HomeMy WebLinkAboutStaff Report 2405-3062CITY OF PALO ALTO
Finance Committee
Regular Meeting
Tuesday, September 17, 2024
Agenda Item
1.Accept California Public Employees’ Retirement System (CalPERS) Pension Annual
Valuation Reports Presentation
Finance Committee
Staff Report
From: City Manager
Report Type: ACTION ITEMS
Lead Department: Administrative Services
Meeting Date: September 17, 2024
Report #:2405-3062
TITLE
Accept California Public Employees’ Retirement System (CalPERS) Pension Annual Valuation
Reports
RECOMMENDATION
Staff recommends that the Finance Committee review and recommend that Council accept the
June 30, 2023 CalPERS Annual Valuation reports for the Miscellaneous and Safety Pension Plans.
EXECUTIVE SUMMARY
The June 30, 2023 CalPERS Annual Valuation report is used to inform the development of the
upcoming FY 2026 Budget process and FY 2026 - 2035 Long Range Financial Forecast (LRFF).
This report estimates total employer costs of $68.5 million in FY 2026, a $3.6 million or 5.5%
increase over prior year levels of $64.9 million. This increase is primarily due to CalPERS
investment gain of 5.8% and loss of -6.1% as compared to target levels of 6.8% for the period
ending June 30, 2023 and June 30, 2022, respectively. This was preceded by a significant
investment gain of +21.3% for the period ending June 30, 2021. This gain triggered the CalPERS
Risk Mitigation Policy, which ultimately resulted in the reduction of the discount rate (target
investment return) from 7.0% to 6.8%. Overall, the City’s combined funded status is projected to
be 64.0% in FY 2026 as compared to 63.8% in FY 2025 and 73.3% in FY 2024.
The Unfunded Accrued Liability (UAL) is $573.5 million. This amount is reduced to $498.9 million
or 69.6% funded status once adjusted for the City’s Pension Trust. In total, planned contributions
(principal) of $73.3 million to the Pension Trust will have been made through FY 2024 ($47.5
million, or 64.8% of the total, is from the General Fund).
BACKGROUND
The City of Palo Alto offers its employees and retirees a defined pension benefit plan which is
managed and administered by CalPERS, a State of California Pension Trust Program. The CalPERS
program maintains two pension plans for the City: one for safety employees (sworn fire and
police personnel) and another for miscellaneous employees (all other non-safety personnel
employed by the City, including field personnel, administrative support, and managers).
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 the California Public Employees’ Pension Reform Act (PEPRA), the benefit calculation is limited by a maximum salary of
$181,734 in 2024 for both the Miscellaneous and Safety plans, therefore it is calculated based on service years but cannot exceed
the $181,734 amount. The final salary calculation is based on the average of the highest three years.
investment returns, inflations, salary growth). These assumptions reflect CalPERS’ best estimate
for future experience of the plans and are long term in nature. Valuation results will vary from
one year to the next due to assumption or method changes, changes in plan provisions, and
actuarial experience that is different than anticipated such as investment returns that do not
meet the CalPERS 6.8% target.
▪Reduction to the discount rate from 7.0% to 6.8%;
▪New actuarial assumptions, including a reduction for price inflation from 2.5% to 2.3%;
and
▪New asset allocation to add 5% leverage and increase private asset (private equity, real
assets, and private debt) allocations from 21% to 33%.
1), and adopting a Retiree Benefit Funding Policy that guides financial
1 January 23, 2017 Council Meeting: https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-
reports/reports/city-manager-reports-cmrs/year-archive/2017/7553.pdf
planning of retirement benefits. The City initially contributed to the Pension Trust in FY 2017 on
an ad-hoc basis, using one-time savings or excess revenues. Beginning in FY 2019, the City Council
directed staff to use a more conservative discount rate as compared to CalPERS for the Normal
Cost (NC) portion of the payment, and transferring the additional “supplemental” funding
beyond CalPERS required employer contributions to the Pension Trust (CMR 97402). This practice
was reinforced in the development of a funding policy, as adopted by the City Council in FY 2021
(CMR 117223) and modified in FY 2023 (CMR 2212-05134); beginning in FY 2024 this rate is 5.3%
as compared to the CalPERS discount rate of 6.8%. Additionally, one-time contributions continue
to be made each year if excess revenues or unspent savings are available, subject to City Council
approval. As part of policy goals, the City seeks to reach a 90% funded status by FY 2036.
Every four years, in alignment with the timing of the CalPERS ALM study, the policy requires that
staff consult with an actuary to inform the City Council of progress the City has made towards
achieving a 90% funded status goal and assess and respond to changes impacting the City’s
retiree benefit plans. The next ALM study is anticipated to be released in Fall 2025. The previous
comprehensive review of the policy by Council was completed in FY 2023 and resulted in several
policy revisions, most notably reducing the discount rate used to calculate supplemental
contributions from 6.2% to 5.3% and extending actuary reporting from 3 to 4 years to align with
the CalPERS ALM Study. Additionally, the title of the policy was revised from the Pension Policy
to the Retiree Benefit Policy to recognize actions approved by the City Council to proactively plan
for retiree healthcare plans in a similar manner to pensions (CMR 2212-0513). The most recent
actuary analysis projects that the City will meet a 90% funded goal by FY 2034 (Miscellaneous
plan) and FY 2036-37 (Safety plan); the City’s practice of transmitting excess one-time savings will
help reach goals sooner.
It is important to note that this policy, and the funding elements within it, are subject to
modification at any time by the City Council. Consistent with prior years, any changes to the
budget or financial planning of retiree benefits in interim years will be implemented at the timing
of City Council approval and formalized in the policy document in the next comprehensive
reporting period.
DISCUSSION
CalPERS has two components designated in the annual billing for employer contributions:
1.The Normal Cost (NC) or “pay-go”
2 City Council Meeting October 29, 2018: https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-
reports/reports/city-manager-reports-cmrs/year-archive/2018/9740.pdf
3 City Council Meeting November 30, 2020: https://www.cityofpaloalto.org/files/assets/public/v/1/agendas-
minutes-reports/reports/city-manager-reports-cmrs/year-archive/2020-2/id-
11722.pdf#:~:text=The%20overarching%20goal%20of%20a,order%20to%20fund%20proactive%20contributions.
4 City Council Meeting February 6, 2023: https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=82218
This cost reflects the employer contribution for the plan retirement benefits provided to
current employees based on the current set of assumptions and is billed as a percentage
of payroll.
2. The Unfunded Accrued Liability (UAL) or “catch-up”
This cost represents the employer amortization of unfunded accrued liability and is billed
as a flat dollar rate. The CalPERS’s annual payment is calculated to pay down the City’s
unfunded accrued pension liability over the amortization timeline. If all actuarial
assumptions were realized through the amortization timeline, the City would eliminate
its unfunded pension liability after making these annual payments.
The Actuarial Determined Contribution (ADC) or “blended rate” reflects the combined cost of NC
and UAL to approximate total employer cost.
Current and Projected Employer Contributions
Table 2 summarizes the projected employer contributions required for each plan to fund the ADC
and the NC and UAL that make up this rate. Over the next six years, CALPERS estimates that future
ADCs will adjust from 47.4% of payroll or $42.3 million in FY 2025 to 44.1% of payroll or $45.2
million by FY 2030 for the Miscellaneous plan. Over the same six-year span, CalPERS estimates
that the ADC will adjust from 83.1% of payroll or $22.6 million in FY 2025 to 88.5% of payroll or
$27.6 million in 2030 for Safety. As projected in the table below, the cost fluctuations in the
outyears are primarily due to investment returns of +21.3% (FY 2024) and -6.1% (FY 2025), where
investment gains and losses are subject to a five-year ramp-up period. The full impact from these
returns will be realized in FY 2028 and FY 2029, respectively.
TABLE 2: CalPERS Current and Projected Employer Contributions*
Miscellaneous FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031
NC (%)**10.6 11.7 11.3 10.9%10.6%10.3%10.0%9.8%9.6%
UAL (%)32.3 33.1 36.1 32.8%30.0%30.7%33.1%32.9%32.6%
Total ADC
(% payroll)42.9%44.8%47.4%43.7%40.6%41.0%43.1%42.7%42.2%
NC ($)9.7 10.2 10.1 10.9 10.9 10.9 10.7 10.9 11.0
UAL ($)**29.7 28.7 32.2 32.8 30.8 32.4 35.8 36.7 37.5
Total ADC ($M)$39.5 $38.8 $42.3 $43.7 $41.7 $43.3 $46.5 $47.6 $48.5
Safety FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031
NC (%)**21.5 20.6 22.2 20.6%20.0%19.4%18.7%18.1%17.5%
UAL (%)48.0 50.6 60.9 61.1%62.8%63.9%67.6%67.3%66.9%
Total ADC
(% payroll)69.6%71.1%83.1 81.7%82.8%83.3%86.3%85.4%84.4%
NC ($)6.0 6.1 6.0 6.3 6.2 6.2 6.2 6.1 6.1
Safety FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031
UAL ($)**13.3 14.9 16.6 18.5 19.6 20.5 22.3 22.8 23.3
Total ADC ($M)$19.2 $20.9 $22.6 $24.8 $25.8 $26.7 $28.5 $29.0 $29.4
* This table does not include cost savings for prepayment of the UAL, which confers 3.2% or $1.7 million in savings,
or provisions in labor agreements for employees to pay a portion of employer normal costs; Miscellaneous groups
pay 1-2% and Safety groups pay 3-4%. These savings will be included in budget development.
** The City makes payments to CalPERS for NC as a percentage of payroll and for UAL as a flat dollar rate. For
illustrative purposes, this table uses CalPERS estimates to restate the total ADC (NC and UAL) in respective terms.
TABLE 3: CalPERS Investment Returns
FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031
Actual (%)4.7 21.3 -6.1 5.8 9.3*-----
Target (%)7.0 6.8 6.8 6.8 6.8 6.8 6.8 6.8 6.8
*This CalPERS report does not consider the preliminary 9.3% return on investments for the period ending June 30,
2024 (6.8 percent target)5. The estimated impact from this return will be included in long-term financial planning.
Pension Plan’s Funded Status
The funded status is a measure of how well funded, or how “on track” a plan is with respect to
assets versus accrued liabilities. As of June 30, 2023, the funded status of the overall Public
Employee’s Retirement Fund (PERF) decreased an estimated 9.2% over the prior year, from
81.2% to projected levels of 72.0%6. This rate is higher than the City’s funded status of 66.3% for
Miscellaneous and 59.7% for Safety. Table 4 details the City’s June 30, 2023 funded status for the
Miscellaneous and Safety plans. The total unfunded pension liability increased from $553.4
million as of June 30, 2022 to $573.5 million as of June 30, 2023. This represents an increase of
$20.2 million, or 3.7% over the prior year. This change was predominantly due to a significant
investment return of 21.3% earned in 2021; this resulted in favorable outcomes for the City’s
plans and triggered the CalPERS Risk Mitigation Policy to decrease to the discount rate from 7.0%
to 6.8%. However, as shown in the table below, those gains were offset by the investment loss
of -6.1% in 2022. Also, the gain of 5.8% in 2023 was below the discount rate of 6.8% which caused
the incremental increase in the City’s unfunded liability.
5 CalPERS Reports Preliminary 9.3% Investment Return for 2023-24 Fiscal Year
6 2022 Annual Review of Funding Levels and Risks - CalPERS
https://www.calpers.ca.gov/docs/board-agendas/202211/financeadmin/item-6a-01_a.pdf
TABLE 4: CalPERS Projected Unfunded Accrued Liability
As of
June 30, 2020
As of
June 30, 2021
As of
June 30, 2022
As of
June 30, 2023
Miscellaneous 317,116,346 236,033,956 340,518,738 349,828,105
Misc. Funded Status 65.1%75.3%65.8%66.3%
Safety 193,301,713 155,885,841 212,812,272 223,707,130
Safety Funded Status 60.3%69.4%60.0%59.7%
TOTAL UNFUNDED PENSION
LIABILITY
$510,418,059 $391,919,797 $553,331,510 $573,535,235
Total Funded Status % 63.5%73.3%63.8%64.0%
% Change from Prior Year 7.0%-23.2%41.2%3.7%
Pension Trust Status
In total, planned contributions (principal) of $73.3 million to the pension Trust Fund will have
been made since inception in FY 2017 through FY 2024 ($47.5 million, or 64.8% of the total, is
from the General Fund). The Trust Fund is invested in a Balanced portfolio, earning 11.5%, 6.7%,
and -9.9% for the years ending June 30, 2024, 2023, and 2022 respectively. The annualized 5-year
return as of July 2024 is 5.4%. In the City Pension Trust, these additional contributions of $73.3
million and net earnings since inception of $11.5 million are not factored into the CalPERS reports
funded status; however, when included the City’s combined funded status is 69.3%.
The Retirement Benefit Policy requires that the City make Additional Discretionary Payments
(ADPs) from the Pension Trust to CalPERS for amounts that exceed the one-year minimum
employer contribution. CalPERS allows agencies to make ADPs at any time and in any amount at
the agency’s discretion. These optional payments serve to reduce the UAL and future required
contributions. Staff will continue to monitor the Pension Trust to evaluate when to begin making
ADPs.
This report and feedback from the Finance Committee will be used to inform the development
of the FY 2026–2035 Long Range Financial Forecast (LRFF), the FY 2026 Adopted Operating
Budget, and other long-term financial planning. Staff will continue to update the City Council and
incorporate information as it becomes available. Below is a timeline of anticipated reporting:
Dec/January: FY 2026 to FY 2035 Long Range Financial Forecast (LRFF)
STAKEHOLDER ENGAGEMENT
ENVIRONMENTAL REVIEW
ATTACHMENTS
APPROVED BY:
Employee Group Employee Group
Sept 2024 Sept 2023 Sept 2024 Sept 2023
City Council & Council Appointees 8 6 IAFF 79 83
Tier 1 1 1 Tier 1 30 34
Tier 2 2 2 Tier 2 8 8
Tier 3 5 3 Tier 3 41 41
Management & Professional 199 189 Fire Chiefs' Association 4 4
Tier 1 56 66 Tier 1 4 4
Tier 2 36 31 Tier 2 0 0
Tier 3 107 92 Tier 3 0 0
Service Employees' International 571 525 Fire Management 6 3
Tier 1 145 156 Tier 1 3 3
Tier 2 43 44 Tier 2 1 0
Tier 3 383 325 Tier 3 2 0
Utilities Management 47 45 PAPOA 73 66
Tier 1 29 30 Tier 1 20 22
Tier 2 6 5 Tier 2 3 4
Tier 3 12 10 Tier 3 50 40
Police Management Association 7 6
Tier 1 7 6
Tier 2 0 0
Tier 3 0 0
Police Management 9 1
Tier 1 3 0
Tier 2 2 1
Tier 3 4 0
Grand Total Miscellaneous Plans 825 765 Grand Total Safety Plans 178 163
Tier 1 231 253 Tier 1 67 69
Tier 2 87 82 Tier 2 14 13
Tier 3 507 430 Tier 3 97 81
Tiered Percentage Miscellaneous Plans Tiered Percentage Safety Plans
Tier 1 28.0% 33.1% Tier 1 37.6% 42.3%
Tier 2 10.5% 10.7% Tier 2 7.9% 8.0%
Tier 3 61.5% 56.2% Tier 3 54.5% 49.7%
Tier Definitions Tier Definitions
Tier 1 2.7% @ 55 Tier 1 3% @ 50
Tier 2 2% @ 60 Tier 2 3% @ 55
Tier 3 2% @ 62 Tier 3 2.7% @ 57
* Includes Police Trainee and Limited Hourly FTE
Attachment A:
City of Palo Alto Pension Plan Benefit Levels Enrollment by Plan and Employee Group
Miscellaneous Plans Safety Plans
Employee Count Employee Count
California Public Employees’ Retirement System
Actuarial Office
400 Q Street, Sacramento, CA 95811 | Phone: (916) 795 -3000 | Fax: (916) 795-2744
888 CalPERS (or 888-225-7377) | TTY: (877) 249 -7442 | www.calpers.ca.gov
July 2024
Miscellaneous Plan of the City of Palo Alto (CalPERS ID: 6373437857)
Annual Valuation Report as of June 30, 2023
Dear Employer,
Attached to this letter is the June 30, 2023, actuarial valuation report for the rate plan noted above. Provided in this report is
the determination of the minimum required employer contributions for fiscal year (FY) 2025-26. In addition, the report
contains important information regarding the current financial status of the plan as well as projections and risk measures to aid
in planning for the future.
Required Contributions
The table below shows the minimum required employer contributions and the PEPRA member contribution rates for FY 2025 -26
along with an estimate of the employer contribution requirements for FY 2026-27. Employee contributions other than cost
sharing (whether paid by the employer or the employe e) are in addition to the results shown below. The required employer
and member contributions in this report do not reflect any cost sharing arrangement between the agency and the
employees.
Fiscal Year Employer Normal
Cost Rate
Employer Amortization of
Unfunded Accrued Liability
PEPRA Member
Contribution Rate
2025-26 10.90% $32,780,459 7.25%
Projected Results
2026-27 10.6% $30,806,000 TBD
The actual investment return for FY 2023-24 was not known at the time this report was prepared. The projections above assume
the investment return for that year would be 6.8%. To the extent the actual investment return for FY 2023-24 differs from 6.8%,
the actual contribution requirements for FY 2026-27 will differ from those shown above. For additional detail s regarding the
assumptions and methods used for these projections, please refer to Projected Employer Contributions . This section also
contains projected required contributions through FY 2030-31.
Report Enhancements
A number of enhancements were made to the report this year to ease navigation and allow the reader to find specific
information more quickly. The tables of contents are now “clickable .” This is true for the main table of contents that follows the
title page and the intermediate tables of contents at the beginning of sections. The Adobe navigation pane on the left can al so
be used to skip to specific exhibits .
CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 2
There are a number of links throughout the document in blue text. Links that are internal to the document are not underlined,
while underlined links will take you to the CalPERS website. Examples are shown below.
Internal Bookmarks CalPERS Website Link s
Required Employer Contributions Required Employer Contribution Search Tool
Member Contribution Rates Public Agency PEPRA Mem ber Contribution Rates
Summary of Key Valuation Results Pension Outlook Overview
Funded Status – Funding Policy Basis Interactive Summary of Public Agency Valu ation Results
Projected Employer Contributions Public Agency Actuarial Valuation Reports
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 any changes on the required contributions are included in the Reconciliation
of Required Employer Contributions section.
Questions
A CalPERS actuary is available to answer questions about th is report. Other questions may be directed to the Customer Contact
Center at 888 CalPERS (or 888-225-7377).
Sincerely,
Matthew Biggart, ASA, MAAA
Actuary, CalPERS
Randall Dziubek, ASA, MAAA
Deputy Chief Actuary, Valuation Services , CalPERS
Scott Terando , ASA, EA, MAAA, FCA, CFA
Chief Actuary, CalPERS
California Public Employees’ Retirement System
Actuarial Valuation for the
Miscellaneous Plan
of the City of Palo Alto
as of June 30, 2023
(CalPERS ID: 6373437857)
(Rate Plan ID: 8)
Required Contributions for Fiscal Year
July 1, 2025 — June 30, 2026
CY Fin Job Instance ID: 438257 PY Fin Job Instance ID: 416785 Report ID: 439291
Table of Contents
Actuarial Certification .......................................................................................................................................................................................1
Highlights and Executive Summary .............................................................................................................................................................2
Introduction .......................................................................................................................................................................................................3
Purpose .............................................................................................................................................................................................................3
Summary of Key Valuation Results ..............................................................................................................................................................4
Changes Since the Prior Year’s Valuation ..................................................................................................................................................5
Subsequent Events .........................................................................................................................................................................................5
Assets ...................................................................................................................................................................................................................6
Reconciliation of the Market Value of Assets ..............................................................................................................................................7
Asset Allocation................................................................................................................................................................................................8
CalPERS History of Investment Returns .....................................................................................................................................................9
Liabilities and Contributions ....................................................................................................................................................................... 10
Determination of Required Contributions.................................................................................................................................................. 11
Development of Accrued and Unfunded Liabilities ................................................................................................................................. 12
Required Employer Contributions .............................................................................................................................................................. 13
Member Contribution Rates ........................................................................................................................................................................ 14
Funded Status – Funding Policy Basis ..................................................................................................................................................... 15
Additional Employer Contributions............................................................................................................................................................. 16
Projected Employer Contributions ............................................................................................................................................................. 17
(Gain)/Loss Analysis 6/30/22 – 6/30/23 .................................................................................................................................................... 18
Schedule of Amortization Bases ................................................................................................................................................................ 19
Amortization Schedule and Alternatives ................................................................................................................................................... 21
Reconciliation of Required Employer Contributions ................................................................................................................................ 23
Employer Con tribution History .................................................................................................................................................................... 24
Funding History ............................................................................................................................................................................................. 24
Normal Cost by Benefit Group .................................................................................................................................................................... 25
Risk Analysis ................................................................................................................................................................................................... 26
Future Investment Return Scenarios ......................................................................................................................................................... 27
Discount Rate Sensitivity............................................................................................................................................................................. 28
Mortality Rate Sensitivity ............................................................................................................................................................................. 28
Maturity Measures ........................................................................................................................................................................................ 29
Maturity Measures History........................................................................................................................................................................... 30
Funded Status – Termination Basis .......................................................................................................................................................... 31
Funded Status – Low-Default-Risk Basis ................................................................................................................................................. 32
Plan’s Major Benefit Options ....................................................................................................................................................................... 33
Appendix A - Actuarial Methods and Assumptions .............................................................................................................................. 37
Appendix B - Principal Plan Provisions .................................................................................................................................................... 62
Appendix C - Participant Data ..................................................................................................................................................................... 73
Appendix D - Glossary .................................................................................................................................................................................. 79
CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 1
Actuarial Certification
It is our opinion that the valuation has been performed in accordance with generally accepted actuarial principles as well as the
applicable Standards of Practice promulgated by the Actuarial Standards Board . While this report is intended to be complete,
our office is available to answer questions as needed. All of the undersigned are actuaries who satisfy the Qualification
Standards for Actuaries I ssuing Statements of Actuarial Opinion in the United States of the American Academy of Actuaries with
regard to pensions.
Actuarial Methods and Assumptions
It is our opinion that the assumptions and methods, as recommended by the Chief Actuary and adopted by the CalPERS Board
of Administration, are internally consistent and reasonable for this plan.
Randall Dziubek, ASA, MAAA
Deputy Chief Actuary, Valuation Services , CalPERS
Scott Terando , ASA, EA, MAAA, FCA, CFA
Chief Actuary, CalPERS
Actuarial Data and Rate Plan Results
To the best of my knowledge and having relied upon the attestation above that the actuarial methods and assumptions are
reasonable, 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 and satisfies the actuarial valuation requirements of Government
Code section 7504. This valuation and related validation work w as performed by the CalPERS Actuarial Office. The valuation
was based on the member and financial data as of June 30, 2023 , provided by the various CalPERS databases and the benefits
under this plan with CalPERS as of the date this report was pr oduced.
Matthew Biggart, ASA, MAAA
Actuary, CalPERS
Highlights and Executive Summary
• Introduction 3
• Purpose 3
• Summary of Key Valuation Results 4
• Changes Since the Prior Year’s Valuation 5
• Subsequent Events 5
CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 3
Introduction
This report presents the results of the June 30, 2023 , 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 minimum required contributions
for fiscal year (FY) 2025-26.
Purpose
This report documents the results of the actuarial valuation prepared by the CalPERS Actuarial Office using data as of June 30,
2023. The purpose of the valuation is to:
• Set forth the assets and accrued liabilities of this rate plan as of June 30, 2023 ;
• Determine the minimum required employer co ntributions for this rate plan for FY July 1, 2025, through June 30, 2026;
• Determine the required member contribution rate for FY July 1, 2025, through June 30, 2026 , for employees subject to the
California Public Employees' Pension Reform Act of 2013 (PEPRA); and
• Provide actuarial information as of June 30, 2023 , to the CalPERS Board of Administration (board) 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 the CalPERS
website (www.calpers.ca.gov).
The measurements shown in this actuarial valuation may not be applicable for other purposes. The agency should contact a
CalPERS 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 th e following: plan experience differing from that anticipated by the economic or demographic assumptions; changes
in economic or demographic assumptions; changes in actuarial policies; changes in plan provisions or applicable law; and
differences between th e required contributions determined by the valuation and the actual contributions made by the agency.
Assessment and Disclosure of Risk
This report includes the following risk disclosures consistent with the guidance of Actuarial Standards of Practice No . 51 and
recommended by the California Actuarial Advisory Panel (CAAP) in the Model Disclosure Elements document:
• A “Scenario Test,” projecting future results under different investment income returns.
• A “Sensitivity Analysis,” showing the impact on curre nt valuation results using alternative discount rates of 5.8% and
7.8%.
• A “Sensitivity Analysis,” showing the impact on current valuation results assuming rates of mortality are 10% lower or
10% higher than our current post-retirement mortality assumptions adopted in 2021.
• Plan maturity measures indicating how sensitive a plan may be to the risks noted above.
CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 4
Summary of Key Valuation Results
Below is a brief summary of key valuation results alo ng with page references where more detailed information can be found .
Required Employer Contributions — page 13
Fiscal Year
2024-25
Fiscal Year
2025-26
Employer Normal Cost Rate 11.34% 10.90 %
Unfunded Accrued Liability (UAL) Contribution Amount $32,190,210 $32,780,459
Paid either as
Option 1) 12 Monthly Payments of $2,682,518 $2,731,705
Option 2) Annual Prepayment in July $31,148,575 $31,719,724
Member Contribution Rates — page 14
Fiscal Year
2024-25
Fiscal Year
2025-26
Classic Member Contribution Rate 7.00%/8.00% 7.00%/8.00%
PEPRA Member Contribution Rate 7.25% 7.25%
Projected Employer Contributions — page 17
Fiscal Year Normal Cost
(% of payroll)
Annual
UAL Payment
2026-27 10.6% $30,806,000
2027-28 10.3% $32,435,000
2028-29 10.0% $35,841,000
2029-30 9.8% $36,701,000
2030-31 9.6% $37,458,000
Funded Status — Funding Policy Basis — page 15
June 30, 2022 June 30, 2023
Entry Age Accrued Liability (AL) $996,201 ,108 $1,037,247,281
Market Value of Assets (MVA) 655,682,370 687,419,176
Unfunded Accrued Liability (UAL) [AL – MVA] $340,518,738 $349,828,105
Funded Ratio [MVA ÷ AL] 65.8% 66.3%
Summary of Valuation Data — Page 74
June 30, 2022 June 30, 2023
Active Member Count 712 757
Annual Covered Payroll $82,193,044 $91,956,169
Transferred Member Count 387 392
Separated Member Count 479 488
Retired Me mbers and Beneficiaries Count 1,320 1,348
CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 5
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. For rate plans that are not in a risk pool (non -pooled), benefit change s by contract
amendment are generally included in the first valuation that is prepared after the amendment becomes effective, even if the
effective date of the amendment is after the valuation date.
Please refer to the Plan’s Major Benefit Options and Appendix B - Principal Plan Provisions 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 6/30/22 – 6/30/23 and the effect on the employer contribution is shown in the Reconcil iation 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
There are no significant changes to the actuarial methods or assumptions for the June 30, 2023, actuarial valuation.
New Disclosure Items
In December 2021, the Actuarial Standards Board issued a revision of Actuarial Standard of Practice No. 4 (ASOP 4) requiring
actuaries to disclose a low-default-risk obligation measure (LDROM) of the benefits earned. This information is shown in a new
exhibit, Funded Status – Low-Default-Risk Basis.
Subsequent Events
This actuarial valuation report reflects fund investment return through June 30, 2023, as well as statutory changes, regulatory
changes and board actions through January 202 4.
During the time period between the valuation date and the p ublication of this report, inflation has been higher than the expected
inflation of 2.3% per annum. Since inflation influences cost-of-living increases for retirees and beneficiaries and active member
pay increases, higher inflation is likely to put at lea st some upward pressure on contribution requirements and downward
pressure on the funded status in the June 30, 202 4, valuation. The actual impact of higher inflation on future valuation results
will depend on, among other factors , how long higher inflatio n persists.
The 2023 annual benefit limit under Internal Revenue Code (IRS) section 415(b) and annual compensation limits under IRS
section 401(a)(17) and Government Code section 7522.10 were use d for this valuation and are assumed to increase 2.3% per
year based on the price inflation assumption. The actual 2024 limits , determined in October 2023, are not reflected.
On April 16, 2024, the board took action to modify the Funding Risk Mitigation Policy to remove the automatic change to the
discount rate when the investment return exceeds various thresholds. Rather than an automatic change to the discount rate, a
board discussion would be placed on the calendar. The 95 th percentile return in the Future Investment Return Scenarios exhibit
in this report has not been modified and still reflects the projected contribution requirements associated with a reduction i n the
discount rate.
To the best of our knowledge, there have been no other subsequent events that could materially affect current or future
certifications rendered in this report.
Assets
• Reconciliation of the Market Value of Assets 7
• Asset Allocation 8
• CalPERS History of Investment Returns 9
CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 7
Reconciliation of the Market Value of Assets
1. Market Value of Assets as of 6/30/22 including Receivables $655,682,370
2. Change in Receivables for Service Buybacks (137,575)
3. Employer Contributions 37,170,955
4. Employee Contributions 8,059,338
5. Benefit Payments to Retirees and Beneficiaries (53,190,716)
6. Refunds (648,157)
7. Transfers (2,503)
8. Service Credit Purchase (SCP) Payments and Interest 250,416
9. Administrative Expenses (388,609)
10. Miscellaneous Adjustments 0
11. Investment Return (Net of Investment Expenses) 40,623,657
12. Market Value of Assets as of 6/30/23 including Receivables $687,419,176
CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 8
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 recognizes that over 90% of the variation in
investment returns of a large, well -diversified pool of assets can typically be attributed to asset allocation decisions .
The asset allocation shown below reflects the allocation of the Public Employe es’ Retirement Fund (PERF) in its entirety. The
assets for City of Palo Alto Miscellaneous Plan are a subset of the PERF and are invested accordingly.
On November 17, 2021, the board adopted changes to the strategic asset allocation . The new allocation was effective July 1,
2022. The asset allocation as of June 30, 2023 , is shown below, along with the long-term strategic asset allocations.
For more information s ee the Trust Level Review as of June 30, 2023 , which is available on the CalPERS website.
33.1%
12.0%
5.1%
5.1%
6.6%
4.5%
5.1%
12.9%
15.2%
2.2%
(1.8%)
30%
12%
5%
5%
10%
5%
5%
13%
15%
5%
(5%)
(10%)0%10%20%30%40%
Public Equities - Cap Weighted
Public Equities - Factor Weighted
Treasury
Mortgage-Backed Securities
Investment Grade Corporates
High Yield
Emerging Market Sovereign Bonds
Private Equity
Real Assets
Private Debt
Strategic Financing
Current Allocation Long-Term Strategic Asset Allocation
CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 9
CalPERS History of Investment Returns
The following is a chart with the 20 -year historical annual return s of the PERF for each fiscal year ending on June 30 as reported
by the Investment Office. Investment returns reported are net of investment expenses but without reduction for administrative
expenses. The assumed rate of return, however, is net of both investment and administrative expenses. Also, the Investment
Office uses a three-month lag on private equity and real assets for investment performance reporting purposes. This can lead to
a timing difference in the returns below and those used for financial reporting purposes. The investment gain or loss calculation
in this report relies on final assets that have been audited and are appropriate for financial reporting. Because of these
differences, the effective investment return for funding purposes in a single year can be higher or lower than the return reported
by the Investment Office shown here.
* As reported by the Investment Office with a 3-month lag on private equity and real assets and without any reduction for administrative
expenses .
The table below shows annualized investment returns of the PERF for various time periods ending on June 30, 2023 . Figures
reported are net of investment expenses but without reduction for administrative expen ses. These returns are the annual rates
that if compounded over the indicated number of years would equate to the actual time -weighted investment performance of the
PERF. It should be recognized that in any given year the rate of return is volatile. The po rtfolio has an expected volatility of
12.0% per year based on the most recent Asset Liability Management study. The realized volatility is a measure of the risk of
the portfolio expressed as the standard deviation of the fund’s total monthly return distrib ution, expressed as an annual
percentage. Due to their volatile nature, when looking at investment returns, it is more instructive to look at returns over longer
time horizons.
History of CalPERS Compound Annual Rates of Return and Volatilities
1 year 5 year 10 year 20 year 30 year
Compound Annual Return 5.8% 6.1% 7.1% 7.0 % 7.5 %
Realized Volatility – 9.5% 7.8% 8.4 % 8.8 %
Liabilities and Contributions
• Determination of Required Contributions 11
• Development of Accrued and Unfunded Liabilities 12
• Required Employer Contributions 13
• Member Contribution Rates 14
• Funded Status – Funding Policy Basis 15
• Additional Employer Contributions 16
• Projected Employer Contributions 17
• (Gain)/Loss Analysis 6/30/22 – 6/30/23 18
• Schedule of Amortization Bases 19
• Amortization Schedule and Alternatives 21
• Reconciliation of Required Employer Contributions 23
• Employer Contribution History 24
• Funding History 24
• Normal Cost by Benefit Group 25
CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 11
Determination of Required Contributions
Contributions to fund the plan are determined by an actuarial valuation performed each year. The valuation employs complex
calculations based on a set of actuarial assumptions and methods. See Appendix A for information on the assumptions and
methods used in this valuation. The valuation incorporates all plan experience through the valuation date and sets required
contributions for the fiscal year that begins two years after the valuation date.
Contribution Components
Two components comprise required contributions:
• Normal Cost — expressed as a percentage of pensionable payroll
• Unfunded Accrued Liability (UAL) Contribution — expressed as a dollar amount
Normal Cost represents the value of benefits allocated to the upcoming year for active employees. If al l plan experience exactly
matched the actuarial assumptions, normal cost would be sufficient to fully fund all benefits. The em ployer and employee s each
pay a share of the normal cost with contributions payable as part of the regular payroll reporting proc ess. The contribution rate
for Classic members is set by statute based on benefit formula whereas for PEPRA members it is based on 50% of the total
normal cost.
When plan experience differs from the actuarial assumptions, unfunded accrued liability (UAL) emerges. The new UAL may be
positive or negative. If the total UAL is positive (i.e., accrued liability exceeds assets), the employer is required to make
contributions to pay off the UAL over time. This is called the Unfunded Accrued Liability Contribution component. There is an
option to prepay this amount during July of each fiscal year , otherwise it is paid monthly.
In measuring the UAL each year, plan experience is split by source. Common sources of UAL include investment experience
different than expe cted, non-investment experience different than expected, assumption changes, and benefit changes. Each
source of UAL (positive or negative) forms a base that is amortized, or paid off, over a specified period of time in accordan ce
with the CalPERS Actuarial Amortization Policy. The Unfunded Accrued Liability Contribution is the sum of the payments on all
bases. See the Schedul e of Amortization Bases section of this report for an inventory of existing bases and Appendix A for more
information on the amortization policy.
CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 12
Development of Accrued and Unfunded Liabilities
June 30, 2022 June 30, 2023
1. Present Value of Projected Benefits
a) Active Members $423,700,971 $454,680,927
b) Transferred Members 44,952,241 45,946,284
c) Separated Members 20,770,710 22,788,782
d) Members and Beneficiaries Receiving Payments 634,851,404 653,009,459
e) Total $1,124,275,326 $1,176,425,452
2. Present Value of Future Employer Normal Costs $73,008,925 $77,828,908
3. Present Value of Future Employee Contributions $55,065,293 $61,349,263
4. Entry Age Accrued Liability
a) Active Members [(1a) - (2) - (3)] $295,626,753 $315,502,756
b) Transferred Members (1b) 44,952,241 45,946,284
c) Separated Members (1c) 20,770,710 22,788,782
d) Members and Beneficiaries Receiving Payments (1d) 634,851,404 653,009,459
e) Total $996,201,108 $1,037,247,281
5. Market Value of Assets (MVA) $655,682,370 $687,419,176
6. Unfunded Accrued Liability (UAL) [(4e) - (5)] $340,518,738 $349,828,105
7. Funded Ratio [(5) ÷ (4e)] 65.8% 66.3%
CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 13
Required Employer Contributions
The required employer contributions in this report do not reflect any cost sharing arrangement between the agency and the
employees.
Fiscal Year
Required Employer Contributions 2025-26
Employer Normal Cost Rate 10.90%
Plus
Unfunded Accrued Liability (UAL) Contribution Amount $32,780,459
Paid either as
1) Monthly Payment $2,731,705
Or
2) Annual Prepayment Option* $31,719,724
The total minimum required employer contribution is the sum of the Plan’s Employer Normal Cost Rate
(expressed as a percentage of payroll and paid as payroll is reported) and the Unfunded Accrued Liability
(UAL) Contribution Amount (billed monthly (1) or p repaid annually (2) in dollars).
* Only the UAL portion of the employer contribution can be prepaid (which must be received in full no later
than July 31).
For Member Contribution Rates see the following page.
Fiscal Year Fiscal Year
2024-25 2025-26
Normal Cost Contribution as a Percentage of Payroll
Total Normal Cost1 18.86% 18.39%
Offset due to Employee Contribution s 2 7.52% 7.49%
Employer Normal Cost 11.34% 10.90%
Projected Annual Payroll for Contribution Year $89,292,382 $99,898,787
Estimated Employer Contributions Based on Projected Payroll
Total Normal Cost $16,840,543 $18,371,387
Expected Employee Contribution s 6,714,787 7,482,419
Employer Normal Cost 10,125,756 10,888,968
Unfunded Liability Contribution 32,190,210 32,780,459
% of Projected Payroll (illustrative only) 36.05% 32.81%
Estimated Total Employer Contribution $42,315,966 $43,669,427
% of Projected Payroll (illustrative only) 47.39% 43.71%
1 The Total Normal Cost is a blended rate for all benefit groups in the plan. For a breakout of normal cost by benefit
group, see Normal Cost by Benefit Group.
2 This is the expected employee contributions, taking into account individual benefit formula and any offset from the use
of a modified formula, divided by projected annual payroll. For member contribution rates above the breakpoint for each
benefit formula, see Member Contribution Rates .
CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 14
Member Contribution Rates
The required member contributions in this report do not reflect any cost sharing arrangement between the agency and the
employees.
Classic Members
Each member contributes toward their retirement based upon the retirement formula. The standard Classic member contribution
rate above the breakpoint, if any, is as described below.
Benefit Formula
Percent Contributed
above the Breakpoint
Miscellaneous, 1.5% at age 65 2%
Miscellaneous, 2% at age 60 7%
Miscellaneous, 2% at age 55 7%
Miscellaneous, 2.5% at age 55 8%
Miscellaneous, 2.7% at age 55 8%
Miscellaneous, 3% at age 60 8%
Auxiliary organizations of the CSU system may elect reduced contribution rates for Miscellaneous members, in which case the
contribution rate above the breakpoint is 6% if members are not covered by Social Security and 5% if they are.
PEPRA Members
The California Public Employees’ Pension Reform Act of 2013 (“PEPRA”) established new benefit formulas, final compensation
period, and contribution requirements for “new” employees (generally those first hired into a CalP ERS-covered position on or
after January 1, 2013). In accordance with Government Code section 7522.30(b), “new members … shall have an initial
contribution rate of at least 50% of the normal cost rate.” The normal cost rate for the plan is dependent on the benefit levels,
actuarial assumptions, and demographics of the plan, particularly members’ entry age into the plan. Should the total normal c ost
rate of the plan change by more than 1% from the base total normal cost rate established for the plan, the new member rate
shall be 50% of the new normal cost rate rounded to the nearest quarter percent.
The table below shows the determination of the PEPRA m ember contribution rates effective July 1, 2025, based on 50 % of the
total normal cost rate for each respective plan as of the June 30, 2023 , valuation.
Basis for Current Rate Rates Effective July 1, 2025
Plan
Identifier Benefit Group Name
Total
Normal
Cost
Member
Rate
Total
Normal
Cost Change
Change
Needed
Member
Rate
26004 Miscellaneous PEPRA
Level 14.250% 7.25% 14.53% 0.280% No 7.25%
For a description of the methodology used to determine the Total Normal Cost for this purpose, see PEPRA Normal Cost Rate
Methodology in Appendix A.
CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 15
Funded Status – Funding Policy Basis
The table below provides information on the current funded status of the plan under the funding policy. The funded status for this
purpose is based on the market value of assets relative to the funding target produced by the entry age actuarial cost method
and actuarial assumptions adopted by the board. The actuar ial cost method allocates the total expected cost of a member’s
projected benefit (Present Value of Benefits ) to individual years of service (the Normal Cost). The value of the projected
benefit that is not allocated to future service is referred to as the Accrued Liability and is the plan’s funding target on the
valuation date. The Unfunded Accrued Liability (UAL) equals the funding target minus the assets. The UAL is an absolute
measure of funded status and can be viewed as employer debt. The funded ratio equals the assets divided by the funding
target. The funded ratio is a relative measure of the funded status and allows for comparisons between plans of different siz es.
June 30, 2022 June 30, 2023
1. Present Value of Benefits $1,124,275,326 $1,176,425,452
2. Entry Age Accrued Liability 996,201,108 1,037,247,281
3. Market Value of Assets (MVA) 655,6 82,370 687,419,176
4. Unfunded Accrued Liability (UAL) [(2) – (3)] $340,518,738 $349,828,105
5. Funded Ratio [(3) ÷ (2)] 65.8% 66.3%
A funded ratio of 100% (UAL of $0) implies that the funding of the plan is on target and that future contributions equal to t he
normal cost of the active plan members will be sufficient to fully fund all retirement benefits if future experience matches the
actuarial assumptions. A funded ratio of less than 100% (positive UAL) implies that in addition to normal costs, payments tow ard
the UAL will be required. Plans with a funded ratio greater than 100% have a negative UAL (or surplus) but are requ ired under
current law to continue contributing the normal cost in most cases, preserving the surplus for future contingencies.
Calculations for the funding target reflect the expected long -term investment return of 6.8%. If it were known on the valuation
date that future investment returns will average something greater/less than the expected return, calculated normal costs and
accrued liabilities provided in this report would be less/greater than the results shown. Therefore, for example, if actual a verage
future returns are less than the expected return, calculated normal costs and UAL contributions will not be sufficient to ful ly fund
all retirement benefits. Under this scenario, required future normal cost contributions will need to increase from those provided in
this report, and the plan will develop unfunded liabilities that will also add to required future contributions. For illustra tive
purposes, funded status es based on a 1% lower and higher average future investment return (discount rate) are as follows:
1% Lower
Average Return
Current
Assumption
1% Higher
Average Return
Discount Rate 5.8% 6.8% 7.8%
1. Present Value of Benefits $1,360,207,967 $1,176,425,452 $1,031,082,699
2. Entry Age Accrued Liability 1,169,285,420 1,037,247,281 927,893,085
3. Market Value of Assets (MVA) 687,419,176 687,419,176 687,419,176
4. Unfunded Accrued Liability (UAL) [(2) – (3)] $481,866,244 $349,828,105 $240,473,909
5. Funded Ratio [(3) ÷ (2)] 58.8% 66.3% 74.1%
The Risk Analysis section of the report provides additional information regarding the sensitivity of valuation results to the
expected investment return and other factors. Also provided in that section are measures of funded status that are appropriate
for assessing the sufficiency of plan assets to cover estimated termination liabilities.
CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 16
Additional Emplo yer Contributions
The minimum required employer contribution towards the Unfunded Accrued Liability (UAL) for this rate plan for FY 2025-26 is
$32,780,459 . CalPERS allows agencies to make additional discretionary payments (ADPs) at any time and in any amount.
These optional payments serve to reduce the UAL and future required contributions and can result in significant long -term
savings. Agencies can also u se ADPs to stabilize annual contributions as a fixed dollar amount, percent of payroll or percent of
revenue.
Provided below are select ADP options for consideration. Making such an ADP during FY 2025-26 does not require an ADP be
made in any future year, nor does it change the remaining amortization period of any portion of unfunded liability. For
information on permanent changes to amortization periods, see Amortization Schedule and Alternatives . Agencies considering
making an ADP should contact CalPERS for additional information.
Fiscal Year 2025-26 Employer Contributions — Illustrative Scenarios
Funding Approach Estimated
Normal Cost
Minimum UAL
Contribution ADP1 Total UAL
Contribution
Estimated Total
Contribution
Minimum required only $10,888,968 $32,780,459 0 $32,780,459 $43,669,427
15 year funding horizon $10,888,968 $32,780,459 $2,271,901 $35,052,360 $45,941,328
10 year funding horizon $10,888,968 $32,780,459 $12,829,260 $45,609,719 $56,498,687
5 year funding horizon $10,888,968 $32,780,459 $45,653,988 $78,434,447 $89,323,415
1 The ADP amounts are assumed to be made in the middle of the fiscal year. A payment made earlier or later in the fiscal year w ould have to
be less or more than the amount shown to have the same effect on the UAL amortization.
The calculations above are based on the projected UAL as of June 30, 2025, as determined in the June 30, 2023, actuarial
valuation. New unfunded liabilities can em erge in future years due to assumption or method changes, changes in plan
provisions, and actuarial experience different than assumed. Making an ADP illustrated above for the indicated number of year s
will not result in a plan that is exactly 100% funded i n the indicated number of years. Valuation results will vary from one year to
the next and can diverge significantly from projections over a period of several years.
Additional Discretionary Payment History
The following table provides a recent history of actual ADPs made to the plan.
Fiscal
Year ADP Fiscal
Year ADP
2018-19 $0 2021-22 $0
2019-20 $0 2022-23 $0
2020-21 $0 2023-24 $0
CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 17
Projected Employer Contributions
The table below shows the required and projected employer contributions (before cost sharing) for the next six fiscal years. The
projection assumes that all actuarial assumptions will be realized and that no further changes to assumptions, contributions,
benefits, or funding will occur during the projection period. In particular, the investment return beginning with FY 2023-24 is
assumed to be 6.80% per year, net of investment and administrative expenses. The projected normal cost percentages below
reflect that the normal cost is expected to continue to decline over time as new employees are hired into lower cost benefit tiers.
Future contribution requirements may differ signifi cantly from those shown below. The actual long -term cost of the plan will
depend on the actual benefits and expenses paid and the actual investment experience of the fund.
Required
Contribution
Projected Future Employer Contributions
(Assumes 6.80% Return for Fiscal Year 2023-24 and Beyond)
Fiscal Year 2025-26 2026-27 2027-28 2028-29 2029-30 2030-31
Normal Cost % 10.90% 10.6% 10.3% 10.0% 9.8% 9.6%
UAL Payment $32,780,459 $30,806,000 $32,435,000 $35,841,000 $36,701,000 $37,458,000
Total as a % of Payroll* 43.71% 40.6% 41.0% 43.1% 42.7% 42.2%
Projected Payroll $99,898,787 $102,695,953 $105,571,440 $108,527,440 $111,566,208 $114,690,062
*Illustrative only and based on the projected payroll shown.
For ongoing plans, investment gains and losses are amortized using a 5 -year ramp up. For more information, please see
Amortization of Unfunded Actuarial Accrued Liability in Appendix A. This method phases in the impact of the change in UAL
over a 5 -year period in order to reduce 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 con tributions can change
gradually and significantly over the next five years. In years when there is a large investment loss, the relatively small
amortization payments during the ramp up period could result in contributions that are less than interest on th e UAL (i.e.
negative amortization) while the contribution impact of the increase in the UAL is phased in.
For projected contributions under alternate investment return scenarios, please see the Future Investment Return Scenarios
exhibit. Our online pension plan projection tool, Pension Outlook, is available in the Employers section of the CalPERS website.
Pension Outlook can help plan and budget pension costs under various scenarios.
CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 18
(Gain)/Loss Analysis 6/30/22 – 6/30/23
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 6/30/22 $340,518,738
b) Expected payment on the UAL during 20 22-23 28,299,872
c) Interest through 6/30/23 [.068 x (1a) - ((1.068)½ - 1) x (1b)] 22,208,904
d) Expected UAL before all other changes [(1a) - (1b) + (1c)] 334,427,770
e) Change due to plan changes 0
f) Change due to AL Significant Increase 0
g) Change due to assumption changes 0
h) Change due to method change s 0
i) Change due to discount rate change with Funding Risk Mitigation 0
j) Expected UAL after all other changes [(1d) + (1e) + (1f) + (1g) + (1h) + (1i)] 334,427,770
k) Actual UAL as of 6/30/23 349,828,105
l) Total (Gain)/Loss for 20 22-23 [(1k) - (1j)] $15,400,335
2. Investment (Gain)/Loss for the Year
a) Market Value of Assets as of 6/30/22 $655,682,370
b) Prior fiscal year receivables (649,626)
c) Current fiscal year receivables 512,051
d) Contributions received 45,230,293
e) Benefits and refunds paid (53,838,873)
f) Transfers, SCP p ayments and interest, and m iscellaneous adjustments 247,912
g) Expected return at 6.8% per year 45,255,412
h) Expected assets as of 6/30/23 [(2a) + (2b) + (2c) + (2d) + (2e) + (2f) + (2g)] 692,439,539
i) Actual Market Value of Assets as of 6/30/23 687,419,176
j) Investment (Gain)/Loss [(2h) - (2i)] $5,020,364
3. Non -Investment (Gain)/Loss for the Year
a) Total (Gain)/Loss (1l) $15,400,335
b) Investment (Gain)/Loss (2j) 5,020,364
c) Non-Investment (Gain)/Loss [(3a) - (3b)] $10,379,971
CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 19
Schedule of Amortization Bases
Below is the schedule of the plan’s amortization bases. Note that there is a two -year lag between the valuation date and the start of the contribution year.
• The assets, liabilities, and funded status of the plan are measured as of the valuation date: June 30, 2023 .
• The required employer contributions determined by the valuation are for the fiscal year beginning two years after the valuati on date: FY 2025-26.
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 fro m 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 FY 2023-24 is based on the actuarial valuation two years ago , adjusted for additional discretionary payments , if
necessary, and the expected payment for FY 2024-25 is based on the actuarial valuation one year ago.
Reason for Base
Date
Est.
Ramp
Level
2025-26
Ramp
Shape
Escala -
tion
Rate
Amort.
Period
Balance
6/30/23
Expected
Payment
2023-24
Balance
6/30/24
Expected
Payment
2024-25
Balance
6/30/25
Minimum
Required
Payment
2025-26
Assumption Change 6/30/03 No Ramp 2.80% 0 4,741,605 2,496,841 2,483,697 2,566,754 0 0
Method Change 6/30/04 No Ramp 2.80% 1 (490,671) (175,518) (342,649) (180,433) (179,482) (185,484)
Benefit Change 6/30/05 No Ramp 2.80% 1 10,870,629 3,888,537 7,591,259 3,997,417 3,976,371 4,109,344
Assumption Change 6/30/09 No Ramp 2.80% 6 18,768,272 2,760,473 17,191,729 2,837,767 15,428,102 2,917,224
Special (Gain)/Loss 6/30/09 No Ramp 2.80% 16 16,318,393 1,270,929 16,114,614 1,306,515 15,860,202 1,343,097
Special (Gain)/Loss 6/30/10 No Ramp 2.80% 17 1,366,036 102,505 1,352,994 105,376 1,336,098 108,326
Assumption Change 6/30/11 No Ramp 2.80% 8 9,703,117 1,183,563 9,139,787 1,216,703 8,503,902 1,250,770
Special (Gain)/Loss 6/30/11 No Ramp 2.80% 18 (58,160) (4,216) (57,758) (4,334) (57,207) (4,455)
(Gain)/Loss 6/30/12 No Ramp 2.80% 19 25,929,949 1,820,158 25,812,160 1,871,123 25,633,692 1,923,514
Payment (Gain)/Loss 6/30/12 No Ramp 2.80% 19 3,075,848 215,910 3,061,875 221,955 3,040,705 228,170
(Gain)/Loss 6/30/13 100% Up/Dn 2.80% 20 81,016,191 5,880,343 80,448,305 6,044,993 79,671,647 6,214,252
(Gain)/Loss 6/30/14 100% Up/Dn 2.80% 21 (51,752,196) (3,637,070) (51,512,649) (3,738,908) (51,151,569) (3,843,597)
Assumption Change 6/30/14 100% Up/Dn 2.80% 11 40,547,059 4,589,850 38,560,921 4,718,366 36,306,911 4,850,480
(Gain)/Loss 6/30/15 100% Up/Dn 2.80% 22 32,252,921 2,199,492 32,173,075 2,261,077 32,024,155 2,324,387
(Gain)/Loss 6/30/16 100% Up/Dn 2.80% 23 37,141,227 2,462,580 37,121,900 2,531,532 37,030,001 2,602,415
Assumption Change 6/30/16 100% Up/Dn 2.80% 13 13,600,377 1,348,739 13,131,361 1,386,503 12,591,425 1,425,325
(Gain)/Loss 6/30/17 100% Up/Dn 2.80% 24 (20,977,651) (1,354,707) (21,004,122) (1,392,639) (20,993,192) (1,431,633)
Assumption Change 6/30/17 100% Up/Dn 2.80% 14 15,186,252 1,422,767 14,748,572 1,462,604 14,239,960 1,503,557
Assumption Change 6/30/18 100% Up/Dn 2.80% 15 28,496,309 2,063,437 28,301,618 2,651,517 27,485,942 2,725,759
Method Change 6/30/18 100% Up/Dn 2.80% 15 5,519,868 399,697 5,482,156 513,611 5,324,156 527,992
CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 20
Schedule of Amortization Bases (continued)
Reason for Base
Date
Est.
Ramp
Level
2025-26
Ramp
Shape
Escala -
tion
Rate
Amort.
Period
Balance
6/30/23
Expected
Payment
2023-24
Balance
6/30/24
Expected
Payment
2024-25
Balance
6/30/25
Minimum
Required
Payment
2025-26
(Gain)/Loss 6/30/18 100% Up/Dn 2.80% 25 (6,551,485) (334,277) (6,651,530) (429,546) (6,659,924) (441,574)
Investment (Gain)/Loss 6/30/19 100% Up Only 0.00% 16 2,727,047 163,968 2,743,035 218,624 2,703,626 273,280
Non-Investment (Gain)/Loss 6/30/19 No Ramp 0.00% 16 5,530,962 524,400 5,365,131 524,400 5,188,024 524,400
Investment (Gain)/Loss 6/30/20 80% Up Only 0.00% 17 16,524,533 679,278 16,946,208 1,018,917 17,045,560 1,358,556
Non-Investment (Gain)/Loss 6/30/20 No Ramp 0.00% 17 10,095,329 931,019 9,819,658 931,019 9,525,242 931,019
Assumption Change 6/30/21 No Ramp 0.00% 18 2,087,558 187,721 2,035,513 187,721 1,979,929 187,720
Net Investment (Gain) 6/30/21 60% Up Only 0.00% 18 (81,788,461) (1,758,018) (85,533,269) (3,516,036) (87,715,916) (5,274,054)
Non-Investment (Gain)/Loss 6/30/21 No Ramp 0.00% 18 (7,491,134) (673,629) (7,304,375) (673,629) (7,104,917) (673,629)
Risk Mitigation 6/30/21 No Ramp 0.00% 0 26,174,799 27,050,107 0 0 0 0
Risk Mitigation Offset 6/30/21 No Ramp 0.00% 0 (26,174,799) (27,050,107) 0 0 0 0
Benefit Change 6/30/22 No Ramp 0.00% 19 877,767 (8,691) 946,437 85,107 922,842 85,107
Investment (Gain)/Loss 6/30/22 40% Up Only 0.00% 19 111,790,824 0 119,392,600 2,566,307 124,859,170 5,132,615
Non-Investment (Gain)/Loss 6/30/22 No Ramp 0.00% 19 9,369,455 0 10,006,578 899,827 9,757,107 899,827
Investment (Gain)/Loss 6/30/23 20% Up Only 0.00% 20 5,020,364 0 5,361,749 0 5,726,348 123,086
Non-Investment (Gain)/Loss 6/30/23 No Ramp 0.00% 20 10,379,971 0 11,085,809 0 11,839,644 1,064,663
Total 349,828,105 28,646,081 344,012,389 32,190,210 334,138,554 32,780,459
CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 21
Amortization Schedule and Alternatives
The amortization schedule on the previous page (s) shows the minimum contributions required according to the CalPERS
amortization policy. Many agencies have expressed a desire for a more stable pattern of payments or have indicated interest i n
paying off the unfunded accrue d liabilities more quickly than required. As such, we have provided alternative amortization
schedules to help analyze the current amortization schedule and illustrate the potential savings of accelerating unfunded lia bility
payments.
Shown on the follow ing 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) alternative “fresh start” amortization schedules
using two sample periods that would both result in interest savings relative to the current amortization schedule. To initiate a
fresh s tart, please contact a CalPERS actuary.
The current amortization s chedule typically contains both positive and negative bases. Positive bases re sult from plan changes,
assumption changes, method changes or plan experience that increase unfunded liability. Negative bases result from plan
changes, assumption changes, method changes, or plan experience that decrease unfunded liability. The combinatio n of
positive and negative bases within an amortization schedule can result in unusual or problematic circumstances in future year s,
such as:
• When a negative payment would be required on a positive unfunded actuarial liability; or
• When the payment would completely amortize the total unfunded liability in a very short time period, and results in
a large change in the employer contribution requirement.
In any year when one of the above scenarios occurs, the actuary will consider corrective action such as re placing the existing
unfunded liability bases with a single “fresh start” base and amortizing it over an appropriate period.
The current amortization s chedule 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 fa ct
arise since there will be additional bases added to the amortization schedule in each future year. Should such a scenario ari se in
any future year, the actuary will take appropriate action based on guidelines in the CalPERS Actuarial Amortization Policy.
CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 22
Amortization Schedule and Alternatives (continued)
Alternative Schedules
Current Amortization
Schedule 15 Year Amortization 10 Year Amortization
Date Balance Payment Balance Payment Balance Payment
6/30/2025 334,138,554 32,780,459 334,138,554 35,052,360 334,138,554 45,609,719
6/30/2026 322,983,310 30,805,887 320,635,435 35,052,360 309,725,029 45,609,719
6/30/2027 313,110,117 32,434,530 306,214,104 35,052,360 283,651,384 45,609,719
6/30/2028 300,882,438 35,840,704 290,812,122 35,052,360 255,804,731 45,609,719
6/30/2029 284,303,197 36,700,653 274,362,805 35,052,360 226,064,506 45,609,719
6/30/2030 265,707,858 37,458,141 256,794,935 35,052,360 194,301,945 45,609,719
6/30/2031 245,065,221 34,793,907 238,032,450 35,052,360 160,379,530 45,609,719
6/30/2032 225,772,210 34,321,032 217,994,116 35,052,360 124,150,391 45,609,719
6/30/2033 205,655,963 32,241,975 196,593,175 35,052,360 85,457,671 45,609,719
6/30/2034 186,320,393 31,265,316 173,736,970 35,052,360 44,133,846 45,609,720
6/30/2035 166,679,322 29,819,900 149,326,543 35,052,360
6/30/2036 147,196,413 27,394,865 123,256,207 35,052,360
6/30/2037 128,894,798 26,169,440 95,413,088 35,052,359
6/30/2038 110,615,077 24,861,482 65,676,638 35,052,360
6/30/2039 92,444,032 23,886,939 33,918,109 35,052,360
6/30/2040 74,044,489 23,300,927
6/30/2041 54,999,386 18,862,924
6/30/2042 39,245,626 15,582,655
6/30/2043 25,810,575 23,584,473
6/30/2044 3,192,535 3,299,296
6/30/2045
6/30/2046
6/30/2047
6/30/2048
6/30/2049
Total 555,405,505 525,785,399 456,097,191
Interest Paid 221,266,951 191,646,845 121,958,6 37
Estimated Savings 29,620,106 99,308,314
CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 23
Reconciliation of Required Employer Contributions
Normal Cost (% of Payroll)
1. For Period 7/1/24 – 6/30/25
a) Employer Normal Cost 11.34%
b) Employee contribution 7.52%
c) Total Normal Cost 18.86%
2. Changes since the prior year annual valuation
a) Effect of demographic experience (0.47%)
b) Effect of plan changes 0.00%
c) Effect of discount rate change due to Funding Risk Mitigation 0.00%
d) Effect of assumption changes 0.00%
e) Effect of method changes 0.00%
f) Net effect of the changes above [sum of (a) through (e)] (0.47%)
3. For Period 7/1/25 – 6/30/26
a) Employer Normal Cost 10.90%
b) Employee contribution 7.49%
c) Total Normal Cost 18.39%
Employer Normal Cost Change [(3a) – (1a)] (0.44%)
Employee Contribution Change [(3b) – (1b)] (0.03%)
Unfunded Liability Contribution ($)
1. For Period 7/1/24 – 6/30/25 32,190,210
2. Changes since the prior year annual valuation
a) Effect of adjustments to prior year’s amortization schedule 0
b) Effect of elimination of amortization bases (2,566,754)
c) Effect of progression of amortization bases 1 1,969,254
d) Effect of investment (gain)/loss during prior year2 123,086
e) Effect of non -investment (gain)/loss during prior year 1,064,663
f) Effect of re-amortizing existing bases due to Funding Risk Mitigation 0
g) Effect of Golden Handshake 0
h) Effect of plan changes 0
i) Effect of AL Significant Increase (Government Code section 20791) 0
j) Effect of assumption changes 0
k) Effect of adjustments to the amortization schedule (e.g., Fresh Start) 0
l) Effect of method change 0
m
)
Net effect of the changes above [sum of (a) through (l)] 590,249
3. For Period 7/1/25 – 6/30/26 [(1) + (2m)] 32,780,459
The amounts shown for the period 7/1/24 – 6/30/25 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 perf ormed.
1 Includes scheduled escalation in individual amortization base payments due to the 5 -year ramp and payroll growth
assumption used in the pre-2019 amortization policy.
2 The unfunded liability contribution for the investment (gain)/loss during the year prior to the valuation date is 20% 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 c ) for each of the next four years.
CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 24
Employer Contribution History
The table below provides a 10-year history of the employer contribution requirements for the plan , as determined by the annual
actuarial valuation . Changes due to prepayments or plan amendments after the valuation report was finalized are not reflected.
Valuation
Date
Contribution
Year
Employer
Normal Cost
Rate
Unfunded
Liability Rate
Unfunded
Liability Payment
06/30/2014 2016 - 17 10.334% 18.556% N/A
06/30/2015 2017 - 18 10.039% N/A 15,765,273
06/30/2016 2018 - 19 10.217% N/A 18,392,618
06/30/2017 2019 - 20 10.716% N/A 21,287,260
06/30/2018 2020 - 21 11.487% N/A 23,432,860
06/30/2019 2021 - 22 10.95% N/A 26,358,094
06/30/2020 2022 - 23 10.58% N/A 29,715,229
06/30/2021 2023 - 24 11.73% N/A 28,654,772
06/30/2022 2024 - 25 11.34% N/A 32,190,210
06/30/2023 2025 - 26 10.90% N/A 32,780,459
Funding History
The table below shows the recent history of the actuarial accrued liability, market value of assets, unfunded accrued liability,
funded ratio and annual covered payroll.
Valuation
Date
Accrued
Liability
(AL)
Market Value of
Assets (MVA)
Unfunded
Accrued
Liability (UAL)
Funded
Ratio
Annual
Covered
Payroll
6/30/2014 $666,978,627 $475,566,994 $191,411,633 71.3% $67,802,942
6/30/2015 696,699,220 477,031,099 219,668,121 68.5% 71,574,823
6/30/2016 730,382,476 468,702,245 261,680,231 64.2% 75,345,962
6/30/2017 772,526,669 511,805,893 260,720,776 66.3% 78,476,098
6/30/2018 831,958,865 547,102,617 284,856,248 65.8% 80,363,405
6/30/2019 868,716,440 574,012,871 294,703,569 66.1% 78,848,216
6/30/2020 909,429,635 592,313,289 317,116,346 65.1% 84,892,137
6/30/2021 956,179,582 720,145,626 236,033,956 75.3% 79,718,988
6/30/2022 996,201,108 655,682,370 340,518,738 65.8% 82,193,044
6/30/2023 1,037,247,281 687,419,176 349,828,105 66.3% 91,956,169
CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 25
Normal Cost by Benefit Group
The table below displays the Total Normal Cost broken out by benefit group for FY 2025-26. The Total Normal Cost is the
annual cost of service accrual for the fiscal year for active employees and can be viewed as the long -term contribution rate for
the benefits contracted. Generally, the normal cost for a benefit group subject to more generous benefit provisions will exce ed
the normal cost for a group with less generous benefits. However, based on the characteristics of the members (particularly
when the number of actives is small), this may not be the case. Future measurements of the Total Normal Cost for each group
may differ significantly from the current values due to such factors as: changes in the demographics of the group, changes in
economic and demographic assumptions, changes in plan benefits or applicable law.
Plan
Identifier Benefit Group Name
Total
Normal Cost
FY 2025-26
Number of
Actives
Payroll on
6/30/2023
8 Miscellaneous First Level 23.39% 255 $34,519,445
26004 Miscellaneous PEPRA Level 14.53% 420 $45,386,175
30157 Miscellaneous Second Level 19.07% 82 $12,050,549
Plan Total 18.39% 757 $91,956,169
Note that if a Benefit Group above has multiple bargaining units, each of which has separately contracted for different benef its
such as Employer Paid Member Contributions, then the Normal Cost shown for the respective benefit level does not reflect
those differences. Additionally, if a Second Level Benefit Group amended to the same benefit formula as a First Level Benefit
Group, their Normal Costs may be dissimilar due to demographic or other population differences. For questions in these
situations, please contact a CalPERS actuary.
Risk Analysis
• Future Investment Return Scenarios 27
• Discount Rate Sensitivity 28
• Mortality Rate Sensitivity 28
• Maturity Measures 29
• Maturity Measures History 30
• Funded Status – Termination Basis 31
• Funded Status – Low-Default-Risk Basis 32
CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 27
Future Investment Return Scenarios
Analysis using the investment return scenarios from the Asset Liability Management process completed in 2021 was performed
to determine the effects of various future investment returns on required employer contributions. The projections below refle ct
the impact of the CalPERS Funding Risk Mitigation Policy. The projected normal cost rates reflect that the rates are anticipated
to decline over time as new employees are hired into lower -cost benefit tiers. The projections also assume that all other actuarial
assumptions will be realized and that no further changes in assumptions, contributions, benefits, or funding will occur.
The first table shows projected contribution requirements if the fund were to earn either 3.0% or 10.8% annually. These alter nate
investment returns were chosen because 90% of long -term average returns are expected to fall between them over the 20 -year
period ending June 30, 2043.
Assumed Annual Return
FY 2023-24
through FY 2042 -43
Projected Employer Contributions
2026-27 2027-28 2028-29 2029 -30 2030-31
3.0% (5th percentile)
Discoun t Rate 6.80 % 6.80% 6.80% 6.80% 6.80%
Normal Cost Rate 10.6% 10.3% 10.0% 9.8% 9.6%
UAL Contribution $31,442,000 $34,356,000 $39,709,000 $43,191,000 $47,258,000
10.8% (95th percentile)
Discoun t Rate 6.75% 6.70% 6.65% 6.60% 6.55%
Normal Cost Rate 10.8% 10.8% 10.7% 10.7% 10.7%
UAL Contribution $30,187,000 $30,626,000 $32,184,000 $30,513,000 $27,953,000
Required contributions outside of this range are also possible. In particular, whereas it is unlikely that investment returns will
average less than 3.0% or greater than 10.8% over a 20 -year period, the likelihood of a single investment return less than 3.0%
or greater than 10.8% in any given year is much greater. The following analysis illustrat es the effect of an extreme, single year
investment return.
The portfolio has an expected volatility (or standard deviation) of 12.0% per year. Accordingly, in any given year there is a 16%
probability that the annual return will be -5.2% or less and a 2.5% probability that the annual return will be -17.2% or less. These
returns represent one and two standard deviations below the expected return of 6.8%.
The following table shows the effect of one and two standard deviation investment loss es in FY 2023-24 on the FY 2026-27
contribution requirements. Note that a single -year investment gain or loss decreases or increases the required UAL contribution
amount incrementally for each of the next five years, not just one, due to the 5 -year ramp in the amortization policy. However,
the contribution requirements beyond the first year are also impac ted by investment returns beyond the first year . Historically,
significant downturns in the market are often followed by higher than average returns. Such investment gains would offset the
impact of these single year negative returns in years beyond FY 2026-27.
Assumed Annual Return for
Fiscal Year 2023-24
Required
Employer
Contributions
Projected
Employer
Contributions
2025-26 2026-27
(17.2%) (2 standard deviation loss)
Discount Rate 6.80% 6.80%
Normal Cost Rate 10.90% 10.6%
UAL Contribution $32,780,459 $34,823,000
(5.2%) (1 standard deviation loss)
Discount Rate 6.80% 6.80%
Normal Cost Rate 10.90% 10.6%
UAL Contribution $32,780,459 $32,815,000
• Without investment gains (returns higher than 6.8%) in FY 2024-25 or later, projected contributions rates would
continue to rise over the next four years due to the continued phase -in of the impact of the illustrated investment loss in
FY 2023-24.
• The Pension Outlook Tool can be used to model projected contributions for these scenarios beyond FY 2026-27 as
well as to model other investment return scenarios .
CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 28
Discount Rate Sensitivity
The discount rate assumption is calculated as the sum of the assumed real rate of return and the assumed annual price
inflation, currently 4.5% and 2.3%, respectively. Ch anging either the price inflation assumption or the real rate of return
assumption will change the discount rate. The sensitivity of the valuation results to the discount rate assumption depends on
which component of the discount rate is changed. Shown bel ow are various valuation results as of June 30, 2023, assuming
alternate discount rates by changing the two components independently. Results are shown using the current discount rate of
6.8% as well as alternate discount rates of 5.8% and 7.8%. The rates of 5.8% and 7.8% were selected since they illustrate the
impact of a 1.0% increase or decrease to the 6.8% assumption.
Sensitivity to the Real Rate of Return Assumption
As of June 30, 2023
1% Lower
Real Return Rate
Current
Assumptions
1% Higher
Real Return Rate
Discount Rate 5.8% 6.8% 7.8%
Price Inflation 2.3% 2.3% 2.3%
Real Rate of Return 3.5% 4.5% 5.5%
a) Total Normal Cost 23.29% 18.39% 14.68%
b) Accrued Liability $1,169,285,420 $1,037,247,281 $927,893,085
c) Market Value of Assets $687,419,176 $687,419,176 $687,419,176
d) Unfunded Liability/(Surplus) [(b) - (c)] $481,866,244 $349,828,105 $240,473,909
e) Funded Ratio 58.8% 66.3% 74.1%
Sensitivity to the Price Inflation Assumption
As of June 30, 2023
1% Lower
Price Inflation
Current
Assumptions
1% Higher
Price Inflation
Discount Rate 5.8% 6.8% 7.8%
Price Inflation 1.3% 2.3% 3.3%
Real Rate of Return 4.5% 4.5% 4.5%
a) Total Normal Cost 19.33% 18.39% 16.72%
b) Accrued Liability $1,070,516,317 $1,037,247,281 $964,582,997
c) Market Value of Assets $687,419,176 $687,419,176 $687,419,176
d) Unfunded Liability/(Surplus) [(b) - (c)] $383,097,141 $349,828,105 $277,163,821
e) Funded Ratio 64.2% 66.3% 71.3%
Mortality Rate Sensitivity
The following table looks at the change in the June 30, 2023, plan costs and funded status under two different longevity
scenarios, namely assuming rates of post-retirement mortality are 10% lower or 10% higher than our current mortality
assumptions adopted in 2021 . This type of analysis highlights the impact on the plan of a change in the mortality assumption .
As of June 30, 2023 10% Lower
Mortality Rates
Current
Assumptions
10% Higher
Mortality Rates
a) Total Normal Cost 18.70% 18.39% 18.09%
b) Accrued Liability $1,060,017,840 $1,037,247,281 $1,016,361,626
c) Market Value of Assets $687,419,176 $687,419,176 $687,419,176
d) Unfunded Liability/(Surplus) [(b) - (c)] $372,598,664 $349,828,105 $328,942,450
e) Funded Ratio 64.8% 66.3% 67.6%
CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 29
Maturity Measures
As pension plans mature they become more sensitive to risks. Understanding plan maturity and how it affects the ability of a
pension plan sponsor to tolerate risk is important in understanding how the pension plan is impacted by investment return
volatility, other economic variables and changes in longevity or other demographic assumptions.
One way to look at the maturity level of CalPERS and its plans is to look at the ratio of a plan’s retiree liability to its t otal liability.
A pension plan in its infancy will have a very low ratio of retiree liability to total liability. As the plan matures, the ratio increases.
A mature plan will often have a ratio above 60%-65%.
Ratio of Retiree Accrued Liability to
Total Accrued Liability June 30, 2022 June 30, 2023
1. Retiree Accrued Liability $634,851,404 $653,009,459
2. Total Accrued Liability $996,201,108 $1,037,247,281
3. Ratio of Retiree AL to Total AL [(1) ÷ (2)] 64% 63%
Another measure of the maturity level of CalPERS and its plans is the ratio of actives to retirees, also called the s upport ratio. A
pension plan in its infancy will have a very high ratio of active to retired members. As the plan matures and members retir e, the
ratio declines. A mature plan will often have a ratio near or below one.
To calculate the support ratio for the rate plan, retirees and beneficiaries receiving a continuance are each counted as one, even
though they may have only worked a portion of their careers as an active member of this rate plan. For this reason, the support
ratio, while intuitive, may be less informative than the ratio of retiree liability to total accrued liability above.
For comparison, the support ratio for all CalPERS pu blic agency plans as of June 30, 202 2, was 0.77 and was calculated
consistently with how it is for the individual rate plan. Note that to calculate the support ratio for all public agency plan s, a retiree
with service from more than one CalPERS agency is c ounted as a retiree more than once .
Support Ratio June 30, 2022 June 30, 2023
1. Number of Actives 712 757
2. Number of Retirees 1,320 1,348
3. Support Ratio [(1) ÷ (2)] 0.54 0.56
CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 30
Maturity Measures (continued)
The actuarial calculations supplied in this communication are based on various assumptions about long -term demographic and
economic behavior. Unless these assumptions (e.g., terminations, deaths, disabilities, retirements, salary increases, 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
contributi ons 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
Shown in the table below is the asset volatility ratio (AVR), which is the ratio of market value of assets to payroll. Plans that have
a higher AVR experience more volatile employer contributions (as a percentage of payroll) due to investment return. For
example, a plan with an AVR of 8 may experience twice the contribution volatility due to investment return volatility than a plan
with an AVR of 4. It should be noted that this ratio is a measure of the current situation. It increases over time but generally
tends to stabilize as a plan matures.
Liability Volatility Ratio
Also shown in the table below is the liability volatility ratio (LVR), which is the ratio of accrued liability to payroll. Plans that ha ve
a higher LVR experience more volatile employer contributions (as a percentage of payroll) due to changes in liability. For
example, a plan with an LVR of 8 is expected to have twice the contribution volatility of a plan with an LVR of 4 when there is a
change in accrued liability, such as when there is a change in actuarial assumptions . It should be noted that this ratio indicates a
longer-term potential for contribution volatility, since the AVR, described above, will tend to move closer to the LVR as the
funded ratio approaches 100%.
Contribution Volatility June 30, 2022 June 30, 2023
1. Market Value of Assets without Receivables $655,032,743 $686,907,124
2. Payroll 82,193,044 91,956,169
3. Asset Volatility Ratio (AVR) [(1) ÷ (2)] 8.0 7.5
4. Accrued Liability $996,201,108 $1,037,247,281
5. Liability Volatility Ratio (LVR) [(4) ÷ (2)] 12.1 11.3
Maturity Measures History
Valuation Date
Ratio of
Retiree Accrued Liability
to
Total Accrued Liability Support Ratio
Asset
Volatility
Ratio
Liability
Volatility
Ratio
6/30/2017
57%
0.74
6.5
9.8
6/30/2018
57%
0.72
6.8
10.4
6/30/2019
61%
0.65
7.3
11.0
6/30/2020
60%
0.64
7.0
10.7
6/30/2021
62%
0.57
9.0
12.0
6/30/2022
64%
0.54
8.0
12.1
6/30/2023
63%
0.56
7.5
11.3
CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 31
Funded Status – Termination Basis
The funded status measured on a termination basis is an estimate of the financial position of the plan had the contract with
CalPERS been terminated as of June 30, 2023. The accrued liability on a termination basis (termination liability) is calculated
differently from the plan’s ongoing funding liability. For th e 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 employ er
that continues to provide CalPERS retirement benefits to active employees. Unlike the actuarial cost method used for ongoing
plans, the termination liability is the present value of the benefits earned through the valuation date.
A more conservative investment policy and asset allocation strategy was adopted by the 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 re mainder of the PERF and
consequently, a lower discoun t rate assumption. The lower discount rate for the Terminated Agency Pool results in higher
liabilities for terminated plans.
The discount rate used for actual termination valuations is a weighted average of the 10 -year and 30 -year Treasury yields where
the weights are based on matching asset and liability durations as of the termination date. The discount rates used in the
following analysis is based on 20 -year Treasury bonds , which is a good proxy for most plans. The discount rate upon contract
termination will depend on actual Treasury rates on the date of termination , which varies over time, as shown below .
Valuation 20-Year Valuation 20-Year
Date Treasury Rate Date Treasury Rate
06/30/2014 3.08% 06/30/2019 2.31%
06/30/2015 2.83% 06/30/2020 1.18%
06/30/2016 1.86% 06/30/2021 2.00%
06/30/2017 2.61% 06/30/2022 3.38%
06/30/2018 2.91% 06/30/2023 4.06%
As Treasury rates are variable, the table below shows a range for the termination liability using discount rates 1% below and
above the 20-year Treasury rate on the valuation date. The price inflation assumption is the 20 -year Treasury breakeven
inflation rate, that is, the difference between the 20 -year inflation indexed bond and the 20 -year fixed -rate bond.
The Market Value of Assets (MVA) also varies with interest rates and will fluctuate depending on other market conditions on the
date of termination . Since i t is not possible to approximate how the MVA will change in different interest rate environments, the
results below use the MVA as of the valuation date.
Discount Rate: 3.06 %
Price Inflation: 2.50%
Discount Rate: 5.06%
Price Inflation: 2.50%
1. Termination Liability1 $1,619,417,854 $1,224,989,038
2. Market Value of Assets (MVA) 687,419,176 687,419,176
3. Unfunded Termination Liability [(1) – (2)] $931,998,678 $537,569,862
4. Funded Ratio [(2) ÷ (1)] 42.4% 56.1%
1 The termination liabilities calculated above include a 5% contingency load. The contingency load and other actuarial
assumptions can be found in Appendix A.
In order to terminate the plan, first contact our Pension Contract Services unit to initiate a Resolution of Intent to Termin ate. The
completed Resolution will allow a CalPERS actuary to provide a preliminary termination valuation with a more up -to-date
es timate of the plan ’s assets and liabilities. Before beginning this process, please consult with a CalPERS actuary.
CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 32
Funded Status – Low-Default-Risk Basis
Actuarial Standard of Practice (ASOP) No. 4, Measuring Pension Obligations and Determining Pension Plan Costs or
Contributions, requires the disclosure of a low -default-risk obligation measure (LDROM) of benefit costs accrued as of the
valuation date using a discount rate based on the yields of high quality fixed income securities with cash flows that replicate
expected benefit payments. Conceptually, this measure represents the level at which financial markets would value the accrued
plan costs, and would be approximately equal to the cost of a portfolio of low -default-risk bonds with similar financial
characteristics to accrued plan costs.
As permitted in ASOP No. 4, the Actuarial Office uses the Entry Age Actuarial Cost Method to calculate the LDROM. This
methodology is in line with the measure of “benefit entitlements” calculated by the Bureau of Economic Analysis and used by t he
Federal Reserve to report the indebtedness due to pensions of plan sponsors and, conversely, the household wealth due to
pensions of plan members.
As shown below, the discount rate used for the LDROM is 4.82%, which is the Standard FTSE Pension Liability Index1 discount
rate as of June 30, 2023 , net of assumed administrative exp enses.
Selected Measures on a Low -Default-Risk Basis June 30, 2023
Discount Rate 4.82%
1. Accrued Liability2 – Low-Default-Risk Basis (LDROM)
a) Active Members $434,163,492
b) Transferred Members 68,831,773
c) Separated Members 30,916,314
d) Members and Beneficiaries Receiving Payments 792,726,914
e) Total $1,326,638,493
2. Market Value of Assets (MVA) 687,419,176
3. Unfunded Accrued Liability – Low-Default-Risk Basis [(1e) – (2)] $639,219,317
4. Unfunded Accrued Liability – Funding Policy Basis 349,828,105
5. Present Value of Unearned Investment Risk Premium [(3) – (4)] $289,391,212
The difference between the unfunded liabilities on a low -default-risk basis and on the funding policy basis represents the present
value of the investment risk premium that must be earned in future years to keep future contributions for currently accrued plan
costs at the levels anticipated by the funding policy.
Benefit security for members of the plan relies on a combination of the assets in the plan, the investment income generated f rom
those assets, and the ability of the plan sponso r to make necessary future contributions. If future returns fall short of 6.8%,
benefit security could be at risk without higher than currently anticipated future contributions.
The funded status on a low -default-risk basis is not appropriate for assessi ng the sufficiency of plan assets to cover the cost of
settling the plan’s benefit obligations (see Funded Status – Termination Basis), nor is it appropriate for assessing the need for
future contributions (see Funded Status – Funding Policy Basis ).
1 This index is based on a yield curve of hypothetical AA -rated zero coupon corporate bonds whose maturities range
from 6 months to 30 years. The index represents the single discount rate that would produce the same present value
as discounting a standardized set of liabilit y cash flows for a fully open pension plan using the yield curve. The liability
cash flows are reasonably consistent with the pattern of benefits expected to be paid from the entire Public
Employees’ Retirement Fund for current and former plan members. A different index, hence a different discount rate,
may be needed to measure the LDROM for a subset of the fund, such as a single rate plan or a group o f retirees.
2 If plan assets were invested entirely in the AA fixed income securities used to determine the discount rate of 4.82%,
the CalPERS discount rate could, at various times, be below 4.5% or 5.25%, and some automatic annual retiree
COLAs could be suspended (Gov. Code sections 21329 and 21335). Since there is currently no proposal to adopt an
asset allocation entirely comprised of fixed income securities, the automa tic COLAs have been fully valued in the
measures above based on the assumptions used for plan funding. Removing future COLAs from the measurement
would understate the statutory obligation.
Plan’s Major Benefit Options
CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 34
Plan's Major Benefit Options
Shown below is a summary of the major optional benefits for which the agency has contracted. A description of principal standard and optional plan provisions is in
Appendix B.
Benefit Group
Member Category Misc Misc Misc Misc Misc Misc Misc
Demographics
Actives No Yes Yes Yes Yes No No
Transfers/Separated Yes Yes Yes Yes Yes No No
Receiving Yes Yes Yes Yes Yes Yes Yes
Benefit Group Key 105391 105393 107485 111264 200040 200044 200045
Benefit Provision
Benefit Formula 2% @ 55 2.7% @ 55 2% @ 60 2% @ 62 2% @ 62
Social Security Coverage No No No No No
Full/Modified Full Full Full Full Full
Employee Contribution Rate 8.00% 7.00% 7.25% 7.25%
Final Average Compensation Period One Year One Year One Year Three Year Three Year
Sick Leave Credit No No No No No
Non-Industrial Disability Standard Standard Standard Standard Standard
Industrial Disability No No No No No
Pre-Retirement Death Benefits
Optional Settlement 2 No No No No No
1959 Survivor Benefit Level Level 1 Level 1 Level 1 Level 1 Level 1
Special No No No No No
Alternate (firefighters) No No No No No
Post-Retirement Death Benefits
Lump Sum $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000
Survivor Allowance (PRSA) No No No No No No No
COLA 2% 2% 2% 2% 2% 2% 2%
CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 35
Plan's Major Benefit Options (Continued)
Shown below is a summary of the major optional benefits for which the agency has contracted. A description of principal stand ard and optional plan provisions is in
Appendix B.
Benefit Group
Member Category Misc
Demographics
Actives No
Transfers/Separated No
Receiving Yes
200046
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 2
1959 Survivor Benefit Level
Special
Alternate (firefighters)
Post-Retirement Death Benefits
Lump Sum $2,000
Survivor Allowance (PRSA) No
COLA 2%
Appendices
• Appendix A – Actuarial Methods and Assumptions
• Appendix B – Principal Plan Provisions
• Appendix C – Participant Data
• Appendix D – Glossary
Appendix A - Actuarial Methods and Assumptions
• Actuarial Data 38
• Actuarial Methods 38
• Actuarial Assumptions 41
• Miscellaneous 61
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 38
Actuarial Data
As stated in the Actuarial Certification, the data which serves as the basis of this valuation has been obtained from the var ious
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 form er 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 t hese
cases may not be accurate. These situations are relatively inf requent, however, and generally do not have a material impact on
the required employer contributions.
Actuarial Methods
Actuarial Cost Method
With one exception, the actuarial cost method use d in this valuation is the Entry Age Actuarial Cost Method. This method is
used to calculate the required employer contributions and the PEPRA member contribution rate. Under this method, the cost of
the projected benefits is allocated on an individual basis as a level percent of e arnings for the individual between entry age and
retirement age. The portion allocated to the year following the valuation date is the normal cost. This method yields a total
normal cost rate, expressed as a percentage of payroll, which is designed to rema in level throughout the member’s career.
The actuarial accrued liability for active members is then calculated as the present value of benefits minus the present value of
future normal cost, or the portion of the total present value of benefits 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 benef its
expected to be paid. No normal costs are applicable for these pa rticipants.
To calculate the accrued liability on termination basis, this valuation use d the Traditional Unit Credit Actuarial Cost Method. This
method differs from the entry age method only for active members where the accrued liability is the present va lue of benefits
assuming no future pay increases or service accruals.
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 acc rued
l iability (UAL). Funding requirements are determined by adding the normal cost and a payment toward the UAL. The UAL
payment is equal to the sum of individual amortization payments, each representing a different source of UAL for a given
measurement period.
Amortization payments are determined according to the CalPERS Actuarial Amortization Policy. The board adopted a new
policy effective for the June 30, 2019 , actuarial valuation. The new policy applies prospectively only; amortization bases
(sources of UAL) established prior to the June 30, 2019 , valuation will continue to be amortized according to the prior policy.
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 39
Prior Policy (Bases Established prior to June 30, 2019)
Amortization payments are determined as a level percentage of payroll whereby the payment increases each year at an
escalation rate. 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 am ortized 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. Bases established prior to June 30, 2013 , may be amortized differently. A summary is provided in the following table:
Driver
Source
(Gain)/Loss
Assumption/Method
Change
Benefit
Change
Golden
Handshake Investment
Non-
investment
Amortization
Period 30 Years 30 Years 20 Years
20
Years 5 Years
Escalation Rate
- Active Plans
- Inactive Plans
2.80%
0%
2.80%
0%
2.80%
0%
2.80%
0%
2.80%
0%
Ramp Up 5 5 5 0 0
Ramp Down 5 5 5 0 0
The 5-year ramp up means that the payments in the first four years of the amortization period are 20%, 40%, 60% and 80% 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.
Current Policy (Bases Established on or after June 30, 2019)
Amortization payments are determined as a level dollar amount. Investment gains or losses are amortized over a fixed 20 -year
period with a 5 -year ramp up at the beginning of the amortization period. Non -investment gains or losses are amortized over a
fixed 20 -year period with no ramps. All changes in liability due to plan amendments (other than golden handshakes) are
amortized over a 20 -year period with no ramps. Changes in actuarial assumptions or changes in actuarial methodology are
amortized over a 20-year period with no ramps. Changes in unfunded accrued liability due to a Golden Handshake are
amortized over a period of five years. A summary is provided in the table below:
Driver
Source
(Gain)/Loss
Assumption/
Method
Change
Benefit
Change
Golden
Handshake Investment
Non-
investment
Amortization
Period 20 Years 20 Years 20 Years 20 Years 5 Years
Escalation Rate 0% 0% 0% 0% 0%
Ramp Up 5 0 0 0 0
Ramp Down 0 0 0 0 0
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 se t
number of years. For example, a fresh star t is needed in the following situations:
• When a negative payment would be required on a positive unfunded actuarial liability; or
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 40
• When the payment would completely amortize the total unfunded liability in a very short time period, and results in
a large change in the employer contribution requirement.
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; how ever, the period will not be greater than 20 years.
Exceptions for Plans in Surplus
If a surplus exists (i.e., the Market Value of Assets exceeds the plan’s accrued liability) any prior amortization layers shall be
considered fully amortized, and the sur plus shall not be amortized.
In the event of any subsequent unfunded liability, a Fresh Start shall be used with an amortization period of 20 years or les s.
Exceptions for Small Amounts
Where small unfunded liabilities are identified in annual valuation s which result in small payment amounts, the actuary may
shorten the remaining period for these bases.
• When the balance of a single amortization base has an absolute value less than $250, the amortization period is
reduced to one year.
• When the entire unfunded liability is a small amount, the actuary may perform a Fresh Start and use an appropriate
amortization period.
Exceptions for Inactive Plans
The following exceptions apply to plans classified as Inactive. These plans have no active members and no e xpectation 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.
Exceptions for Inactive Agencies
For a public agency with no active members in any CalPERS rate plan, the unfunded liability shall be amortized over a closed
amortization period of no more than 15 years.
Asset Valuation Method
The Actuarial Value of Assets is set equal to the m arket value of assets. Asset values include accounts receivable.
PEPRA Normal Cost Rate Methodology
Per Government Code s ection 7522.30(b), the “normal cost rate” shall mean the annual actuarially de termined 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 benefi ts shall include any
elements that would impact the actuarial determination of the normal cost, including, but not limited to, the retirement form ula,
eligibility and vesting criteria, ancillary benefit provisions, and any automatic cost-of-living adjustme nts as determined by the
public retirement system.
For purposes of setting member rates, it is preferable to determine total normal cost using a large active population so that the
rate remains relatively stable. While each CalPERS non -pooled plan has a s ufficiently large active population for this purpose,
the PEPRA active population by itself may not be sufficiently large enough yet. The total PEPRA normal cost for each PEPRA
benefit tier will be determined based on the entire active plan population (both PEPRA and Classic) only until the number of
members covered under the PEPRA formula meets either:
1. 50% of the active population, or
2. 25% of the active population and 100 or more PEPRA members
Once one of these conditions is met, the total PEPRA normal cost for each PEPRA benefit tier will be determined using the
entire active PEPRA population.
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 41
Actuarial Assumptions
In 2021, CalPERS completed its most recent asset liability management stud y incorporating actuarial assumptions and strategic
asset allocation. In November 2021, the board adopted changes to the asset allocation that increased the expected volatility of
returns. The adopted asset allocation was expected to have a long -term blend ed return that continued to support a discount rate
assumption of 6.80%. The board also approved several changes to the demographic assumptions that more closely aligned with
actual experience.
For more details and additional rationale for the selection of the actuarial assumptions, please refer to the 2021 CalPERS
Experience Study and Review of Actuarial Assumptions 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 and price inflation assumption used for the accrued liability on a termination
basis ) 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 November 17, 2 021, is 6.80% compounded annually (net of
investment and administrative expenses) as of June 30, 2023. The discount rate is based on the long-term expected rate of
return on assets using a building -block method in which expected future real rates of return (expected returns, net of pension
plan investment expense and inflation) are developed for each major a s set class. The current assumption, originally based on
capital market assumptions developed by the Investment Office in 2021, has been reviewed for this valuation based on capital
market assumptions developed by the Investment Office in 2023.
Termination Liability Discount Rate
The current discount rate assumption used for termi nation 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 accrued
liabilities on a termination basis in this report use discount rates that are based on the 20-year Treasury rate on the valuation
date.
To illustrate the impact of the variability of interest rates, the accrued liabilities on a termination basis in this report use discount
rates 1% below and 1% above the 20-year Treasury rate on the valuation date. The 20-year Treasury rate was 4.06% on June
30, 2023.
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 42
Salary Increases
Annual increases vary by category, entry age, and duration of service. A sample of assumed increases due to seniority, merit
and promotion are shown below. Assumed wage inflation is combined with these factors to develop the total expected salary
increases.
Public Agency Miscellaneous
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.0764 0.0621 0.0521
1 0.0663 0.0528 0.0424
2 0.0576 0.0449 0.0346
3 0.0501 0.0381 0.0282
4 0.0435 0.0324 0.0229
5 0.0378 0.0276 0.0187
10 0.0201 0.0126 0.0108
15 0.0155 0.0102 0.0071
20 0.0119 0.0083 0.0047
25 0.0091 0.0067 0.0031
30 0.0070 0.0054 0.0020
Public Agency Fire
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1517 0.1549 0.0631
1 0.1191 0.1138 0.0517
2 0.0936 0.0835 0.0423
3 0.0735 0.0613 0.0346
4 0.0577 0.0451 0.0284
5 0.0453 0.0331 0.0232
10 0.0188 0.0143 0.0077
15 0.0165 0.0124 0.0088
20 0.0145 0.0108 0.0101
25 0.0127 0.0094 0.0115
30 0.0112 0.0082 0.0132
Public Agency Police
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1181 0.1051 0.0653
1 0.0934 0.0812 0.0532
2 0.0738 0.0628 0.0434
3 0.0584 0.0485 0.0353
4 0.0462 0.0375 0.0288
5 0.0365 0.0290 0.0235
10 0.0185 0.0155 0.0118
15 0.0183 0.0150 0.0131
20 0.0181 0.0145 0.0145
25 0.0179 0.0141 0.0161
30 0.0178 0.0136 0.0179
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 43
Salary Increases (continued)
Public Agency County Peace Officers
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1238 0.1053 0.0890
1 0.0941 0.0805 0.0674
2 0.0715 0.0616 0.0510
3 0.0544 0.0471 0.0387
4 0.0413 0.0360 0.0293
5 0.0314 0.0276 0.0222
10 0.0184 0.0142 0.0072
15 0.0174 0.0124 0.0073
20 0.0164 0.0108 0.0074
25 0.0155 0.0094 0.0075
30 0.0147 0.0083 0.0077
Schools
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.0275 0.0275 0.0200
1 0.0422 0.0373 0.0298
2 0.0422 0.0373 0.0298
3 0.0422 0.0373 0.0298
4 0.0388 0.0314 0.0245
5 0.0308 0.0239 0.0179
10 0.0236 0.0160 0.0121
15 0.0182 0.0135 0.0103
20 0.0145 0.0109 0.0085
25 0.0124 0.0102 0.0058
30 0.0075 0.0053 0.0019
• The Miscellaneous salary scale is used for Local Prosecutors.
• The Police salary scale is used for Other Safety, Local Sheriff, and School Police.
Price Inflation
2.30% compounded annually.
Termination Liability Price Inflation
The breakeven inflation rate for 20 -year Treasuries on the valuation date, 2.50%.
Wage Inflation
2.80% compounded annually. This is used in projecting individual salary increases.
Payroll Growth
2.80% compounded annually. This is used as the escalation rate of the amortization payments on level percent of payroll
amortization bases , that is, on any amortization bases established prior to 2019 for plans that currently have active members.
Non-valued Potential Additional Liabilities
The potential liability loss for a cost-of-living increase exceeding the 2.30% price inflation assumption and any potential liability
loss from future member service purchases that are not reflected in the valuation.
Miscellaneous Loading Factors
Credit for Unused Sick Leave
Total years of service is increased by 1% for those plans that have adopted the provision of providing Credit for Unused Sick
Leave.
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 44
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 project ed 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 5% contingency load. This load is for unforeseen improvements in mortality.
Demographic Assumptions
Pre -Retirement Mortality
The mortality assumptions are based on mortality rates resulting from the most recent Ca lPERS Experience Study adopted by
the CalPERS Board in November 2021. For purposes of the mortality rates, the rates incorporate generational mortality to
capture ongoing mortality improvement. Generational mortality explicitly assumes that members born mo re recently will live
longer than the members born before them thereby capturing the mortality improvement seen in the past and expected
continued improvement. For more details, please refer to the 2021 CalPERS Experience Study and Review of Actuarial
Assumptions report that can be found on the CalPERS website .
Rates vary by age and gender. This table only contains a sample of the 2017 base table rates for illustrative purposes. The n on-
industrial death rates are used for all plans. The industrial death rates are used for Safety plans (except for local Safety
mem bers described in Government Code s ection 20423.6 where the agency has not specifically contracted for industrial death
benefits.)
Miscellaneous Safety
Non-Industrial Death Non-Industrial Death Industrial Death
(Not Job-Related) (Not Job-Related) (Job-Related)
Age Male Female Male Female Male Female
20 0.00039 0.00014 0.00038 0.00014 0.00004 0.00002
25 0.00033 0.00013 0.00034 0.00018 0.00004 0.00002
30 0.00044 0.00019 0.00042 0.00025 0.00005 0.00003
35 0.00058 0.00029 0.00048 0.00034 0.00005 0.00004
40 0.00075 0.00039 0.00055 0.00042 0.00006 0.00005
45 0.00093 0.00054 0.00066 0.00053 0.00007 0.00006
50 0.00134 0.00081 0.00092 0.00073 0.00010 0.00008
55 0.00198 0.00123 0.00138 0.00106 0.00015 0.00012
60 0.00287 0.00179 0.00221 0.00151 0.00025 0.00017
65 0.00403 0.00250 0.00346 0.00194 0.00038 0.00022
70 0.00594 0.00404 0.00606 0.00358 0.00067 0.00040
75 0.00933 0.00688 0.01099 0.00699 0.00122 0.00078
80 0.01515 0.01149 0.02027 0.01410 0.00225 0.00157
• The pre -retirement mortality rates above are for 2017 and are projected generationally for future years using 80% of
the Society of Actuaries’ Scale MP -2020.
• 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% will
become the non-industrial death rate and 1% will become the industrial death rate.
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 45
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.
Service Retirement
Non-Industrial Disability Industrial Disability
(Not Job-Related) (Job-Related)
Age Male Female Male Female Male Female
50 0.00267 0.00199 0.01701 0.01439 0.00430 0.00311
55 0.00390 0.00325 0.02210 0.01734 0.00621 0.00550
60 0.00578 0.00455 0.02708 0.01962 0.00944 0.00868
65 0.00857 0.00612 0.03334 0.02276 0.01394 0.01190
70 0.01333 0.00996 0.04001 0.02910 0.02163 0.01858
75 0.02391 0.01783 0.05376 0.04160 0.03446 0.03134
80 0.04371 0.03403 0.07936 0.06112 0.05853 0.05183
85 0.08274 0.06166 0.11561 0.09385 0.10137 0.08045
90 0.14539 0.11086 0.16608 0.14396 0.16584 0.12434
95 0.24665 0.20364 0.24665 0.20364 0.24665 0.20364
100 0.36198 0.31582 0.36198 0.31582 0.36198 0.31582
105 0.52229 0.44679 0.52229 0.44679 0.52229 0.44679
110 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000
• The post-retirement mortality rates above are for 2017 and are projected generationally for future years using 80% of
the Society of Actuaries’ Scale MP -2020.
Marital Status
For active members, a percentage who are married upon retirement is assumed according to the member category as shown in
the following table.
Member Category Percent Married
Miscellaneous Member 70%
Local Police 85%
Local Fire 85%
Other Local Safety 70%
School Police 85%
Local County Peace Officers 75%
Age of Spouse
It is assumed that female spouses are 3 years younger than male spouses. This assumption is used for all plans.
Separated Members
It is assumed that separated members refund immediately if non -vested. Separated members who are vested are assumed to
retire at age 59 for Miscellaneous members and age 54 for Safety members.
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 46
Termination with Refu nd
Rates vary by entry age and service for Miscellaneous plans. Rates vary by service for Safety plans. See sample rates in tabl es
below.
Public Agency Miscellaneous
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45
Male Female Male Female Male Female Male Female Male Female Male Female
0 0.1851 0.1944 0.1769 0.1899 0.1631 0.1824 0.1493 0.1749 0.1490 0.1731 0.1487 0.1713
1 0.1531 0.1673 0.1432 0.1602 0.1266 0.1484 0.1101 0.1366 0.1069 0.1323 0.1037 0.1280
2 0.1218 0.1381 0.1125 0.1307 0.0970 0.1183 0.0815 0.1058 0.0771 0.0998 0.0726 0.0938
3 0.0927 0.1085 0.0852 0.1020 0.0727 0.0912 0.0601 0.0804 0.0556 0.0737 0.0511 0.0669
4 0.0672 0.0801 0.0616 0.0752 0.0524 0.0670 0.0431 0.0587 0.0392 0.0523 0.0352 0.0459
5 0.0463 0.0551 0.0423 0.0517 0.0358 0.0461 0.0292 0.0404 0.0261 0.0350 0.0230 0.0296
10 0.0112 0.0140 0.0101 0.0129 0.0083 0.0112 0.0064 0.0094 0.0048 0.0071 0.0033 0.0049
15 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
20 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
25 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
30 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
35 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
Public Agency Safety
Duration of
Service Fire Police County Peace Officer
Male Female Male Female Male Female
0 0.1022 0.1317 0.1298 0.1389 0.1086 0.1284
1 0.0686 0.1007 0.0789 0.0904 0.0777 0.0998
2 0.0441 0.0743 0.0464 0.0566 0.0549 0.0759
3 0.0272 0.0524 0.0274 0.0343 0.0385 0.0562
4 0.0161 0.0349 0.0170 0.0206 0.0268 0.0402
5 0.0092 0.0214 0.0113 0.0128 0.0186 0.0276
10 0.0015 0.0000 0.0032 0.0047 0.0046 0.0038
15 0.0000 0.0000 0.0000 0.0000 0.0023 0.0036
20 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
25 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
30 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
35 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
• The police termination and refund rates are also used for Public Agency Local Prosecutors, Other Safety, Local
Sheriff, and School Police.
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 47
Termination with Refund (continued)
Schools
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45
Male Female Male Female Male Female Male Female Male Female Male Female
0 0.2054 0.2120 0.1933 0.1952 0.1730 0.1672 0.1527 0.1392 0.1423 0.1212 0.1318 0.1032
1 0.1922 0.2069 0.1778 0.1883 0.1539 0.1573 0.1300 0.1264 0.1191 0.1087 0.1083 0.0910
2 0.1678 0.1859 0.1536 0.1681 0.1298 0.1383 0.1060 0.1086 0.0957 0.0934 0.0853 0.0782
3 0.1384 0.1575 0.1256 0.1417 0.1042 0.1155 0.0829 0.0893 0.0736 0.0774 0.0643 0.0656
4 0.1085 0.1274 0.0978 0.1143 0.0800 0.0925 0.0622 0.0707 0.0542 0.0620 0.0462 0.0533
5 0.0816 0.0991 0.0732 0.0887 0.0590 0.0713 0.0449 0.0539 0.0383 0.0476 0.0317 0.0413
10 0.0222 0.0248 0.0200 0.0221 0.0163 0.0174 0.0125 0.0128 0.0094 0.0100 0.0063 0.0072
15 0.0106 0.0132 0.0095 0.0113 0.0077 0.0083 0.0058 0.0052 0.0040 0.0039 0.0021 0.0026
20 0.0059 0.0065 0.0050 0.0054 0.0035 0.0036 0.0021 0.0019 0.0010 0.0009 0.0000 0.0000
25 0.0029 0.0034 0.0025 0.0029 0.0018 0.0020 0.0010 0.0012 0.0005 0.0006 0.0000 0.0000
30 0.0012 0.0015 0.0011 0.0013 0.0011 0.0011 0.0010 0.0009 0.0005 0.0005 0.0000 0.0000
35 0.0006 0.0007 0.0006 0.0007 0.0005 0.0006 0.0005 0.0005 0.0003 0.0002 0.0000 0.0000
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 48
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
Male Female Male Female Male Female Male Female Male Female
5 0.0381 0.0524 0.0381 0.0524 0.0358 0.0464 0.0334 0.0405 0.0301 0.0380
10 0.0265 0.0362 0.0265 0.0362 0.0254 0.0334 0.0244 0.0307 0.0197 0.0236
15 0.0180 0.0252 0.0180 0.0252 0.0166 0.0213 0.0152 0.0174 0.0119 0.0132
20 0.0141 0.0175 0.0141 0.0175 0.0110 0.0131 0.0079 0.0087 0.0000 0.0000
25 0.0084 0.0108 0.0084 0.0108 0.0064 0.0076 0.0000 0.0000 0.0000 0.0000
30 0.0047 0.0056 0.0047 0.0056 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
35 0.0038 0.0041 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
Public Agency Safety
Duration of
Service Fire Police County Peace Officer
Male Female Male Female Male Female
5 0.0089 0.0224 0.0156 0.0272 0.0177 0.0266
10 0.0066 0.0164 0.0113 0.0198 0.0126 0.0189
15 0.0048 0.0120 0.0083 0.0144 0.0089 0.0134
20 0.0035 0.0088 0.0060 0.0105 0.0063 0.0095
25 0.0024 0.0061 0.0042 0.0073 0.0042 0.0063
30 0.0012 0.0031 0.0021 0.0037 0.0021 0.0031
35 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
• 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
Male Female Male Female Male Female Male Female Male Female
5 0.0359 0.0501 0.0359 0.0501 0.0332 0.0402 0.0305 0.0304 0.0266 0.0272
10 0.0311 0.0417 0.0311 0.0417 0.0269 0.0341 0.0228 0.0265 0.0193 0.0233
15 0.0193 0.0264 0.0193 0.0264 0.0172 0.0220 0.0151 0.0175 0.0123 0.0142
20 0.0145 0.0185 0.0145 0.0185 0.0113 0.0141 0.0080 0.0097 0.0000 0.0000
25 0.0089 0.0123 0.0089 0.0123 0.0074 0.0093 0.0000 0.0000 0.0000 0.0000
30 0.0057 0.0064 0.0057 0.0064 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
35 0.0040 0.0049 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 49
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 All All All Male Female
20 0.0001 0.0000 0.0001 0.0001 0.0001 0.0000 0.0002
25 0.0001 0.0001 0.0001 0.0001 0.0001 0.0000 0.0002
30 0.0002 0.0003 0.0001 0.0001 0.0001 0.0002 0.0002
35 0.0004 0.0007 0.0001 0.0002 0.0003 0.0005 0.0004
40 0.0009 0.0012 0.0001 0.0002 0.0006 0.0010 0.0008
45 0.0015 0.0019 0.0002 0.0003 0.0011 0.0019 0.0015
50 0.0015 0.0019 0.0004 0.0005 0.0016 0.0027 0.0021
55 0.0014 0.0013 0.0006 0.0007 0.0009 0.0024 0.0017
60 0.0012 0.0009 0.0006 0.0011 0.0005 0.0020 0.0010
• 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 0.0002 0.0017 0.0013
30 0.0006 0.0048 0.0025
35 0.0012 0.0079 0.0037
40 0.0023 0.0110 0.0051
45 0.0040 0.0141 0.0067
50 0.0208 0.0185 0.0092
55 0.0307 0.0479 0.0151
60 0.0438 0.0602 0.0174
• The police industrial disability rates are also used for Local Sheriff and Other Safety.
• 50% of the police industrial disability rates are used for School Police.
• 1% 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% will
become the non -industrial disability rate and 50% will become the industrial disability rate.
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 50
Service Retirement
Retirement rates vary by age, service, and formula, except for the Safety Half Pay at 55 and 2% at 55 formulas, where
retirement rates vary by age only.
Public Agency Miscellaneous 1.5% at age 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% at age 60
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.010 0.011 0.014 0.014 0.017 0.017
51 0.017 0.013 0.014 0.010 0.010 0.010
52 0.014 0.014 0.018 0.015 0.016 0.016
53 0.015 0.012 0.013 0.010 0.011 0.011
54 0.006 0.010 0.017 0.016 0.018 0.018
55 0.012 0.016 0.024 0.032 0.036 0.036
56 0.010 0.014 0.023 0.030 0.034 0.034
57 0.006 0.018 0.030 0.040 0.044 0.044
58 0.022 0.023 0.033 0.042 0.046 0.046
59 0.039 0.033 0.040 0.047 0.050 0.050
60 0.063 0.069 0.074 0.090 0.137 0.116
61 0.044 0.058 0.066 0.083 0.131 0.113
62 0.084 0.107 0.121 0.153 0.238 0.205
63 0.173 0.166 0.165 0.191 0.283 0.235
64 0.120 0.145 0.164 0.147 0.160 0.172
65 0.138 0.160 0.214 0.216 0.237 0.283
66 0.198 0.228 0.249 0.216 0.228 0.239
67 0.207 0.242 0.230 0.233 0.233 0.233
68 0.201 0.234 0.225 0.231 0.231 0.231
69 0.152 0.173 0.164 0.166 0.166 0.166
70 0.200 0.200 0.200 0.200 0.200 0.200
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 51
Service Retirement (continued)
Public Agency Miscellaneous 2% at age 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.014 0.014 0.017 0.021 0.023 0.024
51 0.013 0.017 0.017 0.018 0.018 0.019
52 0.013 0.018 0.018 0.020 0.020 0.021
53 0.013 0.019 0.021 0.024 0.025 0.026
54 0.017 0.025 0.028 0.032 0.033 0.035
55 0.045 0.042 0.053 0.086 0.098 0.123
56 0.018 0.036 0.056 0.086 0.102 0.119
57 0.041 0.046 0.056 0.076 0.094 0.120
58 0.052 0.044 0.048 0.074 0.106 0.123
59 0.043 0.058 0.073 0.092 0.105 0.126
60 0.059 0.064 0.083 0.115 0.154 0.170
61 0.087 0.074 0.087 0.107 0.147 0.168
62 0.115 0.123 0.151 0.180 0.227 0.237
63 0.116 0.127 0.164 0.202 0.252 0.261
64 0.084 0.138 0.153 0.190 0.227 0.228
65 0.167 0.187 0.210 0.262 0.288 0.291
66 0.187 0.258 0.280 0.308 0.318 0.319
67 0.195 0.235 0.244 0.277 0.269 0.280
68 0.228 0.248 0.250 0.241 0.245 0.245
69 0.188 0.201 0.209 0.219 0.231 0.231
70 0.229 0.229 0.229 0.229 0.229 0.229
Public Agency Miscellaneous 2.5% at age 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.014 0.017 0.027 0.035 0.046 0.050
51 0.019 0.021 0.025 0.030 0.038 0.040
52 0.018 0.020 0.026 0.034 0.038 0.037
53 0.013 0.021 0.031 0.045 0.052 0.053
54 0.025 0.025 0.030 0.046 0.057 0.068
55 0.029 0.042 0.064 0.109 0.150 0.225
56 0.036 0.047 0.068 0.106 0.134 0.194
57 0.051 0.047 0.060 0.092 0.116 0.166
58 0.035 0.046 0.062 0.093 0.119 0.170
59 0.029 0.053 0.072 0.112 0.139 0.165
60 0.039 0.069 0.094 0.157 0.177 0.221
61 0.080 0.077 0.086 0.140 0.167 0.205
62 0.086 0.131 0.149 0.220 0.244 0.284
63 0.135 0.135 0.147 0.214 0.222 0.262
64 0.114 0.128 0.158 0.177 0.233 0.229
65 0.112 0.174 0.222 0.209 0.268 0.273
66 0.235 0.254 0.297 0.289 0.321 0.337
67 0.237 0.240 0.267 0.249 0.267 0.277
68 0.258 0.271 0.275 0.207 0.210 0.212
69 0.117 0.208 0.266 0.219 0.250 0.270
70 0.229 0.229 0.229 0.229 0.229 0.229
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 52
Service Retirement (continued)
Public Agency Miscellaneous 2.7% at age 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.011 0.016 0.022 0.033 0.034 0.038
51 0.018 0.019 0.023 0.032 0.031 0.031
52 0.019 0.020 0.026 0.035 0.034 0.037
53 0.020 0.020 0.025 0.043 0.048 0.053
54 0.018 0.030 0.040 0.052 0.053 0.070
55 0.045 0.058 0.082 0.138 0.208 0.278
56 0.057 0.062 0.080 0.121 0.178 0.222
57 0.045 0.052 0.071 0.106 0.147 0.182
58 0.074 0.060 0.074 0.118 0.163 0.182
59 0.058 0.067 0.086 0.123 0.158 0.187
60 0.087 0.084 0.096 0.142 0.165 0.198
61 0.073 0.084 0.101 0.138 0.173 0.218
62 0.130 0.133 0.146 0.187 0.214 0.249
63 0.122 0.140 0.160 0.204 0.209 0.243
64 0.104 0.124 0.154 0.202 0.214 0.230
65 0.182 0.201 0.242 0.264 0.293 0.293
66 0.272 0.249 0.273 0.285 0.312 0.312
67 0.182 0.217 0.254 0.249 0.264 0.264
68 0.223 0.197 0.218 0.242 0.273 0.273
69 0.217 0.217 0.217 0.217 0.217 0.217
70 0.227 0.227 0.227 0.227 0.227 0.227
Public Agency Miscellaneous 3% at age 60
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.015 0.020 0.025 0.039 0.040 0.044
51 0.041 0.034 0.032 0.041 0.036 0.037
52 0.024 0.020 0.022 0.039 0.040 0.041
53 0.018 0.024 0.032 0.047 0.048 0.057
54 0.033 0.033 0.035 0.051 0.049 0.052
55 0.137 0.043 0.051 0.065 0.076 0.108
56 0.173 0.038 0.054 0.075 0.085 0.117
57 0.019 0.035 0.059 0.088 0.111 0.134
58 0.011 0.040 0.070 0.105 0.133 0.162
59 0.194 0.056 0.064 0.081 0.113 0.163
60 0.081 0.085 0.133 0.215 0.280 0.333
61 0.080 0.090 0.134 0.170 0.223 0.292
62 0.137 0.153 0.201 0.250 0.278 0.288
63 0.128 0.140 0.183 0.227 0.251 0.260
64 0.174 0.147 0.173 0.224 0.239 0.264
65 0.152 0.201 0.262 0.299 0.323 0.323
66 0.272 0.273 0.317 0.355 0.380 0.380
67 0.218 0.237 0.268 0.274 0.284 0.284
68 0.200 0.228 0.269 0.285 0.299 0.299
69 0.250 0.250 0.250 0.250 0.250 0.250
70 0.245 0.245 0.245 0.245 0.245 0.245
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 53
Service Retirement (continued)
Public Agency Miscellaneous 2% at age 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 0.005 0.008 0.012 0.015 0.019 0.031
53 0.007 0.011 0.014 0.018 0.021 0.032
54 0.007 0.011 0.015 0.019 0.023 0.034
55 0.010 0.019 0.028 0.036 0.061 0.096
56 0.014 0.026 0.038 0.050 0.075 0.108
57 0.018 0.029 0.039 0.050 0.074 0.107
58 0.023 0.035 0.048 0.060 0.073 0.099
59 0.025 0.038 0.051 0.065 0.092 0.128
60 0.031 0.051 0.071 0.091 0.111 0.138
61 0.038 0.058 0.079 0.100 0.121 0.167
62 0.044 0.074 0.104 0.134 0.164 0.214
63 0.077 0.105 0.134 0.163 0.192 0.237
64 0.072 0.101 0.129 0.158 0.187 0.242
65 0.108 0.141 0.173 0.206 0.239 0.300
66 0.132 0.172 0.212 0.252 0.292 0.366
67 0.132 0.172 0.212 0.252 0.292 0.366
68 0.120 0.156 0.193 0.229 0.265 0.333
69 0.120 0.156 0.193 0.229 0.265 0.333
70 0.120 0.156 0.193 0.229 0.265 0.333
Public Agency Fire Half Pay at age 55 and 2% at age 55
Age Rate
Age Rate
50 0.016 56 0.111
51 0.000 57 0.000
52 0.034 58 0.095
53 0.020 59 0.044
54 0.041 60 1.000
55 0.075
Public Agency Police Half Pay at age 55 and 2% at age 55
Age Rate
Age Rate
50 0.026 56 0.069
51 0.000 57 0.051
52 0.016 58 0.072
53 0.027 59 0.070
54 0.010 60 0.300
55 0.167
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 54
Service Retirement (continued)
Public Agency Police 2% at age 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.018 0.077 0.056 0.046 0.043 0.046
51 0.022 0.087 0.060 0.048 0.044 0.047
52 0.020 0.102 0.081 0.071 0.069 0.075
53 0.016 0.072 0.053 0.045 0.042 0.046
54 0.006 0.071 0.071 0.069 0.072 0.080
55 0.009 0.040 0.099 0.157 0.186 0.186
56 0.020 0.051 0.108 0.165 0.194 0.194
57 0.036 0.072 0.106 0.139 0.156 0.156
58 0.001 0.046 0.089 0.130 0.152 0.152
59 0.066 0.094 0.119 0.143 0.155 0.155
60 0.177 0.177 0.177 0.177 0.177 0.177
61 0.134 0.134 0.134 0.134 0.134 0.134
62 0.184 0.184 0.184 0.184 0.184 0.184
63 0.250 0.250 0.250 0.250 0.250 0.250
64 0.177 0.177 0.177 0.177 0.177 0.177
65 1.000 1.000 1.000 1.000 1.000 1.000
• These rates also apply to County Peace officers, Local Prosecutors, Local Sheriff, School Police, and Other
Safety.
Public Agency Fire 2% at age 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.054 0.054 0.056 0.080 0.064 0.066
51 0.020 0.020 0.021 0.030 0.024 0.024
52 0.037 0.037 0.038 0.054 0.043 0.045
53 0.051 0.051 0.053 0.076 0.061 0.063
54 0.082 0.082 0.085 0.121 0.097 0.100
55 0.139 0.139 0.139 0.139 0.139 0.139
56 0.129 0.129 0.129 0.129 0.129 0.129
57 0.085 0.085 0.085 0.085 0.085 0.085
58 0.119 0.119 0.119 0.119 0.119 0.119
59 0.167 0.167 0.167 0.167 0.167 0.167
60 0.152 0.152 0.152 0.152 0.152 0.152
61 0.179 0.179 0.179 0.179 0.179 0.179
62 0.179 0.179 0.179 0.179 0.179 0.179
63 0.179 0.179 0.179 0.179 0.179 0.179
64 0.179 0.179 0.179 0.179 0.179 0.179
65 1.000 1.000 1.000 1.000 1.000 1.000
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 55
Service Retirement (continued)
Public Agency Police 3% at age 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.019 0.053 0.045 0.054 0.057 0.061
51 0.002 0.017 0.028 0.044 0.053 0.060
52 0.002 0.031 0.037 0.051 0.059 0.066
53 0.026 0.049 0.049 0.080 0.099 0.114
54 0.019 0.034 0.047 0.091 0.121 0.142
55 0.006 0.115 0.141 0.199 0.231 0.259
56 0.017 0.188 0.121 0.173 0.199 0.199
57 0.008 0.137 0.093 0.136 0.157 0.157
58 0.017 0.126 0.105 0.164 0.194 0.194
59 0.026 0.146 0.110 0.167 0.195 0.195
60 0.155 0.155 0.155 0.155 0.155 0.155
61 0.210 0.210 0.210 0.210 0.210 0.210
62 0.262 0.262 0.262 0.262 0.262 0.262
63 0.172 0.172 0.172 0.172 0.172 0.172
64 0.227 0.227 0.227 0.227 0.227 0.227
65 1.000 1.000 1.000 1.000 1.000 1.000
• These rates also apply to County Peace officers, Local Prosecutors, Local Sheriff, School Police, and Other
Safety.
Public Agency Fire 3% at age 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.003 0.006 0.013 0.019 0.025 0.028
51 0.004 0.008 0.017 0.026 0.034 0.038
52 0.005 0.011 0.022 0.033 0.044 0.049
53 0.005 0.034 0.024 0.038 0.069 0.138
54 0.007 0.047 0.032 0.051 0.094 0.187
55 0.010 0.067 0.046 0.073 0.134 0.266
56 0.010 0.063 0.044 0.069 0.127 0.253
57 0.135 0.100 0.148 0.196 0.220 0.220
58 0.083 0.062 0.091 0.120 0.135 0.135
59 0.137 0.053 0.084 0.146 0.177 0.177
60 0.162 0.063 0.099 0.172 0.208 0.208
61 0.598 0.231 0.231 0.231 0.231 0.231
62 0.621 0.240 0.240 0.240 0.240 0.240
63 0.236 0.236 0.236 0.236 0.236 0.236
64 0.236 0.236 0.236 0.236 0.236 0.236
65 1.000 1.000 1.000 1.000 1.000 1.000
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 56
Service Retirement (continued)
Public Agency Police 3% at age 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.124 0.103 0.113 0.143 0.244 0.376
51 0.060 0.081 0.087 0.125 0.207 0.294
52 0.016 0.055 0.111 0.148 0.192 0.235
53 0.072 0.074 0.098 0.142 0.189 0.237
54 0.018 0.049 0.105 0.123 0.187 0.271
55 0.069 0.074 0.081 0.113 0.209 0.305
56 0.064 0.108 0.113 0.125 0.190 0.288
57 0.056 0.109 0.160 0.182 0.210 0.210
58 0.108 0.129 0.173 0.189 0.214 0.214
59 0.093 0.144 0.204 0.229 0.262 0.262
60 0.343 0.180 0.159 0.188 0.247 0.247
61 0.221 0.221 0.221 0.221 0.221 0.221
62 0.213 0.213 0.213 0.213 0.213 0.213
63 0.233 0.233 0.233 0.233 0.233 0.233
64 0.234 0.234 0.234 0.234 0.234 0.234
65 1.000 1.000 1.000 1.000 1.000 1.000
• These rates also apply to County Peace officers, Local Prosecutors, Local Sheriff, School Police, and Other
Safety.
Public Agency Fire 3% at age 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.095 0.048 0.053 0.093 0.134 0.175
51 0.016 0.032 0.053 0.085 0.117 0.149
52 0.013 0.032 0.054 0.087 0.120 0.154
53 0.085 0.044 0.049 0.089 0.129 0.170
54 0.038 0.065 0.074 0.105 0.136 0.167
55 0.042 0.043 0.049 0.085 0.132 0.215
56 0.133 0.103 0.075 0.113 0.151 0.209
57 0.062 0.048 0.060 0.124 0.172 0.213
58 0.124 0.097 0.092 0.153 0.194 0.227
59 0.092 0.071 0.078 0.144 0.192 0.233
60 0.056 0.044 0.061 0.131 0.186 0.233
61 0.282 0.219 0.158 0.198 0.233 0.260
62 0.292 0.227 0.164 0.205 0.241 0.269
63 0.196 0.196 0.196 0.196 0.196 0.196
64 0.197 0.197 0.197 0.197 0.197 0.197
65 1.000 1.000 1.000 1.000 1.000 1.000
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 57
Service Retirement (continued)
Public Agency Police 2% at age 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.040 0.040 0.040 0.040 0.040 0.080
51 0.028 0.028 0.028 0.028 0.040 0.066
52 0.028 0.028 0.028 0.028 0.043 0.061
53 0.028 0.028 0.028 0.028 0.057 0.086
54 0.028 0.028 0.028 0.032 0.069 0.110
55 0.050 0.050 0.050 0.067 0.099 0.179
56 0.046 0.046 0.046 0.062 0.090 0.160
57 0.054 0.054 0.054 0.072 0.106 0.191
58 0.060 0.060 0.060 0.066 0.103 0.171
59 0.060 0.060 0.060 0.069 0.105 0.171
60 0.113 0.113 0.113 0.113 0.113 0.171
61 0.108 0.108 0.108 0.108 0.108 0.128
62 0.113 0.113 0.113 0.113 0.113 0.159
63 0.113 0.113 0.113 0.113 0.113 0.159
64 0.113 0.113 0.113 0.113 0.113 0.239
65 1.000 1.000 1.000 1.000 1.000 1.000
• These rates also apply to County Peace officers, Local Prosecutors, Local Sheriff, School Police, and Other
Safety.
Public Agency Fire 2% at age 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, 2023 Appendix A
Actuarial Methods and Assumptions
Page 58
Service Retirement (continued)
Public Agency Police 2.5% at age 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.050 0.050 0.050 0.050 0.050 0.100
51 0.038 0.038 0.038 0.038 0.055 0.089
52 0.038 0.038 0.038 0.038 0.058 0.082
53 0.036 0.036 0.036 0.036 0.073 0.111
54 0.036 0.036 0.036 0.041 0.088 0.142
55 0.061 0.061 0.061 0.082 0.120 0.217
56 0.056 0.056 0.056 0.075 0.110 0.194
57 0.060 0.060 0.060 0.080 0.118 0.213
58 0.072 0.072 0.072 0.079 0.124 0.205
59 0.072 0.072 0.072 0.083 0.126 0.205
60 0.135 0.135 0.135 0.135 0.135 0.205
61 0.130 0.130 0.130 0.130 0.130 0.153
62 0.135 0.135 0.135 0.135 0.135 0.191
63 0.135 0.135 0.135 0.135 0.135 0.191
64 0.135 0.135 0.135 0.135 0.135 0.287
65 1.000 1.000 1.000 1.000 1.000 1.000
• These rates also apply to County Peace officers, Local Prosecutors, Local Sheriff, School Police, and Other
Safety.
Public Agency Fire 2.5% at age 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, 2023 Appendix A
Actuarial Methods and Assumptions
Page 59
Service Retirement (continued)
Public Agency Police 2.7% at age 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.050 0.050 0.050 0.050 0.050 0.100
51 0.040 0.040 0.040 0.040 0.058 0.094
52 0.038 0.038 0.038 0.038 0.058 0.083
53 0.038 0.038 0.038 0.038 0.077 0.117
54 0.038 0.038 0.038 0.044 0.093 0.150
55 0.068 0.068 0.068 0.091 0.134 0.242
56 0.063 0.063 0.063 0.084 0.123 0.217
57 0.060 0.060 0.060 0.080 0.118 0.213
58 0.080 0.080 0.080 0.088 0.138 0.228
59 0.080 0.080 0.080 0.092 0.140 0.228
60 0.150 0.150 0.150 0.150 0.150 0.228
61 0.144 0.144 0.144 0.144 0.144 0.170
62 0.150 0.150 0.150 0.150 0.150 0.213
63 0.150 0.150 0.150 0.150 0.150 0.213
64 0.150 0.150 0.150 0.150 0.150 0.319
65 1.000 1.000 1.000 1.000 1.000 1.000
• These rates also apply to County Peace officers, Local Prosecutors, Local Sheriff, School Police, and Other
Safety.
Public Agency Fire 2.7% at age 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 0.013 0.019
52 0.016 0.016 0.016 0.016 0.025 0.038
53 0.044 0.044 0.044 0.044 0.068 0.102
54 0.061 0.061 0.061 0.061 0.093 0.140
55 0.083 0.083 0.083 0.083 0.127 0.190
56 0.074 0.074 0.074 0.074 0.114 0.171
57 0.090 0.090 0.090 0.090 0.139 0.208
58 0.079 0.079 0.079 0.079 0.122 0.182
59 0.073 0.073 0.073 0.073 0.112 0.168
60 0.114 0.114 0.114 0.114 0.175 0.262
61 0.114 0.114 0.114 0.114 0.175 0.262
62 0.114 0.114 0.114 0.114 0.175 0.262
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, 2023 Appendix A
Actuarial Methods and Assumptions
Page 60
Service Retirement (continued)
Schools 2% at age 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.003 0.004 0.006 0.007 0.010 0.010
51 0.004 0.005 0.007 0.008 0.011 0.011
52 0.005 0.007 0.008 0.009 0.012 0.012
53 0.007 0.008 0.010 0.012 0.015 0.015
54 0.006 0.009 0.012 0.015 0.020 0.021
55 0.011 0.023 0.034 0.057 0.070 0.090
56 0.012 0.027 0.036 0.056 0.073 0.095
57 0.016 0.027 0.036 0.055 0.068 0.087
58 0.019 0.030 0.040 0.062 0.078 0.103
59 0.023 0.034 0.046 0.070 0.085 0.109
60 0.022 0.043 0.062 0.095 0.113 0.141
61 0.030 0.051 0.071 0.103 0.124 0.154
62 0.065 0.098 0.128 0.188 0.216 0.248
63 0.075 0.112 0.144 0.197 0.222 0.268
64 0.091 0.116 0.138 0.180 0.196 0.231
65 0.163 0.164 0.197 0.232 0.250 0.271
66 0.208 0.204 0.243 0.282 0.301 0.315
67 0.189 0.185 0.221 0.257 0.274 0.287
68 0.127 0.158 0.200 0.227 0.241 0.244
69 0.168 0.162 0.189 0.217 0.229 0.238
70 0.191 0.190 0.237 0.250 0.246 0.254
Schools 2% at age 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 0.004 0.007 0.010 0.011 0.013 0.015
53 0.004 0.008 0.010 0.013 0.014 0.016
54 0.005 0.011 0.015 0.018 0.020 0.022
55 0.014 0.027 0.038 0.045 0.050 0.056
56 0.013 0.026 0.037 0.043 0.048 0.055
57 0.013 0.027 0.038 0.045 0.050 0.055
58 0.017 0.034 0.047 0.056 0.062 0.069
59 0.019 0.037 0.052 0.062 0.068 0.076
60 0.026 0.053 0.074 0.087 0.097 0.108
61 0.030 0.058 0.081 0.095 0.106 0.119
62 0.053 0.105 0.147 0.174 0.194 0.217
63 0.054 0.107 0.151 0.178 0.198 0.222
64 0.053 0.105 0.147 0.174 0.194 0.216
65 0.072 0.142 0.199 0.235 0.262 0.293
66 0.077 0.152 0.213 0.252 0.281 0.314
67 0.070 0.139 0.194 0.229 0.255 0.286
68 0.063 0.124 0.173 0.205 0.228 0.255
69 0.066 0.130 0.183 0.216 0.241 0.270
70 0.071 0.140 0.196 0.231 0.258 0.289
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 61
Miscellaneous
Models
The valuation results are based on proprietary actuarial valuation models. The models are centralized and maintained by a
specialized team to achieve a high degree of accuracy and consistency. The Actuarial Office is responsible for confirming the
appropriaten ess of the inputs (such as participant data, actuarial methods and assumptions, and plan provisions) as well as
performing tests and validating the reasonableness of the output. The results of our models are independently confirmed by
parallel valuations p erformed by outside actuaries on a periodic basis using their models. In our professional judgment, our
actuarial valuation models produce comprehensive pension funding information consistent with the purposes of the valuation
and have no material limitati ons or known weaknesses.
Internal Revenue Code Section 415 (b)
The limitations on benefits imposed by Internal Revenue Code s ection 415(b) are taken into account in this valuation. Each year
the impact of any changes in this limitation other than assumed since the prior valuation is included and amortized as part of the
non-investment 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. The
Section 415(b) dollar limit for the 2023 calendar year is $2 65,000.
Internal Revenue Code Section 401(a)(17)
The limitations on compensation imposed by Internal R evenue Code s ection 401(a)(17) are taken into account in this valuation.
Each year, the impact of any changes in the compensation limitation other than assumed since the prior valuation is included
and amortized as part of the non -investment gain or loss base. The compensation limit for classic members for the 2023
calendar year is $330,000.
PEPRA Compensation Limits
The limitations on compensation for PEPRA members imposed by Government Code section 75 22.10 are taken into account in
this valuation. Each year, the impact of any changes in the compensation limitation other than assumed since the prior valuation
is included and amortized as part of the non-investment gain or loss base. The PEPRA compensati on limit for 2023 is $146,042
for members who participate in Social Security and $175,250 for those who do not. The limits are adjusted annually based on
changes to the CPI for all urban consumers.
Appendix B - Principal Plan Provisions
• Service Retirement 63
• Vested Deferred Retirement 65
• Non-Industrial Disability Retirement 65
• Industrial Disability Retirement 66
• Post-Retirement Death Benefit 67
• Form of Payment for Retirement Allowance 67
• Pre-Retirement Death Benefits 68
• Cost-of-Living Adjustments (COLA) 70
• Purchasing Power Protection Allowance (PPPA) 70
• Employee Contr ibutions 71
• Refund of Employee Contributions 71
• 1959 Survivor Benefit 72
CalPERS Actuarial Valuation – June 30, 2023 Appendix B
Miscellaneous Plan of the City of Palo Alto
Principal Plan Provisions
Page 63
The following i s 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’ Retire ment Law and the California Public Employees’ Pension Reform Act of 2013 . 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 Ca lPERS has reciprocity agreements). For employees hired into a plan with the 1.5% at age 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 attai nment 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 the 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 retire ment
at whole year ages:
Miscellaneo us Plan Formulas
Retirement
Age
1.5% at
age 65
2% at
age 60
2% at
age 55
2.5% at
age 55
2.7% at
age 55
3% at
age 60
PEPRA
2% at
age 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, 2023 Appendix B
Miscellaneous Plan of the City of Palo Alto
Principal Plan Provisions
Page 64
Classic Safety Plan Formulas
Retirement Age Half Pay at
age 55* 2% at age 55 2% at age 50 3% at age 55 3% at age 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% 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 age 57 2.5% at age 57 2.7% at age 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 co nverted 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 emplo yer 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 m onths’ pay under the 1.5% at age 65 formula. PEPRA
members have a limit on the annual compensation that can be used to calculate final compensation . The limits are adjusted
annually based on changes to the CPI for all urban consumers.
• PEPRA benefit formul as have no Social Security offsets and Social Security coverage is optional . For Classic benefit
formulas, employees must be covered by Social Security with the 1.5% at age 65 formula. Social Security is optional for all
other Classic 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 th an
$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 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% of final compensation.
CalPERS Actuarial Valuation – June 30, 2023 Appendix B
Miscellaneous Plan of the City of Palo Alto
Principal Plan Provisions
Page 65
Vested Deferred Retirement
Eligibility for Deferred Status
CalPERS members becomes eligible for a deferred vested retirement benefit when they leave employment, keep their
contribution account balance on deposit with CalPERS, and have earned at least 5 years of credited service (total service
across all CalPERS employers, and with certain other retirement systems with which CalPERS has reciproci ty 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 o f age 50 (55 for employees hired into a 1.5% at
age 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 Disability Retirement
Eligibility
A CalPERS member is eligible for Non -Industrial (non-job related) 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 w ith
which CalPERS has reciprocity agreements). There is no special age requirement. Disabled means the member is unable to
perform their job because of an illness or injury, which is expected to be permanent or to last indefinitely. The illness or injury
does n ot 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 allo wance equal to 1.8% 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
33⅓% of final compensation.
CalPERS Actuarial Valuation – June 30, 2023 Appendix B
Miscellaneous Plan of the City of Palo Alto
Principal Plan Provisions
Page 66
Improved Benefit
Employers have the option of providing the improved Non -Industrial Disability Retirement benefit. This benefit provides a
monthly allowance equal to 30% of final compensation for the first 5 years of service, plus 1% for each additional year of s ervice
to a maximum of 50% of final compensation.
Members who are eligible for a larger service retirement benefit may choose to receive that benefit in lieu of a disability b enefit.
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 wh o
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 Disability Retirement
This is a standard benefit fo r Safety members except those described in Section 20423.6. For excluded Safety members and all
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 (job related) 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 Disabil ity Retirement benefit is a monthly allowance equal to 50% of final compensation.
Increased Benefit (75% of Final Compensation)
The increased Industrial Disability Retirement benefit is a monthly allowance equal to 75% of final compensation for total
dis ability.
Improved Benefit (50% to 90% 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% or greater, with a m aximum of 90%) 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 in dustrial disability retirement
benefit, the member may choose to receive the larger benefit.
CalPERS Actuarial Valuation – June 30, 2023 Appendix B
Miscellaneous Plan of the City of Palo Alto
Principal Plan Provisions
Page 67
Post-Retirement Death Benefit
Standard Lump Sum Payment
Upon the death of a retiree, a one -time lum p sum payment of $500 will be made to the retiree’s designated survivor(s), or to the
retiree’s estate. The lump sum payment amount increases to $2,000 for any death occurring on or after July 1, 2023 due to SB
1168.
Optional Lump Sum Payment
In lieu of the standard lump sum death benefit, e mployers have the option of providing a lump sum death benefit of $600,
$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 r etiree
may choose to provide for a portion of their 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 their 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 a modified Classic formula, 25% of the retirement allowance will
automatically be continued to certain statutory beneficiaries upon the death of the retiree, without a reduction in the retir ee’s
allowance. For retirement allowances with respect to service subject to a PEPRA formula or a full or supplemental Classic
formula, 50% 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% or 50% 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 ag e 18;
or, if no eligible child(ren), to a qualifying dependent parent) for the rest of their lifetime. This benefit will not be discontinued in
the event the spouse remarries.
The remaining 75% or 50% 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 sam e 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, 2023 Appendix B
Miscellaneous Plan of the City of Palo Alto
Principal Plan Provisions
Page 68
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 survi vor 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 inte rest is credited
annually at the greater of 6% or the prevailing discount rate through the date of death, 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 PEPRA Safety members and age 52 for PEPRA Miscellaneous members, and has at
least 5 years of credited service (total service across all Ca lPERS 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 mean s 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 their 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 o f 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, 2023 Appendix B
Miscellaneous Plan of the City of Palo Alto
Principal Plan Provisions
Page 69
Optional Settlement 2 Death Benefit
This is an optional benefit.
Eligibility
An employee’s eligible survivor may receive the Optional Settlement 2 Death benefit if the member dies while actively employed,
has attained at least age 50 for classic and PEPRA Safety members and age 52 for PEPRA Miscellaneous 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 2 D eath benefit.
Benefit
The Optional Settlement 2 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 their death and elected 100% to continue to the eligible survivor after the
member’s death. The allowance is payable to the surviving spouse until death , at which time it is continued to any unmarried
child(ren), 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 except those described in Section 20423.6. For excluded Safety members and all
Miscellaneous members, employers have the option of providing this benefit.
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 el igible 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 ch ild(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 % of final compensation and will be increased whenever the
com pensation 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% of final compensation
• if 2 eligible children: 20.0% of final compensation
• if 3 or more eligible children: 25.0% of final compensation
CalPERS Actuarial Valuation – June 30, 2023 Appendix B
Miscellaneous Plan of the City of Palo Alto
Principal Plan Provisions
Page 70
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
i s 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 receive d
had the member retired on the d ate of their death and elected Optional Settlement 2. (A retiree who elects Optional Settlement 2
receives an allowance that has been reduced so that it will continue to be paid after their death to a surviving beneficiary.) If the
member has not yet attai ned 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 to the surviving spouse until death , at which time it is
continued to any unmarrie d child(ren), 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%. Annual adjustments are calculated by first
determining the lesser of 1) 2% compounded from the end of the year of retirement or 2) actual rate of price inflation. The
resulting increase is divided by the total increase provided in prior years. For any given year, the COLA adjustment may be l ess
than 2% (when the rate of price inflation is low), may be gre ater than the rate of price inflation (when the rate of price inflation is
low after several years of high price inflation) or may even be greater than 2% (when price inflation is high after several years of
low price inflation).
Improved Benefit
Employers have the option of providing a COLA of 3 %, 4%, or 5%, determined in the same manner as described above for the
standard 2 % COLA. An improved COLA is not available with the 1.5% at age 65 formula.
Purchasing Power Protection Allowance (PPPA)
Retirement and survivor allowances are protected against price inflation by PPPA. PPPA benefits are cost-of-living adjustments
that are intended to maintain an individual’s allowance at 80 % of the initial allowance at retirement adjusted for price inflation
since retirement. The PPPA benefit will be coordinated with other cost -of-living adjustments provided under the plan.
CalPERS Actuarial Valuation – June 30, 2023 Appendix B
Miscellaneous Plan of the City of Palo Alto
Principal Plan Provisions
Page 71
Employee Contribution s
Each employee contributes toward their retirement based upon the retirement formula. The standard employee contribution is as
described below.
• The percent contributed below the monthly compensation breakpoint is 0 %.
• The monthly compensation breakpoint is $0 for all PEPRA members and Classic members covered by a full or
supplemental formula and $133.33 for Classic members covered by a 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 age 65 2%
Miscellaneous, 2% at age 60 7%
Miscellaneous, 2% at age 55 7%
Miscellaneous, 2.5% at age 55 8%
Miscellaneous, 2.7% at age 55 8%
Miscellaneous, 3% at age 60 8%
Miscellaneous, 2% at age 62 50% of the Total Normal Cost
Miscellaneous, 1.5% at age 65 50% of the Total Normal Cost
Safety, Half Pay at age 55 Varies by entry age
Safety, 2% at age 55 7%
Safety, 2% at age 50 9%
Safety, 3% at age 55 9%
Safety, 3% at age 50 9%
Safety, 2% at age 57 50% of the Total Normal Cost
Safety, 2.5% at age 57 50% of the Total Normal Cost
Safety, 2.7% at age 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 CSU system may elect reduced contribution rates, in which case the offset is $317 and the
contribution rate is 6 % 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 %.
Refund of Employee Contributions
If the member’s service with the emplo yer 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 their employee contributions, which are credited with 6 %
interest compounded annually.
CalPERS Actuarial Valuation – June 30, 2023 Appendix B
Miscellaneous Plan of the City of Palo Alto
Principal Plan Provisions
Page 72
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 choos e 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.
Appendix C - Participant Data
• Summary of Valuation Data 74
• Active Members 75
• Transferred and Separated Members 76
• Retired Members and Beneficiaries 77
CalPERS Actuarial Valuation – June 30, 2023 Appendix C
Miscellaneous Plan of the City of Palo Alto
Participant Data
Page 74
Summary of Valuation Data
June 30, 2022 June 30, 2023
1. Active Members
a) Counts 712 757
b) Average Attained Age
45.72 45.55
c) Average Entry Age to Rate Plan 34.98 35.29
d) Average Years of Credited Service 10.80 10.26
e) Average Annual Covered Pay $115,440 $121,474
f) Annual Covered Payroll 82,193,044 91,956,169
g) Projected Annual Payroll for Contribution Year 89,292,382 99,898,787
h) Present Value of Future Payroll 741,723,892 829,447,506
2. Transferred Members
a) Counts 387 392
b) Average Attained Age 46.05 45.76
c) Average Years of Credited Service 3.57 3.58
d) Average Annual Covered Pay $134,373 $137,723
3. Separ ated Members
a) Counts 479 488
b) Average Attained Age 47.49 47.65
c) Average Years of Credited Service 2.95 3.03
d) Average Annual Covered Pay $77,863 $80,177
4. Retired Members and Beneficiaries
a) Counts 1,320 1,348
b) Average Attained Age 70.84 71.13
c) Average Annual Benefits $39,406 $40,011
d) Total Annual Benefits $52,016,069 $53,934,949
5. Active to Retired Ratio [(1a) ÷ (4a)] 0.54 0.56
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, 2023 Appendix C
Miscellaneous Plan of the City of Palo Alto
Participant Data
Page 75
Active Members
Counts of members included in the valuation are counts of the recor ds 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 20-24 25+ Total
15-24 15 0 0 0 0 0 15
25-29 49 4 0 0 0 0 53
30-34 68 38 1 0 0 0 107
35-39 40 29 16 3 0 0 88
40-44 31 34 23 9 10 2 109
45-49 22 23 19 17 18 6 105
50-54 17 18 13 12 16 17 93
55-59 17 15 15 12 18 15 92
60-64 12 9 10 10 9 16 66
65 and Over 4 4 3 8 5 5 29
All Ages 275 174 100 71 76 61 757
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 20-2 4 25+
Average
Salary
15-24 $90,764 $0 $0 $0 $0 $0 $90,764
25-29 96,692 117,141 0 0 0 0 98,235
30-34 98,103 113,140 123,631 0 0 0 103,681
35-39 106,799 133,129 130,402 156,793 0 0 121,472
40-44 108,546 128,444 131,233 123,530 127,958 116,517 122,704
45-49 113,386 133,550 130,668 119,930 148,607 142,167 129,672
50-54 104,817 158,463 132,534 138,949 140,338 166,371 140,842
55-59 102,358 122,363 143,864 129,303 131,937 144,841 128,615
60-64 99,159 159,427 150,315 128,743 116,243 124,715 128,136
65 and Over 102,117 81,540 99,438 131,994 90,085 137,464 111,263
Average $101,898 $129,403 $133,935 $129,343 $132,518 $143,766 $121,474
CalPERS Actuarial Valuation – June 30, 2023 Appendix C
Miscellaneous Plan of the City of Palo Alto
Participant Data
Page 76
Transferred and Separated 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 20-24 25+ Total
Average
Salary
15-24 1 0 0 0 0 0 1 $106,305
25-29 12 1 0 0 0 0 13 107,388
30-34 44 6 0 0 0 0 50 111,675
35-39 52 10 1 0 0 0 63 132,736
40-44 45 9 10 1 1 0 66 138,410
45-49 51 10 3 2 1 2 69 145,636
50-54 38 12 0 5 0 0 55 156,918
55-59 26 5 1 1 0 0 33 160,624
60-64 20 7 3 0 0 0 30 127,690
65 and Over 10 1 1 0 0 0 12 132,760
All Ages 299 61 19 9 2 2 392 $137,723
Distribution of Separated 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 20-2 4 25+ Total
Average
Salary
15-24 1 0 0 0 0 0 1 $60,658
25-29 13 1 0 0 0 0 14 82,132
30-34 47 3 2 0 0 0 52 86,209
35-39 47 12 1 1 0 0 61 89,807
40-44 62 12 5 0 1 0 80 83,656
45-49 64 9 6 0 0 1 80 83,184
50-54 50 16 3 0 1 0 70 86,305
55-59 43 13 2 0 0 1 59 68,049
60-64 38 4 0 1 0 0 43 64,491
65 and Over 22 6 0 0 0 0 28 63,506
All Ages 387 76 19 2 2 2 488 $80,177
CalPERS Actuarial Valuation – June 30, 2023 Appendix C
Miscellaneous Plan of the City of Palo Alto
Participant Data
Page 77
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 1 1
30 -34 0 0 1 0 0 1 2
35 -39 0 0 1 0 0 3 4
40 -44 0 0 1 0 0 1 2
45 -49 0 0 3 0 0 1 4
50 -54 32 2 2 0 0 0 36
55 -59 100 6 2 1 0 0 109
60 -64 203 11 2 0 0 13 229
65 -69 227 8 1 0 0 13 249
70 -74 211 9 0 0 0 22 242
75 -79 198 8 2 0 0 18 226
80 -84 108 2 1 0 0 23 134
85 and Over 67 4 0 0 0 39 110
All Ages 1,146 50 16 1 0 135 1,348
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 $38,966 $38,966
30-34 0 0 218 0 0 15,700 7,959
35-39 0 0 275 0 0 9,713 7,353
40-44 0 0 338 0 0 13,290 6,814
45-49 0 0 725 0 0 116,899 29,768
50-54 23,767 6,119 1,320 0 0 0 21,540
55-59 38,997 17,537 753 18,628 0 0 36,927
60-64 45,471 14,908 1,079 0 0 18,012 42,056
65-69 47,545 13,880 13,279 0 0 24,152 45,104
70-74 46,700 16,756 0 0 0 25,000 43,613
75-79 45,198 21,338 10,859 0 0 29,027 42,761
80-84 33,929 32,561 2,208 0 0 32,558 33,437
85 and Over 34,793 20,519 0 0 0 24,187 30,514
All Ages $43,178 $17,224 $2,907 $18,628 $0 $26,124 $40,011
CalPERS Actuarial Valuation – June 30, 2023 Appendix C
Miscellaneous Plan of the City of Palo Alto
Participant Data
Page 78
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 301 2 4 0 0 50 357
5-9 211 2 1 1 0 23 238
10-14 269 8 5 0 0 25 307
15-19 181 12 3 0 0 16 212
20-24 113 7 1 0 0 11 132
25-29 42 8 2 0 0 3 55
30 and Over 29 11 0 0 0 7 47
All Years 1,146 50 16 1 0 135 1,348
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 $44,201 $9,331 $1,103 $0 $0 $27,580 $41,195
5-9 38,972 14,402 338 18,628 0 23,146 36,989
10-14 53,653 10,870 310 0 0 31,133 49,836
15-19 44,466 18,586 11,662 0 0 23,443 40,950
20-24 36,359 23,893 1,853 0 0 24,690 34,464
25-29 20,721 23,696 1,685 0 0 3,124 19,502
30 and Over 17,040 13,356 0 0 0 25,857 17,491
All Years $43,178 $17,224 $2,907 $18,628 $0 $26,124 $40,011
* 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 C -1 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 - Glossary
CalPERS Actuarial Valuation – June 30, 2023 Appendix D
Mis cellaneous Plan of the City of Palo Alto
Glossary
Page 80
Glossary
Accrued Liability (Actuarial Accrued Liability)
The portion of the Present Value of Benefits allocated to prior years. It can also be expressed as the Present Value of
Benefits minus the present value of future Normal Cost. Different actuarial cost methods and different assumptions will lead
to different measures of Accru ed Liability.
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, dis ability, and
retirement rates. Economic assumptions include discount rate, wage inflation , and price inflation.
Actuarial Methods
Procedures employed by actuaries to achieve certain funding goals of a pension plan. Actuarial methods include an
actuarial cost method, an amortization policy, and an asset valuation method.
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 in plan provisions.
Actuary
A business professional proficient in mathematics and statistics who measures and manages risk. A public retirement
system actuary in California perform s actuarial valuatio ns necessary to properly fund a pension plan and disclose its
liabilities and must satisfy the qualification s tandards for actuaries issuing s tatements of actuarial opinion in the United
States with regard to pensions.
Amortization Bases
Separate payment schedules for different portions of the Unfunded Accrued Liability (UAL). The total UAL of a rate plan can
be segregated by cause. The impact of such individual causes on the UAL are quantified at the time of their occurrence,
resulting in new amortization bases. Each base is separately amortized and paid for over a specific period of time.
Generally, in an actuarial valuation, the separate bases consist of changes in UAL due to contract amendments, actuarial
assumption changes, method changes, and/or experience gains and losses.
Amortization Period
The number of years required to pay off an Amortization Base.
Classic Member (under PEPRA)
A member who joined a public retirement system prior to January 1, 2013 , and who is not defined as a new member under
PEPRA. (See definition of New Member below.)
Discount Rate
The rate used to discount the expected future benefit payments to the valuation date to determine the Projected Value of
Benefits. Different discount rates will produce different measures of the Projected Value of Benefits. The discount rate for
funding purposes is based on the assumed long -term rate of return on plan assets, net of investment and administrative
expenses. This rate is called the “actuar ial interest rate” in Section 20014 of the California Public Employees’ Retirement
Law.
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 Actuarial Cost Method
An actuarial cost method that allocates the cost of the projected benefits on an individual basis as a level percent of
earnings for the individual between entry age and retirement age. This method yields a total normal cost rate, expressed as
a percentage of payroll, which is designed to remain level throughout the member’s career.
Fresh Start
A Fresh Start is when multiple amortization bases are combined into a single base and amortized over a new Amortizat ion
Period.
CalPERS Actuarial Valuation – June 30, 2023 Appendix D
Mis cellaneous Plan of the City of Palo Alto
Glossary
Page 81
Glossary (continued)
Funded Ratio
Defined as the Market Value of Assets divided by the Accrued Liability. Different actuarial cost methods and different
assumptions will lead to different measures of Funded Ratio. The Funded Ratio with the Accrued Liability equal to the
funding target is a measure of how well funded a rate plan is. A ratio greater than 100% means the rate plan has more
assets than the funding target and the employer need only contribute the Normal Cost . A ratio less than 100% means
assets are less than the funding target and contributions in addition to Normal Cost are required.
Funded Status
Any comparison of a particular measure of plan assets to a particular measure of pension obligations. The methods and
assumptions used to calculate a funded status should be consistent with the purpose of the measurement.
Funding Target
The Accrued Liability measure upon which the funding requirements are based. The funding target is the Accrued Liability
under the Entry Age Actuari al Cost Method using the assumptions adopted by the board.
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.
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 n ot subject
to reciprocity with another public retirement system.
Normal Cost
The portion of the Present Value of Benefits allocated to the upcoming fiscal year for active employees. Different actuarial
cost methods and different assumptions will lead to d ifferent measures of Normal Cost. The Normal Cost under the Entry
Age Actuarial Cost Method , using the assumptions adopted by the board , plus the required amortization of the UAL, if any,
make up the required contributions.
PEPRA
The California Public Employees’ Pension Reform Act of 2013 .
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.
Traditional Unit Credit Actuarial Cost Method
An actuarial cost method that sets the Accrued Liability equal to the Present Value of Benefits assuming no future pay
increases or service accruals. The Traditional Unit Credit Cost Method is used to measure the accrued liability on a
termina tion basis.
Unfunded Accrued Liability (UAL)
The Accrued Liability minus the Market Value of Assets. If the UAL for a rate plan is positive, the employer is required to
make contributions in excess of the Normal Cost.
California Public Employees’ Retirement System
Actuarial Office
400 Q Street, Sacramento, CA 95811 | Phone: (916) 795 -3000 | Fax: (916) 795-2744
888 CalPERS (or 888-225-7377) | TTY: (877) 249 -7442 | www.calpers.ca.gov
July 2024
Safety Plan of the City of Palo Alto (CalPERS ID: 6373437857)
Annual Valuation Report as of June 30, 2023
Dear Employer,
Attached to this letter is the June 30, 2023, actuarial valuation report for the rate plan noted above. Provided in this report is
the determination of the minimum required employer contributions for fiscal year (FY) 2025-26. In addition, the report
contains important information regarding the current financial status of the plan as well as projections and risk measures to aid
in planning for the future.
Required Contributions
The table below shows the minimum required employer contributions and the PEPRA member contribution rates for FY 2025 -26
along with an estimate of the employer contribution requirements for FY 2026-27. Employee contributions other than cost
sharing (whether paid by the employer or the employe e) are in addition to the results shown below. The required employer
and member contributions in this report do not reflect any cost sharing arrangement between the agency and the
employees.
Fiscal Year Employer Normal
Cost Rate
Employer Amortization of
Unfunded Accrued Liability
PEPRA Member
Contribution Rate
2025-26 20.61% $18,545,666 11.75%
Projected Results
2026-27 20.0% $19,605,000 TBD
The actual investment return for FY 2023-24 was not known at the time this report was prepared. The projections above assume
the investment return for that year would be 6.8%. To the extent the actual investment return for FY 2023-24 differs from 6.8%,
the actual contribution requirements for FY 2026-27 will differ from those shown above. For additional detail s regarding the
assumptions and methods used for these projections, please refer to Projected Employer Contributions . This section also
contains projected required contributions through FY 2030-31.
Report Enhancements
A number of enhancements were made to the report this year to ease navigation and allow the reader to find specific
information more quickly. The tables of contents are now “clickable .” This is true for the main table of contents that follows the
title page and the intermediate tables of contents at the beginning of sections. The Adobe navigation pane on the left can al so
be used to skip to specific exhibits .
CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 2
There are a number of links throughout the document in blue text. Links that are internal to the document are not underlined,
while underlined links will take you to the CalPERS website. Examples are shown below.
Internal Bookmarks CalPERS Website Link s
Required Employer Contributions Required Employer Contribution Search Tool
Member Contribution Rates Public Agency PEPRA Mem ber Contribution Rates
Summary of Key Valuation Results Pension Outlook Overview
Funded Status – Funding Policy Basis Interactive Summary of Public Agency Valu ation Results
Projected Employer Contributions Public Agency Actuarial Valuation Reports
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 any changes on the required contributions are included in the Reconciliation
of Required Employer Contributions section.
Questions
A CalPERS actuary is available to answer questions about th is report. Other questions may be directed to the Customer Contact
Center at 888 CalPERS (or 888-225-7377).
Sincerely,
Matthew Biggart, ASA, MAAA
Actuary, CalPERS
Randall Dziubek, ASA, MAAA
Deputy Chief Actuary, Valuation Services , CalPERS
Scott Terando , ASA, EA, MAAA, FCA, CFA
Chief Actuary, CalPERS
California Public Employees’ Retirement System
Actuarial Valuation for the
Safety Plan
of the City of Palo Alto
as of June 30, 2023
(CalPERS ID: 6373437857)
(Rate Plan ID: 5080)
Required Contributions for Fiscal Year
July 1, 2025 — June 30, 2026
CY Fin Job Instance ID: 440173 PY Fin Job Instance ID: 416684 Report ID: 440203
Table of Contents
Actuarial Certification .......................................................................................................................................................................................1
Highlights and Executive Summary .............................................................................................................................................................2
Introduction .......................................................................................................................................................................................................3
Purpose .............................................................................................................................................................................................................3
Summary of Key Valuation Results ..............................................................................................................................................................4
Changes Since the Prior Year’s Valuation ..................................................................................................................................................5
Subsequent Events .........................................................................................................................................................................................5
Assets ...................................................................................................................................................................................................................6
Reconciliation of the Market Value of Assets ..............................................................................................................................................7
Asset Allocation................................................................................................................................................................................................8
CalPERS History of Investment Returns .....................................................................................................................................................9
Liabilities and Contributions ....................................................................................................................................................................... 10
Determination of Required Contributions.................................................................................................................................................. 11
Development of Accrued and Unfunded Liabilities ................................................................................................................................. 12
Required Employer Contributions .............................................................................................................................................................. 13
Member Contribution Rates ........................................................................................................................................................................ 14
Funded Status – Funding Policy Basis ..................................................................................................................................................... 15
Additional Employer Contributions............................................................................................................................................................. 16
Projected Employer Contributions ............................................................................................................................................................. 17
(Gain)/Loss Analysis 6/30/22 – 6/30/23 .................................................................................................................................................... 18
Schedule of Amortization Bases ................................................................................................................................................................ 19
Amortization Schedule and Alternatives ................................................................................................................................................... 21
Reconciliation of Required Employer Contributions ................................................................................................................................ 23
Employer Con tribution History .................................................................................................................................................................... 24
Funding History ............................................................................................................................................................................................. 24
Normal Cost by Benefit Group .................................................................................................................................................................... 25
Risk Analysis ................................................................................................................................................................................................... 26
Future Investment Return Scenarios ......................................................................................................................................................... 27
Discount Rate Sensitivity............................................................................................................................................................................. 28
Mortality Rate Sensitivity ............................................................................................................................................................................. 28
Maturity Measures ........................................................................................................................................................................................ 29
Maturity Measures History........................................................................................................................................................................... 30
Funded Status – Termination Basis .......................................................................................................................................................... 31
Funded Status – Low-Default-Risk Basis ................................................................................................................................................. 32
Plan’s Major Benefit Options ....................................................................................................................................................................... 33
Appendix A - Actuarial Methods and Assumptions .............................................................................................................................. 38
Appendix B - Principal Plan Provisions .................................................................................................................................................... 63
Appendix C - Participant Data ..................................................................................................................................................................... 74
Appendix D - Glossary .................................................................................................................................................................................. 80
CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 1
Actuarial Certification
It is our opinion that the valuation has been performed in accordance with generally accepted actuarial principles as well as the
applicable Standards of Practice promulgated by the Actuarial Standards Board . While this report is intended to be complete,
our office is available to answer questions as needed. All of the undersigned are actuaries who satisfy the Qualification
Standards for Actuaries I ssuing Statements of Actuarial Opinion in the United States of the American Academy of Actuaries with
regard to pensions.
Actuarial Methods and Assumptions
It is our opinion that the assumptions and methods, as recommended by the Chief Actuary and adopted by the CalPERS Board
of Administration, are internally consistent and reasonable for this plan.
Randall Dziubek, ASA, MAAA
Deputy Chief Actuary, Valuation Services , CalPERS
Scott Terando , ASA, EA, MAAA, FCA, CFA
Chief Actuary, CalPERS
Actuarial Data and Rate Plan Results
To the best of my knowledge and having relied upon the attestation above that the actuarial methods and assumptions are
reasonable, 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 and satisfies the actuarial valuation requirements of Government Code
section 7504. This valuation and related validation work w as performed by the CalPERS Actuarial Office. The valuation was
based on the member and financial data as of June 30, 2023 , provided by the various CalPERS databases and the benefits
under this plan with CalPERS as of the date this report was pr oduced.
Matthew Biggart, ASA, MAAA
Actuary, CalPERS
Highlights and Executive Summary
• Introduction 3
• Purpose 3
• Summary of Key Valuation Results 4
• Changes Since the Prior Year’s Valuation 5
• Subsequent Events 5
CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 3
Introduction
This report presents the results of the June 30, 2023 , 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 mi nimum required contributions
for fiscal year (FY) 2025-26.
Purpose
This report documents the results of the actuarial valuation prepared by the CalPERS Actuarial Office using data as of June 30,
2023. The purpose of the valuation is to:
• Set forth the assets and accrued liabilities of this rate plan as of June 30, 2023 ;
• Determine the minimum required employer contributions for this rate plan for FY July 1, 2025, through June 30, 2026;
• Determine the required member contribution rate for FY July 1, 2025, through June 30, 2026 , for employees subject to the
California Public Employees' Pension Reform Act of 2013 (PEPRA); and
• Provide actuarial information as of June 30, 2023 , to the CalPERS Board of Administration (board) 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 the CalPERS
website (www.calpers.ca.gov).
The measurements shown in this actuarial valuation may not be applicable for other purposes. The agency should contact a
CalPERS 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 th e following: plan experience differing from that anticipated by the economic or demographic assumptions; changes
in economic or demographic assumptions; changes in actuarial policies; changes in plan provisions or applicable law; and
differences between th e required contributions determined by the valuation and the actual contributions made by the agency.
Assessment and Disclosure of Risk
This report includes the following risk disclosures consistent with the guidance of Actuarial Standards of Practice No . 51 and
recommended by the California Actuarial Advisory Panel (CAAP) in the Model Disclosure Elements document:
• A “Scenario Test,” projecting future results under different investment income returns.
• A “Sensitivity Analysis,” showing the impact on current valuation results using alternative discount rates of 5.8% and
7.8%.
• A “Sensitivity Analysis,” showing the impact on current valuation results assuming rates of mortality are 10% lower or
10% higher than our current post-retirement mortality assumptions adopted in 2021.
• Plan maturity measures indicating how sensitive a plan may be to the risks noted above.
CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 4
Summary of Key Valuation Results
Below is a brief summary of key valuation results along with page references where more detailed information can be found .
Required Employer Contributions — page 13
Fiscal Year
2024-25
Fiscal Year
2025-26
Employer Normal Cost Rate 22.21% 20.61%
Unfunded Accrued Liability (UAL) Contribution Amount $16,551,519 $18,545,666
Paid either as
Option 1) 12 Monthly Payments of $1,379,293 $1,545,472
Option 2) Annual Prepayment in July $16,015,933 $17,945,551
Member Contribution Rates — page 14
Fiscal Year
2024-25
Fiscal Year
2025-26
Classic Member Contribution Rate 9.00% 9.00%
PEPRA Member Contribution Rate 11.75% 11.75%
Projected Employer Contributions — page 17
Fiscal Year Normal Cost
(% of payroll)
Annual
UAL Payment
2026-27 20.0% $19,605,000
2027-28 19.4% $20,526,000
2028-29 18.7% $22,300,000
2029-30 18.1% $22,831,000
2030-31 17.5% $23,316,000
Funded Status — Funding Policy Basis — page 15
June 30, 2022 June 30, 2023
Entry Age Accrued Liability (AL) $531,613,942 $555,403,195
Market Value of Assets (MVA) 318,801,170 331,696,065
Unfunded Accrued Liability (UAL) [AL – MVA] $212,812,772 $223,707,130
Funded Ratio [MVA ÷ AL] 60.0% 59.7%
Summary of Valuation Data — Page 75
June 30, 2022 June 30, 2023
Active Member Count 156 164
Annual Covered Payroll $25,004,764 $27,941,899
Transferred Member Count 61 61
Separated Member Count 56 65
Retired Members and Beneficiaries Count 453 458
CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 5
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. For rate plans that are not in a risk pool (non -pooled), benefit changes by contract
amendment are generally included in the first valuation that is prepared after the amendment becomes effective, even if the
effective date of the amendment is after the valuation date.
Please refer to the Plan’s Major Benefit Options and Appendix B - Principal Plan Provisions 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 6/30/22 – 6/30/23 and the effect on the employer contribution is shown in the Reconcil iation 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
There are no significant changes to the actuarial methods or assumptions for the June 30, 2023, actuarial valuation.
New Disclosure Items
In December 2021, the Actuarial Standards Board issued a revision of Actuarial Standard of Practice No. 4 (ASOP 4) requiring
actuaries to disclose a low-default-risk obligation measure (LDROM) of the benefits earned. This information is shown in a new
exhibit, Funded Status – Low-Default-Risk Basis.
Subsequent Events
This actuarial valuation report reflects fund investment return through June 30, 2023, as well as statutory changes, regulatory
changes and board actions through January 202 4.
During the time period between the valuation date and the p ublication of this report, inflation has been higher than the expected
inflation of 2.3% per annum. Since inflation influences cost-of-living increases for retirees and beneficiaries and active member
pay increases, higher inflation is likely to put at lea st some upward pressure on contribution requirements and downward
pressure on the funded status in the June 30, 202 4, valuation. The actual impact of higher inflation on future valuation results
will depend on, among other factors , how long higher inflatio n persists.
The 2023 annual benefit limit under Internal Revenue Code (IRS) section 415(b) and annual compensation limits under IRS
section 401(a)(17) and Government Code section 7522.10 were use d for this valuation and are assumed to increase 2.3% per
year based on the price inflation assumption. The actual 2024 limits , determined in October 2023, are not reflected.
On April 16, 2024, the board took action to modify the Funding Risk Mitigation Policy to remove the automatic change to the
discount rate when the investment return exceeds various thresholds. Rather than an automatic change to the discount rate, a
board discussion would be placed on the calendar. The 95 th percentile return in the Future Investment Return Scenarios exhibit
in this report has not been modified and still reflects the projected contribution requirements associated with a reduction i n the
discount rate.
To the best of our knowledge, there have been no other subsequent events that could materially affect current or future
certifications rendered in this report.
Assets
• Reconciliation of the Market Value of Assets 7
• Asset Allocation 8
• CalPERS History of Investment Returns 9
CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 7
Reconciliation of the Market Value of Assets
1. Market Value of Assets as of 6/30/22 including Receivables $318,801,170
2. Change in Receivables for Service Buybacks (95,652)
3. Employer Contributions 19,224,123
4. Employee Contributions 3,955,494
5. Benefit Payments to Retirees and Beneficiaries (29,852,456)
6. Refunds 0
7. Transfers 2,503
8. Service Credit Purchase (SCP) Payments and Interest 117,011
9. Administrative Expenses (188,355)
10. Miscellaneous Adjustments 0
11. Investment Return (Net of Investment Expenses) 19,732,225
12. Market Value of Assets as of 6/30/23 including Receivables $331,696,065
CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 8
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 recognizes that over 90% of the variation in
investment returns of a large, well -diversified pool of assets can typically be attributed to asset allocation decisions .
The asset allocation shown below reflects the allocation of the Public Employe es’ Retirement Fund (PERF) in its entirety. The
assets for City of Palo Alto Safety Plan are a subset of the PERF and are invested accordingly.
On November 17, 2021, the board adopted changes to the strategic asset allocation . The new allocation was effective July 1,
2022. The asset allocation as of June 30, 2023 , is shown below, along with the long-term strategic asset allocations.
For more information s ee the Trust Level Review as of June 30, 2023 , which is available on the CalPERS website.
33.1%
12.0%
5.1%
5.1%
6.6%
4.5%
5.1%
12.9%
15.2%
2.2%
(1.8%)
30%
12%
5%
5%
10%
5%
5%
13%
15%
5%
(5%)
(10%)0%10%20%30%40%
Public Equities - Cap Weighted
Public Equities - Factor Weighted
Treasury
Mortgage-Backed Securities
Investment Grade Corporates
High Yield
Emerging Market Sovereign Bonds
Private Equity
Real Assets
Private Debt
Strategic Financing
Current Allocation Long-Term Strategic Asset Allocation
CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 9
CalPERS History of Investment Returns
The following is a chart with the 20 -year historical annual retu rns of the PERF for each fiscal year ending on June 30 as reported
by the Investment Office. Investment returns reported are net of investment expenses but without reduction for administrative
expenses. The assumed rate of return, however, is net of both i nvestment and administrative expenses. Also, the Investment
Office uses a three-month lag on private equity and real assets for investment performance reporting purposes. This can lead to
a timing difference in the returns below and those used for financia l reporting purposes. The investment gain or loss calculation
in this report relies on final assets that have been audited and are appropriate for financial reporting. Because of these
differences, the effective investment return for funding purposes in a single year can be higher or lower than the return reported
by the Investment Office shown here.
* As reported by the Investment Office with a 3-month lag on private equity and real assets and without any reduction for administrative
expenses .
The table below shows annualized investment returns of the PERF for various time periods ending on June 30, 2023 . Figures
reported are net of investment expenses but without reduction for administrative expen ses. These returns are the annual rates
that if compounded over the indicated number of years would equate to the actual time -weighted investment performance of the
PERF. It should be recognized that in any given year the rate of return is volatile. The po rtfolio has an expected volatility of
12.0% per year based on the most recent Asset Liability Management study. The realized volatility is a measure of the risk of
the portfolio expressed as the standard deviation of the fund’s total monthly return distrib ution, expressed as an annual
percentage. Due to their volatile nature, when looking at investment returns, it is more instructive to look at returns over longer
time horizons.
History of CalPERS Compound Annual Rates of Return and Volatilities
1 year 5 year 10 year 20 year 30 year
Compound Annual Return 5.8% 6.1% 7.1% 7.0 % 7.5 %
Realized Volatility – 9.5% 7.8% 8.4 % 8.8 %
Liabilities and Contributions
• Determination of Required Contributions 11
• Development of Accrued and Unfunded Liabilities 12
• Required Employer Contributions 13
• Member Contribution Rates 14
• Funded Status – Funding Policy Basis 15
• Additional Employer Contributions 16
• Projected Employer Contributions 17
• (Gain)/Loss Analysis 6/30/22 – 6/30/23 18
• Schedule of Amortization Bases 19
• Amortization Schedule and Alternatives 21
• Reconciliation of Required Employer Contributions 23
• Employer Contribution History 24
• Funding History 24
• Normal Cost by Benefit Group 25
CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 11
Determination of Required Contributions
Contributions to fund the plan are determined by an actuarial valuation performed each year. The valuation employs complex
calculations based on a set of actuarial assumptions and methods. See Appendix A for information on the assumptions and
methods used in this valuation. The valuation incorporates all plan experience through the valuation date and sets required
contributions for the fiscal year that begins two years after the valuation date.
Contribution Components
Two components comprise required contributions:
• Normal Cost — expressed as a percentage of pensionable payroll
• Unfunded Accrued Liability (UAL) Contribution — expressed as a dollar amount
Normal Cost represents the value of benefits allocated to the upcoming year for active employees. If all plan experience exactly
match ed the actuarial assumptions, normal cost would be sufficient to fully fund all benefits. The em ployer and employee s each
pay a share of the normal cost with contributions payable as part of the regular payroll reporting process. The contribution rate
for Classic members is set by statute based on benefit formula whereas for PEPRA members it is based on 50% of the total
normal cost.
When plan experience differs from the actuarial assumptions, unfunded accrued liability (UAL) emerges. The new UAL may be
pos itive or negative. If the total UAL is positive (i.e., accrued liability exceeds assets), the employer is required to make
contributions to pay off the UAL over time. This is called the Unfunded Accrued Liability Contribution component. There is an
option to prepay this amount during July of each fiscal year , otherwise it is paid monthly.
In measuring the UAL each year, plan experience is split by source. Common sources of UAL include investment experience
different than expected , non-investment experience different than expected, assumption changes, and benefit changes. Each
source of UAL (positive or negative) forms a base that is amortized, or paid off, over a specified period of time in accordan ce
with the CalPERS Actuarial Amortization Policy. The Unfunded Accrued Liability Contribution is the sum of the payments on all
bases. See the Schedule of Amortization Bases section of th is report for an inventory of existing bases and Appendix A for more
information on the amortization policy.
CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 12
Development of Accrued and Unfunded Liabilities
June 30, 2022 June 30, 2023
1. Present Value of Projected Benefits
a) Active Members $195,734,582 $208,285,143
b) Transferred Members 12,803,675 13,177,758
c) Separated Members 6,422,761 6,467,049
d) Members and Beneficiaries Receiving Payments 384,83 4,508 402,806,352
e) Total $599,795,526 $630,736,302
2. Present Value of Future Employer Normal Costs $44,207,523 $46,631,408
3. Present Value of Future Employee Contributions $23,974,061 $28,701,699
4. Entry Age Accrued Liability
a) Active Members [(1a) - (2) - (3)] $127,552,998 $132,952,036
b) Transferred Members (1b) 12,803,675 13,177,758
c) Separated Members (1c) 6,422,761 6,467,049
d) Members and Beneficiaries Receiving Payments (1d) 384,834,508 402,806,352
e) Total $531,613,942 $555,403,195
5. Market Value of Assets (MVA) $318,801,170 $331,696,065
6. Unfunded Accrued Liability (UAL) [(4e) - (5)] $212,812,772 $223,707,130
7. Funded Ratio [(5) ÷ (4e)] 60.0% 59.7%
CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 13
Required Employer Contributions
The required employer contributions in this report do not reflect any cost sharing arrangement between the agency and the
employees.
Fiscal Year
Required Employer Contributions 2025-26
Employer Normal Cost Rate 20.61%
Plus
Unfunded Accrued Liability (UAL) Contribution Amount $18,545,666
Paid either as
1) Monthly Payment $1,545,472
Or
2) Annual Prepayment Option* $17,945,551
The total minimum required employer contribution is the sum of the Plan’s Employer Normal Cost Rate
(expressed as a percentage of payroll and paid as payroll is reported) and the Unfunded Accrued Liability
(UAL) Contribution Amount (billed monthly (1) or p repaid annually (2) in dollars).
* Only the UAL portion of the employer contribution can be prepaid (which must be received in full no later
than July 31).
For Member Contribution Rates see the following page.
Fiscal Year Fiscal Year
2024-25 2025-26
Normal Cost Contribution as a Percentage of Payroll
Total Normal Cost1 32.14% 30.76%
Offset due to Employee Contribution s 2 9.93% 10.15%
Employer Normal Cost 22.21% 20.61%
Projected Annual Payroll for Contribution Year $27,164,524 $30,355,352
Estimated Employer Contributions Based on Projected Payroll
Total Normal Cost $8,730,678 $9,337,306
Expected Employee Contribution s 2,697,437 3,081,068
Employer Normal Cost 6,033,241 6,256,238
Unfunded Liability Contribution 16,551,519 18,545,666
% of Projected Payroll (illustrative only) 60.93% 61.10%
Estimated Total Employer Contribution $22,584,760 $24,801,904
% of Projected Payroll (illustrative only) 83.14% 81.71%
1 The Total Normal Cost is a blended rate for all benefit groups in the plan. For a breakout of normal cost by benefit
group, see Normal Cost by Benefit Group.
2 This is the expected employee contributions, taking into account individual benefit formula and any offset from the use
of a modified formula, divided by projected annual payroll. For member contribution rates above the breakpoint for each
benefit formula, see Member Contribution Rates .
CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 14
Member Contribution Rates
The required member contributions in this report do not reflect any cost sharing arrangement between the agency and the
employees.
Classic Members
Each member contributes toward their retirement based upon the retirement formula. The standard Classic member contribution
rate above the breakpoint, if any, is as described below.
Benefit Formula
Percent Contributed
above the Breakpoint
Safety, 2% at age 55 7%
Safety, 2% at age 50 9%
Safety, 3% at age 55 9%
Safety, 3% at age 50 9%
PEPRA Members
The California Public Employees’ Pension Reform Act of 2013 (“PEPRA”) established new benefit formulas, final compensation
period, and contribution requirements for “new” employees (generally those first hired into a CalP ERS-covered position on or
after January 1, 2013). In accordance with Government Code section 7522.30(b), “new members … shall have an initial
contribution rate of at least 50% of the normal cost rate.” The normal cost rate for the plan is dependent on the benefit levels,
actuarial assumptions, and demographics of the plan, particularly members’ entry age into the plan. Should the total normal c ost
rate of the plan change by more than 1% from the base total normal cost rate established for the plan, the new member rate
shall be 50% of the new normal cost rate rounded to the nearest quarter percent.
The table below shows the determination of the PEPRA m ember contribution rates effective July 1, 2025, based on 50 % of the
total normal cost rate for each respective plan as of the June 30, 2023 , valuation.
Basis for Current Rate Rates Effective July 1, 2025
Plan
Identifier Benefit Group Name
Total
Normal
Cost
Member
Rate
Total
Normal
Cost Change
Change
Needed
Member
Rate
25006 Safety Fire PEPRA
Level 23.540% 11.75% 23.47% (0.070%) No 11.75%
25007 Safety Police PEPRA
Level 23.540% 11.75% 23.47% (0.070%) No 11.75%
For a description of the methodology used to determine the Total Normal Cost for this purpose, see PEPRA Normal Cost Rate
Methodology in Appendix A.
CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 15
Funded Status – Funding Policy Basis
The table below provides information on the current funded status of the plan under the funding policy. The funded status for this
purpose is based on the market value of assets relative to the funding target produced by the entry age actuarial cost method
and actuarial assumptions adopted by the board. The actuarial cost method allocates the total expected cost of a member’s
projected benefit (Present Value of Benefits ) to individual years of service (the Normal Cost). The value of the projected
benefit that is not allocated to future service is referred to as the Accrued Liability and is the plan’s funding target on the
valuation date. The Unfunded Accrued Liability (UAL) equals the funding target minus the assets. The UAL is an absolute
measure of funded status and can be viewed as employer debt. The funded ratio equals the assets divided by the funding
target. The funded ratio is a relative measure of the funded status and allows for comparisons between plans of diffe rent sizes.
June 30, 2022 June 30, 2023
1. Present Value of Benefits $599,795,526 $630,736,302
2. Entry Age Accrued Liability 531,613,942 555,403,195
3. Market Value of Assets (MVA) 318,801,170 331,696,065
4. Unfunded Accrued Liability (UAL) [(2) – (3)] $212,812,772 $223,707,130
5. Funded Ratio [(3) ÷ (2)] 60.0% 59.7%
A funded ratio of 100% (UAL of $0) implies that the funding of the plan is on target and that future contributions equal to the
normal cost of the active plan members will be sufficient to fully fund all retirement benefits if future experience matches the
actuarial assumptions. A funded ratio of less than 100% (positive UAL) implies that in addition to normal costs, payments t oward
the UAL will be required. Plans with a funded ratio greater than 100% have a negative UAL (or surplus) but are required under
current law to continue contributing the normal cost in most cases, preserving the surplus for future contingencies.
Calcul ations for the funding target reflect the expected long -term investment return of 6.8%. If it were known on the valuation
date that future investment returns will average something greater/less than the expected return, calculated normal costs and
accrued liabilities provided in this report would be less/greater than the results shown. Therefore, for example, if actual average
future returns are less than the expected return, calculated normal costs and UAL contributions will not be sufficient to ful ly fund
all retirement benefits. Under this scenario, required future normal cost contributions will need to increase from those provided in
this report, and the plan will develop unfunded liabilities that will also add to required future contributions. For illus trative
purposes, funded status es based on a 1% lower and higher average future investment return (discount rate) are as follows:
1% Lower
Average Return
Current
Assumption
1% Higher
Average Return
Discount Rate 5.8% 6.8% 7.8%
1. Present Value of Benefits $729,709,016 $630,736,302 $552,489,884
2. Entry Age Accrued Liability 626,975,562 555,403,195 496,405,722
3. Market Value of Assets (MVA) 331,696,065 331,696,065 331,696,06 5
4. Unfunded Accrued Liability (UAL) [(2) – (3)] $295,279,497 $223,707,130 $164,709,657
5. Funded Ratio [(3) ÷ (2)] 52.9% 59.7% 66.8%
The Risk Analysis section of the report provides additional information regarding the sensitivity of valuation results to the
expected investment return and other factors. Also provided in that section are measures of funded status that are appropriat e
for ass essing the sufficiency of plan assets to cover estimated termination liabilities.
CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 16
Additional Employer Contributions
The minimum required employer contribution towards the Unfunded Accrued Li ability (UAL) for this rate plan for FY 2025-26 is
$18,545,666 . CalPERS allows agencies to make additional discretionary payments (ADPs) at any time and in any amount.
These optional payments serve to reduce the UAL and future required contributions and can result in significant long -term
savings. Agencies can also u se ADPs to stabilize annual contributions as a fixed dollar amount, percent of payroll or percent of
revenue.
Provided below are select ADP options for consideration. Making such an ADP during FY 2025-26 does not require an ADP be
made in any future year, nor does it change the remaining amortization period of any portion of unfunded liability. For
information on permanent changes to amortization periods, see Amortization Schedule and Alternatives . Agencies considering
making an ADP should contact CalPERS for additional information.
Fiscal Year 2025-26 Employer Contributions — Illustrative Scenarios
Funding Approach Estimated
Normal Cost
Minimum UAL
Contribution ADP1 Total UAL
Contribution
Estimated Total
Contribution
Minimum required only $6,256,238 $18,545,666 0 $18,545,666 $24,801,904
20 year funding horizon $6,256,238 $18,545,666 $1,434,763 $19,980,429 $26,236,667
15 year funding horizon $6,256,238 $18,545,666 $4,763,247 $23,308,913 $29,565,151
10 year funding horizon $6,256,238 $18,545,666 $11,783,618 $30,329,284 $36,585,522
5 year funding horizon $6,256,238 $18,545,666 $33,611,213 $52,156,879 $58,413,117
1 The ADP amounts are assumed to be made in the middle of the fiscal year. A payment made earlier or later in the fiscal year would hav e to
be less or more than the amount shown to have the same effect on the UAL amortization.
The calculations above are based on th e projected UAL as of June 30, 2025, as determined in the June 30, 2023, actuarial
valuation. New unfunded liabilities can emerge in future years due to assumption or method chan ges, changes in plan
provisions, and actuarial experience different than assumed. Making an ADP illustrated above for the indicated number of year s
will not result in a plan that is exactly 100% funded in the indicated number of years. Valuation results wi ll vary from one year to
the next and can diverge significantly from projections over a period of several years.
Additional Discretionary Payment History
The following table provides a recent history of actual ADPs made to the plan.
Fiscal
Year ADP Fiscal
Year ADP
2018-19 $0 2021-22 $0
2019-20 $0 2022-23 $0
2020-21 $0 2023-24 $0
CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 17
Projected Employer Contributions
The table below shows the required and projected employer contributions (before cost sharing) for the next six fiscal years. The
projection assumes that all actuarial assumptio ns will be realized and that no further changes to assumptions, contributions,
benefits, or funding will occur during the projection period. In particular, the investment return beginning with FY 2023-24 is
assumed to be 6.80% per year, net of investment and administrative expenses. The projected normal cost percentages below
reflect that the normal cost is expected to continue to decline over time as new employees are hired in to lower cost benefit tiers.
Future contribution requirements may differ significantly from those shown below. The actual long -term cost of the plan will
depend on the actual benefits and expenses paid and the actual investment experience of the fund.
Required
Contribution
Projected Future Employer Contributions
(Assumes 6.80% Return for Fiscal Year 2023-24 and Beyond)
Fiscal Year 2025-26 2026-27 2027-28 2028-29 2029-30 2030-31
Normal Cost % 20.61% 20.0% 19.4% 18.7% 18.1% 17.5%
UAL Payment $18,545,666 $19,605,000 $20,526,000 $22,300,000 $22,831,000 $23,316,000
Total as a % of Payroll* 81.71% 82.8% 83.3% 86.3% 85.4% 84.4%
Projected Payroll $30,355,352 $31,205,301 $32,079,050 $32,977,264 $33,900,626 $34,849,844
*Illustrative only and based on the projected payroll shown.
For ongoing plans, investment gains and losses are amortized using a 5 -year ramp up. For more information, please see
Amortization of Unfunded Actu arial Accrued Liability in Appendix A. This method phases in the impact of the change in UAL
over a 5 -year period in order to reduce 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 when there is a large investment loss, the relatively small
amortization payments during the ramp up period could result in contributions that are less than interest on the UAL (i.e.
negative amortization) while the contribution impact of the increase in the UAL is phased in.
For projected contributions under alternate investment return scenarios, please see the Future Investment Return Scenarios
exhibit. Our online pension plan projection tool, Pension Outlook, is available in the Employers section of the CalPERS website.
Pension Outlook can help plan and budget pension costs under various scenarios.
CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 18
(Gain)/Loss Analysis 6/30/22 – 6/30/23
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 6/30/22 $212,812,772
b) Expected payment on the UAL during 20 22-23 14,172,457
c) Interest through 6/30/23 [.068 x (1a) - ((1.068)½ - 1) x (1b)] 13,997,330
d) Expected UAL before all other changes [(1a) - (1b) + (1c)] 212,637,645
e) Change due to plan changes 0
f) Change due to AL Significant Increase 0
g) Change due to assumption changes 0
h) Change due to method change s 0
i) Change due to discount rate change with Funding Risk Mitigation 0
j) Expected UAL after all other changes [(1d) + (1e) + (1f) + (1g) + (1h) + (1i)] 212,637,645
k) Actual UAL as of 6/30/23 223,707,130
l) Total (Gain)/Loss for 20 22-23 [(1k) - (1j)] $11,069,485
2. Investment (Gain)/Loss for the Year
a) Market Value of Assets as of 6/30/22 $318,801,170
b) Prior fiscal year receivables (230,389)
c) Current fiscal year receivables 134,737
d) Contributions received 23,179,617
e) Benefits and refunds paid (29,852,456)
f) Transfers, SCP p ayments and interest, and m iscellaneous adjustments 119,515
g) Expected return at 6.8% per year 21,940,158
h) Expected assets as of 6/30/23 [(2a) + (2b) + (2c) + (2d) + (2e) + (2f) + (2g)] 334,092,352
i) Actual Market Value of Assets as of 6/30/23 331,696,065
j) Investment (Gain)/Loss [(2h) - (2i)] $2,396,288
3. Non -Investment (Gain)/Loss for the Year
a) Total (Gain)/Loss (1l) $11,069,485
b) Investment (Gain)/Loss (2j) 2,396,288
c) Non-Investment (Gain)/Loss [(3a) - (3b)] $8,673,197
CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 19
Schedule of Amortization Bases
Below is the schedule of the plan’s amortization bases. Note that there is a two -year lag between the valuation date and the start of the contribution year.
• The assets, liabilities, and funded status of the plan are measured as of the valuation date: June 30, 2023 .
• The required employer contributions determined by the valuation are for the fiscal year beginning two years after the valuati on date: FY 2025-26.
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 fro m 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 FY 2023-24 is based on the actuarial valuation two years ago , adjusted for additional discretionary payments , if
necessary, and the expected payment for FY 2024-25 is based on the actuarial valuation one year ago.
Reason for Base
Date
Est.
Ramp
Level
2025-26
Ramp
Shape
Escala -
tion
Rate
Amort.
Period
Balance
6/30/23
Expected
Payment
2023-24
Balance
6/30/24
Expected
Payment
2024-25
Balance
6/30/25
Minimum
Required
Payment
2025-26
Fresh Start 6/30/04 No Ramp 2.80% 11 (825,249) (81,654) (796,981) (83,940) (764,429) (86,290)
Benefit Change 6/30/05 No Ramp 2.80% 1 58,590 20,958 40,915 21,545 21,432 22,149
Assumption Change 6/30/09 No Ramp 2.80% 6 5,389,068 792,634 4,936,384 814,828 4,429,982 837,643
Special (Gain)/Loss 6/30/09 No Ramp 2.80% 16 8,723,831 679,440 8,614,890 698,464 8,478,881 718,021
Special (Gain)/Loss 6/30/10 No Ramp 2.80% 17 4,211,145 315,998 4,170,938 324,846 4,118,853 333,942
Assumption Change 6/30/11 No Ramp 2.80% 8 4,979,965 607,444 4,690,845 624,453 4,364,487 641,937
Special (Gain)/Loss 6/30/11 No Ramp 2.80% 18 2,416,103 175,143 2,399,398 180,047 2,376,489 185,089
(Gain)/Loss 6/30/12 No Ramp 2.80% 19 45,134,116 3,168,199 44,929,090 3,256,908 44,618,446 3,348,102
Payment (Gain)/Loss 6/30/12 No Ramp 2.80% 19 1,576,930 110,693 1,569,767 113,792 1,558,914 116,979
(Gain)/Loss 6/30/13 100% Up/Dn 2.80% 20 44,942,274 3,262,015 44,627,249 3,353,351 44,196,412 3,447,245
(Gain)/Loss 6/30/14 100% Up/Dn 2.80% 21 (30,252,827) (2,126,125) (30,112,795) (2,185,657) (29,901,718) (2,246,855)
Assumption Change 6/30/14 100% Up/Dn 2.80% 11 19,393,011 2,195,252 18,443,073 2,256,719 17,365,016 2,319,907
(Gain)/Loss 6/30/15 100% Up/Dn 2.80% 22 16,750,275 1,142,287 16,708,808 1,174,271 16,631,467 1,207,150
(Gain)/Loss 6/30/16 100% Up/Dn 2.80% 23 19,871,449 1,317,539 19,861,109 1,354,431 19,811,940 1,392,355
Assumption Change 6/30/16 100% Up/Dn 2.80% 13 7,210,137 715,024 6,961,491 735,044 6,675,248 755,625
(Gain)/Loss 6/30/17 100% Up/Dn 2.80% 24 (1,218,772) (78,707) (1,220,309) (80,910) (1,219,674) (83,176)
Assumption Change 6/30/17 100% Up/Dn 2.80% 14 10,005,367 937,381 9,717,004 963,628 9,381,908 990,609
(Gain)/Loss 6/30/18 100% Up/Dn 2.80% 25 (3,429,206) (174,969) (3,481,572) (224,835) (3,485,965) (231,130)
Assumption Change 6/30/18 100% Up/Dn 2.80% 15 15,793,219 1,143,598 15,685,317 1,469,523 15,233,253 1,510,670
Method Change 6/30/18 100% Up/Dn 2.80% 15 3,641,944 263,716 3,617,061 338,875 3,512,814 348,363
CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 20
Schedule of Amortization Bases (continued)
Reason for Base
Date
Est.
Ramp
Level
2025-26
Ramp
Shape
Escala -
tion
Rate
Amort.
Period
Balance
6/30/23
Expected
Payment
2023-24
Balance
6/30/24
Expected
Payment
2024-25
Balance
6/30/25
Minimum
Required
Payment
2025-26
Investment (Gain)/Loss 6/30/19 100% Up Only 0.00% 16 1,720,435 103,444 1,730,521 137,925 1,705,659 172,406
Non-Investment (Gain)/Loss 6/30/19 No Ramp 0.00% 16 6,725,224 637,630 6,523,586 637,630 6,308,237 637,630
Investment (Gain)/Loss 6/30/20 80% Up Only 0.00% 17 8,357,533 343,555 8,570,801 515,333 8,621,049 687,110
Non-Investment (Gain)/Loss 6/30/20 No Ramp 0.00% 17 1,498,832 138,226 1,457,904 138,226 1,414,193 138,226
Assumption Change 6/30/21 No Ramp 0.00% 18 2,686,469 241,577 2,619,493 241,577 2,547,963 241,577
Net Investment (Gain) 6/30/21 60% Up Only 0.00% 18 (39,065,012) (839,690) (40,853,663) (1,679,381) (41,896,171) (2,519,071)
Non-Investment (Gain)/Loss 6/30/21 No Ramp 0.00% 18 (7,055,176) (634,427) (6,879,285) (634,426) (6,691,435) (634,427)
Risk Mitigation 6/30/21 No Ramp 0.00% 0 14,068,669 14,539,137 0 0 0 0
Risk Mitigation Offset 6/30/21 No Ramp 0.00% 0 (14,068,669) (14,539,137) 0 0 0 0
Benefit Change 6/30/22 No Ramp 0.00% 19 270,878 0 289,298 26,015 282,085 26,015
Investment (Gain)/Loss 6/30/22 40% Up Only 0.00% 19 54,724,603 0 58,445,876 1,256,276 61,121,909 2,512,552
Non-Investment (Gain)/Loss 6/30/22 No Ramp 0.00% 19 8,402,489 0 8,973,858 806,961 8,750,134 806,961
Investment (Gain)/Loss 6/30/23 20% Up Only 0.00% 20 2,396,288 0 2,559,236 0 2,733,264 58,751
Non-Investment (Gain)/Loss 6/30/23 No Ramp 0.00% 20 8,673,197 0 9,262,974 0 9,892,856 889,601
Total 223,707,130 14,376,181 224,062,281 16,551,519 222,193,499 18,545,666
CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 21
Amortization Schedule and Alternatives
The amortization schedule on the previous page (s) shows the minimum contributions required according to the CalPERS
amortization policy. Many agencies have expressed a desire for a more stable pattern of payments or have indicated interest i n
paying off the unfunded accrue d liabilities more quickly than required. As such, we have provided alternative amortization
schedules to help analyze the current amortization schedule and illustrate the potential savings of accelerating unfunded lia bility
payments.
Shown on the follow ing 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) alternative “fresh start” amortization schedules
using two sample periods that would both result in interest savings relative to the current amortization schedule. To initiate a
fresh s tart, please contact a CalPERS actuary.
The current amortization s chedule typically contains both positive and negative bases. Positive bases re sult from plan changes,
assumption changes, method changes or plan experience that increase unfunded liability. Negative bases result from plan
changes, assumption changes, method changes, or plan experience that decrease unfunded liability. The combinatio n of
positive and negative bases within an amortization schedule can result in unusual or problematic circumstances in future year s,
such as:
• When a negative payment would be required on a positive unfunded actuarial liability; or
• When the payment would completely amortize the total unfunded liability in a very short time period, and results in
a large change in the employer contribution requirement.
In any year when one of the above scenarios occurs, the actuary will consider corrective action such as re placing the existing
unfunded liability bases with a single “fresh start” base and amortizing it over an appropriate period.
The current amortization s chedule 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 fa ct
arise since there will be additional bases added to the amortization schedule in each future year. Should such a scenario ari se in
any future year, the actuary will take appropriate action based on guidelines in the CalPERS Actuarial Amortization Policy.
CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 22
Amortization Schedule and Alternatives (continued)
Alternative Schedules
Current Amortization
Schedule 15 Year Amortization 10 Year Amortization
Date Balance Payment Balance Payment Balance Payment
6/30/2025 222,193,499 18,545,666 222,193,499 23,308,913 222,193,499 30,329,284
6/30/2026 218,136,808 19,604,804 213,214,274 23,308,913 205,959,136 30,329,284
6/30/2027 212,709,706 20,526,467 203,624,462 23,308,913 188,620,836 30,329,284
6/30/2028 205,961,077 22,300,325 193,382,542 23,308,913 170,103,532 30,329,284
6/30/2029 196,920,363 22,830,751 182,444,172 23,308,913 150,327,051 30,329,284
6/30/2030 186,716,718 23,315,626 170,761,993 23,308,913 129,205,769 30,329,284
6/30/2031 175,318,135 22,825,495 158,285,426 23,308,913 106,648,240 30,329,284
6/30/2032 163,650,972 22,747,303 144,960,452 23,308,913 82,556,799 30,329,283
6/30/2033 151,271,245 21,850,517 130,729,380 23,308,913 56,827,141 30,329,284
6/30/2034 138,976,472 21,519,293 115,530,595 23,308,913 29,347,865 30,329,283
6/30/2035 126,187,953 20,895,581 99,298,292 23,308,913
6/30/2036 113,174,388 19,837,531 81,962,193 23,308,913
6/30/2037 100,369,333 19,234,250 63,447,239 23,308,914
6/30/2038 87,316,987 18,585,964 43,673,267 23,308,913
6/30/2039 74,047,048 18,113,064 22,554,666 23,308,913
6/30/2040 60,363,468 17,903,230
6/30/2041 45,966,252 15,250,680
6/30/2042 33,331,282 13,630,962
6/30/2043 21,511,016 17,404,329
6/30/2044 4,987,422 3,404,893
6/30/2045 1,807,810 992,372
6/30/2046 905,183 935,453
6/30/2047
6/30/2048
6/30/2049
Total 382,254,556 349,633,696 303,292,838
Interest Paid 160,061,057 127,440,197 81,099,339
Estimated Savings 32,620,860 78,961,718
CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 23
Reconciliation of Required Employer Contributions
Normal Cost (% of Payroll)
1. For Period 7/1/24 – 6/30/25
a) Employer Normal Cost 22.21%
b) Employee contribution 9.93%
c) Total Normal Cost 32.14%
2. Changes since the prior year annual valuation
a) Effect of demographic experience (1.38%)
b) Effect of plan changes 0.00%
c) Effect of discount rate change due to Funding Risk Mitigation 0.00%
d) Effect of assumption changes 0.00%
e) Effect of method changes 0.00%
f) Net effect of the changes above [sum of (a) through (e)] (1.38%)
3. For Period 7/1/25 – 6/30/26
a) Employer Normal Cost 20.61%
b) Employee contribution 10.15%
c) Total Normal Cost 30.76%
Employer Normal Cost Change [(3a) – (1a)] (1.60%)
Employee Contribution Change [(3b) – (1b)] 0.22%
Unfunded Liability Contribution ($)
1. For Period 7/1/24 – 6/30/25 16,551,519
2. Changes since the prior year annual valuation
a) Effect of adjustments to prior year’s amortization schedule 0
b) Effect of elimination of amortization bases 0
c) Effect of progression of amortization bases 1 1,045,795
d) Effect of investment (gain)/loss during prior year2 58,751
e) Effect of non -investment (gain)/loss during prior year 889,601
f) Effect of re-amortizing existing bases due to Funding Risk Mitigation 0
g) Effect of Golden Handshake 0
h) Effect of plan changes 0
i) Effect of AL Significant Increase (Government Code section 20791) 0
j) Effect of assumption changes 0
k) Effect of adjustments to the amortization schedule (e.g., Fresh Start) 0
l) Effect of method change 0
m
)
Net effect of the changes above [sum of (a) through (l)] 1,994,147
3. For Period 7/1/25 – 6/30/26 [(1) + (2m)] 18,545,666
The amounts shown for the period 7/1/24 – 6/30/25 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 perf ormed.
1 Includes scheduled escalation in individual amortization base payments due to the 5 -year ramp and payroll growth
assumption used in the pre-2019 amortization policy.
2 The unfunded liability contribution for the investment (gain)/loss during the year prior to the valuation date is 20% 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 c ) for each of the next four years.
CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 24
Employer Contribution History
The table below provides a 10-year history of the employer contribution requirements for the plan , as determined by the annual
actuarial valuation . Changes due to prepayments or plan amendments after the valuation report was finalized are not reflected.
Valuation
Date
Contribution
Year
Employer
Normal Cost
Rate
Unfunded
Liability Rate
Unfunded
Liability Payment
06/30/2014 2016 - 17 18.977% 26.449% N/A
06/30/2015 2017 - 18 18.900% N/A 7,127,885
06/30/2016 2018 - 19 19.397% N/A 8,421,191
06/30/2017 2019 - 20 20.194% N/A 10,019,332
06/30/2018 2020 - 21 21.566% N/A 11,210,740
06/30/2019 2021 - 22 21.52% N/A 13,282,515
06/30/2020 2022 - 23 20.58% N/A 14,860,807
06/30/2021 2023 - 24 22.59% N/A 14,376,181
06/30/2022 2024 - 25 22.21% N/A 16,551,519
06/30/2023 2025 - 26 20.61% N/A 18,545,666
Funding History
The table below shows the recent history of the actuarial accrued liability, market value of assets, unfunded accrued liability,
funded ratio and annual covered payroll.
Valuation
Date
Accrued
Liability
(AL)
Market Value of
Assets (MVA)
Unfunded
Accrued
Liability (UAL)
Funded
Ratio
Annual
Covered
Payroll
6/30/2014 $367,478,634 $264,145,000 $103,333,634 71.9% $21,274,021
6/30/2015 377,934,524 259,169,591 118,764,933 68.6% 21,186,275
6/30/2016 392,911,774 249,886,581 143,025,193 63.6% 21,268,028
6/30/2017 422,062,152 267,871,162 154,190,990 63.5% 23,485,510
6/30/2018 451,111,924 280,399,741 170,712,183 62.2% 23,613,222
6/30/2019 471,338,133 289,117,004 182,221,129 61.3% 25,488,331
6/30/2020 487,159,688 293,857,975 193,301,713 60.3% 27,097,526
6/30/2021 509,225,515 353,339,674 155,885,841 69.4% 25,745,571
6/30/2022 531,613,942 318,801,170 212,812,772 60.0% 25,004,764
6/30/2023 555,403,195 331,696,065 223,707,130 59.7% 27,941,899
CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 25
Normal Cost by Benefit Group
The table below displays the Total Normal Cost broken out by benefit group for FY 2025-26. The Total Normal Cost is the
annual cost of service accrual for the fiscal year for active employees and can be viewed as the long -term contribution rate for
the benefits contracted. Generally, the normal cost for a benefit group subject to more generous benefit provisions will exce ed
the normal cost for a group with less generous benefits. However, based on the characteristics of the members (particularly
when the number of actives is small), this may not be the case. Future measurements of the Total Normal Cost for each group
may differ significantly from the current values due to such factors as: changes in the demographics of the group, changes in
economic and demographic assumptions, changes in plan benefits or applicable law.
Plan
Identifier Benefit Group Name
Total
Normal Cost
FY 2025-26
Number of
Actives
Payroll on
6/30/2023
5080 Safety Police First Level 38.53% 29 $6,251,342
25006 Safety Fire PEPRA Level 20.62% 43 $5,786,151
25007 Safety Police PEPRA Level 26.33% 38 $5,592,603
30705 Safety Fire First Level N/A 0 $0
30706 Safety Fire Second Level 34.32% 42 $8,094,911
30707 Safety Fire Third Level 30.82% 8 $1,395,634
30708 Safety Police Second Level 44.35% 4 $821,258
Plan Total 30.76% 164 $27,941,899
Note that if a Benefit Group above has multiple bargaining units, each of which has separately contracted for different benef its
such as Employer Paid Member Contributions, then the Normal Cost shown for the respective benefit level does not reflect
those differences. Additionally, if a Second Level Benefit Group amended to the same benefit formula as a First Level Benefit
Group, their Normal Costs may be dissimilar due to demographic or other population differences. For questions in these
situations, please contact a CalPERS actuary.
Risk Analysis
• Future Investment Return Scenarios 27
• Discount Rate Sensitivity 28
• Mortality Rate Sensitivity 28
• Maturity Measures 29
• Maturity Measures History 30
• Funded Status – Termination Basis 31
• Funded Status – Low-Default-Risk Basis 32
CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 27
Future Investment Return Scenarios
Analysis using the investment return scenarios from the Asset Liability Management process completed in 2021 was performed
to determine the effects of various future investment returns on required employer contributions. The projections below refle ct
the impact of the CalPERS Funding Risk Mitigation Policy. The projected normal cost rates reflect that the rates are anticipated
to decline over time as new employees are hired into lower -cost benefit tiers. The projections also assume that all other actuarial
assumptions will be realized and that no further changes in assumptions, contributions, benefits, or funding will occur.
The first table shows projected contribution requirements if the fund were to earn either 3.0% or 10.8% annually. These alter nate
investment returns were chosen because 90% of long -term average returns are expected to fall between them over the 20 -year
period ending June 30, 2043.
Assumed Annual Return
FY 2023-24
through FY 2042 -43
Projected Employer Contributions
2026-27 2027-28 2028-29 2029 -30 2030-31
3.0% (5th percentile)
Discoun t Rate 6.80 % 6.80% 6.80% 6.80% 6.80%
Normal Cost Rate 20.0% 19.4% 18.7% 18.1% 17.5%
UAL Contribution $19,911,000 $21,448,000 $24,151,000 $25,932,000 $27,995,000
10.8% (95th percentile)
Discoun t Rate 6.75% 6.70% 6.65% 6.60% 6.55%
Normal Cost Rate 20.4% 20.1% 19.9% 19.6% 19.4%
UAL Contribution $19,294,000 $19,642,000 $20,540,000 $19,881,000 $18,812,000
Required contributions outside of this range are also possible. In particular, whereas it is unlikely that investment returns will
average less than 3.0% or greater than 10.8% over a 20 -year period, the likelihood of a single investment return less than 3.0%
or greater than 10.8% in any given year is much greater. The following analysis illustrat es the effect of an extreme, single year
investment return.
The portfolio has an expected volatility (or standard deviation) of 12.0% per year. Accordingly, in any given year there is a 16%
probability that the annual return will be -5.2% or less and a 2.5% probability that the annual return will be -17.2% or less. These
returns represent one and two standard deviations below the expected return of 6.8%.
The following table shows the effect of one and two standard deviation investment loss es in FY 2023-24 on the FY 2026-27
contribution requirements. Note that a single -year investment gain or loss decreases or increases the required UAL contribution
amount incrementally for each of the next five years, not just one, due to the 5 -year ramp in the amortization policy. However,
the contribution requirements beyond the first year are also impac ted by investment returns beyond the first year . Historically,
significant downturns in the market are often followed by higher than average returns. Such investment gains would offset the
impact of these single year negative returns in years beyond FY 2026-27.
Assumed Annual Return for
Fiscal Year 2023-24
Required
Employer
Contributions
Projected
Employer
Contributions
2025-26 2026-27
(17.2%) (2 standard deviation loss)
Discount Rate 6.80% 6.80%
Normal Cost Rate 20.61% 20.0%
UAL Contribution $18,545,666 $21,535,000
(5.2%) (1 standard deviation loss)
Discount Rate 6.80% 6.80%
Normal Cost Rate 20.61% 20.0%
UAL Contribution $18,545,666 $20,570,000
• Without investment gains (returns higher than 6.8%) in FY 2024-25 or later, projected contributions rates would
continue to rise over the next four years due to the continued phase -in of the impact of the illustrated investment loss in
FY 2023-24.
• The Pension Outlook Tool can be used to model projected contributions for these scenarios beyond FY 2026-27 as
well as to model other investment return scenarios .
CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 28
Discount Rate Sensitivity
The discount rate assumption is calculated as the sum of the assumed real rate of return and the assumed annual price
inflation, currently 4.5% and 2.3%, respectively. Changing either the pri ce inflation assumption or the real rate of return
assumption will change the discount rate. The sensitivity of the valuation results to the discount rate assumption depends on
which component of the discount rate is changed. Shown below are various valuat ion results as of June 30, 2023, assuming
alternate discount rates by changing the two components independently. Results are shown using the current discount rate of
6.8% as well as alternate discount rates of 5.8% and 7.8%. The rates of 5.8% and 7.8% were selected since they illustrate the
impact of a 1.0% increase or decrease to the 6.8% assumption.
Sensitivity to the Real Rate of Return Assumption
As of June 30, 2023
1% Lower
Real Return Rate
Current
Assumptions
1% Higher
Real Return Rate
Discount Rate 5.8% 6.8% 7.8%
Price Inflation 2.3% 2.3% 2.3%
Real Rate of Return 3.5% 4.5% 5.5%
a) Total Normal Cost 38.89% 30.76% 24.59%
b) Accrued Liability $626,975,562 $555,403,195 $496,405,722
c) Market Value of Assets $331,696,065 $331,696,065 $331,696,065
d) Unfunded Liability/(Surplus) [(b) - (c)] $295,279,497 $223,707,130 $164,709,657
e) Funded Ratio 52.9% 59.7% 66.8%
Sensitivity to the Price Inflation Assumption
As of June 30, 2023
1% Lower
Price Inflation
Current
Assumptions
1% Higher
Price Inflation
Discount Rate 5.8% 6.8% 7.8%
Price Inflation 1.3% 2.3% 3.3%
Real Rate of Return 4.5% 4.5% 4.5%
a) Total Normal Cost 32.28% 30.76% 27.92%
b) Accrued Liability $573,681,082 $555,403,195 $517,681,398
c) Market Value of Assets $331,696,065 $331,696,065 $331,696,065
d) Unfunded Liability/(Surplus) [(b) - (c)] $241,985,017 $223,707,130 $185,985,333
e) Funded Ratio 57.8% 59.7% 64.1%
Mortality Rate Sensitivity
The following table looks at the change in the June 30, 2023, plan costs and funded status under two different longevity
scenarios, namely assuming rates of post-retirement mortality are 10% lower or 10% higher than o ur current mortality
assumptions adopted in 2021 . This type of analysis highlights the impact on the plan of a change in the mortality assumption .
As of June 30, 2023 10% Lower
Mortality Rates
Current
Assumptions
10% Higher
Mortality Rates
a) Total Normal Cost 31.20% 30.76% 30.35%
b) Accrued Liability $566,232,973 $555,403,195 $545,435,074
c) Market Value of Assets $331,696,065 $331,696,065 $331,696,065
d) Unfunded Liability/(Surplus) [(b) - (c)] $234,536,908 $223,707,130 $213,739,009
e) Funded Ratio 58.6% 59.7% 60.8%
CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 29
Maturity Measures
As pension plans mature they become more sensitive to risks. Understanding plan maturity and how it affects the ability of a
pension plan sponsor to tolerate risk is important in understanding how the pension plan is impacted by investment return
volatility, other economic variables and changes in longevity or other demographic assumptions.
One way to look at the maturity level of CalPERS and its plans is to look at the ratio of a plan’s retiree liabili ty to its total liability.
A pension plan in its infancy will have a very low ratio of retiree liability to total liability. As the plan matures, the ra tio increases.
A mature plan will often have a ratio above 60%-65%.
Ratio of Retiree Accrued Liability to
Total Accrued Liability June 30, 2022 June 30, 2023
1. Retiree Accrued Liability $384,834,508 $402,806,352
2. Total Accrued Liability $531,613 ,942 $555,403,195
3. Ratio of Retiree AL to Total AL [(1) ÷ (2)] 72% 73%
Another measure of the maturity level of CalPERS and its plans is the ratio of actives to retirees, also called the s upport ratio. A
pension plan in its infancy will have a very high ratio of active to retired members. As the plan matures and members retire, the
ratio declines. A mature plan will often have a ratio near or below one.
To calculate the support ratio for the rate plan, retirees and beneficiaries receiving a continuance are each counted as one, even
though they may have only worked a portion of their careers as an active member of this rate plan. For this reason, the support
ratio, while intuitive, may be less informative than the ratio of retiree liability to total accrued liability above.
For comparison, the support ratio for all CalPERS public agency plans as of June 30, 202 2, was 0.77 and was calculated
consistently with how it is for the individual rate plan. Note that to calculate the support ratio for all public agency plans, a retiree
with service from more than one CalPERS agency is counted as a retiree more than once .
Support Ratio June 30, 2022 June 30, 2023
1. Number of Actives 156 164
2. Number of Retirees 453 458
3. Support Ratio [(1) ÷ (2)] 0.34 0.36
CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 30
Maturity Measures (continued)
The actuarial calculations supplied in this communication are based on various assumptions about long -term demographic and
economic behavior. Unless these assumptions (e.g., terminations, deaths, disabilities, retirements, salary increases, 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
contributi ons 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
Shown in the table below is the asset volatility ratio (AVR), which is the ratio of market value of assets to payroll. Plans that have
a higher AVR experience more volatile employer contributions (as a percentage of payroll) due to investment return. For
example, a plan with an AVR of 8 may experience twice the contribution volatility due to investment return volatility than a plan
with an AVR of 4. It should be noted that this ratio is a measure of the current situation. It increases over time but generally
tends to stabilize as a plan matures.
Liability Volatility Ratio
Also shown in the table below is the liability volatility ratio (LVR), which is the ratio of accrued liability to payroll. Pl ans that have
a higher LVR experience more volatile employer contributions (as a perc entage of payroll) due to changes in liability. For
example, a plan with an LVR of 8 is expected to have twice the contribution volatility of a plan with an LVR of 4 when there is a
change in accrued liability, such as when there is a change in actuarial a ssumptions. It should be noted that this ratio indicates a
longer-term potential for contribution volatility, since the AVR, described above, will tend to move closer to the LVR as the
funded ratio approaches 100%.
Contribution Volatility June 30, 2022 June 30, 2023
1. Market Value of Assets without Receivables $318,570,781 $331,561,327
2. Payroll 25,004,764 27,941,899
3. Asset Volatility Ratio (AVR) [(1) ÷ (2)] 12.7 11.9
4. Accrued Liability $531,613,942 $555,403,195
5. Liability Volatility Ratio (LVR) [(4) ÷ (2)] 21.3 19.9
Maturity Measures History
Valuation Date
Ratio of
Retiree Accrued Liability
to
Total Accrued Liability Support Ratio
Asset
Volatility
Ratio
Liability
Volatility
Ratio
6/30/2017
72%
0.40
11.4
18.0
6/30/2018
74%
0.39
11.9
19.1
6/30/2019
71%
0.39
11.3
18.5
6/30/2020
71%
0.40
10.8
18.0
6/30/2021
71%
0.37
13.7
19.8
6/30/2022
72%
0.34
12.7
21.3
6/30/2023
73%
0.36
11.9
19.9
CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 31
Funded Status – Termination Basis
The funded status measured on a termination basis is an estimate of the financial position of the plan had the contract with
CalPERS been termi nated as of June 30, 2023. The accrued liability on a termination basis (termination liability) is calculated
differently from the plan’s ongoing funding liability. For th e 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 ongoi ng plan, that is, for an employer
that continues to provide CalPERS retirement benefits to active employees. Unlike the actuarial cost method used for ongoing
plans, the termination liability is the present value of the benefits earned through the valuatio n date.
A more conservative investment policy and asset allocation strategy was adopted by the 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 re mainder of 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 discount rate used for actual termination valuations is a weighted average of the 10 -year and 30 -year Treasury yields where
the weights are based on matching asset and liability durations as of the termination date. The discount rates used in the
following analysis is based on 20 -year Treasury bonds , which is a good proxy for most plans. The discount rate upon contract
termination will depend on actual Treasury rates on the date of termination , which varies over time, as shown below .
Valuation 20-Year Valuation 20-Year
Date Treasury Rate Date Treasury Rate
06/30/2014 3.08% 06/30/2019 2.31%
06/30/2015 2.83% 06/30/2020 1.18%
06/30/2016 1.86% 06/30/2021 2.00%
06/30/2017 2.61% 06/30/2022 3.38%
06/30/2018 2.91% 06/30/2023 4.06%
As Treasury rates are variable, the table below shows a range for the termination liability using discount rates 1% below and
above the 20-year Treasury rate on the valuation date. The price inflation assumption is the 20 -year Treasury breakeven
inflation rate, that is, the difference between the 20 -year inflation indexed bond and the 20 -year fixed -rate bond.
The Market Value of Assets (MVA) also varies with interest rates and will fluctuate depending on other market conditions on the
date of termination . Since i t is not possible to approximate how the MVA will change in different interest rate environments, the
results below use the MVA as of the valuation date.
Discount Rate: 3.06 %
Price Inflation: 2.50%
Discount Rate: 5.06%
Price Inflation: 2.50%
1. Termination Liability1 $904,933,308 $674,921,015
2. Market Value of Assets (MVA) 331,696,065 331,696,065
3. Unfunded Termination Liability [(1) – (2)] $573,237,243 $343,224,950
4. Funded Ratio [(2) ÷ (1)] 36.7% 49.1%
1 The termination liabilities calculated above include a 5% contingency load. The contingency load and other actuarial
assumptions can be found in Appendix A.
In order to terminate the plan, first contact our Pension Contract Services unit to initiate a Resolution of Intent to Terminate. The
completed Resolution will allow a CalPERS actuary to provide a preliminary termination valuation with a more up -to-date
estimate of the plan ’s assets and liabilities. Before beginning this process, please consult with a CalPERS actuary.
CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 32
Funded Status – Low-Default-Risk Basis
Actuarial Standard of Practice (ASOP) No. 4, Measuring Pension Obligations and Determining Pension Plan Costs or
Contributions, requires the disclosure of a low -default-risk obligation measure (LDROM) of benefit costs accrued as of the
valuation date using a discount rate based on the yields of high qual ity fixed income securities with cash flows that replicate
expected benefit payments. Conceptually, this measure represents the level at which financial markets would value the accrued
plan costs, and would be approximately equal to the cost of a portfolio of low-default-risk bonds with similar financial
characteristics to accrued plan costs.
As permitted in ASOP No. 4, the Actuarial Office uses the Entry Age Actuarial Cost Method to calculate the LDROM. This
methodology is in line with the measure of “benefit entitlements” calculated by the Bureau of Economic Analysis and used by the
Federal Reserve to report the indebtedness due to pensions of plan sponsors and, conversely, the household wealth due to
pensions of plan members.
As shown below, the dis count rate used for the LDROM is 4.82%, which is the Standard FTSE Pension Liability Index1 discount
rate as of June 30, 2023 , net of assumed administrative expenses.
Selected Measures on a Low -Default-Risk Basis June 30, 2023
Discount Rate 4.82%
1. Accrued Liability2 – Low-Default-Risk Basis (LDROM)
a) Active Members $183,862,350
b) Transferred Members 20,519,522
c) Separated Members 9,387,460
d) Members and Beneficiaries Receiving Payments 499,071,708
e) Total $712,841,040
2. Market Value of Assets (MVA) 331,696,065
3. Unfunded Accrued Liability – Low-Default-Risk Basis [(1e) – (2)] $381,144,975
4. Unfunded Accrued Liability – Funding Policy Basis 223,707,130
5. Present Value of Unearned Investment Risk Premium [(3) – (4)] $157,437,845
The difference between the unfunded liabilities on a low -default-risk basis and on the funding policy basis represents the present
value of the investment risk premium that must be earned in future years to keep future contributions for currently accrued p lan
costs at the levels anticipated by the funding policy.
Benefit security for members of the plan relies on a combination of the assets in the plan, the investment income generated f rom
those assets, and the ability of the plan sponsor to make necessary future contributions. If future returns fall short of 6.8%,
benefit security could be at risk without higher than currently anticipated future contributions.
The funded status on a low -default-risk basis is not appropriate for assessing the sufficiency of plan assets to cover the cost of
settling the plan’s benefit obligations (see Funded Status – Termination Basis), nor is it appropriate for assessing the need for
future contributions (see Funded Status – Funding Policy Basis ).
1 This index is based on a yield curve of hypothetical AA -rated zero coupon corporate bonds whose maturities range
from 6 months to 30 years. The index represents the single discount rate that would produce the same present value
as discounting a standardized set of liabilit y cash flows for a fully open pension plan using the yield curve. The liability
cash flows are reasonably consistent with the pattern of benefits expected to be paid from the entire Public
Employees’ Retirement Fund for current and former plan members. A different index, hence a different discount rate,
may be needed to measure the LDROM for a subset of the fund, such as a single rate plan or a group o f retirees.
2 If plan assets were invested entirely in the AA fixed income securities used to determine the discount rate of 4.82%,
the CalPERS discount rate could, at various times, be below 4.5% or 5.25%, and some automatic annual retiree
COLAs could be suspended (Gov. Code sections 21329 and 21335). Since there is currently no proposal to adopt an
asset allocation entirely comprised of fixed income securities, the automa tic COLAs have been fully valued in the
measures above based on the assumptions used for plan funding. Removing future COLAs from the measurement
would understate the statutory obligation.
Plan’s Major Benefit Options
CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 34
Plan's Major Benefit Options
Shown below is a summary of the major optional benefits for which the agency has contracted. A description of principal standard and optional plan provisions is in
Appendix B.
Benefit Group
Member Category Police Fire Fire Police Fire Fire Police
Demographics
Actives Yes Yes No Yes No Yes Yes
Transfers/Separated Yes Yes Yes Yes No Yes Yes
Receiving Yes Yes Yes Yes Yes Yes Yes
Benefit Group Key 105397 105398 105400 111263 111265 111268 111269
Benefit Provision
Benefit Formula 3% @ 50 3% @ 50 3% @ 50 2.7% @ 57 3% @ 55 3% @ 55
Social Security Coverage No No No No No No
Full/Modified Full Full Full Full Full Full
Employee Contribution Rate 9.00% 9.00% 11.75% 9.00% 9.00%
Final Average Compensation Period One Year One Year One Year Three Year Three Year Three Year
Sick Leave Credit No No No No No No
Non-Industrial Disability Standard Standard Standard Standard Standard Standard
Industrial Disability Standard Standard Standard Standard Standard Standard
Pre-Retirement Death Benefits
Optional Settlement 2 No Yes Yes No Yes No
1959 Survivor Benefit Level Level 1 Level 1 Level 1 Level 1 Level 1 Level 1
Special Yes Yes Yes Yes Yes Yes
Alternate (firefighters) No No No No No No
Post-Retirement Death Benefits
Lump Sum $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000
Survivor Allowance (PRSA) No No No No No No No
COLA 2% 2% 2% 2% 2% 2% 2%
CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 35
Plan's Major Benefit Options (Continued)
Shown below i s a summary of the major optional benefits for which the agency has contracted. A description of principal standard and optio nal plan provisions is in
Appendix B.
Benefit Group
Member Category Fire Police Fire Fire Fire Fire Police
Demographics
Actives Yes Yes No No No No No
Transfers/Separated Yes Yes No No No No No
Receiving No Yes Yes Yes Yes Yes Yes
112653 217220 217221 217224 217225 217226 217231
Benefit Provision
Benefit Formula 2.7% @ 57 2.7% @ 57
Social Security Coverage No No
Full/Modified Full Full
Employee Contribution Rate 11.75% 11.75%
Final Average Compensation Period Three Year Three Year
Sick Leave Credit No No
Non-Industrial Disability Standard Standard
Industrial Disability Standard Standard
Pre-Retirement Death Benefits
Optional Settlement 2 Yes No
1959 Survivor Benefit Level Level 1 Level 1
Special Yes Yes
Alternate (firefighters) No No
Post-Retirement Death Benefits
Lump Sum $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000
Survivor Allowance (PRSA) No No No No No No No
COLA 2% 2% 2% 2% 2% 2% 2%
CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 36
Plan's Major Benefit Options (Continued)
Shown below is a summary of the major optional benefits for which the agency has contracted. A description of principal stand ard and optional plan provisions is in
Appendix B.
Benefit Group
Member Category Police Police Police
Demographics
Actives No No No
Transfers/Separated No No No
Receiving Yes Yes Yes
217234 217235 217236
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 2
1959 Survivor Benefit Level
Special
Alternate (firefighters)
Post-Retirement Death Benefits
Lump Sum $2,000 $2,000 $2,000
Survivor Allowance (PRSA) No No No
COLA 2% 2% 2%
Appendices
• Appendix A – Actuarial Methods and Assumptions
• Appendix B – Principal Plan Provisions
• Appendix C – Participant Data
• Appendix D – Glossary
Appendix A - Actuarial Methods and Assumptions
• Actuarial Data 39
• Actuarial Methods 39
• Actuarial Assumptions 42
• Miscellaneous 62
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 39
Actuarial Data
As stated in the Actuarial Certification, the data which serves as the basis of this valuation has been obtained from the var ious
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 form er 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 t hese
cases may not be accurate. These situations are relatively inf requent, however, and generally do not have a material impact on
the required employer contributions.
Actuarial Methods
Actuarial Cost Method
With one exception, the actuarial cost method use d in this valuation is the Entry Age Actuarial Cost Method. This method is
used to calculate the required employer contributions and the PEPRA member contribution rate. Under this method, the cost of
the projected benefits is allocated on an individual basis as a level percent of earnings for the individual between entry age and
retirement age. The portion allocated to the year following the valuation date is the normal cost. This method yields a total
normal cost rate, expressed as a pe rcentage of payroll, which is designed to remain level throughout the member’s career.
The actuarial accrued liability for active members is then calculated as the present value of benefits minus the present value of
future normal cost, or the portion of the total present value of benefits 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 benef its
expected to be paid. No norma l costs are applicable for these participants.
To calculate the accrued liability on termination basis, this valuation use d the Traditional Unit Credit Actuarial Cost Method. This
method differs from the entry age method only for active members where the accrued liability is the present value of benefits
assuming no future pay increases or service accruals.
Amortization of Unfunded Actuarial Accrued Liability
The excess of the total actuarial accrued liability over the market value of plan assets is call ed the unfunded actuarial accrued
liability (UAL). Funding requirements are determined by adding the normal cost and a payment toward the UAL. The UAL
payment is equal to the sum of individual amortization payments, each representing a different source of UAL for a given
measurement period.
Amortization payments are determined according to the CalPERS Actuarial Amortization Policy. The board adopted a new
policy effective for the June 30, 2019 , actuarial valuation. The new policy applies prospectively only; amortization bases
(sources of UAL) established prior to the June 30, 2019 , valuation will continue to be amortized according to the prio r policy.
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 40
Prior Policy (Bases Established prior to June 30, 2019)
Amortization payments are determined as a level percentage of payroll whereby the payment increases each year at an
escalation rate. 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. Bases established prior to June 30, 2013 , may be amortized differently. A summary is provided in the following table:
Driver
Source
(Gain)/Loss
Assumption/Method
Change
Benefit
Change
Golden
Handshake Investment
Non-
investment
Amortization
Period 30 Years 30 Years 20 Years
20
Years 5 Years
Escalation Rate
- Active Plans
- Inactive Plans
2.80%
0%
2.80%
0%
2.80%
0%
2.80%
0%
2.80%
0%
Ramp Up 5 5 5 0 0
Ramp Down 5 5 5 0 0
The 5-year ramp up means that the payments in the first four years of the amortization period are 20%, 40%, 60% and 80% 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.
Current Policy (Bases Established on or after June 30, 2019)
Amortization payments are determined as a level dollar amount. Investment gains or losses are amortized over a fixed 20 -year
period with a 5 -year ramp up at the beginning of the amortization period. N on-investment gains or losses are amortized over a
fixed 20 -year period with no ramps. All changes in liability due to plan amendments (other than golden handshakes) are
amortized over a 20 -year period with no ramps. Changes in actuarial assumptions or cha nges in actuarial methodology are
amortized over a 20 -year period with no ramps. Changes in unfunded accrued liability due to a Golden Handshake are
amortized over a period of five years. A summary is provided in the table below:
Driver
Source
(Gain)/Loss
Assumption/
Method
Change
Benefit
Change
Golden
Handshake Investment
Non-
investment
Amortization
Period 20 Years 20 Years 20 Years 20 Years 5 Years
Escalation Rate 0% 0% 0% 0% 0%
Ramp Up 5 0 0 0 0
Ramp Down 0 0 0 0 0
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:
• When a negative payment would be required on a positive unfunded actuarial liability; or
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 41
• When the payment would completely amortize the total unfunded liability in a very short time period, and results in
a large change in the employer contribution requirement .
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 20 years.
Exceptions for Plans in Surplus
If a surplus exists (i.e., the Market Value of Assets exceeds the plan’s accrued liability) any prior amort ization layers shall be
considered fully amortized, and the surplus shall not be amortized.
In the event of any subsequent unfunded liability, a Fresh Start shall be used with an amortization period of 20 years or les s.
Exceptions for Small Amounts
Where small unfunded liabilities are identified in annual valuations which result in small payment amounts, the actuary may
shorten the remaining period for these bases.
• When the balance of a single amortization base has an absolute value less than $250, the amortization period is
reduced to one year.
• When the entire unfunded liability is a small amount , the actuary may perform a Fresh Start and use an appropriate
amortization period.
Exceptions for Inactive Plans
The following exceptions apply to plans clas sified 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 demogra phics of the plan will be used to determine if shorter
periods may be more appropriate.
Exceptions for Inactive Agencies
For a public agency with no active members in any CalPERS rate plan, the unfunded liability shall be amortized over a closed
amortization period of no more than 15 years.
Asset Valuation Method
The Actuarial Value of Assets is set equal to the m arket value of assets. Asset values include accounts receivable.
PEPRA Normal Cost Rate Methodology
Per Government Code s ection 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 th e 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 form ula,
eligibility and vesting criteria, ancillary be nefit provisions, and any automatic cost-of-living adjustments as determined by the
public retirement system.
For purposes of setting member rates, it is preferable to determine total normal cost using a large active population so that the
rate remains re latively stable. While each CalPERS non -pooled plan has a sufficiently large active population for this purpose,
the PEPRA active population by itself may not be sufficiently large enough yet. The total PEPRA normal cost for each PEPRA
benefit tier will be determined based on the entire active plan population (both PEPRA and Classic) only until the number of
members covered under the PEPRA formula meets either:
1. 50% of the active population, or
2. 25% of the active population and 100 or more PEPRA mem bers
Once one of these conditions is met, the total PEPRA normal cost for each PEPRA benefit tier will be determined using the
entire active PEPRA population.
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 42
Actuarial Assumptions
In 2021, CalPERS completed its most recent asset liability management study incorporating actuarial assumptions and strategic
asset allocation. In November 2021, the board adopted changes to the asset allocation that increased the expected volatility of
returns. The adopted asset alloca tion was expected to have a long -term blended return that continued to support a discount rate
assumption of 6.80%. The board also approved several changes to the demographic assumptions that more closely aligned with
actual experience.
For more details and additional rationale for the selection of the actuarial assumptions, please refer to the 2021 CalPERS
Experience Study and Review of Actuarial Assumptions 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 and price inflation assumption used for the accrued liability on a termination
basis ) 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 November 17, 2 021, is 6.80% compounded annually (net of
investment and administrative expenses) as of June 30, 2023. The discount rate is based on the long-term expected rate of
return on assets using a building -block method in which expected future real rates of return (expected returns, net of pension
plan investment expense and inflation) are developed for each major a s set class. The current assumption, originally based on
capital market assumptions developed by the Investment Office in 2021, has been reviewed for this valuation based on capital
market assumptions developed by the Investment Office in 2023.
Termination Liability Discount Rate
The current discount rate assumption used for termi nation 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 accrued
liabilities on a termination basis in this report use discount rates that are based on the 20-year Treasury rate on the valuation
date.
To illustrate the impact of the variability of interest rates, the accrued liabilities on a termination basis in this report use discount
rates 1% below and 1% above the 20-year Treasury rate on the valuation date. The 20-year Treasury rate was 4.06% on June
30, 2023.
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 43
Salary Increases
Annual increases vary by category, entry age, and duration of service. A sample of assumed increases due to seniority, merit
and promotion are shown below. Assumed wage inflation is combined with these factors to develop the total expected salary
increases.
Public Agency Miscellaneous
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.0764 0.0621 0.0521
1 0.0663 0.0528 0.0424
2 0.0576 0.0449 0.0346
3 0.0501 0.0381 0.0282
4 0.0435 0.0324 0.0229
5 0.0378 0.0276 0.0187
10 0.0201 0.0126 0.0108
15 0.0155 0.0102 0.0071
20 0.0119 0.0083 0.0047
25 0.0091 0.0067 0.0031
30 0.0070 0.0054 0.0020
Public Agency Fire
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1517 0.1549 0.0631
1 0.1191 0.1138 0.0517
2 0.0936 0.0835 0.0423
3 0.0735 0.0613 0.0346
4 0.0577 0.0451 0.0284
5 0.0453 0.0331 0.0232
10 0.0188 0.0143 0.0077
15 0.0165 0.0124 0.0088
20 0.0145 0.0108 0.0101
25 0.0127 0.0094 0.0115
30 0.0112 0.0082 0.0132
Public Agency Police
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1181 0.1051 0.0653
1 0.0934 0.0812 0.0532
2 0.0738 0.0628 0.0434
3 0.0584 0.0485 0.0353
4 0.0462 0.0375 0.0288
5 0.0365 0.0290 0.0235
10 0.0185 0.0155 0.0118
15 0.0183 0.0150 0.0131
20 0.0181 0.0145 0.0145
25 0.0179 0.0141 0.0161
30 0.0178 0.0136 0.0179
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 44
Salary Increases (continued)
Public Agency County Peace Officers
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1238 0.1053 0.0890
1 0.0941 0.0805 0.0674
2 0.0715 0.0616 0.0510
3 0.0544 0.0471 0.0387
4 0.0413 0.0360 0.0293
5 0.0314 0.0276 0.0222
10 0.0184 0.0142 0.0072
15 0.0174 0.0124 0.0073
20 0.0164 0.0108 0.0074
25 0.0155 0.0094 0.0075
30 0.0147 0.0083 0.0077
Schools
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.0275 0.0275 0.0200
1 0.0422 0.0373 0.0298
2 0.0422 0.0373 0.0298
3 0.0422 0.0373 0.0298
4 0.0388 0.0314 0.0245
5 0.0308 0.0239 0.0179
10 0.0236 0.0160 0.0121
15 0.0182 0.0135 0.0103
20 0.0145 0.0109 0.0085
25 0.0124 0.0102 0.0058
30 0.0075 0.0053 0.0019
• The Miscellaneous salary scale is used for Local Prosecutors.
• The Police salary scale is used for Other Safety, Local Sheriff, and School Police.
Price Inflation
2.30% compounded annually.
Termination Liability Price Inflation
The breakeven inflation rate for 20 -year Treasuries on the valuation date, 2.50%.
Wage Inflation
2.80% compounded annually. This is used in projecting individual salary increases.
Payroll Growth
2.80% compounded annually. This is used as the escalation rate of the amortization payments on level percent of payroll
amortization bases , that is, on any amortization bases established prior to 2019 for plans that currently have active members.
Non-valued Potential Additional Liabilities
The potential liability loss for a cost-of-living increase exceeding the 2.30% price inflation assumption and any potential liability
loss from future member service purchases that are not reflected in the valuation.
Miscellaneous Loading Factors
Credit for Unused Sick Leave
Total years of service is increased by 1% for those plans that have adopted the provision of providing Credit for Unused Sick
Leave.
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 45
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 project ed 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 5% contingency load. This load is for unforeseen improvements in mortality.
Demographic Assumptions
Pre -Retirement Mortality
The mortality assumptions are based on mortality rates resulting from the most recent Ca lPERS Experience Study adopted by
the CalPERS Board in November 2021. For purposes of the mortality rates, the rates incorporate generational mortality to
capture ongoing mortality improvement. Generational mortality explicitly assumes that members born mo re recently will live
longer than the members born before them thereby capturing the mortality improvement seen in the past and expected
continued improvement. For more details, please refer to the 2021 CalPERS Experience Study and Review of Actuarial
Assumptions report that can be found on the CalPERS website .
Rates vary by age and gender. This table only contains a sample of the 2017 base table rates for illustrative purposes. The n on-
industrial death rates are used for all plans. The industrial death rates are used for Safety plans (except for local Safety
mem bers described in Government Code s ection 20423.6 where the agency has not specifically contracted for industrial death
benefits.)
Miscellaneous Safety
Non-Industrial Death Non-Industrial Death Industrial Death
(Not Job-Related) (Not Job-Related) (Job-Related)
Age Male Female Male Female Male Female
20 0.00039 0.00014 0.00038 0.00014 0.00004 0.00002
25 0.00033 0.00013 0.00034 0.00018 0.00004 0.00002
30 0.00044 0.00019 0.00042 0.00025 0.00005 0.00003
35 0.00058 0.00029 0.00048 0.00034 0.00005 0.00004
40 0.00075 0.00039 0.00055 0.00042 0.00006 0.00005
45 0.00093 0.00054 0.00066 0.00053 0.00007 0.00006
50 0.00134 0.00081 0.00092 0.00073 0.00010 0.00008
55 0.00198 0.00123 0.00138 0.00106 0.00015 0.00012
60 0.00287 0.00179 0.00221 0.00151 0.00025 0.00017
65 0.00403 0.00250 0.00346 0.00194 0.00038 0.00022
70 0.00594 0.00404 0.00606 0.00358 0.00067 0.00040
75 0.00933 0.00688 0.01099 0.00699 0.00122 0.00078
80 0.01515 0.01149 0.02027 0.01410 0.00225 0.00157
• The pre -retirement mortality rates above are for 2017 and are projected generationally for future years using 80% of
the Society of Actuaries’ Scale MP -2020.
• 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% will
become the non-industrial death rate and 1% will become the industrial death rate.
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 46
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.
Service Retirement
Non-Industrial Disability Industrial Disability
(Not Job-Related) (Job-Related)
Age Male Female Male Female Male Female
50 0.00267 0.00199 0.01701 0.01439 0.00430 0.00311
55 0.00390 0.00325 0.02210 0.01734 0.00621 0.00550
60 0.00578 0.00455 0.02708 0.01962 0.00944 0.00868
65 0.00857 0.00612 0.03334 0.02276 0.01394 0.01190
70 0.01333 0.00996 0.04001 0.02910 0.02163 0.01858
75 0.02391 0.01783 0.05376 0.04160 0.03446 0.03134
80 0.04371 0.03403 0.07936 0.06112 0.05853 0.05183
85 0.08274 0.06166 0.11561 0.09385 0.10137 0.08045
90 0.14539 0.11086 0.16608 0.14396 0.16584 0.12434
95 0.24665 0.20364 0.24665 0.20364 0.24665 0.20364
100 0.36198 0.31582 0.36198 0.31582 0.36198 0.31582
105 0.52229 0.44679 0.52229 0.44679 0.52229 0.44679
110 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000
• The post-retirement mortality rates above are for 2017 and are projected generationally for future years using 80% of
the Society of Actuaries’ Scale MP -2020.
Marital Status
For active members, a percentage who are married upon retirement is assumed according to the member category as shown in
the following table.
Member Category Percent Married
Miscellaneous Member 70%
Local Police 85%
Local Fire 85%
Other Local Safety 70%
School Police 85%
Local County Peace Officers 75%
Age of Spouse
It is assumed that female spouses are 3 years younger than male spouses. This assumption is used for all plans.
Separated Members
It is assumed that separated members refund immediately if non -vested. Separated members who are vested are assumed to
retire at age 59 for Miscellaneous members and age 54 for Safety members.
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 47
Termination with Refu nd
Rates vary by entry age and service for Miscellaneous plans. Rates vary by service for Safety plans. See sample rates in tabl es
below.
Public Agency Miscellaneous
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45
Male Female Male Female Male Female Male Female Male Female Male Female
0 0.1851 0.1944 0.1769 0.1899 0.1631 0.1824 0.1493 0.1749 0.1490 0.1731 0.1487 0.1713
1 0.1531 0.1673 0.1432 0.1602 0.1266 0.1484 0.1101 0.1366 0.1069 0.1323 0.1037 0.1280
2 0.1218 0.1381 0.1125 0.1307 0.0970 0.1183 0.0815 0.1058 0.0771 0.0998 0.0726 0.0938
3 0.0927 0.1085 0.0852 0.1020 0.0727 0.0912 0.0601 0.0804 0.0556 0.0737 0.0511 0.0669
4 0.0672 0.0801 0.0616 0.0752 0.0524 0.0670 0.0431 0.0587 0.0392 0.0523 0.0352 0.0459
5 0.0463 0.0551 0.0423 0.0517 0.0358 0.0461 0.0292 0.0404 0.0261 0.0350 0.0230 0.0296
10 0.0112 0.0140 0.0101 0.0129 0.0083 0.0112 0.0064 0.0094 0.0048 0.0071 0.0033 0.0049
15 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
20 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
25 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
30 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
35 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
Public Agency Safety
Duration of
Service Fire Police County Peace Officer
Male Female Male Female Male Female
0 0.1022 0.1317 0.1298 0.1389 0.1086 0.1284
1 0.0686 0.1007 0.0789 0.0904 0.0777 0.0998
2 0.0441 0.0743 0.0464 0.0566 0.0549 0.0759
3 0.0272 0.0524 0.0274 0.0343 0.0385 0.0562
4 0.0161 0.0349 0.0170 0.0206 0.0268 0.0402
5 0.0092 0.0214 0.0113 0.0128 0.0186 0.0276
10 0.0015 0.0000 0.0032 0.0047 0.0046 0.0038
15 0.0000 0.0000 0.0000 0.0000 0.0023 0.0036
20 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
25 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
30 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
35 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
• The police termination and refund rates are also used for Public Agency Local Prosecutors, Other Safety, Local
Sheriff, and School Police.
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 48
Termination with Refund (continued)
Schools
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45
Male Female Male Female Male Female Male Female Male Female Male Female
0 0.2054 0.2120 0.1933 0.1952 0.1730 0.1672 0.1527 0.1392 0.1423 0.1212 0.1318 0.1032
1 0.1922 0.2069 0.1778 0.1883 0.1539 0.1573 0.1300 0.1264 0.1191 0.1087 0.1083 0.0910
2 0.1678 0.1859 0.1536 0.1681 0.1298 0.1383 0.1060 0.1086 0.0957 0.0934 0.0853 0.0782
3 0.1384 0.1575 0.1256 0.1417 0.1042 0.1155 0.0829 0.0893 0.0736 0.0774 0.0643 0.0656
4 0.1085 0.1274 0.0978 0.1143 0.0800 0.0925 0.0622 0.0707 0.0542 0.0620 0.0462 0.0533
5 0.0816 0.0991 0.0732 0.0887 0.0590 0.0713 0.0449 0.0539 0.0383 0.0476 0.0317 0.0413
10 0.0222 0.0248 0.0200 0.0221 0.0163 0.0174 0.0125 0.0128 0.0094 0.0100 0.0063 0.0072
15 0.0106 0.0132 0.0095 0.0113 0.0077 0.0083 0.0058 0.0052 0.0040 0.0039 0.0021 0.0026
20 0.0059 0.0065 0.0050 0.0054 0.0035 0.0036 0.0021 0.0019 0.0010 0.0009 0.0000 0.0000
25 0.0029 0.0034 0.0025 0.0029 0.0018 0.0020 0.0010 0.0012 0.0005 0.0006 0.0000 0.0000
30 0.0012 0.0015 0.0011 0.0013 0.0011 0.0011 0.0010 0.0009 0.0005 0.0005 0.0000 0.0000
35 0.0006 0.0007 0.0006 0.0007 0.0005 0.0006 0.0005 0.0005 0.0003 0.0002 0.0000 0.0000
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 49
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
Male Female Male Female Male Female Male Female Male Female
5 0.0381 0.0524 0.0381 0.0524 0.0358 0.0464 0.0334 0.0405 0.0301 0.0380
10 0.0265 0.0362 0.0265 0.0362 0.0254 0.0334 0.0244 0.0307 0.0197 0.0236
15 0.0180 0.0252 0.0180 0.0252 0.0166 0.0213 0.0152 0.0174 0.0119 0.0132
20 0.0141 0.0175 0.0141 0.0175 0.0110 0.0131 0.0079 0.0087 0.0000 0.0000
25 0.0084 0.0108 0.0084 0.0108 0.0064 0.0076 0.0000 0.0000 0.0000 0.0000
30 0.0047 0.0056 0.0047 0.0056 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
35 0.0038 0.0041 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
Public Agency Safety
Duration of
Service Fire Police County Peace Officer
Male Female Male Female Male Female
5 0.0089 0.0224 0.0156 0.0272 0.0177 0.0266
10 0.0066 0.0164 0.0113 0.0198 0.0126 0.0189
15 0.0048 0.0120 0.0083 0.0144 0.0089 0.0134
20 0.0035 0.0088 0.0060 0.0105 0.0063 0.0095
25 0.0024 0.0061 0.0042 0.0073 0.0042 0.0063
30 0.0012 0.0031 0.0021 0.0037 0.0021 0.0031
35 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
• 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
Male Female Male Female Male Female Male Female Male Female
5 0.0359 0.0501 0.0359 0.0501 0.0332 0.0402 0.0305 0.0304 0.0266 0.0272
10 0.0311 0.0417 0.0311 0.0417 0.0269 0.0341 0.0228 0.0265 0.0193 0.0233
15 0.0193 0.0264 0.0193 0.0264 0.0172 0.0220 0.0151 0.0175 0.0123 0.0142
20 0.0145 0.0185 0.0145 0.0185 0.0113 0.0141 0.0080 0.0097 0.0000 0.0000
25 0.0089 0.0123 0.0089 0.0123 0.0074 0.0093 0.0000 0.0000 0.0000 0.0000
30 0.0057 0.0064 0.0057 0.0064 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
35 0.0040 0.0049 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 50
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 All All All Male Female
20 0.0001 0.0000 0.0001 0.0001 0.0001 0.0000 0.0002
25 0.0001 0.0001 0.0001 0.0001 0.0001 0.0000 0.0002
30 0.0002 0.0003 0.0001 0.0001 0.0001 0.0002 0.0002
35 0.0004 0.0007 0.0001 0.0002 0.0003 0.0005 0.0004
40 0.0009 0.0012 0.0001 0.0002 0.0006 0.0010 0.0008
45 0.0015 0.0019 0.0002 0.0003 0.0011 0.0019 0.0015
50 0.0015 0.0019 0.0004 0.0005 0.0016 0.0027 0.0021
55 0.0014 0.0013 0.0006 0.0007 0.0009 0.0024 0.0017
60 0.0012 0.0009 0.0006 0.0011 0.0005 0.0020 0.0010
• 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 0.0002 0.0017 0.0013
30 0.0006 0.0048 0.0025
35 0.0012 0.0079 0.0037
40 0.0023 0.0110 0.0051
45 0.0040 0.0141 0.0067
50 0.0208 0.0185 0.0092
55 0.0307 0.0479 0.0151
60 0.0438 0.0602 0.0174
• The police industrial disability rates are also used for Local Sheriff and Other Safety.
• 50% of the police industrial disability rates are used for School Police.
• 1% 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% will
become the non -industrial disability rate and 50% will become the industrial disability rate.
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 51
Service Retirement
Retirement rates vary by age, service, and formula, except for the Safety Half Pay at 55 and 2% at 55 formulas, where
retirement rates vary by age only.
Public Agency Miscellaneous 1.5% at age 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% at age 60
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.010 0.011 0.014 0.014 0.017 0.017
51 0.017 0.013 0.014 0.010 0.010 0.010
52 0.014 0.014 0.018 0.015 0.016 0.016
53 0.015 0.012 0.013 0.010 0.011 0.011
54 0.006 0.010 0.017 0.016 0.018 0.018
55 0.012 0.016 0.024 0.032 0.036 0.036
56 0.010 0.014 0.023 0.030 0.034 0.034
57 0.006 0.018 0.030 0.040 0.044 0.044
58 0.022 0.023 0.033 0.042 0.046 0.046
59 0.039 0.033 0.040 0.047 0.050 0.050
60 0.063 0.069 0.074 0.090 0.137 0.116
61 0.044 0.058 0.066 0.083 0.131 0.113
62 0.084 0.107 0.121 0.153 0.238 0.205
63 0.173 0.166 0.165 0.191 0.283 0.235
64 0.120 0.145 0.164 0.147 0.160 0.172
65 0.138 0.160 0.214 0.216 0.237 0.283
66 0.198 0.228 0.249 0.216 0.228 0.239
67 0.207 0.242 0.230 0.233 0.233 0.233
68 0.201 0.234 0.225 0.231 0.231 0.231
69 0.152 0.173 0.164 0.166 0.166 0.166
70 0.200 0.200 0.200 0.200 0.200 0.200
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 52
Service Retirement (continued)
Public Agency Miscellaneous 2% at age 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.014 0.014 0.017 0.021 0.023 0.024
51 0.013 0.017 0.017 0.018 0.018 0.019
52 0.013 0.018 0.018 0.020 0.020 0.021
53 0.013 0.019 0.021 0.024 0.025 0.026
54 0.017 0.025 0.028 0.032 0.033 0.035
55 0.045 0.042 0.053 0.086 0.098 0.123
56 0.018 0.036 0.056 0.086 0.102 0.119
57 0.041 0.046 0.056 0.076 0.094 0.120
58 0.052 0.044 0.048 0.074 0.106 0.123
59 0.043 0.058 0.073 0.092 0.105 0.126
60 0.059 0.064 0.083 0.115 0.154 0.170
61 0.087 0.074 0.087 0.107 0.147 0.168
62 0.115 0.123 0.151 0.180 0.227 0.237
63 0.116 0.127 0.164 0.202 0.252 0.261
64 0.084 0.138 0.153 0.190 0.227 0.228
65 0.167 0.187 0.210 0.262 0.288 0.291
66 0.187 0.258 0.280 0.308 0.318 0.319
67 0.195 0.235 0.244 0.277 0.269 0.280
68 0.228 0.248 0.250 0.241 0.245 0.245
69 0.188 0.201 0.209 0.219 0.231 0.231
70 0.229 0.229 0.229 0.229 0.229 0.229
Public Agency Miscellaneous 2.5% at age 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.014 0.017 0.027 0.035 0.046 0.050
51 0.019 0.021 0.025 0.030 0.038 0.040
52 0.018 0.020 0.026 0.034 0.038 0.037
53 0.013 0.021 0.031 0.045 0.052 0.053
54 0.025 0.025 0.030 0.046 0.057 0.068
55 0.029 0.042 0.064 0.109 0.150 0.225
56 0.036 0.047 0.068 0.106 0.134 0.194
57 0.051 0.047 0.060 0.092 0.116 0.166
58 0.035 0.046 0.062 0.093 0.119 0.170
59 0.029 0.053 0.072 0.112 0.139 0.165
60 0.039 0.069 0.094 0.157 0.177 0.221
61 0.080 0.077 0.086 0.140 0.167 0.205
62 0.086 0.131 0.149 0.220 0.244 0.284
63 0.135 0.135 0.147 0.214 0.222 0.262
64 0.114 0.128 0.158 0.177 0.233 0.229
65 0.112 0.174 0.222 0.209 0.268 0.273
66 0.235 0.254 0.297 0.289 0.321 0.337
67 0.237 0.240 0.267 0.249 0.267 0.277
68 0.258 0.271 0.275 0.207 0.210 0.212
69 0.117 0.208 0.266 0.219 0.250 0.270
70 0.229 0.229 0.229 0.229 0.229 0.229
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 53
Service Retirement (continued)
Public Agency Miscellaneous 2.7% at age 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.011 0.016 0.022 0.033 0.034 0.038
51 0.018 0.019 0.023 0.032 0.031 0.031
52 0.019 0.020 0.026 0.035 0.034 0.037
53 0.020 0.020 0.025 0.043 0.048 0.053
54 0.018 0.030 0.040 0.052 0.053 0.070
55 0.045 0.058 0.082 0.138 0.208 0.278
56 0.057 0.062 0.080 0.121 0.178 0.222
57 0.045 0.052 0.071 0.106 0.147 0.182
58 0.074 0.060 0.074 0.118 0.163 0.182
59 0.058 0.067 0.086 0.123 0.158 0.187
60 0.087 0.084 0.096 0.142 0.165 0.198
61 0.073 0.084 0.101 0.138 0.173 0.218
62 0.130 0.133 0.146 0.187 0.214 0.249
63 0.122 0.140 0.160 0.204 0.209 0.243
64 0.104 0.124 0.154 0.202 0.214 0.230
65 0.182 0.201 0.242 0.264 0.293 0.293
66 0.272 0.249 0.273 0.285 0.312 0.312
67 0.182 0.217 0.254 0.249 0.264 0.264
68 0.223 0.197 0.218 0.242 0.273 0.273
69 0.217 0.217 0.217 0.217 0.217 0.217
70 0.227 0.227 0.227 0.227 0.227 0.227
Public Agency Miscellaneous 3% at age 60
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.015 0.020 0.025 0.039 0.040 0.044
51 0.041 0.034 0.032 0.041 0.036 0.037
52 0.024 0.020 0.022 0.039 0.040 0.041
53 0.018 0.024 0.032 0.047 0.048 0.057
54 0.033 0.033 0.035 0.051 0.049 0.052
55 0.137 0.043 0.051 0.065 0.076 0.108
56 0.173 0.038 0.054 0.075 0.085 0.117
57 0.019 0.035 0.059 0.088 0.111 0.134
58 0.011 0.040 0.070 0.105 0.133 0.162
59 0.194 0.056 0.064 0.081 0.113 0.163
60 0.081 0.085 0.133 0.215 0.280 0.333
61 0.080 0.090 0.134 0.170 0.223 0.292
62 0.137 0.153 0.201 0.250 0.278 0.288
63 0.128 0.140 0.183 0.227 0.251 0.260
64 0.174 0.147 0.173 0.224 0.239 0.264
65 0.152 0.201 0.262 0.299 0.323 0.323
66 0.272 0.273 0.317 0.355 0.380 0.380
67 0.218 0.237 0.268 0.274 0.284 0.284
68 0.200 0.228 0.269 0.285 0.299 0.299
69 0.250 0.250 0.250 0.250 0.250 0.250
70 0.245 0.245 0.245 0.245 0.245 0.245
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 54
Service Retirement (continued)
Public Agency Miscellaneous 2% at age 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 0.005 0.008 0.012 0.015 0.019 0.031
53 0.007 0.011 0.014 0.018 0.021 0.032
54 0.007 0.011 0.015 0.019 0.023 0.034
55 0.010 0.019 0.028 0.036 0.061 0.096
56 0.014 0.026 0.038 0.050 0.075 0.108
57 0.018 0.029 0.039 0.050 0.074 0.107
58 0.023 0.035 0.048 0.060 0.073 0.099
59 0.025 0.038 0.051 0.065 0.092 0.128
60 0.031 0.051 0.071 0.091 0.111 0.138
61 0.038 0.058 0.079 0.100 0.121 0.167
62 0.044 0.074 0.104 0.134 0.164 0.214
63 0.077 0.105 0.134 0.163 0.192 0.237
64 0.072 0.101 0.129 0.158 0.187 0.242
65 0.108 0.141 0.173 0.206 0.239 0.300
66 0.132 0.172 0.212 0.252 0.292 0.366
67 0.132 0.172 0.212 0.252 0.292 0.366
68 0.120 0.156 0.193 0.229 0.265 0.333
69 0.120 0.156 0.193 0.229 0.265 0.333
70 0.120 0.156 0.193 0.229 0.265 0.333
Public Agency Fire Half Pay at age 55 and 2% at age 55
Age Rate
Age Rate
50 0.016 56 0.111
51 0.000 57 0.000
52 0.034 58 0.095
53 0.020 59 0.044
54 0.041 60 1.000
55 0.075
Public Agency Police Half Pay at age 55 and 2% at age 55
Age Rate
Age Rate
50 0.026 56 0.069
51 0.000 57 0.051
52 0.016 58 0.072
53 0.027 59 0.070
54 0.010 60 0.300
55 0.167
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 55
Service Retirement (continued)
Public Agency Police 2% at age 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.018 0.077 0.056 0.046 0.043 0.046
51 0.022 0.087 0.060 0.048 0.044 0.047
52 0.020 0.102 0.081 0.071 0.069 0.075
53 0.016 0.072 0.053 0.045 0.042 0.046
54 0.006 0.071 0.071 0.069 0.072 0.080
55 0.009 0.040 0.099 0.157 0.186 0.186
56 0.020 0.051 0.108 0.165 0.194 0.194
57 0.036 0.072 0.106 0.139 0.156 0.156
58 0.001 0.046 0.089 0.130 0.152 0.152
59 0.066 0.094 0.119 0.143 0.155 0.155
60 0.177 0.177 0.177 0.177 0.177 0.177
61 0.134 0.134 0.134 0.134 0.134 0.134
62 0.184 0.184 0.184 0.184 0.184 0.184
63 0.250 0.250 0.250 0.250 0.250 0.250
64 0.177 0.177 0.177 0.177 0.177 0.177
65 1.000 1.000 1.000 1.000 1.000 1.000
• These rates also apply to County Peace officers, Local Prosecutors, Local Sheriff, School Police, and Other
Safety.
Public Agency Fire 2% at age 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.054 0.054 0.056 0.080 0.064 0.066
51 0.020 0.020 0.021 0.030 0.024 0.024
52 0.037 0.037 0.038 0.054 0.043 0.045
53 0.051 0.051 0.053 0.076 0.061 0.063
54 0.082 0.082 0.085 0.121 0.097 0.100
55 0.139 0.139 0.139 0.139 0.139 0.139
56 0.129 0.129 0.129 0.129 0.129 0.129
57 0.085 0.085 0.085 0.085 0.085 0.085
58 0.119 0.119 0.119 0.119 0.119 0.119
59 0.167 0.167 0.167 0.167 0.167 0.167
60 0.152 0.152 0.152 0.152 0.152 0.152
61 0.179 0.179 0.179 0.179 0.179 0.179
62 0.179 0.179 0.179 0.179 0.179 0.179
63 0.179 0.179 0.179 0.179 0.179 0.179
64 0.179 0.179 0.179 0.179 0.179 0.179
65 1.000 1.000 1.000 1.000 1.000 1.000
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 56
Service Retirement (continued)
Public Agency Police 3% at age 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.019 0.053 0.045 0.054 0.057 0.061
51 0.002 0.017 0.028 0.044 0.053 0.060
52 0.002 0.031 0.037 0.051 0.059 0.066
53 0.026 0.049 0.049 0.080 0.099 0.114
54 0.019 0.034 0.047 0.091 0.121 0.142
55 0.006 0.115 0.141 0.199 0.231 0.259
56 0.017 0.188 0.121 0.173 0.199 0.199
57 0.008 0.137 0.093 0.136 0.157 0.157
58 0.017 0.126 0.105 0.164 0.194 0.194
59 0.026 0.146 0.110 0.167 0.195 0.195
60 0.155 0.155 0.155 0.155 0.155 0.155
61 0.210 0.210 0.210 0.210 0.210 0.210
62 0.262 0.262 0.262 0.262 0.262 0.262
63 0.172 0.172 0.172 0.172 0.172 0.172
64 0.227 0.227 0.227 0.227 0.227 0.227
65 1.000 1.000 1.000 1.000 1.000 1.000
• These rates also apply to County Peace officers, Local Prosecutors, Local Sheriff, School Police, and Other
Safety.
Public Agency Fire 3% at age 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.003 0.006 0.013 0.019 0.025 0.028
51 0.004 0.008 0.017 0.026 0.034 0.038
52 0.005 0.011 0.022 0.033 0.044 0.049
53 0.005 0.034 0.024 0.038 0.069 0.138
54 0.007 0.047 0.032 0.051 0.094 0.187
55 0.010 0.067 0.046 0.073 0.134 0.266
56 0.010 0.063 0.044 0.069 0.127 0.253
57 0.135 0.100 0.148 0.196 0.220 0.220
58 0.083 0.062 0.091 0.120 0.135 0.135
59 0.137 0.053 0.084 0.146 0.177 0.177
60 0.162 0.063 0.099 0.172 0.208 0.208
61 0.598 0.231 0.231 0.231 0.231 0.231
62 0.621 0.240 0.240 0.240 0.240 0.240
63 0.236 0.236 0.236 0.236 0.236 0.236
64 0.236 0.236 0.236 0.236 0.236 0.236
65 1.000 1.000 1.000 1.000 1.000 1.000
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 57
Service Retirement (continued)
Public Agency Police 3% at age 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.124 0.103 0.113 0.143 0.244 0.376
51 0.060 0.081 0.087 0.125 0.207 0.294
52 0.016 0.055 0.111 0.148 0.192 0.235
53 0.072 0.074 0.098 0.142 0.189 0.237
54 0.018 0.049 0.105 0.123 0.187 0.271
55 0.069 0.074 0.081 0.113 0.209 0.305
56 0.064 0.108 0.113 0.125 0.190 0.288
57 0.056 0.109 0.160 0.182 0.210 0.210
58 0.108 0.129 0.173 0.189 0.214 0.214
59 0.093 0.144 0.204 0.229 0.262 0.262
60 0.343 0.180 0.159 0.188 0.247 0.247
61 0.221 0.221 0.221 0.221 0.221 0.221
62 0.213 0.213 0.213 0.213 0.213 0.213
63 0.233 0.233 0.233 0.233 0.233 0.233
64 0.234 0.234 0.234 0.234 0.234 0.234
65 1.000 1.000 1.000 1.000 1.000 1.000
• These rates also apply to County Peace officers, Local Prosecutors, Local Sheriff, School Police, and Other
Safety.
Public Agency Fire 3% at age 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.095 0.048 0.053 0.093 0.134 0.175
51 0.016 0.032 0.053 0.085 0.117 0.149
52 0.013 0.032 0.054 0.087 0.120 0.154
53 0.085 0.044 0.049 0.089 0.129 0.170
54 0.038 0.065 0.074 0.105 0.136 0.167
55 0.042 0.043 0.049 0.085 0.132 0.215
56 0.133 0.103 0.075 0.113 0.151 0.209
57 0.062 0.048 0.060 0.124 0.172 0.213
58 0.124 0.097 0.092 0.153 0.194 0.227
59 0.092 0.071 0.078 0.144 0.192 0.233
60 0.056 0.044 0.061 0.131 0.186 0.233
61 0.282 0.219 0.158 0.198 0.233 0.260
62 0.292 0.227 0.164 0.205 0.241 0.269
63 0.196 0.196 0.196 0.196 0.196 0.196
64 0.197 0.197 0.197 0.197 0.197 0.197
65 1.000 1.000 1.000 1.000 1.000 1.000
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 58
Service Retirement (continued)
Public Agency Police 2% at age 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.040 0.040 0.040 0.040 0.040 0.080
51 0.028 0.028 0.028 0.028 0.040 0.066
52 0.028 0.028 0.028 0.028 0.043 0.061
53 0.028 0.028 0.028 0.028 0.057 0.086
54 0.028 0.028 0.028 0.032 0.069 0.110
55 0.050 0.050 0.050 0.067 0.099 0.179
56 0.046 0.046 0.046 0.062 0.090 0.160
57 0.054 0.054 0.054 0.072 0.106 0.191
58 0.060 0.060 0.060 0.066 0.103 0.171
59 0.060 0.060 0.060 0.069 0.105 0.171
60 0.113 0.113 0.113 0.113 0.113 0.171
61 0.108 0.108 0.108 0.108 0.108 0.128
62 0.113 0.113 0.113 0.113 0.113 0.159
63 0.113 0.113 0.113 0.113 0.113 0.159
64 0.113 0.113 0.113 0.113 0.113 0.239
65 1.000 1.000 1.000 1.000 1.000 1.000
• These rates also apply to County Peace officers, Local Prosecutors, Local Sheriff, School Police, and Other
Safety.
Public Agency Fire 2% at age 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, 2023 Appendix A
Actuarial Methods and Assumptions
Page 59
Service Retirement (continued)
Public Agency Police 2.5% at age 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.050 0.050 0.050 0.050 0.050 0.100
51 0.038 0.038 0.038 0.038 0.055 0.089
52 0.038 0.038 0.038 0.038 0.058 0.082
53 0.036 0.036 0.036 0.036 0.073 0.111
54 0.036 0.036 0.036 0.041 0.088 0.142
55 0.061 0.061 0.061 0.082 0.120 0.217
56 0.056 0.056 0.056 0.075 0.110 0.194
57 0.060 0.060 0.060 0.080 0.118 0.213
58 0.072 0.072 0.072 0.079 0.124 0.205
59 0.072 0.072 0.072 0.083 0.126 0.205
60 0.135 0.135 0.135 0.135 0.135 0.205
61 0.130 0.130 0.130 0.130 0.130 0.153
62 0.135 0.135 0.135 0.135 0.135 0.191
63 0.135 0.135 0.135 0.135 0.135 0.191
64 0.135 0.135 0.135 0.135 0.135 0.287
65 1.000 1.000 1.000 1.000 1.000 1.000
• These rates also apply to County Peace officers, Local Prosecutors, Local Sheriff, School Police, and Other
Safety.
Public Agency Fire 2.5% at age 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, 2023 Appendix A
Actuarial Methods and Assumptions
Page 60
Service Retirement (continued)
Public Agency Police 2.7% at age 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.050 0.050 0.050 0.050 0.050 0.100
51 0.040 0.040 0.040 0.040 0.058 0.094
52 0.038 0.038 0.038 0.038 0.058 0.083
53 0.038 0.038 0.038 0.038 0.077 0.117
54 0.038 0.038 0.038 0.044 0.093 0.150
55 0.068 0.068 0.068 0.091 0.134 0.242
56 0.063 0.063 0.063 0.084 0.123 0.217
57 0.060 0.060 0.060 0.080 0.118 0.213
58 0.080 0.080 0.080 0.088 0.138 0.228
59 0.080 0.080 0.080 0.092 0.140 0.228
60 0.150 0.150 0.150 0.150 0.150 0.228
61 0.144 0.144 0.144 0.144 0.144 0.170
62 0.150 0.150 0.150 0.150 0.150 0.213
63 0.150 0.150 0.150 0.150 0.150 0.213
64 0.150 0.150 0.150 0.150 0.150 0.319
65 1.000 1.000 1.000 1.000 1.000 1.000
• These rates also apply to County Peace officers, Local Prosecutors, Local Sheriff, School Police, and Other
Safety.
Public Agency Fire 2.7% at age 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 0.013 0.019
52 0.016 0.016 0.016 0.016 0.025 0.038
53 0.044 0.044 0.044 0.044 0.068 0.102
54 0.061 0.061 0.061 0.061 0.093 0.140
55 0.083 0.083 0.083 0.083 0.127 0.190
56 0.074 0.074 0.074 0.074 0.114 0.171
57 0.090 0.090 0.090 0.090 0.139 0.208
58 0.079 0.079 0.079 0.079 0.122 0.182
59 0.073 0.073 0.073 0.073 0.112 0.168
60 0.114 0.114 0.114 0.114 0.175 0.262
61 0.114 0.114 0.114 0.114 0.175 0.262
62 0.114 0.114 0.114 0.114 0.175 0.262
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, 2023 Appendix A
Actuarial Methods and Assumptions
Page 61
Service Retirement (continued)
Schools 2% at age 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.003 0.004 0.006 0.007 0.010 0.010
51 0.004 0.005 0.007 0.008 0.011 0.011
52 0.005 0.007 0.008 0.009 0.012 0.012
53 0.007 0.008 0.010 0.012 0.015 0.015
54 0.006 0.009 0.012 0.015 0.020 0.021
55 0.011 0.023 0.034 0.057 0.070 0.090
56 0.012 0.027 0.036 0.056 0.073 0.095
57 0.016 0.027 0.036 0.055 0.068 0.087
58 0.019 0.030 0.040 0.062 0.078 0.103
59 0.023 0.034 0.046 0.070 0.085 0.109
60 0.022 0.043 0.062 0.095 0.113 0.141
61 0.030 0.051 0.071 0.103 0.124 0.154
62 0.065 0.098 0.128 0.188 0.216 0.248
63 0.075 0.112 0.144 0.197 0.222 0.268
64 0.091 0.116 0.138 0.180 0.196 0.231
65 0.163 0.164 0.197 0.232 0.250 0.271
66 0.208 0.204 0.243 0.282 0.301 0.315
67 0.189 0.185 0.221 0.257 0.274 0.287
68 0.127 0.158 0.200 0.227 0.241 0.244
69 0.168 0.162 0.189 0.217 0.229 0.238
70 0.191 0.190 0.237 0.250 0.246 0.254
Schools 2% at age 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 0.004 0.007 0.010 0.011 0.013 0.015
53 0.004 0.008 0.010 0.013 0.014 0.016
54 0.005 0.011 0.015 0.018 0.020 0.022
55 0.014 0.027 0.038 0.045 0.050 0.056
56 0.013 0.026 0.037 0.043 0.048 0.055
57 0.013 0.027 0.038 0.045 0.050 0.055
58 0.017 0.034 0.047 0.056 0.062 0.069
59 0.019 0.037 0.052 0.062 0.068 0.076
60 0.026 0.053 0.074 0.087 0.097 0.108
61 0.030 0.058 0.081 0.095 0.106 0.119
62 0.053 0.105 0.147 0.174 0.194 0.217
63 0.054 0.107 0.151 0.178 0.198 0.222
64 0.053 0.105 0.147 0.174 0.194 0.216
65 0.072 0.142 0.199 0.235 0.262 0.293
66 0.077 0.152 0.213 0.252 0.281 0.314
67 0.070 0.139 0.194 0.229 0.255 0.286
68 0.063 0.124 0.173 0.205 0.228 0.255
69 0.066 0.130 0.183 0.216 0.241 0.270
70 0.071 0.140 0.196 0.231 0.258 0.289
CalPERS Actuarial Valuation – June 30, 2023 Appendix A
Actuarial Methods and Assumptions
Page 62
Miscellaneous
Models
The valuation results are based on proprietary actuarial valuation models. The models are centralized and maintained by a
specialized team to achieve a high degree of accuracy and consistency. The Actuarial Office is responsible for confirming the
appropriaten ess of the inputs (such as participant data, actuarial methods and assumptions, and plan provisions) as well as
performing tests and validating the reasonableness of the output. The results of our models are independently confirmed by
parallel valuations p erformed by outside actuaries on a periodic basis using their models. In our professional judgment, our
actuarial valuation models produce comprehensive pension funding information consistent with the purposes of the valuation
and have no material limitati ons or known weaknesses.
Internal Revenue Code Section 415 (b)
The limitations on benefits imposed by Internal Revenue Code s ection 415(b) are taken into account in this valuation. Each year
the impact of any changes in this limitation other than assumed since the prior valuation is included and amortized as part of the
non-investment 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. The
Section 415(b) dollar limit for the 2023 calendar year is $2 65,000.
Internal Revenue Code Section 401(a)(17)
The limitations on compensation imposed by Internal R evenue Code s ection 401(a)(17) are taken into account in this valuation.
Each year, the impact of any changes in the compensation limitation other than assumed since the prior valuation is included
and amortized as part of the non -investment gain or loss base. The compensation limit for classic members for the 2023
calendar year is $330,000.
PEPRA Compensation Limits
The limitations on compensation for PEPRA members imposed by Government Code section 75 22.10 are taken into account in
this valuation. Each year, the impact of any changes in the compensation limitation other than assumed since the prior valuation
is included and amortized as part of the non-investment gain or loss base. The PEPRA compensati on limit for 2023 is $146,042
for members who participate in Social Security and $175,250 for those who do not. The limits are adjusted annually based on
changes to the CPI for all urban consumers.
Appendix B - Principal Plan Provisions
• Service Retirement 64
• Vested Deferred Retirement 66
• Non-Industrial Disability Retirement 66
• Industrial Disability Retirement 67
• Post-Retirement Death Benefit 68
• Form of Payment for Retirement Allowance 68
• Pre-Retirement Death Benefits 69
• Cost-of-Living Adjustments (COLA) 71
• Purchasing Power Protection Allowance (PPPA) 71
• Employee Contr ibutions 72
• Refund of Employee Contributions 72
• 1959 Survivor Benefit 73
CalPERS Actuarial Valuation – June 30, 2023 Appendix B
Safety Plan of the City of Palo Alto
Principal Plan Provisions
Page 64
The following i s 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’ Retire ment Law and the California Public Employees’ Pension Reform Act of 2013 . 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 Ca lPERS has reciprocity agreements). For employees hired into a plan with the 1.5% at age 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 attai nment 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 the 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 retire ment
at whole year ages:
Miscellaneo us Plan Formulas
Retirement
Age
1.5% at
age 65
2% at
age 60
2% at
age 55
2.5% at
age 55
2.7% at
age 55
3% at
age 60
PEPRA
2% at
age 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, 2023 Appendix B
Safety Plan of the City of Palo Alto
Principal Plan Provisions
Page 65
Classic Safety Plan Formulas
Retirement Age Half Pay at
age 55* 2% at age 55 2% at age 50 3% at age 55 3% at age 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% 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 age 57 2.5% at age 57 2.7% at age 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 co nverted 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 emplo yer 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 m onths’ pay under the 1.5% at age 65 formula. PEPRA
members have a limit on the annual compensation that can be used to calculate final compensation . The limits are adjusted
annually based on changes to the CPI for all urban consumers.
• PEPRA benefit formul as have no Social Security offsets and Social Security coverage is optional . For Classic benefit
formulas, employees must be covered by Social Security with the 1.5% at age 65 formula. Social Security is optional for all
other Classic 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 th an
$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 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% of final compensation.
CalPERS Actuarial Valuation – June 30, 2023 Appendix B
Safety Plan of the City of Palo Alto
Principal Plan Provisions
Page 66
Vested Deferred Retirement
Eligibility for Deferred Status
CalPERS members becomes eligible for a deferred vested retirement benefit when they leave employment, keep their
contribution account balance on deposit with CalPERS, and have 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% at
age 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 deferre d 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 calc ulated separately according to each employer’s contract, and then added together for the total
allowance.
Non-Industrial Disability Retirement
Eligibility
A CalPERS member is eligible for Non-Industrial (non-job related) 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 w ith
which CalPERS has reciprocity agre ements). There is no special age requirement. Disabled means the member is unable to
perform their 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 CalP ERS 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% of final comp ensation, 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 numbe r 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
33⅓% of final compensation.
CalPERS Actuarial Valuation – June 30, 2023 Appendix B
Safety Plan of the City of Palo Alto
Principal Plan Provisions
Page 67
Improved Benefit
Employers have the opti on of providing the improved Non -Industrial Disability Retirement benefit. This benefit provides a
monthly allowance equal to 30% of final compensation for the first 5 years of service, plus 1% for each additional year of se rvice
to a maximum of 50% of fin al compensation.
Members who are eligible for a larger service retirement benefit may choose to receive that benefit in lieu of a disability b enefit.
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 wh o
have earned service with multiple CalPERS employers, the benefit attributed to each employer is the total disa bility allowance
multiplied by the ratio of service with a particular employer to the total CalPERS service.
Industrial Disability Retirement
This is a standard benefit for Safety members except those de scribed in Section 20423.6. For excluded Safety members and all
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 (job related) 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
expecte d 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% of final compensation.
Increased Benefit (75% of Final Compensation)
The increased Industrial Disability Retirement benefit is a monthly allowance equal to 75% of final compensation for total
disability.
Improved Benefit (50% to 90% 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% or greater, with a maximum of 90%) 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 r etirement
benefit, the member may choose to receive the larger benefit.
CalPERS Actuarial Valuation – June 30, 2023 Appendix B
Safety Plan of the City of Palo Alto
Principal Plan Provisions
Page 68
Post-Retirement Death Benefit
Standard Lump Sum Payment
Upon the death of a retiree, a one -time lump sum payment of $500 wil l be made to the retiree’s designated survivor(s), or to the
retiree’s estate. The lump sum payment amount increases to $2,000 for any death occurring on or after July 1, 2023 due to SB
1168.
Optional Lump Sum Payment
In lieu of the standard lump sum death benefit, employers have the option of providing a lump sum death benefit of $600,
$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 their allowance to be paid to any designated beneficiary after the retiree’s death.
CalPERS provide s for a variety of such benefit options, which the retiree pays for by taking a reduction in their 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 a modified Classic formula, 25% of the retirement allowance will
automatically be continued to certain statutory beneficiaries upon the death of the retiree, without a reduction in the retir ee’s
allowance. For retirement allowances w ith respect to service subject to a PEPRA formula or a full or supplemental Classic
formula, 50% 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% or 50% 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 ag e 18;
or, if no eligible child(ren), to a qualifying dependent parent) for the rest of their lifetime. This bene fit will not be discontinued in
the event the spouse remarries.
The remaining 75% or 50% 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 sam e 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, 2023 Appendix B
Safety Plan of the City of Palo Alto
Principal Plan Provisions
Page 69
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 credited
annually at the greater of 6% or the prevailing discount rate through the date of death, 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 benefi t,
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 be nefit if the member dies while actively employed, has
attained at least age 50 for classic and PEPRA Safety members and age 52 for PEPRA Miscellaneous members, and has at
least 5 years of credited service (total service across all CalPERS employers and wit h 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 d eath 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 t he date of their 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 ch ild(ren) is disabled. The total amount paid will be at least equal to
the basic death benefit.
CalPERS Actuarial Valuation – June 30, 2023 Appendix B
Safety Plan of the City of Palo Alto
Principal Plan Provisions
Page 70
Optional Settlement 2 Death Benefit
This is an optional benefit.
Eligibility
An employee’s eligible survivor may receive the Optional Settlement 2 Death benefit if the member dies while actively employed,
has attained at least age 50 for classic and PEPRA Safety members and age 52 for PEPRA Miscellaneous 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 2 D eath benefit.
Benefit
The Optional Settlement 2 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 their death and elected 100% to continue to the eligible survivor after the
member’s death. The allowance is payable to the surviving spouse until death , at which time it is continued to any unmarried
child(ren), 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 except those described in Section 20423.6. For excluded Safety members and all
Miscellaneous members, employers have the option of providing this benefit.
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 el igible 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 ch ild(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 % of final compensation and will be increased whenever the
com pensation 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% of final compensation
• if 2 eligible children: 20.0% of final compensation
• if 3 or more eligible children: 25.0% of final compensation
CalPERS Actuarial Valuation – June 30, 2023 Appendix B
Safety Plan of the City of Palo Alto
Principal Plan Provisions
Page 71
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
i s 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 receive d
had the member retired on the d ate of their death and elected Optional Settlement 2. (A retiree who elects Optional Settlement 2
receives an allowance that has been reduced so that it will continue to be paid after their death to a surviving beneficiary.) If the
member has not yet attai ned 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 to the surviving spouse until death , at which time it is
continued to any unmarrie d child(ren), 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%. Annual adjustments are calculated by first
determining the lesser of 1) 2% compounded from the end of the year of retirement or 2) actual rate of price inflation. The
resulting increase is divided by the total increase provided in prior years. For any given year, the COLA adjustment may be l ess
than 2% (when the rate of price inflation is low), may be gre ater than the rate of price inflation (when the rate of price inflation is
low after several years of high price inflation) or may even be greater than 2% (when price inflation is high after several years of
low price inflation).
Improved Benefit
Employers have the option of providing a COLA of 3 %, 4%, or 5%, determined in the same manner as described above for the
standard 2 % COLA. An improved COLA is not available with the 1.5% at age 65 formula.
Purchasing Power Protection Allowance (PPPA)
Retirement and survivor allowances are protected against price inflation by PPPA. PPPA benefits are cost-of-living adjustments
that are intended to maintain an individual’s allowance at 80 % of the initial allowance at retirement adjusted for price inflation
since retirement. The PPPA benefit will be coordinated with other cost -of-living adjustments provided under the plan.
CalPERS Actuarial Valuation – June 30, 2023 Appendix B
Safety Plan of the City of Palo Alto
Principal Plan Provisions
Page 72
Employee Contribution s
Each employee contributes toward their retirement based upon the retirement formula. The standard employee contribution is as
described below.
• The percent contributed below the monthly compensation breakpoint is 0 %.
• The monthly compensation breakpoint is $0 for all PEPRA members and Classic members covered by a full or
supplemental formula and $133.33 for Classic members covered by a 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 age 65 2%
Miscellaneous, 2% at age 60 7%
Miscellaneous, 2% at age 55 7%
Miscellaneous, 2.5% at age 55 8%
Miscellaneous, 2.7% at age 55 8%
Miscellaneous, 3% at age 60 8%
Miscellaneous, 2% at age 62 50% of the Total Normal Cost
Miscellaneous, 1.5% at age 65 50% of the Total Normal Cost
Safety, Half Pay at age 55 Varies by entry age
Safety, 2% at age 55 7%
Safety, 2% at age 50 9%
Safety, 3% at age 55 9%
Safety, 3% at age 50 9%
Safety, 2% at age 57 50% of the Total Normal Cost
Safety, 2.5% at age 57 50% of the Total Normal Cost
Safety, 2.7% at age 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 CSU system may elect reduced contribution rates, in which case the offset is $317 and the
contribution rate is 6 % 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 %.
Refund of Employee Contributions
If the member’s service with the emplo yer 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 their employee contributions, which are credited with 6 %
interest compounded annually.
CalPERS Actuarial Valuation – June 30, 2023 Appendix B
Safety Plan of the City of Palo Alto
Principal Plan Provisions
Page 73
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 choos e 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.
Appendix C - Participant Data
• Summary of Valuation Data 75
• Active Members 76
• Transferred and Separated Members 77
• Retired Members and Beneficiaries 78
CalPERS Actuarial Valuation – June 30, 20 23 Appendix C
Safety Plan of the City of Palo Alto
Participant Data
Page 75
Summary of Valuation Data
June 30, 2022 June 30, 2023
1. Active Members
a) Counts 156 164
b) Average Attained Age
41.39 40.02
c) Average Entry Age to Rate Plan 29.90 29.65
d) Average Years of Credited Service 11.54 10.46
e) Average Annual Covered Pay $160,287 $170,377
f) Annual Covered Payroll 25,004,764 27,941,899
g) Projected Annual Payroll for Contribution Year 27,164,524 30,355,352
h) Present Value of Future Payroll 232,634,743 271,205,520
2. Transferred Members
a) Counts 61 61
b) Average Attained Age 42.17 42.23
c) Average Years of Credited Service 4.02 4.08
d) Average Annual Covered Pay $143,998 $147,916
3. Separ ated Members
a) Counts 56 65
b) Average Attained Age 43.68 42.84
c) Average Years of Credited Service 3.29 3.07
d) Average Annual Covered Pay $97,247 $99,985
4. Retired Members and Beneficiaries
a) Counts 453 458
b) Average Attained Age 69.30 69.26
c) Average Annual Benefits $64,469 $67,186
d) Total Annual Benefits $29,204,669 $30,771,193
5. Active to Retired Ratio [(1a) ÷ (4a)] 0.34 0.36
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, 20 23 Appendix C
Safety Plan of the City of Palo Alto
Participant Data
Page 76
Active Members
Counts of members included in the valuation are counts of the recor ds 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 20-24 25+ Total
15-24 4 0 0 0 0 0 4
25-29 31 0 0 0 0 0 31
30-34 16 8 0 0 0 0 24
35-39 5 9 7 3 0 0 24
40-44 2 4 11 10 1 0 28
45-49 0 4 3 4 8 1 20
50-54 0 0 3 4 13 5 25
55-59 0 1 0 2 0 2 5
60-64 0 1 0 0 2 0 3
65 and Over 0 0 0 0 0 0 0
All Ages 58 27 24 23 24 8 164
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 20-2 4 25+
Average
Salary
15-24 $117,009 $0 $0 $0 $0 $0 $117,009
25-29 127,257 0 0 0 0 0 127,257
30-34 131,277 170,038 0 0 0 0 144,197
35-39 127,565 168,404 185,506 198,274 0 0 168,618
40-44 153,729 167,334 183,324 214,272 234,475 0 191,805
45-49 0 213,261 192,391 186,510 220,424 267,412 210,35 3
50-54 0 0 186,410 216,960 189,250 213,638 198,220
55-59 0 145,473 0 170,404 0 218,467 184,643
60-64 0 164,140 0 0 200,430 0 188,333
65 and Over 0 0 0 0 0 0 0
Average $128,599 $174,368 $185,479 $204,010 $202,457 $221,567 $170,377
CalPERS Actuarial Valuation – June 30, 20 23 Appendix C
Safety Plan of the City of Palo Alto
Participant Data
Page 77
Transferred and Separated 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 20-24 25+ Total
Average
Salary
15-24 0 0 0 0 0 0 0 $0
25-29 2 0 0 0 0 0 2 132,808
30-34 7 1 0 0 0 0 8 123,372
35-39 12 3 0 0 0 0 15 148,698
40-44 10 4 2 2 0 0 18 154,213
45-49 7 1 0 0 0 0 8 134,871
50-54 5 2 0 0 0 0 7 161,973
55-59 2 0 0 0 0 0 2 187,398
60-64 1 0 0 0 0 0 1 176,417
65 and Over 0 0 0 0 0 0 0 0
All Ages 46 11 2 2 0 0 61 $147,916
Distribution of Separated 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 20-2 4 25+ Total
Average
Salary
15-24 0 0 0 0 0 0 0 $0
25-29 2 0 0 0 0 0 2 106,285
30-34 8 2 0 0 0 0 10 114,985
35-39 12 1 1 0 0 0 14 97,640
40-44 14 3 2 0 0 0 19 98,209
45-49 5 2 1 1 0 0 9 123,153
50-54 3 1 0 0 0 0 4 79,635
55-59 3 0 0 0 0 0 3 64,690
60-64 3 0 0 0 0 0 3 51,086
65 and Over 0 1 0 0 0 0 1 129,400
All Ages 50 10 4 1 0 0 65 $99,985
CalPERS Actuarial Valuation – June 30, 20 23 Appendix C
Safety Plan of the City of Palo Alto
Participant Data
Page 78
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 1 0 0 2 3
30 -34 0 0 1 0 0 0 1
35 -39 0 0 1 0 0 1 2
40 -44 0 0 4 0 0 0 4
45 -49 0 0 7 0 0 0 7
50 -54 17 0 11 0 0 0 28
55 -59 49 1 14 0 0 1 65
60 -64 47 1 22 0 2 1 73
65 -69 42 1 15 0 1 4 63
70 -74 29 0 14 0 0 4 47
75 -79 28 1 18 0 0 12 59
80 -84 29 1 14 0 0 15 59
85 and Over 20 0 16 0 0 11 47
All Ages 261 5 138 0 3 51 458
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 $53,067 $0 $0 $33,123 $39,771
30-34 0 0 1,847 0 0 0 1,847
35-39 0 0 77,483 0 0 30,485 53,984
40-44 0 0 72,882 0 0 0 72,882
45-49 0 0 63,776 0 0 0 63,776
50-54 71,680 0 61,350 0 0 0 67,622
55-59 76,377 99 89,693 0 0 26,815 77,309
60-64 95,888 37,825 74,826 0 56,999 54,932 87,119
65-69 86,069 2,399 86,254 0 32,607 42,808 81,189
70-74 98,602 0 58,522 0 0 28,781 80,721
75-79 56,931 20,120 46,771 0 0 36,785 49,110
80-84 52,197 17,531 45,823 0 0 44,909 48,244
85 and Over 48,385 0 34,196 0 0 32,581 39,856
All Ages $76,696 $15,595 $62,252 $0 $48,869 $38,006 $67,186
CalPERS Actuarial Valuation – June 30, 20 23 Appendix C
Safety Plan of the City of Palo Alto
Participant Data
Page 79
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 50 0 15 0 0 25 90
5-9 42 1 17 0 0 7 67
10-14 62 1 19 0 0 3 85
15-19 34 0 14 0 1 5 54
20-24 28 0 16 0 0 9 53
25-29 22 1 14 0 1 0 38
30 and Over 23 2 43 0 1 2 71
All Years 261 5 138 0 3 51 458
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 $75,145 $0 $76,594 $0 $0 $35,202 $64,291
5-9 81,831 2,399 76,333 0 0 15,222 72,292
10-14 96,910 99 101,447 0 0 24,197 94,219
15-19 74,267 0 77,303 0 60,468 57,060 73,206
20-24 73,256 0 62,337 0 0 55,432 66,933
25-29 46,063 37,825 48,389 0 53,531 0 46,900
30 and Over 53,277 18,826 33,943 0 32,607 47,453 40,142
All Years $76,696 $15,595 $62,252 $0 $48,869 $38,006 $67,186
* 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 C -1 of the report. Multiple records may exist for those who have service in more than one
coverage group. This does not result i n double counting of liabilities .
Appendix D - Glossary
CalPERS Actuarial Valuation – June 30, 2023 Appendix D
Safety Plan of the City of Palo Alto
Glossary
Page 81
Glossary
Accrued Liability (Actuarial Accrued Liability)
The portion of the Present Value of Benefits allocated to prior years. It can also be expressed as the Present Value of
Benefits minus the present value of future Normal Cost. Different actuarial cost methods and different assumptions will lead
to different measures of Accru ed Liability.
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, dis ability, and
retirement rates. Economic assumptions include discount rate, wage inflation , and price inflation.
Actuarial Methods
Procedures employed by actuaries to achieve certain funding goals of a pension plan. Actuarial methods include an
actuarial cost method, an amortization policy, and an asset valuation method.
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 in plan provisions.
Actuary
A business professional proficient in mathematics and statistics who measures and manages risk. A public retirement
system actuary in California perform s actuarial valuatio ns necessary to properly fund a pension plan and disclose its
liabilities and must satisfy the qualification s tandards for actuaries issuing s tatements of actuarial opinion in the United
States with regard to pensions.
Amortization Bases
Separate payment schedules for different portions of the Unfunded Accrued Liability (UAL). The total UAL of a rate plan can
be segregated by cause. The impact of such individual causes on the UAL are quantified at the time of their occurrence,
resulting in new amortization bases. Each base is separately amortized and paid for over a specific period of time.
Generally, in an actuarial valuation, the separate bases consist of changes in UAL due to contract amendments, actuarial
assumption changes, method changes, and/or experience gains and losses.
Amortization Period
The number of years required to pay off an Amortization Base.
Classic Member (under PEPRA)
A member who joined a public retirement system prior to January 1, 2013 , and who is not defined as a new member under
PEPRA. (See definition of New Member below.)
Discount Rate
The rate used to discount the expected future benefit payments to the valuation date to determine the Projected Value of
Benefits. Different discount rates will produce different measures of the Projected Value of Benefits. The discount rate for
funding purposes is based on the assumed long -term rate of return on plan assets, net of investment and administrative
expenses. This rate is called the “actuar ial interest rate” in Section 20014 of the California Public Employees’ Retirement
Law.
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 Actuarial Cost Method
An actuarial cost method that allocates the cost of the projected benefits on an individual basis as a level percent of
earnings for the individual between entry age and retirement age. This method yields a total normal cost rate, expressed as
a percentage of payroll, which is designed to remain level throughout the member’s career.
Fresh Start
A Fresh Start is when multiple amortization bases are combined into a single base and amortized over a new Amortizat ion
Period.
CalPERS Actuarial Valuation – June 30, 2023 Appendix D
Safety Plan of the City of Palo Alto
Glossary
Page 82
Glossary (continued)
Funded Ratio
Defined as the Market Value of Assets divided by the Accrued Liability. Different actuarial cost methods and different
assumptions will lead to different measures of Funded Ratio. The Funded Ratio with the Accrued Liability equal to the
funding target is a measure of how well funded a rate plan is. A ratio greater than 100% means the rate plan has more
assets than the funding target and the employer need only contribute the Normal Cost . A ratio less than 100% means
assets are less than the funding target and contributions in addition to Normal Cost are required.
Funded Status
Any comparison of a particular measure of plan assets to a particular measure of pension obligations. The methods and
assumptions used to calculate a funded status should be consistent with the purpose of the measurement.
Funding Target
The Accrued Liability measure upon which the funding requirements are based. The funding target is the Accrued Liability
under the Entry Age Actuari al Cost Method using the assumptions adopted by the board.
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.
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 n ot subject
to reciprocity with another public retirement system.
Normal Cost
The portion of the Present Value of Benefits allocated to the upcoming fiscal year for active employees. Different actuarial
cost methods and different assumptions will lead to d ifferent measures of Normal Cost. The Normal Cost under the Entry
Age Actuarial Cost Method , using the assumptions adopted by the board , plus the required amortization of the UAL, if any,
make up the required contributions.
PEPRA
The California Public Employees’ Pension Reform Act of 2013 .
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.
Traditional Unit Credit Actuarial Cost Method
An actuarial cost method that sets the Accrued Liability equal to the Present Value of Benefits assuming no future pay
increases or service accruals. The Traditional Unit Credit Cost Method is used to measure the accrued liability on a
termina tion basis.
Unfunded Accrued Liability (UAL)
The Accrued Liability minus the Market Value of Assets. If the UAL for a rate plan is positive, the employer is required to
make contributions in excess of the Normal Cost.
September 17, 2024
Transmittal of CalPERS Annual Valuation ReportsAs of June 30, 2023
1
Finance Committee
Item #1
Overview
2
Today’s meeting transmits the CalPERS annual valuations used
to inform the FY 2026 budget and financial planning of pension
benefits:
•Pension funding sources
•Pension funding sources – trends & strategies
•Status of pension plans
•Current and projected employer contributions
•Expected changes in future reporting
•Next steps in the budget process
GOAL: Accept the June 30, 2023 CalPERS Valuation Reports
California Public Employees’
Retirement System (CalPERS)
Annual Valuation Reports as of
June 30, 2023
Pension Funding Sources – “Pension Buck”
3
Pension
Trust Fund*
$58.4M
Additional
Discretionary
Payments
(ADPs) to UAL
Expected to
occur in next 1-2
years
Improves
funded status
by 5.3%
Pension Funding Sources & Terminology
4
The June 30, 2023 CalPERS valuations informs pension expense in the
FY26 –35 Long Range Financial Forecast (LRFF) and FY26 Budget
*Not contemplated
in CalPERS Valuations
CalPERS Investment
Earnings
(56%)
Plans impacted
when actual
earnings differ from
assumptions
5.8% vs.
+6.8% target
for the period ending
June 30, 2023)
(9.3% est. June 30, 2024)
CalPERS Employee
Contributions
(11%)
Tier 1, 2, PEPRA
(% Payroll)
60% of staff in PEPRA
(55% prior year)
Cost-sharing in Labor
Agreements
Employees pay a portion of Employer NC
CalPERS Employer
Contributions
(33%)
Normal Cost (NC)
“pay-go” for current
employees (% payroll)
+
Unfunded Accrued
Liability (UAL)
“catch-up” payments to
amortize liability
($ flat rate)
Pension
Trust Fund*
$84.7M
CalPERS 6/30/23 Valuation Reports – Summary
•No significant changes to CalPERS actuarial assumptions.
•$68.59M Total Employer Contribution in FY 2026 (est.), a $3.6M or 5.5% increase from prior year
$17.1M Normal Cost (est.) + $51.3M UAL (total UAL balance is $573.5M)
•Investment gain of 5.8% as compared to +6.8% target
•Impact from investment returns phased-in over five years (ramp-up) and 20-year amortization
•Investment return fluctuations over past two years nearly offsets changes to funded status
5
June 30, 2020
(FY 2023)
June 30, 2021
(FY 2024)
June 30, 2022
(FY 2025)
June 30, 2023
(FY 2026)
Actual Investment Return 4.7%21.3%-6.1%5.8%
Target Investment Return 7.0%6.8%*6.8%6.8%
Over/(Under) Target (2.3)%14.5%(12.9)%(1.0)%
City’s Pension Plan
Funded Status
63.5%73.3%63.8%64.0%
*Investment gain triggered the CalPERS Risk Mitigation Policy, reducing the discount rate from 7.0% to 6.8%
CalPERS Employer Contributions – NC & UAL (% Payroll)
6
CalPERS – Total Unfunded Accrued Liability (UAL) ($ Millions)
7
69.3% Funded Status once adjusted for Pension Trust balance of $85M as of June 30, 2024.
Next actuarial review of projected status of funding goals is estimated in FY 2026, in
alignment with Retiree Benefit Funding Policy and CalPERS ALM study. One-time
contributions will help achieve policy goals sooner.
CalPERS Valuation Reports – Expected Changes
Significant Changes Expected to Impact Future Reporting
CalPERS preliminary 9.3% investment return for the period ending June 30, 2024
•Higher than 6.8% target (CalPERS); and
•Higher than 5.3% assumed in the budget (Retiree Benefit Policy)
•CalPERS Risk Mitigation Policy – rate change not automatic and subject to Board review
(in April 2024)
Labor agreements with all groups (through FY 2026)
•Cost of living adjustments (COLA’s)
•Market adjustments
•Other terms (e.g. additional step, specialty pays, etc.)
FY 2025 staffing additions
•Increased full-time staffing from 1,063 FTE to 1,092 FTE, a +29 FTE or +2.7% change 8
Next Steps and Action
9
FY 2026 to FY 2035 Long Range Financial Forecast (LRFF)
Review 10-year financial outlook based on approved service levels and alternative scenarios.The financial
implications of these reports and input from the Finance Committee and City Council are used to inform the
development of the upcoming budget. Staff will include:
•Pension Trust contributions at 5.3% discount rate (6.8% CalPERS), per the Retiree Benefit Policy
•Estimates for expected changes, such as the 9.3% preliminary investment return on June 30, 2024
FY 2026 Proposed Budget Deliberations
Several meetings are held with the Finance Committee during May to facilitate a detailed review of the
Proposed Budget and incorporate opportunities for community input in the decision-making process. Revisions
recommended by the Finance Committee are included as amendments to the Proposed Budget.
FY 2026 Budget Adoption
The City Council reviews the Proposed Budget, as amended by the Finance Committee, for final revisions and
adoption.
ACTION: Accept the June 30, 2023 CalPERS Valuation Reports
DECEMBER/
JANUARY
MAY
JUNE