HomeMy WebLinkAbout2020-10-20 Finance Committee Agenda PacketFinance Committee
1
Tuesday, October 20, 2020
Special Meeting
6:00 PM
***BY VIRTUAL TELECONFERENCE ONLY***
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Pursuant to the provisions of California Governor’s Executive Order N-29-20,
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Call to Order
Oral Communications Members of the public may speak to any item NOT on the agenda.
Action Items
1.Accept CalPERS Pension Annual Valuation Reports as of June 30, 2019
Future Meetings and Agendas
Adjournment
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Presentation
2 October 20, 2020
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Meeting ID: 992-2730-7235 Phone No: 1 (669) 900-6833
City of Palo Alto (ID # 11607)
Finance Committee Staff Report
Report Type: Action Items Meeting Date: 10/20/2020
City of Palo Alto Page 1
Council Priority: Fiscal Sustainability
Summary Title: Accept CalPERS Pension Annual Valuation Reports as of June
30, 2019
Title: Accept CalPERS Pension Annual Valuation Reports as of June 30, 2019
From: City Manager
Lead Department: Administrative Services
Recommendation
Staff recommends that the Finance Committee review and discuss the June 30, 2019 CalPERS
Annual Valuation reports for the Miscellaneous and Safety Pension Plans and updates on
pension funding policy activities.
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. Staff
provides the CalPERS Annual Valuation reports, which are actuarial reports detailing the latest
status of the City of Palo Alto pension trust plans for employees and retirees. These reports
calculate the actuarially determined contribution from the City to the pension plans. In
addition, updates on the rate of return, funding status, and changes to the trust based on
various impacts are detailed in each report.
The CalPERS program maintains two pension plans: 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). These
Annual Valuation reports provide updated actuarial information for both pension plans as of
June 30, 2019.
There are three tiers of benefits within the two plans described above. Table 1 below details
the current pension plans and the different benefit levels in each tier. It takes City employees
five (5) years of service to vest in any tier of the pension program. Attachment A outlines the
number of employees in each tier by pension plan and employee group as of September 2020.
City of Palo Alto Page 2
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
$149,016 in 2019 for both the Miscellaneous and Safety plans, therefore it is calculated based on service years but cannot
exceed the $149,016. The final salary calculation is based on the average of the highest three years.
The CalPERS Annual Valuation reports are included in Attachments B and C and provide an
actuarial analysis to determine the City’s pension liability and annual required contribution for
each of the two pension plans (one for miscellaneous employees, one for safety employees).
These reports provide an update on the funding status, the results of assumption changes such
as rate of return (ROR) which impacts the discount rate assumption, the new fiscal year
Actuarial Determined Contribution (ADC) and the projected future ADC as a percentage of
payroll. The actuarial analysis is based on current employees’ accrued benefits, former
employees who have vested but have not yet retired, and retired employees as of June 30,
2019. CalPERS completes their actuarial analysis two years in arrears by practice. This means
that the June 30, 2019 valuation report will inform the development of the FY 2022 Adopted
Budget.
CalPERS Projected Contribution Levels
CalPERS has two components designated in the annual billing of employer contributions to
employee pension accounts. These two components are: 1) the Normal Cost (NC); and 2) the
Unfunded Accrued Liability (UAL) payment.
1. The NC 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 UAL 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.
City of Palo Alto Page 3
With the June 30, 2019 valuation, CalPERS has adopted a new amortization policy that shifts
from a 30-year to 20-year amortization, shortening the period over which actuarial gains and
losses are amortized. This policy change applies to the amortization of new UAL bases
established on or after June 30, 2019. A new UAL base is created each time there is an increase
or decrease in unfunded liability due to plan changes, assumption changes, method changes, or
plan experience (including investment gains/losses). Additionally, the 5-year ramp-up and
ramp-down policy on UAL bases is revised to include only a ramp-up period for investment
gains/losses. Previously this included a ramp-up and ramp-down period for gains/losses
(investment and non-investment).
The ADC (also referred to as the blended rate) is provided by CalPERS to estimate the total
employer contribution and reflects the combined cost of NC and UAL. The ADC for the
Miscellaneous Plan is $35.7 million in FY 2022, an increase of $2.3 million (6.9 percent), from an
ADC of $33.4 million in FY 2021. The ADC for the Safety Plan is $19.2 million in FY 2022, an
increase of $2.5 million (15.0 percent), from an ADC of $16.7 in FY 2021. The ADC will inform
the development of the FY 2022 – FY 2031 Long Range Financial Forecast and FY 2022 Adopted
Budget.
Tables 2-4 below summarize the projected percentage of payroll 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 grow from 41.8 percent of payroll in FY 2022 to a peak of 43.7 percent in
FY 2025 before tapering to 36.2 percent of payroll by FY 2027 for the Miscellaneous plan. Over
the same six-year span, CALPERS estimates that the ADC will grow from 69.6 percent of payroll
in FY 2022 to a peak of 74.2 percent in FY 2025 before tapering to 73.2 percent of payroll in
2027 for Safety. It is important to note that CalPERS anticipates a 7.0 return throughout the
forecast and does not factor the preliminary 4.7 percent return on investments for the period
ending June 30, 2020. If these returns materialize, the losses will likely offset the relief shown in
the out-years of the current forecast. Any losses from this period will be realized beginning in
the next annual valuation and the FY 2023 Budget. A more detailed discussion of investment
returns, including impacts on liability and funded status at various rates, is provided in the next
section.
− Table 2 reflects the estimated percentage of payroll necessary for the City of Palo Alto
to fund the employer costs, including both the NC and the UAL.
− Table 3 reflects the estimated percentage of payroll for the NC employer contribution.
− Table 4 reflects the estimated employer contribution necessary to pay down the UAL.
City of Palo Alto Page 4
TABLE 2: CalPERS Past and Projected Employer Contribution Rates
(blended UAL and Normal Cost)*
FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
Miscellaneous 35.6% 38.4% 41.8% 43.0% 43.3% 43.7% 40.6% 36.2%
Safety 59.4% 65.3% 69.6% 72.3% 73.5% 74.2% 73.8% 73.2%
* The City and labor groups have Memoranda of Agreements (MOAs) that include provisions for employees to accept a
greater share of pension costs to curtail the City’s growing pension expense – In FY 2021 employees in the Miscellaneous
group will pick-up 1% of the employer contribution and employees in the Safety group will pick-up 3% to 4.0% of the
employer contribution.
TABLE 3: CalPERS Past and Projected Normal Cost Employer Rate*
FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
Miscellaneous 10.7% 11.5% 11.0% 10.7% 10.3% 10.0% 9.8% 9.4%
Safety 20.2% 21.6% 21.5% 21.1% 20.6% 20.2% 19.7% 19.3%
* In addition to the employer contributions, employees contribute the employee share of pension costs based on the plan and
benefit tier. Miscellaneous employees in Tier 1 contribute 8 percent, Tier 2 contribute 7 percent, and Tier 3 contribute 6.25
percent. Safety employees in Tier 1 contribute 9 percent, Tier 2 contribute 9 percent (Fire) or 11.75 percent (Police), and Tier 3
contribute 9 percent.
TABLE 4: CalPERS Past and Projected Annual Employer Amortization of
Unfunded Accrued Liability ($’s in thousands)
FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
Miscellaneous 21,287 23,433 26,358 28,421 29,794 31,207 29,443 26,169
Safety 10,019 11,211 13,283 14,545 15,449 16,211 16,670 17,083
TOTAL $31,306 $34,644 $39,641 $42,966 $45,243 $47,418 $46,113 $43,252
% Change from Prior Yr 10.7% 14.4% 8.4% 5.3% 4.8% -2.8% -6.2%
City of Palo Alto Page 5
CalPERS Projected Unfunded Accrued Pension Liability
Included in the Annual Valuation report is a status of both plans’ “funded status.” Overall,
CalPERS has about 70 percent of the funding it needs for its obligations. This is higher than the
City’s funded status of 61.3 percent for Safety and 66.1 percent for Miscellaneous. Table 5
details the City’s funded status for the Miscellaneous and Safety plans with an assumed future
ROR of 7.0 percent effective June 30, 2018 (FY 2021). The total unfunded pension liability
increased from $455.6 million as of June 30, 2018 to $477.0 million as of June 30, 2019. This
represents an increase of $21.4 million, or 4.7 percent.
TABLE 5: CalPERS Projected Unfunded Accrued Liability for the City of Palo Alto
As of
June 30, 2016
As of
June 30, 2017
As of
June 30, 2018
As of
June 30, 2019
Miscellaneous 261,680,231 260,720,776 284,856,248 294,703,569
Miscellaneous Funded Status 64.2% 66.3% 65.8% 66.1%
Safety 143,025,193 154,190,990 170,712,183 182,221,129
Safety Funded Status 63.6% 63.5% 62.2% 61.3%
TOTAL UNFUNDED PENSION LIABILITY $404,705,424 $414,911,766 $455,568,431 $476,924,698
% Change from Prior Year 2.5% 9.8% 4.7%
Public Agency Retirement Services (PARS) Section 115 Trust Fund Contributions* $32,282,584
Adjusted TOTAL UNFUNDED PENSION LIABILITY $444,641,114
Adjusted % Change from Prior Year -2.4%
* In total, the City has contributed $32.3 million in proactive contributions to the City’s irrevocable Section 115 Pension Trust
Fund (amount excludes investment returns). CalPERS does not consider these amounts in valuation calculations. For illustrative
purposes, an adjusted unfunded liability is included and assumes that the PARS Trust is used to reduce the total unfunded
liability presented by CalPERS. More discussion of the PARS Trust Fund is included later in this report.
CalPERS recognizes the impacts that varying assumptions may have on a plan’s unfunded
accrued liability, and thereby the pension plan’s funding status, especially the implications of
the discount rate assumption. Therefore, in addition to the actuarial assumptions used to
develop this Annual Valuation, CalPERS includes an Analysis of Discount Rate Sensitivity section
in their reports to provide some level of sensitivity analysis of the pension plans. This analysis
can be found on page 26 of each respective plan report. Table 6 illustrates CalPERS’ analysis of
the June 30, 2019 UAL’s discount rate sensitivity. For example, at 6.0 percent ROR, the total
UAL would increase to $648.7 million, representing a 58.6 percent funded status for
Miscellaneous and a 54.3 percent funded status for Safety. This analysis gives an indication of
the potential impacts if CalPERS were to realize investment returns ranging from 6.0 percent to
8.0 percent over the long term.
City of Palo Alto Page 6
TABLE 6: CalPERS Sensitivity Analysis (as of June 30, 2019)
3.25% Discount
Rate
6% Discount
Rate
7% Discount
Rate
8% Discount
Rate
Miscellaneous $761,467,057 $405,221,631 $294,703,569 $202,913,335
Miscellaneous Funded Status 43.0% 58.6% 66.1% 73.9%
Safety $473,047,352 $243,505,471 $182,221,129 $131,641,227
Safety Funded Status 37.9% 54.3% 61.3% 68.7%
TOTAL UNFUNDED PENSION LIABILITY $1.2 billion $649 million $477 million $335 million
Proactive Pension Funding
Since 2017, the City has established and maintained an independent and irrevocable Internal
Revenue Services (IRS) section 115 pension trust fund administered by Public Agency
Retirement Services (PARS). The purpose of the City’s PARS trust fund is to proactively set aside
funding that can be used to offset the City’s growing pension liability. The only way that PARS
funding can be spent is towards City’s pension costs; it cannot be used for any other purpose.
Per City Council direction, the City currently budgets its pension contributions more
conservatively than CalPERS and transmits the additional funding to this pension trust fund
(CMR 9740).
Table 7 below provides a summary of these supplemental contributions that have been made
to date. Through FY 2019, contributions to the PARS trust fund were made on a one-time (“ad-
hoc”) basis. Beginning in FY 2020, consistent with City Council direction, the City uses a 6.2
percent discount rate for the normal cost portion of the liability. The lower discount rate
effectively recalculates the City’ costs as though CalPERS were going to achieve the lower rate
of return. This contribution is budgeted in all departments across the organization as part of the
annual budget process. Additional one-time contributions continue to be made each year if
excess revenues or unspent savings are available, subject to City Council approval.
Table 7: Supplemental Contributions Summary (in millions)
FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Total
Budgeted Contributions
General Fund - - - 4.0 3.0 7.0
Other Funds - - - 2.2 2.0 4.2
Total Budgeted Contributions $- $- $- $6.2 $5.0 $11.2
One-time Contributions
General Fund 2.1 1.4 6.6 3.5 TBD 13.6
Other Funds* - 2.0 1.4 4.1 TBD 7.5
Total One-time Contributions $2.1 $3.4 $8.0 $7.6 TBD $21.1
TOTAL ALL FUNDS $2.1 $3.4 $8.0 $13.8 $5.0 $32.3
CalPERS discount rate (%) 7.5 7.5 7.375 7.25 7.0
* In FY 2018 & 2020, other funds made “catch-up” contribution to align with General Fund contributions to date.
City of Palo Alto Page 7
The FY 2021 Adopted Budget continues the practice to include a normal cost pension expense
of 6.2 percent as part of financial planning for all funds. This resulted in budgeted pre-funding
costs above required CalPERS levels of $5.0 million ($3.0 million General Fund) in FY 2021. The
contributions levels from FY 2020 to FY 2021 decreased by $1.2 million, from $6.2 million to
$5.0 million, primarily due to the change in CalPERS discount rate from 7.25 percent to 7.00
percent. As CalPERS has lowered their rates, the gap to meet the 6.2 percent target has
narrowed. Approximately $500,000 ($400,000 in the General Fund) of this decrease is due to
management concessions and staff freezes in FY 2021 that reduced the associated expense for
pensions because normal cost, employee share of pension cost, and supplemental pension
contributions are calculated as a percentage of payroll. In total, planned contributions
(principal) of $32.3 million to the pension Trust Fund will have been made since inception in FY
2017 through FY 2021 ($21.0 million, or 65 percent of the total, is from the General Fund). The
Trust Fund is invested in a moderately conservative portfolio, earning 6.11 percent for the year
ending June 30, 2020, a 0.21 percent increase compared to FY 2019.
To calculate the supplemental contribution, staff used a 3rd party software (GovInvest) to model
the impact of a 6.2 percent discount rate on the current CalPERS valuation reports. GovInvest
allows for comparisons against a baseline scenario that is meant to align with CalPERS
projections in order to model alternative parameters. It should be explicitly stated that this
analysis is meant to be informative and representational; it is not a replacement for
independent actuarial analysis but rather a supplement to it. Staff modeled the impact of
lowering the discount rate to 6.2 percent on the normal cost in GovInvest and applied the
difference in basis points of percentage between the ‘CalPERS’ scenario and the 6.2 percent
scenario to the City’s current budget estimates for pensionable payroll for the miscellaneous
and safety groups.
Long-term Financial Planning
The City Council adopted “Fiscal Sustainability” as one of four priorities in 2019, including
initiatives to develop a policy that addresses unfunded pension liability. Additionally, the City
Council directed Staff to use the 6.2 discount rate for the normal cost of pensions as part of the
annual budget process (beginning in FY 2020) and include a base case in the Long Range
Financial Forecast that is reflective of the more conservative discount rate.
During FY 2020, Staff returned to the Finance Committee and the City Council to review and
discuss the options for a Pension Funding Policy and elements to consider in the establishment
of a Pension Funding Policy. Four scenarios were presented that included different timelines,
mechanisms, and options available to reach a target funded status of 100 percent. Ultimately,
the City Council pursued a policy that strives to achieve a 90 percent funded level over fifteen
years (CMR 11407).
Staff anticipates returning to the City Council to formally adopt the Pension Funding Policy and
report back on the progress towards meeting these funding goals in the fall of 2020. As part of
City of Palo Alto Page 8
the development of the FY 2021 – 2031 Long Range Financial Forecast, Staff will update the
salary and benefit expense estimates through the next ten years and will refine the calculation
methodology for the 6.2 percent contributions. It is anticipated that proactive pension
contributions will range from 3 to 4 percent of pensionable payroll, or approximately $5.0 to
$6.0 million per year.
Resource Impact
The FY 2021 Adopted Operating Budget includes the actuarially determined contribution as
calculated by CalPERS and the additional costs associated with using a lower 6.2 percent
discount rate.
Environmental Review
This report is not a project for the purposes of the California Environmental Quality Act.
Environmental review is not required.
.
Attachments:
• Attachment A: City of Palo Alto Pension Plan Benefit Levels Enrollment by Plan and
Employee Group
• Attachment B: CalPERS Miscellaneous Annual Valuation Report June 30, 2019
• Attachment C: CalPERS Safety Annual Valuation Report June 30, 2019
Attachment A:
City of Palo Alto Pension Plan Benefit Levels Enrollment by Plan and Employee Group
City Council & Council Appointees 7 7 IAFF 84 81
Tier 1 11 Tier 1 48 59
Tier 2 22 Tier 2 877
Tier 3 44 Tier 3 28 15
Management and Professional 192 188 Fire Chief's Association 44
Tier 1 83 86 Tier 1 44
Tier 2 40 40 Tier 2 00
Tier 3 69 62 Tier 3 00
Service Employees' International 517 528 Fire Management 33
Tier 1 220 238 Tier 1 33
Tier 2 55 61 Tier 2 00
Tier 3*242 229 Tier 3 00
Utilities Management 44 48 PAPOA 69 68
Tier 1 37 44 Tier 1 36 40
Tier 2 2 Tier 2 45
Tier 3 5 2 Tier 3 29 23
Police Management Association 67
Tier 1 66
Tier 2 01
Tier 3 00
Police Management 21
Tier 1 11
Tier 2 20
Tier 3 00
Grand Total Miscellaneous Plans 760 774 Grand Total Safety Plans 168 168
Tier 1 341 371 Tier 1 98 107
Tier 2 99 105 Tier 2 13 12
Tier 3 320 298 Tier 3 57 49
Tiered Percentage Miscellaneous Plans Tiered Percentage Safety Plans
Tier 1 44.9%47.9%Tier 1 58.3%63.7%
Tier 2 13.0%13.6%Tier 2 7.7%7.1%
Tier 3 42.1%38.5%Tier 3 33.9%29.2%
Tier Definitions Tier Definitions
Tier 1 2.7% @ 55 Tier 1 3.0% @ 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
Safety Plans
Employee GroupEmployee CountEmployee Group
Miscellaneous Plans
2
Employee Count
Sept 2020 Sept 2019Sept 2020 Sept 2019
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 2020
Miscellaneous Plan of the City of Palo Alto (CalPERS ID: 6373437857)
Annual Valuation Report as of June 30, 2019
Dear Employer,
Attached to this letter, you will find the June 30, 2019 actuarial valuation report of your CalPERS pension plan. Provided
in this report is the determination of the minimum required employer contributions for fiscal year 2021-
22.In addition, the report also 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.
Actuarial valuations are based on assumptions regarding future plan experience including investment return and payroll growth, eligibility for the types of benefits provided, and longevity among retirees. The CalPERS Board of Administration
adopts these assumptions after considering the advice of CalPERS actuarial and investment teams and other
professionals. Each actuarial valuation reflects all prior differences between actual and assumed experience and adjusts
the contribution rates as needed. This valuation is based on an investment return assumption of 7.0 percent, which was
adopted by the board in December 2016. Other assumptions used in this report are those recommended in the CalPERS
Experience Study and Review of Actuarial Assumptions report from December 2017.
Required Contributions
The table below shows the minimum required employer contributions and the Employee PEPRA Rate for fiscal year 2021-
22 along with an estimate of the required contribution for fiscal year 2022-23. Employee contributions other than cost
sharing (whether paid by the employer or the employee) are in addition to the results shown below. The required
employer contributions in this report do not reflect any cost sharing arrangement you may have with your
employees.
Fiscal Year Employer Normal
Cost Rate
Employer Amortization of
Unfunded Accrued Liability
Employee
PEPRA Rate
2021-22 10.95% $26,358,094 6.25%
Projected Results
2022-23 10.7% $28,421,000 TBD
The actual investment return for fiscal year 2019-20 was not known at the time this report was prepared. The projections
above assume the investment return for that year would be 7.0 percent. To the extent the actual investment return
for fiscal year 2019-20 differs from 7.0 percent, the actual contribution requirements for fiscal year 2022-
23 will differ from those shown above. For additional details regarding the assumptions and methods used for
these projections please refer to the “Projected Employer Contributions” in the “Highlights and Executive Summary”
section. This section also contains projected required contributions through fiscal year 2026-27.
Changes from Previous Year’s Valuations
The CalPERS Board of Administration has adopted a new amortization policy effective with the June 30, 2019 actuarial
valuation. The new policy shortens the period over which actuarial gains and losses are amortized from 30 years to 20
years with the payments computed as a level dollar amount. In addition, the new policy does not utilize a 5-year ramp-
up and ramp-down on UAL bases attributable to assumption and method changes and non-investment gains/losses. The
new policy does not utilize a 5-year ramp-down on investment gains/losses. These changes apply only to new UAL bases established on or after June 30, 2019.
Further descriptions of general changes are included in the “Highlights and Executive Summary” section and in Appendix
A, “Actuarial Methods and Assumptions.” The effects of the changes on the required contributions are included in the
“Reconciliation of Required Employer Contributions” section.
ATTACHMENT B
Miscellaneous Plan of the City of Palo Alto (CalPERS ID: 6373437857)
Annual Valuation Report as of June 30, 2019
Page 2
Questions
We understand that you might have some questions about these results. While we are very interested in discussing these results with your agency, in the interest of allowing us to give every public agency their results, we ask that you wait
until after August 1, 2020 to contact us with actuarial questions. If you have other questions, you may call the Customer
Contact Center at (888)-CalPERS or (888-225-7377).
Sincerely,
SCOTT TERANDO
Chief Actuary
Actuarial Valuation
as of June 30, 2019
for the
Miscellaneous Plan
of the
City of Palo Alto
(CalPERS ID: 6373437857)
(Valuation Rate Plan ID: 8)
Required Contributions
for Fiscal Year
July 1, 2021 – June 30, 2022
Table of Contents
Actuarial Certification 1
Highlights and Executive Summary
Introduction 3
Purpose of the Report 3
Required Contributions 4
Additional Discretionary Employer Contributions 5 Plan’s Funded Status 6
Projected Employer Contributions 6
Cost 7
Changes Since the Prior Year’s Valuation 8
Subsequent Events 8
Assets
Reconciliation of the Market Value of Assets 10 Asset Allocation 11
CalPERS History of Investment Returns 12
Liabilities and Contributions
Development of Accrued and Unfunded Liabilities 14
(Gain) / Loss Analysis 06/30/18 - 06/30/19 15 Schedule of Amortization Bases 16
Amortization Schedule and Alternatives 18
Reconciliation of Required Employer Contributions 20
Employer Contribution History 21
Funding History 21
Normal Cost by Benefit Group 22
PEPRA Member Contribution Rates 23
Risk Analysis
Future Investment Return Scenarios 25 Discount Rate Sensitivity 26
Mortality Rate Sensitivity 26
Maturity Measures 27
Maturity Measures History 28
Hypothetical Termination Liability 29
Plan’s Major Benefit Provisions
Plan’s Major Benefit Options 31
Appendix A – Actuarial Methods and Assumptions
Actuarial Data A-1 Actuarial Methods A-1
Actuarial Assumptions A-4
Miscellaneous A-22
Appendix B – Principal Plan Provisions B-1
Appendix C – Participant Data
Summary of Valuation Data C-1
Active Members C-2 Transferred and Terminated Members C-3
Retired Members and Beneficiaries C-4
Appendix D – Glossary of Actuarial Terms D-1
(CY) FIN JOB INSTANCE ID: 350239 (PY) FIN JOB INSTANCE ID: 133939 REPORT ID: 350292
CalPERS Actuarial Valuation - June 30, 2019 Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 1
Actuarial Certification
To the best of our knowledge, this report is complete and accurate and contains sufficient information to
disclose, fully and fairly, the funded condition of the Miscellaneous Plan of the City of Palo Alto. This valuation
is based on the member and financial data as of June 30, 2019 provided by the various CalPERS databases and the benefits under this plan with CalPERS as of the date this report was produced. It is our opinion that
the valuation has been performed in accordance with generally accepted actuarial principles, in accordance
with standards of practice prescribed by the Actuarial Standards Board, and that the assumptions and methods
are internally consistent and reasonable for this plan, as prescribed by the CalPERS Board of Administration
according to provisions set forth in the California Public Employees’ Retirement Law.
The undersigned is an actuary for CalPERS, a member of the American Academy of Actuaries and the Society
of Actuaries, and meets the Qualification Standards of the American Academy of Actuaries to render the actuarial opinions contained herein.
DAVID CLEMENT, ASA, MAAA, EA Senior Pension Actuary, CalPERS
Highlights and Executive Summary
• Introduction
• Purpose of the Report
• Required Contributions
• Additional Discretionary Employer Contributions
• Plan’s Funded Status
• Projected Employer Contributions
• Cost
• Changes Since the Prior Year’s Valuation
• Subsequent Events
CalPERS Actuarial Valuation - June 30, 2019 Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 3
Introduction
This report presents the results of the June 30, 2019 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 employer contributions for fiscal year 2021-22.
Purpose of the Report
The actuarial valuation was prepared by the CalPERS Actuarial Office using data as of June 30, 2019. The purpose of the report is to:
• Set forth the assets and accrued liabilities of this plan as of June 30, 2019;
• Determine the minimum required employer contributions for the fiscal year July 1, 2021 through June
30, 2022;
• Provide actuarial information as of June 30, 2019 to the CalPERS Board of Administration and other
interested parties.
The pension funding information presented in this report should not be used in financial reports subject to Governmental Accounting Standards Board (GASB) Statement No. 68 for an Agent Employer Defined Benefit
Pension Plan. A separate accounting valuation report for such purposes is available from CalPERS and details
for ordering are available on our website.
The measurements shown in this actuarial valuation may not be applicable for other purposes. The employer
should contact their actuary before disseminating any portion of this report for any reason that is not explicitly
described above.
Future actuarial measurements may differ significantly from the current measurements presented in this
report due to such factors as the following: plan experience differing from that anticipated by the economic
or demographic assumptions; changes in economic or demographic assumptions; changes in actuarial policies;
and changes in plan provisions or applicable law.
Assessment and Disclosure of Risk
This report includes the following risk disclosures consistent with the recommendations 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 6.0 percent and 8.0 percent.
• A “Sensitivity Analysis,” showing the impact on current valuation results assuming rates of mortality
are 10 percent lower or 10 percent higher than our current mortality assumptions adopted in 2017.
• Plan maturity measures indicating how sensitive a plan may be to the risks noted above.
CalPERS Actuarial Valuation - June 30, 2019 Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 4
Required Contributions
Fiscal Year
Required Employer Contribution 2021-22
Employer Normal Cost Rate 10.95%
Plus, Either
1) Monthly Employer Dollar UAL Payment $2,196,508
Or
2) Annual UAL Prepayment Option* $25,481,331
Required PEPRA Member Contribution Rate
6.25%
The total minimum required employer contribution is the sum of the Plan’s Employer Normal Cost Rate
(expressed as a percentage of payroll) and the Employer Unfunded Accrued Liability (UAL) Contribution
Amount (billed monthly in dollars).
* Only the UAL portion of the employer contribution can be prepaid (which must be received in full no
later than July 31). Any prepayment totaling over $5 million requires a 72-hour notice email to
FCSD_public_agency_wires@calpers.ca.gov. Plan Normal Cost contributions will be made as part of the
payroll reporting process. If there is contractual cost sharing or other change, this amount will change.
In accordance with Sections 20537 and 20572 of the Public Employees’ Retirement Law, if a contracting
agency fails to remit the required contributions when due, interest and penalties may apply.
For additional detail regarding the determination of the required contribution for PEPRA members, see
”PEPRA Member Contribution Rates” in the “Liabilities and Contributions” section. Required member
contributions for Classic members can be found in Appendix B.
Fiscal Year Fiscal Year
2020-21 2021-22
Normal Cost Contribution as a Percentage of Payroll
Total Normal Cost 18.831% 18.21%
Employee Contribution1 7.344% 7.26%
Employer Normal Cost2 11.487% 10.95%
Projected Annual Payroll for Contribution Year $87,177,382 $85,533,721
Estimated Employer Contributions Based On
Projected Payroll
Total Normal Cost $16,416,373 $15,575,691
Employee Contribution1 6,402,307 6,209,748
Employer Normal Cost2 10,014,066 9,365,943
Unfunded Liability Contribution 23,432,860 26,358,094
% of Projected Payroll (illustrative only) 26.880% 30.82%
Estimated Total Employer Contribution $33,446,926 $35,724,037
% of Projected Payroll (illustrative only) 38.367% 41.77%
1 For classic members, this is the percentage specified in the Public Employees’ Retirement Law, net of any reduction from
the use of a modified formula or other factors. For PEPRA members, the member contribution rate is based on 50 percent
of the normal cost. A development of PEPRA member contribution rates can be found in the “Liabilities and Contributions” section. Employee cost sharing is not shown in this report.
2 The Employer 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” in the “Liabilities and Contributions” section.
CalPERS Actuarial Valuation - June 30, 2019 Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 5
Additional Discretionary Employer Contributions
The minimum required employer contribution towards the Unfunded Accrued Liability (UAL) for this rate
plan for the 2021-22 fiscal year is $26,358,094. CalPERS allows employers 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. Employers can also use 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 fiscal year 2021-22
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 the
“Amortization Schedule and Alternatives” section of the report.
If you are considering making an ADP, please contact your actuary for additional information.
Minimum Required Employer Contribution for Fiscal Year 2021-22
Estimated
Normal Cost
Minimum UAL
Payment
ADP Total UAL
Contribution
Estimated Total
Contribution
$9,365,943 $26,358,094 $0 $26,358,094 $35,724,037
Alternative Fiscal Year 2021-22 Employer Contributions for Greater UAL Reduction
Funding
Target
Estimated
Normal Cost
Minimum UAL
Payment
ADP1 Total UAL
Contribution
Estimated Total
Contribution
20 years $9,365,943 $26,358,094 $156,829 $26,514,923 $35,880,866
15 years $9,365,943 $26,358,094 $4,483,158 $30,841,252 $40,207,195
10 years $9,365,943 $26,358,094 $13,635,671 $39,993,765 $49,359,708
5 years $9,365,943 $26,358,094 $42,150,673 $68,508,767 $77,874,710
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 have to be less or more than the amount shown to have the same effect on the UAL amortization.
Note that the calculations above are based on the projected Unfunded Accrued Liability as of June 30, 2021
as determined in the June 30, 2019 actuarial valuation. New unfunded liabilities can emerge 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 years will not result in a plan that is
exactly 100 percent funded in 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.
CalPERS Actuarial Valuation - June 30, 2019 Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 6
Plan’s Funded Status
This measure of funded status is an assessment of the need for future employer contributions based on the
actuarial cost method used to fund the plan. The UAL is the present value of future employer contributions
for service that has already been earned and is in addition to future normal cost contributions for active
members. For a measure of funded status that is appropriate for assessing the sufficiency of plan assets to
cover estimated termination liabilities, please see “Hypothetical Termination Liability” in the “Risk Analysis”
section.
Projected Employer Contributions
The table below shows the required and projected employer contributions (before cost sharing) for the next
six fiscal years. 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. As of the
preparation date of this report, the year to date return for the 2019-20 fiscal year was well below the 7 percent
assumed return. Actual contribution rates during this projection period could be significantly higher than the
projection shown below. The projected normal cost percentages in the projections below reflect that the
normal cost will continue to decline over time as new employees are hired into PEPRA or other lower cost benefit tiers.
Required
Contribution
Projected Future Employer Contributions
(Assumes 7.00% Return for Fiscal Year 2019-20)
Fiscal Year 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27
Normal Cost % 10.95% 10.7% 10.3% 10.0% 9.8% 9.4%
UAL Payment $26,358,094 $28,421,000 $29,794,000 $31,207,000 $29,443,000 $26,169,000
Total as a % of Payroll* 41.77% 43.0% 43.3% 43.7% 40.6% 36.2%
Projected Payroll $85,533,721 $87,885,898 $90,302,760 $92,786,086 $95,337,703 $97,959,490
*Illustrative only and based on the projected payroll shown.
For some sources of UAL, the change in UAL is amortized using a 5-year ramp up. For more information,
please see “Amortization of the Unfunded Actuarial Accrued Liability” under “Actuarial Methods” in Appendix
A. This method phases in the impact of 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 increase in UAL, the relatively small
amortization payments during the ramp up period could result in a funded ratio that is projected to decrease
initially while the contribution impact of the increase in the UAL is phased in.
For projected contributions under alternate investment return scenarios, please see the “Future Investment
Return Scenarios” in the “Risk Analysis” section.
June 30, 2018 June 30, 2019
1. Present Value of Projected Benefits $943,874,610 $977,761,615
2. Entry Age Normal Accrued Liability 831,958,865 868,716,440
3. Market Value of Assets (MVA) 547,102,617 574,012,871
4. Unfunded Accrued Liability (UAL) [(2) – (3)] $284,856,248 $294,703,569
5. Funded Ratio [(3) / (2)] 65.8% 66.1%
CalPERS Actuarial Valuation - June 30, 2019 Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 7
Cost
Actuarial Determination of Pension Plan Cost
Contributions to fund the pension plan are comprised of two components:
• The Normal Cost, expressed as a percentage of total active payroll
• The Amortization of the Unfunded Accrued Liability (UAL), expressed as a dollar amount
For fiscal years prior to FY 2017-18, the Amortization of UAL component was expressed as percentage of total
active payroll. Starting with FY 2017-18, the Amortization of UAL component was expressed as a dollar amount
and invoiced on a monthly basis. There continues to be an option to prepay this amount during July of each fiscal year.
The Normal Cost component will continue to be expressed as a percentage of active payroll with employer
and employee contributions payable as part of the regular payroll reporting process.
The determination of both components requires complex actuarial calculations. The calculations are based on
a set of actuarial assumptions which can be divided into two categories:
• Demographic assumptions (e.g., mortality rates, retirement rates, employment termination rates,
disability rates)
• Economic assumptions (e.g., future investment earnings, inflation, salary growth rates)
These assumptions reflect CalPERS’ best estimate of future experience of the plan and are long term in nature.
We recognize that all assumptions will not be realized in any given year. For example, the investment earnings
at CalPERS have averaged 5.8 percent over the 20 years ending June 30, 2019, yet individual fiscal year returns have ranged from -23.6 percent to +20.7 percent. In addition, CalPERS reviews all actuarial
assumptions by conducting in-depth experience studies every four years, with the most recent experience
study completed in 2017.
CalPERS Actuarial Valuation - June 30, 2019 Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 8
Changes since the Prior Year’s Valuation
Benefits
The standard actuarial practice at CalPERS is to recognize mandated legislative benefit changes in the first annual valuation following the effective date of the legislation. Voluntary benefit changes by plan amendment
are generally included in the first valuation that is prepared after the amendment becomes effective, even if
the valuation date is prior to the effective date of the amendment.
This valuation generally reflects plan changes by amendments effective before the date of the report. Please
refer to the “Plan’s Major Benefit Options” and Appendix B for a summary of the plan provisions used in this
valuation. The effect of any mandated benefit changes or plan amendments on the unfunded liability is shown
in the “(Gain)/Loss Analysis” and the effect on the employer contribution is shown in the “Reconciliation of Required Employer Contributions.” It should be noted that no change in liability or contribution is shown for
any plan changes which were already included in the prior year’s valuation.
Actuarial Methods and Assumptions
The CalPERS Board of Administration adopted a new amortization policy effective with this actuarial valuation.
The new policy shortens the period over which actuarial gains and losses are amortized from 30 years to 20 years with the payments computed as a level dollar amount. In addition, the new policy does not utilize a 5-
year ramp-up and ramp-down on UAL bases attributable to assumption and method changes and non-
investment gains/losses. The new policy also does not utilize a 5-year ramp-down on investment gains/losses.
These changes will apply only to new UAL bases established on or after June 30, 2019.
For inactive employers, the new amortization policy imposes a maximum amortization period of 15 years for
all unfunded accrued liabilities effective June 30, 2017. Furthermore, the plan actuary has the ability to shorten
the amortization period on any valuation date based on the life expectancy of plan members and projected cash flow needs to the plan.
Subsequent Events
The contribution requirements determined in this actuarial valuation report are based on demographic and financial information as of June 30, 2019. Changes in the value of assets subsequent to that date are not
reflected. Investment returns below the assumed rate of return will increase future required contributions while
investment returns above the assumed rate of return will decrease future required contributions.
The projected employer contributions on Page 5 are calculated under the assumption that the discount rate
remains at 7.0 percent going forward and that the realized rate of return on assets for fiscal year 2019-20 is
7.0 percent.
This actuarial valuation report reflects statutory changes, regulatory changes and CalPERS Board actions
through January 2020. Any subsequent changes or actions are not reflected.
Assets
• Reconciliation of the Market Value of Assets
• Asset Allocation
• CalPERS History of Investment Returns
CalPERS Actuarial Valuation - June 30, 2019 Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 10
Reconciliation of the Market Value of Assets
1. Market Value of Assets as of 6/30/18 including Receivables $547,102,617
2. Change in Receivables for Service Buybacks (331,733)
3. Employer Contributions 25,423,113
4. Employee Contributions 6,666,050
5. Benefit Payments to Retirees and Beneficiaries (40,655,281)
6. Refunds (469,108)
7. Transfers 0
8. Service Credit Purchase (SCP) Payments and Interest 605,209
9. Administrative Expenses (615,282)
10. Miscellaneous Adjustments 1,270
11. Investment Return (Net of Investment Expenses) 36,286,017
12. Market Value of Assets as of 6/30/19 including Receivables $574,012,871
CalPERS Actuarial Valuation - June 30, 2019 Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 11
Asset Allocation
CalPERS adheres to an Asset Allocation Strategy which establishes asset class allocation policy targets and
ranges and manages those asset class allocations within their policy ranges. CalPERS Investment Belief No. 6
recognizes that strategic asset allocation is the dominant determinant of portfolio risk and return. On December 19, 2017, the CalPERS Board of Administration adopted changes to the current asset allocation as
shown in the Policy Target Allocation below expressed as a percentage of total assets.
The asset allocation shown below reflect the allocation of the Public Employees’ Retirement Fund (PERF) in
its entirety as of June 30, 2019. The assets for City of Palo Alto Miscellaneous Plan are part of the PERF and
are invested accordingly.
Asset Class
Actual
Allocation
Policy Target
Allocation
Public Equity 50.2% 50.0%
Private Equity 7.1% 8.0%
Global Fixed Income 28.7% 28.0%
Real Assets 11.0% 13.0%
Liquidity 1.0% 1.0%
Inflation Sensitive Assets 0.0% 0.0%
Trust Level1 2.0% 0.0%
Total Fund 100.0% 100.0%
1 Trust Level includes Multi-Asset Class, Completion Overlay, Risk Mitigation, Absolute
Return Strategies, Plan Level Transition and other Total Fund level portfolios.
Strategic Asset Allocation Policy Targets
CalPERS Actuarial Valuation - June 30, 2019 Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 12
CalPERS History of Investment Returns
The following is a chart with the 20-year historical annual returns of the Public Employees’ Retirement Fund
for each fiscal year ending on June 30. Beginning in 2002, the figures are reported as gross of
administrative expenses.
The table below shows historical compound annual returns of the Public Employees Retirement Fund for
various time periods ending on June 30, 2019 (figures are reported as gross of fees). The compound annual
return is the average rate per year compounded over the indicated number of years. It should be recognized
that in any given year the rate of return is volatile. The portfolio has an expected volatility of 11.4 percent per
year based on the most recent Asset Liability Modelling study. The volatility is a measure of the risk of the portfolio expressed in the standard deviation of the fund’s total return distribution, expressed as a percentage.
Consequently, when looking at investment returns, it is more instructive to look at returns over longer time
horizons.
History of CalPERS Compound Annual Rates of Return and Volatilities
1 year 5 year 10 year 20 year 30 year
Compound Annual Return 6.7% 5.8% 9.1% 5.8% 8.1%
Volatility – 4.4% 6.9% 10.7% 9.8%
Liabilities and Contributions
• Development of Accrued and Unfunded Liabilities
• (Gain) / Loss Analysis 06/30/18 - 06/30/19
• Schedule of Amortization Bases
• Amortization Schedule and Alternatives
• Reconciliation of Required Employer Contributions
• Employer Contribution History
• Funding History
• Normal Cost by Benefit Group
• PEPRA Member Contribution Rates
CalPERS Actuarial Valuation - June 30, 2019 Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 14
Development of Accrued and Unfunded Liabilities
June 30, 2018 June 30, 2019
1. Present Value of Projected Benefits
a) Active Members $408,701,538 $392,796,621
b) Transferred Members 39,086,313 37,712,848
c) Terminated Members 18,698,038 18,441,931
d) Members and Beneficiaries Receiving Payments 477,388,721 528,810,215
e) Total $943,874,610 $977,761,615
2. Present Value of Future Employer Normal Costs $65,501,935 $62,657,698
3. Present Value of Future Employee Contributions $46,413,810 $46,387,477
4. Entry Age Normal Accrued Liability
a) Active Members [(1a) - (2) - (3)] $296,785,793 $283,751,446
b) Transferred Members (1b) 39,086,313 37,712,848
c) Terminated Members (1c) 18,698,038 18,441,931
d) Members and Beneficiaries Receiving Payments (1d) 477,388,721 528,810,215
e) Total $831,958,865 $868,716,440
5. Market Value of Assets (MVA) $547,102,617 $574,012,871
6. Unfunded Accrued Liability (UAL) [(4e) - (5)] $284,856,248 $294,703,569
7. Funded Ratio [(5) / (4e)] 65.8% 66.1%
CalPERS Actuarial Valuation - June 30, 2019 Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 15
(Gain)/Loss Analysis 6/30/18 – 6/30/19
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 6/30/18 $284,856,248
b) Expected Payment on the UAL during 2018-19 16,845,251
c) Interest through 6/30/19 [.07 x (1a) - ((1.07)½ - 1) x (1b)] 19,360,325 d) Expected UAL before all other changes [(1a) - (1b) + (1c)] 287,371,322
e) Change due to plan changes 0
f) Change due to assumption change 0
g) Change due to method change 0
h) Expected UAL after all other changes [(1d) + (1e) + (1f) + (1g)] 287,371,322
i) Actual UAL as of 6/30/19 294,703,569
j) Total (Gain)/Loss for 2018-19 [(1i) - (1h)] $7,332,247
2. Contribution (Gain)/Loss for the Year
a) Expected Contribution (Employer and Employee) $32,944,528
b) Interest on Expected Contributions 1,133,557 c) Actual Contributions 32,089,162
d) Interest on Actual Contributions 1,104,125
e) Expected Contributions with Interest [(2a) + (2b)] 34,078,085
f) Actual Contributions with Interest [(2c) + (2d)] 33,193,287
g) Contribution (Gain)/Loss [(2e) - (2f)] $884,798
3. Investment (Gain)/Loss for the Year
a) Market Value of Assets as of 6/30/18 $547,102,617
b) Prior Fiscal Year Receivables (1,615,071)
c) Current Fiscal Year Receivables 1,283,337
d) Contributions Received 32,089,162 e) Benefits and Refunds Paid (41,124,389)
f) Transfers, SCP Payments and Interest, and Miscellaneous Adjustments 606,479
g) Expected Int. [.07 x (3a + 3b) + ((1.07)½ - 1) x ((3d) + (3e) + (3f))] 37,894,112
h) Expected Assets as of 6/30/19 [(3a) + (3b) + (3c) + (3d) + (3e) + (3f) + (3g)] 576,236,248
i) Market Value of Assets as of 6/30/19 574,012,871
j) Investment (Gain)/Loss [(3h) - (3i)] $2,223,377
4. Liability (Gain)/Loss for the Year
a) Total (Gain)/Loss (1j) $7,332,247
b) Contribution (Gain)/Loss (2g) 884,798
c) Investment (Gain)/Loss (3j) 2,223,377 d) Liability (Gain)/Loss [(4a) - (4b) - (4c)] $4,224,072
5. Non-Investment (Gain)/Loss for the Year
a) Contribution (Gain)/Loss (2g) $884,798
b) Liability (Gain)/Loss (4d) 4,224,072
c) Non-Investment (Gain)/Loss [(5a) + (5b)] $5,108,870
CalPERS Actuarial Valuation - June 30, 2019 Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 16
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 fiscal year.
• The assets, liabilities, and funded status of the plan are measured as of the valuation date: June 30, 2019.
• The required employer contributions determined by the valuation are for the fiscal year beginning two years after the valuation date: fiscal year 2021-22.
This two-year lag is necessary due to the amount of time needed to extract and test the membership and financial data, and the need to provide public agencies with
their required employer contribution well in advance of the start of the fiscal year.
The Unfunded Accrued Liability (UAL) is used to determine the employer contribution and therefore must be rolled forward two years from the valuation date to the first
day of the fiscal year for which the contribution is being determined. The UAL is rolled forward each year by subtracting the expected payment on the UAL for the fiscal
year and adjusting for interest. The expected payment on the UAL for a fiscal year is equal to the Expected Employer Contribution for the fiscal year minus the
Expected Normal Cost for the year. The Employer Contribution for the first fiscal year is determined by the actuarial valuation two years ago and the contribution for the
second year is from the actuarial valuation one year ago. Additional discretionary payments are reflected in the Expected Payments column in the fiscal year they were
made by the agency.
Reason for Base Date Est.
Ramp
Level 2021-22 Ramp Shape
Escala-
tion Rate Amort. Period Balance 6/30/19
Expected
Payment 2019-20 Balance 6/30/20
Expected
Payment 2020-21 Balance 6/30/21
Minimum
Required
Payment 2021-22
Assumption Change 6/30/03 No Ramp 2.75% 4 11,879,361 2,275,477 10,357,145 2,319,811 8,682,514 2,383,606
Method Change 6/30/04 No Ramp 2.75% 5 (955,912) (160,094) (857,223) (163,155) (748,460) (167,641)
Benefit Change 6/30/05 No Ramp 2.75% 5 21,177,830 3,546,810 18,991,429 3,614,625 16,581,832 3,714,028
Assumption Change 6/30/09 No Ramp 2.75% 10 23,544,505 2,534,996 22,570,400 2,578,025 21,483,598 2,648,920
Special (Gain)/Loss 6/30/09 No Ramp 2.75% 20 16,764,211 1,183,236 16,713,757 1,198,299 16,644,190 1,231,252
Special (Gain)/Loss 6/30/10 No Ramp 2.75% 21 1,390,646 95,554 1,389,149 96,733 1,386,328 99,393
Assumption Change 6/30/11 No Ramp 2.75% 12 11,371,730 1,089,996 11,040,250 1,107,534 10,667,425 1,137,991
Special (Gain)/Loss 6/30/11 No Ramp 2.75% 22 (58,724) (3,935) (58,764) (3,982) (58,758) (4,092)
Payment (Gain)/Loss 6/30/12 No Ramp 2.75% 23 3,082,588 201,771 3,089,656 204,105 3,094,804 209,718
(Gain)/Loss 6/30/12 No Ramp 2.75% 23 25,986,780 1,700,967 26,046,361 1,720,644 26,089,758 1,767,962
(Gain)/Loss 6/30/13 100% Up/Down 2.75% 24 81,826,984 5,488,706 81,877,311 5,554,310 81,863,300 5,707,054
Assumption Change 6/30/14 100% Up/Down 2.75% 15 45,534,347 3,386,584 45,218,642 4,299,805 43,936,194 4,418,049
(Gain)/Loss 6/30/14 100% Up/Down 2.75% 25 (51,223,251) (2,719,039) (51,996,283) (3,438,352) (52,079,364) (3,532,907)
(Gain)/Loss 6/30/15 100% Up/Down 2.75% 26 30,941,729 1,234,835 31,830,327 1,664,856 32,336,309 2,138,299
Assumption Change 6/30/16 80% Up/Down 2.75% 17 13,520,332 499,046 13,950,538 759,535 14,141,407 1,040,563
(Gain)/Loss 6/30/16 80% Up/Down 2.75% 27 34,165,789 922,983 35,602,653 1,399,137 36,647,560 1,916,817
Assumption Change 6/30/17 60% Up/Down 2.75% 18 13,956,543 263,619 14,660,811 534,613 15,134,060 823,972
(Gain)/Loss 6/30/17 60% Up/Down 2.75% 28 (18,300,498) (254,252) (19,318,533) (513,519) (20,139,642) (791,461)
Method Change 6/30/18 40% Up/Down 2.75% 19 4,490,712 (227,382) 5,040,268 93,974 5,295,879 193,116
Assumption Change 6/30/18 40% Up/Down 2.75% 19 23,700,483 (638,877) 26,020,376 485,140 27,339,970 996,963
CalPERS Actuarial Valuation - June 30, 2019 Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 17
Schedule of Amortization Bases (continued)
Reason for Base
Date
Est.
Ramp Level
2021-22
Ramp
Shape
Escala-tion
Rate
Amort.
Period
Balance
6/30/19
Expected Payment
2019-20
Balance
6/30/20
Expected Payment
2020-21
Balance
6/30/21
Minimum
Required Payment
2021-22
(Gain)/Loss 6/30/18 40% Up/Down 2.75% 29 (5,424,863) 0 (5,804,603) (79,278) (6,128,919) (162,917)
Non-Investment (Gain)/Loss 6/30/19 No Ramp 0.00% 20 5,108,870 0 5,466,491 0 5,849,145 533,753
Investment (Gain)/Loss 6/30/19 20% Up Only 0.00% 20 2,223,377 0 2,379,013 0 2,545,544 55,656
Total 294,703,569 20,421,001 294,209,171 23,432,860 290,564,674 26,358,094
CalPERS Actuarial Valuation - June 30, 2019 Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 20 Page 18
Amortization Schedule and Alternatives
The amortization schedule on the previous page shows the minimum contributions required according to the
CalPERS amortization policy. Many agencies have expressed interest in paying off the unfunded accrued 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 liability
payments.
Shown on the following page are future year amortization payments based on 1) the current amortization
schedule reflecting the individual bases and remaining periods shown on the previous page, and 2) alternative
“fresh start” amortization schedules using two sample periods that would both result in interest savings relative to the current amortization schedule.
The Current Amortization Schedule typically contains both positive and negative bases. Positive bases result
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 combination of positive and negative bases within an amortization schedule
can result in unusual or problematic circumstances in future years, 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
replacing the existing unfunded liability bases with a single “fresh start” base and amortizing it over a
reasonable period.
The Current Amortization Schedule on the following page may appear to show that, based on the current
amortization bases, one of the above scenarios will occur at some point in the future. It is impossible to know
today whether such a scenario will in fact arise since there will be additional bases added to the amortization
schedule in each future year. Should such a scenario arise in any future year, the actuary will take appropriate
action based on guidelines in the CalPERS amortization policy.
CalPERS Actuarial Valuation - June 30, 2019 Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 19
Amortization Schedule and Alternatives
Alternative Schedules
Current Amortization Schedule 15 Year Amortization 10 Year Amortization
Date Balance Payment Balance Payment Balance Payment
6/30/2021 290,564,674 26,358,094 290,564,674 30,841,252 290,564,674 39,993,765
6/30/2022 283,639,177 28,420,907 279,001,762 30,841,252 269,534,329 39,993,766
6/30/2023 274,095,103 29,794,053 266,629,446 30,841,252 247,031,859 39,993,765
6/30/2024 262,462,552 31,206,908 253,391,068 30,841,252 222,954,217 39,993,766
6/30/2025 248,554,252 29,443,130 239,226,004 30,841,252 197,191,139 39,993,765
6/30/2026 235,496,839 26,168,906 224,069,385 30,841,252 169,624,647 39,993,766
6/30/2027 224,912,293 26,866,221 207,851,803 30,841,252 140,128,499 39,993,766
6/30/2028 212,865,517 27,582,711 190,498,990 30,841,252 108,567,621 39,993,766
6/30/2029 199,234,326 28,318,904 171,931,480 30,841,253 74,797,481 39,993,765
6/30/2030 183,887,428 29,075,347 152,064,243 30,841,252 38,663,432 39,993,765
6/30/2031 166,683,776 26,378,124 130,806,301 30,841,252
6/30/2032 151,065,896 25,890,331 108,060,303 30,841,253
6/30/2033 134,859,343 23,780,506 83,722,084 30,841,252
6/30/2034 119,700,749 22,784,737 57,680,191 30,841,253
6/30/2035 104,511,087 21,315,281 29,815,364 30,841,252
6/30/2036 89,778,166 18,854,524
6/30/2037 76,559,367 17,606,778
6/30/2038 63,705,929 16,276,755
6/30/2039 51,328,538 15,284,803
6/30/2040 39,110,812 14,686,483
6/30/2041 26,656,754 10,174,005
6/30/2042 17,998,655 9,509,421
6/30/2043 9,421,939 8,211,777
6/30/2044 1,587,146 1,641,757
6/30/2045
6/30/2046
6/30/2047
6/30/2048
6/30/2049
6/30/2050
Total 515,630,463 462,618,783 399,937,655
Interest Paid 225,065,789 172,054,109 109,372,981
Estimated Savings 53,011,680 115,692,808
CalPERS Actuarial Valuation - June 30, 2019 Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 20
Reconciliation of Required Employer
Contributions
Normal Cost (% of Payroll)
1. For Period 7/1/20 – 6/30/21
a) Employer Normal Cost 11.487%
b) Employee Contribution 7.344%
c) Total Normal Cost 18.831%
2. Changes since the prior year annual valuation
a) Effect of demographic experience (0.621%)
b) Effect of plan changes 0.000%
c) Effect of assumption changes 0.000%
d) Effect of method changes 0.000%
e) Net effect of the changes above [sum of (a) through (d)] (0.621%)
3. For Period 7/1/21 – 6/30/22
a) Employer Normal Cost 10.95%
b) Employee Contribution 7.26%
c) Total Normal Cost 18.21%
Employer Normal Cost Change [(3a) – (1a)] (0.537%)
Employee Contribution Change [(3b) – (1b)] (0.084%)
Unfunded Liability Contribution ($)
1. For Period 7/1/20 – 6/30/21 23,432,860
2. Changes since the prior year annual valuation
a) Effect of adjustments to prior year’s amortization schedule 0
b) Effect of investment (gain)/loss during prior year1 55,656
c) Effect of non-investment (gain)/loss during prior year 533,753
d) Effect of plan changes 0
e) Effect of assumption changes 0
f) Changes to prior year amortization payments2
2,335,825
g) Effect of changes due to Fresh Start 0
h) Effect of elimination of amortization base 0
i) Effect of method change 0
j) Net effect of the changes above [sum of (a) through (i)] 2,925,234
3. For Period 7/1/21 – 6/30/22 [(1) + (2j)] 26,358,094
The amounts shown for the period 7/1/20 – 6/30/21 may be different if a prepayment of unfunded actuarial
liability is made or a plan change became effective after the prior year’s actuarial valuation was performed.
1 The unfunded liability contribution for the investment (gain)/loss during the year prior to the valuation date is 20 percent
of the “full” annual requirement due to the 5-year ramp. Increases to this amount that occur during the ramp period will be included in line f) in future years.
2 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.
CalPERS Actuarial Valuation - June 30, 2019 Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 21
Employer Contribution History
The table below provides a recent history of the required employer contributions for the plan for fiscal years
prior to 2019-20. The amounts are based on the actuarial valuation from two years prior and does not account for prepayments or benefit changes made during a fiscal year. Additional discretionary payments before July
1, 2018 or after June 30, 2019 are not included.
Fiscal
Year
Employer
Normal Cost
Unfunded Rate
Unfunded Liability
Payment ($)
Additional Discretionary Payments
2013 - 14 10.360% 14.240% N/A N/A
2014 - 15 10.283% 15.839% N/A N/A
2015 - 16 10.358% 17.336% N/A N/A
2016 - 17 10.334% 18.556% N/A N/A
2017 - 18 10.039% N/A 15,765,273 N/A
2018 - 19 10.217% N/A 18,392,618 0
2019 - 20 10.716% N/A 21,287,260
2020 - 21 11.487% N/A 23,432,860
2021 - 22 10.95% N/A 26,358,094
Funding History
The table below shows the recent history of the actuarial accrued liability, the market value of assets, the
funded ratio and the annual covered payroll.
[]
Valuation
Date
Accrued
Liability
Market Value
of Assets
(MVA)
Unfunded
Liability
Funded
Ratio
Annual
Covered
Payroll
06/30/11 $552,715,631 $384,056,704 $168,658,927 69.5% $60,297,783
06/30/12 576,182,013 373,592,926 202,589,087 64.8% 62,910,810
06/30/13 602,540,178 412,227,784 190,312,394 68.4% 64,439,680
06/30/14 666,978,627 475,566,994 191,411,633 71.3% 67,802,942
06/30/15 696,699,220 477,031,099 219,668,121 68.5% 71,574,823
06/30/16 730,382,476 468,702,245 261,680,231 64.2% 75,345,962
06/30/17 772,526,669 511,805,893 260,720,776 66.3% 78,476,098
06/30/18 831,958,865 547,102,617 284,856,248 65.8% 80,363,405
06/30/19 868,716,440 574,012,871 294,703,569 66.1% 78,848,216
CalPERS Actuarial Valuation - June 30, 2019 Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 22
Normal Cost by Benefit Group
The table below displays the Total Normal Cost broken out by benefit group for Fiscal Year 2021-22. 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 exceed 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.
Rate Plan
Identifier Benefit Group Name
Total Normal
Cost
FY 2021-22
Number of
Actives
Payroll on
6/30/2019
8 Miscellaneous First Level 21.63% 378 $40,955,320
26004 Miscellaneous PEPRA Level 13.23% 294 $25,647,981
30157 Miscellaneous Second Level 17.57% 101 $12,244,915
Plan Total 18.21% 773 $78,848,216
Note that if a Benefit Group above has multiple bargaining units, each of which has separately contracted for
different benefits such as Employer Paid Member Contributions, then the Normal Cost split 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. If you have questions in these situations, please consult with your plan actuary.
CalPERS Actuarial Valuation - June 30, 2019 Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 23
PEPRA Member Contribution Rates
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 CalPERS-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 percent of the normal cost
rate.” The normal cost for the plan is dependent on the benefit levels, actuarial assumptions and demographics
of the plan, particularly members’ entry age into the plan. Should the total normal cost of the plan change by one percent or more from the base total normal cost established for the plan, the new member rate shall be
50 percent of the new normal cost rounded to the nearest quarter percent.
The table below shows the determination of the PEPRA member contribution rates effective July 1, 2021,
based on 50 percent of the Total Normal Cost for each respective plan as of the June 30, 2019 valuation.
Basis for Current Rate Rates Effective July 1, 2021
Rate Plan
Identifier Benefit Group Name
Total
Normal
Cost
Member
Rate
Total
Normal
Cost
Change Change
Needed
Member
Rate
26004 Miscellaneous PEPRA
Level 12.500% 6.25% 13.23% 0.730% No 6.25%
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 sufficiently
large active population for this purpose, the PEPRA active population by itself may not be sufficiently large.
The total PEPRA normal cost will be determined based on the plan’s PEPRA membership only if the number
of members covered under the PEPRA formula meets either:
1. 50 percent of the active population, or
2. 25 percent of the active population and 100 or more PEPRA members
Until one of these conditions is met, the plan’s total PEPRA normal cost will be determined using the entire
active plan population (both PEPRA and Classic) based on the PEPRA benefit provisions. For this reason, the
PEPRA member contribution rate determined in the table above may not equal 50 percent of the total normal cost of the PEPRA group shown on the “Total Normal Cost by Group” page.
Risk Analysis
• Future Investment Return Scenarios
• Discount Rate Sensitivity
• Mortality Rate Sensitivity
• Maturity Measures
• Maturity Measures History
• Hypothetical Termination Liability
CalPERS Actuarial Valuation - June 30, 2019 Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 25
Future Investment Return Scenarios
Analysis was performed to determine the effects of various future investment returns on required employer
contributions. The projections below provide a range of results based on five investment return scenarios assumed to occur during the next four fiscal years (2019-20, 2020-21, 2021-22 and 2022-23). The projections
also assume that all other actuarial assumptions will be realized and that no further changes to assumptions,
contributions, benefits, or funding will occur.
For fiscal years 2019-20, 2020-21, 2021-22, and 2022-23 each scenario assumes an alternate fixed annual
return. The fixed return assumptions for the five scenarios are 1.0 percent, 4.0 percent, 7.0 percent, 9.0
percent and 12.0 percent.
These alternate investment returns were chosen based on stochastic analysis of possible future investment
returns over the four-year period ending June 30, 2023. Using the expected returns and volatility of the asset
classes in which the funds are invested, we produced five thousand stochastic outcomes for this period based
on the recently completed Asset Liability Management process. We then selected annual returns that
approximate the 5th, 25th, 50th, 75th, and 95th percentiles for these outcomes. For example, of all the four-year
outcomes generated in the stochastic analysis, approximately 25 percent had an average annual return of 4.0
percent or less.
Required contributions outside of this range are also possible. In particular, whereas it is unlikely that
investment returns will average less than 1.0 percent or greater than 12.0 percent over a four-year period,
the likelihood of a single investment return less than 1.0 percent or greater than 12.0 percent in any given
year is much greater.
Assumed Annual Return From 2019-20 through 2022-23
Projected Employer Contributions
2022-23 2023-24 2024-25 2025-26
1.0%
Normal Cost 10.7% 10.3% 10.0% 9.8%
UAL Contribution $29,276,000 $32,361,000 $36,345,000 $38,018,000
4.0%
Normal Cost 10.7% 10.3% 10.0% 9.8%
UAL Contribution $28,849,000 $31,090,000 $33,828,000 $33,861,000
7.0%
Normal Cost 10.7% 10.3% 10.0% 9.8%
UAL Contribution $28,421,000 $29,794,000 $31,207,000 $29,443,000
9.0%
Normal Cost 10.9% 10.9% 10.9% 11.0%
UAL Contribution $28,168,000 $29,120,000 $29,919,000 $27,351,000
12.0%
Normal Cost 10.9% 10.9% 10.9% 11.0%
UAL Contribution $27,743,000 $27,794,000 $27,160,000 $22,560,000
These projections reflect recent changes to the amortization policy effective with the June 30, 2019 valuation
as well as the impact of the CalPERS risk mitigation policy (which reduces the discount rate when investment
returns exceed specified trigger points). The projected normal cost percentages reflect that normal cost will
continue to decline over time as new employees are hired into PEPRA or other lower-cost benefit tiers.
CalPERS Actuarial Valuation - June 30, 2019 Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 26
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 4.50 percent and 2.50 percent, respectively. Changing 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 below are various valuation results as of June 30, 2019 assuming alternate discount rates by changing the
two components independently. Results are shown using the current discount rate of 7.0 percent as well as
alternate discount rates of 6.0 percent and 8.0 percent. The rates of 6.0 percent and 8.0 percent were selected
since they illustrate the impact of a 1.0 percent increase or decrease to the 7.0 percent assumption.
Sensitivity to the Real Rate of Return Assumption
As of June 30, 2019 1% Lower
Real Return Rate
Current
Assumptions
1% Higher
Real Return Rate
Discount Rate 6.0% 7.0% 8.0%
Inflation 2.5% 2.5% 2.5%
Real Rate of Return 3.5% 4.5% 5.5%
a) Total Normal Cost 22.92% 18.21% 14.63%
b) Accrued Liability $979,234,502 $868,716,440 $776,926,206
c) Market Value of Assets $574,012,871 $574,012,871 $574,012,871
d) Unfunded Liability/(Surplus) [(b) - (c)] $405,221,631 $294,703,569 $202,913,335
e) Funded Status 58.6% 66.1% 73.9%
Sensitivity to the Price Inflation Assumption
As of June 30, 2019 1% Lower
Inflation Rate
Current
Assumptions
1% Higher
Inflation Rate
Discount Rate 6.0% 7.0% 8.0%
Inflation 1.5% 2.5% 3.5%
Real Rate of Return 4.5% 4.5% 4.5%
a) Total Normal Cost 19.46% 18.21% 16.74%
b) Accrued Liability $913,648,119 $868,716,440 $808,312,473
c) Market Value of Assets $574,012,871 $574,012,871 $574,012,871
d) Unfunded Liability/(Surplus) [(b) - (c)] $339,635,248 $294,703,569 $234,299,602
e) Funded Status 62.8% 66.1% 71.0%
Mortality Rate Sensitivity
The following table looks at the change in the June 30, 2019 plan costs and funded ratio under two different
longevity scenarios, namely assuming rates of mortality are 10 percent lower or 10 percent higher than our
current mortality assumptions. This type of analysis highlights the impact on the plan of improving or
worsening mortality over the long-term.
As of June 30, 2019 10% Lower
Mortality Rates
Current
Assumptions
10% Higher
Mortality Rates
a) Total Normal Cost 18.53% 18.21% 17.91%
b) Accrued Liability $886,993,297 $868,716,440 $851,889,362
c) Market Value of Assets $574,012,871 $574,012,871 $574,012,871
d) Unfunded Liability/(Surplus) [(b) - (c)] $312,980,426 $294,703,569 $277,876,491
e) Funded Status 64.7% 66.1% 67.4%
CalPERS Actuarial Valuation - June 30, 2019 Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 27
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 to tolerate risk is important in understanding how the 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 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 ratio increases. A mature plan will often have a ratio above 60-65
percent.
Ratio of Retiree Accrued Liability to
Total Accrued Liability June 30, 2018 June 30, 2019
1. Retiree Accrued Liability 477,388,721 528,810,215
2. Total Accrued Liability 831,958,865 868,716,440
3. Ratio of Retiree AL to Total AL [(1) / (2)] 57% 61%
Another measure of the maturity level of CalPERS and its plans is the ratio of actives to retirees, also called
Support 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.
The average support ratio for CalPERS public agency plans is 1.25.
Support Ratio June 30, 2018 June 30, 2019
1. Number of Actives 808 773
2. Number of Retirees 1,129 1,194
3. Support Ratio [(1) / (2)] 0.72 0.65
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 growth, investment return) are exactly realized each year, there will be differences on a
year-to-year basis. The year-to-year differences between actual experience and the assumptions are called
actuarial gains and losses and serve to lower or raise required employer contributions from one year to the
next. Therefore, employer contributions will inevitably fluctuate, especially due to the ups and downs of
investment returns.
Asset Volatility Ratio
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 AVR of 8 may experience twice the contribution
volatility due to investment return volatility than a plan with 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 have a higher LVR experience more volatile employer contributions (as a percentage of
payroll) due to changes in liability. For example, a plan with LVR of 8 is expected to have twice the contribution
volatility of a plan with 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 status approaches
100 percent.
CalPERS Actuarial Valuation - June 30, 2019 Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 28
Maturity Measures (continued)
Contribution Volatility June 30, 2018 June 30, 2019
1. Market Value of Assets without Receivables $545,487,546 $572,729,533
2. Payroll 80,363,405 78,848,216
3. Asset Volatility Ratio (AVR) [(1) / (2)] 6.8 7.3
4. Accrued Liability $831,958,865 $868,716,440
5. Liability Volatility Ratio (LVR) [(4) / (2)] 10.4 11.0
Maturity Measures History
Valuation Date
Ratio of Retiree Accrued Liability
to
Total Accrued Liability
Support
Ratio
Asset
Volatility
Ratio
Liability
Volatility
Ratio
06/30/17 57% 0.74 6.5 9.8
06/30/18 57% 0.72 6.8 10.4
06/30/19 61% 0.65 7.3 11.0
CalPERS Actuarial Valuation - June 30, 2019 Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 29
Hypothetical Termination Liability
The hypothetical termination liability is an estimate of the financial position of the plan had the contract with
CalPERS been terminated as of June 30, 2019. The plan liability on a termination basis is calculated differently
from the plan’s ongoing funding liability. For this hypothetical termination liability calculation, both
compensation and service are frozen as of the valuation date and no future pay increases or service accruals
are assumed. This measure of funded status is not appropriate for assessing the need for future employer
contributions in the case of an ongoing plan, that is, for an employer that continues to provide CalPERS retirement benefits to active employees.
A more conservative investment policy and asset allocation strategy was adopted by the CalPERS Board for
the Terminated Agency Pool. The Terminated Agency Pool has limited funding sources since no future
employer contributions will be made. Therefore, expected benefit payments are secured by risk-free assets
and benefit security for members is increased while limiting the funding risk. However, this asset allocation
has a lower expected rate of return than the PERF and consequently, a lower discount rate assumption. The
lower discount rate for the Terminated Agency Pool results in higher liabilities for terminated plans.
The effective termination discount rate will depend on actual market rates of return for risk-free securities on
the date of termination. As market discount rates are variable the table below shows a range for the
hypothetical termination liability based on the lowest and highest interest rates observed during an
approximate 19-month period from 12 months before the valuation date to 7 months after.
[
Market Value of
Assets (MVA)
Hypothetical Termination
Liability1,2
@ 1.75%
Funded
Status
Unfunded Termination
Liability
@ 1.75%
Hypothetical Termination
Liability1,2
@ 3.25%
Funded
Status
Unfunded Termination
Liability
@ 3.25%
$574,012,871 $1,646,864,487 34.9% $1,072,851,616 $1,335,479,928 43.0% $761,467,057
1 The hypothetical liabilities calculated above include a 5 percent contingency load in accordance with Board policy. Other
actuarial assumptions can be found in Appendix A.
2 The current discount rate assumption used for termination valuations is a weighted average of the 10-year and 30-year U.S. Treasury yields where the weights are based on matching asset and liability durations as of the termination date.
The discount rates used in the table are based on 20-year Treasury bonds, rounded to the nearest quarter percentage
point, which is a good proxy for most plans. The 20-year Treasury yield was 2.31 percent on June 30, 2019, and was 1.83 percent on January 31, 2020.
In order to terminate the plan, you must first contact our Retirement Services Contract Unit to initiate a
Resolution of Intent to Terminate. The completed Resolution will allow the plan actuary to give you a
preliminary termination valuation with a more up-to-date estimate of the plan liabilities. CalPERS advises you
to consult with the plan actuary before beginning this process.
Plan’s Major Benefit Provisions
CalPERS Actuarial Valuation - June 30, 2019
Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 31
Plan’s Major Benefit Options
Shown below is a summary of the major optional benefits for which your agency has contracted. A description of principal standard and optional plan provisions
is in Appendix B.
Benefit Group
Member Category Misc Misc Misc Misc Misc Misc Misc
Demographics Actives No Yes Yes No Yes No No
Transfers/Separated Yes Yes Yes No Yes No No
Receiving Yes Yes Yes Yes Yes Yes Yes
Benefit Group Key 105391 105393 107485 111261 111264 200044 200045
Benefit Provision
Benefit Formula 2% @ 55 2.7% @ 55 2% @ 60 2% @ 62
Social Security Coverage No No No No
Full/Modified Full Full Full Full
Employee Contribution Rate 8.00% 7.00% 6.25%
Final Average Compensation Period One Year One Year One Year Three Year
Sick Leave Credit No No No No
Non-Industrial Disability Standard Standard Standard Standard
Industrial Disability No No No No
Pre-Retirement Death Benefits
Optional Settlement 2 No No No No 1959 Survivor Benefit Level Level 1 Level 1 Level 1 Level 1
Special No No No No
Alternate (firefighters) No No No No
Post-Retirement Death Benefits
Lump Sum $500 $500 $500 $500 $500 $500 $500
Survivor Allowance (PRSA) No No No No No No No
COLA 2% 2% 2% 2% 2% 2% 2%
CalPERS Actuarial Valuation - June 30, 2019
Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 32
Plan’s Major Benefit Options
Shown below is a summary of the major optional benefits for which your agency has contracted. A description of principal standard and optional plan provisions
is in Appendix B.
Benefit Group
Member Category Misc
Demographics Actives No
Transfers/Separated No
Receiving Yes
Benefit Group Key 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 $500
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 of Actuarial Terms
Appendix A
Actuarial Methods and Assumptions
• Actuarial Data
• Actuarial Methods
• Actuarial Assumptions
• Miscellaneous
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-1
Actuarial Data
As stated in the Actuarial Certification, the data which serves as the basis of this valuation has been obtained
from the various CalPERS databases. We have reviewed the valuation data and believe that it is reasonable
and appropriate in aggregate. We are unaware of any potential data issues that would have a material effect
on the results of this valuation, except that data does not always contain the latest salary information for
former members now in reciprocal systems and does not recognize the potential for unusually large salary
deviation in certain cases such as elected officials. Therefore, salary information in these cases may not be accurate. These situations are relatively infrequent, however, and generally do not have a material impact on
the required employer contributions.
Actuarial Methods
Actuarial Cost Method
The actuarial cost method used is the Entry Age Actuarial Cost Method. Under this method, projected benefits
are determined for all members and the associated liabilities are spread in a manner that produces level
annual cost as a percentage of pay in each year from the member’s entry age to their assumed retirement
age on the valuation date. The cost allocated to the current fiscal year is called the normal cost.
The actuarial accrued liability for active members is then calculated as the portion of the total cost of the plan
allocated to prior years. The actuarial accrued liability for members currently receiving benefits and for
members entitled to deferred benefits is equal to the present value of the benefits expected to be paid. No
normal costs are applicable for these participants.
Amortization of Unfunded Actuarial Accrued Liability
The excess of the total actuarial accrued liability over the market value of plan assets is called the unfunded
actuarial accrued liability (UAL). Funding requirements are determined by adding the normal cost and 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 amortization policy. The CalPERS 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.
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:
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-2
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
2.75%
0%
2.75%
0%
2.75%
0%
2.75%
0%
2.75%
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 percent,
40 percent, 60 percent and 80 percent of the “full” payment which begins in year five. The 5-year ramp down means that the reverse is true in the final four years of the amortization period.
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:
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
• 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.
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-3
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 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 less.
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 classified as Inactive. These plans have no active members and no
expectation to have active members in the future.
• Amortization of the unfunded liability is on a “level dollar” basis rather than a “level percent of pay”
basis. For amortization layers, which utilize a ramp up and ramp down, the “ultimate” payment is
constant. • Actuarial judgment will be used to shorten amortization periods for Inactive plans with existing periods that are deemed too long given the duration of the liability. The specific demographics of the
plan will be used to determine if shorter periods may be more appropriate.
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 Market value of assets. Asset values include accounts
receivable.
PEPRA Normal Cost Rate Methodology
Per Government Code Section 7522.30(b), the “normal cost rate” shall mean the annual actuarially determined
normal cost for the plan of retirement benefits provided to the new member and shall be established based on actuarial assumptions used to determine the liabilities and costs as part of the annual actuarial valuation.
The plan of retirement benefits shall include any elements that would impact the actuarial determination of
the normal cost, including, but not limited to, the retirement formula, eligibility and vesting criteria, ancillary
benefit provisions, and any automatic cost-of-living adjustments as determined by the public retirement
system.
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 sufficiently large active population for this purpose, the PEPRA active population by itself may not be sufficiently large.
The total PEPRA normal cost will be determined based on the plan’s PEPRA membership only if the number
of members covered under the PEPRA formula meets either:
1. 50 percent of the active population, or 2. 25 percent of the active population and 100 or more PEPRA members
Until one of these conditions is met, the plan’s total PEPRA normal cost will be determined using the entire
active plan population (both PEPRA and Classic) based on the PEPRA benefit provisions.
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-4
Actuarial Assumptions
In 2017, CalPERS completed its most recent asset liability management study incorporating actuarial
assumptions and strategic asset allocation. In December 2017, the CalPERS Board of Administration adopted
relatively modest changes to the asset allocation that reduced the expected volatility of returns. The adopted
asset allocation was expected to have a long-term blended return that continued to support a discount rate
assumption of 7.00 percent. The Board also approved several changes to the demographic assumptions that
more closely aligned with actual experience.
On December 21, 2016, the CalPERS Board of Administration lowered the discount rate from 7.50 percent to
7.00 percent using a three-year phase-in beginning with the June 30, 2016 actuarial valuations. The minimum
employer contributions for fiscal year 2021-22 determined in this valuation were calculated using a discount
rate of 7.00 percent. The decision to reduce the discount rate was primarily based on reduced capital market
assumptions provided by external investment consultants and CalPERS investment staff. The specific decision
adopted by the Board reflected recommendations from CalPERS staff and additional input from employer and
employee stakeholder groups. Based on the investment allocation adopted by the Board and capital market assumptions, the reduced discount rate schedule provides a more realistic assumption for the long-term
investment return of the fund.
Notwithstanding the Board’s decision to phase into a 7.0 percent discount rate, subsequent analysis of the
expected investment return of CalPERS assets or changes to the investment allocation may result in a change
to this discount rate schedule.
For more details and additional rationale for the selection of the actuarial assumptions, please refer to the
CalPERS Experience Study and Review of Actuarial Assumptions report from December 2017 that can be found
on the CalPERS website under: “Forms and Publications”. Click on “View All” and search for Experience Study.
All actuarial assumptions (except the discount rates used for the hypothetical termination liability) represent
an estimate of future experience rather than observations of the estimates inherent in market data.
Economic Assumptions
Discount Rate
The prescribed discount rate assumption, adopted by the Board on December 21, 2016, is 7.00
percent compounded annually (net of investment and administrative expenses) as of June 30, 2019.
Termination Liability Discount Rate
The current discount rate assumption used for termination valuations is a weighted average of the 10-year and 30-year U.S. Treasury yields where the weights are based on matching asset and liability
durations as of the termination date.
The hypothetical termination liabilities in this report are calculated using an observed range of market
interest rates. This range is based on the lowest and highest 20-year Treasury bond observed during
an approximate 19-month period from 12 months before the valuation date to 7 months after. The
20-year Treasury bond has a similar duration to most plan liabilities and serves as a good proxy for the termination discount rate. The 20-year Treasury yield was 2.31 percent on June 30, 2019.
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-5
Salary Growth
Annual increases vary by category, entry age, and duration of service. A sample of assumed increases
are shown below. Wage inflation assumption in the valuation year (2.75% for 2019) is added to
these factors for total salary growth.
Public Agency Miscellaneous
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.0850 0.0775 0.0650
1 0.0690 0.0635 0.0525
2 0.0560 0.0510 0.0410
3 0.0470 0.0425 0.0335
4 0.0400 0.0355 0.0270
5 0.0340 0.0295 0.0215
10 0.0160 0.0135 0.0090
15 0.0120 0.0100 0.0060
20 0.0090 0.0075 0.0045
25 0.0080 0.0065 0.0040
30 0.0080 0.0065 0.0040
Public Agency Fire
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1700 0.1700 0.1700
1 0.1100 0.1100 0.1100
2 0.0700 0.0700 0.0700
3 0.0580 0.0580 0.0580
4 0.0473 0.0473 0.0473
5 0.0372 0.0372 0.0372
10 0.0165 0.0165 0.0165
15 0.0144 0.0144 0.0144
20 0.0126 0.0126 0.0126
25 0.0111 0.0111 0.0111
30 0.0097 0.0097 0.0097
Public Agency Police
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1027 0.1027 0.1027
1 0.0803 0.0803 0.0803
2 0.0628 0.0628 0.0628
3 0.0491 0.0491 0.0491
4 0.0384 0.0384 0.0384
5 0.0300 0.0300 0.0300
10 0.0145 0.0145 0.0145
15 0.0150 0.0150 0.0150
20 0.0155 0.0155 0.0155
25 0.0160 0.0160 0.0160
30 0.0165 0.0165 0.0165
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-6
Salary Growth (continued)
Public Agency County Peace Officers
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1320 0.1320 0.1320
1 0.0960 0.0960 0.0960
2 0.0657 0.0657 0.0657
3 0.0525 0.0525 0.0525
4 0.0419 0.0419 0.0419
5 0.0335 0.0335 0.0335
10 0.0170 0.0170 0.0170
15 0.0150 0.0150 0.0150
20 0.0150 0.0150 0.0150
25 0.0175 0.0175 0.0175
30 0.0200 0.0200 0.0200
Schools
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.0428 0.0419 0.0380
1 0.0428 0.0419 0.0380
2 0.0428 0.0419 0.0380
3 0.0354 0.0332 0.0280
4 0.0305 0.0279 0.0224
5 0.0262 0.0234 0.0180
10 0.0171 0.0154 0.0112
15 0.0152 0.0134 0.0098
20 0.0135 0.0117 0.0086
25 0.0120 0.0103 0.0076
30 0.0087 0.0071 0.0048
• The Miscellaneous salary scale is used for Local Prosecutors. • The Police salary scale is used for Other Safety, Local Sheriff, and School Police.
Overall Payroll Growth
2.75 percent compounded annually (used in projecting the payroll over which the unfunded liability
is amortized). This assumption is used for all plans with active members.
Inflation
2.50 percent compounded annually.
Non-valued Potential Additional Liabilities
The potential liability loss for a cost-of-living increase exceeding the 2.50 percent inflation assumption
and any potential liability loss from future member service purchases are not reflected in the
valuation.
Miscellaneous Loading Factors
Credit for Unused Sick Leave
Total years of service is increased by 1 percent for those plans that have adopted the provision of
providing Credit for Unused Sick Leave.
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-7
Conversion of Employer Paid Member Contributions (EPMC)
Total years of service is increased by the Employee Contribution Rate for those plans with the
provision providing for the Conversion of Employer Paid Member Contributions (EPMC) during the
final compensation period.
Norris Decision (Best Factors) Employees hired prior to July 1, 1982 have projected benefit amounts increased in order to reflect
the use of “Best Factors” in the calculation of optional benefit forms. This is due to a 1983 Supreme
Court decision, known as the Norris decision, which required males and females to be treated equally
in the determination of benefit amounts. Consequently, anyone already employed at that time is
given the best possible conversion factor when optional benefits are determined. No loading is
necessary for employees hired after July 1, 1982.
Termination Liability
The termination liabilities include a 5 percent contingency load. This load is for unforeseen negative
experience.
Demographic Assumptions
Pre-Retirement Mortality
Non-industrial death rates vary by age and gender. Industrial death rates vary by age. See sample rates in table below. The non-industrial death rates are used for all plans. The industrial death rates
are used for safety plans (except for Local Prosecutor safety members where the corresponding
miscellaneous plan does not have the Industrial Death Benefit).
Non-Industrial Death Industrial Death
(Not Job-Related) (Job-Related)
Age Male Female Male and Female
20 0.00022 0.00007 0.00004
25 0.00029 0.00011 0.00006
30 0.00038 0.00015 0.00007
35 0.00049 0.00027 0.00009
40 0.00064 0.00037 0.00010
45 0.00080 0.00054 0.00012
50 0.00116 0.00079 0.00013 55 0.00172 0.00120 0.00015
60 0.00255 0.00166 0.00016
65 0.00363 0.00233 0.00018
70 0.00623 0.00388 0.00019
75 0.01057 0.00623 0.00021
80 0.01659 0.00939 0.00022
Miscellaneous plans usually have industrial death rates set to zero unless the agency has specifically contracted for industrial death benefits. If so, each non-industrial death rate shown above will be split
into two components; 99 percent will become the non-industrial death rate and 1 percent will become
the industrial death rate.
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-8
Post-Retirement Mortality
Rates vary by age, type of retirement, and gender. See sample rates in table below. These rates are
used for all plans.
Healthy Recipients Non-Industrially Disabled Industrially Disabled
(Not Job-Related) (Job-Related)
Age Male Female Male Female Male Female
50 0.00372 0.00346 0.01183 0.01083 0.00372 0.00346
55 0.00437 0.00410 0.01613 0.01178 0.00437 0.00410
60 0.00671 0.00476 0.02166 0.01404 0.00671 0.00476
65 0.00928 0.00637 0.02733 0.01757 0.01113 0.00765
70 0.01339 0.00926 0.03358 0.02183 0.01607 0.01111
75 0.02316 0.01635 0.04277 0.02969 0.02779 0.01962 80 0.03977 0.03007 0.06272 0.04641 0.04773 0.03609
85 0.07122 0.05418 0.09793 0.07847 0.08547 0.06501
90 0.13044 0.10089 0.14616 0.13220 0.14348 0.11098
95 0.21658 0.17698 0.21658 0.21015 0.21658 0.17698
100 0.32222 0.28151 0.32222 0.32226 0.32222 0.28151
105 0.46691 0.43491 0.46691 0.43491 0.46691 0.43491
110 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000
The post-retirement mortality rates above include 15 years of projected on-going mortality
improvement using 90 percent of Scale MP 2016 published by the Society of Actuaries.
Marital Status
For active members, a percentage who are married upon retirement is assumed according to member
category as shown in the following table.
Member Category Percent Married
Miscellaneous Member 70%
Local Police 85% Local Fire 90%
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.
Terminated Members
It is assumed that terminated members refund immediately if non-vested. Terminated 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, 2019 Appendix A Actuarial Methods and Assumptions
A-9
Termination with Refund
Rates vary by entry age and service for miscellaneous plans. Rates vary by service for safety plans.
See sample rates in tables below.
Public Agency Miscellaneous
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45
0 0.1742 0.1674 0.1606 0.1537 0.1468 0.1400
1 0.1545 0.1477 0.1409 0.1339 0.1271 0.1203
2 0.1348 0.1280 0.1212 0.1142 0.1074 0.1006
3 0.1151 0.1083 0.1015 0.0945 0.0877 0.0809
4 0.0954 0.0886 0.0818 0.0748 0.0680 0.0612
5 0.0212 0.0193 0.0174 0.0155 0.0136 0.0116
10 0.0138 0.0121 0.0104 0.0088 0.0071 0.0055
15 0.0060 0.0051 0.0042 0.0032 0.0023 0.0014
20 0.0037 0.0029 0.0021 0.0013 0.0005 0.0001
25 0.0017 0.0011 0.0005 0.0001 0.0001 0.0001
30 0.0005 0.0001 0.0001 0.0001 0.0001 0.0001
35 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001
Public Agency Safety
Duration of Service Fire Police County Peace Officer
0 0.1298 0.1013 0.1188
1 0.0674 0.0636 0.0856
2 0.0320 0.0271 0.0617
3 0.0237 0.0258 0.0445
4 0.0087 0.0245 0.0321
5 0.0052 0.0086 0.0121
10 0.0005 0.0053 0.0053
15 0.0004 0.0027 0.0025
20 0.0003 0.0017 0.0012
25 0.0002 0.0012 0.0005
30 0.0002 0.0009 0.0003
35 0.0001 0.0009 0.0002
The police termination and refund rates are also used for Public Agency Local Prosecutors, Other
Safety, Local Sheriff, and School Police.
Schools
Duration of Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45
0 0.2107 0.2107 0.1827 0.1546 0.1375 0.1203
1 0.1807 0.1807 0.1526 0.1246 0.1105 0.0963
2 0.1526 0.1526 0.1259 0.0992 0.0878 0.0765
3 0.1266 0.1266 0.1023 0.0780 0.0691 0.0603
4 0.1026 0.1026 0.0815 0.0605 0.0537 0.0469
5 0.0808 0.0808 0.0634 0.0461 0.0409 0.0358
10 0.0202 0.0202 0.0157 0.0112 0.0087 0.0063
15 0.0107 0.0107 0.0077 0.0048 0.0034 0.0021
20 0.0056 0.0056 0.0037 0.0017 0.0016 0.0016
25 0.0026 0.0026 0.0018 0.0009 0.0012 0.0015
30 0.0013 0.0013 0.0011 0.0009 0.0012 0.0015
35 0.0008 0.0008 0.0009 0.0009 0.0012 0.0015
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-10
Termination with Vested Benefits
Rates vary by entry age and service for miscellaneous plans. Rates vary by service for safety plans.
See sample rates in tables below.
Public Agency Miscellaneous
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40
5 0.0422 0.0422 0.0393 0.0364 0.0344
10 0.0278 0.0278 0.0271 0.0263 0.0215
15 0.0192 0.0192 0.0174 0.0156 0.0120
20 0.0139 0.0139 0.0109 0.0079 0.0047
25 0.0083 0.0083 0.0048 0.0014 0.0007
30 0.0015 0.0015 0.0007 0.0000 0.0000
35 0.0000 0.0000 0.0000 0.0000 0.0000
Public Agency Safety
Duration of
Service Fire Police
County Peace
Officer
5 0.0094 0.0163 0.0187
10 0.0064 0.0126 0.0134
15 0.0048 0.0082 0.0092
20 0.0038 0.0065 0.0064
25 0.0026 0.0058 0.0042
30 0.0014 0.0056 0.0022
35 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
5 0.0405 0.0405 0.0346 0.0288 0.0264
10 0.0324 0.0324 0.0280 0.0235 0.0211
15 0.0202 0.0202 0.0179 0.0155 0.0126
20 0.0144 0.0144 0.0114 0.0083 0.0042
25 0.0091 0.0091 0.0046 0.0000 0.0000
30 0.0015 0.0015 0.0007 0.0000 0.0000
35 0.0000 0.0000 0.0000 0.0000 0.0000
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-11
Non-Industrial (Not Job-Related) Disability
Rates vary by age and gender for miscellaneous plans. Rates vary by age and category for safety
plans.
Miscellaneous Fire Police County Peace Officer Schools
Age Male Female Male and Female Male and Female Male and Female Male Female
20 0.0002 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001
25 0.0002 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001
30 0.0002 0.0002 0.0001 0.0002 0.0001 0.0001 0.0002
35 0.0004 0.0007 0.0001 0.0003 0.0004 0.0005 0.0004
40 0.0010 0.0014 0.0001 0.0004 0.0007 0.0012 0.0008
45 0.0015 0.0019 0.0002 0.0005 0.0013 0.0020 0.0017
50 0.0016 0.0020 0.0005 0.0008 0.0018 0.0026 0.0022
55 0.0016 0.0015 0.0007 0.0013 0.0010 0.0025 0.0018
60 0.0015 0.0011 0.0007 0.0020 0.0006 0.0022 0.0011
• 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.
• Fifty percent of the police industrial disability rates are used for School Police.
• One percent of the police industrial disability rates are used for Local Prosecutors.
• Normally, rates are zero for miscellaneous plans unless the agency has specifically contracted
for industrial disability benefits. If so, each miscellaneous non-industrial disability rate will be
split into two components: 50 percent will become the non-industrial disability rate and 50 percent will become the industrial disability rate.
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-12
Service Retirement
Retirement rates vary by age, service, and formula, except for the safety ½ @ 55 and 2% @ 55
formulas, where retirement rates vary by age only.
Public Agency Miscellaneous 1.5% @ 65
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.008 0.011 0.013 0.015 0.017 0.019
51 0.007 0.010 0.012 0.013 0.015 0.017
52 0.010 0.014 0.017 0.019 0.021 0.024
53 0.008 0.012 0.015 0.017 0.019 0.022
54 0.012 0.016 0.019 0.022 0.025 0.028
55 0.018 0.025 0.031 0.035 0.038 0.043
56 0.015 0.021 0.025 0.029 0.032 0.036
57 0.020 0.028 0.033 0.038 0.043 0.048
58 0.024 0.033 0.040 0.046 0.052 0.058
59 0.028 0.039 0.048 0.054 0.060 0.067
60 0.049 0.069 0.083 0.094 0.105 0.118
61 0.062 0.087 0.106 0.120 0.133 0.150
62 0.104 0.146 0.177 0.200 0.223 0.251
63 0.099 0.139 0.169 0.191 0.213 0.239
64 0.097 0.136 0.165 0.186 0.209 0.233
65 0.140 0.197 0.240 0.271 0.302 0.339
66 0.092 0.130 0.157 0.177 0.198 0.222
67 0.129 0.181 0.220 0.249 0.277 0.311
68 0.092 0.129 0.156 0.177 0.197 0.221
69 0.092 0.130 0.158 0.178 0.199 0.224
70 0.103 0.144 0.175 0.198 0.221 0.248
Public Agency Miscellaneous 2% @ 60
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.020 0.020 0.020 0.020 0.020 0.150
51 0.006 0.019 0.027 0.031 0.035 0.038
52 0.011 0.024 0.031 0.034 0.037 0.040
53 0.010 0.015 0.021 0.027 0.033 0.040
54 0.025 0.025 0.029 0.035 0.041 0.048
55 0.019 0.026 0.033 0.092 0.136 0.146
56 0.030 0.034 0.038 0.060 0.093 0.127
57 0.030 0.046 0.061 0.076 0.090 0.104
58 0.040 0.044 0.059 0.080 0.101 0.122
59 0.024 0.044 0.063 0.083 0.103 0.122
60 0.070 0.074 0.089 0.113 0.137 0.161
61 0.080 0.086 0.093 0.118 0.156 0.195
62 0.100 0.117 0.133 0.190 0.273 0.357
63 0.140 0.157 0.173 0.208 0.255 0.301
64 0.140 0.153 0.165 0.196 0.239 0.283
65 0.140 0.178 0.215 0.264 0.321 0.377
66 0.140 0.178 0.215 0.264 0.321 0.377
67 0.140 0.178 0.215 0.264 0.321 0.377
68 0.112 0.142 0.172 0.211 0.257 0.302
69 0.112 0.142 0.172 0.211 0.257 0.302
70 0.140 0.178 0.215 0.264 0.321 0.377
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-13
Service Retirement
Public Agency Miscellaneous 2% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.008 0.013 0.018 0.021 0.022 0.033
51 0.009 0.016 0.020 0.023 0.026 0.036
52 0.015 0.018 0.020 0.021 0.025 0.030
53 0.016 0.020 0.024 0.028 0.031 0.035
54 0.018 0.022 0.026 0.030 0.034 0.038
55 0.040 0.040 0.056 0.093 0.109 0.154
56 0.034 0.050 0.066 0.092 0.107 0.138
57 0.042 0.048 0.058 0.082 0.096 0.127
58 0.046 0.054 0.062 0.090 0.106 0.131
59 0.045 0.055 0.066 0.097 0.115 0.144
60 0.058 0.075 0.093 0.126 0.143 0.169
61 0.065 0.088 0.111 0.146 0.163 0.189
62 0.136 0.118 0.148 0.190 0.213 0.247
63 0.130 0.133 0.174 0.212 0.249 0.285
64 0.113 0.129 0.165 0.196 0.223 0.249
65 0.145 0.173 0.201 0.233 0.266 0.289
66 0.170 0.199 0.229 0.258 0.284 0.306
67 0.250 0.204 0.233 0.250 0.257 0.287
68 0.227 0.175 0.193 0.215 0.240 0.262
69 0.200 0.180 0.180 0.198 0.228 0.246
70 0.150 0.171 0.192 0.239 0.304 0.330
Public Agency Miscellaneous 2.5% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.008 0.014 0.020 0.026 0.033 0.050
51 0.008 0.015 0.023 0.030 0.037 0.059
52 0.009 0.016 0.023 0.030 0.037 0.061
53 0.014 0.021 0.028 0.035 0.042 0.063
54 0.014 0.022 0.030 0.039 0.047 0.068
55 0.020 0.038 0.055 0.073 0.122 0.192
56 0.025 0.047 0.069 0.091 0.136 0.196
57 0.030 0.048 0.065 0.083 0.123 0.178
58 0.035 0.054 0.073 0.093 0.112 0.153
59 0.035 0.054 0.073 0.092 0.131 0.183
60 0.044 0.072 0.101 0.130 0.158 0.197
61 0.050 0.078 0.105 0.133 0.161 0.223
62 0.055 0.093 0.130 0.168 0.205 0.268
63 0.090 0.124 0.158 0.192 0.226 0.279
64 0.080 0.112 0.144 0.175 0.207 0.268
65 0.120 0.156 0.193 0.229 0.265 0.333
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
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-14
Service Retirement
Public Agency Miscellaneous 2.7% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.003 0.010 0.016 0.034 0.033 0.045
51 0.009 0.016 0.023 0.042 0.038 0.047
52 0.015 0.019 0.024 0.040 0.036 0.046
53 0.012 0.020 0.028 0.047 0.046 0.060
54 0.020 0.027 0.035 0.054 0.056 0.073
55 0.033 0.055 0.078 0.113 0.156 0.234
56 0.039 0.067 0.095 0.135 0.169 0.227
57 0.050 0.067 0.084 0.113 0.142 0.198
58 0.043 0.066 0.089 0.124 0.151 0.201
59 0.050 0.070 0.090 0.122 0.158 0.224
60 0.060 0.086 0.112 0.150 0.182 0.238
61 0.071 0.094 0.117 0.153 0.184 0.241
62 0.091 0.122 0.152 0.194 0.226 0.279
63 0.143 0.161 0.179 0.209 0.222 0.250
64 0.116 0.147 0.178 0.221 0.254 0.308
65 0.140 0.174 0.208 0.254 0.306 0.389
66 0.170 0.209 0.247 0.298 0.310 0.324
67 0.170 0.199 0.228 0.269 0.296 0.342
68 0.150 0.181 0.212 0.255 0.287 0.339
69 0.150 0.181 0.212 0.255 0.287 0.339
70 0.150 0.181 0.212 0.243 0.291 0.350
Public Agency Miscellaneous 3% @ 60
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.013 0.019 0.026 0.042 0.038 0.064
51 0.035 0.037 0.039 0.052 0.047 0.062
52 0.023 0.030 0.038 0.055 0.051 0.056
53 0.025 0.032 0.040 0.057 0.056 0.066
54 0.035 0.042 0.050 0.067 0.066 0.076
55 0.040 0.052 0.064 0.085 0.095 0.120
56 0.043 0.056 0.070 0.094 0.102 0.150
57 0.045 0.060 0.074 0.099 0.109 0.131
58 0.053 0.056 0.059 0.099 0.126 0.185
59 0.050 0.068 0.085 0.113 0.144 0.202
60 0.089 0.106 0.123 0.180 0.226 0.316
61 0.100 0.117 0.133 0.212 0.230 0.298
62 0.130 0.155 0.180 0.248 0.282 0.335
63 0.120 0.163 0.206 0.270 0.268 0.352
64 0.150 0.150 0.150 0.215 0.277 0.300
65 0.200 0.242 0.283 0.330 0.300 0.342
66 0.220 0.264 0.308 0.352 0.379 0.394
67 0.250 0.279 0.309 0.338 0.371 0.406
68 0.170 0.196 0.223 0.249 0.290 0.340
69 0.220 0.261 0.302 0.344 0.378 0.408
70 0.220 0.255 0.291 0.326 0.358 0.388
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-15
Service Retirement
Public Agency Miscellaneous 2% @ 62
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.000 0.000 0.000 0.000 0.000 0.000
51 0.000 0.000 0.000 0.000 0.000 0.000
52 0.005 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
Service Retirement
Public Agency Fire ½ @ 55 and 2% @ 55
Age Rate
Age Rate
50 0.0159 56 0.1108
51 0.0000 57 0.0000
52 0.0344 58 0.0950
53 0.0199 59 0.0441
54 0.0413 60 1.00000
55 0.0751
Public Agency Police ½ @ 55 and 2% @ 55
Age Rate
Age Rate
50 0.0255 56 0.0692
51 0.0000 57 0.0511
52 0.0164 58 0.0724
53 0.0272 59 0.0704
54 0.0095 60 0.3000
55 0.1667
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-16
Service Retirement
Public Agency Police 2% @ 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.050 0.050 0.050 0.050 0.050 0.100
51 0.040 0.040 0.040 0.040 0.058 0.094
52 0.040 0.040 0.040 0.040 0.061 0.087
53 0.040 0.040 0.040 0.040 0.082 0.123
54 0.040 0.040 0.040 0.046 0.098 0.158
55 0.072 0.072 0.072 0.096 0.141 0.255
56 0.066 0.066 0.066 0.088 0.129 0.228
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.
Service Retirement
Public Agency Fire 2% @ 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.009 0.009 0.009 0.009 0.013 0.020
51 0.013 0.013 0.013 0.013 0.020 0.029
52 0.018 0.018 0.018 0.018 0.028 0.042
53 0.052 0.052 0.052 0.052 0.079 0.119
54 0.067 0.067 0.067 0.067 0.103 0.154
55 0.089 0.089 0.089 0.089 0.136 0.204
56 0.083 0.083 0.083 0.083 0.127 0.190
57 0.082 0.082 0.082 0.082 0.126 0.189
58 0.088 0.088 0.088 0.088 0.136 0.204
59 0.074 0.074 0.074 0.074 0.113 0.170
60 0.100 0.100 0.100 0.100 0.154 0.230
61 0.072 0.072 0.072 0.072 0.110 0.165
62 0.099 0.099 0.099 0.099 0.152 0.228
63 0.114 0.114 0.114 0.114 0.175 0.262
64 0.114 0.114 0.114 0.114 0.175 0.262
65 1.000 1.000 1.000 1.000 1.000 1.000
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-17
Service Retirement
Public Agency Police 3% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.035 0.035 0.035 0.035 0.070 0.090
51 0.028 0.028 0.028 0.029 0.065 0.101
52 0.032 0.032 0.032 0.039 0.066 0.109
53 0.028 0.028 0.028 0.043 0.075 0.132
54 0.038 0.038 0.038 0.074 0.118 0.333
55 0.070 0.070 0.070 0.120 0.175 0.340
56 0.060 0.060 0.060 0.110 0.165 0.330
57 0.060 0.060 0.060 0.110 0.165 0.320
58 0.080 0.080 0.080 0.100 0.185 0.350
59 0.090 0.090 0.095 0.130 0.185 0.350
60 0.150 0.150 0.150 0.150 0.185 0.350
61 0.120 0.120 0.120 0.120 0.160 0.350
62 0.150 0.150 0.150 0.150 0.200 0.350
63 0.150 0.150 0.150 0.150 0.200 0.400
64 0.150 0.150 0.150 0.150 0.175 0.350
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.
Service Retirement
Public Agency Fire 3% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.001 0.001 0.001 0.006 0.016 0.069
51 0.002 0.002 0.002 0.006 0.018 0.071
52 0.012 0.012 0.012 0.021 0.040 0.098
53 0.032 0.032 0.032 0.049 0.085 0.149
54 0.057 0.057 0.057 0.087 0.144 0.217
55 0.073 0.073 0.073 0.109 0.179 0.259
56 0.064 0.064 0.064 0.097 0.161 0.238
57 0.063 0.063 0.063 0.095 0.157 0.233
58 0.065 0.065 0.065 0.099 0.163 0.241
59 0.088 0.088 0.088 0.131 0.213 0.299
60 0.105 0.105 0.105 0.155 0.251 0.344
61 0.118 0.118 0.118 0.175 0.282 0.380
62 0.087 0.087 0.087 0.128 0.210 0.295
63 0.067 0.067 0.067 0.100 0.165 0.243
64 0.067 0.067 0.067 0.100 0.165 0.243
65 1.000 1.000 1.000 1.000 1.000 1.000
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-18
Service Retirement
Public Agency Police 3% @ 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.050 0.050 0.050 0.100 0.155 0.400
51 0.040 0.040 0.040 0.090 0.140 0.380
52 0.040 0.040 0.040 0.070 0.115 0.350
53 0.040 0.040 0.040 0.080 0.135 0.350
54 0.040 0.040 0.040 0.090 0.145 0.350
55 0.070 0.070 0.070 0.120 0.175 0.340
56 0.060 0.060 0.060 0.110 0.165 0.330
57 0.060 0.060 0.060 0.110 0.165 0.320
58 0.080 0.080 0.080 0.100 0.185 0.350
59 0.090 0.090 0.095 0.130 0.185 0.350
60 0.150 0.150 0.150 0.150 0.185 0.350
61 0.120 0.120 0.120 0.120 0.160 0.350
62 0.150 0.150 0.150 0.150 0.200 0.350
63 0.150 0.150 0.150 0.150 0.200 0.400
64 0.150 0.150 0.150 0.150 0.175 0.350
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.
Service Retirement
Public Agency Fire 3% @ 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.020 0.020 0.020 0.040 0.130 0.192
51 0.008 0.008 0.008 0.023 0.107 0.164
52 0.023 0.023 0.023 0.043 0.136 0.198
53 0.023 0.023 0.023 0.043 0.135 0.198
54 0.027 0.027 0.027 0.048 0.143 0.207
55 0.043 0.043 0.043 0.070 0.174 0.244
56 0.053 0.053 0.053 0.085 0.196 0.269
57 0.054 0.054 0.054 0.086 0.197 0.271
58 0.052 0.052 0.052 0.084 0.193 0.268
59 0.075 0.075 0.075 0.116 0.239 0.321
60 0.065 0.065 0.065 0.102 0.219 0.298
61 0.076 0.076 0.076 0.117 0.241 0.324
62 0.068 0.068 0.068 0.106 0.224 0.304
63 0.027 0.027 0.027 0.049 0.143 0.208
64 0.094 0.094 0.094 0.143 0.277 0.366
65 1.000 1.000 1.000 1.000 1.000 1.000
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-19
Service Retirement
Public Agency Police 2% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.040 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.
Service Retirement
Public Agency Fire 2% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.005 0.005 0.005 0.005 0.008 0.012
51 0.006 0.006 0.006 0.006 0.009 0.013
52 0.012 0.012 0.012 0.012 0.019 0.028
53 0.033 0.033 0.033 0.033 0.050 0.075
54 0.045 0.045 0.045 0.045 0.069 0.103
55 0.061 0.061 0.061 0.061 0.094 0.140
56 0.055 0.055 0.055 0.055 0.084 0.126
57 0.081 0.081 0.081 0.081 0.125 0.187
58 0.059 0.059 0.059 0.059 0.091 0.137
59 0.055 0.055 0.055 0.055 0.084 0.126
60 0.085 0.085 0.085 0.085 0.131 0.196
61 0.085 0.085 0.085 0.085 0.131 0.196
62 0.085 0.085 0.085 0.085 0.131 0.196
63 0.085 0.085 0.085 0.085 0.131 0.196
64 0.085 0.085 0.085 0.085 0.131 0.196
65 1.000 1.000 1.000 1.000 1.000 1.000
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-20
Service Retirement
Public Agency Police 2.5% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.050 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.
Service Retirement
Public Agency Fire 2.5% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.007 0.007 0.007 0.007 0.010 0.015
51 0.008 0.008 0.008 0.008 0.012 0.018
52 0.016 0.016 0.016 0.016 0.025 0.038
53 0.042 0.042 0.042 0.042 0.064 0.096
54 0.057 0.057 0.057 0.057 0.088 0.132
55 0.074 0.074 0.074 0.074 0.114 0.170
56 0.066 0.066 0.066 0.066 0.102 0.153
57 0.090 0.090 0.090 0.090 0.139 0.208
58 0.071 0.071 0.071 0.071 0.110 0.164
59 0.066 0.066 0.066 0.066 0.101 0.151
60 0.102 0.102 0.102 0.102 0.157 0.235
61 0.102 0.102 0.102 0.102 0.157 0.236
62 0.102 0.102 0.102 0.102 0.157 0.236
63 0.102 0.102 0.102 0.102 0.157 0.236
64 0.102 0.102 0.102 0.102 0.157 0.236
65 1.000 1.000 1.000 1.000 1.000 1.000
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-21
Service Retirement
Public Agency Police 2.7% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.0500 0.0500 0.0500 0.0500 0.0500 0.1000
51 0.0400 0.0400 0.0400 0.0400 0.0575 0.0942
52 0.0380 0.0380 0.0380 0.0380 0.0580 0.0825
53 0.0380 0.0380 0.0380 0.0380 0.0774 0.1169
54 0.0380 0.0380 0.0380 0.0437 0.0931 0.1497
55 0.0684 0.0684 0.0684 0.0912 0.1340 0.2423
56 0.0627 0.0627 0.0627 0.0836 0.1228 0.2168
57 0.0600 0.0600 0.0600 0.0800 0.1175 0.2125
58 0.0800 0.0800 0.0800 0.0880 0.1375 0.2275
59 0.0800 0.0800 0.0800 0.0920 0.1400 0.2275
60 0.1500 0.1500 0.1500 0.1500 0.1500 0.2275
61 0.1440 0.1440 0.1440 0.1440 0.1440 0.1700
62 0.1500 0.1500 0.1500 0.1500 0.1500 0.2125
63 0.1500 0.1500 0.1500 0.1500 0.1500 0.2125
64 0.1500 0.1500 0.1500 0.1500 0.1500 0.3188
65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
• These rates also apply to County Peace officers, Local Prosecutors, Local Sheriff, School Police,
and Other Safety.
Service Retirement
Public Agency Fire 2.7% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.0065 0.0065 0.0065 0.0065 0.0101 0.0151
51 0.0081 0.0081 0.0081 0.0081 0.0125 0.0187
52 0.0164 0.0164 0.0164 0.0164 0.0254 0.0380
53 0.0442 0.0442 0.0442 0.0442 0.0680 0.1018
54 0.0606 0.0606 0.0606 0.0606 0.0934 0.1397
55 0.0825 0.0825 0.0825 0.0825 0.1269 0.1900
56 0.0740 0.0740 0.0740 0.0740 0.1140 0.1706
57 0.0901 0.0901 0.0901 0.0901 0.1387 0.2077
58 0.0790 0.0790 0.0790 0.0790 0.1217 0.1821
59 0.0729 0.0729 0.0729 0.0729 0.1123 0.1681
60 0.1135 0.1135 0.1135 0.1135 0.1747 0.2615
61 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618
62 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618
63 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618
64 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618
65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-22
Service Retirement
Schools 2% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.004 0.007 0.011 0.012 0.013 0.015
51 0.004 0.008 0.011 0.014 0.016 0.017
52 0.005 0.010 0.014 0.016 0.018 0.021
53 0.006 0.012 0.016 0.020 0.022 0.025
54 0.008 0.017 0.023 0.027 0.031 0.034
55 0.021 0.042 0.058 0.069 0.077 0.086
56 0.019 0.037 0.053 0.062 0.069 0.078
57 0.019 0.038 0.054 0.064 0.071 0.079
58 0.022 0.045 0.062 0.074 0.082 0.092
59 0.025 0.049 0.069 0.082 0.090 0.101
60 0.033 0.066 0.092 0.109 0.121 0.135
61 0.037 0.072 0.101 0.119 0.133 0.149
62 0.066 0.131 0.184 0.218 0.242 0.271
63 0.064 0.126 0.178 0.209 0.233 0.261
64 0.059 0.117 0.163 0.193 0.215 0.240
65 0.080 0.158 0.221 0.261 0.291 0.326
66 0.081 0.160 0.224 0.265 0.296 0.330
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
Miscellaneous
Internal Revenue Code Section 415
The limitations on benefits imposed by Internal Revenue Code Section 415 are taken into account in this
valuation. Each year the impact of any changes in this limitation since the prior valuation is included and
amortized as part of the actuarial gain or loss base. This results in lower contributions for those employers
contributing to the Replacement Benefit Fund and protects CalPERS from prefunding expected benefits in excess of limits imposed by federal tax law. The Section 415(b) dollar limit for the 2019 calendar year is
$225,000.
Internal Revenue Code Section 401(a)(17)
The limitations on compensation imposed by Internal Revenue Code Section 401(a)(17) are taken into account in this valuation. Each year, the impact of any changes in the compensation limitation since the prior valuation
is included and amortized as part of the actuarial gain or loss base. The compensation limit for classic members
for the 2019 calendar year is $280,000.
Appendix B
Principal Plan Provisions
CalPERS Actuarial Valuation – June 30, 2019 Appendix B Miscellaneous Plan of the City of Palo Alto
Principal Plan Provisions
B-1
The following is a description of the principal plan provisions used in calculating costs and liabilities. We have indicated
whether a plan provision is standard or optional. Standard benefits are applicable to all members while optional benefits
vary among employers. Optional benefits that apply to a single period of time, such as Golden Handshakes, have not
been included. Many of the statements in this summary are general in nature, and are intended to provide an easily
understood summary of the Public Employees’ Retirement Law. The law itself governs in all situations.
Service Retirement
Eligibility
A classic CalPERS member or PEPRA Safety member becomes eligible for Service Retirement upon attainment of age
50 with at least 5 years of credited service (total service across all CalPERS employers, and with certain other retirement
systems with which CalPERS has reciprocity agreements). For employees hired into a plan with the 1.5 percent at 65
formula, eligibility for service retirement is age 55 with at least 5 years of service. PEPRA miscellaneous members
become eligible for service retirement upon attainment of age 52 with at least 5 years of service.
Benefit
The service retirement benefit is a monthly allowance equal to the product of the benefit factor, years of service, and
final compensation.
• The benefit factor depends on the benefit formula specified in your agency’s contract. The table below shows the
factors for each of the available formulas. Factors vary by the member’s age at retirement. Listed are the factors
for retirement at whole year ages:
Miscellaneous Plan Formulas
Retirement
Age
1.5% at
65 2% at 60 2% at 55 2.5% at
55
2.7% at
55 3% at 60
PEPRA
2% at 62
50 0.5000% 1.092% 1.426% 2.000% 2.000% 2.000% N/A
51 0.5667% 1.156% 1.522% 2.100% 2.140% 2.100% N/A
52 0.6334% 1.224% 1.628% 2.200% 2.280% 2.200% 1.000%
53 0.7000% 1.296% 1.742% 2.300% 2.420% 2.300% 1.100%
54 0.7667% 1.376% 1.866% 2.400% 2.560% 2.400% 1.200%
55 0.8334% 1.460% 2.000% 2.500% 2.700% 2.500% 1.300%
56 0.9000% 1.552% 2.052% 2.500% 2.700% 2.600% 1.400%
57 0.9667% 1.650% 2.104% 2.500% 2.700% 2.700% 1.500%
58 1.0334% 1.758% 2.156% 2.500% 2.700% 2.800% 1.600%
59 1.1000% 1.874% 2.210% 2.500% 2.700% 2.900% 1.700%
60 1.1667% 2.000% 2.262% 2.500% 2.700% 3.000% 1.800%
61 1.2334% 2.134% 2.314% 2.500% 2.700% 3.000% 1.900%
62 1.3000% 2.272% 2.366% 2.500% 2.700% 3.000% 2.000%
63 1.3667% 2.418% 2.418% 2.500% 2.700% 3.000% 2.100%
64 1.4334% 2.418% 2.418% 2.500% 2.700% 3.000% 2.200%
65 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.300%
66 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.400%
67 & up 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.500%
CalPERS Actuarial Valuation – June 30, 2019 Appendix B Miscellaneous Plan of the City of Palo Alto
Principal Plan Provisions
B-2
Safety Plan Formulas
Retirement
Age ½ at 55 * 2% at 55 2% at 50 3% at 55 3% at 50
50 1.783% 1.426% 2.000% 2.400% 3.000%
51 1.903% 1.522% 2.140% 2.520% 3.000%
52 2.035% 1.628% 2.280% 2.640% 3.000%
53 2.178% 1.742% 2.420% 2.760% 3.000%
54 2.333% 1.866% 2.560% 2.880% 3.000%
55 & Up 2.500% 2.000% 2.700% 3.000% 3.000%
* For this formula, the benefit factor also varies by entry age. The factors shown are for members with an entry age
of 35 or greater. If entry age is less than 35, then the age 55 benefit factor is 50 percent divided by the difference
between age 55 and entry age. The benefit factor for ages prior to age 55 is the same proportion of the age 55 benefit
factor as in the above table.
PEPRA Safety Plan Formulas
Retirement Age 2% at 57 2.5% at 57 2.7% at 57
50 1.426% 2.000% 2.000%
51 1.508% 2.071% 2.100%
52 1.590% 2.143% 2.200%
53 1.672% 2.214% 2.300%
54 1.754% 2.286% 2.400%
55 1.836% 2.357% 2.500%
56 1.918% 2.429% 2.600%
57 & Up 2.000% 2.500% 2.700%
• The years of service is the amount credited by CalPERS to a member while he or she is employed in this group (or for other periods that are recognized under the employer’s contract with CalPERS). For a member who has earned
service with multiple CalPERS employers, the benefit from each employer is calculated separately according to
each employer’s contract, and then added together for the total allowance. An agency may contract for an optional
benefit where any unused sick leave accumulated at the time of retirement will be converted to credited service
at a rate of 0.004 years of service for each day of sick leave.
• The final compensation is the monthly average of the member’s highest 36 or 12 consecutive months’ full-time
equivalent monthly pay (no matter which CalPERS employer paid this compensation). The standard benefit is 36 months. Employers had the option of providing a final compensation equal to the highest 12 consecutive months
for classic plans only. Final compensation must be defined by the highest 36 consecutive months’ pay under the
1.5% at 65 formula. PEPRA members have a cap on the annual salary that can be used to calculate final
compensation for all new members based on the Social Security contribution and benefit base. For employees that
participate in Social Security this cap is $124,180 for 2019 and for those employees that do not participate in Social
Security the cap for 2019 is $149,016. Adjustments to the caps are permitted annually based on changes to the
CPI for all urban consumers.
• Employees must be covered by Social Security with the 1.5% at 65 formula. Social Security is optional for all other
benefit formulas. For employees covered by Social Security, the modified formula is the standard benefit. Under
this type of formula, the final compensation is offset by $133.33 (or by one third if the final compensation is less
than $400). Employers may contract for the full benefit with Social Security that will eliminate the offset applicable
to the final compensation. For employees not covered by Social Security, the full benefit is paid with no offsets.
CalPERS Actuarial Valuation – June 30, 2019 Appendix B Miscellaneous Plan of the City of Palo Alto
Principal Plan Provisions
B-3
Auxiliary organizations of the CSUC system may elect reduced contribution rates, in which case the offset is $317 if members are not covered by Social Security or $513 if members are covered by Social Security.
• The miscellaneous and PEPRA safety service retirement benefit is not capped. The classic Safety service retirement
benefit is capped at 90 percent of final compensation.
Vested Deferred Retirement
Eligibility for Deferred Status
A CalPERS member becomes eligible for a deferred vested retirement benefit when he or she leaves employment,
keeps his or her contribution account balance on deposit with CalPERS, and has earned at least 5 years of credited
service (total service across all CalPERS employers, and with certain other retirement systems with which CalPERS has
reciprocity agreements).
Eligibility to Start Receiving Benefits
The CalPERS classic members and PEPRA safety members become eligible to receive the deferred retirement benefit
upon satisfying the eligibility requirements for deferred status and upon attainment of age 50 (55 for employees hired
into a 1.5% @ 65 plan). PEPRA miscellaneous members become eligible to receive the deferred retirement benefit
upon satisfying the eligibility requirements for deferred status and upon attainment of age 52.
Benefit
The vested deferred retirement benefit is the same as the service retirement benefit, where the benefit factor is based
on the member’s age at allowance commencement. For members who have earned service with multiple CalPERS
employers, the benefit from each employer is calculated separately according to each employer’s contract, and then
added together for the total allowance.
Non-Industrial (Non-Job Related) Disability Retirement
Eligibility
A CalPERS member is eligible for Non-Industrial Disability Retirement if he or she becomes disabled and has at least 5
years of credited service (total service across all CalPERS employers, and with certain other retirement systems with which CalPERS has reciprocity agreements). There is no special age requirement. Disabled means the member is unable
to perform his or her job because of an illness or injury, which is expected to be permanent or to last indefinitely. The
illness or injury does not have to be job related. A CalPERS member must be actively employed by any CalPERS
employer at the time of disability in order to be eligible for this benefit.
Standard Benefit
The standard Non-Industrial Disability Retirement benefit is a monthly allowance equal to 1.8 percent of final
compensation, multiplied by service, which is determined as follows:
• Service is CalPERS credited service, for members with less than 10 years of service or greater than 18.518 years
of service; or
• Service is CalPERS credited service plus the additional number of years that the member would have worked until
age 60, for members with at least 10 years but not more than 18.518 years of service. The maximum benefit in this case is 33 1/3 percent of final compensation.
CalPERS Actuarial Valuation – June 30, 2019 Appendix B Miscellaneous Plan of the City of Palo Alto
Principal Plan Provisions
B-4
Improved Benefit
Employers have the option of providing the improved Non-Industrial Disability Retirement benefit. This benefit provides
a monthly allowance equal to 30 percent of final compensation for the first 5 years of service, plus 1 percent for each
additional year of service to a maximum of 50 percent of final compensation.
Members who are eligible for a larger service retirement benefit may choose to receive that benefit in lieu of a disability
benefit. Members eligible to retire, and who have attained the normal retirement age determined by their service
retirement benefit formula, will receive the same dollar amount for disability retirement as that payable for service
retirement. For members who have earned service with multiple CalPERS employers, the benefit attributed to each
employer is the total disability allowance multiplied by the ratio of service with a particular employer to the total
CalPERS service.
Industrial (Job Related) Disability Retirement
All safety members have this benefit. For miscellaneous members, employers have the option of providing this benefit.
An employer may choose to provide the increased benefit option or the improved benefit option.
Eligibility
An employee is eligible for Industrial Disability Retirement if he or she becomes disabled while working, where disabled
means the member is unable to perform the duties of the job because of a work-related illness or injury, which is
expected to be permanent or to last indefinitely. A CalPERS member who has left active employment within this group
is not eligible for this benefit, except to the extent described below.
Standard Benefit
The standard Industrial Disability Retirement benefit is a monthly allowance equal to 50 percent of final compensation.
Increased Benefit (75 percent of Final Compensation)
The increased Industrial Disability Retirement benefit is a monthly allowance equal to 75 percent final compensation for total disability.
Improved Benefit (50 percent to 90 percent of Final Compensation)
The improved Industrial Disability Retirement benefit is a monthly allowance equal to the Workman’s Compensation
Appeals Board permanent disability rate percentage (if 50 percent or greater, with a maximum of 90 percent) times the final compensation.
For a CalPERS member not actively employed in this group who became disabled while employed by some other
CalPERS employer, the benefit is a return of accumulated member contributions with respect to employment in this
group. With the standard or increased benefit, a member may also choose to receive the annuitization of the
accumulated member contributions.
If a member is eligible for service retirement and if the service retirement benefit is more than the industrial disability
retirement benefit, the member may choose to receive the larger benefit.
CalPERS Actuarial Valuation – June 30, 2019 Appendix B Miscellaneous Plan of the City of Palo Alto
Principal Plan Provisions
B-5
Post-Retirement Death Benefit
Standard Lump Sum Payment
Upon the death of a retiree, a one-time lump sum payment of $500 will be made to the retiree’s designated survivor(s),
or to the retiree’s estate.
Improved Lump Sum Payment
Employers have the option of providing an improved lump sum death benefit of $600, $2,000, $3,000, $4,000 or $5,000.
Form of Payment for Retirement Allowance
Standard Form of Payment
Generally, the retirement allowance is paid to the retiree in the form of an annuity for as long as he or she is alive. The
retiree may choose to provide for a portion of his or her allowance to be paid to any designated beneficiary after the
retiree’s death. CalPERS provides for a variety of such benefit options, which the retiree pays for by taking a reduction
in his or her retirement allowance. Such reduction takes into account the amount to be provided to the beneficiary and
the probable duration of payments (based on the ages of the member and beneficiary) made subsequent to the
member’s death.
Improved Form of Payment (Post-Retirement Survivor Allowance)
Employers have the option to contract for the post-retirement survivor allowance.
For retirement allowances with respect to service subject to the modified formula, 25 percent of the retirement
allowance will automatically be continued to certain statutory beneficiaries upon the death of the retiree, without a reduction in the retiree’s allowance. For retirement allowances with respect to service subject to the full or supplemental
formula, 50 percent of the retirement allowance will automatically be continued to certain statutory beneficiaries upon
the death of the retiree, without a reduction in the retiree’s allowance. This additional benefit is referred to as post-
retirement survivor allowance (PRSA) or simply as survivor continuance.
In other words, 25 percent or 50 percent of the allowance, the continuance portion, is paid to the retiree for as long
as he or she is alive, and that same amount is continued to the retiree’s spouse (or if no eligible spouse, to unmarried
child(ren) until they attain age 18; or, if no eligible child(ren), to a qualifying dependent parent) for the rest of his or her lifetime. This benefit will not be discontinued in the event the spouse remarries.
The remaining 75 percent or 50 percent of the retirement allowance, which may be referred to as the option portion
of the benefit, is paid to the retiree as an annuity for as long as he or she is alive. Or, the retiree may choose to provide
for some of this option portion to be paid to any designated beneficiary after the retiree’s death. Benefit options
applicable to the option portion are the same as those offered with the standard form. The reduction is calculated in
the same manner but is applied only to the option portion.
CalPERS Actuarial Valuation – June 30, 2019 Appendix B Miscellaneous Plan of the City of Palo Alto
Principal Plan Provisions
B-6
Pre-Retirement Death Benefits
Basic Death Benefit
This is a standard benefit.
Eligibility
An employee’s beneficiary (or estate) may receive the basic death benefit if the member dies while actively employed.
A CalPERS member must be actively employed with the CalPERS employer providing this benefit to be eligible for this
benefit. A member’s survivor who is eligible for any other pre-retirement death benefit may choose to receive that
death benefit instead of this basic death benefit.
Benefit
The basic death benefit is a lump sum in the amount of the member’s accumulated contributions, where interest is
credited annually at the greater of 6 percent 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 safety PEPRA members and age 52 for miscellaneous PEPRA members, and
has at least 5 years of credited service (total service across all CalPERS employers and with certain other retirement
systems with which CalPERS has reciprocity agreements). A CalPERS member must be actively employed with the
CalPERS employer providing this benefit to be eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married at least one year before death or, if there is no eligible spouse, to the member's
unmarried child(ren) under age 18. A member’s survivor who is eligible for any other pre-retirement death benefit may
choose to receive that death benefit instead of this 1957 Survivor benefit.
Benefit
The 1957 Survivor benefit is a monthly allowance equal to one-half of the unmodified service retirement benefit that the member would have been entitled to receive if the member had retired on the date of his or her death. If the
benefit is payable to the spouse, the benefit is discontinued upon the death of the spouse. If the benefit is payable to
dependent child(ren), the benefit will be discontinued upon death or attainment of age 18, unless the child(ren) is
disabled. The total amount paid will be at least equal to the basic death benefit.
CalPERS Actuarial Valuation – June 30, 2019 Appendix B Miscellaneous Plan of the City of Palo Alto
Principal Plan Provisions
B-7
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 safety PEPRA members and age 52 for miscellaneous PEPRA
members, and has at least 5 years of credited service (total service across all CalPERS employers and with certain other
retirement systems with which CalPERS has reciprocity agreements). A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An eligible survivor means the surviving spouse
to whom the member was married at least one year before death. A member’s survivor who is eligible for any other
pre-retirement death benefit may choose to receive that death benefit instead of this Optional Settlement 2 Death
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 his or her death and elected 100 percent to continue to
the eligible survivor after the member’s death. The allowance is payable as long as the surviving spouse lives, at which
time it is continued to any unmarried child(ren) under age 18, if applicable. The total amount paid will be at least equal
to the basic death benefit.
Special Death Benefit
This is a standard benefit for safety members. An employer may elect to provide this benefit for miscellaneous
members.
Eligibility
An employee’s eligible survivor(s) may receive the special death benefit if the member dies while actively employed and the death is job-related. A CalPERS member who is no longer actively employed with any CalPERS employer is
not eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married prior to
the onset of the injury or illness that resulted in death. If there is no eligible spouse, an eligible survivor means the
member's unmarried child(ren) under age 22. An eligible survivor who chooses to receive this benefit will not receive
any other death benefit.
Benefit
The special death benefit is a monthly allowance equal to 50 percent of final compensation, and will be increased
whenever the compensation paid to active employees is increased but ceasing to increase when the member would
have attained age 50. The allowance is payable to the surviving spouse until death at which time the allowance is
continued to any unmarried child(ren) under age 22. There is a guarantee that the total amount paid will at least equal
the basic death benefit.
If the member’s death is the result of an accident or injury caused by external violence or physical force incurred in the performance of the member’s duty, and there are eligible surviving child(ren) (eligible means unmarried child(ren)
under age 22) in addition to an eligible spouse, then an additional monthly allowance is paid equal to the following:
• if 1 eligible child: 12.5 percent of final compensation
• if 2 eligible children: 20.0 percent of final compensation
• if 3 or more eligible children: 25.0 percent of final compensation
CalPERS Actuarial Valuation – June 30, 2019 Appendix B Miscellaneous Plan of the City of Palo Alto
Principal Plan Provisions
B-8
Alternate Death Benefit for Local Fire Members
This is an optional benefit available only to local fire members.
Eligibility
An employee’s eligible survivor(s) may receive the alternate death benefit in lieu of the basic death benefit or the 1957
Survivor benefit if the member dies while actively employed and has at least 20 years of total CalPERS service. A
CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An
eligible survivor means the surviving spouse to whom the member was married prior to the onset of the injury or illness that resulted in death. If there is no eligible spouse, an eligible survivor means the member's unmarried child(ren)
under age 18.
Benefit
The Alternate Death benefit is a monthly allowance equal to the service retirement benefit that the member would
have received had the member retired on the date of his or her death and elected Optional Settlement 2. (A retiree
who elects Optional Settlement 2 receives an allowance that has been reduced so that it will continue to be paid after his or her death to a surviving beneficiary.) If the member has not yet attained age 50, the benefit is equal to that
which would be payable if the member had retired at age 50, based on service credited at the time of death. The
allowance is payable as long as the surviving spouse lives, at which time it is continued to any unmarried child(ren)
under age 18, if applicable. The total amount paid will be at least equal to the basic death benefit.
Cost-of-Living Adjustments (COLA)
Standard Benefit
Retirement and survivor allowances are adjusted each year in May for cost of living, beginning the second calendar year after the year of retirement. The standard cost-of-living adjustment (COLA) is 2 percent. Annual adjustments are
calculated by first determining the lesser of 1) 2 percent compounded from the end of the year of retirement or 2)
actual rate of inflation. The resulting increase is divided by the total increase provided in prior years. For any given
year, the COLA adjustment may be less than 2 percent (when the rate of inflation is low), may be greater than the
rate of inflation (when the rate of inflation is low after several years of high inflation) or may even be greater than 2
percent (when inflation is high after several years of low inflation).
Improved Benefit
Employers have the option of providing a COLA of 3 percent, 4 percent, or 5 percent, determined in the same manner
as described above for the standard 2 percent COLA. An improved COLA is not available with the 1.5% at 65 formula.
Purchasing Power Protection Allowance (PPPA)
Retirement and survivor allowances are protected against inflation by PPPA. PPPA benefits are cost-of-living
adjustments that are intended to maintain an individual’s allowance at 80 percent of the initial allowance at retirement
adjusted for inflation since retirement. The PPPA benefit will be coordinated with other cost-of-living adjustments provided under the plan.
CalPERS Actuarial Valuation – June 30, 2019 Appendix B Miscellaneous Plan of the City of Palo Alto
Principal Plan Provisions
B-9
Employee Contributions
Each employee contributes toward his or her retirement based upon the retirement formula. The standard employee
contribution is as described below.
• The percent contributed below the monthly compensation breakpoint is 0 percent.
• The monthly compensation breakpoint is $0 for full and supplemental formula members and $133.33 for
employees covered by the modified formula.
• The percent contributed above the monthly compensation breakpoint depends upon the benefit formula, as
shown in the table below.
Benefit Formula Percent Contributed above the
Breakpoint
Miscellaneous, 1.5% at 65 2%
Miscellaneous, 2% at 60 7%
Miscellaneous, 2% at 55 7%
Miscellaneous, 2.5% at 55 8%
Miscellaneous, 2.7% at 55 8%
Miscellaneous, 3% at 60 8%
Miscellaneous, 2% at 62 50% of the Total Normal Cost
Miscellaneous, 1.5% at 65 50% of the Total Normal Cost
Safety, 1/2 at 55 Varies by entry age
Safety, 2% at 55 7%
Safety, 2% at 50 9%
Safety, 3% at 55 9%
Safety, 3% at 50 9%
Safety, 2% at 57 50% of the Total Normal Cost
Safety, 2.5% at 57 50% of the Total Normal Cost
Safety, 2.7% at 57 50% of the Total Normal Cost
The employer may choose to “pick-up” these contributions for classic members (Employer Paid Member Contributions
or EPMC). EPMC is prohibited for new PEPRA members.
An employer may also include Employee Cost Sharing in the contract, where employees agree to share the cost of the
employer contribution. These contributions are paid in addition to the member contribution.
Auxiliary organizations of the CSU system may elect reduced contribution rates, in which case the offset is $317 and
the contribution rate is 6 percent if members are not covered by Social Security. If members are covered by Social
Security, the offset is $513 and the contribution rate is 5 percent.
Refund of Employee Contributions
If the member’s service with the employer ends, and if the member does not satisfy the eligibility conditions for any of
the retirement benefits above, the member may elect to receive a refund of his or her employee contributions, which are credited with 6 percent interest compounded annually.
CalPERS Actuarial Valuation – June 30, 2019 Appendix B Miscellaneous Plan of the City of Palo Alto
Principal Plan Provisions
B-10
1959 Survivor Benefit
This is a pre-retirement death benefit available only to members not covered by Social Security. Any agency joining CalPERS subsequent to 1993 is required to provide this benefit if the members are not covered by Social Security. The
benefit is optional for agencies joining CalPERS prior to 1994. Levels 1, 2 and 3 are now closed. Any new agency or
any agency wishing to add this benefit or increase the current level may only choose the 4th or Indexed Level.
This benefit is not included in the results presented in this valuation. More information on this benefit is available on
the CalPERS website at www.calpers.ca.gov.
Appendix C
Participant Data
• Summary of Valuation Data
• Active Members
• Transferred and Terminated Members
• Retired Members and Beneficiaries
CalPERS Actuarial Valuation – June 30, 2019 Appendix C Miscellaneous Plan of the City of Palo Alto
Participant Data
C-1
Summary of Valuation Data
June 30, 2018 June 30, 2019
1. Active Members
a) Counts 808 773
b) Average Attained Age
46.16 45.50
c) Average Entry Age to Rate Plan 35.31 34.82
d) Average Years of Credited Service 11.05 10.81
e) Average Annual Covered Pay $99,460 $102,003
f) Annual Covered Payroll 80,363,405 78,848,216
g) Projected Annual Payroll for Contribution Year 87,177,382 85,533,721
h) Present Value of Future Payroll 647,044,574 655,083,871
2. Transferred Members
a) Counts 382 388
b) Average Attained Age 45.77 45.97
c) Average Years of Credited Service 3.44 3.34
d) Average Annual Covered Pay $121,467 $116,675
3. Terminated Members
a) Counts 414 438
b) Average Attained Age 47.71 47.25
c) Average Years of Credited Service 3.15 3.05
d) Average Annual Covered Pay $70,599 $73,181
4. Retired Members and Beneficiaries
a) Counts 1,129 1,194
b) Average Attained Age 70.15 70.20
c) Average Annual Benefits $34,217 $35,868
5. Active to Retired Ratio [(1a) / (4a)] 0.72 0.65
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, 2019 Appendix C Miscellaneous Plan of the City of Palo Alto
Participant Data
C-2
Active Members
Counts of members included in the valuation are counts of the records processed by the valuation. Multiple records
may exist for those who have service in more than one valuation group. This does not result in double counting of
liabilities.
Distribution of Active Members by Age and Service
Years of Service at Valuation Date
Attained
Age 0-4 5-9 10-14 15-19 20-24 25+ Total
15-24 7 0 0 0 0 0 7
25-29 67 6 0 0 0 0 73
30-34 69 22 1 0 0 0 92
35-39 42 27 19 9 1 0 98
40-44 33 23 17 22 9 2 106
45-49 21 20 15 22 12 7 97
50-54 18 21 14 22 17 19 111
55-59 20 11 24 18 16 29 118
60-64 7 7 19 3 7 8 51
65 and Over 1 2 2 4 1 10 20
All Ages 285 139 111 100 63 75 773
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 20-24 25+
Average
Salary
15-24 $68,029 $0 $0 $0 $0 $0 $68,029
25-29 74,976 99,956 0 0 0 0 77,029
30-34 90,369 96,330 115,348 0 0 0 92,066
35-39 94,443 111,074 105,600 89,556 96,491 0 100,760
40-44 96,417 109,281 98,532 116,644 110,197 96,642 104,920
45-49 120,609 93,970 115,489 115,030 128,532 127,946 114,569
50-54 102,910 119,005 95,595 107,587 106,398 128,243 110,830
55-59 109,158 112,774 112,783 102,768 99,035 109,212 107,898
60-64 84,605 113,122 104,438 90,311 81,525 117,905 101,044
65 and Over 59,314 123,066 132,125 67,756 90,625 105,097 99,116
Average $91,590 $107,111 $106,512 $106,615 $106,115 $115,825 $102,003
CalPERS Actuarial Valuation – June 30, 2019 Appendix C Miscellaneous Plan of the City of Palo Alto
Participant Data
C-3
Transferred and Terminated Members
Distribution of Transfers to Other CalPERS Plans by Age, Service, and average Salary
Years of Service at Valuation Date
Attained Age 0-4 5-9 10-14 15-19 20-24 25+ Total Average Salary
15-24 0 0 0 0 0 0 0 $0
25-29 19 0 0 0 0 0 19 91,264
30-34 31 2 0 0 0 0 33 108,623
35-39 54 7 5 0 0 0 66 116,830
40-44 50 11 4 2 0 0 67 114,462
45-49 45 8 1 4 0 0 58 116,013
50-54 51 12 2 2 1 0 68 124,266
55-59 31 11 4 1 1 0 48 118,509
60-64 15 2 3 0 0 0 20 134,365
65 and Over 7 2 0 0 0 0 9 113,013
All Ages 303 55 19 9 2 0 388 $116,675
Distribution of Terminated Participants with Funds on Deposit by Age, Service, and average Salary
Years of Service at Valuation Date
Attained Age 0-4 5-9 10-14 15-19 20-24 25+ Total Average Salary
15-24 1 0 0 0 0 0 1 $65,791
25-29 22 0 0 0 0 0 22 75,085
30-34 40 6 0 0 0 0 46 80,846
35-39 48 6 2 0 0 0 56 70,444
40-44 64 6 4 0 0 0 74 80,284
45-49 42 16 0 2 1 0 61 84,337
50-54 47 17 2 3 0 0 69 72,408
55-59 41 5 4 1 0 0 51 65,666
60-64 24 7 2 1 0 0 34 65,501
65 and Over 19 4 1 0 0 0 24 42,247
All Ages 348 67 15 7 1 0 438 $73,181
CalPERS Actuarial Valuation – June 30, 2019 Appendix C Miscellaneous Plan of the City of Palo Alto
Participant Data
C-4
Retired Members and Beneficiaries
Distribution of Retirees and Beneficiaries by Age and Retirement Type*
Attained
Age
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Total
Under 30 0 0 0 0 0 1 1
30-34 0 0 0 0 0 2 2
35-39 0 0 2 0 0 1 3
40-44 0 0 1 0 0 1 2
45-49 0 1 2 0 0 0 3
50-54 21 4 0 1 0 0 26
55-59 116 12 4 0 0 5 137
60-64 178 10 1 0 0 6 195
65-69 210 8 0 0 0 20 238
70-74 201 10 2 0 0 17 230
75-79 146 6 2 0 0 22 176
80-84 71 3 0 0 0 13 87
85 and Over 59 4 0 0 0 31 94
All Ages 1,002 58 14 1 0 119 1,194
Distribution of Average Annual Disbursements to Retirees and Beneficiaries by Age and Retirement
Type*
Attained
Age
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Average
Under 30 $0 $0 $0 $0 $0 $13,887 $13,887
30-34 0 0 0 0 0 13,083 13,083
35-39 0 0 288 0 0 12,279 4,285
40-44 0 0 243 0 0 108,000 54,122
45-49 0 9,460 280 0 0 0 3,340
50-54 16,544 14,354 0 17,209 0 0 16,233
55-59 38,291 13,206 840 0 0 22,739 34,433
60-64 44,226 15,470 12,194 0 0 14,690 41,678
65-69 44,611 20,037 0 0 0 27,799 42,372
70-74 39,833 17,818 9,862 0 0 19,021 37,077
75-79 33,387 22,780 1,981 0 0 27,935 31,987
80-84 34,605 16,575 0 0 0 24,537 32,479
85 and Over 27,003 20,040 0 0 0 20,911 24,698
All Ages $38,883 $16,984 $2,901 $17,209 $0 $23,725 $35,868
CalPERS Actuarial Valuation – June 30, 2019 Appendix C Miscellaneous Plan of the City of Palo Alto
Participant Data
C-5
Retired Members and Beneficiaries (continued)
Distribution of Retirees and Beneficiaries by Years Retired and Retirement Type*
Years
Retired
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Total
Under 5 Yrs 261 1 1 1 0 37 301
5-9 245 6 6 0 0 29 286
10-14 230 15 3 0 0 24 272
15-19 135 9 2 0 0 12 158
20-24 66 13 2 0 0 8 89
25-29 48 9 0 0 0 8 65
30 and Over 17 5 0 0 0 1 23
All Years 1,002 58 14 1 0 119 1,194
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 $39,136 $24,435 $312 $17,209 $0 $22,542 $36,846
5-9 44,094 11,049 276 0 0 31,543 41,209
10-14 44,565 16,984 10,634 0 0 20,865 40,578
15-19 34,541 19,664 1,817 0 0 21,395 32,281
20-24 29,504 22,252 1,557 0 0 15,431 26,552
25-29 16,500 12,543 0 0 0 18,434 16,190
30 and Over 17,114 12,092 0 0 0 46,079 17,281
All Years $38,883 $16,984 $2,901 $17,209 $0 $23,725 $35,868
* 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 of Actuarial Terms
CalPERS Actuarial Valuation – June 30, 2019 Appendix D Miscellaneous Plan of the City of Palo Alto
Glossary of Actuarial Terms
D-1
Glossary of Actuarial Terms
Accrued Liability (also called Actuarial Accrued Liability or Entry Age Actuarial Accrued Liability)
The total dollars needed as of the valuation date to fund all benefits earned in the past for current members.
Actuarial Assumptions Assumptions made about certain events that will affect pension costs. Assumptions generally can be broken down
into two categories: demographic and economic. Demographic assumptions include such things as mortality,
disability and retirement rates. Economic assumptions include discount rate, salary growth and inflation.
Actuarial Methods
Procedures employed by actuaries to achieve certain funding goals of a pension plan. Actuarial methods include
funding method, setting the length of time to fund the Accrued Liability and determining the Value of Assets.
Actuarial Valuation
The determination as of a valuation date of the Normal Cost, Accrued Liability, and related actuarial present values
for a pension plan. These valuations are performed annually or when an employer is contemplating a change to
their plan provisions.
Amortization Bases
Separate payment schedules for different portions of the Unfunded Liability. The total Unfunded Liability of a Risk Pool or non-pooled plan can be segregated by cause, creating “bases,” and each such base will be separately
amortized and paid for over a specific period of time. However, all bases are amortized using investment and
payroll assumptions from the current valuation. This can be likened to a home having a first mortgage of 24 years
remaining payments and a second mortgage that has 10 years remaining payments. Each base or each mortgage
note has its own terms (payment period, principal, etc.).
Generally, in an actuarial valuation, the separate bases consist of changes in unfunded liability due to contract amendments, actuarial assumption changes, method changes, and/or gains and losses.
Amortization Period
The number of years required to pay off an Amortization Base.
Classic Member (under PEPRA)
A classic member is a member who joined CalPERS prior to January 1, 2013 and who is not defined as a new member under PEPRA. (See definition of New Member below.)
Discount Rate
The assumed long-term rate of return on plan assets. This is the rate at which projected cash flows are discounted
to the valuation date to determine Accrued Liability. This assumption is called “investment return” in earlier
CalPERS reports and “actuarial interest rate” in Section 20014 of the California Public Employees’ Retirement Law
(PERL).
Entry Age
The earliest age at which a plan member begins to accrue benefits under a defined benefit pension plan. In most
cases, this is the age of the member on their date of hire.
Entry Age Actuarial Cost Method
An actuarial cost method designed to fund a member's total plan benefit over the course of his or her career. This
method is designed to yield a rate expressed as a level percentage of payroll. (The assumed retirement age less the entry age is the amount of time required to fund a member’s total benefit.
Generally, the older a member on the date of hire, the greater the entry age normal cost. This is mainly because
there is less time to earn investment income to fund the future benefits.)
CalPERS Actuarial Valuation – June 30, 2019 Appendix D Miscellaneous Plan of the City of Palo Alto
Glossary of Actuarial Terms
D-2
Fresh Start
A Fresh Start is when multiple amortization bases are collapsed to one base and amortized together over a new
funding period.
Funded Status
A measure of how well funded, or how "on track" a plan or risk pool is with respect to assets versus accrued
liabilities. A ratio greater than 100 percent means the plan or risk pool has more assets than liabilities and a ratio
less than 100 percent means liabilities are greater than assets.
GASB 68
Statement No. 68 of the Governmental Accounting Standards Board. The accounting standard governing a state
or local governmental employer’s accounting and financial reporting for pensions. GASB 68 replaces GASB 27
effective the first fiscal year beginning after June 15, 2014.
New Member (under PEPRA) A new member includes an individual who becomes a member of a public retirement system for the first time on
or after January 1, 2013, and who was not a member of another public retirement system prior to that date, and
who is not subject to reciprocity with another public retirement system.
Normal Cost
The annual cost of service accrual for the upcoming fiscal year for active employees. The normal cost should be
viewed as the long-term contribution rate.
Pension Actuary
A business professional that is authorized by the Society of Actuaries and the American Academy of Actuaries to
perform the calculations necessary to properly fund a pension plan.
PEPRA
The California Public Employees’ Pension Reform Act of 2013
Present Value of Benefits (PVB)
The total dollars needed as of the valuation date to fund all benefits earned in the past or expected to be earned
in the future for current members.
Unfunded Accrued Liability (UAL)
When a plan or pool’s value of assets is less than its Accrued Liability, the difference is the plan or pool’s Unfunded
Accrued Liability (or unfunded liability). If the unfunded liability is positive, the plan or pool will have to pay
contributions exceeding the Normal Cost.
California Public Employees’ Retirement System
Actuarial Office
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 2020
Safety Plan of the City of Palo Alto (CalPERS ID: 6373437857)
Annual Valuation Report as of June 30, 2019
Dear Employer,
Attached to this letter, you will find the June 30, 2019 actuarial valuation report of your CalPERS pension plan. Provided
in this report is the determination of the minimum required employer contributions for fiscal year 2021-
22.In addition, the report also 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.
Actuarial valuations are based on assumptions regarding future plan experience including investment return and payroll growth, eligibility for the types of benefits provided, and longevity among retirees. The CalPERS Board of Administration
adopts these assumptions after considering the advice of CalPERS actuarial and investment teams and other
professionals. Each actuarial valuation reflects all prior differences between actual and assumed experience and adjusts
the contribution rates as needed. This valuation is based on an investment return assumption of 7.0 percent, which was
adopted by the board in December 2016. Other assumptions used in this report are those recommended in the CalPERS
Experience Study and Review of Actuarial Assumptions report from December 2017.
Required Contributions
The table below shows the minimum required employer contributions and the Employee PEPRA Rate for fiscal year 2021-
22 along with an estimate of the required contribution for fiscal year 2022-23. Employee contributions other than cost
sharing (whether paid by the employer or the employee) are in addition to the results shown below. The required
employer contributions in this report do not reflect any cost sharing arrangement you may have with your
employees.
Fiscal Year Employer Normal
Cost Rate
Employer Amortization of
Unfunded Accrued Liability
Employee
PEPRA Rate
2021-22 21.52% $13,282,515 11.75%
Projected Results
2022-23 21.1% $14,545,000 TBD
The actual investment return for fiscal year 2019-20 was not known at the time this report was prepared. The projections
above assume the investment return for that year would be 7.0 percent. To the extent the actual investment return
for fiscal year 2019-20 differs from 7.0 percent, the actual contribution requirements for fiscal year 2022-
23 will differ from those shown above. For additional details regarding the assumptions and methods used for
these projections please refer to the “Projected Employer Contributions” in the “Highlights and Executive Summary”
section. This section also contains projected required contributions through fiscal year 2026-27.
Changes from Previous Year’s Valuations
The CalPERS Board of Administration has adopted a new amortization policy effective with the June 30, 2019 actuarial
valuation. The new policy shortens the period over which actuarial gains and losses are amortized from 30 years to 20
years with the payments computed as a level dollar amount. In addition, the new policy does not utilize a 5-year ramp-
up and ramp-down on UAL bases attributable to assumption and method changes and non-investment gains/losses. The
new policy does not utilize a 5-year ramp-down on investment gains/losses. These changes apply only to new UAL bases established on or after June 30, 2019.
Further descriptions of general changes are included in the “Highlights and Executive Summary” section and in Appendix
A, “Actuarial Methods and Assumptions.” The effects of the changes on the required contributions are included in the
“Reconciliation of Required Employer Contributions” section.
ATTACHMENT C
Safety Plan of the City of Palo Alto (CalPERS ID: 6373437857)
Annual Valuation Report as of June 30, 2019
Page 2
Questions
We understand that you might have some questions about these results. While we are very interested in discussing these results with your agency, in the interest of allowing us to give every public agency their results, we ask that you wait
until after August 1, 2020 to contact us with actuarial questions. If you have other questions, you may call the Customer
Contact Center at (888)-CalPERS or (888-225-7377).
Sincerely,
SCOTT TERANDO
Chief Actuary
Actuarial Valuation
as of June 30, 2019
for the
Safety Plan
of the
City of Palo Alto
(CalPERS ID: 6373437857)
(Valuation Rate Plan ID: 5080)
Required Contributions
for Fiscal Year
July 1, 2021 – June 30, 2022
Table of Contents
Actuarial Certification 1
Highlights and Executive Summary
Introduction 3
Purpose of the Report 3
Required Contributions 4
Additional Discretionary Employer Contributions 5 Plan’s Funded Status 6
Projected Employer Contributions 6
Cost 7
Changes Since the Prior Year’s Valuation 8
Subsequent Events 8
Assets
Reconciliation of the Market Value of Assets 10 Asset Allocation 11
CalPERS History of Investment Returns 12
Liabilities and Contributions
Development of Accrued and Unfunded Liabilities 14
(Gain) / Loss Analysis 06/30/18 - 06/30/19 15 Schedule of Amortization Bases 16
Amortization Schedule and Alternatives 18
Reconciliation of Required Employer Contributions 20
Employer Contribution History 21
Funding History 21
Normal Cost by Benefit Group 22
PEPRA Member Contribution Rates 23
Risk Analysis
Future Investment Return Scenarios 25 Discount Rate Sensitivity 26
Mortality Rate Sensitivity 26
Maturity Measures 27
Maturity Measures History 28
Hypothetical Termination Liability 29
Plan’s Major Benefit Provisions
Plan’s Major Benefit Options 31
Appendix A – Actuarial Methods and Assumptions
Actuarial Data A-1 Actuarial Methods A-1
Actuarial Assumptions A-4
Miscellaneous A-22
Appendix B – Principal Plan Provisions B-1
Appendix C – Participant Data
Summary of Valuation Data C-1
Active Members C-2 Transferred and Terminated Members C-3
Retired Members and Beneficiaries C-4
Appendix D – Glossary of Actuarial Terms D-1
(CY) FIN JOB INSTANCE ID: 350271 (PY) FIN JOB INSTANCE ID: 135204 REPORT ID: 350319
CalPERS Actuarial Valuation - June 30, 2019 Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 1
Actuarial Certification
To the best of our knowledge, this report is complete and accurate and contains sufficient information to
disclose, fully and fairly, the funded condition of the Safety Plan of the City of Palo Alto. This valuation is
based on the member and financial data as of June 30, 2019 provided by the various CalPERS databases and the benefits under this plan with CalPERS as of the date this report was produced. It is our opinion that the
valuation has been performed in accordance with generally accepted actuarial principles, in accordance with
standards of practice prescribed by the Actuarial Standards Board, and that the assumptions and methods are
internally consistent and reasonable for this plan, as prescribed by the CalPERS Board of Administration
according to provisions set forth in the California Public Employees’ Retirement Law.
The undersigned is an actuary for CalPERS, a member of the American Academy of Actuaries and the Society
of Actuaries, and meets the Qualification Standards of the American Academy of Actuaries to render the actuarial opinions contained herein.
DAVID CLEMENT, ASA, MAAA, EA Senior Pension Actuary, CalPERS
Highlights and Executive Summary
• Introduction
• Purpose of the Report
• Required Contributions
• Additional Discretionary Employer Contributions
• Plan’s Funded Status
• Projected Employer Contributions
• Cost
• Changes Since the Prior Year’s Valuation
• Subsequent Events
CalPERS Actuarial Valuation - June 30, 2019 Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 3
Introduction
This report presents the results of the June 30, 2019 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
minimum required employer contributions for fiscal year 2021-22.
Purpose of the Report
The actuarial valuation was prepared by the CalPERS Actuarial Office using data as of June 30, 2019. The purpose of the report is to:
• Set forth the assets and accrued liabilities of this plan as of June 30, 2019;
• Determine the minimum required employer contributions for the fiscal year July 1, 2021 through June
30, 2022;
• Provide actuarial information as of June 30, 2019 to the CalPERS Board of Administration and other
interested parties.
The pension funding information presented in this report should not be used in financial reports subject to Governmental Accounting Standards Board (GASB) Statement No. 68 for an Agent Employer Defined Benefit
Pension Plan. A separate accounting valuation report for such purposes is available from CalPERS and details
for ordering are available on our website.
The measurements shown in this actuarial valuation may not be applicable for other purposes. The employer
should contact their actuary before disseminating any portion of this report for any reason that is not explicitly
described above.
Future actuarial measurements may differ significantly from the current measurements presented in this
report due to such factors as the following: plan experience differing from that anticipated by the economic
or demographic assumptions; changes in economic or demographic assumptions; changes in actuarial policies;
and changes in plan provisions or applicable law.
Assessment and Disclosure of Risk
This report includes the following risk disclosures consistent with the recommendations 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 6.0 percent and 8.0 percent.
• A “Sensitivity Analysis,” showing the impact on current valuation results assuming rates of mortality
are 10 percent lower or 10 percent higher than our current mortality assumptions adopted in 2017.
• Plan maturity measures indicating how sensitive a plan may be to the risks noted above.
CalPERS Actuarial Valuation - June 30, 2019 Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 4
Required Contributions
Fiscal Year
Required Employer Contribution 2021-22
Employer Normal Cost Rate 21.52%
Plus, Either
1) Monthly Employer Dollar UAL Payment $1,106,876
Or
2) Annual UAL Prepayment Option* $12,840,692
Required PEPRA Member Contribution Rate
11.75%
The total minimum required employer contribution is the sum of the Plan’s Employer Normal Cost Rate
(expressed as a percentage of payroll) and the Employer Unfunded Accrued Liability (UAL) Contribution
Amount (billed monthly in dollars).
* Only the UAL portion of the employer contribution can be prepaid (which must be received in full no
later than July 31). Any prepayment totaling over $5 million requires a 72-hour notice email to
FCSD_public_agency_wires@calpers.ca.gov. Plan Normal Cost contributions will be made as part of the
payroll reporting process. If there is contractual cost sharing or other change, this amount will change.
In accordance with Sections 20537 and 20572 of the Public Employees’ Retirement Law, if a contracting
agency fails to remit the required contributions when due, interest and penalties may apply.
For additional detail regarding the determination of the required contribution for PEPRA members, see
”PEPRA Member Contribution Rates” in the “Liabilities and Contributions” section. Required member
contributions for Classic members can be found in Appendix B.
Fiscal Year Fiscal Year
2020-21 2021-22
Normal Cost Contribution as a Percentage of Payroll
Total Normal Cost 30.913% 31.17%
Employee Contribution1 9.347% 9.65%
Employer Normal Cost2 21.566% 21.52%
Projected Annual Payroll for Contribution Year $25,615,376 $27,649,475
Estimated Employer Contributions Based On
Projected Payroll
Total Normal Cost $7,918,482 $8,618,341
Employee Contribution1 2,394,269 2,668,174
Employer Normal Cost2 5,524,213 5,950,167
Unfunded Liability Contribution 11,210,740 13,282,515
% of Projected Payroll (illustrative only) 43.766% 48.04%
Estimated Total Employer Contribution $16,734,953 $19,232,682
% of Projected Payroll (illustrative only) 65.332% 69.56%
1 For classic members, this is the percentage specified in the Public Employees’ Retirement Law, net of any reduction from
the use of a modified formula or other factors. For PEPRA members, the member contribution rate is based on 50 percent
of the normal cost. A development of PEPRA member contribution rates can be found in the “Liabilities and Contributions” section. Employee cost sharing is not shown in this report.
2 The Employer 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” in the “Liabilities and Contributions” section.
CalPERS Actuarial Valuation - June 30, 2019 Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 5
Additional Discretionary Employer Contributions
The minimum required employer contribution towards the Unfunded Accrued Liability (UAL) for this rate
plan for the 2021-22 fiscal year is $13,282,515. CalPERS allows employers 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. Employers can also use 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 fiscal year 2021-22
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 the
“Amortization Schedule and Alternatives” section of the report.
If you are considering making an ADP, please contact your actuary for additional information.
Minimum Required Employer Contribution for Fiscal Year 2021-22
Estimated
Normal Cost
Minimum UAL
Payment
ADP Total UAL
Contribution
Estimated Total
Contribution
$5,950,167 $13,282,515 $0 $13,282,515 $19,232,682
Alternative Fiscal Year 2021-22 Employer Contributions for Greater UAL Reduction
Funding
Target
Estimated
Normal Cost
Minimum UAL
Payment
ADP1 Total UAL
Contribution
Estimated Total
Contribution
20 years $5,950,167 $13,282,515 $3,718,751 $17,001,266 $22,951,433
15 years $5,950,167 $13,282,515 $6,492,777 $19,775,292 $25,725,459
10 years $5,950,167 $13,282,515 $12,361,333 $25,643,848 $31,594,015
5 years $5,950,167 $13,282,515 $30,645,042 $43,927,557 $49,877,724
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 have to be less or more than the amount shown to have the same effect on the UAL amortization.
Note that the calculations above are based on the projected Unfunded Accrued Liability as of June 30, 2021
as determined in the June 30, 2019 actuarial valuation. New unfunded liabilities can emerge 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 years will not result in a plan that is
exactly 100 percent funded in 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.
CalPERS Actuarial Valuation - June 30, 2019 Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 6
Plan’s Funded Status
This measure of funded status is an assessment of the need for future employer contributions based on the
actuarial cost method used to fund the plan. The UAL is the present value of future employer contributions
for service that has already been earned and is in addition to future normal cost contributions for active
members. For a measure of funded status that is appropriate for assessing the sufficiency of plan assets to
cover estimated termination liabilities, please see “Hypothetical Termination Liability” in the “Risk Analysis”
section.
Projected Employer Contributions
The table below shows the required and projected employer contributions (before cost sharing) for the next
six fiscal years. 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. As of the
preparation date of this report, the year to date return for the 2019-20 fiscal year was well below the 7 percent
assumed return. Actual contribution rates during this projection period could be significantly higher than the
projection shown below. The projected normal cost percentages in the projections below reflect that the
normal cost will continue to decline over time as new employees are hired into PEPRA or other lower cost benefit tiers.
Required
Contribution
Projected Future Employer Contributions
(Assumes 7.00% Return for Fiscal Year 2019-20)
Fiscal Year 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27
Normal Cost % 21.52% 21.1% 20.6% 20.2% 19.7% 19.3%
UAL Payment $13,282,515 $14,545,000 $15,449,000 $16,211,000 $16,670,000 $17,083,000
Total as a % of Payroll* 69.56% 72.3% 73.5% 74.2% 73.8% 73.2%
Projected Payroll $27,649,475 $28,409,835 $29,191,106 $29,993,861 $30,818,693 $31,666,207
*Illustrative only and based on the projected payroll shown.
For some sources of UAL, the change in UAL is amortized using a 5-year ramp up. For more information,
please see “Amortization of the Unfunded Actuarial Accrued Liability” under “Actuarial Methods” in Appendix
A. This method phases in the impact of 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 increase in UAL, the relatively small
amortization payments during the ramp up period could result in a funded ratio that is projected to decrease
initially while the contribution impact of the increase in the UAL is phased in.
For projected contributions under alternate investment return scenarios, please see the “Future Investment
Return Scenarios” in the “Risk Analysis” section.
June 30, 2018 June 30, 2019
1. Present Value of Projected Benefits $516,421,166 $540,115,883
2. Entry Age Normal Accrued Liability 451,111,924 471,338,133
3. Market Value of Assets (MVA) 280,399,741 289,117,004
4. Unfunded Accrued Liability (UAL) [(2) – (3)] $170,712,183 $182,221,129
5. Funded Ratio [(3) / (2)] 62.2% 61.3%
CalPERS Actuarial Valuation - June 30, 2019 Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 7
Cost
Actuarial Determination of Pension Plan Cost
Contributions to fund the pension plan are comprised of two components:
• The Normal Cost, expressed as a percentage of total active payroll
• The Amortization of the Unfunded Accrued Liability (UAL), expressed as a dollar amount
For fiscal years prior to FY 2017-18, the Amortization of UAL component was expressed as percentage of total
active payroll. Starting with FY 2017-18, the Amortization of UAL component was expressed as a dollar amount
and invoiced on a monthly basis. There continues to be an option to prepay this amount during July of each fiscal year.
The Normal Cost component will continue to be expressed as a percentage of active payroll with employer
and employee contributions payable as part of the regular payroll reporting process.
The determination of both components requires complex actuarial calculations. The calculations are based on
a set of actuarial assumptions which can be divided into two categories:
• Demographic assumptions (e.g., mortality rates, retirement rates, employment termination rates,
disability rates)
• Economic assumptions (e.g., future investment earnings, inflation, salary growth rates)
These assumptions reflect CalPERS’ best estimate of future experience of the plan and are long term in nature.
We recognize that all assumptions will not be realized in any given year. For example, the investment earnings
at CalPERS have averaged 5.8 percent over the 20 years ending June 30, 2019, yet individual fiscal year returns have ranged from -23.6 percent to +20.7 percent. In addition, CalPERS reviews all actuarial
assumptions by conducting in-depth experience studies every four years, with the most recent experience
study completed in 2017.
CalPERS Actuarial Valuation - June 30, 2019 Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 8
Changes since the Prior Year’s Valuation
Benefits
The standard actuarial practice at CalPERS is to recognize mandated legislative benefit changes in the first annual valuation following the effective date of the legislation. Voluntary benefit changes by plan amendment
are generally included in the first valuation that is prepared after the amendment becomes effective, even if
the valuation date is prior to the effective date of the amendment.
This valuation generally reflects plan changes by amendments effective before the date of the report. Please
refer to the “Plan’s Major Benefit Options” and Appendix B for a summary of the plan provisions used in this
valuation. The effect of any mandated benefit changes or plan amendments on the unfunded liability is shown
in the “(Gain)/Loss Analysis” and the effect on the employer contribution is shown in the “Reconciliation of Required Employer Contributions.” It should be noted that no change in liability or contribution is shown for
any plan changes which were already included in the prior year’s valuation.
Actuarial Methods and Assumptions
The CalPERS Board of Administration adopted a new amortization policy effective with this actuarial valuation.
The new policy shortens the period over which actuarial gains and losses are amortized from 30 years to 20 years with the payments computed as a level dollar amount. In addition, the new policy does not utilize a 5-
year ramp-up and ramp-down on UAL bases attributable to assumption and method changes and non-
investment gains/losses. The new policy also does not utilize a 5-year ramp-down on investment gains/losses.
These changes will apply only to new UAL bases established on or after June 30, 2019.
For inactive employers, the new amortization policy imposes a maximum amortization period of 15 years for
all unfunded accrued liabilities effective June 30, 2017. Furthermore, the plan actuary has the ability to shorten
the amortization period on any valuation date based on the life expectancy of plan members and projected cash flow needs to the plan.
Subsequent Events
The contribution requirements determined in this actuarial valuation report are based on demographic and financial information as of June 30, 2019. Changes in the value of assets subsequent to that date are not
reflected. Investment returns below the assumed rate of return will increase future required contributions while
investment returns above the assumed rate of return will decrease future required contributions.
The projected employer contributions on Page 5 are calculated under the assumption that the discount rate
remains at 7.0 percent going forward and that the realized rate of return on assets for fiscal year 2019-20 is
7.0 percent.
This actuarial valuation report reflects statutory changes, regulatory changes and CalPERS Board actions
through January 2020. Any subsequent changes or actions are not reflected.
Assets
• Reconciliation of the Market Value of Assets
• Asset Allocation
• CalPERS History of Investment Returns
CalPERS Actuarial Valuation - June 30, 2019 Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 10
Reconciliation of the Market Value of Assets
1. Market Value of Assets as of 6/30/18 including Receivables $280,399,741
2. Change in Receivables for Service Buybacks (83,869)
3. Employer Contributions 12,369,833
4. Employee Contributions 3,193,688
5. Benefit Payments to Retirees and Beneficiaries (24,665,415)
6. Refunds (91,807)
7. Transfers 0
8. Service Credit Purchase (SCP) Payments and Interest 115,569
9. Administrative Expenses (315,338)
10. Miscellaneous Adjustments 653
11. Investment Return (Net of Investment Expenses) 18,193,947
12. Market Value of Assets as of 6/30/19 including Receivables $289,117,004
CalPERS Actuarial Valuation - June 30, 2019 Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 11
Asset Allocation
CalPERS adheres to an Asset Allocation Strategy which establishes asset class allocation policy targets and
ranges and manages those asset class allocations within their policy ranges. CalPERS Investment Belief No. 6
recognizes that strategic asset allocation is the dominant determinant of portfolio risk and return. On December 19, 2017, the CalPERS Board of Administration adopted changes to the current asset allocation as
shown in the Policy Target Allocation below expressed as a percentage of total assets.
The asset allocation shown below reflect the allocation of the Public Employees’ Retirement Fund (PERF) in
its entirety as of June 30, 2019. The assets for City of Palo Alto Safety Plan are part of the PERF and are
invested accordingly.
Asset Class
Actual
Allocation
Policy Target
Allocation
Public Equity 50.2% 50.0%
Private Equity 7.1% 8.0%
Global Fixed Income 28.7% 28.0%
Real Assets 11.0% 13.0%
Liquidity 1.0% 1.0%
Inflation Sensitive Assets 0.0% 0.0%
Trust Level1 2.0% 0.0%
Total Fund 100.0% 100.0%
1 Trust Level includes Multi-Asset Class, Completion Overlay, Risk Mitigation, Absolute
Return Strategies, Plan Level Transition and other Total Fund level portfolios.
Strategic Asset Allocation Policy Targets
CalPERS Actuarial Valuation - June 30, 2019 Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 12
CalPERS History of Investment Returns
The following is a chart with the 20-year historical annual returns of the Public Employees’ Retirement Fund
for each fiscal year ending on June 30. Beginning in 2002, the figures are reported as gross of
administrative expenses.
The table below shows historical compound annual returns of the Public Employees Retirement Fund for
various time periods ending on June 30, 2019 (figures are reported as gross of fees). The compound annual
return is the average rate per year compounded over the indicated number of years. It should be recognized
that in any given year the rate of return is volatile. The portfolio has an expected volatility of 11.4 percent per
year based on the most recent Asset Liability Modelling study. The volatility is a measure of the risk of the portfolio expressed in the standard deviation of the fund’s total return distribution, expressed as a percentage.
Consequently, when looking at investment returns, it is more instructive to look at returns over longer time
horizons.
History of CalPERS Compound Annual Rates of Return and Volatilities
1 year 5 year 10 year 20 year 30 year
Compound Annual Return 6.7% 5.8% 9.1% 5.8% 8.1%
Volatility – 4.4% 6.9% 10.7% 9.8%
Liabilities and Contributions
• Development of Accrued and Unfunded Liabilities
• (Gain) / Loss Analysis 06/30/18 - 06/30/19
• Schedule of Amortization Bases
• Amortization Schedule and Alternatives
• Reconciliation of Required Employer Contributions
• Employer Contribution History
• Funding History
• Normal Cost by Benefit Group
• PEPRA Member Contribution Rates
CalPERS Actuarial Valuation - June 30, 2019 Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 14
Development of Accrued and Unfunded Liabilities
June 30, 2018 June 30, 2019
1. Present Value of Projected Benefits
a) Active Members $171,136,068 $190,843,454
b) Transferred Members 9,367,648 10,711,205
c) Terminated Members 3,140,488 3,368,570
d) Members and Beneficiaries Receiving Payments 332,776,962 335,192,654
e) Total $516,421,166 $540,115,883
2. Present Value of Future Employer Normal Costs $44,061,667 $45,282,263
3. Present Value of Future Employee Contributions $21,247,575 $23,495,487
4. Entry Age Normal Accrued Liability
a) Active Members [(1a) - (2) - (3)] $105,826,826 $122,065,704
b) Transferred Members (1b) 9,367,648 10,711,205
c) Terminated Members (1c) 3,140,488 3,368,570
d) Members and Beneficiaries Receiving Payments (1d) 332,776,962 335,192,654
e) Total $451,111,924 $471,338,133
5. Market Value of Assets (MVA) $280,399,741 $289,117,004
6. Unfunded Accrued Liability (UAL) [(4e) - (5)] $170,712,183 $182,221,129
7. Funded Ratio [(5) / (4e)] 62.2% 61.3%
CalPERS Actuarial Valuation - June 30, 2019 Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 15
(Gain)/Loss Analysis 6/30/18 – 6/30/19
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 6/30/18 $170,712,183
b) Expected Payment on the UAL during 2018-19 7,787,624
c) Interest through 6/30/19 [.07 x (1a) - ((1.07)½ - 1) x (1b)] 11,681,898 d) Expected UAL before all other changes [(1a) - (1b) + (1c)] 174,606,457
e) Change due to plan changes 0
f) Change due to assumption change 0
g) Change due to method change 0
h) Expected UAL after all other changes [(1d) + (1e) + (1f) + (1g)] 174,606,457
i) Actual UAL as of 6/30/19 182,221,129
j) Total (Gain)/Loss for 2018-19 [(1i) - (1h)] $7,614,672
2. Contribution (Gain)/Loss for the Year
a) Expected Contribution (Employer and Employee) $15,376,789
b) Interest on Expected Contributions 529,085 c) Actual Contributions 15,563,521
d) Interest on Actual Contributions 535,510
e) Expected Contributions with Interest [(2a) + (2b)] 15,905,874
f) Actual Contributions with Interest [(2c) + (2d)] 16,099,031
g) Contribution (Gain)/Loss [(2e) - (2f)] ($193,157)
3. Investment (Gain)/Loss for the Year
a) Market Value of Assets as of 6/30/18 $280,399,741
b) Prior Fiscal Year Receivables (490,763)
c) Current Fiscal Year Receivables 406,894
d) Contributions Received 15,563,521 e) Benefits and Refunds Paid (24,757,221)
f) Transfers, SCP Payments and Interest, and Miscellaneous Adjustments 116,223
g) Expected Int. [.07 x (3a + 3b) + ((1.07)½ - 1) x ((3d) + (3e) + (3f))] 19,281,290
h) Expected Assets as of 6/30/19 [(3a) + (3b) + (3c) + (3d) + (3e) + (3f) + (3g)] 290,519,685
i) Market Value of Assets as of 6/30/19 289,117,004
j) Investment (Gain)/Loss [(3h) - (3i)] $1,402,680
4. Liability (Gain)/Loss for the Year
a) Total (Gain)/Loss (1j) $7,614,672
b) Contribution (Gain)/Loss (2g) (193,157)
c) Investment (Gain)/Loss (3j) 1,402,680 d) Liability (Gain)/Loss [(4a) - (4b) - (4c)] $6,405,149
5. Non-Investment (Gain)/Loss for the Year
a) Contribution (Gain)/Loss (2g) ($193,157)
b) Liability (Gain)/Loss (4d) 6,405,149
c) Non-Investment (Gain)/Loss [(5a) + (5b)] $6,211,992
CalPERS Actuarial Valuation - June 30, 2019 Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 16
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 fiscal year.
• The assets, liabilities, and funded status of the plan are measured as of the valuation date: June 30, 2019.
• The required employer contributions determined by the valuation are for the fiscal year beginning two years after the valuation date: fiscal year 2021-22.
This two-year lag is necessary due to the amount of time needed to extract and test the membership and financial data, and the need to provide public agencies with
their required employer contribution well in advance of the start of the fiscal year.
The Unfunded Accrued Liability (UAL) is used to determine the employer contribution and therefore must be rolled forward two years from the valuation date to the first
day of the fiscal year for which the contribution is being determined. The UAL is rolled forward each year by subtracting the expected payment on the UAL for the fiscal
year and adjusting for interest. The expected payment on the UAL for a fiscal year is equal to the Expected Employer Contribution for the fiscal year minus the
Expected Normal Cost for the year. The Employer Contribution for the first fiscal year is determined by the actuarial valuation two years ago and the contribution for the
second year is from the actuarial valuation one year ago. Additional discretionary payments are reflected in the Expected Payments column in the fiscal year they were
made by the agency.
Reason for Base Date Est.
Ramp
Level 2021-22 Ramp Shape
Escala-
tion Rate Amort. Period Balance 6/30/19
Expected
Payment 2019-20 Balance 6/30/20
Expected
Payment 2020-21 Balance 6/30/21
Minimum
Required
Payment 2021-22
Fresh Start 6/30/04 No Ramp 2.75% 15 (904,751) (75,515) (889,970) (76,632) (872,999) (78,739)
Benefit Change 6/30/05 No Ramp 2.75% 5 114,143 19,116 102,359 19,482 89,372 20,018
Assumption Change 6/30/09 No Ramp 2.75% 10 6,760,500 727,891 6,480,799 740,246 6,168,739 760,603
Special (Gain)/Loss 6/30/09 No Ramp 2.75% 20 8,962,167 632,560 8,935,194 640,612 8,898,003 658,229
Special (Gain)/Loss 6/30/10 No Ramp 2.75% 21 4,287,015 294,570 4,282,400 298,204 4,273,703 306,405
Assumption Change 6/30/11 No Ramp 2.75% 12 5,836,352 559,422 5,666,226 568,423 5,474,880 584,055
Special (Gain)/Loss 6/30/11 No Ramp 2.75% 22 2,439,506 163,472 2,441,175 165,425 2,440,940 169,974
Payment (Gain)/Loss 6/30/12 No Ramp 2.75% 23 1,580,384 103,444 1,584,008 104,641 1,586,647 107,518
(Gain)/Loss 6/30/12 No Ramp 2.75% 23 45,233,036 2,960,732 45,336,744 2,994,983 45,412,282 3,077,345
(Gain)/Loss 6/30/13 100% Up/Down 2.75% 24 45,392,048 3,044,761 45,419,966 3,081,154 45,412,193 3,165,885
Assumption Change 6/30/14 100% Up/Down 2.75% 15 21,778,351 1,619,749 21,627,354 2,056,528 21,013,980 2,113,082
(Gain)/Loss 6/30/14 100% Up/Down 2.75% 25 (29,943,623) (1,589,471) (30,395,515) (2,009,961) (30,444,081) (2,065,235)
(Gain)/Loss 6/30/15 100% Up/Down 2.75% 26 16,069,319 641,301 16,530,804 864,629 16,793,581 1,110,507
Assumption Change 6/30/16 80% Up/Down 2.75% 17 7,167,703 264,566 7,395,773 402,662 7,496,960 551,647
(Gain)/Loss 6/30/16 80% Up/Down 2.75% 27 18,279,518 493,818 19,048,275 748,572 19,607,325 1,025,543
Assumption Change 6/30/17 60% Up/Down 2.75% 18 9,195,185 173,688 9,659,184 352,226 9,970,981 542,869
(Gain)/Loss 6/30/17 60% Up/Down 2.75% 28 (1,063,234) (14,772) (1,122,380) (29,835) (1,170,085) (45,983)
Method Change 6/30/18 40% Up/Down 2.75% 19 3,087,468 (21,190) 3,325,510 62,003 3,494,159 127,416
Assumption Change 6/30/18 40% Up/Down 2.75% 19 13,174,875 (313,118) 14,421,008 268,874 15,152,353 552,537
(Gain)/Loss 6/30/18 40% Up/Down 2.75% 29 (2,839,505) 0 (3,038,270) (41,496) (3,208,025) (85,275)
CalPERS Actuarial Valuation - June 30, 2019 Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 17
Schedule of Amortization Bases (continued)
Reason for Base
Date
Est.
Ramp Level
2021-22
Ramp
Shape
Escala-tion
Rate
Amort.
Period
Balance
6/30/19
Expected Payment
2019-20
Balance
6/30/20
Expected Payment
2020-21
Balance
6/30/21
Minimum
Required Payment
2021-22
Non-Investment (Gain)/Loss 6/30/19 No Ramp 0.00% 20 6,211,992 0 6,646,831 0 7,112,109 649,002
Investment (Gain)/Loss 6/30/19 20% Up Only 0.00% 20 1,402,680 0 1,500,868 0 1,605,929 35,112
Total 182,221,129 9,685,024 184,958,343 11,210,740 186,308,946 13,282,515
CalPERS Actuarial Valuation - June 30, 2019 Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 20 Page 18
Amortization Schedule and Alternatives
The amortization schedule on the previous page shows the minimum contributions required according to the
CalPERS amortization policy. Many agencies have expressed interest in paying off the unfunded accrued 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 liability
payments.
Shown on the following page are future year amortization payments based on 1) the current amortization
schedule reflecting the individual bases and remaining periods shown on the previous page, and 2) alternative
“fresh start” amortization schedules using two sample periods that would both result in interest savings relative to the current amortization schedule.
The Current Amortization Schedule typically contains both positive and negative bases. Positive bases result
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 combination of positive and negative bases within an amortization schedule
can result in unusual or problematic circumstances in future years, 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
replacing the existing unfunded liability bases with a single “fresh start” base and amortizing it over a
reasonable period.
The Current Amortization Schedule on the following page may appear to show that, based on the current
amortization bases, one of the above scenarios will occur at some point in the future. It is impossible to know
today whether such a scenario will in fact arise since there will be additional bases added to the amortization
schedule in each future year. Should such a scenario arise in any future year, the actuary will take appropriate
action based on guidelines in the CalPERS amortization policy.
CalPERS Actuarial Valuation - June 30, 2019 Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 19
Amortization Schedule and Alternatives
Alternative Schedules
Current Amortization Schedule 20 Year Amortization 15 Year Amortization
Date Balance Payment Balance Payment Balance Payment
6/30/2021 186,308,946 13,282,515 186,308,946 17,001,266 186,308,946 19,775,292
6/30/2022 185,611,031 14,544,923 181,764,326 17,001,266 178,894,851 19,775,292
6/30/2023 183,558,418 15,449,025 176,901,583 17,001,266 170,961,769 19,775,292
6/30/2024 180,426,911 16,210,793 171,698,448 17,001,266 162,473,372 19,775,292
6/30/2025 176,288,219 16,669,988 166,131,093 17,001,266 153,390,787 19,775,291
6/30/2026 171,384,825 17,082,811 160,174,023 17,001,266 143,672,422 19,775,292
6/30/2027 165,711,165 17,529,913 153,799,958 17,001,266 133,273,770 19,775,291
6/30/2028 159,177,862 17,989,311 146,979,709 17,001,267 122,147,214 19,775,292
6/30/2029 151,712,023 18,461,343 139,682,041 17,001,266 110,241,798 19,775,291
6/30/2030 143,235,302 18,946,354 131,873,538 17,001,267 97,503,004 19,775,292
6/30/2031 133,663,512 18,447,059 123,518,438 17,001,266 83,872,493 19,775,291
6/30/2032 123,938,171 18,362,104 114,578,482 17,001,266 69,287,847 19,775,291
6/30/2033 113,619,934 17,450,363 105,012,729 17,001,266 53,682,276 19,775,292
6/30/2034 103,522,531 17,110,018 94,777,374 17,001,267 36,984,314 19,775,291
6/30/2035 93,070,366 16,473,822 83,825,543 17,001,267 19,117,496 19,775,292
6/30/2036 82,544,634 15,397,886 72,107,084 17,001,266
6/30/2037 72,395,062 14,781,725 59,568,334 17,001,267
6/30/2038 62,172,380 14,120,650 46,151,870 17,001,267
6/30/2039 51,917,932 13,637,395 31,796,254 17,001,267
6/30/2040 41,445,558 13,420,498 16,435,744 17,001,266
6/30/2041 30,464,477 10,720,553
6/30/2042 21,507,565 10,084,591
6/30/2043 12,581,511 9,249,934
6/30/2044 3,894,010 2,256,558
6/30/2045 1,832,389 1,008,317
6/30/2046 917,644 949,218
6/30/2047
6/30/2048
6/30/2049
6/30/2050
Total 359,637,667 340,025,327 296,629,374
Interest Paid 173,328,721 153,716,381 110,320,428
Estimated Savings 19,612,340 63,008,293
CalPERS Actuarial Valuation - June 30, 2019 Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 20
Reconciliation of Required Employer
Contributions
Normal Cost (% of Payroll)
1. For Period 7/1/20 – 6/30/21
a) Employer Normal Cost 21.566%
b) Employee Contribution 9.347%
c) Total Normal Cost 30.913%
2. Changes since the prior year annual valuation
a) Effect of demographic experience 0.257%
b) Effect of plan changes 0.000%
c) Effect of assumption changes 0.000%
d) Effect of method changes 0.000%
e) Net effect of the changes above [sum of (a) through (d)] 0.257%
3. For Period 7/1/21 – 6/30/22
a) Employer Normal Cost 21.52%
b) Employee Contribution 9.65%
c) Total Normal Cost 31.17%
Employer Normal Cost Change [(3a) – (1a)] (0.046%)
Employee Contribution Change [(3b) – (1b)] 0.303%
Unfunded Liability Contribution ($)
1. For Period 7/1/20 – 6/30/21 11,210,740
2. Changes since the prior year annual valuation
a) Effect of adjustments to prior year’s amortization schedule 0
b) Effect of investment (gain)/loss during prior year1 35,112
c) Effect of non-investment (gain)/loss during prior year 649,002
d) Effect of plan changes 0
e) Effect of assumption changes 0
f) Changes to prior year amortization payments2
1,387,661
g) Effect of changes due to Fresh Start 0
h) Effect of elimination of amortization base 0
i) Effect of method change 0
j) Net effect of the changes above [sum of (a) through (i)] 2,071,775
3. For Period 7/1/21 – 6/30/22 [(1) + (2j)] 13,282,515
The amounts shown for the period 7/1/20 – 6/30/21 may be different if a prepayment of unfunded actuarial
liability is made or a plan change became effective after the prior year’s actuarial valuation was performed.
1 The unfunded liability contribution for the investment (gain)/loss during the year prior to the valuation date is 20 percent
of the “full” annual requirement due to the 5-year ramp. Increases to this amount that occur during the ramp period will be included in line f) in future years.
2 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.
CalPERS Actuarial Valuation - June 30, 2019 Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 21
Employer Contribution History
The table below provides a recent history of the required employer contributions for the plan for fiscal years
prior to 2019-20. The amounts are based on the actuarial valuation from two years prior and does not account for prepayments or benefit changes made during a fiscal year. Additional discretionary payments before July
1, 2018 or after June 30, 2019 are not included.
Fiscal
Year
Employer
Normal Cost
Unfunded Rate
Unfunded Liability
Payment ($)
Additional Discretionary Payments
2013 - 14 18.658% 14.786% N/A N/A
2014 - 15 18.874% 20.654% N/A N/A
2015 - 16 18.627% 23.305% N/A N/A
2016 - 17 18.977% 26.449% N/A N/A
2017 - 18 18.900% N/A 7,127,885 N/A
2018 - 19 19.397% N/A 8,421,191 0
2019 - 20 20.194% N/A 10,019,332
2020 - 21 21.566% N/A 11,210,740
2021 - 22 21.52% N/A 13,282,515
Funding History
The table below shows the recent history of the actuarial accrued liability, the market value of assets, the
funded ratio and the annual covered payroll.
[]
Valuation
Date
Accrued
Liability
Market Value
of Assets
(MVA)
Unfunded
Liability
Funded
Ratio
Annual
Covered
Payroll
06/30/11 $313,183,690 $225,015,089 $88,168,601 71.8% $22,774,462
06/30/12 327,608,300 215,605,457 112,002,843 65.8% 20,919,846
06/30/13 338,666,499 233,417,363 105,249,136 68.9% 21,258,082
06/30/14 367,478,634 264,145,000 103,333,634 71.9% 21,274,021
06/30/15 377,934,524 259,169,591 118,764,933 68.6% 21,186,275
06/30/16 392,911,774 249,886,581 143,025,193 63.6% 21,268,028
06/30/17 422,062,152 267,871,162 154,190,990 63.5% 23,485,510
06/30/18 451,111,924 280,399,741 170,712,183 62.2% 23,613,222
06/30/19 471,338,133 289,117,004 182,221,129 61.3% 25,488,331
CalPERS Actuarial Valuation - June 30, 2019 Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 22
Normal Cost by Benefit Group
The table below displays the Total Normal Cost broken out by benefit group for Fiscal Year 2021-22. 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 exceed 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.
Rate Plan
Identifier Benefit Group Name
Total Normal
Cost
FY 2021-22
Number of
Actives
Payroll on
6/30/2019
5080 Safety Police First Level 35.35% 47 $8,350,876
25006 Safety Fire PEPRA Level 19.89% 24 $2,766,692
25007 Safety Police PEPRA Level 27.21% 23 $3,009,023
30705 Safety Fire First Level 27.62% 3 $468,590
30706 Safety Fire Second Level 31.73% 59 $8,951,272
30707 Safety Fire Third Level 28.90% 7 $979,600
30708 Safety Police Second Level 40.64% 6 $962,278
Plan Total 31.17% 169 $25,488,331
Note that if a Benefit Group above has multiple bargaining units, each of which has separately contracted for
different benefits such as Employer Paid Member Contributions, then the Normal Cost split 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. If you have questions in these situations, please consult with your plan actuary.
CalPERS Actuarial Valuation - June 30, 2019 Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 23
PEPRA Member Contribution Rates
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 CalPERS-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 percent of the normal cost
rate.” The normal cost for the plan is dependent on the benefit levels, actuarial assumptions and demographics
of the plan, particularly members’ entry age into the plan. Should the total normal cost of the plan change by one percent or more from the base total normal cost established for the plan, the new member rate shall be
50 percent of the new normal cost rounded to the nearest quarter percent.
The table below shows the determination of the PEPRA member contribution rates effective July 1, 2021,
based on 50 percent of the Total Normal Cost for each respective plan as of the June 30, 2019 valuation.
Basis for Current Rate Rates Effective July 1, 2021
Rate 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% 23.14% (0.400%) No 11.75%
25007 Safety Police PEPRA
Level 23.540% 11.75% 23.14% (0.400%) No 11.75%
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 sufficiently large active population for this purpose, the PEPRA active population by itself may not be sufficiently large.
The total PEPRA normal cost will be determined based on the plan’s PEPRA membership only if the number
of members covered under the PEPRA formula meets either:
1. 50 percent of the active population, or
2. 25 percent of the active population and 100 or more PEPRA members
Until one of these conditions is met, the plan’s total PEPRA normal cost will be determined using the entire
active plan population (both PEPRA and Classic) based on the PEPRA benefit provisions. For this reason, the
PEPRA member contribution rate determined in the table above may not equal 50 percent of the total
normal cost of the PEPRA group shown on the “Total Normal Cost by Group” page.
Risk Analysis
• Future Investment Return Scenarios
• Discount Rate Sensitivity
• Mortality Rate Sensitivity
• Maturity Measures
• Maturity Measures History
• Hypothetical Termination Liability
CalPERS Actuarial Valuation - June 30, 2019 Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 25
Future Investment Return Scenarios
Analysis was performed to determine the effects of various future investment returns on required employer
contributions. The projections below provide a range of results based on five investment return scenarios assumed to occur during the next four fiscal years (2019-20, 2020-21, 2021-22 and 2022-23). The projections
also assume that all other actuarial assumptions will be realized and that no further changes to assumptions,
contributions, benefits, or funding will occur.
For fiscal years 2019-20, 2020-21, 2021-22, and 2022-23 each scenario assumes an alternate fixed annual
return. The fixed return assumptions for the five scenarios are 1.0 percent, 4.0 percent, 7.0 percent, 9.0
percent and 12.0 percent.
These alternate investment returns were chosen based on stochastic analysis of possible future investment
returns over the four-year period ending June 30, 2023. Using the expected returns and volatility of the asset
classes in which the funds are invested, we produced five thousand stochastic outcomes for this period based
on the recently completed Asset Liability Management process. We then selected annual returns that
approximate the 5th, 25th, 50th, 75th, and 95th percentiles for these outcomes. For example, of all the four-year
outcomes generated in the stochastic analysis, approximately 25 percent had an average annual return of 4.0
percent or less.
Required contributions outside of this range are also possible. In particular, whereas it is unlikely that
investment returns will average less than 1.0 percent or greater than 12.0 percent over a four-year period,
the likelihood of a single investment return less than 1.0 percent or greater than 12.0 percent in any given
year is much greater.
Assumed Annual Return From 2019-20 through 2022-23
Projected Employer Contributions
2022-23 2023-24 2024-25 2025-26
1.0%
Normal Cost 21.1% 20.6% 20.2% 19.7%
UAL Contribution $14,973,000 $16,727,000 $18,756,000 $20,899,000
4.0%
Normal Cost 21.1% 20.6% 20.2% 19.7%
UAL Contribution $14,759,000 $16,094,000 $17,509,000 $18,850,000
7.0%
Normal Cost 21.1% 20.6% 20.2% 19.7%
UAL Contribution $14,545,000 $15,449,000 $16,211,000 $16,670,000
9.0%
Normal Cost 21.5% 21.5% 21.5% 21.6%
UAL Contribution $14,413,000 $15,109,000 $15,577,000 $15,651,000
12.0%
Normal Cost 21.5% 21.5% 21.5% 21.6%
UAL Contribution $14,200,000 $14,448,000 $14,209,000 $13,286,000
These projections reflect recent changes to the amortization policy effective with the June 30, 2019 valuation
as well as the impact of the CalPERS risk mitigation policy (which reduces the discount rate when investment
returns exceed specified trigger points). The projected normal cost percentages reflect that normal cost will
continue to decline over time as new employees are hired into PEPRA or other lower-cost benefit tiers.
CalPERS Actuarial Valuation - June 30, 2019 Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 26
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 4.50 percent and 2.50 percent, respectively. Changing 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 below are various valuation results as of June 30, 2019 assuming alternate discount rates by changing the
two components independently. Results are shown using the current discount rate of 7.0 percent as well as
alternate discount rates of 6.0 percent and 8.0 percent. The rates of 6.0 percent and 8.0 percent were selected
since they illustrate the impact of a 1.0 percent increase or decrease to the 7.0 percent assumption.
Sensitivity to the Real Rate of Return Assumption
As of June 30, 2019 1% Lower
Real Return Rate
Current
Assumptions
1% Higher
Real Return Rate
Discount Rate 6.0% 7.0% 8.0%
Inflation 2.5% 2.5% 2.5%
Real Rate of Return 3.5% 4.5% 5.5%
a) Total Normal Cost 39.03% 31.17% 25.13%
b) Accrued Liability $532,622,475 $471,338,133 $420,758,231
c) Market Value of Assets $289,117,004 $289,117,004 $289,117,004
d) Unfunded Liability/(Surplus) [(b) - (c)] $243,505,471 $182,221,129 $131,641,227
e) Funded Status 54.3% 61.3% 68.7%
Sensitivity to the Price Inflation Assumption
As of June 30, 2019 1% Lower
Inflation Rate
Current
Assumptions
1% Higher
Inflation Rate
Discount Rate 6.0% 7.0% 8.0%
Inflation 1.5% 2.5% 3.5%
Real Rate of Return 4.5% 4.5% 4.5%
a) Total Normal Cost 33.34% 31.17% 28.69%
b) Accrued Liability $496,836,082 $471,338,133 $439,814,495
c) Market Value of Assets $289,117,004 $289,117,004 $289,117,004
d) Unfunded Liability/(Surplus) [(b) - (c)] $207,719,078 $182,221,129 $150,697,491
e) Funded Status 58.2% 61.3% 65.7%
Mortality Rate Sensitivity
The following table looks at the change in the June 30, 2019 plan costs and funded ratio under two different
longevity scenarios, namely assuming rates of mortality are 10 percent lower or 10 percent higher than our
current mortality assumptions. This type of analysis highlights the impact on the plan of improving or
worsening mortality over the long-term.
As of June 30, 2019 10% Lower
Mortality Rates
Current
Assumptions
10% Higher
Mortality Rates
a) Total Normal Cost 31.63% 31.17% 30.73%
b) Accrued Liability $480,063,834 $471,338,133 $463,284,960
c) Market Value of Assets $289,117,004 $289,117,004 $289,117,004
d) Unfunded Liability/(Surplus) [(b) - (c)] $190,946,830 $182,221,129 $174,167,956
e) Funded Status 60.2% 61.3% 62.4%
CalPERS Actuarial Valuation - June 30, 2019 Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 27
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 to tolerate risk is important in understanding how the 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 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 ratio increases. A mature plan will often have a ratio above 60-65
percent.
Ratio of Retiree Accrued Liability to
Total Accrued Liability June 30, 2018 June 30, 2019
1. Retiree Accrued Liability 332,776,962 335,192,654
2. Total Accrued Liability 451,111,924 471,338,133
3. Ratio of Retiree AL to Total AL [(1) / (2)] 74% 71%
Another measure of the maturity level of CalPERS and its plans is the ratio of actives to retirees, also called
Support 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.
The average support ratio for CalPERS public agency plans is 1.25.
Support Ratio June 30, 2018 June 30, 2019
1. Number of Actives 167 169
2. Number of Retirees 430 430
3. Support Ratio [(1) / (2)] 0.39 0.39
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 growth, investment return) are exactly realized each year, there will be differences on a
year-to-year basis. The year-to-year differences between actual experience and the assumptions are called
actuarial gains and losses and serve to lower or raise required employer contributions from one year to the
next. Therefore, employer contributions will inevitably fluctuate, especially due to the ups and downs of
investment returns.
Asset Volatility Ratio
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 AVR of 8 may experience twice the contribution
volatility due to investment return volatility than a plan with 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 have a higher LVR experience more volatile employer contributions (as a percentage of
payroll) due to changes in liability. For example, a plan with LVR of 8 is expected to have twice the contribution
volatility of a plan with 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 status approaches
100 percent.
CalPERS Actuarial Valuation - June 30, 2019 Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 28
Maturity Measures (continued)
Contribution Volatility June 30, 2018 June 30, 2019
1. Market Value of Assets without Receivables $279,908,979 $288,710,111
2. Payroll 23,613,222 25,488,331
3. Asset Volatility Ratio (AVR) [(1) / (2)] 11.9 11.3
4. Accrued Liability $451,111,924 $471,338,133
5. Liability Volatility Ratio (LVR) [(4) / (2)] 19.1 18.5
Maturity Measures History
Valuation Date
Ratio of Retiree Accrued Liability
to
Total Accrued Liability
Support
Ratio
Asset
Volatility
Ratio
Liability
Volatility
Ratio
06/30/17 72% 0.40 11.4 18.0
06/30/18 74% 0.39 11.9 19.1
06/30/19 71% 0.39 11.3 18.5
CalPERS Actuarial Valuation - June 30, 2019 Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 29
Hypothetical Termination Liability
The hypothetical termination liability is an estimate of the financial position of the plan had the contract with
CalPERS been terminated as of June 30, 2019. The plan liability on a termination basis is calculated differently
from the plan’s ongoing funding liability. For this hypothetical termination liability calculation, both
compensation and service are frozen as of the valuation date and no future pay increases or service accruals
are assumed. This measure of funded status is not appropriate for assessing the need for future employer
contributions in the case of an ongoing plan, that is, for an employer that continues to provide CalPERS retirement benefits to active employees.
A more conservative investment policy and asset allocation strategy was adopted by the CalPERS Board for
the Terminated Agency Pool. The Terminated Agency Pool has limited funding sources since no future
employer contributions will be made. Therefore, expected benefit payments are secured by risk-free assets
and benefit security for members is increased while limiting the funding risk. However, this asset allocation
has a lower expected rate of return than the PERF and consequently, a lower discount rate assumption. The
lower discount rate for the Terminated Agency Pool results in higher liabilities for terminated plans.
The effective termination discount rate will depend on actual market rates of return for risk-free securities on
the date of termination. As market discount rates are variable the table below shows a range for the
hypothetical termination liability based on the lowest and highest interest rates observed during an
approximate 19-month period from 12 months before the valuation date to 7 months after.
[
Market Value of
Assets (MVA)
Hypothetical Termination
Liability1,2
@ 1.75%
Funded
Status
Unfunded Termination
Liability
@ 1.75%
Hypothetical Termination
Liability1,2
@ 3.25%
Funded
Status
Unfunded Termination
Liability
@ 3.25%
$289,117,004 $949,176,678 30.5% $660,059,674 $762,164,356 37.9% $473,047,352
1 The hypothetical liabilities calculated above include a 5 percent contingency load in accordance with Board policy. Other
actuarial assumptions can be found in Appendix A.
2 The current discount rate assumption used for termination valuations is a weighted average of the 10-year and 30-year U.S. Treasury yields where the weights are based on matching asset and liability durations as of the termination date.
The discount rates used in the table are based on 20-year Treasury bonds, rounded to the nearest quarter percentage
point, which is a good proxy for most plans. The 20-year Treasury yield was 2.31 percent on June 30, 2019, and was 1.83 percent on January 31, 2020.
In order to terminate the plan, you must first contact our Retirement Services Contract Unit to initiate a
Resolution of Intent to Terminate. The completed Resolution will allow the plan actuary to give you a
preliminary termination valuation with a more up-to-date estimate of the plan liabilities. CalPERS advises you
to consult with the plan actuary before beginning this process.
Plan’s Major Benefit Provisions
CalPERS Actuarial Valuation - June 30, 2019
Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 31
Plan’s Major Benefit Options
Shown below is a summary of the major optional benefits for which your agency has contracted. A description of principal standard and optional plan provisions
is in Appendix B.
Benefit Group
Member Category Police Fire Fire Police Fire Fire Police
Demographics Actives Yes Yes Yes Yes No Yes Yes
Transfers/Separated Yes Yes Yes Yes No Yes Yes
Receiving Yes Yes Yes No Yes No No
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% 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 $500 $500 $500 $500 $500 $500 $500
Survivor Allowance (PRSA) No No No No No No No
COLA 2% 2% 2% 2% 2% 2% 2%
CalPERS Actuarial Valuation - June 30, 2019
Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 32
Plan’s Major Benefit Options
Shown below is a summary of the major optional benefits for which your agency has contracted. A description of principal standard and optional plan provisions
is in Appendix B.
Benefit Group
Member Category Police Fire Fire Fire Fire Fire Police
Demographics Actives No Yes No No No No No
Transfers/Separated No Yes No No No No No
Receiving Yes No Yes Yes Yes Yes Yes
Benefit Group Key 112652 112653 217221 217224 217225 217226 217231
Benefit Provision
Benefit Formula 2.7% @ 57 Social Security Coverage No
Full/Modified Full
Employee Contribution Rate 11.75%
Final Average Compensation Period Three Year
Sick Leave Credit No
Non-Industrial Disability Standard
Industrial Disability Standard
Pre-Retirement Death Benefits
Optional Settlement 2 Yes
1959 Survivor Benefit Level Level 1
Special Yes
Alternate (firefighters) No
Post-Retirement Death Benefits
Lump Sum $500 $500 $500 $500 $500 $500 $500
Survivor Allowance (PRSA) No No No No No No No
COLA 2% 2% 2% 2% 2% 2% 2%
CalPERS Actuarial Valuation - June 30, 2019
Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 33
Plan’s Major Benefit Options
Shown below is a summary of the major optional benefits for which your agency has contracted. A description of principal standard and optional plan provisions
is in Appendix B.
Benefit Group
Member Category Police Police Police
Demographics Actives No No No
Transfers/Separated No No No
Receiving Yes Yes Yes
Benefit Group Key 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 $500 $500 $500
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 of Actuarial Terms
Appendix A
Actuarial Methods and Assumptions
• Actuarial Data
• Actuarial Methods
• Actuarial Assumptions
• Miscellaneous
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-1
Actuarial Data
As stated in the Actuarial Certification, the data which serves as the basis of this valuation has been obtained
from the various CalPERS databases. We have reviewed the valuation data and believe that it is reasonable
and appropriate in aggregate. We are unaware of any potential data issues that would have a material effect
on the results of this valuation, except that data does not always contain the latest salary information for
former members now in reciprocal systems and does not recognize the potential for unusually large salary
deviation in certain cases such as elected officials. Therefore, salary information in these cases may not be accurate. These situations are relatively infrequent, however, and generally do not have a material impact on
the required employer contributions.
Actuarial Methods
Actuarial Cost Method
The actuarial cost method used is the Entry Age Actuarial Cost Method. Under this method, projected benefits
are determined for all members and the associated liabilities are spread in a manner that produces level
annual cost as a percentage of pay in each year from the member’s entry age to their assumed retirement
age on the valuation date. The cost allocated to the current fiscal year is called the normal cost.
The actuarial accrued liability for active members is then calculated as the portion of the total cost of the plan
allocated to prior years. The actuarial accrued liability for members currently receiving benefits and for
members entitled to deferred benefits is equal to the present value of the benefits expected to be paid. No
normal costs are applicable for these participants.
Amortization of Unfunded Actuarial Accrued Liability
The excess of the total actuarial accrued liability over the market value of plan assets is called the unfunded
actuarial accrued liability (UAL). Funding requirements are determined by adding the normal cost and 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 amortization policy. The CalPERS 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.
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:
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-2
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
2.75%
0%
2.75%
0%
2.75%
0%
2.75%
0%
2.75%
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 percent,
40 percent, 60 percent and 80 percent of the “full” payment which begins in year five. The 5-year ramp down means that the reverse is true in the final four years of the amortization period.
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:
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
• 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.
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-3
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 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 less.
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 classified as Inactive. These plans have no active members and no
expectation to have active members in the future.
• Amortization of the unfunded liability is on a “level dollar” basis rather than a “level percent of pay”
basis. For amortization layers, which utilize a ramp up and ramp down, the “ultimate” payment is
constant. • Actuarial judgment will be used to shorten amortization periods for Inactive plans with existing periods that are deemed too long given the duration of the liability. The specific demographics of the
plan will be used to determine if shorter periods may be more appropriate.
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 Market value of assets. Asset values include accounts
receivable.
PEPRA Normal Cost Rate Methodology
Per Government Code Section 7522.30(b), the “normal cost rate” shall mean the annual actuarially determined
normal cost for the plan of retirement benefits provided to the new member and shall be established based on actuarial assumptions used to determine the liabilities and costs as part of the annual actuarial valuation.
The plan of retirement benefits shall include any elements that would impact the actuarial determination of
the normal cost, including, but not limited to, the retirement formula, eligibility and vesting criteria, ancillary
benefit provisions, and any automatic cost-of-living adjustments as determined by the public retirement
system.
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 sufficiently large active population for this purpose, the PEPRA active population by itself may not be sufficiently large.
The total PEPRA normal cost will be determined based on the plan’s PEPRA membership only if the number
of members covered under the PEPRA formula meets either:
1. 50 percent of the active population, or 2. 25 percent of the active population and 100 or more PEPRA members
Until one of these conditions is met, the plan’s total PEPRA normal cost will be determined using the entire
active plan population (both PEPRA and Classic) based on the PEPRA benefit provisions.
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
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Actuarial Assumptions
In 2017, CalPERS completed its most recent asset liability management study incorporating actuarial
assumptions and strategic asset allocation. In December 2017, the CalPERS Board of Administration adopted
relatively modest changes to the asset allocation that reduced the expected volatility of returns. The adopted
asset allocation was expected to have a long-term blended return that continued to support a discount rate
assumption of 7.00 percent. The Board also approved several changes to the demographic assumptions that
more closely aligned with actual experience.
On December 21, 2016, the CalPERS Board of Administration lowered the discount rate from 7.50 percent to
7.00 percent using a three-year phase-in beginning with the June 30, 2016 actuarial valuations. The minimum
employer contributions for fiscal year 2021-22 determined in this valuation were calculated using a discount
rate of 7.00 percent. The decision to reduce the discount rate was primarily based on reduced capital market
assumptions provided by external investment consultants and CalPERS investment staff. The specific decision
adopted by the Board reflected recommendations from CalPERS staff and additional input from employer and
employee stakeholder groups. Based on the investment allocation adopted by the Board and capital market assumptions, the reduced discount rate schedule provides a more realistic assumption for the long-term
investment return of the fund.
Notwithstanding the Board’s decision to phase into a 7.0 percent discount rate, subsequent analysis of the
expected investment return of CalPERS assets or changes to the investment allocation may result in a change
to this discount rate schedule.
For more details and additional rationale for the selection of the actuarial assumptions, please refer to the
CalPERS Experience Study and Review of Actuarial Assumptions report from December 2017 that can be found
on the CalPERS website under: “Forms and Publications”. Click on “View All” and search for Experience Study.
All actuarial assumptions (except the discount rates used for the hypothetical termination liability) represent
an estimate of future experience rather than observations of the estimates inherent in market data.
Economic Assumptions
Discount Rate
The prescribed discount rate assumption, adopted by the Board on December 21, 2016, is 7.00
percent compounded annually (net of investment and administrative expenses) as of June 30, 2019.
Termination Liability Discount Rate
The current discount rate assumption used for termination valuations is a weighted average of the 10-year and 30-year U.S. Treasury yields where the weights are based on matching asset and liability
durations as of the termination date.
The hypothetical termination liabilities in this report are calculated using an observed range of market
interest rates. This range is based on the lowest and highest 20-year Treasury bond observed during
an approximate 19-month period from 12 months before the valuation date to 7 months after. The
20-year Treasury bond has a similar duration to most plan liabilities and serves as a good proxy for the termination discount rate. The 20-year Treasury yield was 2.31 percent on June 30, 2019.
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-5
Salary Growth
Annual increases vary by category, entry age, and duration of service. A sample of assumed increases
are shown below. Wage inflation assumption in the valuation year (2.75% for 2019) is added to
these factors for total salary growth.
Public Agency Miscellaneous
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.0850 0.0775 0.0650
1 0.0690 0.0635 0.0525
2 0.0560 0.0510 0.0410
3 0.0470 0.0425 0.0335
4 0.0400 0.0355 0.0270
5 0.0340 0.0295 0.0215
10 0.0160 0.0135 0.0090
15 0.0120 0.0100 0.0060
20 0.0090 0.0075 0.0045
25 0.0080 0.0065 0.0040
30 0.0080 0.0065 0.0040
Public Agency Fire
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1700 0.1700 0.1700
1 0.1100 0.1100 0.1100
2 0.0700 0.0700 0.0700
3 0.0580 0.0580 0.0580
4 0.0473 0.0473 0.0473
5 0.0372 0.0372 0.0372
10 0.0165 0.0165 0.0165
15 0.0144 0.0144 0.0144
20 0.0126 0.0126 0.0126
25 0.0111 0.0111 0.0111
30 0.0097 0.0097 0.0097
Public Agency Police
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1027 0.1027 0.1027
1 0.0803 0.0803 0.0803
2 0.0628 0.0628 0.0628
3 0.0491 0.0491 0.0491
4 0.0384 0.0384 0.0384
5 0.0300 0.0300 0.0300
10 0.0145 0.0145 0.0145
15 0.0150 0.0150 0.0150
20 0.0155 0.0155 0.0155
25 0.0160 0.0160 0.0160
30 0.0165 0.0165 0.0165
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-6
Salary Growth (continued)
Public Agency County Peace Officers
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1320 0.1320 0.1320
1 0.0960 0.0960 0.0960
2 0.0657 0.0657 0.0657
3 0.0525 0.0525 0.0525
4 0.0419 0.0419 0.0419
5 0.0335 0.0335 0.0335
10 0.0170 0.0170 0.0170
15 0.0150 0.0150 0.0150
20 0.0150 0.0150 0.0150
25 0.0175 0.0175 0.0175
30 0.0200 0.0200 0.0200
Schools
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.0428 0.0419 0.0380
1 0.0428 0.0419 0.0380
2 0.0428 0.0419 0.0380
3 0.0354 0.0332 0.0280
4 0.0305 0.0279 0.0224
5 0.0262 0.0234 0.0180
10 0.0171 0.0154 0.0112
15 0.0152 0.0134 0.0098
20 0.0135 0.0117 0.0086
25 0.0120 0.0103 0.0076
30 0.0087 0.0071 0.0048
• The Miscellaneous salary scale is used for Local Prosecutors. • The Police salary scale is used for Other Safety, Local Sheriff, and School Police.
Overall Payroll Growth
2.75 percent compounded annually (used in projecting the payroll over which the unfunded liability
is amortized). This assumption is used for all plans with active members.
Inflation
2.50 percent compounded annually.
Non-valued Potential Additional Liabilities
The potential liability loss for a cost-of-living increase exceeding the 2.50 percent inflation assumption
and any potential liability loss from future member service purchases are not reflected in the
valuation.
Miscellaneous Loading Factors
Credit for Unused Sick Leave
Total years of service is increased by 1 percent for those plans that have adopted the provision of
providing Credit for Unused Sick Leave.
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-7
Conversion of Employer Paid Member Contributions (EPMC)
Total years of service is increased by the Employee Contribution Rate for those plans with the
provision providing for the Conversion of Employer Paid Member Contributions (EPMC) during the
final compensation period.
Norris Decision (Best Factors) Employees hired prior to July 1, 1982 have projected benefit amounts increased in order to reflect
the use of “Best Factors” in the calculation of optional benefit forms. This is due to a 1983 Supreme
Court decision, known as the Norris decision, which required males and females to be treated equally
in the determination of benefit amounts. Consequently, anyone already employed at that time is
given the best possible conversion factor when optional benefits are determined. No loading is
necessary for employees hired after July 1, 1982.
Termination Liability
The termination liabilities include a 5 percent contingency load. This load is for unforeseen negative
experience.
Demographic Assumptions
Pre-Retirement Mortality
Non-industrial death rates vary by age and gender. Industrial death rates vary by age. See sample rates in table below. The non-industrial death rates are used for all plans. The industrial death rates
are used for safety plans (except for Local Prosecutor safety members where the corresponding
miscellaneous plan does not have the Industrial Death Benefit).
Non-Industrial Death Industrial Death
(Not Job-Related) (Job-Related)
Age Male Female Male and Female
20 0.00022 0.00007 0.00004
25 0.00029 0.00011 0.00006
30 0.00038 0.00015 0.00007
35 0.00049 0.00027 0.00009
40 0.00064 0.00037 0.00010
45 0.00080 0.00054 0.00012
50 0.00116 0.00079 0.00013 55 0.00172 0.00120 0.00015
60 0.00255 0.00166 0.00016
65 0.00363 0.00233 0.00018
70 0.00623 0.00388 0.00019
75 0.01057 0.00623 0.00021
80 0.01659 0.00939 0.00022
Miscellaneous plans usually have industrial death rates set to zero unless the agency has specifically contracted for industrial death benefits. If so, each non-industrial death rate shown above will be split
into two components; 99 percent will become the non-industrial death rate and 1 percent will become
the industrial death rate.
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-8
Post-Retirement Mortality
Rates vary by age, type of retirement, and gender. See sample rates in table below. These rates are
used for all plans.
Healthy Recipients Non-Industrially Disabled Industrially Disabled
(Not Job-Related) (Job-Related)
Age Male Female Male Female Male Female
50 0.00372 0.00346 0.01183 0.01083 0.00372 0.00346
55 0.00437 0.00410 0.01613 0.01178 0.00437 0.00410
60 0.00671 0.00476 0.02166 0.01404 0.00671 0.00476
65 0.00928 0.00637 0.02733 0.01757 0.01113 0.00765
70 0.01339 0.00926 0.03358 0.02183 0.01607 0.01111
75 0.02316 0.01635 0.04277 0.02969 0.02779 0.01962 80 0.03977 0.03007 0.06272 0.04641 0.04773 0.03609
85 0.07122 0.05418 0.09793 0.07847 0.08547 0.06501
90 0.13044 0.10089 0.14616 0.13220 0.14348 0.11098
95 0.21658 0.17698 0.21658 0.21015 0.21658 0.17698
100 0.32222 0.28151 0.32222 0.32226 0.32222 0.28151
105 0.46691 0.43491 0.46691 0.43491 0.46691 0.43491
110 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000
The post-retirement mortality rates above include 15 years of projected on-going mortality
improvement using 90 percent of Scale MP 2016 published by the Society of Actuaries.
Marital Status
For active members, a percentage who are married upon retirement is assumed according to member
category as shown in the following table.
Member Category Percent Married
Miscellaneous Member 70%
Local Police 85% Local Fire 90%
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.
Terminated Members
It is assumed that terminated members refund immediately if non-vested. Terminated 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, 2019 Appendix A Actuarial Methods and Assumptions
A-9
Termination with Refund
Rates vary by entry age and service for miscellaneous plans. Rates vary by service for safety plans.
See sample rates in tables below.
Public Agency Miscellaneous
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45
0 0.1742 0.1674 0.1606 0.1537 0.1468 0.1400
1 0.1545 0.1477 0.1409 0.1339 0.1271 0.1203
2 0.1348 0.1280 0.1212 0.1142 0.1074 0.1006
3 0.1151 0.1083 0.1015 0.0945 0.0877 0.0809
4 0.0954 0.0886 0.0818 0.0748 0.0680 0.0612
5 0.0212 0.0193 0.0174 0.0155 0.0136 0.0116
10 0.0138 0.0121 0.0104 0.0088 0.0071 0.0055
15 0.0060 0.0051 0.0042 0.0032 0.0023 0.0014
20 0.0037 0.0029 0.0021 0.0013 0.0005 0.0001
25 0.0017 0.0011 0.0005 0.0001 0.0001 0.0001
30 0.0005 0.0001 0.0001 0.0001 0.0001 0.0001
35 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001
Public Agency Safety
Duration of Service Fire Police County Peace Officer
0 0.1298 0.1013 0.1188
1 0.0674 0.0636 0.0856
2 0.0320 0.0271 0.0617
3 0.0237 0.0258 0.0445
4 0.0087 0.0245 0.0321
5 0.0052 0.0086 0.0121
10 0.0005 0.0053 0.0053
15 0.0004 0.0027 0.0025
20 0.0003 0.0017 0.0012
25 0.0002 0.0012 0.0005
30 0.0002 0.0009 0.0003
35 0.0001 0.0009 0.0002
The police termination and refund rates are also used for Public Agency Local Prosecutors, Other
Safety, Local Sheriff, and School Police.
Schools
Duration of Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45
0 0.2107 0.2107 0.1827 0.1546 0.1375 0.1203
1 0.1807 0.1807 0.1526 0.1246 0.1105 0.0963
2 0.1526 0.1526 0.1259 0.0992 0.0878 0.0765
3 0.1266 0.1266 0.1023 0.0780 0.0691 0.0603
4 0.1026 0.1026 0.0815 0.0605 0.0537 0.0469
5 0.0808 0.0808 0.0634 0.0461 0.0409 0.0358
10 0.0202 0.0202 0.0157 0.0112 0.0087 0.0063
15 0.0107 0.0107 0.0077 0.0048 0.0034 0.0021
20 0.0056 0.0056 0.0037 0.0017 0.0016 0.0016
25 0.0026 0.0026 0.0018 0.0009 0.0012 0.0015
30 0.0013 0.0013 0.0011 0.0009 0.0012 0.0015
35 0.0008 0.0008 0.0009 0.0009 0.0012 0.0015
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-10
Termination with Vested Benefits
Rates vary by entry age and service for miscellaneous plans. Rates vary by service for safety plans.
See sample rates in tables below.
Public Agency Miscellaneous
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40
5 0.0422 0.0422 0.0393 0.0364 0.0344
10 0.0278 0.0278 0.0271 0.0263 0.0215
15 0.0192 0.0192 0.0174 0.0156 0.0120
20 0.0139 0.0139 0.0109 0.0079 0.0047
25 0.0083 0.0083 0.0048 0.0014 0.0007
30 0.0015 0.0015 0.0007 0.0000 0.0000
35 0.0000 0.0000 0.0000 0.0000 0.0000
Public Agency Safety
Duration of
Service Fire Police
County Peace
Officer
5 0.0094 0.0163 0.0187
10 0.0064 0.0126 0.0134
15 0.0048 0.0082 0.0092
20 0.0038 0.0065 0.0064
25 0.0026 0.0058 0.0042
30 0.0014 0.0056 0.0022
35 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
5 0.0405 0.0405 0.0346 0.0288 0.0264
10 0.0324 0.0324 0.0280 0.0235 0.0211
15 0.0202 0.0202 0.0179 0.0155 0.0126
20 0.0144 0.0144 0.0114 0.0083 0.0042
25 0.0091 0.0091 0.0046 0.0000 0.0000
30 0.0015 0.0015 0.0007 0.0000 0.0000
35 0.0000 0.0000 0.0000 0.0000 0.0000
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-11
Non-Industrial (Not Job-Related) Disability
Rates vary by age and gender for miscellaneous plans. Rates vary by age and category for safety
plans.
Miscellaneous Fire Police County Peace Officer Schools
Age Male Female Male and Female Male and Female Male and Female Male Female
20 0.0002 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001
25 0.0002 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001
30 0.0002 0.0002 0.0001 0.0002 0.0001 0.0001 0.0002
35 0.0004 0.0007 0.0001 0.0003 0.0004 0.0005 0.0004
40 0.0010 0.0014 0.0001 0.0004 0.0007 0.0012 0.0008
45 0.0015 0.0019 0.0002 0.0005 0.0013 0.0020 0.0017
50 0.0016 0.0020 0.0005 0.0008 0.0018 0.0026 0.0022
55 0.0016 0.0015 0.0007 0.0013 0.0010 0.0025 0.0018
60 0.0015 0.0011 0.0007 0.0020 0.0006 0.0022 0.0011
• 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.
• Fifty percent of the police industrial disability rates are used for School Police.
• One percent of the police industrial disability rates are used for Local Prosecutors.
• Normally, rates are zero for miscellaneous plans unless the agency has specifically contracted
for industrial disability benefits. If so, each miscellaneous non-industrial disability rate will be
split into two components: 50 percent will become the non-industrial disability rate and 50 percent will become the industrial disability rate.
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-12
Service Retirement
Retirement rates vary by age, service, and formula, except for the safety ½ @ 55 and 2% @ 55
formulas, where retirement rates vary by age only.
Public Agency Miscellaneous 1.5% @ 65
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.008 0.011 0.013 0.015 0.017 0.019
51 0.007 0.010 0.012 0.013 0.015 0.017
52 0.010 0.014 0.017 0.019 0.021 0.024
53 0.008 0.012 0.015 0.017 0.019 0.022
54 0.012 0.016 0.019 0.022 0.025 0.028
55 0.018 0.025 0.031 0.035 0.038 0.043
56 0.015 0.021 0.025 0.029 0.032 0.036
57 0.020 0.028 0.033 0.038 0.043 0.048
58 0.024 0.033 0.040 0.046 0.052 0.058
59 0.028 0.039 0.048 0.054 0.060 0.067
60 0.049 0.069 0.083 0.094 0.105 0.118
61 0.062 0.087 0.106 0.120 0.133 0.150
62 0.104 0.146 0.177 0.200 0.223 0.251
63 0.099 0.139 0.169 0.191 0.213 0.239
64 0.097 0.136 0.165 0.186 0.209 0.233
65 0.140 0.197 0.240 0.271 0.302 0.339
66 0.092 0.130 0.157 0.177 0.198 0.222
67 0.129 0.181 0.220 0.249 0.277 0.311
68 0.092 0.129 0.156 0.177 0.197 0.221
69 0.092 0.130 0.158 0.178 0.199 0.224
70 0.103 0.144 0.175 0.198 0.221 0.248
Public Agency Miscellaneous 2% @ 60
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.020 0.020 0.020 0.020 0.020 0.150
51 0.006 0.019 0.027 0.031 0.035 0.038
52 0.011 0.024 0.031 0.034 0.037 0.040
53 0.010 0.015 0.021 0.027 0.033 0.040
54 0.025 0.025 0.029 0.035 0.041 0.048
55 0.019 0.026 0.033 0.092 0.136 0.146
56 0.030 0.034 0.038 0.060 0.093 0.127
57 0.030 0.046 0.061 0.076 0.090 0.104
58 0.040 0.044 0.059 0.080 0.101 0.122
59 0.024 0.044 0.063 0.083 0.103 0.122
60 0.070 0.074 0.089 0.113 0.137 0.161
61 0.080 0.086 0.093 0.118 0.156 0.195
62 0.100 0.117 0.133 0.190 0.273 0.357
63 0.140 0.157 0.173 0.208 0.255 0.301
64 0.140 0.153 0.165 0.196 0.239 0.283
65 0.140 0.178 0.215 0.264 0.321 0.377
66 0.140 0.178 0.215 0.264 0.321 0.377
67 0.140 0.178 0.215 0.264 0.321 0.377
68 0.112 0.142 0.172 0.211 0.257 0.302
69 0.112 0.142 0.172 0.211 0.257 0.302
70 0.140 0.178 0.215 0.264 0.321 0.377
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-13
Service Retirement
Public Agency Miscellaneous 2% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.008 0.013 0.018 0.021 0.022 0.033
51 0.009 0.016 0.020 0.023 0.026 0.036
52 0.015 0.018 0.020 0.021 0.025 0.030
53 0.016 0.020 0.024 0.028 0.031 0.035
54 0.018 0.022 0.026 0.030 0.034 0.038
55 0.040 0.040 0.056 0.093 0.109 0.154
56 0.034 0.050 0.066 0.092 0.107 0.138
57 0.042 0.048 0.058 0.082 0.096 0.127
58 0.046 0.054 0.062 0.090 0.106 0.131
59 0.045 0.055 0.066 0.097 0.115 0.144
60 0.058 0.075 0.093 0.126 0.143 0.169
61 0.065 0.088 0.111 0.146 0.163 0.189
62 0.136 0.118 0.148 0.190 0.213 0.247
63 0.130 0.133 0.174 0.212 0.249 0.285
64 0.113 0.129 0.165 0.196 0.223 0.249
65 0.145 0.173 0.201 0.233 0.266 0.289
66 0.170 0.199 0.229 0.258 0.284 0.306
67 0.250 0.204 0.233 0.250 0.257 0.287
68 0.227 0.175 0.193 0.215 0.240 0.262
69 0.200 0.180 0.180 0.198 0.228 0.246
70 0.150 0.171 0.192 0.239 0.304 0.330
Public Agency Miscellaneous 2.5% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.008 0.014 0.020 0.026 0.033 0.050
51 0.008 0.015 0.023 0.030 0.037 0.059
52 0.009 0.016 0.023 0.030 0.037 0.061
53 0.014 0.021 0.028 0.035 0.042 0.063
54 0.014 0.022 0.030 0.039 0.047 0.068
55 0.020 0.038 0.055 0.073 0.122 0.192
56 0.025 0.047 0.069 0.091 0.136 0.196
57 0.030 0.048 0.065 0.083 0.123 0.178
58 0.035 0.054 0.073 0.093 0.112 0.153
59 0.035 0.054 0.073 0.092 0.131 0.183
60 0.044 0.072 0.101 0.130 0.158 0.197
61 0.050 0.078 0.105 0.133 0.161 0.223
62 0.055 0.093 0.130 0.168 0.205 0.268
63 0.090 0.124 0.158 0.192 0.226 0.279
64 0.080 0.112 0.144 0.175 0.207 0.268
65 0.120 0.156 0.193 0.229 0.265 0.333
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
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-14
Service Retirement
Public Agency Miscellaneous 2.7% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.003 0.010 0.016 0.034 0.033 0.045
51 0.009 0.016 0.023 0.042 0.038 0.047
52 0.015 0.019 0.024 0.040 0.036 0.046
53 0.012 0.020 0.028 0.047 0.046 0.060
54 0.020 0.027 0.035 0.054 0.056 0.073
55 0.033 0.055 0.078 0.113 0.156 0.234
56 0.039 0.067 0.095 0.135 0.169 0.227
57 0.050 0.067 0.084 0.113 0.142 0.198
58 0.043 0.066 0.089 0.124 0.151 0.201
59 0.050 0.070 0.090 0.122 0.158 0.224
60 0.060 0.086 0.112 0.150 0.182 0.238
61 0.071 0.094 0.117 0.153 0.184 0.241
62 0.091 0.122 0.152 0.194 0.226 0.279
63 0.143 0.161 0.179 0.209 0.222 0.250
64 0.116 0.147 0.178 0.221 0.254 0.308
65 0.140 0.174 0.208 0.254 0.306 0.389
66 0.170 0.209 0.247 0.298 0.310 0.324
67 0.170 0.199 0.228 0.269 0.296 0.342
68 0.150 0.181 0.212 0.255 0.287 0.339
69 0.150 0.181 0.212 0.255 0.287 0.339
70 0.150 0.181 0.212 0.243 0.291 0.350
Public Agency Miscellaneous 3% @ 60
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.013 0.019 0.026 0.042 0.038 0.064
51 0.035 0.037 0.039 0.052 0.047 0.062
52 0.023 0.030 0.038 0.055 0.051 0.056
53 0.025 0.032 0.040 0.057 0.056 0.066
54 0.035 0.042 0.050 0.067 0.066 0.076
55 0.040 0.052 0.064 0.085 0.095 0.120
56 0.043 0.056 0.070 0.094 0.102 0.150
57 0.045 0.060 0.074 0.099 0.109 0.131
58 0.053 0.056 0.059 0.099 0.126 0.185
59 0.050 0.068 0.085 0.113 0.144 0.202
60 0.089 0.106 0.123 0.180 0.226 0.316
61 0.100 0.117 0.133 0.212 0.230 0.298
62 0.130 0.155 0.180 0.248 0.282 0.335
63 0.120 0.163 0.206 0.270 0.268 0.352
64 0.150 0.150 0.150 0.215 0.277 0.300
65 0.200 0.242 0.283 0.330 0.300 0.342
66 0.220 0.264 0.308 0.352 0.379 0.394
67 0.250 0.279 0.309 0.338 0.371 0.406
68 0.170 0.196 0.223 0.249 0.290 0.340
69 0.220 0.261 0.302 0.344 0.378 0.408
70 0.220 0.255 0.291 0.326 0.358 0.388
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-15
Service Retirement
Public Agency Miscellaneous 2% @ 62
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.000 0.000 0.000 0.000 0.000 0.000
51 0.000 0.000 0.000 0.000 0.000 0.000
52 0.005 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
Service Retirement
Public Agency Fire ½ @ 55 and 2% @ 55
Age Rate
Age Rate
50 0.0159 56 0.1108
51 0.0000 57 0.0000
52 0.0344 58 0.0950
53 0.0199 59 0.0441
54 0.0413 60 1.00000
55 0.0751
Public Agency Police ½ @ 55 and 2% @ 55
Age Rate
Age Rate
50 0.0255 56 0.0692
51 0.0000 57 0.0511
52 0.0164 58 0.0724
53 0.0272 59 0.0704
54 0.0095 60 0.3000
55 0.1667
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-16
Service Retirement
Public Agency Police 2% @ 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.050 0.050 0.050 0.050 0.050 0.100
51 0.040 0.040 0.040 0.040 0.058 0.094
52 0.040 0.040 0.040 0.040 0.061 0.087
53 0.040 0.040 0.040 0.040 0.082 0.123
54 0.040 0.040 0.040 0.046 0.098 0.158
55 0.072 0.072 0.072 0.096 0.141 0.255
56 0.066 0.066 0.066 0.088 0.129 0.228
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.
Service Retirement
Public Agency Fire 2% @ 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.009 0.009 0.009 0.009 0.013 0.020
51 0.013 0.013 0.013 0.013 0.020 0.029
52 0.018 0.018 0.018 0.018 0.028 0.042
53 0.052 0.052 0.052 0.052 0.079 0.119
54 0.067 0.067 0.067 0.067 0.103 0.154
55 0.089 0.089 0.089 0.089 0.136 0.204
56 0.083 0.083 0.083 0.083 0.127 0.190
57 0.082 0.082 0.082 0.082 0.126 0.189
58 0.088 0.088 0.088 0.088 0.136 0.204
59 0.074 0.074 0.074 0.074 0.113 0.170
60 0.100 0.100 0.100 0.100 0.154 0.230
61 0.072 0.072 0.072 0.072 0.110 0.165
62 0.099 0.099 0.099 0.099 0.152 0.228
63 0.114 0.114 0.114 0.114 0.175 0.262
64 0.114 0.114 0.114 0.114 0.175 0.262
65 1.000 1.000 1.000 1.000 1.000 1.000
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-17
Service Retirement
Public Agency Police 3% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.035 0.035 0.035 0.035 0.070 0.090
51 0.028 0.028 0.028 0.029 0.065 0.101
52 0.032 0.032 0.032 0.039 0.066 0.109
53 0.028 0.028 0.028 0.043 0.075 0.132
54 0.038 0.038 0.038 0.074 0.118 0.333
55 0.070 0.070 0.070 0.120 0.175 0.340
56 0.060 0.060 0.060 0.110 0.165 0.330
57 0.060 0.060 0.060 0.110 0.165 0.320
58 0.080 0.080 0.080 0.100 0.185 0.350
59 0.090 0.090 0.095 0.130 0.185 0.350
60 0.150 0.150 0.150 0.150 0.185 0.350
61 0.120 0.120 0.120 0.120 0.160 0.350
62 0.150 0.150 0.150 0.150 0.200 0.350
63 0.150 0.150 0.150 0.150 0.200 0.400
64 0.150 0.150 0.150 0.150 0.175 0.350
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.
Service Retirement
Public Agency Fire 3% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.001 0.001 0.001 0.006 0.016 0.069
51 0.002 0.002 0.002 0.006 0.018 0.071
52 0.012 0.012 0.012 0.021 0.040 0.098
53 0.032 0.032 0.032 0.049 0.085 0.149
54 0.057 0.057 0.057 0.087 0.144 0.217
55 0.073 0.073 0.073 0.109 0.179 0.259
56 0.064 0.064 0.064 0.097 0.161 0.238
57 0.063 0.063 0.063 0.095 0.157 0.233
58 0.065 0.065 0.065 0.099 0.163 0.241
59 0.088 0.088 0.088 0.131 0.213 0.299
60 0.105 0.105 0.105 0.155 0.251 0.344
61 0.118 0.118 0.118 0.175 0.282 0.380
62 0.087 0.087 0.087 0.128 0.210 0.295
63 0.067 0.067 0.067 0.100 0.165 0.243
64 0.067 0.067 0.067 0.100 0.165 0.243
65 1.000 1.000 1.000 1.000 1.000 1.000
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-18
Service Retirement
Public Agency Police 3% @ 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.050 0.050 0.050 0.100 0.155 0.400
51 0.040 0.040 0.040 0.090 0.140 0.380
52 0.040 0.040 0.040 0.070 0.115 0.350
53 0.040 0.040 0.040 0.080 0.135 0.350
54 0.040 0.040 0.040 0.090 0.145 0.350
55 0.070 0.070 0.070 0.120 0.175 0.340
56 0.060 0.060 0.060 0.110 0.165 0.330
57 0.060 0.060 0.060 0.110 0.165 0.320
58 0.080 0.080 0.080 0.100 0.185 0.350
59 0.090 0.090 0.095 0.130 0.185 0.350
60 0.150 0.150 0.150 0.150 0.185 0.350
61 0.120 0.120 0.120 0.120 0.160 0.350
62 0.150 0.150 0.150 0.150 0.200 0.350
63 0.150 0.150 0.150 0.150 0.200 0.400
64 0.150 0.150 0.150 0.150 0.175 0.350
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.
Service Retirement
Public Agency Fire 3% @ 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.020 0.020 0.020 0.040 0.130 0.192
51 0.008 0.008 0.008 0.023 0.107 0.164
52 0.023 0.023 0.023 0.043 0.136 0.198
53 0.023 0.023 0.023 0.043 0.135 0.198
54 0.027 0.027 0.027 0.048 0.143 0.207
55 0.043 0.043 0.043 0.070 0.174 0.244
56 0.053 0.053 0.053 0.085 0.196 0.269
57 0.054 0.054 0.054 0.086 0.197 0.271
58 0.052 0.052 0.052 0.084 0.193 0.268
59 0.075 0.075 0.075 0.116 0.239 0.321
60 0.065 0.065 0.065 0.102 0.219 0.298
61 0.076 0.076 0.076 0.117 0.241 0.324
62 0.068 0.068 0.068 0.106 0.224 0.304
63 0.027 0.027 0.027 0.049 0.143 0.208
64 0.094 0.094 0.094 0.143 0.277 0.366
65 1.000 1.000 1.000 1.000 1.000 1.000
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-19
Service Retirement
Public Agency Police 2% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.040 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.
Service Retirement
Public Agency Fire 2% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.005 0.005 0.005 0.005 0.008 0.012
51 0.006 0.006 0.006 0.006 0.009 0.013
52 0.012 0.012 0.012 0.012 0.019 0.028
53 0.033 0.033 0.033 0.033 0.050 0.075
54 0.045 0.045 0.045 0.045 0.069 0.103
55 0.061 0.061 0.061 0.061 0.094 0.140
56 0.055 0.055 0.055 0.055 0.084 0.126
57 0.081 0.081 0.081 0.081 0.125 0.187
58 0.059 0.059 0.059 0.059 0.091 0.137
59 0.055 0.055 0.055 0.055 0.084 0.126
60 0.085 0.085 0.085 0.085 0.131 0.196
61 0.085 0.085 0.085 0.085 0.131 0.196
62 0.085 0.085 0.085 0.085 0.131 0.196
63 0.085 0.085 0.085 0.085 0.131 0.196
64 0.085 0.085 0.085 0.085 0.131 0.196
65 1.000 1.000 1.000 1.000 1.000 1.000
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-20
Service Retirement
Public Agency Police 2.5% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.050 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.
Service Retirement
Public Agency Fire 2.5% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.007 0.007 0.007 0.007 0.010 0.015
51 0.008 0.008 0.008 0.008 0.012 0.018
52 0.016 0.016 0.016 0.016 0.025 0.038
53 0.042 0.042 0.042 0.042 0.064 0.096
54 0.057 0.057 0.057 0.057 0.088 0.132
55 0.074 0.074 0.074 0.074 0.114 0.170
56 0.066 0.066 0.066 0.066 0.102 0.153
57 0.090 0.090 0.090 0.090 0.139 0.208
58 0.071 0.071 0.071 0.071 0.110 0.164
59 0.066 0.066 0.066 0.066 0.101 0.151
60 0.102 0.102 0.102 0.102 0.157 0.235
61 0.102 0.102 0.102 0.102 0.157 0.236
62 0.102 0.102 0.102 0.102 0.157 0.236
63 0.102 0.102 0.102 0.102 0.157 0.236
64 0.102 0.102 0.102 0.102 0.157 0.236
65 1.000 1.000 1.000 1.000 1.000 1.000
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-21
Service Retirement
Public Agency Police 2.7% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.0500 0.0500 0.0500 0.0500 0.0500 0.1000
51 0.0400 0.0400 0.0400 0.0400 0.0575 0.0942
52 0.0380 0.0380 0.0380 0.0380 0.0580 0.0825
53 0.0380 0.0380 0.0380 0.0380 0.0774 0.1169
54 0.0380 0.0380 0.0380 0.0437 0.0931 0.1497
55 0.0684 0.0684 0.0684 0.0912 0.1340 0.2423
56 0.0627 0.0627 0.0627 0.0836 0.1228 0.2168
57 0.0600 0.0600 0.0600 0.0800 0.1175 0.2125
58 0.0800 0.0800 0.0800 0.0880 0.1375 0.2275
59 0.0800 0.0800 0.0800 0.0920 0.1400 0.2275
60 0.1500 0.1500 0.1500 0.1500 0.1500 0.2275
61 0.1440 0.1440 0.1440 0.1440 0.1440 0.1700
62 0.1500 0.1500 0.1500 0.1500 0.1500 0.2125
63 0.1500 0.1500 0.1500 0.1500 0.1500 0.2125
64 0.1500 0.1500 0.1500 0.1500 0.1500 0.3188
65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
• These rates also apply to County Peace officers, Local Prosecutors, Local Sheriff, School Police,
and Other Safety.
Service Retirement
Public Agency Fire 2.7% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.0065 0.0065 0.0065 0.0065 0.0101 0.0151
51 0.0081 0.0081 0.0081 0.0081 0.0125 0.0187
52 0.0164 0.0164 0.0164 0.0164 0.0254 0.0380
53 0.0442 0.0442 0.0442 0.0442 0.0680 0.1018
54 0.0606 0.0606 0.0606 0.0606 0.0934 0.1397
55 0.0825 0.0825 0.0825 0.0825 0.1269 0.1900
56 0.0740 0.0740 0.0740 0.0740 0.1140 0.1706
57 0.0901 0.0901 0.0901 0.0901 0.1387 0.2077
58 0.0790 0.0790 0.0790 0.0790 0.1217 0.1821
59 0.0729 0.0729 0.0729 0.0729 0.1123 0.1681
60 0.1135 0.1135 0.1135 0.1135 0.1747 0.2615
61 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618
62 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618
63 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618
64 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618
65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
CalPERS Actuarial Valuation – June 30, 2019 Appendix A Actuarial Methods and Assumptions
A-22
Service Retirement
Schools 2% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.004 0.007 0.011 0.012 0.013 0.015
51 0.004 0.008 0.011 0.014 0.016 0.017
52 0.005 0.010 0.014 0.016 0.018 0.021
53 0.006 0.012 0.016 0.020 0.022 0.025
54 0.008 0.017 0.023 0.027 0.031 0.034
55 0.021 0.042 0.058 0.069 0.077 0.086
56 0.019 0.037 0.053 0.062 0.069 0.078
57 0.019 0.038 0.054 0.064 0.071 0.079
58 0.022 0.045 0.062 0.074 0.082 0.092
59 0.025 0.049 0.069 0.082 0.090 0.101
60 0.033 0.066 0.092 0.109 0.121 0.135
61 0.037 0.072 0.101 0.119 0.133 0.149
62 0.066 0.131 0.184 0.218 0.242 0.271
63 0.064 0.126 0.178 0.209 0.233 0.261
64 0.059 0.117 0.163 0.193 0.215 0.240
65 0.080 0.158 0.221 0.261 0.291 0.326
66 0.081 0.160 0.224 0.265 0.296 0.330
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
Miscellaneous
Internal Revenue Code Section 415
The limitations on benefits imposed by Internal Revenue Code Section 415 are taken into account in this
valuation. Each year the impact of any changes in this limitation since the prior valuation is included and
amortized as part of the actuarial gain or loss base. This results in lower contributions for those employers
contributing to the Replacement Benefit Fund and protects CalPERS from prefunding expected benefits in excess of limits imposed by federal tax law. The Section 415(b) dollar limit for the 2019 calendar year is
$225,000.
Internal Revenue Code Section 401(a)(17)
The limitations on compensation imposed by Internal Revenue Code Section 401(a)(17) are taken into account in this valuation. Each year, the impact of any changes in the compensation limitation since the prior valuation
is included and amortized as part of the actuarial gain or loss base. The compensation limit for classic members
for the 2019 calendar year is $280,000.
Appendix B
Principal Plan Provisions
CalPERS Actuarial Valuation – June 30, 2019 Appendix B Safety Plan of the City of Palo Alto
Principal Plan Provisions
B-1
The following is a description of the principal plan provisions used in calculating costs and liabilities. We have indicated
whether a plan provision is standard or optional. Standard benefits are applicable to all members while optional benefits
vary among employers. Optional benefits that apply to a single period of time, such as Golden Handshakes, have not
been included. Many of the statements in this summary are general in nature, and are intended to provide an easily
understood summary of the Public Employees’ Retirement Law. The law itself governs in all situations.
Service Retirement
Eligibility
A classic CalPERS member or PEPRA Safety member becomes eligible for Service Retirement upon attainment of age
50 with at least 5 years of credited service (total service across all CalPERS employers, and with certain other retirement
systems with which CalPERS has reciprocity agreements). For employees hired into a plan with the 1.5 percent at 65
formula, eligibility for service retirement is age 55 with at least 5 years of service. PEPRA miscellaneous members
become eligible for service retirement upon attainment of age 52 with at least 5 years of service.
Benefit
The service retirement benefit is a monthly allowance equal to the product of the benefit factor, years of service, and
final compensation.
• The benefit factor depends on the benefit formula specified in your agency’s contract. The table below shows the
factors for each of the available formulas. Factors vary by the member’s age at retirement. Listed are the factors
for retirement at whole year ages:
Miscellaneous Plan Formulas
Retirement
Age
1.5% at
65 2% at 60 2% at 55 2.5% at
55
2.7% at
55 3% at 60
PEPRA
2% at 62
50 0.5000% 1.092% 1.426% 2.000% 2.000% 2.000% N/A
51 0.5667% 1.156% 1.522% 2.100% 2.140% 2.100% N/A
52 0.6334% 1.224% 1.628% 2.200% 2.280% 2.200% 1.000%
53 0.7000% 1.296% 1.742% 2.300% 2.420% 2.300% 1.100%
54 0.7667% 1.376% 1.866% 2.400% 2.560% 2.400% 1.200%
55 0.8334% 1.460% 2.000% 2.500% 2.700% 2.500% 1.300%
56 0.9000% 1.552% 2.052% 2.500% 2.700% 2.600% 1.400%
57 0.9667% 1.650% 2.104% 2.500% 2.700% 2.700% 1.500%
58 1.0334% 1.758% 2.156% 2.500% 2.700% 2.800% 1.600%
59 1.1000% 1.874% 2.210% 2.500% 2.700% 2.900% 1.700%
60 1.1667% 2.000% 2.262% 2.500% 2.700% 3.000% 1.800%
61 1.2334% 2.134% 2.314% 2.500% 2.700% 3.000% 1.900%
62 1.3000% 2.272% 2.366% 2.500% 2.700% 3.000% 2.000%
63 1.3667% 2.418% 2.418% 2.500% 2.700% 3.000% 2.100%
64 1.4334% 2.418% 2.418% 2.500% 2.700% 3.000% 2.200%
65 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.300%
66 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.400%
67 & up 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.500%
CalPERS Actuarial Valuation – June 30, 2019 Appendix B Safety Plan of the City of Palo Alto
Principal Plan Provisions
B-2
Safety Plan Formulas
Retirement
Age ½ at 55 * 2% at 55 2% at 50 3% at 55 3% at 50
50 1.783% 1.426% 2.000% 2.400% 3.000%
51 1.903% 1.522% 2.140% 2.520% 3.000%
52 2.035% 1.628% 2.280% 2.640% 3.000%
53 2.178% 1.742% 2.420% 2.760% 3.000%
54 2.333% 1.866% 2.560% 2.880% 3.000%
55 & Up 2.500% 2.000% 2.700% 3.000% 3.000%
* For this formula, the benefit factor also varies by entry age. The factors shown are for members with an entry age
of 35 or greater. If entry age is less than 35, then the age 55 benefit factor is 50 percent divided by the difference
between age 55 and entry age. The benefit factor for ages prior to age 55 is the same proportion of the age 55 benefit
factor as in the above table.
PEPRA Safety Plan Formulas
Retirement Age 2% at 57 2.5% at 57 2.7% at 57
50 1.426% 2.000% 2.000%
51 1.508% 2.071% 2.100%
52 1.590% 2.143% 2.200%
53 1.672% 2.214% 2.300%
54 1.754% 2.286% 2.400%
55 1.836% 2.357% 2.500%
56 1.918% 2.429% 2.600%
57 & Up 2.000% 2.500% 2.700%
• The years of service is the amount credited by CalPERS to a member while he or she is employed in this group (or for other periods that are recognized under the employer’s contract with CalPERS). For a member who has earned
service with multiple CalPERS employers, the benefit from each employer is calculated separately according to
each employer’s contract, and then added together for the total allowance. An agency may contract for an optional
benefit where any unused sick leave accumulated at the time of retirement will be converted to credited service
at a rate of 0.004 years of service for each day of sick leave.
• The final compensation is the monthly average of the member’s highest 36 or 12 consecutive months’ full-time
equivalent monthly pay (no matter which CalPERS employer paid this compensation). The standard benefit is 36 months. Employers had the option of providing a final compensation equal to the highest 12 consecutive months
for classic plans only. Final compensation must be defined by the highest 36 consecutive months’ pay under the
1.5% at 65 formula. PEPRA members have a cap on the annual salary that can be used to calculate final
compensation for all new members based on the Social Security contribution and benefit base. For employees that
participate in Social Security this cap is $124,180 for 2019 and for those employees that do not participate in Social
Security the cap for 2019 is $149,016. Adjustments to the caps are permitted annually based on changes to the
CPI for all urban consumers.
• Employees must be covered by Social Security with the 1.5% at 65 formula. Social Security is optional for all other
benefit formulas. For employees covered by Social Security, the modified formula is the standard benefit. Under
this type of formula, the final compensation is offset by $133.33 (or by one third if the final compensation is less
than $400). Employers may contract for the full benefit with Social Security that will eliminate the offset applicable
to the final compensation. For employees not covered by Social Security, the full benefit is paid with no offsets.
CalPERS Actuarial Valuation – June 30, 2019 Appendix B Safety Plan of the City of Palo Alto
Principal Plan Provisions
B-3
Auxiliary organizations of the CSUC system may elect reduced contribution rates, in which case the offset is $317 if members are not covered by Social Security or $513 if members are covered by Social Security.
• The miscellaneous and PEPRA safety service retirement benefit is not capped. The classic Safety service retirement
benefit is capped at 90 percent of final compensation.
Vested Deferred Retirement
Eligibility for Deferred Status
A CalPERS member becomes eligible for a deferred vested retirement benefit when he or she leaves employment,
keeps his or her contribution account balance on deposit with CalPERS, and has earned at least 5 years of credited
service (total service across all CalPERS employers, and with certain other retirement systems with which CalPERS has
reciprocity agreements).
Eligibility to Start Receiving Benefits
The CalPERS classic members and PEPRA safety members become eligible to receive the deferred retirement benefit
upon satisfying the eligibility requirements for deferred status and upon attainment of age 50 (55 for employees hired
into a 1.5% @ 65 plan). PEPRA miscellaneous members become eligible to receive the deferred retirement benefit
upon satisfying the eligibility requirements for deferred status and upon attainment of age 52.
Benefit
The vested deferred retirement benefit is the same as the service retirement benefit, where the benefit factor is based
on the member’s age at allowance commencement. For members who have earned service with multiple CalPERS
employers, the benefit from each employer is calculated separately according to each employer’s contract, and then
added together for the total allowance.
Non-Industrial (Non-Job Related) Disability Retirement
Eligibility
A CalPERS member is eligible for Non-Industrial Disability Retirement if he or she becomes disabled and has at least 5
years of credited service (total service across all CalPERS employers, and with certain other retirement systems with which CalPERS has reciprocity agreements). There is no special age requirement. Disabled means the member is unable
to perform his or her job because of an illness or injury, which is expected to be permanent or to last indefinitely. The
illness or injury does not have to be job related. A CalPERS member must be actively employed by any CalPERS
employer at the time of disability in order to be eligible for this benefit.
Standard Benefit
The standard Non-Industrial Disability Retirement benefit is a monthly allowance equal to 1.8 percent of final
compensation, multiplied by service, which is determined as follows:
• Service is CalPERS credited service, for members with less than 10 years of service or greater than 18.518 years
of service; or
• Service is CalPERS credited service plus the additional number of years that the member would have worked until
age 60, for members with at least 10 years but not more than 18.518 years of service. The maximum benefit in this case is 33 1/3 percent of final compensation.
CalPERS Actuarial Valuation – June 30, 2019 Appendix B Safety Plan of the City of Palo Alto
Principal Plan Provisions
B-4
Improved Benefit
Employers have the option of providing the improved Non-Industrial Disability Retirement benefit. This benefit provides
a monthly allowance equal to 30 percent of final compensation for the first 5 years of service, plus 1 percent for each
additional year of service to a maximum of 50 percent of final compensation.
Members who are eligible for a larger service retirement benefit may choose to receive that benefit in lieu of a disability
benefit. Members eligible to retire, and who have attained the normal retirement age determined by their service
retirement benefit formula, will receive the same dollar amount for disability retirement as that payable for service
retirement. For members who have earned service with multiple CalPERS employers, the benefit attributed to each
employer is the total disability allowance multiplied by the ratio of service with a particular employer to the total
CalPERS service.
Industrial (Job Related) Disability Retirement
All safety members have this benefit. For miscellaneous members, employers have the option of providing this benefit.
An employer may choose to provide the increased benefit option or the improved benefit option.
Eligibility
An employee is eligible for Industrial Disability Retirement if he or she becomes disabled while working, where disabled
means the member is unable to perform the duties of the job because of a work-related illness or injury, which is
expected to be permanent or to last indefinitely. A CalPERS member who has left active employment within this group
is not eligible for this benefit, except to the extent described below.
Standard Benefit
The standard Industrial Disability Retirement benefit is a monthly allowance equal to 50 percent of final compensation.
Increased Benefit (75 percent of Final Compensation)
The increased Industrial Disability Retirement benefit is a monthly allowance equal to 75 percent final compensation for total disability.
Improved Benefit (50 percent to 90 percent of Final Compensation)
The improved Industrial Disability Retirement benefit is a monthly allowance equal to the Workman’s Compensation
Appeals Board permanent disability rate percentage (if 50 percent or greater, with a maximum of 90 percent) times the final compensation.
For a CalPERS member not actively employed in this group who became disabled while employed by some other
CalPERS employer, the benefit is a return of accumulated member contributions with respect to employment in this
group. With the standard or increased benefit, a member may also choose to receive the annuitization of the
accumulated member contributions.
If a member is eligible for service retirement and if the service retirement benefit is more than the industrial disability
retirement benefit, the member may choose to receive the larger benefit.
CalPERS Actuarial Valuation – June 30, 2019 Appendix B Safety Plan of the City of Palo Alto
Principal Plan Provisions
B-5
Post-Retirement Death Benefit
Standard Lump Sum Payment
Upon the death of a retiree, a one-time lump sum payment of $500 will be made to the retiree’s designated survivor(s),
or to the retiree’s estate.
Improved Lump Sum Payment
Employers have the option of providing an improved lump sum death benefit of $600, $2,000, $3,000, $4,000 or $5,000.
Form of Payment for Retirement Allowance
Standard Form of Payment
Generally, the retirement allowance is paid to the retiree in the form of an annuity for as long as he or she is alive. The
retiree may choose to provide for a portion of his or her allowance to be paid to any designated beneficiary after the
retiree’s death. CalPERS provides for a variety of such benefit options, which the retiree pays for by taking a reduction
in his or her retirement allowance. Such reduction takes into account the amount to be provided to the beneficiary and
the probable duration of payments (based on the ages of the member and beneficiary) made subsequent to the
member’s death.
Improved Form of Payment (Post-Retirement Survivor Allowance)
Employers have the option to contract for the post-retirement survivor allowance.
For retirement allowances with respect to service subject to the modified formula, 25 percent of the retirement
allowance will automatically be continued to certain statutory beneficiaries upon the death of the retiree, without a reduction in the retiree’s allowance. For retirement allowances with respect to service subject to the full or supplemental
formula, 50 percent of the retirement allowance will automatically be continued to certain statutory beneficiaries upon
the death of the retiree, without a reduction in the retiree’s allowance. This additional benefit is referred to as post-
retirement survivor allowance (PRSA) or simply as survivor continuance.
In other words, 25 percent or 50 percent of the allowance, the continuance portion, is paid to the retiree for as long
as he or she is alive, and that same amount is continued to the retiree’s spouse (or if no eligible spouse, to unmarried
child(ren) until they attain age 18; or, if no eligible child(ren), to a qualifying dependent parent) for the rest of his or her lifetime. This benefit will not be discontinued in the event the spouse remarries.
The remaining 75 percent or 50 percent of the retirement allowance, which may be referred to as the option portion
of the benefit, is paid to the retiree as an annuity for as long as he or she is alive. Or, the retiree may choose to provide
for some of this option portion to be paid to any designated beneficiary after the retiree’s death. Benefit options
applicable to the option portion are the same as those offered with the standard form. The reduction is calculated in
the same manner but is applied only to the option portion.
CalPERS Actuarial Valuation – June 30, 2019 Appendix B Safety Plan of the City of Palo Alto
Principal Plan Provisions
B-6
Pre-Retirement Death Benefits
Basic Death Benefit
This is a standard benefit.
Eligibility
An employee’s beneficiary (or estate) may receive the basic death benefit if the member dies while actively employed.
A CalPERS member must be actively employed with the CalPERS employer providing this benefit to be eligible for this
benefit. A member’s survivor who is eligible for any other pre-retirement death benefit may choose to receive that
death benefit instead of this basic death benefit.
Benefit
The basic death benefit is a lump sum in the amount of the member’s accumulated contributions, where interest is
credited annually at the greater of 6 percent 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 safety PEPRA members and age 52 for miscellaneous PEPRA members, and
has at least 5 years of credited service (total service across all CalPERS employers and with certain other retirement
systems with which CalPERS has reciprocity agreements). A CalPERS member must be actively employed with the
CalPERS employer providing this benefit to be eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married at least one year before death or, if there is no eligible spouse, to the member's
unmarried child(ren) under age 18. A member’s survivor who is eligible for any other pre-retirement death benefit may
choose to receive that death benefit instead of this 1957 Survivor benefit.
Benefit
The 1957 Survivor benefit is a monthly allowance equal to one-half of the unmodified service retirement benefit that the member would have been entitled to receive if the member had retired on the date of his or her death. If the
benefit is payable to the spouse, the benefit is discontinued upon the death of the spouse. If the benefit is payable to
dependent child(ren), the benefit will be discontinued upon death or attainment of age 18, unless the child(ren) is
disabled. The total amount paid will be at least equal to the basic death benefit.
CalPERS Actuarial Valuation – June 30, 2019 Appendix B Safety Plan of the City of Palo Alto
Principal Plan Provisions
B-7
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 safety PEPRA members and age 52 for miscellaneous PEPRA
members, and has at least 5 years of credited service (total service across all CalPERS employers and with certain other
retirement systems with which CalPERS has reciprocity agreements). A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An eligible survivor means the surviving spouse
to whom the member was married at least one year before death. A member’s survivor who is eligible for any other
pre-retirement death benefit may choose to receive that death benefit instead of this Optional Settlement 2 Death
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 his or her death and elected 100 percent to continue to
the eligible survivor after the member’s death. The allowance is payable as long as the surviving spouse lives, at which
time it is continued to any unmarried child(ren) under age 18, if applicable. The total amount paid will be at least equal
to the basic death benefit.
Special Death Benefit
This is a standard benefit for safety members. An employer may elect to provide this benefit for miscellaneous
members.
Eligibility
An employee’s eligible survivor(s) may receive the special death benefit if the member dies while actively employed and the death is job-related. A CalPERS member who is no longer actively employed with any CalPERS employer is
not eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married prior to
the onset of the injury or illness that resulted in death. If there is no eligible spouse, an eligible survivor means the
member's unmarried child(ren) under age 22. An eligible survivor who chooses to receive this benefit will not receive
any other death benefit.
Benefit
The special death benefit is a monthly allowance equal to 50 percent of final compensation, and will be increased
whenever the compensation paid to active employees is increased but ceasing to increase when the member would
have attained age 50. The allowance is payable to the surviving spouse until death at which time the allowance is
continued to any unmarried child(ren) under age 22. There is a guarantee that the total amount paid will at least equal
the basic death benefit.
If the member’s death is the result of an accident or injury caused by external violence or physical force incurred in the performance of the member’s duty, and there are eligible surviving child(ren) (eligible means unmarried child(ren)
under age 22) in addition to an eligible spouse, then an additional monthly allowance is paid equal to the following:
• if 1 eligible child: 12.5 percent of final compensation
• if 2 eligible children: 20.0 percent of final compensation
• if 3 or more eligible children: 25.0 percent of final compensation
CalPERS Actuarial Valuation – June 30, 2019 Appendix B Safety Plan of the City of Palo Alto
Principal Plan Provisions
B-8
Alternate Death Benefit for Local Fire Members
This is an optional benefit available only to local fire members.
Eligibility
An employee’s eligible survivor(s) may receive the alternate death benefit in lieu of the basic death benefit or the 1957
Survivor benefit if the member dies while actively employed and has at least 20 years of total CalPERS service. A
CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An
eligible survivor means the surviving spouse to whom the member was married prior to the onset of the injury or illness that resulted in death. If there is no eligible spouse, an eligible survivor means the member's unmarried child(ren)
under age 18.
Benefit
The Alternate Death benefit is a monthly allowance equal to the service retirement benefit that the member would
have received had the member retired on the date of his or her death and elected Optional Settlement 2. (A retiree
who elects Optional Settlement 2 receives an allowance that has been reduced so that it will continue to be paid after his or her death to a surviving beneficiary.) If the member has not yet attained age 50, the benefit is equal to that
which would be payable if the member had retired at age 50, based on service credited at the time of death. The
allowance is payable as long as the surviving spouse lives, at which time it is continued to any unmarried child(ren)
under age 18, if applicable. The total amount paid will be at least equal to the basic death benefit.
Cost-of-Living Adjustments (COLA)
Standard Benefit
Retirement and survivor allowances are adjusted each year in May for cost of living, beginning the second calendar year after the year of retirement. The standard cost-of-living adjustment (COLA) is 2 percent. Annual adjustments are
calculated by first determining the lesser of 1) 2 percent compounded from the end of the year of retirement or 2)
actual rate of inflation. The resulting increase is divided by the total increase provided in prior years. For any given
year, the COLA adjustment may be less than 2 percent (when the rate of inflation is low), may be greater than the
rate of inflation (when the rate of inflation is low after several years of high inflation) or may even be greater than 2
percent (when inflation is high after several years of low inflation).
Improved Benefit
Employers have the option of providing a COLA of 3 percent, 4 percent, or 5 percent, determined in the same manner
as described above for the standard 2 percent COLA. An improved COLA is not available with the 1.5% at 65 formula.
Purchasing Power Protection Allowance (PPPA)
Retirement and survivor allowances are protected against inflation by PPPA. PPPA benefits are cost-of-living
adjustments that are intended to maintain an individual’s allowance at 80 percent of the initial allowance at retirement
adjusted for inflation since retirement. The PPPA benefit will be coordinated with other cost-of-living adjustments provided under the plan.
CalPERS Actuarial Valuation – June 30, 2019 Appendix B Safety Plan of the City of Palo Alto
Principal Plan Provisions
B-9
Employee Contributions
Each employee contributes toward his or her retirement based upon the retirement formula. The standard employee
contribution is as described below.
• The percent contributed below the monthly compensation breakpoint is 0 percent.
• The monthly compensation breakpoint is $0 for full and supplemental formula members and $133.33 for
employees covered by the modified formula.
• The percent contributed above the monthly compensation breakpoint depends upon the benefit formula, as
shown in the table below.
Benefit Formula Percent Contributed above the
Breakpoint
Miscellaneous, 1.5% at 65 2%
Miscellaneous, 2% at 60 7%
Miscellaneous, 2% at 55 7%
Miscellaneous, 2.5% at 55 8%
Miscellaneous, 2.7% at 55 8%
Miscellaneous, 3% at 60 8%
Miscellaneous, 2% at 62 50% of the Total Normal Cost
Miscellaneous, 1.5% at 65 50% of the Total Normal Cost
Safety, 1/2 at 55 Varies by entry age
Safety, 2% at 55 7%
Safety, 2% at 50 9%
Safety, 3% at 55 9%
Safety, 3% at 50 9%
Safety, 2% at 57 50% of the Total Normal Cost
Safety, 2.5% at 57 50% of the Total Normal Cost
Safety, 2.7% at 57 50% of the Total Normal Cost
The employer may choose to “pick-up” these contributions for classic members (Employer Paid Member Contributions
or EPMC). EPMC is prohibited for new PEPRA members.
An employer may also include Employee Cost Sharing in the contract, where employees agree to share the cost of the
employer contribution. These contributions are paid in addition to the member contribution.
Auxiliary organizations of the CSU system may elect reduced contribution rates, in which case the offset is $317 and
the contribution rate is 6 percent if members are not covered by Social Security. If members are covered by Social
Security, the offset is $513 and the contribution rate is 5 percent.
Refund of Employee Contributions
If the member’s service with the employer ends, and if the member does not satisfy the eligibility conditions for any of
the retirement benefits above, the member may elect to receive a refund of his or her employee contributions, which are credited with 6 percent interest compounded annually.
CalPERS Actuarial Valuation – June 30, 2019 Appendix B Safety Plan of the City of Palo Alto
Principal Plan Provisions
B-10
1959 Survivor Benefit
This is a pre-retirement death benefit available only to members not covered by Social Security. Any agency joining CalPERS subsequent to 1993 is required to provide this benefit if the members are not covered by Social Security. The
benefit is optional for agencies joining CalPERS prior to 1994. Levels 1, 2 and 3 are now closed. Any new agency or
any agency wishing to add this benefit or increase the current level may only choose the 4th or Indexed Level.
This benefit is not included in the results presented in this valuation. More information on this benefit is available on
the CalPERS website at www.calpers.ca.gov.
Appendix C
Participant Data
• Summary of Valuation Data
• Active Members
• Transferred and Terminated Members
• Retired Members and Beneficiaries
CalPERS Actuarial Valuation – June 30, 2019 Appendix C Safety Plan of the City of Palo Alto
Participant Data
C-1
Summary of Valuation Data
June 30, 2018 June 30, 2019
1. Active Members
a) Counts 167 169
b) Average Attained Age
41.89 41.90
c) Average Entry Age to Rate Plan 30.65 30.41
d) Average Years of Credited Service 11.44 11.72
e) Average Annual Covered Pay $141,397 $150,819
f) Annual Covered Payroll 23,613,222 25,488,331
g) Projected Annual Payroll for Contribution Year 25,615,376 27,649,475
h) Present Value of Future Payroll 223,983,606 236,905,356
2. Transferred Members
a) Counts 61 59
b) Average Attained Age 42.92 43.49
c) Average Years of Credited Service 3.74 4.11
d) Average Annual Covered Pay $124,058 $130,854
3. Terminated Members
a) Counts 48 50
b) Average Attained Age 41.94 42.27
c) Average Years of Credited Service 2.84 2.81
d) Average Annual Covered Pay $89,042 $90,415
4. Retired Members and Beneficiaries
a) Counts 430 430
b) Average Attained Age 68.22 69.11
c) Average Annual Benefits $57,369 $58,574
5. Active to Retired Ratio [(1a) / (4a)] 0.39 0.39
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, 2019 Appendix C Safety Plan of the City of Palo Alto
Participant Data
C-2
Active Members
Counts of members included in the valuation are counts of the records processed by the valuation. Multiple records
may exist for those who have service in more than one valuation group. This does not result in double counting of
liabilities.
Distribution of Active Members by Age and Service
Years of Service at Valuation Date
Attained
Age 0-4 5-9 10-14 15-19 20-24 25+ Total
15-24 3 0 0 0 0 0 3
25-29 11 2 0 0 0 0 13
30-34 15 8 2 0 0 0 25
35-39 4 15 13 0 0 0 32
40-44 4 8 8 7 2 0 29
45-49 1 3 5 10 11 0 30
50-54 1 1 1 8 8 6 25
55-59 2 0 0 4 1 2 9
60-64 0 0 1 1 0 0 2
65 and Over 0 0 0 0 0 1 1
All Ages 41 37 30 30 22 9 169
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 20-24 25+
Average
Salary
15-24 $87,023 $0 $0 $0 $0 $0 $87,023
25-29 112,362 136,866 0 0 0 0 116,132
30-34 119,486 139,794 160,826 0 0 0 129,291
35-39 130,435 147,036 174,818 0 0 0 156,247
40-44 152,272 153,384 152,493 181,063 214,315 0 163,868
45-49 140,113 141,908 179,032 160,222 165,591 0 162,824
50-54 148,594 151,021 145,285 144,766 152,389 178,154 155,642
55-59 141,484 0 0 156,790 159,398 193,876 161,920
60-64 0 0 154,844 191,551 0 0 173,198
65 and Over 0 0 0 0 0 153,718 153,718
Average $121,752 $145,985 $166,984 $161,550 $164,939 $178,932 $150,819
CalPERS Actuarial Valuation – June 30, 2019 Appendix C Safety Plan of the City of Palo Alto
Participant Data
C-3
Transferred and Terminated Members
Distribution of Transfers to Other CalPERS Plans by Age, Service, and average Salary
Years of Service at Valuation Date
Attained Age 0-4 5-9 10-14 15-19 20-24 25+ Total Average Salary
15-24 0 0 0 0 0 0 0 $0
25-29 2 0 0 0 0 0 2 121,669
30-34 7 1 0 0 0 0 8 138,895
35-39 5 4 2 0 0 0 11 131,729
40-44 10 1 0 0 0 0 11 112,782
45-49 9 2 1 1 0 0 13 152,855
50-54 5 5 0 0 0 0 10 122,328
55-59 2 0 1 0 0 0 3 114,671
60-64 0 1 0 0 0 0 1 121,889
65 and Over 0 0 0 0 0 0 0 0
All Ages 40 14 4 1 0 0 59 $130,854
Distribution of Terminated Participants with Funds on Deposit by Age, Service, and average Salary
Years of Service at Valuation Date
Attained Age 0-4 5-9 10-14 15-19 20-24 25+ Total Average Salary
15-24 0 0 0 0 0 0 0 $0
25-29 2 0 0 0 0 0 2 100,708
30-34 7 1 0 0 0 0 8 89,738
35-39 8 1 1 0 0 0 10 93,770
40-44 10 3 1 0 0 0 14 94,830
45-49 3 2 1 0 0 0 6 91,802
50-54 4 1 0 0 0 0 5 89,316
55-59 4 0 0 0 0 0 4 52,335
60-64 0 1 0 0 0 0 1 129,374
65 and Over 0 0 0 0 0 0 0 0
All Ages 38 9 3 0 0 0 50 $90,415
CalPERS Actuarial Valuation – June 30, 2019 Appendix C Safety Plan of the City of Palo Alto
Participant Data
C-4
Retired Members and Beneficiaries
Distribution of Retirees and Beneficiaries by Age and Retirement Type*
Attained
Age
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Total
Under 30 0 0 0 0 0 0 0
30-34 0 0 0 0 0 0 0
35-39 0 0 3 0 0 0 3
40-44 0 0 4 0 0 0 4
45-49 0 0 7 0 0 0 7
50-54 25 1 7 0 0 0 33
55-59 38 0 21 0 1 0 60
60-64 45 2 17 0 2 1 67
65-69 32 0 16 0 0 3 51
70-74 27 1 19 0 0 7 54
75-79 31 0 19 0 0 13 63
80-84 23 1 18 0 0 8 50
85 and Over 17 0 11 0 0 10 38
All Ages 238 5 142 0 3 42 430
Distribution of Average Annual Disbursements to Retirees and Beneficiaries by Age and Retirement
Type*
Attained
Age
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Average
Under 30 $0 $0 $0 $0 $0 $0 $0
30-34 0 0 0 0 0 0 0
35-39 0 0 57,662 0 0 0 57,662
40-44 0 0 46,939 0 0 0 46,939
45-49 0 0 53,915 0 0 0 53,915
50-54 76,572 88 63,982 0 0 0 71,584
55-59 91,935 0 71,033 0 55,866 0 84,018
60-64 78,627 18,559 76,450 0 38,716 70,341 74,966
65-69 76,932 0 49,786 0 0 39,037 66,186
70-74 59,408 18,414 49,583 0 0 22,839 50,452
75-79 51,178 0 37,217 0 0 40,806 44,827
80-84 50,227 15,045 36,322 0 0 13,451 38,633
85 and Over 32,440 0 25,734 0 0 33,216 30,703
All Ages $68,509 $14,133 $51,831 $0 $44,433 $31,371 $58,574
CalPERS Actuarial Valuation – June 30, 2019 Appendix C Safety Plan of the City of Palo Alto
Participant Data
C-5
Retired Members and Beneficiaries (continued)
Distribution of Retirees and Beneficiaries by Years Retired and Retirement Type*
Years
Retired
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Total
Under 5 Yrs 40 1 13 0 0 14 68
5-9 57 0 20 0 0 3 80
10-14 40 1 17 0 1 7 66
15-19 37 0 16 0 0 11 64
20-24 20 1 18 0 1 3 43
25-29 28 0 12 0 0 3 43
30 and Over 16 2 46 0 1 1 66
All Years 238 5 142 0 3 42 430
Distribution of Average Annual Disbursements to Retirees and Beneficiaries by Years Retired and
Retirement Type*
Years
Retired
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Average
Under 5 Yrs $77,215 $2,172 $54,673 $0 $0 $20,313 $60,087
5-9 90,603 0 97,494 0 0 18,881 89,636
10-14 62,271 88 66,009 0 55,866 41,087 59,948
15-19 69,841 0 61,024 0 0 43,123 63,045
20-24 42,714 34,945 48,330 0 49,456 27,081 43,950
25-29 55,666 0 45,344 0 0 37,167 51,495
30 and Over 35,266 16,730 25,800 0 27,977 21,857 27,793
All Years $68,509 $14,133 $51,831 $0 $44,433 $31,371 $58,574
* 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 of Actuarial Terms
CalPERS Actuarial Valuation – June 30, 2019 Appendix D Safety Plan of the City of Palo Alto
Glossary of Actuarial Terms
D-1
Glossary of Actuarial Terms
Accrued Liability (also called Actuarial Accrued Liability or Entry Age Actuarial Accrued Liability)
The total dollars needed as of the valuation date to fund all benefits earned in the past for current members.
Actuarial Assumptions Assumptions made about certain events that will affect pension costs. Assumptions generally can be broken down
into two categories: demographic and economic. Demographic assumptions include such things as mortality,
disability and retirement rates. Economic assumptions include discount rate, salary growth and inflation.
Actuarial Methods
Procedures employed by actuaries to achieve certain funding goals of a pension plan. Actuarial methods include
funding method, setting the length of time to fund the Accrued Liability and determining the Value of Assets.
Actuarial Valuation
The determination as of a valuation date of the Normal Cost, Accrued Liability, and related actuarial present values
for a pension plan. These valuations are performed annually or when an employer is contemplating a change to
their plan provisions.
Amortization Bases
Separate payment schedules for different portions of the Unfunded Liability. The total Unfunded Liability of a Risk Pool or non-pooled plan can be segregated by cause, creating “bases,” and each such base will be separately
amortized and paid for over a specific period of time. However, all bases are amortized using investment and
payroll assumptions from the current valuation. This can be likened to a home having a first mortgage of 24 years
remaining payments and a second mortgage that has 10 years remaining payments. Each base or each mortgage
note has its own terms (payment period, principal, etc.).
Generally, in an actuarial valuation, the separate bases consist of changes in unfunded liability due to contract amendments, actuarial assumption changes, method changes, and/or gains and losses.
Amortization Period
The number of years required to pay off an Amortization Base.
Classic Member (under PEPRA)
A classic member is a member who joined CalPERS prior to January 1, 2013 and who is not defined as a new member under PEPRA. (See definition of New Member below.)
Discount Rate
The assumed long-term rate of return on plan assets. This is the rate at which projected cash flows are discounted
to the valuation date to determine Accrued Liability. This assumption is called “investment return” in earlier
CalPERS reports and “actuarial interest rate” in Section 20014 of the California Public Employees’ Retirement Law
(PERL).
Entry Age
The earliest age at which a plan member begins to accrue benefits under a defined benefit pension plan. In most
cases, this is the age of the member on their date of hire.
Entry Age Actuarial Cost Method
An actuarial cost method designed to fund a member's total plan benefit over the course of his or her career. This
method is designed to yield a rate expressed as a level percentage of payroll. (The assumed retirement age less the entry age is the amount of time required to fund a member’s total benefit.
Generally, the older a member on the date of hire, the greater the entry age normal cost. This is mainly because
there is less time to earn investment income to fund the future benefits.)
CalPERS Actuarial Valuation – June 30, 2019 Appendix D Safety Plan of the City of Palo Alto
Glossary of Actuarial Terms
D-2
Fresh Start
A Fresh Start is when multiple amortization bases are collapsed to one base and amortized together over a new
funding period.
Funded Status
A measure of how well funded, or how "on track" a plan or risk pool is with respect to assets versus accrued
liabilities. A ratio greater than 100 percent means the plan or risk pool has more assets than liabilities and a ratio
less than 100 percent means liabilities are greater than assets.
GASB 68
Statement No. 68 of the Governmental Accounting Standards Board. The accounting standard governing a state
or local governmental employer’s accounting and financial reporting for pensions. GASB 68 replaces GASB 27
effective the first fiscal year beginning after June 15, 2014.
New Member (under PEPRA) A new member includes an individual who becomes a member of a public retirement system for the first time on
or after January 1, 2013, and who was not a member of another public retirement system prior to that date, and
who is not subject to reciprocity with another public retirement system.
Normal Cost
The annual cost of service accrual for the upcoming fiscal year for active employees. The normal cost should be
viewed as the long-term contribution rate.
Pension Actuary
A business professional that is authorized by the Society of Actuaries and the American Academy of Actuaries to
perform the calculations necessary to properly fund a pension plan.
PEPRA
The California Public Employees’ Pension Reform Act of 2013
Present Value of Benefits (PVB)
The total dollars needed as of the valuation date to fund all benefits earned in the past or expected to be earned
in the future for current members.
Unfunded Accrued Liability (UAL)
When a plan or pool’s value of assets is less than its Accrued Liability, the difference is the plan or pool’s Unfunded
Accrued Liability (or unfunded liability). If the unfunded liability is positive, the plan or pool will have to pay
contributions exceeding the Normal Cost.