is
not explicitly described above.
Future actuarial measurements may differ significantly from the current measurements presented in this
report due to such factors as the following: plan experience differing from that anticipated by the economic
or demographic assumptions; changes in economic or demographic assumptions; changes in actuarial
policies; and changes in plan provisions or applicable law.
California Actuarial Advisory Panel Recommendations
This report includes all the basic disclosure elements as described in the Model Disclosure Elements for
Actuarial Valuation Reports recommended in 2011 by the California Actuarial Advisory Panel (CAAP), with
the exception of including the original base amounts of the various components of the unfunded liability in
the Schedule of Amortization Bases shown on page 15.
Additionally, this report includes the following “Enhanced Risk Disclosures” also recommended by the CAAP
in the Model Disclosure Elements document:
A “Deterministic Stress Test,” projecting future results under different investment income
scenarios
A “Sensitivity Analysis,” showing the impact on current valuation results using alternative discount
rates of 6.0 percent, 7.0 percent and 8.0 percent.
CALPERS ACTUARIAL VALUATION - June 30, 2016
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 4
Required Contributions
Fiscal Year
Required Employer Contribution 2018-19
Employer Normal Cost Rate 10.217%
Plus Either
1) Monthly Employer Dollar UAL Payment $ 1,532,718
Or
2) Annual UAL Prepayment Option $ 17,749,739
Required PEPRA Member Contribution Rate
6.25%
The total minimum required employer contribution is the sum of the Plan’s Employer Normal Cost Rate
(expressed as a percentage of payroll) plus the Employer Unfunded Accrued Liability (UAL) Contribution
Amount (billed monthly in dollars).
Only the UAL portion of the employer contribution can be prepaid (which must be received in full no
later than July 31). Plan Normal Cost contributions will be made as part of the payroll reporting
process. If there is contractual cost sharing or other change, this amount will change.
§20572 of the Public Employees’ Retirement Law assesses interest at an annual rate of 10 percent if a
contracting agency fails to remit the required contributions when due.
For additional detail regarding the determination of the required contribution for PEPRA members, see Appendix D. Required member contributions for Classic members can be found in Appendix B.
Fiscal Year Fiscal Year
2017-18 2018-19
Normal Cost Contribution as a Percentage of Payroll
Total Normal Cost 17.623% 17.697%
Employee Contribution1 7.584% 7.480%
Employer Normal Cost 10.039% 10.217%
Projected Annual Payroll for Contribution Year $ 78,211,742 $ 82,332,567
Estimated Employer Contributions Based On
Projected Payroll
Total Normal Cost $ 13,783,255 $ 14,570,395
Employee Contribution1 5,931,579 6,158,476
Employer Normal Cost 7,851,676 8,411,919
Unfunded Liability Contribution 15,765,273 18,392,618
% of Projected Payroll (illustrative only) 20.157% 22.339%
Estimated Total Employer Contribution $ 23,616,949 $ 26,804,537
% of Projected Payroll (illustrative only) 30.196% 32.556%
1 For classic members, this is the percentage specified in the Public Employees Retirement Law, net of any reduction from
the use of a modified formula or other factors. For PEPRA members, the member contribution rate is based on 50 percent of the normal cost. A development of PEPRA member contribution rates can be found in Appendix D. Employee
cost sharing is not shown in this report.
CALPERS ACTUARIAL VALUATION - June 30, 2016
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 5
Plan’s Funded Status
This measure of funded status is an assessment of the need for future employer contributions based on the
selected actuarial cost method used to fund the plan. The UAL is the present value of future employer
contributions for service that has already been earned and is in addition to future normal cost contributions
for active members. For a measure of funded status that is appropriate for assessing the sufficiency of plan assets to cover estimated termination liabilities, please see “Hypothetical Termination Liability” in the “Risk
Analysis” section.
Projected Employer Contributions
The table below shows the required and projected employer contributions (before cost sharing) for the next
six fiscal years. Projected results reflect the adopted changes to the discount rate described in Appendix A,
“Actuarial Methods and Assumptions.” The projections also assume that all actuarial assumptions will be
realized and that no further changes to assumptions, contributions, benefits, or funding will occur during the
projection period. The projected normal cost percentages in the projections below do not reflect that the
normal cost will decline over time as new employees are hired into PEPRA or other lower cost benefit tiers.
Required
Contribution
Projected Future Employer Contributions
(Assumes 7.375% Return for Fiscal Year 2016-17)
Fiscal Year 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25
Normal Cost % 10.217% 10.7% 11.7% 11.7% 11.7% 11.7% 11.7%
UAL Payment 18,392,618 21,368,000 23,620,000 26,268,000 28,624,000 30,328,000 31,816,000
Total as a % of Payroll* 32.6% 35.9% 38.8% 40.9% 42.6% 43.5% 44.1%
Projected Payroll 82,332,567 84,802,544 87,346,620 89,967,019 92,666,029 95,446,010 98,309,391
*Illustrative only and based on the projected payroll shown.
Changes in the UAL due to actuarial gains or losses as well as changes in actuarial assumptions or methods
are amortized using a 5-year ramp up. For more information, please see “Amortization of the Unfunded
Actuarial Accrued Liability” under “Actuarial Methods” in Appendix A. This method phases in the impact of
unanticipated changes in UAL over a 5-year period and attempts to minimize employer cost volatility from
year to year. As a result of this methodology, dramatic changes in the required employer contributions in
any one year are less likely. However, required contributions can change gradually and significantly over the next five years. In years where there is a large increase in UAL the relatively small amortization payments
during the ramp up period could result in a funded ratio that is projected to decrease initially while the
contribution impact of the increase in the UAL is phased in.
Due to the adopted changes in the discount rate for the next two valuations in combination with the 5-year
phase-in ramp, the increases in the required contributions are expected to continue for seven years from
Fiscal Year 2018-19 through Fiscal Year 2024-25.
For projected contributions under alternate investment return scenarios, please see the “Analysis of Future
Investment Return Scenarios” in the “Risk Analysis” section.
June 30, 2015 June 30, 2016
1. Present Value of Projected Benefits $ 788,241,494 $ 827,688,407
2. Entry Age Normal Accrued Liability 696,699,220 730,382,476
3. Market Value of Assets (MVA) $ 477,031,099 $ 468,702,245
4. Unfunded Accrued Liability (UAL) [(2) – (3)] $ 219,668,121 $ 261,680,231
5. Funded Ratio [(3) / (2)] 68.5% 64.2%
CALPERS ACTUARIAL VALUATION - June 30, 2016
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 6
Cost
Actuarial Cost Estimates in General
What is the cost of the pension plan?
Contributions to fund the pension plan are comprised of two components:
The Normal Cost, expressed as a percentage of total active payroll.
The Amortization of the Unfunded Accrued Liability (UAL), expressed as a dollar amount.
For fiscal years prior to FY 2017-18, the Amortizations of UAL component was expressed as percentage of
total active payroll. Starting with FY 2017-18, the Amortization of UAL component will be expressed as a dollar amount and will be invoiced on a monthly basis. There will be an option to prepay this amount during
July of each fiscal year.
The Normal Cost component will continue to be expressed as a percentage of active payroll with employer
and employee contributions payable as part of the regular payroll reporting process.
The determination of both components requires complex actuarial calculations. The calculations are based on a set of actuarial assumptions which can be divided into two categories:
Demographic assumptions (which includes mortality rates, retirement rates, employment
termination rates, disability rates)
Economic assumptions (which includes future investment earnings, inflation, salary growth rates)
These assumptions reflect CalPERS best estimate of the future experience of the plan and are long term in nature. We recognize that all the assumptions will not be realized in any given year. For example, the
investment earnings at CalPERS have averaged 7.0 percent over the 20 years ending June 30, 2016, yet
individual fiscal year returns have ranged from -24 percent to +21.7 percent. In addition, CalPERS reviews
all the actuarial assumptions on an ongoing basis by conducting in depth experience studies every four
years.
CALPERS ACTUARIAL VALUATION - June 30, 2016
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 7
Changes since the Prior Year’s Valuation
Benefits
The standard actuarial practice at CalPERS is to recognize mandated legislative benefit changes in the first annual valuation following the effective date of the legislation. Voluntary benefit changes by plan
amendment are generally included in the first valuation that is prepared after the amendment becomes
effective, even if the valuation date is prior to the effective date of the amendment.
This valuation generally reflects plan changes by amendments effective before the date of the report. Please
refer to the “Plan’s Major Benefit Options” and Appendix B for a summary of the plan provisions used in this
valuation. The effect of any mandated benefit changes or plan amendments on the unfunded liability is shown in the “(Gain)/Loss Analysis” and the effect on the employer contribution is shown in the
“Reconciliation of Required Employer Contributions.” It should be noted that no change in liability or
contribution is shown for any plan changes which were already included in the prior year’s valuation.
Actuarial Methods and Assumptions
On December 21, 2016, the CalPERS Board of Administration lowered the discount rate from 7.50 percent to
7.00 percent using a three year phase-in beginning with the June 30, 2016 actuarial valuations. The minimum employer contributions for Fiscal Year 2018-19 determined in this valuation were calculated using
a discount rate of 7.375 percent. The projected employer contributions on Page 5 are calculated assuming
that the discount rate will be lowered to 7.25 percent next year and 7.00 percent the following year as
adopted by the Board. The decision to reduce the discount rate was primarily based on reduced capital
market assumptions provided by external investment consultants and CalPERS investment staff. The specific
decision adopted by the Board reflected recommendations from CalPERS staff and additional input from
employer and employee stakeholder groups. Based on the investment allocation adopted by the Board and capital market assumptions, the reduced discount rate assumption provides a more realistic assumption for
the long term investment return of the fund.
Notwithstanding the Board’s decision to phase into a 7.0 percent discount rate, subsequent analysis of the
expected investment return of CalPERS assets or changes to the investment allocation may result in a
change to this three year discount rate schedule. A comprehensive analysis of all actuarial assumptions and
methods including the discount rate will be conducted in 2017.
Subsequent Events
The contribution requirements determined in this actuarial valuation report are based on demographic and financial information as of June 30, 2016. Changes in the value of assets subsequent to that date are not
reflected. Declines in asset values will increase the required contribution, while investment returns above
the assumed rate of return will decrease the actuarial cost of the plan.
This actuarial valuation report reflects statutory changes, regulatory changes and CalPERS Board actions
through January 2017. Any subsequent changes or actions are not reflected.
ASSETS
RECONCILIATION OF THE MARKET VALUE OF ASSETS
ASSET ALLOCATION
CALPERS HISTORY OF INVESTMENT RETURNS
CALPERS ACTUARIAL VALUATION - June 30, 2016
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 9
Reconciliation of the Market Value of Assets
1. Market Value of Assets as of 6/30/15 including Receivables $ 477,031,099
2. Change in Receivables for Service Buybacks (370,242)
3. Employer Contributions 18,839,524
4. Employee Contributions 5,608,002
5. Benefit Payments to Retirees and Beneficiaries (34,250,971)
6. Refunds (574,027)
7. Lump Sum Payments 0
8. Transfers and Miscellaneous Adjustments 572,097
9. Net Investment Return 1,846,763
10. Market Value of Assets as of 6/30/16 including Receivables $ 468,702,245
CALPERS ACTUARIAL VALUATION - June 30, 2016
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 10
Asset Allocation
CalPERS adheres to an Asset Allocation Strategy which establishes asset class allocation policy targets and
ranges, and manages those asset class allocations within their policy ranges. CalPERS Investment Belief No.
6 recognizes that strategic asset allocation is the dominant determinant of portfolio risk and return. On February 19, 2014, the CalPERS Board of Administration adopted changes to the current asset allocation as
shown in the Policy Target Allocation below expressed as a percentage of total assets.
The asset allocation and market value of assets shown below reflect the values of the Public Employees’
Retirement Fund (PERF) in its entirety as of June 30, 2016. The assets for CITY OF PALO ALTO
MISCELLANEOUS PLAN are part of the PERF and are invested accordingly.
(A)
Asset Class
(B)
Market Value
($ Billion)
(C)
Policy Target
Allocation
Public Equity 153.1 51.0%
Private Equity 26.4 10.0%
Global Fixed Income 59.9 20.0%
Liquidity 4.5 1.0%
Real Assets 31.8 12.0%
Inflation Sensitive Assets 17.8 6.0%
Other 1.6 0.0%
Total Fund $295.1 100.0%
Global Equity
51.9%
Private Equity
9.0%
Global Fixed
Income
20.3%
Liquidity
1.5%
Real Assets
10.8%
Inflation
6.0%
Other
0.5%
Asset Allocation at 6/30/2016
CALPERS ACTUARIAL VALUATION - June 30, 2016
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 11
CalPERS History of Investment Returns
The following is a chart with the 20-year historical annual returns of the Public Employees Retirement Fund
for each fiscal year ending on June 30. Beginning in 2002, the figures are reported as gross of fees.
The table below shows historical geometric mean annual returns of the Public Employees Retirement Fund
for various time periods ending on June 30, 2016, (figures are reported as gross of fees). The geometric
mean rate of return is the average rate per period compounded over multiple periods. It should be
recognized that in any given year the rate of return is volatile. The portfolio has an expected volatility of 11.8 percent per year based on the most recent Asset Liability Modelling study. The volatility is a measure of
the risk of the portfolio expressed in the standard deviation of the fund’s total return distribution, expressed
as a percentage. Consequently, when looking at investment returns, it is more instructive to look at returns
over longer time horizons.
History of CalPERS Geometric Mean Rates of Return and Volatilities
1 year 5 year 10 year 20 year 30 year
Geometric Return 0.6% 6.6% 5.0% 7.0% 8.2%
Volatility – 8.1% 14.0% 11.8% 10.1%
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
20
.
1
%
19
.
5
%
12
.
5
%
10
.
5
%
-7.
2
%
-6.
1
%
3.
7
%
16
.
6
%
12
.
3
%
11
.
8
%
19
.
1
%
-5.
1
%
-24
.
0
%
13
.
3
%
21
.
7
%
0.
2
%
13
.
2
%
17
.
7
%
2.
4
%
0.
6
%
LIABILITIES AND CONTRIBUTIONS
DEVELOPMENT OF ACCRUED AND UNFUNDED LIABILITIES
(GAIN) / LOSS ANALYSIS 06/30/15 - 06/30/16
SCHEDULE OF AMORTIZATION BASES
30-YEAR AMORTIZATION SCHEDULES AND ALTERNATIVES
RECONCILIATION OF REQUIRED EMPLOYER CONTRIBUTIONS
EMPLOYER CONTRIBUTION HISTORY
FUNDING HISTORY
CALPERS ACTUARIAL VALUATION - June 30, 2016
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 13
Development of Accrued and Unfunded Liabilities
June 30, 2015 June 30, 2016
1. Present Value of Projected Benefits
a) Active Members $ 342,215,197 362,450,800
b) Transferred Members 31,772,074 33,583,165
c) Terminated Members 12,787,802 13,595,787
d) Members and Beneficiaries Receiving Payments 401,466,421 418,058,655
e) Total $ 788,241,494 827,688,407
2. Present Value of Future Employer Normal Costs $ 50,436,220 54,419,083
3. Present Value of Future Employee Contributions $ 41,106,054 42,886,848
4. Entry Age Normal Accrued Liability
a) Active Members [(1a) - (2) - (3)] $ 250,672,923 265,144,869
b) Transferred Members (1b) 31,772,074 33,583,165
c) Terminated Members (1c) 12,787,802 13,595,787
d) Members and Beneficiaries Receiving Payments (1d) 401,466,421 418,058,655
e) Total $ 696,699,220 730,382,476
5. Market Value of Assets (MVA) $ 477,031,099 468,702,245
6. Unfunded Accrued Liability (UAL) [(4e) - (5)] $ 219,668,121 261,680,231
7. Funded Ratio [(5) / (4e)] 68.5% 64.2%
CALPERS ACTUARIAL VALUATION - June 30, 2016
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 14
(Gain)/Loss Analysis 6/30/15 – 6/30/16
To calculate the cost requirements of the plan, assumptions are made about future events that affect the
amount and timing of benefits to be paid and assets to be accumulated. Each year, actual experience is
compared to the expected experience based on the actuarial assumptions. This results in actuarial gains or losses, as shown below.
1. Total (Gain)/Loss for the Year
a) Unfunded Accrued Liability (UAL) as of 6/30/15 $ 219,668,121
b) Expected Payment on the UAL during 2015-16 13,171,185 c) Interest through 6/30/16 [.075 x (1a) - ((1.075)½ - 1) x (1b)] 15,990,119
d) Expected UAL before all other changes [(1a) - (1b) + (1c)] 222,487,055
e) Change due to plan changes 0
f) Change due to assumption change 10,486,467
g) Expected UAL after all other changes [(1d) + (1e) + (1f)] 232,973,522
h) Actual UAL as of 6/30/16 261,680,231
i) Total (Gain)/Loss for 2015-16 [(1h) - (1g)] $ 28,706,709
2. Contribution (Gain)/Loss for the Year
a) Expected Contribution (Employer and Employee) $ 26,007,671
b) Interest on Expected Contributions 957,656
c) Actual Contributions 24,447,526 d) Interest on Actual Contributions 900,208
e) Expected Contributions with Interest [(2a) + (2b)] 26,965,327
f) Actual Contributions with Interest [(2c) + (2d)] 25,347,734
g) Contribution (Gain)/Loss [(2e) - (2f)] $ 1,617,593
3. Asset (Gain)/Loss for the Year
a) Market Value of Assets as of 6/30/15 $ 477,031,099
b) Prior Fiscal Year Receivables (2,539,961)
c) Current Fiscal Year Receivables 2,169,719
d) Contributions Received 24,447,526
e) Benefits and Refunds Paid (34,824,998) f) Transfers and Miscellaneous Adjustments 572,097
g) Expected Int. [.075 x (3a + 3b) + ((1.075)½ - 1) x ((3d) + (3e) + (3f))] 35,225,781
h) Expected Assets as of 6/30/16 [(3a) + (3b) + (3c) + (3d) + (3e) + (3f) + (3g)] 502,081,263
i) Market Value of Assets as of 6/30/16 468,702,245
j) Asset (Gain)/Loss [(3h) - (3i)] $ 33,379,018
4. Liability (Gain)/Loss for the Year
a) Total (Gain)/Loss (1i) $ 28,706,709
b) Contribution (Gain)/Loss (2g) 1,617,593
c) Asset (Gain)/Loss (3j) 33,379,018
d) Liability (Gain)/Loss [(4a) - (4b) - (4c)] $ (6,289,902)
CALPERS ACTUARIAL VALUATION - June 30, 2016
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 15
Schedule of Amortization Bases
There is a two-year lag between the valuation date and the start of the contribution fiscal year.
The assets, liabilities, and funded status of the plan are measured as of the valuation date: June 30, 2016.
The required employer contributions determined by the valuation are for the fiscal year beginning two years after the valuation date: Fiscal Year 2018-19.
This two-year lag is necessary due to the amount of time needed to extract and test the membership and financial data, and the need to provide public agencies
with their required employer contribution well in advance of the start of the fiscal year.
The Unfunded Accrued Liability (UAL) is used to determine the employer contribution and therefore must be rolled forward two years from the valuation date to the first day of the fiscal year for which the contribution is being determined. The UAL is rolled forward each year by subtracting the expected payment on the UAL for
the fiscal year and adjusting for interest. The expected payment on the UAL for a fiscal year is equal to the Expected Employer Contribution for the fiscal year minus
the Expected Normal Cost for the year. The Employer Contribution for the first fiscal year is determined by the actuarial valuation two years ago and the contribution
for the second year is from the actuarial valuation one year ago. The Normal Cost Rate for each of the two fiscal years is assumed to be the same as the rate
determined by the current valuation. All expected dollar amounts are determined by multiplying the rate by the expected payroll for the applicable fiscal year, based
on payroll as of the valuation date.
Reason for Base
Date
Established
Amorti-zation
Period
Balance
6/30/16
Expected Payment
2016-17
Balance
6/30/17
Expected Payment
2017-18
Balance
6/30/18
Scheduled Payment for
2018-19
ASSUMPTION CHANGE 06/30/03 7 $15,478,726 $2,102,994 $14,441,120 $2,166,084 $13,261,614 $2,216,388
METHOD CHANGE 06/30/04 8 $(1,186,612) $(148,017) $(1,120,747) $(152,458) $(1,045,422) $(155,924)
BENEFIT CHANGE 06/30/05 8 $26,288,910 $3,279,266 $24,829,679 $3,377,643 $23,160,890 $3,454,433
ASSUMPTION CHANGE 06/30/09 13 $25,621,903 $2,348,748 $25,077,701 $2,419,210 $24,420,350 $2,468,358
SPECIAL (GAIN)/LOSS 06/30/09 23 $16,653,731 $1,100,719 $16,741,358 $1,133,741 $16,801,229 $1,151,812
SPECIAL (GAIN)/LOSS 06/30/10 24 $1,374,845 $88,923 $1,384,096 $91,591 $1,391,265 $93,015
ASSUMPTION CHANGE 06/30/11 15 $12,031,321 $1,010,766 $11,871,256 $1,041,089 $11,667,965 $1,061,270
SPECIAL (GAIN)/LOSS 06/30/11 25 $(57,801) $(3,663) $(58,268) $(3,773) $(58,656) $(3,830)
PAYMENT (GAIN)/LOSS 06/30/12 26 $3,021,937 $187,905 $3,050,094 $193,542 $3,074,487 $196,400
(GAIN)/LOSS 06/30/12 26 $25,475,473 $1,584,070 $25,712,846 $1,631,592 $25,918,481 $1,655,688
(GAIN)/LOSS 06/30/13 27 $74,807,078 $2,043,968 $78,206,101 $3,157,930 $80,701,494 $4,273,993
ASSUMPTION CHANGE 06/30/14 18 $41,242,604 $785,576 $43,470,217 $1,618,287 $44,999,246 $2,472,670
(GAIN)/LOSS 06/30/14 28 $(45,020,639) $(633,217) $(47,684,760) $(1,304,427) $(49,849,838) $(1,984,845)
(GAIN)/LOSS 06/30/15 29 $26,755,579 $639,126 $28,066,528 $395,222 $29,726,898 $801,201
ASSUMPTION CHANGE 06/30/16 20 $10,486,467 $(364,750) $11,637,805 $(375,692) $12,885,392 $242,873
(GAIN)/LOSS 06/30/16 30 $28,706,709 $624,231 $30,176,989 $0 $32,402,542 $449,116
TOTAL $261,680,231 $14,646,645 $265,802,015 $15,389,581 $269,457,937 $18,392,618
CALPERS ACTUARIAL VALUATION - June 30, 2016
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 20 Page 16
30-Year Amortization Schedule and Alternatives
The amortization schedule on the previous page shows the minimum contributions required according to
CalPERS amortization policy. There has been considerable interest from many agencies in paying off these unfunded accrued liabilities sooner and the possible savings in doing so. As a result, we have provided
alternate amortization schedules to help analyze the current amortization schedule and illustrate the
advantages of accelerating unfunded liability payments.
Shown on the following page are future year amortization payments based on 1) the current amortization
schedule reflecting the individual bases and remaining periods shown on the previous page, and 2) alternate “fresh start” amortization schedules using two sample periods that would both result in interest savings
relative to the current amortization schedule. Note that the payments under each alternate scenario
increase by 3 percent per year. The schedules do not reflect the impact of adopted discount rate
changes that will become effective beyond June 30, 2016. Therefore, future amortization
payments displayed in the Current Amortization Schedule on the following page will not match
projected amortization payments shown in connection with Projected Employer Contributions
provided elsewhere in this report.
The Current Amortization Schedule typically contains individual bases that are both positive and negative.
Positive bases result from plan changes, assumption changes or plan experience that result in increases to
unfunded liability. Negative bases result from plan changes, assumption changes or plan experience that
result in decreases to unfunded liability. The combination of positive and negative bases within an
amortization schedule can result in unusual or problematic circumstances in future years such as:
A positive total unfunded liability with a negative total payment,
A negative total unfunded liability with a positive total payment, or Total payments that completely amortize the unfunded liability over a very short period of time
In any year where one of the above scenarios occurs, the actuary will consider corrective action such as
replacing the existing unfunded liability bases with a single “fresh start” base and amortizing it over a
reasonable period.
The Current Amortization Schedule on the following page may appear to show that, based on the current amortization bases, one of the above scenarios will occur at some point in the future. It is impossible to
know today whether such a scenario will in fact arise since there will be additional bases added to the
amortization schedule in each future year. Should such a scenario arise in any future year, the actuary will
take appropriate action based on guidelines in the CalPERS amortization policy. For purposes of this display,
total payments include any negative payments. Therefore, the amount of estimated savings may be
understated to the extent that negative payments appear in the current schedule.
CALPERS ACTUARIAL VALUATION - June 30, 2016
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 17
30-Year Amortization Schedule and Alternatives
* This schedule does not reflect the impact of adopted discount rate changes that will become effective
beyond June 30, 2016. For Projected Employer Contributions, please see Page 5.
Alternate Schedules
Current Amortization
Schedule* 20 Year Amortization 15 Year Amortization
Date Balance Payment Balance Payment Balance Payment
6/30/2018 269,457,937 18,392,618 269,457,937 20,142,652 269,457,937 24,508,772
6/30/2019 270,271,679 21,337,802 268,458,259 20,746,932 263,934,002 25,244,035
6/30/2020 268,093,576 23,309,575 266,758,689 21,369,340 257,240,783 26,001,357
6/30/2021 263,711,651 25,202,766 264,288,825 22,010,420 249,269,189 26,781,397
6/30/2022 257,044,797 26,737,689 260,972,509 22,670,732 239,901,397 27,584,839
6/30/2023 248,295,747 27,539,817 256,727,386 23,350,854 229,010,188 28,412,384
6/30/2024 238,070,276 28,366,013 251,464,429 24,051,380 216,458,234 29,264,756
6/30/2025 226,234,553 26,491,113 245,087,432 24,772,921 202,097,330 30,142,699
6/30/2026 215,468,753 23,107,399 237,492,456 25,516,109 185,767,569 31,046,980
6/30/2027 207,415,244 23,800,618 228,567,245 26,281,592 167,296,454 31,978,389
6/30/2028 198,049,463 24,514,638 218,190,592 27,070,040 146,497,951 32,937,741
6/30/2029 187,253,077 25,250,078 206,231,656 27,882,141 123,171,459 33,925,873
6/30/2030 174,898,379 26,007,577 192,549,233 28,718,606 97,100,717 34,943,649
6/30/2031 160,847,587 23,162,939 176,990,972 29,580,164 68,052,619 35,991,958
6/30/2032 148,708,219 22,611,118 159,392,526 30,467,569 35,775,945 37,071,717
6/30/2033 136,245,376 20,351,915 139,576,649 31,381,596
6/30/2034 125,204,431 19,250,096 117,352,218 32,323,044
6/30/2035 114,490,941 18,063,849 92,513,190 33,292,735
6/30/2036 104,216,544 16,789,107 64,837,470 34,291,517
6/30/2037 94,505,323 16,866,899 34,085,709 35,320,262
6/30/2038 83,997,289 16,934,251
6/30/2039 72,644,495 17,442,280
6/30/2040 59,928,003 17,965,550
6/30/2041 45,731,446 14,122,542
6/30/2042 34,470,094 13,530,028
6/30/2043 22,992,191 12,253,254
6/30/2044 11,990,809 5,916,684
6/30/2045 6,744,151 3,302,911
6/30/2046 3,818,993 2,971,635
6/30/2047 1,021,378 1,058,372
Totals 562,651,133 541,240,606 455,836,546
Interest Paid 293,193,196 271,782,669 186,378,609
Estimated Savings 21,410,527 106,814,587
CALPERS ACTUARIAL VALUATION - June 30, 2016
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 18
Reconciliation of Required Employer
Contributions
Normal Cost (% of Payroll)
1. For Period 7/1/17 – 6/30/18
a) Employer Normal Cost 10.039%
b) Employee Contribution 7.584%
c) Total Normal Cost 17.623%
2. Changes since the prior year annual valuation
a) Effect of changes in demographics results (0.396%)
b) Effect of plan changes 0.000%
c) Effect of changes in assumptions 0.470%
d) Net effect of the changes above [sum of (a) through (c)] 0.074%
3. For Period 7/1/18 – 6/30/19
a) Employer Normal Cost 10.217%
b) Employee Contribution 7.480%
c) Total Normal Cost 17.697%
Employer Normal Cost Change [(3a) – (1a)] 0.178%
Employee Contribution Change [(3b) – (1b)] (0.104%)
Unfunded Liability Contribution ($)
1. For Period 7/1/17 – 6/30/18 15,765,273
2. Changes since the prior year annual valuation
a) Effect of (gain)/loss during prior year1 449,116
b) Effect of plan changes 0
c) Effect of changes in assumptions2 242,873
d) Changes to prior year amortization payments3 1,935,356
e) Effect of changes due to Fresh Start 0
f) Effect of elimination of amortization base 0
g) Net effect of the changes above [sum of (a) through (f)] 2,627,345
3. For Period 7/1/18 – 6/30/19 [(1)+(2g)] 18,392,618
1 The unfunded liability contribution for the (gain)/loss during the year prior to the valuation date is 20 percent of the
“full” annual requirement due to the 5-year ramp. Increases to this amount that occur during the ramp period will be included in line d) in future years.
2 The unfunded liability contribution for the change in assumptions is 20 percent of the “full” annual requirement due to the 5-year ramp. Increases to this amount that occur during the ramp period will be included in line d) in future years.
3 Includes changes due to 5-year ramp, payroll growth assumption, and re-amortization under new discount rate.
The amounts shown for the period 7/1/17 – 6/30/18 may be different if a prepayment of unfunded actuarial
liability is made or a plan change became effective after the prior year’s actuarial valuation was performed.
CALPERS ACTUARIAL VALUATION - June 30, 2016
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 19
Employer Contribution History
The table below provides a recent history of the required employer contributions for the plan, as determined
by the annual actuarial valuation. It does not account for prepayments or benefit changes made during a fiscal year.
Required By Valuation
Fiscal
Year
Employer
Normal Cost
Unfunded Rate
Unfunded Liability
Payment ($)
2013 - 14 10.360% 14.240% N/A
2014 - 15 10.283% 15.839% N/A
2015 - 16 10.358% 17.336% N/A
2016 - 17 10.334% 18.556% N/A
2017 - 18 10.039% N/A 15,765,273
2018 - 19 10.217% N/A 18,392,618
Funding History
The table below shows the recent history of the actuarial accrued liability, the market value of assets, the
funded ratio and the annual covered payroll.
Valuation
Date
Accrued
Liability
Market Value
of Assets
(MVA)
Unfunded
Liability
Funded
Ratio
Annual
Covered
Payroll
06/30/11 $ 552,715,631 $ 384,056,704 $ 168,658,927 69.5% $ 60,297,783
06/30/12 576,182,013 373,592,926 202,589,087 64.8% 62,910,810
06/30/13 602,540,178 412,227,784 190,312,394 68.4% 64,439,680
06/30/14 666,978,627 475,566,994 191,411,633 71.3% 67,802,942
06/30/15 696,699,220 477,031,099 219,668,121 68.5% 71,574,823
06/30/16 730,382,476 468,702,245 261,680,231 64.2% 75,345,962
RISK ANALYSIS
ANALYSIS OF FUTURE INVESTMENT RETURN SCENARIOS
ANALYSIS OF DISCOUNT RATE SENSITIVITY
VOLATILITY RATIOS
HYPOTHETICAL TERMINATION LIABILITY
CALPERS ACTUARIAL VALUATION - June 30, 2016
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 21
Analysis of Future Investment Return Scenarios
Analysis was performed to determine the effects of various future investment returns on required employer
contributions. The projections below provide a range of results based on five investment return scenarios assumed to occur during the next four fiscal years (2016-17, 2017-18, 2018-19 and 2019-20). The
projections also assume that all other actuarial assumptions will be realized and that no further changes to
assumptions, contributions, benefits, or funding will occur.
Each of the five investment return scenarios assumes a return of 7.375 percent for fiscal year 2016-17. For
fiscal years 2017-18, 2018-19, and 2019-20 each scenario assumes an alternate fixed annual return. The fixed return assumptions for the five scenarios are -3.0 percent, 3.0 percent, 7.0 percent (7.25 percent for
2017-18), 11.0 percent and 17.0 percent.
The alternate investment returns were chosen based on stochastic analysis of possible future investment
returns over the four year period ending June 30, 2020. Using the expected returns and volatility of the
asset classes in which the funds are invested, we produced ten thousand stochastic outcomes for this
period. We then selected annual returns that approximate the 5th, 25th, 50th, 75th, and 95th percentiles for
these outcomes. For example, of all of the 4-year outcomes generated in the stochastic analysis, approximately 25 percent of them had an average annual return of 3.0 percent or less.
Required contributions outside of this range are also possible. In particular, while it is unlikely that
investment returns will average less than -3.0 percent or greater than 17.0 percent over this four year
period, the possibility of a single investment return less than -3.0 percent or greater than 17.0 percent in
any given year is much greater.
Assumed Annual Return From 2017-18 through 2019-20
Projected Employer Contributions
2019-20 2020-21 2021-22 2022-23
(3.0%)
Normal Cost 10.7% 11.7% 11.7% 11.7%
UAL Contribution $21,368,000 $24,382,000 $28,551,000 $33,202,000
3.0%
Normal Cost 10.7% 11.7% 11.7% 11.7%
UAL Contribution $21,368,000 $23,936,000 $27,222,000 $30,563,000
Assumed Discount Rate
Normal Cost 10.7% 11.7% 11.7% 11.7%
UAL Contribution $21,368,000 $23,620,000 $26,268,000 $28,624,000
11.0%
Normal Cost 10.7% 11.7% 12.0% 12.2%
UAL Contribution $21,368,000 $23,341,000 $25,347,000 $26,740,000
17.0%
Normal Cost 10.7% 11.7% 12.5% 13.2%
UAL Contribution $21,368,000 $22,895,000 $23,879,000 $23,757,000
Given the temporary suspension of the Risk Mitigation Policy during the period over which the discount rate
assumption is being phased down to 7.0 percent, the projections above were performed without reflection
of any possible impact of this Policy for Fiscal Years 2019-20 and 2020-21.
The projected normal cost percentages do not reflect that the normal cost will decline over time as new
employees are hired into PEPRA or other lower cost benefit tiers.
CALPERS ACTUARIAL VALUATION - June 30, 2016
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 22
Analysis of Discount Rate Sensitivity
Shown below are various valuation results as of June 30, 2016 assuming alternate discount rates. Results
are shown using the current discount rate of 7.375 percent as well as alternate discount rates of 6.0
percent, 7.0 percent, and 8.0 percent. The alternate rate of 7.0 percent was selected since the Board has adopted this rate as the final discount rate at the end of the three year phase-in of the reduction in this
assumption. The rates of 6.0 percent and 8.0 percent were selected since they illustrate the impact of a 1
percent increase or decrease to the 7.0 percent assumption. This analysis shows the potential plan impacts
if the PERF were to realize investment returns of 6.0 percent, 7.0 percent, or 8.0 percent over the long-
term.
This type of analysis gives the reader a sense of the long-term risk to required contributions. For a measure of funded status that is appropriate for assessing the sufficiency of plan assets to cover estimated
termination liabilities, please see “Hypothetical Termination Liability” in the “Risk Analysis” section.
Sensitivity Analysis
As of June 30, 2016 Plan’s
Normal Cost
Accrued
Liability Unfunded
Accrued Liability Funded
Status
7.375% (current discount rate) 17.697% $730,382,476 $261,680,231 64.2%
6.0% 24.098% $863,632,400 $394,930,155 54.3%
7.0% 19.208% $763,341,929 $294,639,684 61.4%
8.0% 15.497% $680,268,344 $211,566,099 68.9%
CALPERS ACTUARIAL VALUATION - June 30, 2016
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 23
Volatility Ratios
The actuarial calculations supplied in this communication are based on a number of assumptions about
long-term demographic and economic behavior. Unless these assumptions (terminations, deaths, disabilities,
retirements, salary growth, and investment return) are exactly realized each year, there will be differences on a year-to-year basis. The year-to-year differences between actual experience and the assumptions are
called actuarial gains and losses and serve to lower or raise required employer contributions from one year
to the next. Therefore, employer contributions will inevitably fluctuate, especially due to the ups and downs
of investment returns.
Asset Volatility Ratio (AVR)
Plans that have higher asset-to-payroll ratios experience more volatile employer contributions (as a
percentage of payroll) due to investment return. For example, a plan with an asset-to-payroll ratio of 8 may
experience twice the contribution volatility due to investment return volatility than a plan with an asset-to-
payroll ratio of 4. Shown below is the asset volatility ratio, a measure of the plan’s current volatility. It
should be noted that this ratio is a measure of the current situation. It increases over time but generally
tends to stabilize as the plan matures.
Liability Volatility Ratio (LVR)
Plans that have higher liability-to-payroll ratios experience more volatile employer contributions (as a
percentage of payroll) due to investment return and changes in liability. For example, a plan with a liability-
to-payroll ratio of 8 is expected to have twice the contribution volatility of a plan with a liability-to-payroll
ratio of 4. The liability volatility ratio is also included in the table below. It should be noted that this ratio
indicates a longer-term potential for contribution volatility. The asset volatility ratio, described above, will
tend to move closer to the liability volatility ratio as the plan matures. Since the liability volatility ratio is a long-term measure, it is shown below at the current discount rate (7.375 percent) as well as the discount
rate the Board has adopted to determine the contribution requirement in the June 30, 2018 actuarial
valuation (7.00 percent).
Contribution Volatility As of June 30, 2016
1. Market Value of Assets without Receivables $ 466,532,526
2. Payroll 75,345,962
3. Asset Volatility Ratio (AVR) [(1) / ( 2)] 6.2
4. Accrued Liability (7.375% discount rate) $ 730,382,476
5. Liability Volatility Ratio (LVR) [(4) / (2)] 9.7
6. Accrued Liability (7.00% discount rate) 763,341,929
7. Projected Liability Volatility Ratio [(6) / (2)] 10.1
CALPERS ACTUARIAL VALUATION - June 30, 2016
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 24
Hypothetical Termination Liability
The hypothetical termination liability is an estimate of the financial position of the plan had the contract with
CalPERS been terminated as of June 30, 2016. The plan liability on a termination basis is calculated
differently compared to the plan’s ongoing funding liability. For this hypothetical termination liability calculation, both compensation and service are frozen as of the valuation date and no future pay increases
or service accruals are assumed. This measure of funded status is not appropriate for assessing the need for
future employer contributions in the case of an ongoing plan, that is, for an employer that continues to
provide CalPERS retirement benefits to active employees.
A more conservative investment policy and asset allocation strategy was adopted by the CalPERS Board for
the Terminated Agency Pool. The Terminated Agency Pool has limited funding sources since no future employer contributions will be made. Therefore, expected benefit payments are secured by risk-free assets
and benefit security for members is increased while limiting the funding risk. However, this asset allocation
has a lower expected rate of return than the PERF and consequently, a lower discount rate assumption. The
lower discount rate for the Terminated Agency Pool results in higher liabilities for terminated plans.
The effective termination discount rate will depend on actual market rates of return for risk-free securities
on the date of termination. As market discount rates are variable the table below shows a range for the
hypothetical termination liability based on the lowest and highest interest rates observed during an approximate 2-year period centered around the valuation date.
Market
Value of
Assets (MVA)
Hypothetical
Termination
Liability1,2
@ 1.75%
Funded
Status
Unfunded
Termination
Liability
@ 1.75%
Hypothetical
Termination
Liability1,2
@ 3.00%
Funded
Status
Unfunded
Termination
Liability
@ 3.00%
$468,702,245 $1,331,814,237 35.2% $863,111,992 $1,150,377,585 40.7% $681,675,340
1 The hypothetical liabilities calculated above include a 7 percent mortality contingency load in accordance with Board
policy. Other actuarial assumptions can be found in Appendix A. 2 The current discount rate assumption used for termination valuations is a weighted average of the 10-year and 30-year
U.S. Treasury yields where the weights are based on matching asset and liability durations as of the termination date.
The discount rates used in the table are based on 20-year Treasury bonds, rounded to the nearest quarter percentage point, which is a good proxy for most plans. The 20-year Treasury yield was 1.75 percent on June 30, 2016, and was
2.75 percent on January 31, 2017.
In order to terminate the plan, you must first contact our Retirement Services Contract Unit to initiate a
Resolution of Intent to Terminate. The completed Resolution will allow the plan actuary to give you a
preliminary termination valuation with a more up-to-date estimate of the plan liabilities. CalPERS advises
you to consult with the plan actuary before beginning this process.
PLAN’S MAJOR BENEFIT PROVISIONS
CALPERS ACTUARIAL VALUATION – June 30, 2016
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Plan’s Major Benefit Options
Shown below is a summary of the major optional benefits for which your agency has contracted for this plan. A description of principal standard and optional
plan provisions is in Appendix B of this report.
Contract Package
Active
Misc
Active
Misc
Active
Misc
Inactive
Misc
Receiving
Misc
Benefit Provision
Benefit Formula 2.7% @ 55 2.0% @ 60 2.0% @ 62 2.0% @ 55
Social Security Coverage No No No No Full/Modified Full Full Full Full
Employee Contribution Rate 8.00% 7.00% 6.25%
Final Average Compensation Period One Year One Year Three Year One Year
Sick Leave Credit No No No No
Non-Industrial Disability Standard Standard Standard Standard
Industrial Disability No No No No
Pre-Retirement Death Benefits
Optional Settlement 2W No No No No 1959 Survivor Benefit Level Level 1 Level 1 Level 1 Level 1
Special No No No No
Alternate (firefighters) No No No No
Post-Retirement Death Benefits
Lump Sum $500 $500 $500 $500 $500
Survivor Allowance (PRSA) No No No No No
COLA 2% 2% 2% 2% 2%
Page 26
APPENDICES
APPENDIX A – ACTUARIAL METHODS AND ASSUMPTIONS
APPENDIX B – PRINCIPAL PLAN PROVISIONS
APPENDIX C – PARTICIPANT DATA
APPENDIX D – DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION RATES
APPENDIX E – GLOSSARY OF ACTUARIAL TERMS
APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
ACTUARIAL DATA
ACTUARIAL METHODS
ACTUARIAL ASSUMPTIONS
MISCELLANEOUS
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-1
Actuarial Data
As stated in the Actuarial Certification, the data which serves as the basis of this valuation has been
obtained from the various CalPERS databases. We have reviewed the valuation data and believe that it is
reasonable and appropriate in aggregate. We are unaware of any potential data issues that would have a
material effect on the results of this valuation, except that data does not always contain the latest salary
information for former members now in reciprocal systems and does not recognize the potential for unusually large salary deviation in certain cases such as elected officials. Therefore, salary information in
these cases may not be accurate. These situations are relatively infrequent, however, and when they do
occur, they generally do not have a material impact on the required employer contributions.
Actuarial Methods
Actuarial Cost Method
The actuarial cost method used is the Entry Age Normal Cost Method. Under this method, projected benefits are determined for all members and the associated liabilities are spread in a manner that produces level
annual cost as a percentage of pay in each year from the member’s entry age to their assumed retirement
age on the valuation date. The cost allocated to the current fiscal year is called the normal cost.
The actuarial accrued liability for active members is then calculated as the portion of the total cost of the
plan allocated to prior years. The actuarial accrued liability for members currently receiving benefits and for
members entitled to deferred benefits is equal to the present value of the benefits expected to be paid. No
normal costs are applicable for these participants.
Amortization of Unfunded Actuarial Accrued Liability
The excess of the total actuarial accrued liability over the market value of plan assets is called the unfunded
actuarial accrued liability (UAL). Funding requirements are determined by adding the normal cost and an
amortization payment toward the unfunded liability. The unfunded liability is amortized as a “level percent
of pay”. Commencing with the June 30, 2013 valuation, all new gains or losses are amortized over a fixed 30-year period with a 5-year ramp up at the beginning and a 5-year ramp down at the end of the
amortization period. All changes in liability due to plan amendments (other than golden handshakes) are
amortized over a 20-year period with no ramp. Changes in actuarial assumptions or changes in actuarial
methodology are amortized over a 20-year period with a 5-year ramp up at the beginning and a 5-year
ramp down at the end of the amortization period. Changes in unfunded accrued liability due to a Golden
Handshake will be amortized over a period of five years.
The 5-year ramp up means that the payments in the first four years of the amortization period are 20
percent, 40 percent, 60 percent and 80 percent of the “full” payment which begins in year five. The 5-year
ramp down means that the reverse is true in the final four years of the amortization period.
Exceptions for Inconsistencies:
An exception to the amortization rules above is used whenever their application results in inconsistencies. In
these cases, a “fresh start” approach is used. This means that the current unfunded actuarial liability is projected and amortized over a set number of years. For example, a fresh start is needed in the following
situations:
1) When a positive payment would be required on a negative unfunded actuarial liability (or
conversely a negative payment on a positive unfunded actuarial liability); or
2) When there are excess assets, rather than an unfunded liability. In this situation, a 30-year fresh
start is used.
It should be noted that the actuary may determine that a fresh start is necessary under other
circumstances. In all cases of a fresh start, the period is set by the actuary at what is deemed appropriate;
however, the period will not be greater than 30 years.
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-2
Exceptions for Inactive Plans:
The following exceptions apply to plans classified as Inactive. These plans have no active members and no
expectation to have active members in the future.
Amortization of the unfunded liability is on a “level dollar” basis rather than a “level percent of pay”
basis. For amortization layers which utilize a ramp up and ramp down, the “ultimate” payment is
constant.
Actuarial judgment will be used to shorten amortization periods for Inactive plans with existing
periods that are deemed too long given the duration of the liability. The specific demographics of
the plan will be used to determine if shorter periods may be more appropriate.
Asset Valuation Method
It is the policy of the CalPERS Board of Administration to use professionally accepted amortization methods
to eliminate a surplus or an unfunded accrued liability in a manner that maintains benefit security for the
members of the System while minimizing substantial variations in required employer contributions. On April
17, 2013, the CalPERS Board of Administration approved a recommendation to change the CalPERS
amortization and rate smoothing policies. Beginning with the June 30, 2013 valuations that set the employer
contribution for Fiscal Year 2015-16, CalPERS employs a policy that amortizes all gains and losses over a fixed 30-year period. The increase or decrease in the rate is then spread directly over a 5-year period. This
method is referred to as “direct rate smoothing.” CalPERS no longer uses an actuarial value of assets and
only uses the market value of assets. The direct rate smoothing method is equivalent to a method using a 5
year asset smoothing period with no actuarial value of asset corridor and a 25-year amortization period for
gains and losses.
PEPRA Normal Cost Rate Methodology
Per Government Code Section 7522.30(b) the “normal cost rate” shall mean the annual actuarially
determined normal cost for the plan of retirement benefits provided to the new member and shall be
established based on actuarial assumptions used to determine the liabilities and costs as part of the annual
actuarial valuation. The plan of retirement benefits shall include any elements that would impact the
actuarial determination of the normal cost, including, but not limited to, the retirement formula, eligibility
and vesting criteria, ancillary benefit provisions, and any automatic cost-of-living adjustments as determined by the public retirement system.
Each non-pooled plan is considered to be stable with a sufficiently large demographic of actives. It is
preferable to determine normal cost using a large active population ongoing so that this rate remains
relatively stable. The total PEPRA normal cost will be calculated using all active members within a non-
pooled plan until the number of members covered under the PEPRA formula meets either:
1. 50 percent of the active population, or
2. 25 percent of the active population and 100 or more PEPRA members
Once either of the conditions above are met for a non-pooled plan, the total PEPRA normal cost will be
based on the active PEPRA population in the plan.
Accordingly, the total normal cost will be funded equally between employer and employee based on the
demographics of the employees of that employer.
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-3
Actuarial Assumptions
In 2014, CalPERS completed a 2-year asset liability management study incorporating actuarial assumptions
and strategic asset allocation. On February 19, 2014, the CalPERS Board of Administration adopted relatively
modest changes to the asset allocation that reduced the expected volatility of returns. The adopted asset
allocation was expected to have a long-term blended return that continued to support a discount rate
assumption of 7.5 percent at that time. The Board also approved several changes to the demographic assumptions that more closely aligned with actual experience. The most significant of these is mortality
improvement to acknowledge the greater life expectancies we are seeing in our membership and expected
continued improvements. These new actuarial assumptions were first used in the June 30, 2014 valuation to
set the Fiscal Year 2016-17 contribution for public agency employers.
On December 21, 2016, the CalPERS Board of Administration lowered the discount rate from 7.50 percent to
7.00 percent using a three year phase-in beginning with the June 30, 2016 actuarial valuations. The
minimum employer contributions for Fiscal Year 2018-19 determined in this valuation were calculated using a discount rate of 7.375 percent. The projected employer contributions on Page 5 are calculated assuming
that the discount rate will be lowered to 7.25 percent next year and 7.00 percent the following year as
adopted by the Board. The decision to reduce the discount rate was primarily based on reduced capital
market assumptions provided by external investment consultants and CalPERS investment staff. The specific
decision adopted by the Board reflected recommendations from CalPERS staff and additional input from
employer and employee stakeholder groups. Based on the investment allocation adopted by the Board
and capital market assumptions, the reduced discount rate schedule provides a more realistic assumption
for the long term investment return of the fund.
Notwithstanding the Board’s decision to phase into a 7.0 percent discount rate, subsequent analysis of the
expected investment return of CalPERS assets or changes to the investment allocation may result in a
change to this three year discount rate schedule. A comprehensive analysis of all actuarial assumptions and methods including the discount rate will be conducted in 2017.
For more details and additional rationale for the selection of the actuarial assumptions, please refer to the
CalPERS Experience Study and Review of Actuarial Assumptions report from January 2014 that can be found
on the CalPERS website under: “Forms and Publications”. Click on “View All” and search for Experience
Study.
All actuarial assumptions (except the discount rates used for the hypothetical termination liability) represent an estimate of future experience rather than observations of the estimates inherent in market data.
Economic Assumptions
Discount Rate
The prescribed discount rate assumption adopted by the Board on December 21, 2016 is 7.375 percent compounded annually (net of investment and administrative expenses) as of 6/30/2016.
The Board also prescribed that the assumed discount rate will reduce to 7.25 percent compounded
annually (net of expenses) as of 6/30/2017, and 7.0 percent compounded annually (net of
expenses) as of 6/30/2018. These further changes to the discount rate assumption are not
reflected in the determination of required contributions determined in this report for Fiscal Year
2018-19.
Termination Liability Discount Rate The current discount rate assumption used for termination valuations is a weighted average of the
10-year and 30-year U.S. Treasury yields where the weights are based on matching asset and
liability durations as of the termination date.
The hypothetical termination liabilities in this report are calculated using an observed range of
market interest rates. This range is based on the lowest and highest 20-year Treasury bond observed during an approximate 2-year period centered around the valuation date. The 20-year
Treasury bond has a similar duration to most plan liabilities and serves as a good proxy for the
termination discount rate. The 20-year Treasury yield was 1.75 percent on June 30, 2016.
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-4
Salary Growth
Annual increases vary by category, entry age, and duration of service. A sample of assumed
increases are shown below.
Public Agency Miscellaneous
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1220 0.1160 0.1020
1 0.0990 0.0940 0.0830
2 0.0860 0.0810 0.0710
3 0.0770 0.0720 0.0630
4 0.0700 0.0650 0.0570
5 0.0640 0.0600 0.0520
10 0.0460 0.0430 0.0390
15 0.0420 0.0400 0.0360
20 0.0390 0.0380 0.0340
25 0.0370 0.0360 0.0330
30 0.0350 0.0340 0.0320
Public Agency Fire
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.2000 0.1980 0.1680
1 0.1490 0.1460 0.1250
2 0.1200 0.1160 0.0990
3 0.0980 0.0940 0.0810
4 0.0820 0.0780 0.0670
5 0.0690 0.0640 0.0550
10 0.0470 0.0460 0.0420
15 0.0440 0.0420 0.0390
20 0.0420 0.0390 0.0360
25 0.0400 0.0370 0.0340
30 0.0380 0.0360 0.0340
Public Agency Police
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1500 0.1470 0.1310
1 0.1160 0.1120 0.1010
2 0.0950 0.0920 0.0830
3 0.0810 0.0780 0.0700
4 0.0700 0.0670 0.0600
5 0.0610 0.0580 0.0520
10 0.0450 0.0430 0.0370
15 0.0450 0.0430 0.0370
20 0.0450 0.0430 0.0370
25 0.0450 0.0430 0.0370
30 0.0450 0.0430 0.0370
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-5
Salary Growth (continued)
Public Agency County Peace Officers
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1770 0.1670 0.1500
1 0.1340 0.1260 0.1140
2 0.1080 0.1030 0.0940
3 0.0900 0.0860 0.0790
4 0.0760 0.0730 0.0670
5 0.0650 0.0620 0.0580
10 0.0470 0.0450 0.0410
15 0.0460 0.0450 0.0390
20 0.0460 0.0450 0.0380
25 0.0460 0.0450 0.0380
30 0.0460 0.0440 0.0380
Schools
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.0900 0.0880 0.0820
1 0.0780 0.0750 0.0700
2 0.0700 0.0680 0.0630
3 0.0650 0.0630 0.0580
4 0.0610 0.0590 0.0540
5 0.0580 0.0560 0.0510
10 0.0460 0.0450 0.0410
15 0.0420 0.0410 0.0380
20 0.0390 0.0380 0.0350
25 0.0370 0.0350 0.0330
30 0.0350 0.0330 0.0310
The Miscellaneous salary scale is used for Local Prosecutors.
The Police salary scale is used for Other Safety, Local Sheriff, and School Police.
Overall Payroll Growth
3.00 percent compounded annually (used in projecting the payroll over which the unfunded liability
is amortized). This assumption is used for all plans with active members.
Inflation
2.75 percent compounded annually.
Non-valued Potential Additional Liabilities
The potential liability loss for a cost-of-living increase exceeding the 2.75 percent inflation
assumption, and any potential liability loss from future member service purchases are not reflected
in the valuation.
Miscellaneous Loading Factors
Credit for Unused Sick Leave
Total years of service is increased by 1 percent for those plans that have accepted the provision
providing Credit for Unused Sick Leave.
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-6
Conversion of Employer Paid Member Contributions (EPMC)
Total years of service is increased by the Employee Contribution Rate for those plans with the
provision providing for the Conversion of Employer Paid Member Contributions (EPMC) during the
final compensation period.
Norris Decision (Best Factors)
Employees hired prior to July 1, 1982 have projected benefit amounts increased in order to reflect
the use of “Best Factors” in the calculation of optional benefit forms. This is due to a 1983
Supreme Court decision, known as the Norris decision, which required males and females to be
treated equally in the determination of benefit amounts. Consequently, anyone already employed
at that time is given the best possible conversion factor when optional benefits are determined. No loading is necessary for employees hired after July 1, 1982.
Termination Liability
The termination liabilities include a 7 percent contingency load. This load is for unforeseen
improvements in mortality.
Demographic Assumptions
Pre-Retirement Mortality
Non-industrial death rates vary by age and gender. Industrial death rates vary by age. See sample
rates in table below. The non-industrial death rates are used for all plans. The industrial death
rates are used for safety plans (except for Local Prosecutor safety members where the
corresponding miscellaneous plan does not have the Industrial Death Benefit).
Non-Industrial Death Industrial Death (Not Job-Related) (Job-Related)
Age Male Female Male and Female
20 0.00031 0.00020 0.00003
25 0.00040 0.00023 0.00007
30 0.00049 0.00025 0.00010
35 0.00057 0.00035 0.00012
40 0.00075 0.00050 0.00013
45 0.00106 0.00071 0.00014 50 0.00155 0.00100 0.00015
55 0.00228 0.00138 0.00016
60 0.00308 0.00182 0.00017
65 0.00400 0.00257 0.00018
70 0.00524 0.00367 0.00019
75 0.00713 0.00526 0.00020
80 0.00990 0.00814 0.00021
Miscellaneous plans usually have industrial death rates set to zero unless the agency has specifically
contracted for industrial death benefits. If so, each non-industrial death rate shown above will be
split into two components; 99 percent will become the non-industrial death rate and 1 percent will
become the industrial death rate.
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-7
Post-Retirement Mortality
Rates vary by age, type of retirement, and gender. See sample rates in table below. These rates
are used for all plans.
Healthy Recipients
Non-Industrially Disabled Industrially Disabled
(Not Job-Related) (Job-Related)
Age Male Female Male Female Male Female
50 0.00501 0.00466 0.01680 0.01158 0.00501 0.00466
55 0.00599 0.00416 0.01973 0.01149 0.00599 0.00416
60 0.00710 0.00436 0.02289 0.01235 0.00754 0.00518
65 0.00829 0.00588 0.02451 0.01607 0.01122 0.00838 70 0.01305 0.00993 0.02875 0.02211 0.01635 0.01395
75 0.02205 0.01722 0.03990 0.03037 0.02834 0.02319
80 0.03899 0.02902 0.06083 0.04725 0.04899 0.03910
85 0.06969 0.05243 0.09731 0.07762 0.07679 0.06251
90 0.12974 0.09887 0.14804 0.12890 0.12974 0.09887
95 0.22444 0.18489 0.22444 0.21746 0.22444 0.18489
100 0.32536 0.30017 0.32536 0.30017 0.32536 0.30017
105 0.58527 0.56093 0.58527 0.56093 0.58527 0.56093 110 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000
The post-retirement mortality rates above include 20 years of projected on-going mortality
improvement using Scale BB published by the Society of Actuaries.
Marital Status
For active members, a percentage who are married upon retirement is assumed according to member category as shown in the following table.
Member Category Percent Married
Miscellaneous Member 85% Local Police 90%
Local Fire 90%
Other Local Safety 90%
School Police 90%
Age of Spouse
It is assumed that female spouses are 3 years younger than male spouses. This assumption is used for all plans.
Terminated Members
It is assumed that terminated members refund immediately if non-vested. Terminated members
who are vested are assumed to follow the same service retirement pattern as active members but
with a load to reflect the expected higher rates of retirement, especially at lower ages. The
following table shows the load factors that are applied to the service retirement assumption for active members to obtain the service retirement pattern for separated vested members:
Age Load Factor Miscellaneous Load Factor Safety
50 190% 310%
51 110% 190% 52 110% 105%
53 through 54 100% 105%
55 100% 140%
56 and above 100% (no change) 100% (no change)
Termination with Refund Rates vary by entry age and service for miscellaneous plans. Rates vary by service for safety plans.
See sample rates in tables below.
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-8
Public Agency Miscellaneous
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45
0 0.1742 0.1674 0.1606 0.1537 0.1468 0.1400
1 0.1545 0.1477 0.1409 0.1339 0.1271 0.1203
2 0.1348 0.1280 0.1212 0.1142 0.1074 0.1006
3 0.1151 0.1083 0.1015 0.0945 0.0877 0.0809
4 0.0954 0.0886 0.0818 0.0748 0.0680 0.0612
5 0.0212 0.0193 0.0174 0.0155 0.0136 0.0116
10 0.0138 0.0121 0.0104 0.0088 0.0071 0.0055
15 0.0060 0.0051 0.0042 0.0032 0.0023 0.0014
20 0.0037 0.0029 0.0021 0.0013 0.0005 0.0001
25 0.0017 0.0011 0.0005 0.0001 0.0001 0.0001
30 0.0005 0.0001 0.0001 0.0001 0.0001 0.0001
35 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001
Public Agency Safety
Duration of Service Fire Police County Peace Officer
0 0.0710 0.1013 0.0997
1 0.0554 0.0636 0.0782
2 0.0398 0.0271 0.0566
3 0.0242 0.0258 0.0437
4 0.0218 0.0245 0.0414
5 0.0029 0.0086 0.0145
10 0.0009 0.0053 0.0089
15 0.0006 0.0027 0.0045
20 0.0005 0.0017 0.0020
25 0.0003 0.0012 0.0009
30 0.0003 0.0009 0.0006
35 0.0003 0.0009 0.0006
The police termination and refund rates are also used for Public Agency Local Prosecutors, Other
Safety, Local Sheriff, and School Police.
Schools
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45
0 0.1730 0.1627 0.1525 0.1422 0.1319 0.1217
1 0.1585 0.1482 0.1379 0.1277 0.1174 0.1071
2 0.1440 0.1336 0.1234 0.1131 0.1028 0.0926
3 0.1295 0.1192 0.1089 0.0987 0.0884 0.0781
4 0.1149 0.1046 0.0944 0.0841 0.0738 0.0636
5 0.0278 0.0249 0.0221 0.0192 0.0164 0.0135
10 0.0172 0.0147 0.0122 0.0098 0.0074 0.0049
15 0.0115 0.0094 0.0074 0.0053 0.0032 0.0011
20 0.0073 0.0055 0.0038 0.0020 0.0002 0.0002
25 0.0037 0.0023 0.0010 0.0002 0.0002 0.0002
30 0.0015 0.0003 0.0002 0.0002 0.0002 0.0002
35 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-9
Termination with Vested Benefits
Rates vary by entry age and service for miscellaneous plans. Rates vary by service for safety plans.
See sample rates in tables below.
Public Agency Miscellaneous
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40
5 0.0656 0.0597 0.0537 0.0477 0.0418
10 0.0530 0.0466 0.0403 0.0339 0.0000
15 0.0443 0.0373 0.0305 0.0000 0.0000
20 0.0333 0.0261 0.0000 0.0000 0.0000
25 0.0212 0.0000 0.0000 0.0000 0.0000
30 0.0000 0.0000 0.0000 0.0000 0.0000
35 0.0000 0.0000 0.0000 0.0000 0.0000
Public Agency Safety
Duration of
Service Fire Police
County Peace
Officer
5 0.0162 0.0163 0.0265
10 0.0061 0.0126 0.0204
15 0.0058 0.0082 0.0130
20 0.0053 0.0065 0.0074
25 0.0047 0.0058 0.0043
30 0.0045 0.0056 0.0030
35 0.0000 0.0000 0.0000
When a member is eligible to retire, the termination with vested benefits probability is set to zero.
After termination with vested benefits, a miscellaneous member is assumed to retire at age 59
and a safety member at age 54.
The Police termination with vested benefits rates are also used for Public Agency Local
Prosecutors, Other Safety, Local Sheriff, and School Police.
Schools
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40
5 0.0816 0.0733 0.0649 0.0566 0.0482
10 0.0629 0.0540 0.0450 0.0359 0.0000
15 0.0537 0.0440 0.0344 0.0000 0.0000
20 0.0420 0.0317 0.0000 0.0000 0.0000
25 0.0291 0.0000 0.0000 0.0000 0.0000
30 0.0000 0.0000 0.0000 0.0000 0.0000
35 0.0000 0.0000 0.0000 0.0000 0.0000
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-10
Non-Industrial (Not Job-Related) Disability
Rates vary by age and gender for miscellaneous plans. Rates vary by age and category for safety
plans.
Miscellaneous Fire Police County Peace Officer Schools
Age Male Female Male and Female Male and Female Male and Female Male Female
20 0.0002 0.0001 0.0001 0.0001 0.0001 0.0003 0.0003
25 0.0002 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001
30 0.0002 0.0002 0.0001 0.0002 0.0001 0.0001 0.0002
35 0.0005 0.0008 0.0001 0.0003 0.0004 0.0005 0.0004
40 0.0012 0.0016 0.0001 0.0004 0.0007 0.0015 0.0010
45 0.0019 0.0022 0.0002 0.0005 0.0013 0.0030 0.0019
50 0.0021 0.0023 0.0005 0.0008 0.0018 0.0039 0.0024
55 0.0022 0.0018 0.0010 0.0013 0.0010 0.0036 0.0021
60 0.0022 0.0014 0.0015 0.0020 0.0006 0.0031 0.0014
The miscellaneous non-industrial disability rates are used for Local Prosecutors.
The police non-industrial disability rates are also used for Other Safety, Local Sheriff, and
School Police.
Industrial (Job-Related) Disability Rates vary by age and category.
Age Fire Police County Peace Officer
20 0.0001 0.0000 0.0004
25 0.0003 0.0017 0.0013
30 0.0007 0.0048 0.0025
35 0.0016 0.0079 0.0037
40 0.0030 0.0110 0.0051
45 0.0053 0.0141 0.0067
50 0.0277 0.0185 0.0092
55 0.0409 0.0479 0.0151
60 0.0583 0.0602 0.0174
The police industrial disability rates are also used for Local Sheriff and Other Safety.
Fifty percent of the police industrial disability rates are used for School Police.
One percent of the police industrial disability rates are used for Local Prosecutors.
Normally, rates are zero for miscellaneous plans unless the agency has specifically contracted for industrial disability benefits. If so, each miscellaneous non-industrial disability rate will be
split into two components: 50 percent will become the non-industrial disability rate and 50
percent will become the industrial disability rate.
Service Retirement
Retirement rates vary by age, service, and formula, except for the safety ½ @ 55 and 2% @ 55
formulas, where retirement rates vary by age only.
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-11
Service Retirement
Public Agency Miscellaneous 1.5% @ 65
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.008 0.011 0.013 0.015 0.017 0.019
51 0.007 0.010 0.012 0.013 0.015 0.017
52 0.010 0.014 0.017 0.019 0.021 0.024
53 0.008 0.012 0.015 0.017 0.019 0.022
54 0.012 0.016 0.019 0.022 0.025 0.028
55 0.018 0.025 0.031 0.035 0.038 0.043
56 0.015 0.021 0.025 0.029 0.032 0.036
57 0.020 0.028 0.033 0.038 0.043 0.048
58 0.024 0.033 0.040 0.046 0.052 0.058
59 0.028 0.039 0.048 0.054 0.060 0.067
60 0.049 0.069 0.083 0.094 0.105 0.118
61 0.062 0.087 0.106 0.120 0.133 0.150
62 0.104 0.146 0.177 0.200 0.223 0.251
63 0.099 0.139 0.169 0.191 0.213 0.239
64 0.097 0.136 0.165 0.186 0.209 0.233
65 0.140 0.197 0.240 0.271 0.302 0.339
66 0.092 0.130 0.157 0.177 0.198 0.222
67 0.129 0.181 0.220 0.249 0.277 0.311
68 0.092 0.129 0.156 0.177 0.197 0.221
69 0.092 0.130 0.158 0.178 0.199 0.224
70 0.103 0.144 0.175 0.198 0.221 0.248
Public Agency Miscellaneous 2% @ 60
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.010 0.013 0.015 0.018 0.019 0.021
51 0.009 0.011 0.014 0.016 0.017 0.019
52 0.011 0.014 0.017 0.020 0.022 0.024
53 0.010 0.012 0.015 0.017 0.020 0.021
54 0.015 0.019 0.023 0.025 0.029 0.031
55 0.022 0.029 0.035 0.040 0.045 0.049
56 0.018 0.024 0.028 0.033 0.036 0.040
57 0.024 0.032 0.038 0.043 0.049 0.053
58 0.027 0.036 0.043 0.049 0.055 0.061
59 0.033 0.044 0.054 0.061 0.068 0.076
60 0.056 0.077 0.092 0.105 0.117 0.130
61 0.071 0.097 0.118 0.134 0.149 0.166
62 0.117 0.164 0.198 0.224 0.250 0.280
63 0.122 0.171 0.207 0.234 0.261 0.292
64 0.114 0.159 0.193 0.218 0.244 0.271
65 0.150 0.209 0.255 0.287 0.321 0.358
66 0.114 0.158 0.192 0.217 0.243 0.270
67 0.141 0.196 0.238 0.270 0.301 0.337
68 0.103 0.143 0.174 0.196 0.219 0.245
69 0.109 0.153 0.185 0.209 0.234 0.261
70 0.117 0.162 0.197 0.222 0.248 0.277
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-12
Service Retirement
Public Agency Miscellaneous 2% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.014 0.018 0.021 0.025 0.027 0.031
51 0.012 0.014 0.017 0.020 0.021 0.025
52 0.013 0.017 0.019 0.023 0.025 0.028
53 0.015 0.020 0.023 0.027 0.030 0.034
54 0.026 0.033 0.038 0.045 0.051 0.059
55 0.048 0.061 0.074 0.088 0.100 0.117
56 0.042 0.053 0.063 0.075 0.085 0.100
57 0.044 0.056 0.067 0.081 0.091 0.107
58 0.049 0.062 0.074 0.089 0.100 0.118
59 0.057 0.072 0.086 0.103 0.118 0.138
60 0.067 0.086 0.103 0.123 0.139 0.164
61 0.081 0.103 0.124 0.148 0.168 0.199
62 0.116 0.147 0.178 0.214 0.243 0.288
63 0.114 0.144 0.174 0.208 0.237 0.281
64 0.108 0.138 0.166 0.199 0.227 0.268
65 0.155 0.197 0.238 0.285 0.325 0.386
66 0.132 0.168 0.203 0.243 0.276 0.328
67 0.122 0.155 0.189 0.225 0.256 0.304
68 0.111 0.141 0.170 0.204 0.232 0.274
69 0.114 0.144 0.174 0.209 0.238 0.282
70 0.130 0.165 0.200 0.240 0.272 0.323
Public Agency Miscellaneous 2.5% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.004 0.009 0.019 0.029 0.049 0.094
51 0.004 0.009 0.019 0.029 0.049 0.094
52 0.004 0.009 0.020 0.030 0.050 0.095
53 0.008 0.014 0.025 0.036 0.058 0.104
54 0.024 0.034 0.050 0.066 0.091 0.142
55 0.066 0.088 0.115 0.142 0.179 0.241
56 0.042 0.057 0.078 0.098 0.128 0.184
57 0.041 0.057 0.077 0.097 0.128 0.183
58 0.045 0.061 0.083 0.104 0.136 0.192
59 0.055 0.074 0.098 0.123 0.157 0.216
60 0.066 0.088 0.115 0.142 0.179 0.241
61 0.072 0.095 0.124 0.153 0.191 0.255
62 0.099 0.130 0.166 0.202 0.248 0.319
63 0.092 0.121 0.155 0.189 0.233 0.302
64 0.091 0.119 0.153 0.187 0.231 0.299
65 0.122 0.160 0.202 0.245 0.297 0.374
66 0.138 0.179 0.226 0.272 0.329 0.411
67 0.114 0.149 0.189 0.229 0.279 0.354
68 0.100 0.131 0.168 0.204 0.250 0.322
69 0.114 0.149 0.189 0.229 0.279 0.354
70 0.127 0.165 0.209 0.253 0.306 0.385
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-13
Service Retirement
Public Agency Miscellaneous 2.7% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.004 0.009 0.014 0.035 0.055 0.095
51 0.002 0.006 0.011 0.030 0.050 0.090
52 0.006 0.012 0.017 0.038 0.059 0.099
53 0.010 0.017 0.024 0.046 0.068 0.110
54 0.032 0.044 0.057 0.085 0.113 0.160
55 0.076 0.101 0.125 0.165 0.205 0.265
56 0.055 0.074 0.093 0.127 0.160 0.214
57 0.050 0.068 0.086 0.118 0.151 0.204
58 0.055 0.074 0.093 0.127 0.161 0.215
59 0.061 0.082 0.102 0.138 0.174 0.229
60 0.069 0.093 0.116 0.154 0.192 0.250
61 0.086 0.113 0.141 0.183 0.225 0.288
62 0.105 0.138 0.171 0.218 0.266 0.334
63 0.103 0.135 0.167 0.215 0.262 0.329
64 0.109 0.143 0.177 0.226 0.275 0.344
65 0.134 0.174 0.215 0.270 0.326 0.401
66 0.147 0.191 0.235 0.294 0.354 0.433
67 0.121 0.158 0.196 0.248 0.300 0.372
68 0.113 0.147 0.182 0.232 0.282 0.352
69 0.117 0.153 0.189 0.240 0.291 0.362
70 0.141 0.183 0.226 0.283 0.341 0.418
Public Agency Miscellaneous 3% @ 60
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.012 0.018 0.024 0.039 0.040 0.091
51 0.009 0.014 0.019 0.034 0.034 0.084
52 0.014 0.020 0.026 0.043 0.044 0.096
53 0.016 0.023 0.031 0.048 0.050 0.102
54 0.026 0.036 0.045 0.065 0.070 0.125
55 0.043 0.057 0.072 0.096 0.105 0.165
56 0.042 0.056 0.070 0.094 0.103 0.162
57 0.049 0.065 0.082 0.108 0.119 0.180
58 0.057 0.076 0.094 0.122 0.136 0.199
59 0.076 0.100 0.123 0.157 0.175 0.244
60 0.114 0.148 0.182 0.226 0.255 0.334
61 0.095 0.123 0.152 0.190 0.214 0.288
62 0.133 0.172 0.211 0.260 0.294 0.378
63 0.129 0.166 0.204 0.252 0.285 0.368
64 0.143 0.185 0.226 0.278 0.315 0.401
65 0.202 0.260 0.318 0.386 0.439 0.542
66 0.177 0.228 0.279 0.340 0.386 0.482
67 0.151 0.194 0.238 0.292 0.331 0.420
68 0.139 0.179 0.220 0.270 0.306 0.391
69 0.190 0.245 0.299 0.364 0.414 0.513
70 0.140 0.182 0.223 0.274 0.310 0.396
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-14
Service Retirement
Public Agency Miscellaneous 2% @ 62
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.000 0.000 0.000 0.000 0.000 0.000
51 0.000 0.000 0.000 0.000 0.000 0.000
52 0.010 0.013 0.016 0.019 0.022 0.024
53 0.013 0.017 0.020 0.024 0.027 0.031
54 0.021 0.027 0.033 0.039 0.045 0.050
55 0.044 0.056 0.068 0.080 0.092 0.104
56 0.030 0.039 0.047 0.055 0.063 0.072
57 0.036 0.046 0.056 0.066 0.076 0.086
58 0.046 0.059 0.072 0.085 0.097 0.110
59 0.058 0.074 0.089 0.105 0.121 0.137
60 0.062 0.078 0.095 0.112 0.129 0.146
61 0.062 0.079 0.096 0.113 0.129 0.146
62 0.097 0.123 0.150 0.176 0.202 0.229
63 0.089 0.113 0.137 0.162 0.186 0.210
64 0.094 0.120 0.145 0.171 0.197 0.222
65 0.129 0.164 0.199 0.234 0.269 0.304
66 0.105 0.133 0.162 0.190 0.219 0.247
67 0.105 0.133 0.162 0.190 0.219 0.247
68 0.105 0.133 0.162 0.190 0.219 0.247
69 0.105 0.133 0.162 0.190 0.219 0.247
70 0.125 0.160 0.194 0.228 0.262 0.296
Service Retirement
Public Agency Fire ½ @ 55 and 2% @ 55
Age Rate
Age Rate
50 0.0159 56 0.1108
51 0.0000 57 0.0000
52 0.0344 58 0.0950
53 0.0199 59 0.0441
54 0.0413 60 1.00000
55 0.0751
Public Agency Police ½ @ 55 and 2% @ 55
Age Rate
Age Rate
50 0.0255 56 0.0692
51 0.0000 57 0.0511
52 0.0164 58 0.0724
53 0.0272 59 0.0704
54 0.0095 60 1.0000
55 0.1667
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-15
Service Retirement
Public Agency Police 2% @ 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.005 0.005 0.005 0.005 0.017 0.089
51 0.005 0.005 0.005 0.005 0.017 0.087
52 0.018 0.018 0.018 0.018 0.042 0.132
53 0.044 0.044 0.044 0.044 0.090 0.217
54 0.065 0.065 0.065 0.065 0.126 0.283
55 0.086 0.086 0.086 0.086 0.166 0.354
56 0.067 0.067 0.067 0.067 0.130 0.289
57 0.066 0.066 0.066 0.066 0.129 0.288
58 0.066 0.066 0.066 0.066 0.129 0.288
59 0.139 0.139 0.139 0.139 0.176 0.312
60 0.123 0.123 0.123 0.123 0.153 0.278
61 0.110 0.110 0.110 0.110 0.138 0.256
62 0.130 0.130 0.130 0.130 0.162 0.291
63 0.130 0.130 0.130 0.130 0.162 0.291
64 0.130 0.130 0.130 0.130 0.162 0.291
65 1.000 1.000 1.000 1.000 1.000 1.000
These rates also apply to Local Prosecutors, Local Sheriff, School Police, and Other Safety.
Service Retirement
Public Agency Fire 2% @ 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.009 0.009 0.009 0.009 0.013 0.020
51 0.013 0.013 0.013 0.013 0.020 0.029
52 0.018 0.018 0.018 0.018 0.028 0.042
53 0.052 0.052 0.052 0.052 0.079 0.119
54 0.067 0.067 0.067 0.067 0.103 0.154
55 0.089 0.089 0.089 0.089 0.136 0.204
56 0.083 0.083 0.083 0.083 0.127 0.190
57 0.082 0.082 0.082 0.082 0.126 0.189
58 0.088 0.088 0.088 0.088 0.136 0.204
59 0.074 0.074 0.074 0.074 0.113 0.170
60 0.100 0.100 0.100 0.100 0.154 0.230
61 0.072 0.072 0.072 0.072 0.110 0.165
62 0.099 0.099 0.099 0.099 0.152 0.228
63 0.114 0.114 0.114 0.114 0.175 0.262
64 0.114 0.114 0.114 0.114 0.175 0.262
65 1.000 1.000 1.000 1.000 1.000 1.000
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-16
Service Retirement
Public Agency Police 3% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.004 0.004 0.004 0.004 0.015 0.086
51 0.014 0.014 0.014 0.014 0.034 0.114
52 0.026 0.026 0.026 0.026 0.060 0.154
53 0.038 0.038 0.038 0.038 0.083 0.188
54 0.071 0.071 0.071 0.071 0.151 0.292
55 0.061 0.061 0.061 0.061 0.131 0.261
56 0.072 0.072 0.072 0.072 0.153 0.295
57 0.065 0.065 0.065 0.065 0.140 0.273
58 0.066 0.066 0.066 0.066 0.142 0.277
59 0.118 0.118 0.118 0.118 0.247 0.437
60 0.065 0.065 0.065 0.065 0.138 0.272
61 0.084 0.084 0.084 0.084 0.178 0.332
62 0.108 0.108 0.108 0.108 0.226 0.405
63 0.084 0.084 0.084 0.084 0.178 0.332
64 0.084 0.084 0.084 0.084 0.178 0.332
65 1.000 1.000 1.000 1.000 1.000 1.000
These rates also apply to Local Prosecutors, Local Sheriff, School Police, and Other Safety.
Service Retirement
Public Agency Fire 3% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.001 0.001 0.001 0.006 0.016 0.069
51 0.002 0.002 0.002 0.006 0.018 0.071
52 0.012 0.012 0.012 0.021 0.040 0.098
53 0.032 0.032 0.032 0.049 0.085 0.149
54 0.057 0.057 0.057 0.087 0.144 0.217
55 0.073 0.073 0.073 0.109 0.179 0.259
56 0.064 0.064 0.064 0.097 0.161 0.238
57 0.063 0.063 0.063 0.095 0.157 0.233
58 0.065 0.065 0.065 0.099 0.163 0.241
59 0.088 0.088 0.088 0.131 0.213 0.299
60 0.105 0.105 0.105 0.155 0.251 0.344
61 0.118 0.118 0.118 0.175 0.282 0.380
62 0.087 0.087 0.087 0.128 0.210 0.295
63 0.067 0.067 0.067 0.100 0.165 0.243
64 0.067 0.067 0.067 0.100 0.165 0.243
65 1.000 1.000 1.000 1.000 1.000 1.000
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-17
Service Retirement
Public Agency Police 3% @ 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.050 0.050 0.050 0.099 0.240 0.314
51 0.034 0.034 0.034 0.072 0.198 0.260
52 0.033 0.033 0.033 0.071 0.198 0.259
53 0.039 0.039 0.039 0.080 0.212 0.277
54 0.045 0.045 0.045 0.092 0.229 0.300
55 0.052 0.052 0.052 0.105 0.248 0.323
56 0.042 0.042 0.042 0.087 0.221 0.289
57 0.043 0.043 0.043 0.088 0.223 0.292
58 0.054 0.054 0.054 0.109 0.255 0.333
59 0.054 0.054 0.054 0.108 0.253 0.330
60 0.060 0.060 0.060 0.121 0.272 0.355
61 0.048 0.048 0.048 0.098 0.238 0.311
62 0.061 0.061 0.061 0.122 0.274 0.357
63 0.057 0.057 0.057 0.115 0.263 0.343
64 0.069 0.069 0.069 0.137 0.296 0.385
65 1.000 1.000 1.000 1.000 1.000 1.000
These rates also apply to Local Prosecutors, Local Sheriff, School Police, and Other Safety.
Service Retirement
Public Agency Fire 3% @ 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.020 0.020 0.020 0.040 0.130 0.192
51 0.008 0.008 0.008 0.023 0.107 0.164
52 0.023 0.023 0.023 0.043 0.136 0.198
53 0.023 0.023 0.023 0.043 0.135 0.198
54 0.027 0.027 0.027 0.048 0.143 0.207
55 0.043 0.043 0.043 0.070 0.174 0.244
56 0.053 0.053 0.053 0.085 0.196 0.269
57 0.054 0.054 0.054 0.086 0.197 0.271
58 0.052 0.052 0.052 0.084 0.193 0.268
59 0.075 0.075 0.075 0.116 0.239 0.321
60 0.065 0.065 0.065 0.102 0.219 0.298
61 0.076 0.076 0.076 0.117 0.241 0.324
62 0.068 0.068 0.068 0.106 0.224 0.304
63 0.027 0.027 0.027 0.049 0.143 0.208
64 0.094 0.094 0.094 0.143 0.277 0.366
65 1.000 1.000 1.000 1.000 1.000 1.000
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-18
Service Retirement
Public Agency Police 2% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.011 0.011 0.011 0.011 0.020 0.036
51 0.009 0.009 0.009 0.009 0.016 0.028
52 0.018 0.018 0.018 0.018 0.034 0.060
53 0.037 0.037 0.037 0.037 0.067 0.119
54 0.049 0.049 0.049 0.049 0.089 0.159
55 0.063 0.063 0.063 0.063 0.115 0.205
56 0.045 0.045 0.045 0.045 0.082 0.146
57 0.064 0.064 0.064 0.064 0.117 0.209
58 0.047 0.047 0.047 0.047 0.086 0.154
59 0.105 0.105 0.105 0.105 0.130 0.191
60 0.105 0.105 0.105 0.105 0.129 0.188
61 0.105 0.105 0.105 0.105 0.129 0.188
62 0.105 0.105 0.105 0.105 0.129 0.188
63 0.105 0.105 0.105 0.105 0.129 0.188
64 0.105 0.105 0.105 0.105 0.129 0.188
65 1.000 1.000 1.000 1.000 1.000 1.000
These rates also apply to Local Prosecutors, Local Sheriff, School Police, and Other Safety.
Service Retirement
Public Agency Fire 2% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.005 0.005 0.005 0.005 0.008 0.012
51 0.006 0.006 0.006 0.006 0.009 0.013
52 0.012 0.012 0.012 0.012 0.019 0.028
53 0.033 0.033 0.033 0.033 0.050 0.075
54 0.045 0.045 0.045 0.045 0.069 0.103
55 0.061 0.061 0.061 0.061 0.094 0.140
56 0.055 0.055 0.055 0.055 0.084 0.126
57 0.081 0.081 0.081 0.081 0.125 0.187
58 0.059 0.059 0.059 0.059 0.091 0.137
59 0.055 0.055 0.055 0.055 0.084 0.126
60 0.085 0.085 0.085 0.085 0.131 0.196
61 0.085 0.085 0.085 0.085 0.131 0.196
62 0.085 0.085 0.085 0.085 0.131 0.196
63 0.085 0.085 0.085 0.085 0.131 0.196
64 0.085 0.085 0.085 0.085 0.131 0.196
65 1.000 1.000 1.000 1.000 1.000 1.000
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-19
Service Retirement
Public Agency Police 2.5% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.014 0.014 0.014 0.014 0.025 0.045
51 0.012 0.012 0.012 0.012 0.021 0.038
52 0.025 0.025 0.025 0.025 0.046 0.081
53 0.047 0.047 0.047 0.047 0.086 0.154
54 0.063 0.063 0.063 0.063 0.115 0.205
55 0.076 0.076 0.076 0.076 0.140 0.249
56 0.054 0.054 0.054 0.054 0.099 0.177
57 0.071 0.071 0.071 0.071 0.130 0.232
58 0.057 0.057 0.057 0.057 0.103 0.184
59 0.126 0.126 0.126 0.126 0.156 0.229
60 0.126 0.126 0.126 0.126 0.155 0.226
61 0.126 0.126 0.126 0.126 0.155 0.226
62 0.126 0.126 0.126 0.126 0.155 0.226
63 0.126 0.126 0.126 0.126 0.155 0.226
64 0.126 0.126 0.126 0.126 0.155 0.226
65 1.000 1.000 1.000 1.000 1.000 1.000
These rates also apply to Local Prosecutors, Local Sheriff, School Police, and Other Safety.
Service Retirement
Public Agency Fire 2.5% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.007 0.007 0.007 0.007 0.010 0.015
51 0.008 0.008 0.008 0.008 0.012 0.018
52 0.016 0.016 0.016 0.016 0.025 0.038
53 0.042 0.042 0.042 0.042 0.064 0.096
54 0.057 0.057 0.057 0.057 0.088 0.132
55 0.074 0.074 0.074 0.074 0.114 0.170
56 0.066 0.066 0.066 0.066 0.102 0.153
57 0.090 0.090 0.090 0.090 0.139 0.208
58 0.071 0.071 0.071 0.071 0.110 0.164
59 0.066 0.066 0.066 0.066 0.101 0.151
60 0.102 0.102 0.102 0.102 0.157 0.235
61 0.102 0.102 0.102 0.102 0.157 0.236
62 0.102 0.102 0.102 0.102 0.157 0.236
63 0.102 0.102 0.102 0.102 0.157 0.236
64 0.102 0.102 0.102 0.102 0.157 0.236
65 1.000 1.000 1.000 1.000 1.000 1.000
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-20
Service Retirement
Public Agency Police 2.7% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.0138 0.0138 0.0138 0.0138 0.0253 0.0451
51 0.0123 0.0123 0.0123 0.0123 0.0226 0.0402
52 0.0249 0.0249 0.0249 0.0249 0.0456 0.0812
53 0.0497 0.0497 0.0497 0.0497 0.0909 0.1621
54 0.0662 0.0662 0.0662 0.0662 0.1211 0.2160
55 0.0854 0.0854 0.0854 0.0854 0.1563 0.2785
56 0.0606 0.0606 0.0606 0.0606 0.1108 0.1975
57 0.0711 0.0711 0.0711 0.0711 0.1300 0.2318
58 0.0628 0.0628 0.0628 0.0628 0.1149 0.2049
59 0.1396 0.1396 0.1396 0.1396 0.1735 0.2544
60 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506
61 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506
62 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506
63 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506
64 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506
65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
These rates also apply to Local Prosecutors, Local Sheriff, School Police, and Other Safety.
Service Retirement
Public Agency Fire 2.7% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.0065 0.0065 0.0065 0.0065 0.0101 0.0151
51 0.0081 0.0081 0.0081 0.0081 0.0125 0.0187
52 0.0164 0.0164 0.0164 0.0164 0.0254 0.0380
53 0.0442 0.0442 0.0442 0.0442 0.0680 0.1018
54 0.0606 0.0606 0.0606 0.0606 0.0934 0.1397
55 0.0825 0.0825 0.0825 0.0825 0.1269 0.1900
56 0.0740 0.0740 0.0740 0.0740 0.1140 0.1706
57 0.0901 0.0901 0.0901 0.0901 0.1387 0.2077
58 0.0790 0.0790 0.0790 0.0790 0.1217 0.1821
59 0.0729 0.0729 0.0729 0.0729 0.1123 0.1681
60 0.1135 0.1135 0.1135 0.1135 0.1747 0.2615
61 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618
62 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618
63 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618
64 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618
65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-21
Service Retirement
Schools 2% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.005 0.009 0.013 0.015 0.016 0.018
51 0.005 0.010 0.014 0.017 0.019 0.021
52 0.006 0.012 0.017 0.020 0.022 0.025
53 0.007 0.014 0.019 0.023 0.026 0.029
54 0.012 0.024 0.033 0.039 0.044 0.049
55 0.024 0.048 0.067 0.079 0.088 0.099
56 0.020 0.039 0.055 0.065 0.072 0.081
57 0.021 0.042 0.059 0.070 0.078 0.087
58 0.025 0.050 0.070 0.083 0.092 0.103
59 0.029 0.057 0.080 0.095 0.105 0.118
60 0.037 0.073 0.102 0.121 0.134 0.150
61 0.046 0.090 0.126 0.149 0.166 0.186
62 0.076 0.151 0.212 0.250 0.278 0.311
63 0.069 0.136 0.191 0.225 0.251 0.281
64 0.067 0.133 0.185 0.219 0.244 0.273
65 0.091 0.180 0.251 0.297 0.331 0.370
66 0.072 0.143 0.200 0.237 0.264 0.295
67 0.067 0.132 0.185 0.218 0.243 0.272
68 0.060 0.118 0.165 0.195 0.217 0.243
69 0.067 0.133 0.187 0.220 0.246 0.275
70 0.066 0.131 0.183 0.216 0.241 0.270
Miscellaneous
Internal Revenue Code Section 415
The limitations on benefits imposed by Internal Revenue Code Section 415 are taken into account in this
valuation. Each year the impact of any changes in this limitation since the prior valuation is included and
amortized as part of the actuarial gain or loss base. This results in lower contributions for those employers
contributing to the Replacement Benefit Fund and protects CalPERS from prefunding expected benefits in
excess of limits imposed by federal tax law.
Internal Revenue Code Section 401(a)(17)
The limitations on compensation imposed by Internal Revenue Code Section 401(a)(17) are taken into
account in this valuation. Each year, the impact of any changes in the compensation limitation since the
prior valuation is included and amortized as part of the actuarial gain or loss base. The compensation limit
for classic members for the 2016 calendar year is $265,000.
APPENDIX B
PRINCIPAL PLAN PROVISIONS
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX B
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-1
The following is a description of the principal plan provisions used in calculating costs and liabilities. We have
indicated whether a plan provision is standard or optional. Standard benefits are applicable to all members while
optional benefits vary among employers. Optional benefits that apply to a single period of time, such as Golden
Handshakes, have not been included. Many of the statements in this summary are general in nature, and are
intended to provide an easily understood summary of the Public Employees’ Retirement Law. The law itself governs in all situations.
Service Retirement
Eligibility
A classic CalPERS member or PEPRA Safety member becomes eligible for Service Retirement upon attainment of age
50 with at least 5 years of credited service (total service across all CalPERS employers, and with certain other
retirement systems with which CalPERS has reciprocity agreements). For employees hired into a plan with the 1.5
percent at 65 formula, eligibility for service retirement is age 55 with at least 5 years of service. PEPRA miscellaneous
members become eligible for service retirement upon attainment of age 52 with at least 5 years of service.
Benefit
The service retirement benefit is a monthly allowance equal to the product of the benefit factor, years of service, and
final compensation.
The benefit factor depends on the benefit formula specified in your agency’s contract. The table below shows
the factors for each of the available formulas. Factors vary by the member’s age at retirement. Listed are the
factors for retirement at whole year ages:
Miscellaneous Plan Formulas
Retirement
Age
1.5% at
65 2% at 60 2% at 55 2.5% at
55
2.7% at
55 3% at 60
PEPRA
2% at 62
50 0.5000% 1.092% 1.426% 2.000% 2.000% 2.000% N/A
51 0.5667% 1.156% 1.522% 2.100% 2.140% 2.100% N/A
52 0.6334% 1.224% 1.628% 2.200% 2.280% 2.200% 1.000%
53 0.7000% 1.296% 1.742% 2.300% 2.420% 2.300% 1.100%
54 0.7667% 1.376% 1.866% 2.400% 2.560% 2.400% 1.200%
55 0.8334% 1.460% 2.000% 2.500% 2.700% 2.500% 1.300%
56 0.9000% 1.552% 2.052% 2.500% 2.700% 2.600% 1.400%
57 0.9667% 1.650% 2.104% 2.500% 2.700% 2.700% 1.500%
58 1.0334% 1.758% 2.156% 2.500% 2.700% 2.800% 1.600%
59 1.1000% 1.874% 2.210% 2.500% 2.700% 2.900% 1.700%
60 1.1667% 2.000% 2.262% 2.500% 2.700% 3.000% 1.800%
61 1.2334% 2.134% 2.314% 2.500% 2.700% 3.000% 1.900%
62 1.3000% 2.272% 2.366% 2.500% 2.700% 3.000% 2.000%
63 1.3667% 2.418% 2.418% 2.500% 2.700% 3.000% 2.100%
64 1.4334% 2.418% 2.418% 2.500% 2.700% 3.000% 2.200%
65 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.300%
66 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.400%
67 & up 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.500%
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX B
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-2
Safety Plan Formulas
Retirement
Age ½ at 55 * 2% at 55 2% at 50 3% at 55 3% at 50
50 1.783% 1.426% 2.000% 2.400% 3.000%
51 1.903% 1.522% 2.140% 2.520% 3.000%
52 2.035% 1.628% 2.280% 2.640% 3.000%
53 2.178% 1.742% 2.420% 2.760% 3.000%
54 2.333% 1.866% 2.560% 2.880% 3.000%
55 & Up 2.500% 2.000% 2.700% 3.000% 3.000%
* For this formula, the benefit factor also varies by entry age. The factors shown are for members with an entry age
of 35 or greater. If entry age is less than 35, then the age 55 benefit factor is 50 percent divided by the difference
between age 55 and entry age. The benefit factor for ages prior to age 55 is the same proportion of the age 55
benefit factor as in the above table.
PEPRA Safety Plan Formulas
Retirement Age 2% at 57 2.5% at 57 2.7% at 57
50 1.426% 2.000% 2.000%
51 1.508% 2.071% 2.100%
52 1.590% 2.143% 2.200%
53 1.672% 2.214% 2.300%
54 1.754% 2.286% 2.400%
55 1.836% 2.357% 2.500%
56 1.918% 2.429% 2.600%
57 & Up 2.000% 2.500% 2.700%
The years of service is the amount credited by CalPERS to a member while he or she is employed in this group
(or for other periods that are recognized under the employer’s contract with CalPERS). For a member who has
earned service with multiple CalPERS employers, the benefit from each employer is calculated separately
according to each employer’s contract, and then added together for the total allowance. An agency may contract
for an optional benefit where any unused sick leave accumulated at the time of retirement will be converted to
credited service at a rate of 0.004 years of service for each day of sick leave.
The final compensation is the monthly average of the member’s highest 36 or 12 consecutive months’ full-time
equivalent monthly pay (no matter which CalPERS employer paid this compensation). The standard benefit is 36 months. Employers had the option of providing a final compensation equal to the highest 12 consecutive months
for classic plans only. Final compensation must be defined by the highest 36 consecutive months’ pay under the
1.5% at 65 formula. PEPRA members have a cap on the annual salary that can be used to calculate final
compensation for all new members based on the Social Security contribution and benefit base. For employees
that participate in Social Security this cap is $118,775 for 2016 and for those employees that do not participate
in Social Security the cap for 2016 is $142,530. Adjustments to the caps are permitted annually based on
changes to the CPI for all urban consumers.
Employees must be covered by Social Security with the 1.5% at 65 formula. Social Security is optional for all
other benefit formulas. For employees covered by Social Security, the modified formula is the standard benefit.
Under this type of formula, the final compensation is offset by $133.33 (or by one third if the final compensation
is less than $400). Employers may contract for the full benefit with Social Security that will eliminate the offset
applicable to the final compensation. For employees not covered by Social Security, the full benefit is paid with
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX B
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-3
no offsets. Auxiliary organizations of the CSUC system may elect reduced contribution rates, in which case the offset is $317 if members are not covered by Social Security or $513 if members are covered by Social Security.
The miscellaneous and PEPRA safety service retirement benefit is not capped. The classic Safety service
retirement benefit is capped at 90 percent of final compensation.
Vested Deferred Retirement
Eligibility for Deferred Status
A CalPERS member becomes eligible for a deferred vested retirement benefit when he or she leaves employment,
keeps his or her contribution account balance on deposit with CalPERS, and has earned at least 5 years of credited
service (total service across all CalPERS employers, and with certain other retirement systems with which CalPERS
has reciprocity agreements).
Eligibility to Start Receiving Benefits
The CalPERS classic members and PEPRA safety members become eligible to receive the deferred retirement benefit
upon satisfying the eligibility requirements for deferred status and upon attainment of age 50 (55 for employees
hired into a 1.5% @ 65 plan). PEPRA miscellaneous members become eligible to receive the deferred retirement
benefit upon satisfying the eligibility requirements for deferred status and upon attainment of age 52.
Benefit
The vested deferred retirement benefit is the same as the service retirement benefit, where the benefit factor is
based on the member’s age at allowance commencement. For members who have earned service with multiple
CalPERS employers, the benefit from each employer is calculated separately according to each employer’s contract,
and then added together for the total allowance.
Non-Industrial (Non-Job Related) Disability Retirement
Eligibility
A CalPERS member is eligible for Non-Industrial Disability Retirement if he or she becomes disabled and has at least 5 years of credited service (total service across all CalPERS employers, and with certain other retirement systems
with which CalPERS has reciprocity agreements). There is no special age requirement. Disabled means the member is
unable to perform his or her job because of an illness or injury, which is expected to be permanent or to last
indefinitely. The illness or injury does not have to be job related. A CalPERS member must be actively employed by
any CalPERS employer at the time of disability in order to be eligible for this benefit.
Standard Benefit
The standard Non-Industrial Disability Retirement benefit is a monthly allowance equal to 1.8 percent of final
compensation, multiplied by service, which is determined as follows:
Service is CalPERS credited service, for members with less than 10 years of service or greater than 18.518 years
of service; or
Service is CalPERS credited service plus the additional number of years that the member would have worked
until age 60, for members with at least 10 years but not more than 18.518 years of service. The maximum benefit in this case is 33 1/3 percent of final compensation.
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX B
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-4
Improved Benefit
Employers have the option of providing the improved Non-Industrial Disability Retirement benefit. This benefit
provides a monthly allowance equal to 30 percent of final compensation for the first 5 years of service, plus 1 percent
for each additional year of service to a maximum of 50 percent of final compensation.
Members who are eligible for a larger service retirement benefit may choose to receive that benefit in lieu of a
disability benefit. Members eligible to retire, and who have attained the normal retirement age determined by their
service retirement benefit formula, will receive the same dollar amount for disability retirement as that payable for
service retirement. For members who have earned service with multiple CalPERS employers, the benefit attributed to
each employer is the total disability allowance multiplied by the ratio of service with a particular employer to the total
CalPERS service.
Industrial (Job Related) Disability Retirement
All safety members have this benefit. For miscellaneous members, employers have the option of providing this benefit. An employer may choose to provide the increased benefit option or the improved benefit option.
Eligibility
An employee is eligible for Industrial Disability Retirement if he or she becomes disabled while working, where
disabled means the member is unable to perform the duties of the job because of a work-related illness or injury,
which is expected to be permanent or to last indefinitely. A CalPERS member who has left active employment within
this group is not eligible for this benefit, except to the extent described below.
Standard Benefit
The standard Industrial Disability Retirement benefit is a monthly allowance equal to 50 percent of final
compensation.
Increased Benefit (75 percent of Final Compensation)
The increased Industrial Disability Retirement benefit is a monthly allowance equal to 75 percent final compensation
for total disability.
Improved Benefit (50 percent to 90 percent of Final Compensation)
The improved Industrial Disability Retirement benefit is a monthly allowance equal to the Workman’s Compensation Appeals Board permanent disability rate percentage (if 50 percent or greater, with a maximum of 90 percent) times
the final compensation.
For a CalPERS member not actively employed in this group who became disabled while employed by some other
CalPERS employer, the benefit is a return of accumulated member contributions with respect to employment in this
group. With the standard or increased benefit, a member may also choose to receive the annuitization of the
accumulated member contributions.
If a member is eligible for service retirement and if the service retirement benefit is more than the industrial disability
retirement benefit, the member may choose to receive the larger benefit.
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX B
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-5
Post-Retirement Death Benefit
Standard Lump Sum Payment
Upon the death of a retiree, a one-time lump sum payment of $500 will be made to the retiree’s designated
survivor(s), or to the retiree’s estate.
Improved Lump Sum Payment
Employers have the option of providing an improved lump sum death benefit of $600, $2,000, $3,000, $4,000 or $5,000.
Form of Payment for Retirement Allowance
Standard Form of Payment
Generally, the retirement allowance is paid to the retiree in the form of an annuity for as long as he or she is alive.
The retiree may choose to provide for a portion of his or her allowance to be paid to any designated beneficiary after
the retiree’s death. CalPERS provides for a variety of such benefit options, which the retiree pays for by taking a
reduction in his or her retirement allowance. Such reduction takes into account the amount to be provided to the
beneficiary and the probable duration of payments (based on the ages of the member and beneficiary) made subsequent to the member’s death.
Improved Form of Payment (Post-Retirement Survivor Allowance)
Employers have the option to contract for the post-retirement survivor allowance.
For retirement allowances with respect to service subject to the modified formula, 25 percent of the retirement
allowance will automatically be continued to certain statutory beneficiaries upon the death of the retiree, without a reduction in the retiree’s allowance. For retirement allowances with respect to service subject to the full or
supplemental formula, 50 percent of the retirement allowance will automatically be continued to certain statutory
beneficiaries upon the death of the retiree, without a reduction in the retiree’s allowance. This additional benefit is
referred to as post-retirement survivor allowance (PRSA) or simply as survivor continuance.
In other words, 25 percent or 50 percent of the allowance, the continuance portion, is paid to the retiree for as long
as he or she is alive, and that same amount is continued to the retiree’s spouse (or if no eligible spouse, to unmarried child(ren) until they attain age 18; or, if no eligible child(ren), to a qualifying dependent parent) for the
rest of his or her lifetime. This benefit will not be discontinued in the event the spouse remarries.
The remaining 75 percent or 50 percent of the retirement allowance, which may be referred to as the option portion
of the benefit, is paid to the retiree as an annuity for as long as he or she is alive. Or, the retiree may choose to
provide for some of this option portion to be paid to any designated beneficiary after the retiree’s death. Benefit
options applicable to the option portion are the same as those offered with the standard form. The reduction is calculated in the same manner but is applied only to the option portion.
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX B
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-6
Pre-Retirement Death Benefits
Basic Death Benefit
This is a standard benefit.
Eligibility
An employee’s beneficiary (or estate) may receive the basic death benefit if the member dies while actively
employed. A CalPERS member must be actively employed with the CalPERS employer providing this benefit to be
eligible for this benefit. A member’s survivor who is eligible for any other pre-retirement death benefit may choose to
receive that death benefit instead of this basic death benefit.
Benefit
The basic death benefit is a lump sum in the amount of the member’s accumulated contributions, where interest is
currently credited at 7.5 percent per year, plus a lump sum in the amount of one month's salary for each completed
year of current service, up to a maximum of six months' salary. For purposes of this benefit, one month's salary is
defined as the member's average monthly full-time rate of compensation during the 12 months preceding death.
1957 Survivor Benefit
This is a standard benefit.
Eligibility
An employee’s eligible survivor(s) may receive the 1957 Survivor benefit if the member dies while actively employed,
has attained at least age 50 for classic and safety PEPRA members and age 52 for miscellaneous PEPRA members,
and has at least 5 years of credited service (total service across all CalPERS employers and with certain other
retirement systems with which CalPERS has reciprocity agreements). A CalPERS member must be actively employed
with the CalPERS employer providing this benefit to be eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married at least one year before death or, if there is no eligible spouse,
to the member's unmarried child(ren) under age 18. A member’s survivor who is eligible for any other pre-retirement
death benefit may choose to receive that death benefit instead of this 1957 Survivor benefit.
Benefit
The 1957 Survivor benefit is a monthly allowance equal to one-half of the unmodified service retirement benefit that the member would have been entitled to receive if the member had retired on the date of his or her death. If the
benefit is payable to the spouse, the benefit is discontinued upon the death of the spouse. If the benefit is payable to
dependent child(ren), the benefit will be discontinued upon death or attainment of age 18, unless the child(ren) is
disabled. The total amount paid will be at least equal to the basic death benefit.
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX B
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-7
Optional Settlement 2W Death Benefit
This is an optional benefit.
Eligibility
An employee’s eligible survivor may receive the Optional Settlement 2W Death benefit if the member dies while
actively employed, has attained at least age 50 for classic and safety PEPRA members and age 52 for miscellaneous
PEPRA members, and has at least 5 years of credited service (total service across all CalPERS employers and with
certain other retirement systems with which CalPERS has reciprocity agreements). A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An eligible survivor means the
surviving spouse to whom the member was married at least one year before death. A member’s survivor who is
eligible for any other pre-retirement death benefit may choose to receive that death benefit instead of this Optional
Settlement 2W Death benefit.
Benefit
The Optional Settlement 2W Death benefit is a monthly allowance equal to the service retirement benefit that the
member would have received had the member retired on the date of his or her death and elected Optional
Settlement 2W. (A retiree who elects Optional Settlement 2W receives an allowance that has been reduced so that it
will continue to be paid after his or her death to a surviving beneficiary.) The allowance is payable as long as the
surviving spouse lives, at which time it is continued to any unmarried child(ren) under age 18, if applicable. The total
amount paid will be at least equal to the basic death benefit.
Special Death Benefit
This is a standard benefit for safety members. An employer may elect to provide this benefit for miscellaneous
members.
Eligibility
An employee’s eligible survivor(s) may receive the special death benefit if the member dies while actively employed
and the death is job-related. A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married prior
to the onset of the injury or illness that resulted in death. If there is no eligible spouse, an eligible survivor means the
member's unmarried child(ren) under age 22. An eligible survivor who chooses to receive this benefit will not receive
any other death benefit.
Benefit
The special death benefit is a monthly allowance equal to 50 percent of final compensation, and will be increased whenever the compensation paid to active employees is increased but ceasing to increase when the member would
have attained age 50. The allowance is payable to the surviving spouse until death at which time the allowance is
continued to any unmarried child(ren) under age 22. There is a guarantee that the total amount paid will at least
equal the basic death benefit.
If the member’s death is the result of an accident or injury caused by external violence or physical force incurred in
the performance of the member’s duty, and there are eligible surviving child(ren) (eligible means unmarried child(ren) under age 22) in addition to an eligible spouse, then an additional monthly allowance is paid equal to
the following:
if 1 eligible child: 12.5 percent of final compensation
if 2 eligible children: 20.0 percent of final compensation
if 3 or more eligible children: 25.0 percent of final compensation
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX B
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-8
Alternate Death Benefit for Local Fire Members
This is an optional benefit available only to local fire members.
Eligibility
An employee’s eligible survivor(s) may receive the alternate death benefit in lieu of the basic death benefit or the
1957 Survivor benefit if the member dies while actively employed and has at least 20 years of total CalPERS service.
A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An
eligible survivor means the surviving spouse to whom the member was married prior to the onset of the injury or illness that resulted in death. If there is no eligible spouse, an eligible survivor means the member's unmarried
child(ren) under age 18.
Benefit
The Alternate Death benefit is a monthly allowance equal to the service retirement benefit that the member would
have received had the member retired on the date of his or her death and elected Optional Settlement 2W. (A retiree who elects Optional Settlement 2W receives an allowance that has been reduced so that it will continue to be paid
after his or her death to a surviving beneficiary.) If the member has not yet attained age 50, the benefit is equal to
that which would be payable if the member had retired at age 50, based on service credited at the time of death.
The allowance is payable as long as the surviving spouse lives, at which time it is continued to any unmarried
child(ren) under age 18, if applicable. The total amount paid will be at least equal to the basic death benefit.
Cost-of-Living Adjustments (COLA)
Standard Benefit
Retirement and survivor allowances are adjusted each year in May for cost of living, beginning the second calendar year after the year of retirement. The standard cost-of-living adjustment (COLA) is 2 percent. Annual adjustments
are calculated by first determining the lesser of 1) 2 percent compounded from the end of the year of retirement or
2) actual rate of inflation. The resulting increase is divided by the total increase provided in prior years. For any
particular year, the COLA adjustment may be less than 2 percent (when the rate of inflation is low), may be greater
than the rate of inflation (when the rate of inflation is low after several years of high inflation) or may even be
greater than 2 percent (when inflation is high after several years of low inflation).
Improved Benefit
Employers have the option of providing a COLA of 3 percent, 4 percent, or 5 percent, determined in the same
manner as described above for the standard 2 percent COLA. An improved COLA is not available with the 1.5% at 65
formula.
Purchasing Power Protection Allowance (PPPA)
Retirement and survivor allowances are protected against inflation by PPPA. PPPA benefits are cost-of-living adjustments that are intended to maintain an individual’s allowance at 80 percent of the initial allowance at
retirement adjusted for inflation since retirement. The PPPA benefit will be coordinated with other cost-of-living
adjustments provided under the plan.
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX B
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-9
Employee Contributions
Each employee contributes toward his or her retirement based upon the retirement formula. The standard employee
contribution is as described below.
The percent contributed below the monthly compensation breakpoint is 0 percent.
The monthly compensation breakpoint is $0 for full and supplemental formula members and $133.33 for
employees covered by the modified formula.
The percent contributed above the monthly compensation breakpoint depends upon the benefit formula, as
shown in the table below.
Benefit Formula Percent Contributed above the
Breakpoint
Miscellaneous, 1.5% at 65 2%
Miscellaneous, 2% at 60 7%
Miscellaneous, 2% at 55 7%
Miscellaneous, 2.5% at 55 8%
Miscellaneous, 2.7% at 55 8%
Miscellaneous, 3% at 60 8%
Miscellaneous, 2% at 62 50% of the Total Normal Cost
Miscellaneous, 1.5% at 65 50% of the Total Normal Cost
Safety, 1/2 at 55 Varies by entry age
Safety, 2% at 55 7%
Safety, 2% at 50 9%
Safety, 3% at 55 9%
Safety, 3% at 50 9%
Safety, 2% at 57 50% of the Total Normal Cost
Safety, 2.5% at 57 50% of the Total Normal Cost
Safety, 2.7% at 57 50% of the Total Normal Cost
The employer may choose to “pick-up” these contributions for classic members (Employer Paid Member Contributions
or EPMC). EPMC is prohibited for new PEPRA members.
An employer may also include Employee Cost Sharing in the contract, where employees agree to share the cost of the employer contribution. These contributions are paid in addition to the member contribution.
Auxiliary organizations of the CSUC system may elect reduced contribution rates, in which case the offset is $317 and
the contribution rate is 6 percent if members are not covered by Social Security. If members are covered by Social
Security, the offset is $513 and the contribution rate is 5 percent.
Refund of Employee Contributions
If the member’s service with the employer ends, and if the member does not satisfy the eligibility conditions for any of the retirement benefits above, the member may elect to receive a refund of his or her employee contributions,
which are credited with 6 percent interest compounded annually.
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX B
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-10
1959 Survivor Benefit
This is a pre-retirement death benefit available only to members not covered by Social Security. Any agency joining
CalPERS subsequent to 1993 is required to provide this benefit if the members are not covered by Social Security.
The benefit is optional for agencies joining CalPERS prior to 1994. Levels 1, 2 and 3 are now closed. Any new agency
or any agency wishing to add this benefit or increase the current level may only choose the 4th or Indexed Level.
This benefit is not included in the results presented in this valuation. More information on this benefit is available on
the CalPERS website at www.calpers.ca.gov.
APPENDIX C
PARTICIPANT DATA
SUMMARY OF VALUATION DATA
ACTIVE MEMBERS
TRANSFERRED AND TERMINATED MEMBERS
RETIRED MEMBERS AND BENEFICIARIES
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX C
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PARTICIPANT DATA
C-1
Summary of Valuation Data
June 30, 2015 June 30, 2016
1. Active Members
a) Counts 796 821
b) Average Attained Age
46.35 46.17
c) Average Entry Age to Rate Plan 35.01 35.05
d) Average Years of Service 11.34 11.12
e) Average Annual Covered Pay $ 89,918 $ 91,773
f) Annual Covered Payroll 71,574,823 75,345,962
g) Projected Annual Payroll for Contribution Year 78,211,742 82,332,567
h) Present Value of Future Payroll 549,799,999 583,437,155
2. Transferred Members
a) Counts 347 361
b) Average Attained Age 46.34 45.98
c) Average Years of Service 3.55 3.46
d) Average Annual Covered Pay $ 111,297 $ 113,704
3. Terminated Members
a) Counts 367 383
b) Average Attained Age 47.69 48.05
c) Average Years of Service 3.30 3.19
d) Average Annual Covered Pay $ 64,442 $ 66,844
4. Retired Members and Beneficiaries
a) Counts 1,027 1,061
b) Average Attained Age 69.31 69.64
c) Average Annual Benefits $ 32,564 $ 32,763
5. Active to Retired Ratio [(1a) / (4a)] 0.78 0.77
Counts of members included in the valuation are counts of the records processed by the valuation. Multiple
records may exist for those who have service in more than one valuation group. This does not result in
double counting of liabilities.
Average Annual Benefits represents benefit amounts payable by this plan only. Some members may have
service with another agency and would therefore have a larger total benefit than would be included as part
of the average shown here.
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX C
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PARTICIPANT DATA
C-2
Active Members
Counts of members included in the valuation are counts of the records processed by the valuation. Multiple records
may exist for those who have service in more than one valuation group. This does not result in double counting of
liabilities.
Distribution of Active Members by Age and Service
Years of Service at Valuation Date
Attained
Age 0-4 5-9 10-14 15-19 20-25 25+ Total
15-24 12 0 0 0 0 0 12
25-29 52 0 0 0 0 0 52
30-34 54 20 6 1 0 0 81
35-39 45 34 20 11 2 0 112
40-44 34 26 20 19 6 1 106
45-49 43 17 16 28 13 3 120
50-54 19 29 19 27 33 29 156
55-59 18 18 11 21 11 19 98
60-64 6 13 7 10 10 9 55
65 and over 3 4 1 9 7 5 29
All Ages 286 161 100 126 82 66 821
Distribution of Average Annual Salaries by Age and Service
Years of Service at Valuation Date
Attained
Age 0-4 5-9 10-14 15-19 20-25 25+ Average
15-24 $57,743 $0 $0 $0 $0 $0 $57,743
25-29 68,174 0 0 0 0 0 68,174
30-34 77,827 83,831 83,460 99,780 0 0 79,998
35-39 80,289 86,452 91,827 91,950 82,351 0 85,402
40-44 92,188 91,278 89,991 93,318 111,222 86,060 92,772
45-49 96,084 93,981 111,666 98,326 118,659 93,855 100,777
50-54 109,651 98,853 98,331 86,561 102,240 104,917 99,821
55-59 113,847 97,497 90,220 83,301 92,928 106,744 97,921
60-64 110,080 87,411 85,736 85,225 103,248 88,967 92,407
65 and over 97,621 94,278 58,768 116,311 89,153 97,137 99,493
All Ages $85,334 $91,441 $94,434 $92,245 $102,772 $101,890 $91,773
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX C
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PARTICIPANT DATA
C-3
Transferred and Terminated Members
Distribution of Transfers to Other CalPERS Plans by Age, Service, and average Salary
Years of Service at Valuation Date
Attained
Age 0-4 5-9 10-14 15-19 20-25 25+ Total
Average
Salary
15-24 1 0 0 0 0 0 1 $103,645
25-29 14 1 0 0 0 0 15 97,680
30-34 39 3 0 0 0 0 42 96,159
35-39 43 10 1 0 0 0 54 106,490
40-44 43 7 0 2 0 0 52 111,706
45-49 47 10 2 2 1 0 62 113,645
50-54 48 14 3 3 1 0 69 123,040
55-59 25 7 4 1 0 0 37 129,573
60-64 15 3 1 1 1 0 21 129,129
65 and over 3 4 1 0 0 0 8 104,826
All Ages 278 59 12 9 3 0 361 113,704
Distribution of Terminated Participants with Funds on Deposit by Age, Service, and average Salary
Years of Service at Valuation Date
Attained Age 0-4 5-9 10-14 15-19 20-25 25+ Total Average Salary
15-24 1 0 0 0 0 0 1 $53,219
25-29 14 0 0 0 0 0 14 72,132
30-34 30 5 0 0 0 0 35 71,310
35-39 46 3 2 0 0 0 51 63,875
40-44 37 7 1 0 0 0 45 66,627
45-49 43 14 1 2 1 0 61 74,762
50-54 49 15 4 2 1 0 71 68,022
55-59 32 8 5 1 0 0 46 65,351
60-64 30 6 1 0 0 0 37 60,309
65 and over 17 3 1 1 0 0 22 52,669
All Ages 299 61 15 6 2 0 383 66,844
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX C
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PARTICIPANT DATA
C-4
Retired Members and Beneficiaries
Distribution of Retirees and Beneficiaries by Age and Retirement Type*
Attained
Age
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Total
Under 30 0 0 0 0 0 2 2
30-34 0 0 0 0 0 1 1
35-39 0 0 1 0 0 1 2
40-44 0 1 3 0 0 0 4
45-49 0 2 0 0 0 0 2
50-54 18 8 3 0 0 2 31
55-59 100 14 1 0 0 3 118
60-64 171 7 2 0 0 9 189
65-69 196 13 2 0 0 17 228
70-74 191 7 1 0 0 14 213
75-79 97 7 1 0 0 11 116
80-84 54 3 1 0 0 15 73
85 and Over 51 3 0 0 0 28 82
All Ages 878 65 15 0 0 103 1,061
Distribution of Average Annual Disbursements to Retirees and Beneficiaries by Age
and Retirement Type*
Attained
Age
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Average
Under 30 $0 $0 $0 $0 $0 $13,093 $13,093
30-34 0 0 0 0 0 11,571 11,571
35-39 0 0 249 0 0 11,571 5,910
40-44 0 8,919 252 0 0 0 2,419
45-49 0 10,962 0 0 0 0 10,962
50-54 22,821 15,760 519 0 0 21,898 18,781
55-59 39,769 12,987 1,613 0 0 19,713 35,759
60-64 43,184 19,227 6,833 0 0 28,913 41,233
65-69 37,757 17,063 9,278 0 0 23,978 35,300
70-74 32,812 14,768 1,922 0 0 17,440 31,064
75-79 33,718 20,452 1,811 0 0 31,435 32,426
80-84 27,675 16,738 4,260 0 0 19,678 25,262
85 and Over 23,075 18,352 0 0 0 20,838 22,138
All Ages $35,742 $16,107 $2,959 $0 $0 $22,220 $32,763
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX C
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PARTICIPANT DATA
C-5
Retired Members and Beneficiaries (continued)
Distribution of Retirees and Beneficiaries by Years Retired and Retirement Type*
Years
Retired
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Total
Under 5 Yrs 184 5 4 0 0 34 227
5-9 312 10 3 0 0 25 350
10-14 170 12 2 0 0 16 200
15-19 107 11 5 0 0 11 134
20-24 59 16 1 0 0 9 85
25-29 30 7 0 0 0 7 44
30 and Over 16 4 0 0 0 1 21
All Years 878 65 15 0 0 103 1,061
Distribution of Average Annual Disbursements to Retirees and Beneficiaries by Years Retired and
Retirement Type*
Years
Retired
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Average
Under 5 Yrs $32,001 $16,464 $267 $0 $0 $23,840 $29,878
5-9 48,959 10,254 6,013 0 0 26,976 45,915
10-14 30,240 18,806 6,254 0 0 17,696 28,310
15-19 29,154 19,607 2,124 0 0 24,030 26,941
20-24 17,218 19,494 2,155 0 0 12,395 16,958
25-29 21,552 9,324 0 0 0 19,847 19,335
30 and Over 18,472 10,892 0 0 0 5,784 16,424
All Years $35,742 $16,107 $2,959 $0 $0 $22,220 $32,763
* Counts of members do not include alternate payees receiving benefits while the member is still working.
Therefore, the total counts may not match information on page 25 of the report. Multiple records may exist for
those who have service in more than one coverage group. This does not result in double counting of liabilities.
APPENDIX D
DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION
RATES
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX D
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PARTICIPANT DATA
D-1
Development of PEPRA Members Contribution Rates
The table below shows the determination of the Member contribution rates based on 50 percent of the Total Normal
Cost for each respective plan on June 30, 2016.
Assembly Bill (AB) 340 created PEPRA that implemented new benefit formulas and a final compensation period as
well as new contribution requirements for new employees. In accordance with Section Code 7522.30(b), “new
members … shall have an initial contribution rate of at least 50 percent of the normal cost rate.” The normal cost for
the plan is dependent on the benefit levels, actuarial assumptions and demographics of the plan particularly the entry
age into the plan. Should the total normal cost of the plan change by one percent or more from the base total normal
cost established for the plan, the new member rate shall be 50 percent of the new normal cost rounded to the
nearest quarter percent.
Basis for Current Rate Rates Effective July 1, 2018
Rate Plan
Identifier Plan
Total
Normal Cost
Member
Rate
Total
Normal Cost Change Change
Needed
Member
Rate
26004 Miscellaneous PEPRA 12.500% 6.250% 12.165% (0.335%) No 6.250%
For a description of the methods used to determine the Total Normal Cost for this purpose, please see the “PEPRA
Normal Cost Rate Methodology” section in Appendix A.
APPENDIX E
GLOSSARY OF ACTUARIAL TERMS
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX E
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
GLOSSARY OF ACTUARIAL TERMS
E-1
Glossary of Actuarial Terms
Accrued Liability (also called Actuarial Accrued Liability or Entry Age Normal Accrued Liability)
The total dollars needed as of the valuation date to fund all benefits earned in the past for current members.
Actuarial Assumptions
Assumptions made about certain events that will affect pension costs. Assumptions generally can be broken
down into two categories: demographic and economic. Demographic assumptions include such things as
mortality, disability and retirement rates. Economic assumptions include discount rate, salary growth and
inflation.
Actuarial Methods
Procedures employed by actuaries to achieve certain funding goals of a pension plan. Actuarial methods include funding method, setting the length of time to fund the Accrued Liability and determining the Value of Assets.
Actuarial Valuation
The determination, as of a valuation date of the Normal Cost, Accrued liability, and related actuarial present
values for a pension plan. These valuations are performed annually or when an employer is contemplating a
change to their plan provisions.
Amortization Bases
Separate payment schedules for different portions of the Unfunded Liability. The total Unfunded Liability of a
Risk Pool or non-pooled plan can be segregated by "cause,” creating “bases” and each such base will be
separately amortized and paid for over a specific period of time. However, all bases are amortized using
investment and payroll assumptions from the current valuation. This can be likened to a home having a first
mortgage of 24 years remaining payments and a second mortgage that has 10 years remaining payments. Each
base or each mortgage note has its own terms (payment period, principal, etc.)
Generally, in an actuarial valuation, the separate bases consist of changes in unfunded liability due to contract
amendments, actuarial assumption changes, actuarial methodology changes, and/or gains and losses. Payment
periods are determined by Board policy and vary based on the cause of the change.
Amortization Period
The number of years required to pay off an Amortization Base.
Classic Member (under PEPRA)
A classic member is a member who joined CalPERS prior to January, 1, 2013 and who is not defined as a new
member under PEPRA. (See definition of new member below)
Discount Rate Assumption
The actuarial assumption that was called “investment return” in earlier CalPERS reports or “actuarial interest
rate” in Section 20014 of the California Public Employees’ Retirement Law (PERL).
Entry Age
The earliest age at which a plan member begins to accrue benefits under a defined benefit pension plan. In
most cases, this is the age of the member on their date of hire.
Entry Age Normal Cost Method
An actuarial cost method designed to fund a member's total plan benefit over the course of his or her career.
This method is designed to yield a rate expressed as a level percentage of payroll. (The assumed retirement age less the entry age is the amount of time required to fund a member’s total benefit.
Generally, the older a member on the date of hire, the greater the entry age normal cost. This is mainly because
there is less time to earn investment income to fund the future benefits.)
CALPERS ACTUARIAL VALUATION – June 30, 2016 APPENDIX E
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
GLOSSARY OF ACTUARIAL TERMS
E-2
Fresh Start
A Fresh Start is when multiple amortization bases are collapsed to one base and amortized together over a new
funding period.
Funded Status
A measure of how well funded, or how "on track" a plan or risk pool is with respect to assets versus accrued
liabilities. A ratio greater than 100 percent means the plan or risk pool has more assets than liabilities and a ratio
less than 100 percent means liabilities are greater than assets.
GASB 68
Statement No. 68 of the Governmental Accounting Standards Board. The accounting standard governing a state
or local governmental employer’s accounting and financial reporting for pensions. GASB 68 replaces GASB 27
effective the first fiscal year beginning after June 15, 2014.
New Member (under PEPRA) A new member includes an individual who becomes a member of a public retirement system for the first time on
or after January 1, 2013, and who was not a member of another public retirement system prior to that date, and
who is not subject to reciprocity with another public retirement system.
Normal Cost
The annual cost of service accrual for the upcoming fiscal year for active employees. The normal cost should be
viewed as the long term contribution rate.
Pension Actuary
A business professional that is authorized by the Society of Actuaries, and the American Academy of Actuaries to
perform the calculations necessary to properly fund a pension plan.
PEPRA
The California Public Employees’ Pension Reform Act of 2013
Prepayment Contribution
A payment made by the employer to reduce or eliminate the year’s required employer contribution.
Present Value of Benefits (PVB)
The total dollars needed as of the valuation date to fund all benefits earned in the past or expected to be earned
in the future for current members.
Unfunded Accrued Liability (UAL)
When a plan or pool’s Value of Assets is less than its Accrued Liability, the difference is the plan or pool’s
Unfunded Accrued Liability (or unfunded liability). If the unfunded liability is positive, the plan or pool will have
to pay contributions exceeding the Normal Cost.