HomeMy WebLinkAbout2022-09-20 Finance Committee Agenda Packet
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FINANCE COMMITTEE
Tuesday, September 20, 2022
Special Meeting
Community Meeting Room & Virtual
5:30 PM
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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 California Public Employees’ Retirement System (CalPERS)
Pension Annual Valuation Reports as of June 30, 2021
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Finance Committee Regular Meeting September 20, 2022
FUTURE MEETINGS AND AGENDAS
ADJOURNMENT
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City of Palo Alto (ID # 14628)
Finance Committee Staff Report
Meeting Date: 9/20/2022 Report Type: Action Items
City of Palo Alto Page 1
Title: Accept California Public Employees’ Retirement System (CalPERS)
Pension Annual Valuation Reports as of June 30, 2021
From: City Manager
Lead Department: Administrative Services
Recommendation
Staff recommends that the Finance Committee accept and forward to the City Council for
information, the June 30, 2021 CalPERS Annual Valuation reports for the Miscellaneous and
Safety Pension Plans.
Background
The City of Palo Alto offers its employees and retirees a defined pension benefit plan which is
managed and administered by CalPERS, a State of California Pension Trust Program. The
CalPERS program maintains two pension plans for the City: one for safety employees (sworn
fire and police personnel) and another for miscellaneous employees (all other non-safety
personnel employed by the City, including field personnel, administrative support, and
managers).
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 2022.
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)
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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
$161,969 in 2022 for both the Miscellaneous and Safety plans, therefore it is calculated based on service years but cannot
exceed the $161,969. 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 of the City of Palo Alto pension trust plans based on member and financial
data as of June 30, 2021. The purpose of these reports is to provide an update on the assets
and accrued liabilities of plans, determine minimum employer contributions for the coming
fiscal year, and communicate significant changes in actuarial assumptions or policies. The
valuation reports included for review as part of this memo will be used to inform the FY 2024 –
FY 2033 Long Range Financial Forecast and FY 2024 budget. The calculations for annual
employer contributions are based on a set of actuarial assumptions for demographic (e.g.,
mortality, retirement, termination, and disability rates) and economic factors (e.g., future
investment earnings, inflations, salary growth). These assumptions reflect CalPERS’ best
estimate for future experience of the plans and are long term in nature. Valuation results will
vary from one year to the next due to assumption or method changes, changes in plan
provisions, and actuarial experience that is different than anticipated. For example, the
investment earnings at CalPERS have averaged 6.9 percent over the 20 years ending June 30,
2021, yet individual fiscal year returns have ranged from -23.6 percent to +21.3 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 2021.
CalPERS FY 2024 & Projected Employer Contributions
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. The combined cost of NC and UAL reflect the total
Actuarial Determined Contribution (ADC), or total cost, and is commonly referred to as the
blended rate.
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.
Long-term Financial Planning
The City has taken several proactive steps to address rising pension costs and long-term
liabilities, including cost-sharing in labor agreements, establishing an irrevocable Section 115
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Pension Trust (“Pension Trust”), and adopting a Pension Funding Policy. In January 2017, the
City Council authorized the establishment of a Pension Trust, administered by Public Agency
Retirement Service (PARS) (CMR 7553). Contributions were initially made to the Pension Trust
on an ad-hoc basis, using one-time savings or excess revenues. In October 2018, the City
Council directed staff to use a more conservative discount rate as compared to CalPERS for the
NC portion of the liability, transferring the additional (“supplemental”) funding beyond CalPERS
actuarial determined contribution levels to the Pension Trust (CMR 9740). Additional one-time
contributions continue to be made each year if excess revenues or unspent savings are
available, subject to City Council approval. This practice was reinforced in the development of a
Pension Funding Policy, adopted by the City Council in November 2020 (CMR 11722). As part of
policy goals, the City seeks to reach a 90 percent funded status by FY 2036. This policy is an
evergreen policy that automatically renews until goals are complete, subject to modification at
the City Council’s direction, and is intended to identify a path forward for the City to address its
pension obligations on an ongoing basis, ensure prudent and proactive financial planning, and
avoid significant impacts to service delivery. This policy requires that staff consult with an
actuary every three years to inform the City Council of the progress towards achieving this goal.
Discussion
In November 2021, CalPERS completed an Asset Liability Management (ALM) process to review
the capital market assumptions and the strategic asset allocation to ascertain whether a change
in the discount rate and other economic assumptions is warranted. As part of this process, the
Actuarial Office also completed an Experience Study to review pension demographics for
potential modification. This comprehensive review is completed every four years and last
resulted in a reduction in the discount rate from 7.5 percent to 7.0 percent. Notable outcomes
of the recent ALM process include but are not limited to the following:
▪ Reduction to the discount rate from 7.0 to 6.8 percent;
▪ New actuarial assumptions, including a reduction for price inflation from 2.50 to 2.30
percent; and
▪ New asset allocation to target 1/3 investment in private assets, add 5 percent leverage,
and reduce public equity exposure
▪
In the Period ending June 30, 2021, the plan experienced a 21.3 percent investment return as
compared to a 6.8 percent return assumed by CalPERS. This gain triggered the CalPERS Risk
Mitigation Policy to use of a portion of the gains to offset the costs of reducing the expected
volatility of future investment returns. Consistent with the current amortization policy, the
resulting investment gain will be amortized over 20 years with a 5-year ramp-up period.
Overall, the funded status of the Public Employee’s Retirement Fund (PERF) increased 10.6
percent over the prior year, from 70.6 percent to 81.2 percent as of June 30, 2021. This report
does not consider the preliminary -6.1 percent return on investments for the period ending
June 30, 2022 (6.8 percent target); this investment loss will be included in the report issued in
fall 2023 and incorporated in the FY 2025 budget. CalPERS estimates that this loss will result in
a 9.2 percent decrease in the total PERF, from 81.2 percent to 72.0 percent as of June 30, 2022.
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Public Employee’s Pension Reform Act (PEPRA) Employee Contributions
The California Public Employee’s Pension Reform Act (PEPRA) was enacted in 2013 to address
structural concerns relating to the public retirement employee system and changed the way
CalPERS retirement and health benefits were applied and placed compensation benefits on
members. Provisions included reduced benefit formulas and increased retirement age and
created a lower pensionable compensation cap ($161,969 in FY 2022). Additionally, PEPRA
members are subject to possible increases or decreases to their contribution rate based on the
requirement that members contribute at least 50 percent of the total annual NC of their
pension benefit. As a result of the June 30, 2021 valuation, the PEPRA employee contribution
for the Miscellaneous group will increase 1.00 percent, from 6.25 percent to 7.25 percent. This
is the first rate increase for the PEPRA Miscellaneous members since the inception of the plan.
There is no change for PEPRA employees in the Safety group, the 11.75 percent contribution
remains unchanged from the prior year. The most recent change for the Safety plan occurred in
the June 30, 2018 valuation (FY 2021), resulting in a 1.00 percent increase from 10.75 percent
to 11.75 percent. Additionally, the City has negotiated Memoranda of Agreements (MOAs) with
labor groups to include provisions for employees to accept a greater share of pension costs;
Miscellaneous groups pick-up 1-2 percent and Safety groups pick up 3-4 percent of the
employer share of pension costs1. Therefore, a PEPRA employee in the Miscellaneous group will
contribute a total of 8.25 percent (MGMT and UMPAPA) to 9.25 percent (SEIU) of pensionable
salary beginning in FY 2024. This rate is inclusive of the PEPRA required rate of 7.25 percent
plus the negotiated terms to pay 1.00 percent (MGMT and UMPAPA) and 2.00 percent (SEIU) of
the employer share.
Current and Projected Employer Contributions
The ADC for the Miscellaneous Plan is $38.8 million in FY 2024, a decrease of $0.6 million (1.6
percent), from an ADC of $39.5 million in FY 2023. The ADC for the Safety Plan is $20.7 million
in FY 2024, a decrease of $0.2 million (1.0 percent), from an ADC of $20.9 in FY 2023. The ADC
will inform the development of the FY 2024–FY 2033 Long Range Financial Forecast and FY 2024
Adopted Budget.
Tables 2 summarizes the projected employer contributions required for each plan to fund the
ADC and the NC and UAL that make up this rate. Over the next six years, CalPERS estimates that
future ADCs will steadily decrease from a peak of 44.8 percent of payroll in FY 2024 to 30.7
percent of payroll by FY 2029 for the Miscellaneous plan. Over the same six-year span, CalPERS
estimates that the ADC will peak at 74.0 percent of payroll in FY 2024 and steadily decrease to
63.2 percent of payroll in 2029 for Safety. Of important note, these results do not include
preliminary investment losses incurred June 30, 2022. Additionally, investment gains and losses
are subject to a five-year ramp-up period. Therefore, investment gains recognized in the June
1 Safety Group: Fire Chiefs Association (FCA), International Association of Fire Fighters (IAFF), and Police
Management Association (PMA) at 4.0%, Palo Alto Peace Officers’ Association (PAPOA) at 3.5%.
Miscellaneous Group: Service Employees International Union (SEIU) at 2.0%, and Management, Professionals, and
Council Appointees (MGMT) and Utilities Management and Professionals (UMPAPA) at 1.0%,
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30, 2021 valuation will be phased in from FY 2024 through FY 2028.
TABLE 2: CalPERS Current and Projected Employer Contributions*
Miscellaneous FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029
NC (%)** 11.0 10.6 11.7 11.4 11.1 10.7 10.4 10.1
UAL (%) 30.8 32.3 33.1 32.2 27.8 22.2 20.5 20.6
Total ADC (% payroll) 41.8% 42.9% 44.8% 43.6% 38.9% 32.9% 30.9% 30.7%
NC ($) 9.4 9.7 10.2 10.1 10.2 10.1 10.1 10.0
UAL ($)** 26.4 29.7 28.7 28.6 25.5 20.8 19.8 20.5
Total ADC ($) $35.7M $39.5M $38.8M $38.8M $35.6M $30.9M $29.8M $30.5M
Safety FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029
NC (%)** 21.5 20.6 22.6 22.0 21.3 20.7 20.1 19.4
UAL (%) 48.0 50.6 51.4 50.3 48.2 46.1 43.5 43.8
Total ADC (% payroll) 69.6% 71.1% 74.0% 72.3% 69.5% 66.8% 63.6% 63.2%
NC ($) 6.0 6.1 6.3 6.3 6.3 6.3 6.3 6.2
UAL ($)** 13.3 14.9 14.4 14.5 14.3 14.0 13.6 14.1
Total ADC ($) $19.2M $20.9M $20.7M $20.8M $20.5M $20.3M $19.9M $20.3M
* The City’s current Memoranda of Agreements (MOAs) with labor groups include provisions for employees to accept a
greater share of pension costs to curtail the City’s growing pension expense; Miscellaneous groups pick-up 1-2% and Safety
groups pick up 3-4%. CalPERS does not consider these amounts in valuation calculations.
** The City makes payments to CalPERS for NC as a percentage of payroll and for UAL as a flat dollar rate. For illustrative
purposes, this table uses CalPERS estimates to restate the total ADC (NC and UAL) in respective terms.
Pension Plan’s Funded Status
The funded status is a measure of how well funded, or how “on track” a plan is with respect to
assets versus accrued liabilities. As of June 30, 2021, the funded status of the overall Public
Employee’s Retirement Fund (PERF) increased 10.6 percent over the prior year, from 70.6
percent to 81.2 percent. This rate is higher than the City’s funded status of 75.3 percent for
Miscellaneous and 69.4 percent for Safety. Table 3 details the City’s June 30, 2021 funded
status for the Miscellaneous and Safety plans with an assumed rate of return of 6.8 percent.
The total unfunded pension liability decreased from $510.4 million as of June 30, 2020 to
$391.9 million as of June 30, 2021. This represents a decrease of $118.5 million, or 23.2 percent
over the prior year. This significant change is predominantly due to a significant investment
return of 21.3 percent in 2020-2021 and does not consider preliminary investments losses of -
6.1 percent for the period ending June 30, 2021. CalPERS estimates that this loss will result in a
9.2 percent decrease in the overall funded status of the PERF, from 81.2 percent to 72.0
percent as of June 30, 2022.
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TABLE 3: CalPERS Projected Unfunded Accrued Liability
As of
June 30, 2018
As of
June 30, 2019
As of
June 30, 2020
As of
June 30,2021
Miscellaneous 284,856,248 294,703,569 317,116,346 236,033,956
Miscellaneous Funded Status 65.8% 66.1% 65.1% 75.3%
Safety 170,712,183 182,221,129 193,301,713 155,885,841
Safety Funded Status 62.2% 61.3% 60.3% 69.4%
TOTAL UNFUNDED PENSION
LIABILITY
$455,568,431 $476,924,698 $510,418,059 $391,919,797
% Change from Prior Year 9.8% 4.7% 7.0% -23.2%
Long-term Financial Planning
The City has taken several proactive steps to address rising pension costs and long-term
liabilities, including cost-sharing in labor agreements, establishing an irrevocable Section 115
Pension Trust (“Pension Trust”), and adopting a Pension Funding Policy. Consistent with City
Council direction, staff continues to calculate the NC of pension at a more conservative
discount rate than CalPERS and transmits amounts above required payments to the Pension
Trust. Additional one-time contributions continue to be made each year if excess revenues or
unspent savings are available, subject to City Council approval.
The FY 2023 Adopted Budget includes a two-year plan to reduce the discount rate for
supplemental contributions to the Pension Trust from a previously approved rate of 6.2 percent
to 5.3 percent. This action more closely aligns the discount rate with the recent ALM study,
which includes a survey of external asset managers and consultants to gain expert projections
on expected market returns. In the most recent ALM study, the median expected returns of
survey participants were 5.3 percent (10-year) to 6.2 percent (20-year)2. It is important to note
that the Pension Policy does not require realignment of this rate based on market returns, or
other external factors. However, a lower discount rate aligns with the policy's intent to fund
pensions at a rate that more closely reflects market projections. The City has engaged in
extensive conversations to address the cost of current and forecasted pension benefits,
including strategies to pre-fund long-term pension obligations. As part of pension funding
guidelines in September 2018, the Finance Committee directed the use of a 6.2 percent rate of
return for financial planning purposes (CMR 9604). This rate was consistent with CalPERS
investment consultant (Wilshire Associates) 10-year projection as of November 20163. Wilshire
continues to provide pension consultancy services to CalPERS and participates in survey
responses included in the ALM study. Staff anticipates returning to the Finance Committee in
fall 2022 to engage in a more detailed discussion on the Pension Policy, including external and
2 CalPERS ALM Quarterly Webinar, August 03.2021 (slide 26) -
https://www.calpers.ca.gov/docs/alm-quarterly-webinar-08-03-2021.pdf
3 Wilshire CalPERS Performance Review, June 30, 2016 (slide 12) -
https://web.archive.org/web/20161221170559/https://www.calpers.ca.gov/docs/board-
agendas/201608/invest/item07b-01.pdf
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other factors to use as guidance in setting the discount rate for supplemental contributions.
In total, planned contributions (principal) of nearly $50 million to the pension Trust Fund will
have been made since inception in FY 2017 through FY 2023 (65 percent from the General
Fund). The Trust Fund is invested in a moderately conservative portfolio, earning 11.5 percent
for the year ending June 30, 2021, a 5.4 percent increase over the prior year return of 6.1
percent. These additional funds are not factored into the CalPERS reports funded status, when
included the City’s combined funded status is 76.6 percent.
Timeline and Next Steps
Staff is preparing for a series of meetings with the Finance Committee this year to further
review the current status of the City and its Council approved Pension Funding Policy. As part
of the policy and Council direction, periodic reviews are included to assess and respond to
changes impacting the City’s pensions and Other Post-Employment Benefits (OPEB) plans. Staff
expect as part of this review to memorialize any practices adjusted since the adoption of the
policy, reviewing progress towards policy goals and discuss and review any modifications to the
Pension Policy or budgetary practices used to inform financial planning of these benefits.
The FY 2024 annual budget development process will begin with the FY 2024–2033 Long Range
Financial Forecast (LRFF) in December 2022.
Below is a list of expected reports and City Council updates over the coming months. Staff will
continue to update the City Council and incorporate information as it becomes available.
• Oct/November 2022: Review Pension and Other Post Employment Benefit
(OPEB)/Retiree Healthcare Trust Funds: Staff are working to arrange an item including
representatives from Public Agency Retirement Service (PARS) and CalPERS will discuss
performance and investment strategy of the City’s Section 115 Pension Trust and
California Employers’ Retirement Benefit Trust (CERBT).
• Nov/December 2022: Pension Policy Check-in: Staff is engaged with an actuary to
complete a comprehensive analysis of pension plans including but not limited to funding
policy, economic and demographic assumptions, and other risk mitigation strategies.
This analysis will be used to inform the progress the City has made towards Pension
Policy goals of meeting a 90 percent funding level by FY 2036 (15 years).
• Dec/January: FY 2024 to FY 2033 Long Range Financial Forecast (LRFF): Annually, staff
brings forward a LRFF that projects the City’s financial outlook over the next 10 years
based on current City Council approved service levels and several alternative scenarios.
• May/June: FY 2024 Budget Deliberations and City Council Adoption: Actuarially
determined contributions as calculated by CalPERS in the June 30, 2021 valuation
reports and the additional contributions per the pension funding are used as part of the
development of the FY 2024 budget and City’s pension contributions.
Resource Impact
This is an informational report and will be used to inform the development of the FY 2024–2033
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Long Range Financial Forecast (LRFF), the FY 2024 Adopted Operating Budget, and other long-
term financial planning.
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 Valuation as of June 30, 2021
• Attachment C: CalPERS Safety Valuation as of June 30, 2021
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Attachment A:
City of Palo Alto Pension Plan Benefit Levels Enrollment by Plan and Employee Group
City Council & Council Appointees 9 10 IAFF 81 79
Tier 1 12 Tier 1 40 45
Tier 2 33 Tier 2 98
Tier 3 55 Tier 3 32 26
Management and Professional 186 180 Fire Chief's Association 54
Tier 1 72 74 Tier 1 54
Tier 2 32 35 Tier 2 00
Tier 3 82 71 Tier 3 00
Service Employees' International 490 491 Fire Management 23
Tier 1 167 192 Tier 1 23
Tier 2 47 55 Tier 2 00
Tier 3*276 244 Tier 3 00
Utilities Management 42 44 PAPOA 63 68
Tier 1 30 35 Tier 1 27 33
Tier 2 4 Tier 2 44
Tier 3 8 5 Tier 3 32 31
Police Management Association 66
Tier 1 66
Tier 2 00
Tier 3 00
Police Management 12
Tier 1 01
Tier 2 11
Tier 3 00
Grand Total Miscellaneous Plans 727 727 Grand Total Safety Plans 158 162
Tier 1 270 302 Tier 1 80 91
Tier 2 86 96 Tier 2 14 13
Tier 3 371 329 Tier 3 64 58
Tiered Percentage Miscellaneous Plans Tiered Percentage Safety Plans
Tier 1 37.1%41.5%Tier 1 50.6%56.2%
Tier 2 11.8%13.2%Tier 2 8.9%8.0%
Tier 3 51.0%45.3%Tier 3 40.5%35.8%
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
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Employee Count
Sept 2022 Sept 2021Sept 2022 Sept 2021
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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 2022
Miscellaneous Plan of the City of Palo Alto (CalPERS ID: 6373437857)
Annual Valuation Report as of June 30, 2021
Dear Employer,
Attached to this letter, you will find the June 30, 2021 actuarial valuation report for the rate plan noted above. Provided
in this report is the determination of the minimum required employer contributions for fiscal year (FY)
2023-24. 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
(board) 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 requirements as needed. This valuation is based on an investment return assumption of 6.8%, which
was adopted by the board in November 2021. Other assumptions used in this report are those recommended in the
CalPERS Experience Study and Review of Actuarial Assumptions report from November 2021.
Required Contributions
The table below shows the minimum required employer contributions and the PEPRA member rate for FY 2023-24 along
with an estimate of the required contribution for FY 2024-25. 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 between the agency and the
employees.
Fiscal Year Employer Normal Cost Rate Employer Amortization of Unfunded Accrued Liability PEPRA Member Rate
2023-24 11.73% $28,654,772 7.25%
Projected Results
2024-25 11.4% $28,639,000 TBD
The actual investment return for FY 2021-22 was not known at the time this report was prepared. The projections above assume the investment return for that year would be 6.8%. To the extent the actual investment return for FY
2021-22 differs from 6.8%, the actual contribution requirements for FY 2024-25 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 FY 2028-29.
Changes from Previous Year’s Valuations
On July 12, 2021, CalPERS reported a preliminary 21.3% net return on investments for FY 2020-21. Since the return
exceeded the 7.00% discount rate sufficiently, the CalPERS Funding Risk Mitigation policy allows CalPERS to use a portion of the investment gain to offset the cost of reducing the expected volatility of future investment returns. Based on the
thresholds specified in the policy, the excess return of 14.3% prescribes a reduction in investment volatility that
corresponds to a reduction in the discount rate of 0.20%, from 7.00% to 6.80%.
On November 17, 2021, the board adopted new actuarial assumptions based on the recommendations in the November
2021 CalPERS Experience Study and Review of Actuarial Assumptions. This study reviewed the retirement rates, termination rates, mortality rates, rates of salary increases, and inflation assumption for public agencies. These new
assumptions are incorporated in this actuarial valuation and will impact the required contrib ution for FY 2023-24. In addition, the board adopted a new strategic asset allocation as part of its Asset Liability Management process. The new
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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Miscellaneous Plan of the City of Palo Alto (CalPERS ID: 6373437857)
Annual Valuation Report as of June 30, 2021
Page 2
asset allocation, along with the new capital market assumptions and economic assumptions, support a discount rate of
6.80%. This includes a reduction in the price inflation assumption from 2.50% to 2.30%.
Besides the above noted changes, there may also be changes specific to the plan such as contract amendments and funding changes.
Further descriptions of general changes are included in the “Highlights and Executive Summary” section and in Appendix
A, “Actuarial Methods and Assumptions.” The effects of the changes on the required contributions are included in the
“Reconciliation of Required Employer Contributions” section.
Questions
We understand that you might have questions about these results, and the plan actuary whose signature is on the
valuation report is available to discuss. If you have other questions, you may call the Customer Contact Center at (888)-
CalPERS or (888-225-7377). Sincerely,
SCOTT TERANDO, ASA, EA, MAAA, FCA, CFA
Chief Actuary, CalPERS
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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Actuarial Valuation
as of June 30, 2021
for the
Miscellaneous Plan
of the
City of Palo Alto
(CalPERS ID: 6373437857)
(Rate Plan ID: 8)
Required Contributions
for Fiscal Year
July 1, 2023 – June 30, 2024
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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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 6/30/20 - 6/30/21 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-24
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: 404975 (PY) FIN JOB INSTANCE ID: 379719 REPORT ID: 404977
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation - June 30, 2021 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 and satisfies
the actuarial valuation requirements of Government Code section 7504. This valuation is based on the member
and financial data as of June 30, 2021 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 provis ions
set forth in the California Public Employees’ Retirement Law.
The undersigned is an actuary who satisfies the Qualification Standards for Actuaries Issuing Statements of Actuarial Opinion in the United States with regard to pensions.
DAVID CLEMENT, ASA, MAAA, EA
Senior Pension Actuary, CalPERS
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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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
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation - June 30, 2021 Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 3
Introduction
This report presents the results of the June 30, 2021 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 (FY) 2023-24.
Purpose of the Report
The actuarial valuation was prepared by the CalPERS Actuarial Office using data as of June 30, 2021. The
purpose of the report is to:
• Set forth the assets and accrued liabilities of this plan as of June 30, 2021;
• Determine the minimum required employer contributions for the FY July 1, 2023 through June 30, 2024; • Provide actuarial information as of June 30, 2021 to the CalPERS Board of Administration (board) and
other interested parties.
The pension funding information presented in this report should not be used in financial reports subject to
Governmental Accounting Standards Board (GASB) Statement No. 68 for an Agent Employer Defined Benefit
Pension Plan. A separate accounting valuation report for such purposes is available from CalPERS and details
for ordering are available on the CalPERS website (www.calpers.ca.gov).
The measurements shown in this actuarial valuation may not be applicable for other purposes. The agency should contact the plan 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;
changes in plan provisions or applicable law; and differences between the required contributions determined
by the valuation and the actual contributions made by the agency.
Assessment and Disclosure of Risk
This report includes the following risk disclosures consistent with the 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 5.8% and 7.8%.
• A “Sensitivity Analysis,” showing the impact on current valuation results assuming rates of mortality
are 10% lower or 10% higher than our current post-retirement mortality assumptions adopted in 2021.
• Plan maturity measures indicating how sensitive a plan may be to the risks noted above.
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation - June 30, 2021 Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 4
Required Contributions
Fiscal Year
Required Employer Contributions 2023-24
Employer Normal Cost Rate 11.73%
Plus
Required Payment on Amortization Bases $28,654,772
Paid either as
1) Monthly Payment $2,387,898
Or
2) Annual Prepayment Option* $27,727,539
Required PEPRA Member Contribution Rate 7.25%
The total minimum required employer contribution is the sum of the Plan’s Employer Normal Cost Rate
(expressed as a percentage of payroll and paid as payroll is reported) plus the Employer Unfunded Accrued
Liability (UAL) Contribution Amount (billed monthly (1) or prepaid annually (2) in dollars).
* Only the UAL portion of the employer contribution can be prepaid (which must be received in full no
later than July 31).
For 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
2022-23 2023-24
Normal Cost Contribution as a Percentage of Payroll
Total Normal Cost 17.78% 19.28%
Employee Contribution1 7.20% 7.55%
Employer Normal Cost2 10.58% 11.73%
Projected Annual Payroll for Contribution Year $92,090,103 $86,604,632
Estimated Employer Contributions Based On
Projected Payroll
Total Normal Cost $16,373,620 $16,697,373
Employee Contribution 6,630,487 6,538,650
Employer Normal Cost 9,743,133 10,158,723
Unfunded Liability Contribution 29,715,229 28,654,772
% of Projected Payroll (illustrative only) 32.27% 33.09%
Estimated Total Employer Contribution $39,458,362 $38,813,495
% of Projected Payroll (illustrative only) 42.85% 44.82%
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% 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.
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation - June 30, 2021 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 FY 2023-24 is $28,654,772. CalPERS allows agencies to make additional discretionary payments (ADPs) at
any time and in any amount. These optional payments serve to reduce the UAL and future required
contributions and can result in significant long-term savings. Agencies can also 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 FY 2023-24 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.
Agencies considering making an ADP should contact CalPERS for additional information.
Minimum Required Employer Contribution for Fiscal Year 2023-24
Estimated
Normal Cost
Minimum UAL
Payment
ADP Total UAL
Contribution
Estimated Total
Contribution
$10,158,723 $28,654,772 $0 $28,654,772 $38,813,495
Alternative Fiscal Year 2023-24 Employer Contributions for Greater UAL Reduction
Funding
Target
Estimated
Normal Cost
Minimum UAL
Payment
ADP1 Total UAL
Contribution
Estimated Total
Contribution
10 years $10,158,723 $28,654,772 $336,302 $28,991,074 $39,149,797
5 years $10,158,723 $28,654,772 $21,200,805 $49,855,577 $60,014,300
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, 2023
as determined in the June 30, 2021 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% 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.
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation - June 30, 2021 Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 6
Plan’s Funded Status
The UAL and funded ratio are assessments 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. The funded ratio, on the other hand, is a relative measure of funded status that allows for
comparison between plans of different sizes. For measures of funded status that are appropriate f or 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. In particular, the investment return beginning with FY 2021-22 is assumed to be 6.80% per year, net of
investment and administrative expenses. Actual contribution rates during this projection period could be
significantly higher or lower than the projection shown below. The projected normal cost percentages below
reflect that the normal cost will continue to decline over time as new employees are hired into lower cost
benefit tiers. Future contribution requirements may differ significantly from those shown below. The actual long-term cost of the plan will depend on the actual benefits and expenses paid and the actual investment
experience of the fund.
Required
Contribution
Projected Future Employer Contributions
(Assumes 6.80% Return for Fiscal Year 2021-22 and Beyond)
Fiscal Year 2023-24 2024-25 2025-26 2026-27 2027-28 2028-29
Normal Cost % 11.73% 11.4% 11.1% 10.7% 10.4% 10.1%
UAL Payment $28,654,772 $28,639,000 $25,475,000 $20,811,000 $19,750,000 $20,467,000
Total as a % of Payroll* 44.82% 43.6% 38.9% 32.9% 30.9% 30.7%
Projected Payroll $86,604,632 $89,029,562 $91,522,389 $94,085,016 $96,719,397 $99,427,539
*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. Our online pension plan projection tool, Pension Outlook, is
available in the Employers section of the CalPERS website. Pension Outlook can help plan and budget pension
costs under various scenarios.
June 30, 2020 June 30, 2021
1. Present Value of Projected Benefits $1,023,471,916 $1,083,646,563
2. Entry Age Accrued Liability 909,429,635 956,179,582
3. Market Value of Assets (MVA) 592,313,289 720,145,626
4. Unfunded Accrued Liability (UAL) [(2) – (3)] $317,116,346 $236,033,956
5. Funded Ratio [(3) / (2)] 65.1% 75.3%
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation - June 30, 2021 Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 7
Cost
Actuarial Determination of Plan Cost
Contributions to fund the plan are comprised of two components:
• Normal Cost, expressed as a percentage of total active payroll
• Amortization of the Unfunded Accrued Liability (UAL), expressed as a dollar amount
For fiscal years prior to 2017-18, the Amortization of UAL component was expressed as a percentage of total
active payroll. Starting with FY 2017-18, the Amortization of UAL component is expressed as a dollar amount
and invoiced on a monthly basis. There is an option to prepay this amount during July of each fiscal year.
The Normal Cost component is 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 6.9% over the 20 years ending June 30, 2021, yet individual fiscal year returns
have ranged from -23.6% to +21.3%. In addition, CalPERS reviews all actuarial assumptions by conducting in-depth experience studies every four years, with the most recent experience study completed in 2021.
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation - June 30, 2021 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 6/30/20 – 6/30/21” and the effect on the employer contribution is shown in the “Reconciliation of Required Employer Contributions.” It should be noted that no change in liability or
contribution is shown for any plan changes which were already included in the prior year’s valuation.
Actuarial Methods and Assumptions
On November 17, 2021, the board adopted new actuarial assumptions based on the recommendations in the
2021 CalPERS Experience Study and Review of Actuarial Assumptions. This study reviewed the retirement
rates, termination rates, mortality rates, rates of salary increases, and inflation assumptions for Public Agencies. These new assumptions are incorporated in this actuarial valuation and will impact the required contribution
for FY 2023-24. In addition, the board adopted a new asset portfolio as part of its Asset Liability Management process. The new asset mix supports a 6.80% discount rate, which reflects a change in the price inflation
assumption to 2.30%.
Subsequent Events
The contribution requirements determined in this actuarial valuation report are based on demographic and
financial information as of June 30, 2021. Changes subsequent to that date are not reflected. Investment
returns below the assumed rate of return may increase future required contributions while investment returns
above the assumed rate of return may decrease future required contributions.
The projected employer contributions on Page 6 are calculated under the assumption that the discount rate remains at 6.8% going forward and that the realized rate of return on assets for FY 2021-22 is 6.8%.
This actuarial valuation report reflects statutory changes, regulatory changes , and board actions through
January 2022. Any subsequent changes or actions are not reflected.
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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Assets
• Reconciliation of the Market Value of Assets
• Asset Allocation
• CalPERS History of Investment Returns
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation - June 30, 2021 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 6/30/20 including Receivables $592,313,289
2. Change in Receivables for Service Buybacks (180,910)
3. Employer Contributions 31,005,355
4. Employee Contributions 6,975,879
5. Benefit Payments to Retirees and Beneficiaries (46,809,253)
6. Refunds (217,860)
7. Transfers 0
8. Service Credit Purchase (SCP) Payments and Interest 500,212
9. Administrative Expenses (749,764)
10. Miscellaneous Adjustments 0
11. Investment Return (Net of Investment Expenses) 137,308,678
12. Market Value of Assets as of 6/30/21 including Receivables $720,145,626
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation - June 30, 2021 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.
The asset allocation shown below reflects the allocation of the Public Employees’ Retirement Fund (PERF) in
its entirety as of June 30, 2021. The assets for City of Palo Alto Miscellaneous Plan are part of the PERF and
are invested accordingly.
Asset Class
Current Allocation
as of 6/30/2021
Policy Target
Allocation
as of 6/30/2021
Public Equity 51.4% 50.0%
Private Equity 8.3% 8.0%
Global Fixed Income 29.8% 28.0%
Real Assets 9.6% 13.0%
Liquidity 1.0% 1.0%
Total Fund Level Portfolios 2.5% 0.0%
Trust Level Financing (2.6%) 0.0%
Total Fund 100.0% 100.0%
On November 17, 2021, the board adopted changes to the strategic asset allocation as shown in the Policy Target Allocation below expressed as a percentage of total assets.
Strategic Asset Allocation Policy Targets
Asset Class
Policy Target
Allocation
effective
11/17/2021
Global Equity Cap-weighted 30.0%
Global Equity Non-cap-weighted 12.0%
Private Equity 13.0%
Private Debt 5.0%
Emerging Market Sovereign Bonds 5.0%
High Yield Bonds 5.0%
Investment Grade Corporates 10.0%
Mortgage-backed Securities 5.0%
Treasuries 5.0%
Real Assets 15.0%
Leverage (5.0%)
Total Fund 100.0%
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation - June 30, 2021 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 PERF for each fiscal year ending on
June 30 as reported by the Investment Office. Investment returns reported are net of investment expenses
but without reduction for administrative expenses. The assumed rate of return, however, is net of both
investment and administrative expenses. The Investment Office uses a three-month lag on private assets for investment performance reporting purposes. This can lead to a timing difference in the returns below and
those used for financial reporting purposes. The investment gain or loss calculation in this report relies on
assets that have been audited and are appropriate for financial reporting. Because of these differences, it is
possible for the Investment Office to report a return higher than the discount rate while the rate plan
experiences an investment loss, or a return lower than the discount rate while the rate plan experiences an investment gain.
The table below shows annualized investment returns of the PERF for various time periods ending on June
30, 2021 (figures reported are net of investment expenses but without reduction for administrative expenses).
These returns are the annual rates that if compounded over the indicated number of years would equate to
the actual time-weighted investment performance of the PERF. It should be recognized that in any given year
the rate of return is volatile. The portfolio has an expected volatility of 12.0% per year based on the most
recent Asset Liability Management study. The realized volatility is a measure of the risk of the portfolio
expressed as the standard deviation of the fund’s total monthly return distribution, expressed as an annual
percentage. Due to their volatile nature, when looking at investment returns, it is more instructive to look at returns over longer time horizons.
History of CalPERS Compound Annual Rates of Return and Volatilities
1 year 5 year 10 year 20 year 30 year
Compound Annual Return 21.3% 10.3% 8.5% 6.9% 8.4%
Realized Volatility – 7.3% 7.2% 8.5% 8.5%
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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Liabilities and Contributions
• Development of Accrued and Unfunded Liabilities
• (Gain) / Loss Analysis 6/30/20 - 6/30/21
• 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
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation - June 30, 2021 Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 14
Development of Accrued and Unfunded Liabilities
June 30, 2020 June 30, 2021
1. Present Value of Projected Benefits
a) Active Members $415,029,592 $425,818,364
b) Transferred Members 38,702,466 43,056,289
c) Terminated Members 19,811,280 20,009,393
d) Members and Beneficiaries Receiving Payments 549,928,578 594,762,517
e) Total $1,023,471,916 $1,083,646,563
2. Present Value of Future Employer Normal Costs $64,609,385 $77,169,423
3. Present Value of Future Employee Contributions $49,432,896 $50,297,558
4. Entry Age Accrued Liability
a) Active Members [(1a) - (2) - (3)] $300,987,311 $298,351,383
b) Transferred Members (1b) 38,702,466 43,056,289
c) Terminated Members (1c) 19,811,280 20,009,393
d) Members and Beneficiaries Receiving Payments (1d) 549,928,578 594,762,517
e) Total $909,429,635 $956,179,582
5. Market Value of Assets (MVA) $592,313,289 $720,145,626
6. Unfunded Accrued Liability (UAL) [(4e) - (5)] $317,116,346 $236,033,956
7. Funded Ratio [(5) / (4e)] 65.1% 75.3%
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation - June 30, 2021 Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 15
(Gain)/Loss Analysis 6/30/20 – 6/30/21
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 6/30/20 $317,116,346
b) Expected Payment on the UAL during 2020-21 23,432,860 c) Interest through 6/30/21 [.07 x (1a) - ((1.07)½ - 1) x (1b)] 21,391,866
d) Expected UAL before all other changes [(1a) - (1b) + (1c)] 315,075,352 e) Change due to plan changes 0
f) Change due to AL Significant Increase 0
g) Change due to assumption change 507,348
h) Change due to method change 0
i) Change due to Funding Risk Mitigation 21,671,636
j) Expected UAL after all other changes [(1d) + (1e) + (1f) + (1g) + (1h) + (1i)] 337,254,336
k) Actual UAL as of 6/30/21 236,033,956
l) Total (Gain)/Loss for 2020-21 [(1k) - (1j)] ($101,220,380)
2. Investment (Gain)/Loss for the Year
a) Market Value of Assets as of 6/30/20 $592,313,289 b) Prior Fiscal Year Receivables (972,288)
c) Current Fiscal Year Receivables 791,379 d) Contributions Received 37,981,234
e) Benefits and Refunds Paid (47,027,114)
f) Transfers, SCP Payments and Interest, and Miscellaneous Adjustments 500,213
g) Expected Return at 7% per year 41,906,109
h) Expected Assets as of 6/30/21 [(2a) + (2b) + (2c) + (2d) + (2e) + (2f) + (2g)] 625,492,821
i) Actual Market Value of Assets as of 6/30/21 720,145,626
j) Investment (Gain)/Loss [(2h) - (2i)] ($94,652,805)
3. Non-Investment (Gain)/Loss for the Year a) Total (Gain)/Loss (1l) ($101,220,380)
b) Investment (Gain)/Loss (2j) (94,652,805)
c) Non-Investment (Gain)/Loss [(3a) - (3b)] ($6,567,575)
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation - June 30, 2021 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 year.
• The assets, liabilities, and funded status of the plan are measured as of the valuation date: June 30, 2021. • The required employer contributions determined by the valuation are for the fiscal year beginning two years after the valuation date: FY 2023-24.
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 ag encies 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 Contribu tion 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
2023-24
Ramp
Shape
Escala-
tion
Rate
Amort.
Period
Balance
6/30/21
Expected
Payment
2021-22
Balance
6/30/22
Expected
Payment
2022-23
Balance
6/30/23
Minimum Required
Payment
2023-24
Assumption Change 6/30/03 No Ramp 2.80% 2 8,682,514 2,383,606 6,809,609 2,449,156 4,741,605 2,496,841
Method Change 6/30/04 No Ramp 2.80% 3 (748,460) (167,641) (626,108) (172,252) (490,671) (175,518)
Benefit Change 6/30/05 No Ramp 2.80% 3 16,581,832 3,714,028 13,871,168 3,816,163 10,870,629 3,888,537 Assumption Change 6/30/09 No Ramp 2.80% 8 21,483,598 2,648,920 20,206,981 2,721,766 18,768,272 2,760,473
Special (Gain)/Loss 6/30/09 No Ramp 2.80% 18 16,644,190 1,231,252 16,503,569 1,265,112 16,318,393 1,270,929 Special (Gain)/Loss 6/30/10 No Ramp 2.80% 19 1,386,328 99,393 1,377,882 102,127 1,366,036 102,505
Assumption Change 6/30/11 No Ramp 2.80% 10 10,667,425 1,137,991 10,216,764 1,169,285 9,703,117 1,183,563
Special (Gain)/Loss 6/30/11 No Ramp 2.80% 20 (58,758) (4,092) (58,525) (4,204) (58,160) (4,216)
(Gain)/Loss 6/30/12 No Ramp 2.80% 21 26,089,758 1,767,962 26,036,777 1,816,581 25,929,949 1,820,158
Payment (Gain)/Loss 6/30/12 No Ramp 2.80% 21 3,094,804 209,718 3,088,520 215,485 3,075,848 215,910
(Gain)/Loss 6/30/13 100% Up/Down 2.80% 22 81,863,300 5,707,054 81,532,102 5,863,997 81,016,191 5,880,343
(Gain)/Loss 6/30/14 100% Up/Down 2.80% 23 (52,079,364) (3,532,907) (51,969,710) (3,630,062) (51,752,196) (3,637,070)
Assumption Change 6/30/14 100% Up/Down 2.80% 13 43,936,194 4,418,049 42,358,063 4,539,546 40,547,059 4,589,850
(Gain)/Loss 6/30/15 100% Up/Down 2.80% 24 32,336,309 2,138,299 32,325,372 2,197,103 32,252,921 2,199,492 (Gain)/Loss 6/30/16 100% Up/Down 2.80% 25 36,647,560 1,916,817 37,158,677 2,461,912 37,141,227 2,462,580
Assumption Change 6/30/16 100% Up/Down 2.80% 15 14,141,407 1,040,563 14,027,662 1,336,473 13,600,377 1,348,739 (Gain)/Loss 6/30/17 100% Up/Down 2.80% 26 (20,139,642) (791,461) (20,691,210) (1,084,301) (20,977,651) (1,354,707)
Assumption Change 6/30/17 100% Up/Down 2.80% 16 15,134,060 823,972 15,311,650 1,128,841 15,186,252 1,422,767
Assumption Change 6/30/18 80% Up/Down 2.80% 17 27,339,970 996,963 28,168,786 1,536,570 28,496,309 2,063,437
Method Change 6/30/18 80% Up/Down 2.80% 17 5,295,879 193,116 5,456,425 297,641 5,519,868 399,697
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation - June 30, 2021 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 2023-24 Ramp Shape
Escala-
tion Rate Amort. Period Balance 6/30/21
Expected
Payment 2021-22 Balance 6/30/22
Expected
Payment 2022-23 Balance 6/30/23
Minimum
Required
Payment 2023-24 (Gain)/Loss 6/30/18 80% Up/Down 2.80% 27 (6,128,919) (162,917) (6,377,320) (251,096) (6,551,485) (334,277)
Investment (Gain)/Loss 6/30/19 60% Up Only 0.00% 18 2,545,544 55,656 2,661,124 111,311 2,727,047 163,968 Non-Investment (Gain)/Loss 6/30/19 No Ramp 0.00% 18 5,849,145 533,753 5,695,285 533,753 5,530,962 524,400
Investment (Gain)/Loss 6/30/20 40% Up Only 0.00% 19 14,800,998 0 15,807,466 346,261 16,524,533 679,278
Non-Investment (Gain)/Loss 6/30/20 No Ramp 0.00% 19 9,709,680 0 10,369,938 948,061 10,095,329 931,019
Assumption Change 6/30/21 No Ramp 0.00% 20 507,348 (696,584) 1,261,726 (716,088) 2,087,558 187,721
Net Investment (Gain) 6/30/21 20% Up Only 0.00% 20 (71,705,015) 0 (76,580,956) 0 (81,788,461) (1,758,018)
Non-Investment (Gain)/Loss 6/30/21 No Ramp 0.00% 20 (6,567,575) 0 (7,014,170) 0 (7,491,134) (673,629) Risk Mitigation 6/30/21 No Ramp 0.00% 1 21,671,636 (671,999) 23,839,778 (690,815) 26,174,799 27,050,107
Risk Mitigation Offset 6/30/21 No Ramp 0.00% 1 (22,947,790) 0 (24,508,240) 0 (26,174,799) (27,050,107)
Total 236,033,956 24,989,511 226,259,085 28,308,326 212,389,724 28,654,772
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation - June 30, 2021 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 ac cording to the
CalPERS amortization policy. Many agencies have expressed a desire for a more stable pattern of payments or have indicated 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 curre nt amortization
schedule reflecting the individual bases and remaining periods shown on the previous page, and 2) alternative “fresh start” amortization schedules using two sample periods that would both result in interest savings relative
to the current amortization schedule. To initiate a Fresh Start, please contact the plan actuary.
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 an
appropriate 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.
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation - June 30, 2021 Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 19
Amortization Schedule and Alternatives
(continued)
Alternative Schedules
Current Amortization
Schedule 10 Year Amortization 5 Year Amortization
Date Balance Payment Balance Payment Balance Payment
6/30/2023 212,389,724 28,654,772 212,389,724 28,991,074 212,389,724 49,855,577
6/30/2024 197,219,216 28,638,969 196,871,665 28,991,074 175,309,435 49,855,577
6/30/2025 181,033,443 25,475,161 180,298,378 28,991,074 135,707,686 49,855,577
6/30/2026 167,016,644 20,811,196 162,598,107 28,991,074 93,413,019 49,855,578
6/30/2027 156,866,639 19,750,445 143,694,218 28,991,074 48,242,313 49,855,577
6/30/2028 147,122,654 20,467,226 123,504,865 28,991,075
6/30/2029 135,975,328 21,204,088 101,942,634 28,991,074
6/30/2030 123,308,478 21,961,576 78,914,173 28,991,075
6/30/2031 108,997,466 19,297,342 54,319,775 28,991,074
6/30/2032 96,466,630 18,824,467 28,052,959 28,991,074
6/30/2033 83,572,386 16,745,409
6/30/2034 71,949,918 15,768,752
6/30/2035 60,546,438 14,323,336
6/30/2036 49,861,275 11,898,300
6/30/2037 40,955,653 10,672,875
6/30/2038 32,710,854 9,364,917
6/30/2039 25,257,105 8,390,374
6/30/2040 18,303,635 7,804,363
6/30/2041 11,482,935 3,366,357
6/30/2042 8,784,842 86,089
6/30/2043 9,293,242 8,087,908
6/30/2044 1,566,807 1,619,202
6/30/2045
6/30/2046
6/30/2047
6/30/2048
6/30/2049
6/30/2050
6/30/2051
6/30/2052
Total 333,213,124 289,910,742 249,277,886
Interest Paid 120,823,400 77,521,018 36,888,162
Estimated Savings 43,302,382 83,935,238
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation - June 30, 2021 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 7/1/22 – 6/30/23
a) Employer Normal Cost 10.58%
b) Employee contribution 7.20%
c) Total Normal Cost 17.78%
2. Changes since the prior year annual valuation
a) Effect of demographic experience (0.17%) b) Effect of plan changes 0.00%
c) Effect of Funding Risk Mitigation 0.82%
d) Effect of assumption changes 0.85%
e) Effect of method changes 0.00%
f) Net effect of the changes above [sum of (a) through (e)] 1.50%
3. For Period 7/1/23 – 6/30/24
a) Employer Normal Cost 11.73%
b) Employee contribution 7.55%
c) Total Normal Cost 19.28%
Employer Normal Cost Change [(3a) – (1a)] 1.15%
Employee Contribution Change [(3b) – (1b)] 0.35%
Unfunded Liability Contribution ($)
1. For Period 7/1/22 – 6/30/23 29,715,229
2. Changes since the prior year annual valuation
a) Effect of adjustments to prior year’s amortization schedule 0
b) Effect of elimination of amortization bases 0
c) Effect of progression of amortization bases1 1,719,408
d) Effect of net investment (gain) after Funding Risk Mitigation2 (1,758,018)
e) Effect of non-investment (gain)/loss during the prior year (673,629)
f) Effect of Funding Risk Mitigation (re-amortize existing bases at 6.8%) (466,137)
g) Effect of Golden Handshake 0
h) Effect of plan changes 0
i) Effect of AL Significant Increase 0
j) Effect of assumption changes 117,919
k) Effect of changes due to Fresh Start or one year recognition of small balances 0
l) Effect of method change 0
m) Net effect of the changes above [sum of (a) through (l)] (1,060,457)
3. For Period 7/1/23 – 6/30/24 [(1) + (2m)] 28,654,772
The amounts shown for the period 7/1/22 – 6/30/23 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 Includes scheduled escalation in individual amortization base payments due to the 5-year ramp and payroll growth
assumption used in the pre-2019 amortization policy.
2 The unfunded liability contribution for the investment (gain)/loss during the year prior to the valuation date is 20% of the “full” annual requirement due to the 5-year ramp. Increases to this amount that occur during the ramp period will be included in line c) in future years.
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation - June 30, 2021 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. 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,
2021 are not included.
Fiscal
Year
Employer
Normal Cost
Unfunded Rate
Unfunded Liability
Payment ($)
Additional Discretionary
Payments
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 0
2020 - 21 11.487% N/A 23,432,860 0
2021 - 22 10.95% N/A 26,358,094
2022 - 23 10.58% N/A 29,715,229
2023 - 24 11.73% N/A 28,654,772
Funding History
The table below shows the recent history of actuarial accrued liability, market value of assets, unfunded
accrued liability, funded ratio and annual covered payroll.
[]
Valuation
Date
Accrued Liability
(AL)
Market Value of Assets
(MVA)
Unfunded Accrued
Liability (UAL)
Funded
Ratio
Annual Covered
Payroll
6/30/2012 $576,182,013 $373,592,926 $202,589,087 64.8% $62,910,810
6/30/2013 602,540,178 412,227,784 190,312,394 68.4% 64,439,680
6/30/2014 666,978,627 475,566,994 191,411,633 71.3% 67,802,942
6/30/2015 696,699,220 477,031,099 219,668,121 68.5% 71,574,823
6/30/2016 730,382,476 468,702,245 261,680,231 64.2% 75,345,962
6/30/2017 772,526,669 511,805,893 260,720,776 66.3% 78,476,098
6/30/2018 831,958,865 547,102,617 284,856,248 65.8% 80,363,405
6/30/2019 868,716,440 574,012,871 294,703,569 66.1% 78,848,216
6/30/2020 909,429,635 592,313,289 317,116,346 65.1% 84,892,137
6/30/2021 956,179,582 720,145,626 236,033,956 75.3% 79,718,988
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation - June 30, 2021 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 FY 2023-24. 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 ben efits.
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 2023-24
Number of
Actives
Payroll on
6/30/2021
8 Miscellaneous First Level 23.70% 306 $36,349,177
26004 Miscellaneous PEPRA Level 14.25% 321 $30,849,866
30157 Miscellaneous Second Level 19.23% 96 $12,519,945
Plan Total 19.28% 723 $79,718,988
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 shown for the respective benefit level does not reflect those differences. Additionally, if a Second Level Benefit Group amended to the
same benefit formula as a First Level Benefit Group, their Normal Costs may be dissimilar due to demographic
or other population differences. For questions in these situations, please contact the plan actuary.
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation - June 30, 2021 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 le ast 50% 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
more than 1% from the base total normal cost established for the plan, the new member rate shall be 50%
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, 2023, based on 50% of the Total Normal Cost for each respective plan as of the June 30, 2021 valuation.
Basis for Current Rate Rates Effective July 1, 2023
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% 14.25% 1.750% Yes 7.25%
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% of the active population, or
2. 25% 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% of the total normal cost of the PEPRA group shown on the “Normal Cost by Benefit Group” page.
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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Risk Analysis
• Future Investment Return Scenarios
• Discount Rate Sensitivity
• Mortality Rate Sensitivity
• Maturity Measures
• Maturity Measures History
• Hypothetical Termination Liability
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
Packet Pg. 39
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CalPERS Actuarial Valuation - June 30, 2021 Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 25
Future Investment Return Scenarios
Analysis using the investment return scenarios from the Asset Liability Management process completed in 2021 was performed to determine the effects of various future investment returns on required employer
contributions. The projections below reflect the impact of the CalPERS Funding Risk Mitigation policy. The projected normal cost rates reflect that the rates are anticipated to decline over time as new employees are
hired into lower-cost benefit tiers. The projections also assume that all other actuarial assumptions will be
realized and that no further changes in assumptions, contributions, benefits, or funding will occur.
The first table shows projected contribution requirements if the fund were to earn either 3.0% or 10.8%
annually. These alternate investment returns were chosen because 90% of long-term average returns are expected to fall between them over the 20-year period ending June 30, 2041.
Assumed Annual Return
FY 2021-22
through FY 2040-41
Projected Employer Contributions
FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29
3.0% (5th percentile)
Normal Cost Rate 11.4% 11.1% 10.7% 10.4% 10.1%
UAL Contribution $29,306,000 $27,491,000 $24,873,000 $26,572,000 $30,777,000
10.8% (95th percentile)
Normal Cost Rate 11.6% 11.6% 11.5% 11.4% 11.3%
UAL Contribution $27,995,000 $23,599,000 $17,050,000 $13,338,000 $0
Required contributions outside of this range are also possible. In particular, whereas it is unlikely that
investment returns will average less than 3.0% or greater than 10.8% over a 20-year period, the likelihood
of a single investment return less than 3.0% or greater than 10.8% in any given year is much greater. The
following analysis illustrates the effect of an extreme, single year investment return.
The portfolio has an expected volatility (or standard deviation) of 12.0% per year. Accordingly, in any given
year there is a 16% probability that the annual return will be -5.2% or less and a 2.5% probability that the annual return will be -17.2% or less. These returns represent one and two standard deviations below the
expected return of 6.8%.
The following table shows the effect of a one or two standard deviation investment loss in FY 2021-22 on the
FY 2024-25 contribution requirements. Note that a single-year investment gain or loss decreases or increases
the required UAL contribution amount incrementally for each of the next five years, not just one, due to the 5-year ramp in the amortization policy. However, the contribution requirements beyond the first year are also
impacted by investment returns beyond the first year. Historically, significant downturns in the market are often followed by higher than average returns. Such investment gains would offset the impact of these single
year negative returns in years beyond FY 2024-25.
Assumed Annual Return for
Fiscal Year 2021-22
Required
Employer Contributions
Projected
Employer Contributions
FY 2023-24 FY 2024-25
(17.2%) (2 standard deviation loss)
Normal Cost Rate 11.73% 11.4%
UAL Contribution $28,654,772 $32,851,000
(5.2%) (1 standard deviation loss)
Normal Cost Rate 11.73% 11.4%
UAL Contribution $28,654,772 $30,745,000
• Without investment gains (returns higher than 6.8%) in year FY 2022-23 or later, projected
contributions rates would continue to rise over the next four years due to the continued phase-in of the impact of the illustrated investment loss in FY 2021-22.
• The Pension Outlook Tool can be used to model projected contributions for these scenarios beyond
FY 2024-25 as well as to model other investment return scenarios.
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
Packet Pg. 40
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CalPERS Actuarial Valuation - June 30, 2021 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 4.5% and 2.3%, 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, 2021 assuming alternate discount rates by changing the two components independently. Results are shown using the current discount rate of 6.8% as well as alternate
discount rates of 5.8% and 7.8%. The rates of 5.8% and 7.8% were selected since they illustrate the impact
of a 1.0% increase or decrease to the 6.8% assumption.
Sensitivity to the Real Rate of Return Assumption
As of June 30, 2021
1% Lower
Real Return Rate
Current
Assumptions
1% Higher
Real Return Rate
Discount Rate 5.8% 6.8% 7.8%
Price Inflation 2.3% 2.3% 2.3%
Real Rate of Return 3.5% 4.5% 5.5%
a) Total Normal Cost 24.49% 19.28% 15.35%
b) Accrued Liability $1,079,948,215 $956,179,582 $853,808,167 c) Market Value of Assets $720,145,626 $720,145,626 $720,145,626
d) Unfunded Liability/(Surplus) [(b) - (c)] $359,802,589 $236,033,956 $133,662,541 e) Funded Ratio 66.7% 75.3% 84.3%
Sensitivity to the Price Inflation Assumption
As of June 30, 2021
1% Lower
Inflation Rate
Current
Assumptions
1% Higher
Inflation Rate
Discount Rate 5.8% 6.8% 7.8%
Price Inflation 1.3% 2.3% 3.3%
Real Rate of Return 4.5% 4.5% 4.5%
a) Total Normal Cost 20.27% 19.28% 17.53% b) Accrued Liability $987,053,305 $956,179,582 $881,745,544
c) Market Value of Assets $720,145,626 $720,145,626 $720,145,626 d) Unfunded Liability/(Surplus) [(b) - (c)] $266,907,679 $236,033,956 $161,599,918
e) Funded Ratio 73.0% 75.3% 81.7%
Mortality Rate Sensitivity
The following table looks at the change in the June 30, 2021 plan costs and funded status under two different
longevity scenarios, namely assuming rates of post-retirement mortality are 10% lower or 10% higher than
our current mortality assumptions. This type of analysis highlights the impact on the plan of improving or worsening mortality over the long term.
As of June 30, 2021 10% Lower
Mortality Rates
Current
Assumptions
10% Higher
Mortality Rates
a) Total Normal Cost 19.61% 19.28% 18.97%
b) Accrued Liability $976,703,835 $956,179,582 $937,336,721
c) Market Value of Assets $720,145,626 $720,145,626 $720,145,626
d) Unfunded Liability/(Surplus) [(b) - (c)] $256,558,209 $236,033,956 $217,191,095
e) Funded Ratio 73.7% 75.3% 76.8%
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
Packet Pg. 41
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CalPERS Actuarial Valuation - June 30, 2021 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 sponsor 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%.
Ratio of Retiree Accrued Liability to
Total Accrued Liability June 30, 2020 June 30, 2021
1. Retiree Accrued Liability 549,928,578 594,762,517
2. Total Accrued Liability 909,429,635 956,179,582
3. Ratio of Retiree AL to Total AL [(1) / (2)] 60% 62%
Another measure of the maturity level of CalPERS and its plans is the ratio of actives to retirees, also called the 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.
To calculate the support ratio for the rate plan, retirees and beneficiaries receiving a continuance are each
counted as one, even though they may have only worked a portion of their careers as an active member of
this rate plan. For this reason, the support ratio, while intuitive, may be less informative than the ratio of retiree liability to total accrued liability above. For comparison, the support ratio for all CalPERS public agency
plans is 0.82 and is calculated consistently with how it is for the individual rate plan. Note that to calculate the support ratio for all public agency plans, a retiree with service from more than one CalPERS agency is
counted as a retiree more than once.
Support Ratio June 30, 2020 June 30, 2021
1. Number of Actives 777 723
2. Number of Retirees 1,223 1,276
3. Support Ratio [(1) / (2)] 0.64 0.57
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.
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation - June 30, 2021 Miscellaneous Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 28
Maturity Measures (continued)
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 exam ple, 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 ratio approaches
100%.
Contribution Volatility June 30, 2020 June 30, 2021
1. Market Value of Assets without Receivables $591,341,001 $719,354,248
2. Payroll 84,892,137 79,718,988
3. Asset Volatility Ratio (AVR) [(1) / (2)] 7.0 9.0
4. Accrued Liability $909,429,635 $956,179,582
5. Liability Volatility Ratio (LVR) [(4) / (2)] 10.7 12.0
Maturity Measures History
Valuation Date
Ratio of
Retiree Accrued Liability
to
Total Accrued Liability
Support
Ratio
Asset
Volatility
Ratio
Liability
Volatility
Ratio
6/30/2017
57%
0.74
6.5
9.8
6/30/2018
57%
0.72
6.8
10.4
6/30/2019
61%
0.65
7.3
11.0
6/30/2020
60%
0.64
7.0
10.7
6/30/2021
62%
0.57
9.0
12.0
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation - June 30, 2021 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, 2021. 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 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 b y 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 seven months after.
[
Market
Value of Assets (MVA)
Hypothetical Termination
Liability1,2
at 1.00% Funded Ratio
Unfunded Termination
Liability at 1.00%
Hypothetical Termination
Liability1,2 at 2.25% Funded Ratio
Unfunded Termination
Liability at 2.25%
$720,145,626 $2,052,630,754 35.1% $1,332,485,128 $1,704,527,809 42.2% $984,382,183
1 The hypothetical liabilities calculated above include a 5% contingency load. The contingency load and other actuarial assumptions can be found in Appendix A.
2 The discount rate 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 2.00% on June 30, 2021, the valuation date.
In order to terminate the plan, first contact our Pension Contract Services unit to initiate a Resolution of Intent
to Terminate. The completed Resolution will allow the plan actuary to provide a preliminary termination
valuation with a more up-to-date estimate of the plan liabilities. Before beginning this process, please consult with the plan actuary.
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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Plan’s Major Benefit Provisions
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation - June 30, 2021
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 the agency has contracted. A description of principal standard and optional plan provisions
is in Appendix B.
Benefit Group
Member Category Misc Misc Misc Misc Misc Misc Misc
Demographics Actives No Yes Yes No Yes Yes No
Transfers/Separated Yes Yes Yes No Yes Yes No Receiving Yes Yes Yes Yes Yes Yes Yes
Benefit Group Key 105391 105393 107485 111261 111264 200040 200044
Benefit Provision
Benefit Formula 2% @ 55 2.7% @ 55 2% @ 60 2% @ 62 2% @ 62 Social Security Coverage No No No No No
Full/Modified Full Full Full Full Full
Employee Contribution Rate 8.00% 7.00% 6.25% 6.25%
Final Average Compensation Period One Year One Year One Year Three Year Three Year
Sick Leave Credit No No No No No
Non-Industrial Disability Standard Standard Standard Standard Standard
Industrial Disability No No No No No
Pre-Retirement Death Benefits
Optional Settlement 2 No No No No No
1959 Survivor Benefit Level Level 1 Level 1 Level 1 Level 1 Level 1
Special No No No No No
Alternate (firefighters) No No No No No
Post-Retirement Death Benefits Lump Sum $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%
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation - June 30, 2021
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 the agency has contracted. A description of principal standard and optional plan provisions
is in Appendix B.
Benefit Group
Member Category Misc Misc
Demographics Actives No No
Transfers/Separated No No
Receiving Yes Yes
Benefit Group Key 200045 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 $500 Survivor Allowance (PRSA) No No
COLA 2% 2%
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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Appendices
• Appendix A – Actuarial Methods and Assumptions
• Appendix B – Principal Plan Provisions
• Appendix C – Participant Data
• Appendix D – Glossary of Actuarial Terms
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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Appendix A
Actuarial Methods and Assumptions
• Actuarial Data
• Actuarial Methods
• Actuarial Assumptions
• Miscellaneous
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
Packet Pg. 49
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CalPERS Actuarial Valuation – June 30, 2021 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 ha ve 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.
CalPERS uses an in-house proprietary actuarial model for calculating plan costs. We believe this model is fit
for its intended purpose and meets all applicable Actuarial Standards of Practice. Furthe rmore, the actuarial
results of our model are independently confirmed periodically by outside auditing actuaries. The actuarial assumptions used are internally consistent and the generated results are reasonable.
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 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:
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation – June 30, 2021 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
2.80%
0%
2.80%
0%
2.80%
0%
2.80%
0%
2.80%
0%
Ramp Up 5 5 5 0 0
Ramp Down 5 5 5 0 0
The 5-year ramp up means that the payments in the first four years of the amortization period are 20%, 40%,
60% and 80% of the “full” payment which begins in year five. The 5-year ramp down means that the reverse
is true in the final four years of the amortization period.
Current Policy (Bases Established on or after June 30, 2019)
Amortization payments are determined as a level dollar amount. Investment g ains 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.
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
Packet Pg. 51
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CalPERS Actuarial Valuation – June 30, 2021 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% of the active population, or
2. 25% 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.
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
Packet Pg. 52
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CalPERS Actuarial Valuation – June 30, 2021 Appendix A Actuarial Methods and Assumptions
A-4
Actuarial Assumptions
In 2021, CalPERS completed its most recent asset liability management study incorporating actuarial
assumptions and strategic asset allocation. In November 2021, the board adopted changes to the asset
allocation that increased the expected volatility of returns. The adopted asset allocation was expected to have
a long-term blended return that continued to support a discount rate assumption of 6.80%. The board also
approved several changes to the demographic assumptions that more closely aligned with actual experience.
For more details and additional rationale for the selection of the actuarial assumptions, please refer to the CalPERS Experience Study and Review of Actuarial Assumptions report from November 2021 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 November 17, 2021, is 6.80% compounded annually (net of investment and administrative expenses) as of June 30, 2021.
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 m arket 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 seven 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 2.00% on June 30, 2021.
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation – June 30, 2021 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 (2.80% for 2021) 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 0.0764 0.0621 0.0521
1 0.0663 0.0528 0.0424
2 0.0576 0.0449 0.0346
3 0.0501 0.0381 0.0282
4 0.0435 0.0324 0.0229
5 0.0378 0.0276 0.0187
10 0.0201 0.0126 0.0108
15 0.0155 0.0102 0.0071
20 0.0119 0.0083 0.0047
25 0.0091 0.0067 0.0031
30 0.0070 0.0054 0.0020
Public Agency Fire
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1517 0.1549 0.0631
1 0.1191 0.1138 0.0517
2 0.0936 0.0835 0.0423
3 0.0735 0.0613 0.0346
4 0.0577 0.0451 0.0284
5 0.0453 0.0331 0.0232
10 0.0188 0.0143 0.0077
15 0.0165 0.0124 0.0088
20 0.0145 0.0108 0.0101
25 0.0127 0.0094 0.0115
30 0.0112 0.0082 0.0132
Public Agency Police
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1181 0.1051 0.0653
1 0.0934 0.0812 0.0532
2 0.0738 0.0628 0.0434
3 0.0584 0.0485 0.0353
4 0.0462 0.0375 0.0288
5 0.0365 0.0290 0.0235
10 0.0185 0.0155 0.0118
15 0.0183 0.0150 0.0131
20 0.0181 0.0145 0.0145
25 0.0179 0.0141 0.0161
30 0.0178 0.0136 0.0179
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation – June 30, 2021 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 0.1238 0.1053 0.0890
1 0.0941 0.0805 0.0674
2 0.0715 0.0616 0.0510
3 0.0544 0.0471 0.0387
4 0.0413 0.0360 0.0293
5 0.0314 0.0276 0.0222
10 0.0184 0.0142 0.0072
15 0.0174 0.0124 0.0073
20 0.0164 0.0108 0.0074
25 0.0155 0.0094 0.0075
30 0.0147 0.0083 0.0077
Schools
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.0275 0.0275 0.0200
1 0.0422 0.0373 0.0298
2 0.0422 0.0373 0.0298
3 0.0422 0.0373 0.0298
4 0.0388 0.0314 0.0245
5 0.0308 0.0239 0.0179
10 0.0236 0.0160 0.0121
15 0.0182 0.0135 0.0103
20 0.0145 0.0109 0.0085
25 0.0124 0.0102 0.0058
30 0.0075 0.0053 0.0019
• The Miscellaneous salary scale is used for Local Prosecutors.
• The Police salary scale is used for Other Safety, Local Sheriff, and School Police.
Price Inflation
2.30% compounded annually.
Wage Inflation
2.80% compounded annually (used in projecting individual salary increases).
Payroll Growth
2.80% compounded annually (used in projecting the payroll over which the unfunded liability is amortized for level percent of payroll bases). This assumption is used for all plans with active
members.
Non-valued Potential Additional Liabilities
The potential liability loss for a cost-of-living increase exceeding the 2.30% price inflation assumption
and any potential liability loss from future member service purchases that are not reflected in the
valuation.
Miscellaneous Loading Factors
Credit for Unused Sick Leave
Total years of service is increased by 1% for those plans that have adopted the provision of providing
Credit for Unused Sick Leave.
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation – June 30, 2021 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% contingency load. This load is for unforeseen improvements
in mortality.
Demographic Assumptions
Pre-Retirement Mortality
The mortality assumptions are based on mortality rates resulting from the most recent CalPERS
Experience Study adopted by the CalPERS Board in November 2021. For purposes of the mortality rates, the rates incorporate generational mortality to capture on-going mortality improvement.
Generational mortality explicitly assumes that members born more recently will live longer than the members born before them thereby capturing the mortality improvement seen in the past and
expected continued improvement. For more details, please refer to the 2021 experience study report
that can be found on the CalPERS website
Rates vary by age and gender are shown in the table below. This table only contains a sample of the
2017 base table rates for illustrative purposes. The non-industrial death rates are used for all plans. The industrial death rates are used for Safety plans (except for local Safety members described in
Section 20423.6 where the agency has not specifically contracted for industrial death benefits.)
Miscellaneous Safety
Non-Industrial Death Non-Industrial Death Industrial Death
(Not Job-Related) (Not Job-Related) (Job-Related)
Age Male Female Male Female Male Female
20 0.00039 0.00014 0.00038 0.00014 0.00004 0.00002
25 0.00033 0.00013 0.00034 0.00018 0.00004 0.00002
30 0.00044 0.00019 0.00042 0.00025 0.00005 0.00003 35 0.00058 0.00029 0.00048 0.00034 0.00005 0.00004
40 0.00075 0.00039 0.00055 0.00042 0.00006 0.00005
45 0.00093 0.00054 0.00066 0.00053 0.00007 0.00006
50 0.00134 0.00081 0.00092 0.00073 0.00010 0.00008
55 0.00198 0.00123 0.00138 0.00106 0.00015 0.00012
60 0.00287 0.00179 0.00221 0.00151 0.00025 0.00017
65 0.00403 0.00250 0.00346 0.00194 0.00038 0.00022
70 0.00594 0.00404 0.00606 0.00358 0.00067 0.00040 75 0.00933 0.00688 0.01099 0.00699 0.00122 0.00078
80 0.01515 0.01149 0.02027 0.01410 0.00225 0.00157
• The pre-retirement mortality rates above are for 2017 and are projected generationally for future
years using 80% of the Society of Actuaries’ Scale MP-2020.
• Miscellaneous plans usually have industrial death rates set to zero unless the agency has
specifically contracted for industrial death benefits. If so, each non-industrial death rate shown
above will be split into two components: 99% will become the non-industrial death rate and 1% will become the industrial death rate.
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation – June 30, 2021 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 0.00267 0.00199 0.01701 0.01439 0.00430 0.00311
55 0.00390 0.00325 0.02210 0.01734 0.00621 0.00550
60 0.00578 0.00455 0.02708 0.01962 0.00944 0.00868
65 0.00857 0.00612 0.03334 0.02276 0.01394 0.01190
70 0.01333 0.00996 0.04001 0.02910 0.02163 0.01858
75 0.02391 0.01783 0.05376 0.04160 0.03446 0.03134 80 0.04371 0.03403 0.07936 0.06112 0.05853 0.05183
85 0.08274 0.06166 0.11561 0.09385 0.10137 0.08045 90 0.14539 0.11086 0.16608 0.14396 0.16584 0.12434
95 0.24665 0.20364 0.24665 0.20364 0.24665 0.20364
100 0.36198 0.31582 0.36198 0.31582 0.36198 0.31582
105 0.52229 0.44679 0.52229 0.44679 0.52229 0.44679
110 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000
The post-retirement mortality rates above are for 2017 and are projected generationally for future years using 80% of the Society of Actuaries’ Scale MP-2020.
Marital Status
For active members, a percentage who are married upon retirement is assumed according to the
member category as shown in the following table.
Member Category Percent Married
Miscellaneous Member 70%
Local Police 85%
Local Fire 85% Other Local Safety 70%
School Police 85% Local County Peace Officers 75%
Age of Spouse
It is assumed that female spouses are 3 years younger than male spouses. This assumption is used
for all plans.
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.
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
Packet Pg. 57
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CalPERS Actuarial Valuation – June 30, 2021 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
Male Female Male Female Male Female Male Female Male Female Male Female
0 0.1851 0.1944 0.1769 0.1899 0.1631 0.1824 0.1493 0.1749 0.1490 0.1731 0.1487 0.1713
1 0.1531 0.1673 0.1432 0.1602 0.1266 0.1484 0.1101 0.1366 0.1069 0.1323 0.1037 0.1280
2 0.1218 0.1381 0.1125 0.1307 0.0970 0.1183 0.0815 0.1058 0.0771 0.0998 0.0726 0.0938
3 0.0927 0.1085 0.0852 0.1020 0.0727 0.0912 0.0601 0.0804 0.0556 0.0737 0.0511 0.0669
4 0.0672 0.0801 0.0616 0.0752 0.0524 0.0670 0.0431 0.0587 0.0392 0.0523 0.0352 0.0459
5 0.0463 0.0551 0.0423 0.0517 0.0358 0.0461 0.0292 0.0404 0.0261 0.0350 0.0230 0.0296
10 0.0112 0.0140 0.0101 0.0129 0.0083 0.0112 0.0064 0.0094 0.0048 0.0071 0.0033 0.0049
15 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
20 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
25 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
30 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
35 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
• The police termination and refund rates are also used for Public Agency Local Prosecutors, Other
Safety, Local Sheriff, and School Police.
Public Agency Safety
Duration of
Service Fire Police County Peace Officer
Male Female Male Female Male Female
0 0.1022 0.1317 0.1298 0.1389 0.1086 0.1284
1 0.0686 0.1007 0.0789 0.0904 0.0777 0.0998
2 0.0441 0.0743 0.0464 0.0566 0.0549 0.0759
3 0.0272 0.0524 0.0274 0.0343 0.0385 0.0562
4 0.0161 0.0349 0.0170 0.0206 0.0268 0.0402
5 0.0092 0.0214 0.0113 0.0128 0.0186 0.0276
10 0.0015 0.0000 0.0032 0.0047 0.0046 0.0038
15 0.0000 0.0000 0.0000 0.0000 0.0023 0.0036
20 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
25 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
30 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
35 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
Packet Pg. 58
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CalPERS Actuarial Valuation – June 30, 2021 Appendix A Actuarial Methods and Assumptions
A-10
Termination with Refund (continued)
Schools
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45
Male Female Male Female Male Female Male Female Male Female Male Female
0 0.2054 0.2120 0.1933 0.1952 0.1730 0.1672 0.1527 0.1392 0.1423 0.1212 0.1318 0.1032
1 0.1922 0.2069 0.1778 0.1883 0.1539 0.1573 0.1300 0.1264 0.1191 0.1087 0.1083 0.0910
2 0.1678 0.1859 0.1536 0.1681 0.1298 0.1383 0.1060 0.1086 0.0957 0.0934 0.0853 0.0782
3 0.1384 0.1575 0.1256 0.1417 0.1042 0.1155 0.0829 0.0893 0.0736 0.0774 0.0643 0.0656
4 0.1085 0.1274 0.0978 0.1143 0.0800 0.0925 0.0622 0.0707 0.0542 0.0620 0.0462 0.0533
5 0.0816 0.0991 0.0732 0.0887 0.0590 0.0713 0.0449 0.0539 0.0383 0.0476 0.0317 0.0413
10 0.0222 0.0248 0.0200 0.0221 0.0163 0.0174 0.0125 0.0128 0.0094 0.0100 0.0063 0.0072
15 0.0106 0.0132 0.0095 0.0113 0.0077 0.0083 0.0058 0.0052 0.0040 0.0039 0.0021 0.0026
20 0.0059 0.0065 0.0050 0.0054 0.0035 0.0036 0.0021 0.0019 0.0010 0.0009 0.0000 0.0000
25 0.0029 0.0034 0.0025 0.0029 0.0018 0.0020 0.0010 0.0012 0.0005 0.0006 0.0000 0.0000
30 0.0012 0.0015 0.0011 0.0013 0.0011 0.0011 0.0010 0.0009 0.0005 0.0005 0.0000 0.0000
35 0.0006 0.0007 0.0006 0.0007 0.0005 0.0006 0.0005 0.0005 0.0003 0.0002 0.0000 0.0000
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
Packet Pg. 59
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CalPERS Actuarial Valuation – June 30, 2021 Appendix A Actuarial Methods and Assumptions
A-11
Termination with Vested Benefits
Rates vary by entry age and service for Miscellaneous plans. Rates vary by service for Safety plans.
See sample rates in tables below.
Public Agency Miscellaneous
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40
Male Female Male Female Male Female Male Female Male Female
5 0.0381 0.0524 0.0381 0.0524 0.0358 0.0464 0.0334 0.0405 0.0301 0.0380
10 0.0265 0.0362 0.0265 0.0362 0.0254 0.0334 0.0244 0.0307 0.0197 0.0236
15 0.0180 0.0252 0.0180 0.0252 0.0166 0.0213 0.0152 0.0174 0.0119 0.0132
20 0.0141 0.0175 0.0141 0.0175 0.0110 0.0131 0.0079 0.0087 0.0000 0.0000
25 0.0084 0.0108 0.0084 0.0108 0.0064 0.0076 0.0000 0.0000 0.0000 0.0000
30 0.0047 0.0056 0.0047 0.0056 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
35 0.0038 0.0041 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
• After termination with vested benefits, a Miscellaneous member is assumed to retire at age 59 and a Safety member at age 54.
• The Police termination with vested benefits rates are also used for Public Agency Local
Prosecutors, Other Safety, Local Sheriff, and School Police.
Schools
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40
Male Female Male Female Male Female Male Female Male Female
5 0.0359 0.0501 0.0359 0.0501 0.0332 0.0402 0.0305 0.0304 0.0266 0.0272
10 0.0311 0.0417 0.0311 0.0417 0.0269 0.0341 0.0228 0.0265 0.0193 0.0233
15 0.0193 0.0264 0.0193 0.0264 0.0172 0.0220 0.0151 0.0175 0.0123 0.0142
20 0.0145 0.0185 0.0145 0.0185 0.0113 0.0141 0.0080 0.0097 0.0000 0.0000
25 0.0089 0.0123 0.0089 0.0123 0.0074 0.0093 0.0000 0.0000 0.0000 0.0000
30 0.0057 0.0064 0.0057 0.0064 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
35 0.0040 0.0049 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
Public Agency Safety
Duration of
Service Fire Police County Peace Officer
Male Female Male Female Male Female
5 0.0089 0.0224 0.0156 0.0272 0.0177 0.0266
10 0.0066 0.0164 0.0113 0.0198 0.0126 0.0189
15 0.0048 0.0120 0.0083 0.0144 0.0089 0.0134
20 0.0035 0.0088 0.0060 0.0105 0.0063 0.0095
25 0.0024 0.0061 0.0042 0.0073 0.0042 0.0063
30 0.0012 0.0031 0.0021 0.0037 0.0021 0.0031
35 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
Packet Pg. 60
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CalPERS Actuarial Valuation – June 30, 2021 Appendix A Actuarial Methods and Assumptions
A-12
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 0.0001 0.0000 0.0001 0.0001 0.0001 0.0000 0.0002
25 0.0001 0.0001 0.0001 0.0001 0.0001 0.0000 0.0002
30 0.0002 0.0003 0.0001 0.0001 0.0001 0.0002 0.0002
35 0.0004 0.0007 0.0001 0.0002 0.0003 0.0005 0.0004
40 0.0009 0.0012 0.0001 0.0002 0.0006 0.0010 0.0008
45 0.0015 0.0019 0.0002 0.0003 0.0011 0.0019 0.0015
50 0.0015 0.0019 0.0004 0.0005 0.0016 0.0027 0.0021
55 0.0014 0.0013 0.0006 0.0007 0.0009 0.0024 0.0017
60 0.0012 0.0009 0.0006 0.0011 0.0005 0.0020 0.0010
• The Miscellaneous non-industrial disability rates are used for Local Prosecutors.
• The police non-industrial disability rates are also used for Other Safety, Local Sheriff, and School Police.
Industrial (Job-Related) Disability
Rates vary by age and category.
Age Fire Police County Peace Officer
20 0.0001 0.0000 0.0004
25 0.0002 0.0017 0.0013
30 0.0006 0.0048 0.0025
35 0.0012 0.0079 0.0037
40 0.0023 0.0110 0.0051
45 0.0040 0.0141 0.0067
50 0.0208 0.0185 0.0092
55 0.0307 0.0479 0.0151
60 0.0438 0.0602 0.0174
• The police industrial disability rates are also used for Local Sheriff and Other Safety.
• 50% of the police industrial disability rates are used for School Police.
• 1% of the police industrial disability rates are used for Local Prosecutors.
• Normally, rates are zero for Miscellaneous plans unless the agency has specifically contracted for industrial disability benefits. If so, each Miscellaneous non-industrial disability rate will be
split into two components: 50% will become the non-industrial disability rate and 50% will
become the industrial disability rate.
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
Packet Pg. 61
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CalPERS Actuarial Valuation – June 30, 2021 Appendix A Actuarial Methods and Assumptions
A-13
Service Retirement
Retirement rates vary by age, service, and formula, except for the Safety Half Pay at 55 and 2% at
55 formulas, where retirement rates vary by age only.
Public Agency Miscellaneous 1.5% at 65
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.008 0.011 0.013 0.015 0.017 0.019
51 0.007 0.010 0.012 0.013 0.015 0.017
52 0.010 0.014 0.017 0.019 0.021 0.024
53 0.008 0.012 0.015 0.017 0.019 0.022
54 0.012 0.016 0.019 0.022 0.025 0.028
55 0.018 0.025 0.031 0.035 0.038 0.043
56 0.015 0.021 0.025 0.029 0.032 0.036
57 0.020 0.028 0.033 0.038 0.043 0.048
58 0.024 0.033 0.040 0.046 0.052 0.058
59 0.028 0.039 0.048 0.054 0.060 0.067
60 0.049 0.069 0.083 0.094 0.105 0.118
61 0.062 0.087 0.106 0.120 0.133 0.150
62 0.104 0.146 0.177 0.200 0.223 0.251
63 0.099 0.139 0.169 0.191 0.213 0.239
64 0.097 0.136 0.165 0.186 0.209 0.233
65 0.140 0.197 0.240 0.271 0.302 0.339
66 0.092 0.130 0.157 0.177 0.198 0.222
67 0.129 0.181 0.220 0.249 0.277 0.311
68 0.092 0.129 0.156 0.177 0.197 0.221
69 0.092 0.130 0.158 0.178 0.199 0.224
70 0.103 0.144 0.175 0.198 0.221 0.248
Public Agency Miscellaneous 2% at 60
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.010 0.011 0.014 0.014 0.017 0.017
51 0.017 0.013 0.014 0.010 0.010 0.010
52 0.014 0.014 0.018 0.015 0.016 0.016
53 0.015 0.012 0.013 0.010 0.011 0.011
54 0.006 0.010 0.017 0.016 0.018 0.018
55 0.012 0.016 0.024 0.032 0.036 0.036
56 0.010 0.014 0.023 0.030 0.034 0.034
57 0.006 0.018 0.030 0.040 0.044 0.044
58 0.022 0.023 0.033 0.042 0.046 0.046
59 0.039 0.033 0.040 0.047 0.050 0.050
60 0.063 0.069 0.074 0.090 0.137 0.116
61 0.044 0.058 0.066 0.083 0.131 0.113
62 0.084 0.107 0.121 0.153 0.238 0.205
63 0.173 0.166 0.165 0.191 0.283 0.235
64 0.120 0.145 0.164 0.147 0.160 0.172
65 0.138 0.160 0.214 0.216 0.237 0.283
66 0.198 0.228 0.249 0.216 0.228 0.239
67 0.207 0.242 0.230 0.233 0.233 0.233
68 0.201 0.234 0.225 0.231 0.231 0.231
69 0.152 0.173 0.164 0.166 0.166 0.166
70 0.200 0.200 0.200 0.200 0.200 0.200
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
Packet Pg. 62
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CalPERS Actuarial Valuation – June 30, 2021 Appendix A Actuarial Methods and Assumptions
A-14
Service Retirement
Public Agency Miscellaneous 2% at 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.014 0.014 0.017 0.021 0.023 0.024
51 0.013 0.017 0.017 0.018 0.018 0.019
52 0.013 0.018 0.018 0.020 0.020 0.021
53 0.013 0.019 0.021 0.024 0.025 0.026
54 0.017 0.025 0.028 0.032 0.033 0.035
55 0.045 0.042 0.053 0.086 0.098 0.123
56 0.018 0.036 0.056 0.086 0.102 0.119
57 0.041 0.046 0.056 0.076 0.094 0.120
58 0.052 0.044 0.048 0.074 0.106 0.123
59 0.043 0.058 0.073 0.092 0.105 0.126
60 0.059 0.064 0.083 0.115 0.154 0.170
61 0.087 0.074 0.087 0.107 0.147 0.168
62 0.115 0.123 0.151 0.180 0.227 0.237
63 0.116 0.127 0.164 0.202 0.252 0.261
64 0.084 0.138 0.153 0.190 0.227 0.228
65 0.167 0.187 0.210 0.262 0.288 0.291
66 0.187 0.258 0.280 0.308 0.318 0.319
67 0.195 0.235 0.244 0.277 0.269 0.280
68 0.228 0.248 0.250 0.241 0.245 0.245
69 0.188 0.201 0.209 0.219 0.231 0.231
70 0.229 0.229 0.229 0.229 0.229 0.229
Public Agency Miscellaneous 2.5% at 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.014 0.017 0.027 0.035 0.046 0.050
51 0.019 0.021 0.025 0.030 0.038 0.040
52 0.018 0.020 0.026 0.034 0.038 0.037
53 0.013 0.021 0.031 0.045 0.052 0.053
54 0.025 0.025 0.030 0.046 0.057 0.068
55 0.029 0.042 0.064 0.109 0.150 0.225
56 0.036 0.047 0.068 0.106 0.134 0.194
57 0.051 0.047 0.060 0.092 0.116 0.166
58 0.035 0.046 0.062 0.093 0.119 0.170
59 0.029 0.053 0.072 0.112 0.139 0.165
60 0.039 0.069 0.094 0.157 0.177 0.221
61 0.080 0.077 0.086 0.140 0.167 0.205
62 0.086 0.131 0.149 0.220 0.244 0.284
63 0.135 0.135 0.147 0.214 0.222 0.262
64 0.114 0.128 0.158 0.177 0.233 0.229
65 0.112 0.174 0.222 0.209 0.268 0.273
66 0.235 0.254 0.297 0.289 0.321 0.337
67 0.237 0.240 0.267 0.249 0.267 0.277
68 0.258 0.271 0.275 0.207 0.210 0.212
69 0.117 0.208 0.266 0.219 0.250 0.270
70 0.229 0.229 0.229 0.229 0.229 0.229
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
Packet Pg. 63
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CalPERS Actuarial Valuation – June 30, 2021 Appendix A Actuarial Methods and Assumptions
A-15
Service Retirement
Public Agency Miscellaneous 2.7% at 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.011 0.016 0.022 0.033 0.034 0.038
51 0.018 0.019 0.023 0.032 0.031 0.031
52 0.019 0.020 0.026 0.035 0.034 0.037
53 0.020 0.020 0.025 0.043 0.048 0.053
54 0.018 0.030 0.040 0.052 0.053 0.070
55 0.045 0.058 0.082 0.138 0.208 0.278
56 0.057 0.062 0.080 0.121 0.178 0.222
57 0.045 0.052 0.071 0.106 0.147 0.182
58 0.074 0.060 0.074 0.118 0.163 0.182
59 0.058 0.067 0.086 0.123 0.158 0.187
60 0.087 0.084 0.096 0.142 0.165 0.198
61 0.073 0.084 0.101 0.138 0.173 0.218
62 0.130 0.133 0.146 0.187 0.214 0.249
63 0.122 0.140 0.160 0.204 0.209 0.243
64 0.104 0.124 0.154 0.202 0.214 0.230
65 0.182 0.201 0.242 0.264 0.293 0.293
66 0.272 0.249 0.273 0.285 0.312 0.312
67 0.182 0.217 0.254 0.249 0.264 0.264
68 0.223 0.197 0.218 0.242 0.273 0.273
69 0.217 0.217 0.217 0.217 0.217 0.217
70 0.227 0.227 0.227 0.227 0.227 0.227
Public Agency Miscellaneous 3% at 60
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.015 0.020 0.025 0.039 0.040 0.044
51 0.041 0.034 0.032 0.041 0.036 0.037
52 0.024 0.020 0.022 0.039 0.040 0.041
53 0.018 0.024 0.032 0.047 0.048 0.057
54 0.033 0.033 0.035 0.051 0.049 0.052
55 0.137 0.043 0.051 0.065 0.076 0.108
56 0.173 0.038 0.054 0.075 0.085 0.117
57 0.019 0.035 0.059 0.088 0.111 0.134
58 0.011 0.040 0.070 0.105 0.133 0.162
59 0.194 0.056 0.064 0.081 0.113 0.163
60 0.081 0.085 0.133 0.215 0.280 0.333
61 0.080 0.090 0.134 0.170 0.223 0.292
62 0.137 0.153 0.201 0.250 0.278 0.288
63 0.128 0.140 0.183 0.227 0.251 0.260
64 0.174 0.147 0.173 0.224 0.239 0.264
65 0.152 0.201 0.262 0.299 0.323 0.323
66 0.272 0.273 0.317 0.355 0.380 0.380
67 0.218 0.237 0.268 0.274 0.284 0.284
68 0.200 0.228 0.269 0.285 0.299 0.299
69 0.250 0.250 0.250 0.250 0.250 0.250
70 0.245 0.245 0.245 0.245 0.245 0.245
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
Packet Pg. 64
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CalPERS Actuarial Valuation – June 30, 2021 Appendix A Actuarial Methods and Assumptions
A-16
Service Retirement
Public Agency Miscellaneous 2% at 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 Half Pay at 55 and 2% at 55
Age Rate
Age Rate
50 0.016 56 0.111
51 0.000 57 0.000
52 0.034 58 0.095
53 0.020 59 0.044
54 0.041 60 1.000
55 0.075
Public Agency Police Half Pay at 55 and 2% at 55
Age Rate
Age Rate
50 0.026 56 0.069
51 0.000 57 0.051
52 0.016 58 0.072
53 0.027 59 0.070
54 0.010 60 0.300
55 0.167
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
Packet Pg. 65
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CalPERS Actuarial Valuation – June 30, 2021 Appendix A Actuarial Methods and Assumptions
A-17
Service Retirement
Public Agency Police 2% at 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.018 0.077 0.056 0.046 0.043 0.046
51 0.022 0.087 0.060 0.048 0.044 0.047
52 0.020 0.102 0.081 0.071 0.069 0.075
53 0.016 0.072 0.053 0.045 0.042 0.046
54 0.006 0.071 0.071 0.069 0.072 0.080
55 0.009 0.040 0.099 0.157 0.186 0.186
56 0.020 0.051 0.108 0.165 0.194 0.194
57 0.036 0.072 0.106 0.139 0.156 0.156
58 0.001 0.046 0.089 0.130 0.152 0.152
59 0.066 0.094 0.119 0.143 0.155 0.155
60 0.177 0.177 0.177 0.177 0.177 0.177
61 0.134 0.134 0.134 0.134 0.134 0.134
62 0.184 0.184 0.184 0.184 0.184 0.184
63 0.250 0.250 0.250 0.250 0.250 0.250
64 0.177 0.177 0.177 0.177 0.177 0.177
65 1.000 1.000 1.000 1.000 1.000 1.000
• These rates also apply to County Peace officers, Local Prosecutors, Local Sheriff, School Police, and Other Safety.
Service Retirement
Public Agency Fire 2% at 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.054 0.054 0.056 0.080 0.064 0.066
51 0.020 0.020 0.021 0.030 0.024 0.024
52 0.037 0.037 0.038 0.054 0.043 0.045
53 0.051 0.051 0.053 0.076 0.061 0.063
54 0.082 0.082 0.085 0.121 0.097 0.100
55 0.139 0.139 0.139 0.139 0.139 0.139
56 0.129 0.129 0.129 0.129 0.129 0.129
57 0.085 0.085 0.085 0.085 0.085 0.085
58 0.119 0.119 0.119 0.119 0.119 0.119
59 0.167 0.167 0.167 0.167 0.167 0.167
60 0.152 0.152 0.152 0.152 0.152 0.152
61 0.179 0.179 0.179 0.179 0.179 0.179
62 0.179 0.179 0.179 0.179 0.179 0.179
63 0.179 0.179 0.179 0.179 0.179 0.179
64 0.179 0.179 0.179 0.179 0.179 0.179
65 1.000 1.000 1.000 1.000 1.000 1.000
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
Packet Pg. 66
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CalPERS Actuarial Valuation – June 30, 2021 Appendix A Actuarial Methods and Assumptions
A-18
Service Retirement
Public Agency Police 3% at 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.019 0.053 0.045 0.054 0.057 0.061
51 0.002 0.017 0.028 0.044 0.053 0.060
52 0.002 0.031 0.037 0.051 0.059 0.066
53 0.026 0.049 0.049 0.080 0.099 0.114
54 0.019 0.034 0.047 0.091 0.121 0.142
55 0.006 0.115 0.141 0.199 0.231 0.259
56 0.017 0.188 0.121 0.173 0.199 0.199
57 0.008 0.137 0.093 0.136 0.157 0.157
58 0.017 0.126 0.105 0.164 0.194 0.194
59 0.026 0.146 0.110 0.167 0.195 0.195
60 0.155 0.155 0.155 0.155 0.155 0.155
61 0.210 0.210 0.210 0.210 0.210 0.210
62 0.262 0.262 0.262 0.262 0.262 0.262
63 0.172 0.172 0.172 0.172 0.172 0.172
64 0.227 0.227 0.227 0.227 0.227 0.227
65 1.000 1.000 1.000 1.000 1.000 1.000
• These rates also apply to County Peace officers, Local Prosecutors, Local Sheriff, School Police, and Other Safety.
Service Retirement
Public Agency Fire 3% at 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.003 0.006 0.013 0.019 0.025 0.028
51 0.004 0.008 0.017 0.026 0.034 0.038
52 0.005 0.011 0.022 0.033 0.044 0.049
53 0.005 0.034 0.024 0.038 0.069 0.138
54 0.007 0.047 0.032 0.051 0.094 0.187
55 0.010 0.067 0.046 0.073 0.134 0.266
56 0.010 0.063 0.044 0.069 0.127 0.253
57 0.135 0.100 0.148 0.196 0.220 0.220
58 0.083 0.062 0.091 0.120 0.135 0.135
59 0.137 0.053 0.084 0.146 0.177 0.177
60 0.162 0.063 0.099 0.172 0.208 0.208
61 0.598 0.231 0.231 0.231 0.231 0.231
62 0.621 0.240 0.240 0.240 0.240 0.240
63 0.236 0.236 0.236 0.236 0.236 0.236
64 0.236 0.236 0.236 0.236 0.236 0.236
65 1.000 1.000 1.000 1.000 1.000 1.000
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
Packet Pg. 67
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CalPERS Actuarial Valuation – June 30, 2021 Appendix A Actuarial Methods and Assumptions
A-19
Service Retirement
Public Agency Police 3% at 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.124 0.103 0.113 0.143 0.244 0.376
51 0.060 0.081 0.087 0.125 0.207 0.294
52 0.016 0.055 0.111 0.148 0.192 0.235
53 0.072 0.074 0.098 0.142 0.189 0.237
54 0.018 0.049 0.105 0.123 0.187 0.271
55 0.069 0.074 0.081 0.113 0.209 0.305
56 0.064 0.108 0.113 0.125 0.190 0.288
57 0.056 0.109 0.160 0.182 0.210 0.210
58 0.108 0.129 0.173 0.189 0.214 0.214
59 0.093 0.144 0.204 0.229 0.262 0.262
60 0.343 0.180 0.159 0.188 0.247 0.247
61 0.221 0.221 0.221 0.221 0.221 0.221
62 0.213 0.213 0.213 0.213 0.213 0.213
63 0.233 0.233 0.233 0.233 0.233 0.233
64 0.234 0.234 0.234 0.234 0.234 0.234
65 1.000 1.000 1.000 1.000 1.000 1.000
• These rates also apply to County Peace officers, Local Prosecutors, Local Sheriff, School Police, and Other Safety.
Service Retirement
Public Agency Fire 3% at 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.095 0.048 0.053 0.093 0.134 0.175
51 0.016 0.032 0.053 0.085 0.117 0.149
52 0.013 0.032 0.054 0.087 0.120 0.154
53 0.085 0.044 0.049 0.089 0.129 0.170
54 0.038 0.065 0.074 0.105 0.136 0.167
55 0.042 0.043 0.049 0.085 0.132 0.215
56 0.133 0.103 0.075 0.113 0.151 0.209
57 0.062 0.048 0.060 0.124 0.172 0.213
58 0.124 0.097 0.092 0.153 0.194 0.227
59 0.092 0.071 0.078 0.144 0.192 0.233
60 0.056 0.044 0.061 0.131 0.186 0.233
61 0.282 0.219 0.158 0.198 0.233 0.260
62 0.292 0.227 0.164 0.205 0.241 0.269
63 0.196 0.196 0.196 0.196 0.196 0.196
64 0.197 0.197 0.197 0.197 0.197 0.197
65 1.000 1.000 1.000 1.000 1.000 1.000
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
Packet Pg. 68
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CalPERS Actuarial Valuation – June 30, 2021 Appendix A Actuarial Methods and Assumptions
A-20
Service Retirement
Public Agency Police 2% at 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% at 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
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
Packet Pg. 69
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CalPERS Actuarial Valuation – June 30, 2021 Appendix A Actuarial Methods and Assumptions
A-21
Service Retirement
Public Agency Police 2.5% at 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% at 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
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
Packet Pg. 70
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CalPERS Actuarial Valuation – June 30, 2021 Appendix A Actuarial Methods and Assumptions
A-22
Service Retirement
Public Agency Police 2.7% at 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.050 0.050 0.050 0.050 0.050 0.100
51 0.040 0.040 0.040 0.040 0.058 0.094
52 0.038 0.038 0.038 0.038 0.058 0.083
53 0.038 0.038 0.038 0.038 0.077 0.117
54 0.038 0.038 0.038 0.044 0.093 0.150
55 0.068 0.068 0.068 0.091 0.134 0.242
56 0.063 0.063 0.063 0.084 0.123 0.217
57 0.060 0.060 0.060 0.080 0.118 0.213
58 0.080 0.080 0.080 0.088 0.138 0.228
59 0.080 0.080 0.080 0.092 0.140 0.228
60 0.150 0.150 0.150 0.150 0.150 0.228
61 0.144 0.144 0.144 0.144 0.144 0.170
62 0.150 0.150 0.150 0.150 0.150 0.213
63 0.150 0.150 0.150 0.150 0.150 0.213
64 0.150 0.150 0.150 0.150 0.150 0.319
65 1.000 1.000 1.000 1.000 1.000 1.000
• These rates also apply to County Peace officers, Local Prosecutors, Local Sheriff, School Police, and Other Safety.
Service Retirement
Public Agency Fire 2.7% at 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.007 0.007 0.007 0.007 0.010 0.015
51 0.008 0.008 0.008 0.008 0.013 0.019
52 0.016 0.016 0.016 0.016 0.025 0.038
53 0.044 0.044 0.044 0.044 0.068 0.102
54 0.061 0.061 0.061 0.061 0.093 0.140
55 0.083 0.083 0.083 0.083 0.127 0.190
56 0.074 0.074 0.074 0.074 0.114 0.171
57 0.090 0.090 0.090 0.090 0.139 0.208
58 0.079 0.079 0.079 0.079 0.122 0.182
59 0.073 0.073 0.073 0.073 0.112 0.168
60 0.114 0.114 0.114 0.114 0.175 0.262
61 0.114 0.114 0.114 0.114 0.175 0.262
62 0.114 0.114 0.114 0.114 0.175 0.262
63 0.114 0.114 0.114 0.114 0.175 0.262
64 0.114 0.114 0.114 0.114 0.175 0.262
65 1.000 1.000 1.000 1.000 1.000 1.000
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
Packet Pg. 71
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CalPERS Actuarial Valuation – June 30, 2021 Appendix A Actuarial Methods and Assumptions
A-23
Service Retirement
Schools 2% at 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.003 0.004 0.006 0.007 0.010 0.010
51 0.004 0.005 0.007 0.008 0.011 0.011
52 0.005 0.007 0.008 0.009 0.012 0.012
53 0.007 0.008 0.010 0.012 0.015 0.015
54 0.006 0.009 0.012 0.015 0.020 0.021
55 0.011 0.023 0.034 0.057 0.070 0.090
56 0.012 0.027 0.036 0.056 0.073 0.095
57 0.016 0.027 0.036 0.055 0.068 0.087
58 0.019 0.030 0.040 0.062 0.078 0.103
59 0.023 0.034 0.046 0.070 0.085 0.109
60 0.022 0.043 0.062 0.095 0.113 0.141
61 0.030 0.051 0.071 0.103 0.124 0.154
62 0.065 0.098 0.128 0.188 0.216 0.248
63 0.075 0.112 0.144 0.197 0.222 0.268
64 0.091 0.116 0.138 0.180 0.196 0.231
65 0.163 0.164 0.197 0.232 0.250 0.271
66 0.208 0.204 0.243 0.282 0.301 0.315
67 0.189 0.185 0.221 0.257 0.274 0.287
68 0.127 0.158 0.200 0.227 0.241 0.244
69 0.168 0.162 0.189 0.217 0.229 0.238
70 0.191 0.190 0.237 0.250 0.246 0.254
Schools 2% at 62
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.000 0.000 0.000 0.000 0.000 0.000
51 0.000 0.000 0.000 0.000 0.000 0.000
52 0.004 0.007 0.010 0.011 0.013 0.015
53 0.004 0.008 0.010 0.013 0.014 0.016
54 0.005 0.011 0.015 0.018 0.020 0.022
55 0.014 0.027 0.038 0.045 0.050 0.056
56 0.013 0.026 0.037 0.043 0.048 0.055
57 0.013 0.027 0.038 0.045 0.050 0.055
58 0.017 0.034 0.047 0.056 0.062 0.069
59 0.019 0.037 0.052 0.062 0.068 0.076
60 0.026 0.053 0.074 0.087 0.097 0.108
61 0.030 0.058 0.081 0.095 0.106 0.119
62 0.053 0.105 0.147 0.174 0.194 0.217
63 0.054 0.107 0.151 0.178 0.198 0.222
64 0.053 0.105 0.147 0.174 0.194 0.216
65 0.072 0.142 0.199 0.235 0.262 0.293
66 0.077 0.152 0.213 0.252 0.281 0.314
67 0.070 0.139 0.194 0.229 0.255 0.286
68 0.063 0.124 0.173 0.205 0.228 0.255
69 0.066 0.130 0.183 0.216 0.241 0.270
70 0.071 0.140 0.196 0.231 0.258 0.289
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation – June 30, 2021 Appendix A Actuarial Methods and Assumptions
A-24
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 2021 calendar year is $230,000.
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 2021 calendar year is $290,000.
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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Appendix B
Principal Plan Provisions
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation – June 30, 2021 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% at age 65
formula, eligibility for service retirement is age 55 with at least 5 years of service. PEPRA Miscellaneous members
become eligible for service retirement upon 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 the agency’s contract. The table below shows the
factors for each of the available formulas. Factors vary by the member’s age at retirement. Listed are the factors for 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%
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation – June 30, 2021 Appendix B Miscellaneous Plan of the City of Palo Alto
Principal Plan Provisions
B-2
Safety Plan Formulas
Retirement
Age Half Pay 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% 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 $128,059 for 2021 and for those employees that do not participate in Social Security the cap for 2021 is $153,671. 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 co mpensation 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.
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation – June 30, 2021 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% 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% at 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 perm anent 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% of final compensation,
multiplied by service, which is determined as follows:
• Service is CalPERS credited service, for members with less than 10 years of service or greater than 18.518 years
of service; or
• Service is CalPERS credited service plus the additional number of years that the member would have worked until
age 60, for members with at least 10 years but not more than 18.518 years of service. The maximum benefit in
this case is 33⅓% of final compensation.
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation – June 30, 2021 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% of final compensation for the first 5 years of service, plus 1% for each additional
year of service to a maximum of 50% of final compensation.
Members who are eligible for a larger service retirement benefit may choose to receive that benefit in lieu of a disability
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
This is a standard benefit for Safety members except those described in Section 20423.6. For excluded Safety members
and all Miscellaneous members, employers have the option of providing this benefit. 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% of final compensation.
Increased Benefit (75% of Final Compensation)
The increased Industrial Disability Retirement benefit is a monthly allowance equal to 75 % of final compensation for total disability.
Improved Benefit (50% to 90% of Final Compensation)
The improved Industrial Disability Retirement benefit is a monthly allowance equal to the Workman’s Compensation
Appeals Board permanent disability rate percentage (if 50% or greater, with a maximum of 90%) times the final
compensation.
For a CalPERS member not actively employed in this group who became disabled while employed by some other CalPERS employer, the benefit is a return of accumulated member contributions with respect to employment in this
group. With the standard or increased benefit, a member may also choose to receive the annuitization of the
accumulated member contributions.
If a member is eligible for service retirement and if the service retirement benefit is more than the industrial disability
retirement benefit, the member may choose to receive the larger benefit.
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation – June 30, 2021 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 % 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% of the retirement allowance will automatically be continued to certain statutory beneficiaries upon the death of
the retiree, without a reduction in the retiree’s allowance. This additional benefit is referred to as post-retirement survivor allowance (PRSA) or simply as survivor continuance.
In other words, 25% or 50% of the allowance, the continuance portion, is paid to the retiree for as long as he or she
is alive, and that same amount is continued to the retiree’s spouse (or if no eligible spouse, to unmarried child (ren)
until they attain 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% or 50% of the retirement allowance, which may be referred to as the option portion of the benefit, is paid to the retiree as an annuity for as long as he or she is alive. Or, the retiree may choose to provide for some of
this option portion to be paid to any designated beneficiary after the retiree’s death. Benefit options applicable to the option portion are the same as those offered with the standard form. The reduction is calculated in the same manner
but is applied only to the option portion.
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation – June 30, 2021 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% or the prevailing discount rate through the date of death, plus a lump sum in the amount of one month's salary for each completed year of current service, up to a maximum of six months' salary.
For purposes of this benefit, one month's salary is defined as the member's average monthly full -time rate of
compensation during the 12 months preceding death.
1957 Survivor Benefit
This is a standard benefit.
Eligibility
An employee’s eligible survivor(s) may receive the 1957 Survivor benefit if the member dies while actively employed,
has attained at least age 50 for classic and PEPRA Safety members and age 52 for PEPRA Miscellaneous members, and
has at least 5 years of credited service (total service across all 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.
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation – June 30, 2021 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 PEPRA Safety members and age 52 for PEPRA Miscellaneous
members, and has at least 5 years of credited service (total service across all CalPERS employers and with certain other
retirement systems with which CalPERS has reciprocity agreements). A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An eligible survivor means the surviving spouse
to whom the member was married at least one year before death. A member’s survivor who is eligible for any other
pre-retirement death benefit may choose to receive that death benefit instead of this Optional Settlement 2 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% 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 except those described in Section 20423.6. For excluded Safety members
and all Miscellaneous members, employers have the option of providing this benefit.
Eligibility
An employee’s eligible survivor(s) may receive the special death benefit if the member dies while actively employed and the death is job-related. A CalPERS member who is no longer actively employed with any CalPERS employer is
not 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% 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% of final compensation
• if 2 eligible children: 20.0% of final compensation
• if 3 or more eligible children: 25.0% of final compensation
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation – June 30, 2021 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%. Annual adjustments are calculated by first determining the lesser of 1) 2% compounded from the end of the year of retirement or 2) actual
rate of price inflation. The resulting increase is divided by the total increase provided in prior years. For any given year, the COLA adjustment may be less than 2% (when the rate of price inflation is low), may be greater than the rate of
price inflation (when the rate of price inflation is low after several years of high price inflation) or may even be greater
than 2% (when price inflation is high after several years of low price inflation).
Improved Benefit
Employers have the option of providing a COLA of 3%, 4%, or 5%, determined in the same manner as described above
for the standard 2% COLA. An improved COLA is not available with the 1.5% at 65 formula.
Purchasing Power Protection Allowance (PPPA)
Retirement and survivor allowances are protected against price inflation by PPPA. PPPA benefits are cost-of-living
adjustments that are intended to maintain an individual’s allowance at 80% of the initial allowance at retirement
adjusted for price inflation since retirement. The PPPA benefit will be coordinated with other cost-of-living adjustments
provided under the plan.
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation – June 30, 2021 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%.
• 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, Half Pay 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% if members are not covered by Social Security. If members are covered by Social Security, the offset is $513 and the contribution rate is 5%.
Refund of Employee Contributions
If the member’s service with the 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% interest compounded annually.
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation – June 30, 2021 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.
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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Appendix C
Participant Data
• Summary of Valuation Data
• Active Members
• Transferred and Terminated Members
• Retired Members and Beneficiaries
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation – June 30, 2021 Appendix C Miscellaneous Plan of the City of Palo Alto
Participant Data
C-1
Summary of Valuation Data
June 30, 2020 June 30, 2021
1. Active Members
a) Counts 777 723
b) Average Attained Age
45.63 45.60
c) Average Entry Age to Rate Plan 34.93 34.59
d) Average Years of Credited Service 10.79 11.10
e) Average Annual Covered Pay $109,256 $110,261
f) Annual Covered Payroll 84,892,137 79,718,988
g) Projected Annual Payroll for Contribution Year 92,090,103 86,604,632
h) Present Value of Future Payroll 705,964,490 722,368,530
2. Transferred Members
a) Counts 385 386
b) Average Attained Age 45.81 46.36
c) Average Years of Credited Service 3.34 3.42
d) Average Annual Covered Pay $128,303 $132,366
3. Terminated Members
a) Counts 450 463
b) Average Attained Age 47.38 47.53
c) Average Years of Credited Service 3.05 2.97
d) Average Annual Covered Pay $74,685 $75,408
4. Retired Members and Beneficiaries
a) Counts 1,223 1,276
b) Average Attained Age 70.54 70.67
c) Average Annual Benefits $36,759 $37,887
5. Active to Retired Ratio [(1a) / (4a)] 0.64 0.57
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.
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation – June 30, 2021 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 6 0 0 0 0 0 6
25-29 48 8 0 0 0 0 56
30-34 66 32 0 0 0 0 98
35-39 31 33 15 3 1 0 83
40-44 34 23 25 16 10 2 110
45-49 16 20 19 16 16 6 93
50-54 9 19 16 17 23 13 97
55-59 14 15 20 13 17 27 106
60-64 6 10 7 9 10 8 50
65 and Over 1 4 4 3 4 8 24
All Ages 231 164 106 77 81 64 723
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 $74,317 $0 $0 $0 $0 $0 $74,317
25-29 82,329 93,764 0 0 0 0 83,963
30-34 91,522 101,784 0 0 0 0 94,873
35-39 100,721 109,996 119,460 91,828 112,850 0 107,620
40-44 109,523 125,596 122,071 119,674 119,982 108,444 118,143
45-49 107,647 121,341 106,497 122,249 120,816 137,468 117,059
50-54 94,305 128,336 120,673 139,176 119,394 139,514 125,192
55-59 93,299 127,116 120,025 120,639 100,156 123,119 115,175
60-64 100,614 116,806 118,182 119,679 101,962 107,290 111,081
65 and Over 136,342 78,790 132,408 101,657 83,474 116,579 106,360
Average $94,812 $114,518 $118,446 $122,891 $111,703 $124,540 $110,261
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation – June 30, 2021 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 1 0 0 0 0 0 1 $103,031
25-29 13 0 0 0 0 0 13 104,362
30-34 38 5 0 0 0 0 43 113,346
35-39 48 6 3 0 0 0 57 126,132
40-44 44 12 8 1 0 0 65 122,851
45-49 45 10 3 4 0 0 62 142,305
50-54 48 12 2 3 0 0 65 142,692
55-59 31 9 3 1 0 0 44 136,773
60-64 19 4 3 0 0 0 26 154,349
65 and Over 8 1 1 0 0 0 10 145,568
All Ages 295 59 23 9 0 0 386 $132,366
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 15 1 0 0 0 0 16 79,655
30-34 36 1 0 0 0 0 37 82,451
35-39 57 8 1 1 0 0 67 77,899
40-44 66 8 4 0 0 0 78 76,441
45-49 55 12 5 0 1 1 74 82,463
50-54 49 16 2 2 0 0 69 78,126
55-59 49 10 2 2 0 0 63 69,608
60-64 25 5 3 0 0 0 33 61,804
65 and Over 22 4 0 0 0 0 26 57,286
All Ages 374 65 17 5 1 1 463 $75,408
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation – June 30, 2021 Appendix C Miscellaneous Plan of the City of Palo Alto
Participant Data
C-4
Retired Members and Beneficiaries
Distribution of Retirees and Beneficiaries by Age and Retirement Type*
Attained
Age
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Total
Under 30 0 0 0 0 0 2 2
30-34 0 0 0 0 0 1 1
35-39 0 0 0 0 0 2 2
40-44 0 0 2 0 0 1 3
45-49 0 2 3 0 0 1 6
50-54 24 2 0 0 0 0 26
55-59 115 7 3 1 0 5 131
60-64 175 14 1 0 0 6 196
65-69 220 7 1 0 0 14 242
70-74 215 12 2 0 0 22 251
75-79 186 5 1 0 0 22 214
80-84 84 5 1 0 0 18 108
85 and Over 54 3 0 0 0 37 94
All Ages 1,073 57 14 1 0 131 1,276
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 $25,709 $25,709
30-34 0 0 0 0 0 14,313 14,313
35-39 0 0 0 0 0 6,443 6,443
40-44 0 0 918 0 0 12,750 4,862
45-49 0 5,686 276 0 0 111,316 20,586
50-54 20,108 12,008 0 0 0 0 19,484
55-59 44,293 16,395 567 17,836 0 24,011 40,825
60-64 44,188 14,265 1,781 0 0 13,355 40,890
65-69 45,054 18,879 12,569 0 0 26,429 43,085
70-74 43,347 17,486 10,170 0 0 22,542 40,023
75-79 36,758 15,632 2,122 0 0 23,961 34,787
80-84 35,076 25,363 2,000 0 0 38,744 34,932
85 and Over 31,242 16,907 0 0 0 22,446 27,322
All Ages $41,017 $16,623 $3,084 $17,836 $0 $25,373 $37,887
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation – June 30, 2021 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 289 2 2 1 0 51 345
5-9 179 4 4 0 0 27 214
10-14 304 10 2 0 0 22 338
15-19 149 11 2 0 0 11 173
20-24 91 10 4 0 0 9 114
25-29 42 10 0 0 0 8 60
30 and Over 19 10 0 0 0 3 32
All Years 1,073 57 14 1 0 131 1,276
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 $42,619 $8,963 $918 $17,836 $0 $25,048 $39,512
5-9 34,870 16,669 292 0 0 29,088 33,154
10-14 53,547 11,219 9,746 0 0 29,774 50,488
15-19 34,153 19,584 6,829 0 0 16,017 31,758
20-24 31,835 21,069 1,755 0 0 25,488 29,334
25-29 17,840 21,582 0 0 0 14,348 17,998
30 and Over 23,121 10,882 0 0 0 28,541 19,805
All Years $41,017 $16,623 $3,084 $17,836 $0 $25,373 $37,887
* 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.
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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Appendix D
Glossary of Actuarial Terms
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation – June 30, 2021 Appendix D Miscellaneous Plan of the City of Palo Alto
Glossary of Actuarial Terms
D-1
Glossary of Actuarial Terms
Accrued Liability (Actuarial Accrued Liability)
The portion of the Present Value of Benefits allocated to prior years. Based on CalPERS funding policies, the
accrued liability is the target level of assets on any valuation date.
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
an actuarial cost method, an amortization policy, and an asset valuation method.
Actuarial Valuation
The determination as of a valuation date of the Normal Cost, Accrued Liability, and related actuarial present values for a pension plan. These valuations are performed annually or when an employer is contemplating a change in
plan provisions.
Amortization Bases
Separate payment schedules for different portions of the Unfunded Accrued Liability (UAL). The total UAL of a rate
plan can be segregated by cause. The impact of such individual causes on the UAL are quantified at the time of their occurrence, resulting in new amortization bases. Each base is separately amortized and paid for over a specific
period of time. Generally, in an actuarial valuation, the separate bases consist of changes in UAL due to contract
amendments, actuarial assumption changes, method changes, and/or gains and losses.
Amortization Period The number of years required to pay off an Amortization Base.
Classic Member (under PEPRA)
A member who joined a public retirement system prior to January 1, 2013 and who is not defined as a new member
under PEPRA. (See definition of New Member below.)
Discount Rate
This is the rate used to discount the expected future benefit payments to the valuation date to determine the Projected Value of Benefits. The discount rate is based on the assumed long-term rate of return on plan assets,
net of investment and administrative expenses. This rate is called the “actuarial interest rate” in Section 20014 of the California Public Employees’ Retirement Law.
Entry Age
The earliest age at which a plan member begins to accrue benefits under a defined benefit pension plan. In most
cases, this is the age of the member on their date of hire.
Entry Age Actuarial Cost Method
An actuarial cost method designed to fund a member's total plan benefit evenly over the course of his or her career. This method yields a total normal cost rate, expressed as a percentage of payroll, which is designed to
remain level throughout the member’s career.
Fresh Start
A Fresh Start is when multiple amortization bases are combined into a single base and amortized over a new
Amortization Period.
Funded Ratio Defined as the Market Value of Assets divided by the Accrued Liability. It is a measure of how well funded a rate
plan is. A ratio greater than 100% means the rate plan has more assets than the target established by CalPERS
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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CalPERS Actuarial Valuation – June 30, 2021 Appendix D Miscellaneous Plan of the City of Palo Alto
Glossary of Actuarial Terms
D-2
funding policies on the valuation date and the employer need only contribute the Normal Cost. A ratio less than 100% means assets are less than the funding target and contributions in addition to Normal Cost are required.
GASB 68
Statement No. 68 of the Governmental Accounting Standards Board. The accounting standard governing a state
or local governmental employer’s accounting and financial reporting for pensions.
New Member (under PEPRA)
A new member includes an individual who becomes a member of a public retirement system fo r 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 portion of the Present Value of Benefits allocated to the upcoming fiscal year for active employees. The normal
cost plus the required amortization of the UAL, if any, make up the required contributions .
Pension Actuary
A business professional proficient in mathematics and statistics who performs the calculations necessary to
properly fund a pension plan and allow the plan sponsor to disclose its liabilities. A pension actuary must satisfy the Qualification Standards for Actuaries Issuing Statements of Actuarial Opinion in the United States with regard
to pensions.
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)
The Accrued Liability minus the Market Value of Assets. If the UAL for a rate plan is positive, the employer is
required to make contributions in excess of the Normal Cost.
Attachment B: CalPERS Miscellaneous Valuation as of June 30, 2021 1.b
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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 2022
Safety Plan of the City of Palo Alto (CalPERS ID: 6373437857)
Annual Valuation Report as of June 30, 2021
Dear Employer,
Attached to this letter, you will find the June 30, 2021 actuarial valuation report for the rate plan noted above. Provided
in this report is the determination of the minimum required employer contributions for fiscal year (FY)
2023-24. 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
(board) 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 requirements as needed. This valuation is based on an investment return assumption of 6.8%, which
was adopted by the board in November 2021. Other assumptions used in this report are those recommended in the
CalPERS Experience Study and Review of Actuarial Assumptions report from November 2021.
Required Contributions
The table below shows the minimum required employer contributions and the PEPRA member rate for FY 2023-24 along
with an estimate of the required contribution for FY 2024-25. 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 between the agency and the
employees.
Fiscal Year Employer Normal Cost Rate Employer Amortization of Unfunded Accrued Liability PEPRA Member Rate
2023-24 22.59% $14,376,181 11.75%
Projected Results
2024-25 22.0% $14,462,000 TBD
The actual investment return for FY 2021-22 was not known at the time this report was prepared. The projections above assume the investment return for that year would be 6.8%. To the extent the actual investment return for FY
2021-22 differs from 6.8%, the actual contribution requirements for FY 2024-25 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 FY 2028-29.
Changes from Previous Year’s Valuations
On July 12, 2021, CalPERS reported a preliminary 21.3% net return on investments for FY 2020-21. Since the return
exceeded the 7.00% discount rate sufficiently, the CalPERS Funding Risk Mitigation policy allows CalPERS to use a portion of the investment gain to offset the cost of reducing the expected volatility of future investment returns. Based on the
thresholds specified in the policy, the excess return of 14.3% prescribes a reduction in investment volatility that
corresponds to a reduction in the discount rate of 0.20%, from 7.00% to 6.80%.
On November 17, 2021, the board adopted new actuarial assumptions based on the recommendations in the November
2021 CalPERS Experience Study and Review of Actuarial Assumptions. This study reviewed the retirement rates, termination rates, mortality rates, rates of salary increases, and inflation assumption for public agencies. These new
assumptions are incorporated in this actuarial valuation and will impact the required contrib ution for FY 2023-24. In addition, the board adopted a new strategic asset allocation as part of its Asset Liability Management process. The new
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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Safety Plan of the City of Palo Alto (CalPERS ID: 6373437857)
Annual Valuation Report as of June 30, 2021
Page 2
asset allocation, along with the new capital market assumptions and economic assumptions support, a discount rate of
6.80%. This includes a reduction in the price inflation assumption from 2.50% to 2.30%.
Besides the above noted changes, there may also be changes specific to the plan such as contract amendments and funding changes.
Further descriptions of general changes are included in the “Highlights and Executive Summary” section and in Appendix
A, “Actuarial Methods and Assumptions.” The effects of the changes on the required contributions are included in the
“Reconciliation of Required Employer Contributions” section.
Questions
We understand that you might have questions about these results, and the plan actuary whose signature is on the
valuation report is available to discuss. If you have other questions, you may call the Customer Contact Center at (888)-
CalPERS or (888-225-7377).
Sincerely,
SCOTT TERANDO, ASA, EA, MAAA, FCA, CFA
Chief Actuary, CalPERS
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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Actuarial Valuation
as of June 30, 2021
for the
Safety Plan
of the
City of Palo Alto
(CalPERS ID: 6373437857)
(Rate Plan ID: 5080)
Required Contributions
for Fiscal Year
July 1, 2023 – June 30, 2024
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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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 6/30/20 - 6/30/21 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-24
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: 399048 (PY) FIN JOB INSTANCE ID: 379734 REPORT ID: 399831
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation - June 30, 2021 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 and satisfies the
actuarial valuation requirements of Government Code section 7504. This valuation is based on the member
and financial data as of June 30, 2021 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 provis ions
set forth in the California Public Employees’ Retirement Law.
The undersigned is an actuary who satisfies the Qualification Standards for Actuaries Issuing Statements of Actuarial Opinion in the United States with regard to pensions.
DAVID CLEMENT, ASA, MAAA, EA
Senior Pension Actuary, CalPERS
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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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
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation - June 30, 2021 Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 3
Introduction
This report presents the results of the June 30, 2021 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 (FY) 2023-24.
Purpose of the Report
The actuarial valuation was prepared by the CalPERS Actuarial Office using data as of June 30, 2021. The
purpose of the report is to:
• Set forth the assets and accrued liabilities of this plan as of June 30, 2021;
• Determine the minimum required employer contributions for the FY July 1, 2023 through June 30, 2024; • Provide actuarial information as of June 30, 2021 to the CalPERS Board of Administration (board) and
other interested parties.
The pension funding information presented in this report should not be used in financial reports subject to
Governmental Accounting Standards Board (GASB) Statement No. 68 for an Agent Employer Defined Benefit
Pension Plan. A separate accounting valuation report for such purposes is available from CalPERS and details
for ordering are available on the CalPERS website (www.calpers.ca.gov).
The measurements shown in this actuarial valuation may not be applicable for other purposes. The agency should contact the plan 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;
changes in plan provisions or applicable law; and differences between the required contributions determined
by the valuation and the actual contributions made by the agency.
Assessment and Disclosure of Risk
This report includes the following risk disclosures consistent with the 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 5.8% and 7.8%.
• A “Sensitivity Analysis,” showing the impact on current valuation results assuming rates of mortality
are 10% lower or 10% higher than our current post-retirement mortality assumptions adopted in 2021.
• Plan maturity measures indicating how sensitive a plan may be to the risks noted above.
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation - June 30, 2021 Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 4
Required Contributions
Fiscal Year
Required Employer Contributions 2023-24
Employer Normal Cost Rate 22.59%
Plus
Required Payment on Amortization Bases $14,376,181
Paid either as
1) Monthly Payment $1,198,015
Or
2) Annual Prepayment Option* $13,910,986
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 paid as payroll is reported) plus the Employer Unfunded Accrued
Liability (UAL) Contribution Amount (billed monthly (1) or prepaid annually (2) in dollars).
* Only the UAL portion of the employer contribution can be prepaid (which must be received in full no
later than July 31).
For 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
2022-23 2023-24
Normal Cost Contribution as a Percentage of Payroll
Total Normal Cost 30.36% 32.45%
Employee Contribution1 9.78% 9.86%
Employer Normal Cost2 20.58% 22.59%
Projected Annual Payroll for Contribution Year $29,395,113 $27,969,318
Estimated Employer Contributions Based On
Projected Payroll
Total Normal Cost $8,924,356 $9,076,044
Employee Contribution 2,874,842 2,757,775
Employer Normal Cost 6,049,514 6,318,269
Unfunded Liability Contribution 14,860,807 14,376,181
% of Projected Payroll (illustrative only) 50.56% 51.40%
Estimated Total Employer Contribution $20,910,321 $20,694,450
% of Projected Payroll (illustrative only) 71.14% 73.99%
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% 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.
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation - June 30, 2021 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 FY 2023-24 is $14,376,181. CalPERS allows agencies to make additional discretionary payments (ADPs) at
any time and in any amount. These optional payments serve to reduce the UAL and future required
contributions and can result in significant long-term savings. Agencies can also 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 FY 2023-24 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.
Agencies considering making an ADP should contact CalPERS for additional information.
Minimum Required Employer Contribution for Fiscal Year 2023-24
Estimated
Normal Cost
Minimum UAL
Payment
ADP Total UAL
Contribution
Estimated Total
Contribution
$6,318,269 $14,376,181 $0 $14,376,181 $20,694,450
Alternative Fiscal Year 2023-24 Employer Contributions for Greater UAL Reduction
Funding
Target
Estimated
Normal Cost
Minimum UAL
Payment
ADP1 Total UAL
Contribution
Estimated Total
Contribution
15 years $6,318,269 $14,376,181 $1,279,608 $15,655,789 $21,974,058
10 years $6,318,269 $14,376,181 $5,994,948 $20,371,129 $26,689,398
5 years $6,318,269 $14,376,181 $20,655,788 $35,031,969 $41,350,238
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, 2023 as determined in the June 30, 2021 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% 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.
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation - June 30, 2021 Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 6
Plan’s Funded Status
The UAL and funded ratio are assessments 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. The funded ratio, on the other hand, is a relative measure of funded status that allows for
comparison between plans of different sizes. For measures of funded status that are appropriate f or 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. In particular, the investment return beginning with FY 2021-22 is assumed to be 6.80% per year, net of
investment and administrative expenses. Actual contribution rates during this projection period could be
significantly higher or lower than the projection shown below. The projected normal cost percentages below
reflect that the normal cost will continue to decline over time as new employees are hired into lower cost
benefit tiers. Future contribution requirements may differ significantly from those shown below. The actual long-term cost of the plan will depend on the actual benefits and expenses paid and the actual investment
experience of the fund.
Required
Contribution
Projected Future Employer Contributions
(Assumes 6.80% Return for Fiscal Year 2021-22 and Beyond)
Fiscal Year 2023-24 2024-25 2025-26 2026-27 2027-28 2028-29
Normal Cost % 22.59% 22.0% 21.3% 20.7% 20.1% 19.4%
UAL Payment $14,376,181 $14,462,000 $14,252,000 $13,996,000 $13,603,000 $14,061,000
Total as a % of Payroll* 73.99% 72.3% 69.5% 66.8% 63.6% 63.2%
Projected Payroll $27,969,318 $28,752,459 $29,557,528 $30,385,139 $31,235,923 $32,110,527
*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. Our online pension plan projection tool, Pension Outlook, is
available in the Employers section of the CalPERS website. Pension Outlook can help plan and budget pension
costs under various scenarios.
June 30, 2020 June 30, 2021
1. Present Value of Projected Benefits $558,256,577 $580,099,122
2. Entry Age Accrued Liability 487,159,688 509,225,515
3. Market Value of Assets (MVA) 293,857,975 353,339,674
4. Unfunded Accrued Liability (UAL) [(2) – (3)] $193,301,713 $155,885,841
5. Funded Ratio [(3) / (2)] 60.3% 69.4%
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation - June 30, 2021 Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 7
Cost
Actuarial Determination of Plan Cost
Contributions to fund the plan are comprised of two components:
• Normal Cost, expressed as a percentage of total active payroll
• Amortization of the Unfunded Accrued Liability (UAL), expressed as a dollar amount
For fiscal years prior to 2017-18, the Amortization of UAL component was expressed as a percentage of total
active payroll. Starting with FY 2017-18, the Amortization of UAL component is expressed as a dollar amount
and invoiced on a monthly basis. There is an option to prepay this amount during July of each fiscal year.
The Normal Cost component is 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 6.9% over the 20 years ending June 30, 2021, yet individual fiscal year returns
have ranged from -23.6% to +21.3%. In addition, CalPERS reviews all actuarial assumptions by conducting in-depth experience studies every four years, with the most recent experience study completed in 2021.
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation - June 30, 2021 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 6/30/20 – 6/30/21” and the effect on the employer contribution is shown in the “Reconciliation of Required Employer Contributions.” It should be noted that no change in liability or
contribution is shown for any plan changes which were already included in the prior year’s valuation.
Actuarial Methods and Assumptions
On November 17, 2021, the board adopted new actuarial assumptions based on the recommendations in the
2021 CalPERS Experience Study and Review of Actuarial Assumptions. This study reviewed the retirement
rates, termination rates, mortality rates, rates of salary increases, and inflation assumptions for Public Agencies. These new assumptions are incorporated in this actuarial valuation and will impact the required contribution
for FY 2023-24. In addition, the board adopted a new asset portfolio as part of its Asset Liability Management process. The new asset mix supports a 6.80% discount rate, which reflects a change in the price inflation
assumption to 2.30%.
Subsequent Events
The contribution requirements determined in this actuarial valuation report are based on demographic and
financial information as of June 30, 2021. Changes subsequent to that date are not reflected. Investment
returns below the assumed rate of return may increase future required contributions while investment returns
above the assumed rate of return may decrease future required contributions.
The projected employer contributions on Page 6 are calculated under the assumption that the discount rate remains at 6.8% going forward and that the realized rate of return on assets for FY 2021-22 is 6.8%.
This actuarial valuation report reflects statutory changes, regulatory changes , and board actions through
January 2022. Any subsequent changes or actions are not reflected.
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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Assets
• Reconciliation of the Market Value of Assets
• Asset Allocation
• CalPERS History of Investment Returns
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation - June 30, 2021 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 6/30/20 including Receivables $293,857,975
2. Change in Receivables for Service Buybacks (43,385)
3. Employer Contributions 15,702,797
4. Employee Contributions 3,455,641
5. Benefit Payments to Retirees and Beneficiaries (26,951,061)
6. Refunds (7,622)
7. Transfers 0
8. Service Credit Purchase (SCP) Payments and Interest 77,366
9. Administrative Expenses (373,036)
10. Miscellaneous Adjustments 1
11. Investment Return (Net of Investment Expenses) 67,621,000
12. Market Value of Assets as of 6/30/21 including Receivables $353,339,674
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation - June 30, 2021 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.
The asset allocation shown below reflects the allocation of the Public Employees’ Retirement Fund (PERF) in
its entirety as of June 30, 2021. The assets for City of Palo Alto Safety Plan are part of the PERF and are
invested accordingly.
Asset Class
Current Allocation
as of 6/30/2021
Policy Target
Allocation
as of 6/30/2021
Public Equity 51.4% 50.0%
Private Equity 8.3% 8.0%
Global Fixed Income 29.8% 28.0%
Real Assets 9.6% 13.0%
Liquidity 1.0% 1.0%
Total Fund Level Portfolios 2.5% 0.0%
Trust Level Financing (2.6%) 0.0%
Total Fund 100.0% 100.0%
On November 17, 2021, the board adopted changes to the strategic asset allocation as shown in the Policy Target Allocation below expressed as a percentage of total assets.
Strategic Asset Allocation Policy Targets
Asset Class
Policy Target
Allocation
effective
11/17/2021
Global Equity Cap-weighted 30.0%
Global Equity Non-cap-weighted 12.0%
Private Equity 13.0%
Private Debt 5.0%
Emerging Market Sovereign Bonds 5.0%
High Yield Bonds 5.0%
Investment Grade Corporates 10.0%
Mortgage-backed Securities 5.0%
Treasuries 5.0%
Real Assets 15.0%
Leverage (5.0%)
Total Fund 100.0%
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation - June 30, 2021 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 PERF for each fiscal year ending on
June 30 as reported by the Investment Office. Investment returns reported are net of investment expenses
but without reduction for administrative expenses. The assumed rate of return, however, is net of both
investment and administrative expenses. The Investment Office uses a three-month lag on private assets for investment performance reporting purposes. This can lead to a timing difference in the returns below and
those used for financial reporting purposes. The investment gain or loss calculation in this report relies on
assets that have been audited and are appropriate for financial reporting. Because of these differences, it is
possible for the Investment Office to report a return higher than the discount rate while the rate plan
experiences an investment loss, or a return lower than the discount rate while the rate plan experiences an investment gain.
The table below shows annualized investment returns of the PERF for various time periods ending on June
30, 2021 (figures reported are net of investment expenses but without reduction for administrative expenses).
These returns are the annual rates that if compounded over the indicated number of years would equate to
the actual time-weighted investment performance of the PERF. It should be recognized that in any given year
the rate of return is volatile. The portfolio has an expected volatility of 12.0% per year based on the most
recent Asset Liability Management study. The realized volatility is a measure of the risk of the portfolio
expressed as the standard deviation of the fund’s total monthly return distribution, expressed as an annual
percentage. Due to their volatile nature, when looking at investment returns, it is more instructive to look at returns over longer time horizons.
History of CalPERS Compound Annual Rates of Return and Volatilities
1 year 5 year 10 year 20 year 30 year
Compound Annual Return 21.3% 10.3% 8.5% 6.9% 8.4%
Realized Volatility – 7.3% 7.2% 8.5% 8.5%
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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Liabilities and Contributions
• Development of Accrued and Unfunded Liabilities
• (Gain) / Loss Analysis 6/30/20 - 6/30/21
• 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
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation - June 30, 2021 Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 14
Development of Accrued and Unfunded Liabilities
June 30, 2020 June 30, 2021
1. Present Value of Projected Benefits
a) Active Members $197,379,325 $201,248,509
b) Transferred Members 10,354,720 11,933,851
c) Terminated Members 3,330,796 4,365,437
d) Members and Beneficiaries Receiving Payments 347,191,736 362,551,325
e) Total $558,256,577 $580,099,122
2. Present Value of Future Employer Normal Costs $45,431,028 $46,706,711
3. Present Value of Future Employee Contributions $25,665,861 $24,166,896
4. Entry Age Accrued Liability
a) Active Members [(1a) - (2) - (3)] $126,282,436 $130,374,902
b) Transferred Members (1b) 10,354,720 11,933,851
c) Terminated Members (1c) 3,330,796 4,365,437
d) Members and Beneficiaries Receiving Payments (1d) 347,191,736 362,551,325
e) Total $487,159,688 $509,225,515
5. Market Value of Assets (MVA) $293,857,975 $353,339,674
6. Unfunded Accrued Liability (UAL) [(4e) - (5)] $193,301,713 $155,885,841
7. Funded Ratio [(5) / (4e)] 60.3% 69.4%
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation - June 30, 2021 Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 15
(Gain)/Loss Analysis 6/30/20 – 6/30/21
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 6/30/20 $193,301,713
b) Expected Payment on the UAL during 2020-21 11,210,740 c) Interest through 6/30/21 [.07 x (1a) - ((1.07)½ - 1) x (1b)] 13,145,379
d) Expected UAL before all other changes [(1a) - (1b) + (1c)] 195,236,352 e) Change due to plan changes 0
f) Change due to AL Significant Increase 0
g) Change due to assumption change 1,772,236
h) Change due to method change 0
i) Change due to Funding Risk Mitigation 11,645,613
j) Expected UAL after all other changes [(1d) + (1e) + (1f) + (1g) + (1h) + (1i)] 208,654,201
k) Actual UAL as of 6/30/21 155,885,841
l) Total (Gain)/Loss for 2020-21 [(1k) - (1j)] ($52,768,360)
2. Investment (Gain)/Loss for the Year
a) Market Value of Assets as of 6/30/20 $293,857,975 b) Prior Fiscal Year Receivables (358,568)
c) Current Fiscal Year Receivables 315,183 d) Contributions Received 19,158,438
e) Benefits and Refunds Paid (26,958,683)
f) Transfers, SCP Payments and Interest, and Miscellaneous Adjustments 77,366
g) Expected Return at 7% per year on 2a, 2b, 2d, 2e and 2f 20,664,969
h) Expected Assets as of 6/30/21 [(2a) + (2b) + (2c) + (2d) + (2e) + (2f) + (2g)] 306,756,680
i) Actual Market Value of Assets as of 6/30/21 353,339,674
j) Investment (Gain)/Loss [(2h) - (2i)] ($46,582,995)
3. Non-Investment (Gain)/Loss for the Year a) Total (Gain)/Loss (1l) ($52,768,360)
b) Investment (Gain)/Loss (2j) (46,582,995)
c) Non-Investment (Gain)/Loss [(3a) - (3b)] ($6,185,365)
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation - June 30, 2021 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 year.
• The assets, liabilities, and funded status of the plan are measured as of the valuation date: June 30, 2021. • The required employer contributions determined by the valuation are for the fiscal year beginning two years after the valuation date: FY 2023-24.
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 ag encies 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 Contribu tion 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
2023-24
Ramp
Shape
Escala-
tion
Rate
Amort.
Period
Balance
6/30/21
Expected
Payment
2021-22
Balance
6/30/22
Expected
Payment
2022-23
Balance
6/30/23
Minimum Required
Payment
2023-24
Fresh Start 6/30/04 No Ramp 2.80% 13 (872,999) (78,739) (850,991) (80,904) (825,249) (81,654)
Benefit Change 6/30/05 No Ramp 2.80% 3 89,372 20,018 74,762 20,568 58,590 20,958
Assumption Change 6/30/09 No Ramp 2.80% 8 6,168,739 760,603 5,802,175 781,520 5,389,068 792,634 Special (Gain)/Loss 6/30/09 No Ramp 2.80% 18 8,898,003 658,229 8,822,826 676,330 8,723,831 679,440
Special (Gain)/Loss 6/30/10 No Ramp 2.80% 19 4,273,703 306,405 4,247,663 314,831 4,211,145 315,998 Assumption Change 6/30/11 No Ramp 2.80% 10 5,474,880 584,055 5,243,586 600,116 4,979,965 607,444
Special (Gain)/Loss 6/30/11 No Ramp 2.80% 20 2,440,940 169,974 2,431,266 174,649 2,416,103 175,143
(Gain)/Loss 6/30/12 No Ramp 2.80% 21 45,412,282 3,077,345 45,320,063 3,161,972 45,134,116 3,168,199
Payment (Gain)/Loss 6/30/12 No Ramp 2.80% 21 1,586,647 107,518 1,583,426 110,475 1,576,930 110,693
(Gain)/Loss 6/30/13 100% Up/Down 2.80% 22 45,412,193 3,165,885 45,228,467 3,252,947 44,942,274 3,262,015
(Gain)/Loss 6/30/14 100% Up/Down 2.80% 23 (30,444,081) (2,065,235) (30,379,980) (2,122,029) (30,252,827) (2,126,125)
Assumption Change 6/30/14 100% Up/Down 2.80% 13 21,013,980 2,113,082 20,259,185 2,171,192 19,393,011 2,195,252
(Gain)/Loss 6/30/15 100% Up/Down 2.80% 24 16,793,581 1,110,507 16,787,901 1,141,046 16,750,275 1,142,287
(Gain)/Loss 6/30/16 100% Up/Down 2.80% 25 19,607,325 1,025,543 19,880,785 1,317,182 19,871,449 1,317,539 Assumption Change 6/30/16 100% Up/Down 2.80% 15 7,496,960 551,647 7,436,659 708,521 7,210,137 715,024
(Gain)/Loss 6/30/17 100% Up/Down 2.80% 26 (1,170,085) (45,983) (1,202,130) (62,996) (1,218,772) (78,707) Assumption Change 6/30/17 100% Up/Down 2.80% 16 9,970,981 542,869 10,087,985 743,730 10,005,367 937,381
(Gain)/Loss 6/30/18 80% Up/Down 2.80% 27 (3,208,025) (85,275) (3,338,044) (131,430) (3,429,206) (174,969)
Assumption Change 6/30/18 80% Up/Down 2.80% 17 15,152,353 552,537 15,611,699 851,597 15,793,219 1,143,598
Method Change 6/30/18 80% Up/Down 2.80% 17 3,494,159 127,416 3,600,085 196,380 3,641,944 263,716
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation - June 30, 2021 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 2023-24 Ramp Shape
Escala-
tion Rate Amort. Period Balance 6/30/21
Expected
Payment 2021-22 Balance 6/30/22
Expected
Payment 2022-23 Balance 6/30/23
Minimum
Required
Payment 2023-24 Investment (Gain)/Loss 6/30/19 60% Up Only 0.00% 18 1,605,929 35,112 1,678,846 70,224 1,720,435 103,444
Non-Investment (Gain)/Loss 6/30/19 No Ramp 0.00% 18 7,112,109 649,002 6,925,027 649,002 6,725,224 637,630 Investment (Gain)/Loss 6/30/20 40% Up Only 0.00% 19 7,485,830 0 7,994,866 175,127 8,357,533 343,555
Non-Investment (Gain)/Loss 6/30/20 No Ramp 0.00% 19 1,441,576 0 1,539,603 140,757 1,498,832 138,226
Assumption Change 6/30/21 No Ramp 0.00% 20 1,772,236 (307,011) 2,210,026 (315,607) 2,686,469 241,577
Net Investment (Gain) 6/30/21 20% Up Only 0.00% 20 (34,248,808) 0 (36,577,727) 0 (39,065,012) (839,690)
Non-Investment (Gain)/Loss 6/30/21 No Ramp 0.00% 20 (6,185,365) 0 (6,605,970) 0 (7,055,176) (634,427)
Risk Mitigation 6/30/21 No Ramp 0.00% 1 11,645,613 (362,590) 12,812,230 (372,743) 14,068,669 14,539,137 Risk Mitigation Offset 6/30/21 No Ramp 0.00% 1 (12,334,187) 0 (13,172,912) 0 (14,068,669) (14,539,137)
Total 155,885,841 12,612,914 153,451,377 14,172,457 149,239,675 14,376,181
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation - June 30, 2021 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 ac cording to the
CalPERS amortization policy. Many agencies have expressed a desire for a more stable pattern of payments or have indicated 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 curre nt amortization
schedule reflecting the individual bases and remaining periods shown on the previous page, and 2) alternative “fresh start” amortization schedules using two sample periods that would both result in interest savings relative
to the current amortization schedule. To initiate a Fresh Start, please contact the plan actuary.
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 an
appropriate 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.
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation - June 30, 2021 Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 19
Amortization Schedule and Alternatives
(continued)
Alternative Schedules
Current Amortization
Schedule 15 Year Amortization 10 Year Amortization
Date Balance Payment Balance Payment Balance Payment
6/30/2023 149,239,675 14,376,181 149,239,675 15,655,789 149,239,675 20,371,129
6/30/2024 144,531,039 14,462,267 143,208,641 15,655,789 138,335,616 20,371,129
6/30/2025 139,413,251 14,251,786 136,767,497 15,655,789 126,690,081 20,371,129
6/30/2026 134,164,974 13,995,897 129,888,355 15,655,789 114,252,650 20,371,129
6/30/2027 128,824,260 13,602,533 122,541,431 15,655,790 100,969,473 20,371,129
6/30/2028 123,526,897 14,061,364 114,694,915 15,655,789 86,783,040 20,371,129
6/30/2029 117,395,137 14,533,040 106,314,837 15,655,789 71,631,930 20,371,130
6/30/2030 110,358,970 15,017,916 97,364,914 15,655,790 55,450,543 20,371,129
6/30/2031 102,343,253 14,527,783 87,806,395 15,655,789 38,168,823 20,371,130
6/30/2032 94,288,992 14,449,591 77,597,898 15,655,790 19,711,945 20,371,129
6/30/2033 85,767,845 13,552,806 66,695,222 15,655,789
6/30/2034 77,594,035 13,221,582 55,051,165 15,655,790
6/30/2035 69,206,704 12,597,870 42,615,311 15,655,789
6/30/2036 60,893,607 11,539,817 29,333,820 15,655,789
6/30/2037 53,108,654 10,936,539 15,149,188 15,655,790
6/30/2038 45,417,774 10,288,251
6/30/2039 37,873,884 9,815,352
6/30/2040 30,305,723 9,605,518
6/30/2041 22,439,776 6,952,969
6/30/2042 16,780,199 5,333,251
6/30/2043 12,409,653 9,106,617
6/30/2044 3,842,360 2,221,540
6/30/2045 1,807,810 992,372
6/30/2046 905,183 935,453
6/30/2047
6/30/2048
6/30/2049
6/30/2050
6/30/2051
6/30/2052
Total 260,378,295 234,836,840 203,711,292
Interest Paid 111,138,620 85,597,165 54,471,617
Estimated Savings 25,541,455 56,667,003
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation - June 30, 2021 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 7/1/22 – 6/30/23
a) Employer Normal Cost 20.58%
b) Employee contribution 9.78%
c) Total Normal Cost 30.36%
2. Changes since the prior year annual valuation
a) Effect of demographic experience (0.44%) b) Effect of plan changes 0.00%
c) Effect of Funding Risk Mitigation 1.37%
d) Effect of assumption changes 1.16%
e) Effect of method changes 0.00%
f) Net effect of the changes above [sum of (a) through (e)] 2.09%
3. For Period 7/1/23 – 6/30/24
a) Employer Normal Cost 22.59%
b) Employee contribution 9.86%
c) Total Normal Cost 32.45%
Employer Normal Cost Change [(3a) – (1a)] 2.01%
Employee Contribution Change [(3b) – (1b)] 0.08%
Unfunded Liability Contribution ($)
1. For Period 7/1/22 – 6/30/23 14,860,807
2. Changes since the prior year annual valuation
a) Effect of adjustments to prior year’s amortization schedule 0
b) Effect of elimination of amortization bases 0
c) Effect of progression of amortization bases1 1,079,229
d) Effect of net investment (gain) after Funding Risk Mitigation2 (839,690)
e) Effect of non-investment (gain)/loss during the prior year (634,427)
f) Effect of Funding Risk Mitigation (re-amortize existing bases at 6.8%) (282,883)
g) Effect of Golden Handshake 0
h) Effect of plan changes 0
i) Effect of AL Significant Increase 0
j) Effect of assumption changes 193,145
k) Effect of changes due to Fresh Start or one year recognition of small balances 0
l) Effect of method change 0
m) Net effect of the changes above [sum of (a) through (l)] (484,626)
3. For Period 7/1/23 – 6/30/24 [(1) + (2m)] 14,376,181
The amounts shown for the period 7/1/22 – 6/30/23 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 Includes scheduled escalation in individual amortization base payments due to the 5-year ramp and payroll growth
assumption used in the pre-2019 amortization policy.
2 The unfunded liability contribution for the investment (gain)/loss during the year prior to the valuation date is 20% of the “full” annual requirement due to the 5-year ramp. Increases to this amount that occur during the ramp period will be included in line c) in future years.
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation - June 30, 2021 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. 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,
2021 are not included.
Fiscal
Year
Employer
Normal Cost
Unfunded Rate
Unfunded Liability
Payment ($)
Additional Discretionary
Payments
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 0
2020 - 21 21.566% N/A 11,210,740 0
2021 - 22 21.52% N/A 13,282,515
2022 - 23 20.58% N/A 14,860,807
2023 - 24 22.59% N/A 14,376,181
Funding History
The table below shows the recent history of actuarial accrued liability, market value of assets, unfunded
accrued liability, funded ratio and annual covered payroll.
[]
Valuation
Date
Accrued Liability
(AL)
Market Value of Assets
(MVA)
Unfunded Accrued
Liability (UAL)
Funded
Ratio
Annual Covered
Payroll
6/30/2012 $327,608,300 $215,605,457 $112,002,843 65.8% $20,919,846
6/30/2013 338,666,499 233,417,363 105,249,136 68.9% 21,258,082
6/30/2014 367,478,634 264,145,000 103,333,634 71.9% 21,274,021
6/30/2015 377,934,524 259,169,591 118,764,933 68.6% 21,186,275
6/30/2016 392,911,774 249,886,581 143,025,193 63.6% 21,268,028
6/30/2017 422,062,152 267,871,162 154,190,990 63.5% 23,485,510
6/30/2018 451,111,924 280,399,741 170,712,183 62.2% 23,613,222
6/30/2019 471,338,133 289,117,004 182,221,129 61.3% 25,488,331
6/30/2020 487,159,688 293,857,975 193,301,713 60.3% 27,097,526
6/30/2021 509,225,515 353,339,674 155,885,841 69.4% 25,745,571
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation - June 30, 2021 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 FY 2023-24. 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 ben efits.
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 2023-24
Number of
Actives
Payroll on
6/30/2021
5080 Safety Police First Level 38.40% 39 $7,312,797
25006 Safety Fire PEPRA Level 20.33% 26 $3,484,406
25007 Safety Police PEPRA Level 27.19% 32 $4,345,921
30705 Safety Fire First Level 31.91% 1 $160,331
30706 Safety Fire Second Level 34.56% 52 $8,393,219
30707 Safety Fire Third Level 30.49% 8 $1,168,580
30708 Safety Police Second Level 42.44% 5 $880,317
Plan Total 32.45% 163 $25,745,571
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 shown for the respective
benefit level does not reflect those differences. Additionally, if a Second Level Benefit Group amended to the
same benefit formula as a First Level Benefit Group, their Normal Costs may be dissimilar due to demographic or other population differences. For questions in these situations, please contact the plan actuary.
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation - June 30, 2021 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 le ast 50% 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
more than 1% from the base total normal cost established for the plan, the new member rate shall be 50%
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, 2023, based on 50% of the Total Normal Cost for each respective plan as of the June 30, 2021 valuation.
Basis for Current Rate Rates Effective July 1, 2023
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% 23.84% 0.300% No 11.75%
25007 Safety Police PEPRA
Level 23.540% 11.75% 23.84% 0.300% 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% of the active population, or
2. 25% 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% of the total normal cost of the PEPRA group shown on the “Normal Cost by Benefit Group” page.
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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Risk Analysis
• Future Investment Return Scenarios
• Discount Rate Sensitivity
• Mortality Rate Sensitivity
• Maturity Measures
• Maturity Measures History
• Hypothetical Termination Liability
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation - June 30, 2021 Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 25
Future Investment Return Scenarios
Analysis using the investment return scenarios from the Asset Liability Management process completed in 2021 was performed to determine the effects of various future investment returns on required employer
contributions. The projections below reflect the impact of the CalPERS Funding Risk Mitigation policy. The projected normal cost rates reflect that the rates are anticipated to decline over time as new employees are
hired into lower-cost benefit tiers. The projections also assume that all other actuarial assumptions will be
realized and that no further changes in assumptions, contributions, benefits, or funding will occur.
The first table shows projected contribution requirements if the fund were to earn either 3.0% or 10.8%
annually. These alternate investment returns were chosen because 90% of long-term average returns are expected to fall between them over the 20-year period ending June 30, 2041.
Assumed Annual Return
FY 2021-22
through FY 2040-41
Projected Employer Contributions
FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29
3.0% (5th percentile)
Normal Cost Rate 22.0% 21.3% 20.7% 20.1% 19.4%
UAL Contribution $14,788,000 $15,235,000 $15,972,000 $16,913,000 $19,052,000
10.8% (95th percentile)
Normal Cost Rate 22.4% 22.1% 21.9% 21.7% 21.4%
UAL Contribution $14,142,000 $13,328,000 $12,154,000 $10,491,000 $9,271,000
Required contributions outside of this range are also possible. In particular, whereas it is unlikely that
investment returns will average less than 3.0% or greater than 10.8% over a 20-year period, the likelihood
of a single investment return less than 3.0% or greater than 10.8% in any given year is much greater. The
following analysis illustrates the effect of an extreme, single year investment return.
The portfolio has an expected volatility (or standard deviation) of 12.0% per year. Accordingly, in any given
year there is a 16% probability that the annual return will be -5.2% or less and a 2.5% probability that the annual return will be -17.2% or less. These returns represent one and two standard deviations below the
expected return of 6.8%.
The following table shows the effect of a one or two standard deviation investment loss in FY 2021-22 on the
FY 2024-25 contribution requirements. Note that a single-year investment gain or loss decreases or increases
the required UAL contribution amount incrementally for each of the next five years, not just one, due to the 5-year ramp in the amortization policy. However, the contribution requirements beyond the first year are also
impacted by investment returns beyond the first year. Historically, significant downturns in the market are often followed by higher than average returns. Such investment gains would offset the impact of these single
year negative returns in years beyond FY 2024-25.
Assumed Annual Return for
Fiscal Year 2021-22
Required
Employer Contributions
Projected
Employer Contributions
FY 2023-24 FY 2024-25
(17.2%) (2 standard deviation loss)
Normal Cost Rate 22.59% 22.0%
UAL Contribution $14,376,181 $16,521,000
(5.2%) (1 standard deviation loss)
Normal Cost Rate 22.59% 22.0%
UAL Contribution $14,376,181 $15,492,000
• Without investment gains (returns higher than 6.8%) in year FY 2022-23 or later, projected
contributions rates would continue to rise over the next four years due to the continued phase-in of the impact of the illustrated investment loss in FY 2021-22.
• The Pension Outlook Tool can be used to model projected contributions for these scenarios beyond
FY 2024-25 as well as to model other investment returns scenarios.
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation - June 30, 2021 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 4.5% and 2.3%, 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, 2021 assuming alternate discount rates by changing the two components independently. Results are shown using the current discount rate of 6.8% as well as alternate
discount rates of 5.8% and 7.8%. The rates of 5.8% and 7.8% were selected since they illustrate the impact
of a 1.0% increase or decrease to the 6.8% assumption.
Sensitivity to the Real Rate of Return Assumption
As of June 30, 2021
1% Lower
Real Return Rate
Current
Assumptions
1% Higher
Real Return Rate
Discount Rate 5.8% 6.8% 7.8%
Price Inflation 2.3% 2.3% 2.3%
Real Rate of Return 3.5% 4.5% 5.5%
a) Total Normal Cost 40.92% 32.45% 26.00%
b) Accrued Liability $575,714,977 $509,225,515 $454,453,745 c) Market Value of Assets $353,339,674 $353,339,674 $353,339,674
d) Unfunded Liability/(Surplus) [(b) - (c)] $222,375,303 $155,885,841 $101,114,071 e) Funded Ratio 61.4% 69.4% 77.8%
Sensitivity to the Price Inflation Assumption
As of June 30, 2021
1% Lower
Inflation Rate
Current
Assumptions
1% Higher
Inflation Rate
Discount Rate 5.8% 6.8% 7.8%
Price Inflation 1.3% 2.3% 3.3%
Real Rate of Return 4.5% 4.5% 4.5%
a) Total Normal Cost 34.05% 32.45% 29.46% b) Accrued Liability $525,972,860 $509,225,515 $469,289,443
c) Market Value of Assets $353,339,674 $353,339,674 $353,339,674 d) Unfunded Liability/(Surplus) [(b) - (c)] $172,633,186 $155,885,841 $115,949,769
e) Funded Ratio 67.2% 69.4% 75.3%
Mortality Rate Sensitivity
The following table looks at the change in the June 30, 2021 plan costs and funded status under two different
longevity scenarios, namely assuming rates of post-retirement mortality are 10% lower or 10% higher than
our current mortality assumptions. This type of analysis highlights the impact on the plan of improving or worsening mortality over the long term.
As of June 30, 2021 10% Lower
Mortality Rates
Current
Assumptions
10% Higher
Mortality Rates
a) Total Normal Cost 32.92% 32.45% 32.01%
b) Accrued Liability $518,987,774 $509,225,515 $500,232,168
c) Market Value of Assets $353,339,674 $353,339,674 $353,339,674
d) Unfunded Liability/(Surplus) [(b) - (c)] $165,648,100 $155,885,841 $146,892,494
e) Funded Ratio 68.1% 69.4% 70.6%
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation - June 30, 2021 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 sponsor 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%.
Ratio of Retiree Accrued Liability to
Total Accrued Liability June 30, 2020 June 30, 2021
1. Retiree Accrued Liability 347,191,736 362,551,325
2. Total Accrued Liability 487,159,688 509,225,515
3. Ratio of Retiree AL to Total AL [(1) / (2)] 71% 71%
Another measure of the maturity level of CalPERS and its plans is the ratio of actives to retirees, also called the 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.
To calculate the support ratio for the rate plan, all retirees and beneficiaries receiving a continuance are
counted as one, even though they may have only worked a portion of their careers as an active member of
this rate plan. For this reason, the support ratio, while intuitive, may be less informative than the ratio of retiree liability to total accrued liability above. The support ratio for all CalPERS public agency plans is 0.82.
Note that to calculate the support ratio for all public agency plans, a retiree with service from more than one CalPERS agency is counted as a retiree more than once, consistent with how the support ratio is calculated
for the individual rate plan.
Support Ratio June 30, 2020 June 30, 2021
1. Number of Actives 174 163
2. Number of Retirees 435 443
3. Support Ratio [(1) / (2)] 0.40 0.37
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.
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation - June 30, 2021 Safety Plan of the City of Palo Alto
CalPERS ID: 6373437857
Page 28
Maturity Measures (continued)
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 exam ple, 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 ratio approaches
100%.
Contribution Volatility June 30, 2020 June 30, 2021
1. Market Value of Assets without Receivables $293,499,407 $353,024,492
2. Payroll 27,097,526 25,745,571
3. Asset Volatility Ratio (AVR) [(1) / (2)] 10.8 13.7
4. Accrued Liability $487,159,688 $509,225,515
5. Liability Volatility Ratio (LVR) [(4) / (2)] 18.0 19.8
Maturity Measures History
Valuation Date
Ratio of
Retiree Accrued Liability
to
Total Accrued Liability
Support
Ratio
Asset
Volatility
Ratio
Liability
Volatility
Ratio
6/30/2017
72%
0.40
11.4
18.0
6/30/2018
74%
0.39
11.9
19.1
6/30/2019
71%
0.39
11.3
18.5
6/30/2020
71%
0.40
10.8
18.0
6/30/2021
71%
0.37
13.7
19.8
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation - June 30, 2021 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, 2021. 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 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 seven months after.
[
Market
Value of Assets (MVA)
Hypothetical Termination
Liability1,2
at 1.00% Funded Ratio
Unfunded Termination
Liability at 1.00%
Hypothetical Termination
Liability1,2 at 2.25% Funded Ratio
Unfunded Termination
Liability at 2.25%
$353,339,674 $1,152,467,278 30.7% $799,127,604 $951,449,546 37.1% $598,109,872
1 The hypothetical liabilities calculated above include a 5% contingency load. The contingency load and other actuarial assumptions can be found in Appendix A.
2 The discount rate 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 2.00% on June 30, 2021, the valuation date.
In order to terminate the plan, first contact our Pension Contract Services unit to initiate a Resolution of Intent
to Terminate. The completed Resolution will allow the plan actuary to provide a preliminary termination
valuation with a more up-to-date estimate of the plan liabilities. Before beginning this process, please consult with the plan actuary.
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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Plan’s Major Benefit Provisions
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation - June 30, 2021
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 the agency has contracted. A description of principal standard and optional plan provisions
is in Appendix B.
Benefit Group
Member Category Police Fire Fire Police Fire Fire Police
Demographics Actives Yes Yes Yes Yes No Yes Yes
Transfers/Separated Yes Yes Yes Yes No Yes Yes Receiving Yes Yes Yes No Yes Yes Yes
Benefit Group Key 105397 105398 105400 111263 111265 111268 111269
Benefit Provision
Benefit Formula 3% @ 50 3% @ 50 3% @ 50 2.7% @ 57 3% @ 55 3% @ 55 Social Security Coverage No No No No No No
Full/Modified Full Full Full Full Full Full
Employee Contribution Rate 9.00% 9.00% 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%
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation - June 30, 2021
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 the agency has contracted. A description of principal standard and optional plan provisions
is in Appendix B.
Benefit Group
Member Category Police Fire Police Fire Fire Fire Fire
Demographics Actives No Yes Yes No No No No
Transfers/Separated No Yes Yes No No No No
Receiving Yes No No Yes Yes Yes Yes
Benefit Group Key 112652 112653 217220 217221 217224 217225 217226
Benefit Provision
Benefit Formula 2.7% @ 57 2.7% @ 57
Social Security Coverage No No Full/Modified Full Full
Employee Contribution Rate 11.75% 11.75%
Final Average Compensation Period Three Year Three Year
Sick Leave Credit No No
Non-Industrial Disability Standard Standard
Industrial Disability Standard Standard
Pre-Retirement Death Benefits
Optional Settlement 2 Yes No
1959 Survivor Benefit Level Level 1 Level 1
Special Yes Yes
Alternate (firefighters) No No
Post-Retirement Death Benefits
Lump Sum $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%
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation - June 30, 2021
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 the agency has contracted. A description of principal standard and optional plan provisions
is in Appendix B.
Benefit Group
Member Category Police Police Police Police
Demographics Actives No No No No
Transfers/Separated No No No No
Receiving Yes Yes Yes Yes
Benefit Group Key 217231 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 $500 Survivor Allowance (PRSA) No No No No
COLA 2% 2% 2% 2%
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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Appendices
• Appendix A – Actuarial Methods and Assumptions
• Appendix B – Principal Plan Provisions
• Appendix C – Participant Data
• Appendix D – Glossary of Actuarial Terms
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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Appendix A
Actuarial Methods and Assumptions
• Actuarial Data
• Actuarial Methods
• Actuarial Assumptions
• Miscellaneous
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation – June 30, 2021 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.
CalPERS uses an in-house proprietary actuarial model for calculating plan costs. We believe this model is fit
for its intended purpose and meets all applicable Actuarial Standards of Practice. Furthermore, the actuarial
results of our model are independently confirmed periodically by outside auditing actuaries. The actuarial assumptions used are internally consistent and the generated results are reasonable.
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 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:
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation – June 30, 2021 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
2.80%
0%
2.80%
0%
2.80%
0%
2.80%
0%
2.80%
0%
Ramp Up 5 5 5 0 0
Ramp Down 5 5 5 0 0
The 5-year ramp up means that the payments in the first four years of the amortization period are 20%, 40%,
60% and 80% of the “full” payment which begins in year five. The 5-year ramp down means that the reverse
is true in the final four years of the amortization period.
Current Policy (Bases Established on or after June 30, 2019)
Amortization payments are determined as a level dollar amount. Investment g ains 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.
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation – June 30, 2021 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% of the active population, or
2. 25% 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.
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation – June 30, 2021 Appendix A Actuarial Methods and Assumptions
A-4
Actuarial Assumptions
In 2021, CalPERS completed its most recent asset liability management study incorporating actuarial
assumptions and strategic asset allocation. In November 2021, the board adopted changes to the asset
allocation that increased the expected volatility of returns. The adopted asset allocation was expected to have
a long-term blended return that continued to support a discount rate assumption of 6.80%. The board also
approved several changes to the demographic assumptions that more closely aligned with actual experience.
For more details and additional rationale for the selection of the actuarial assumptions, please refer to the CalPERS Experience Study and Review of Actuarial Assumptions report from November 2021 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 November 17, 2021, is 6.80% compounded annually (net of investment and administrative expenses) as of June 30, 2021.
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 m arket 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 seven 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 2.00% on June 30, 2021.
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation – June 30, 2021 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 (2.80% for 2021) 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 0.0764 0.0621 0.0521
1 0.0663 0.0528 0.0424
2 0.0576 0.0449 0.0346
3 0.0501 0.0381 0.0282
4 0.0435 0.0324 0.0229
5 0.0378 0.0276 0.0187
10 0.0201 0.0126 0.0108
15 0.0155 0.0102 0.0071
20 0.0119 0.0083 0.0047
25 0.0091 0.0067 0.0031
30 0.0070 0.0054 0.0020
Public Agency Fire
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1517 0.1549 0.0631
1 0.1191 0.1138 0.0517
2 0.0936 0.0835 0.0423
3 0.0735 0.0613 0.0346
4 0.0577 0.0451 0.0284
5 0.0453 0.0331 0.0232
10 0.0188 0.0143 0.0077
15 0.0165 0.0124 0.0088
20 0.0145 0.0108 0.0101
25 0.0127 0.0094 0.0115
30 0.0112 0.0082 0.0132
Public Agency Police
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1181 0.1051 0.0653
1 0.0934 0.0812 0.0532
2 0.0738 0.0628 0.0434
3 0.0584 0.0485 0.0353
4 0.0462 0.0375 0.0288
5 0.0365 0.0290 0.0235
10 0.0185 0.0155 0.0118
15 0.0183 0.0150 0.0131
20 0.0181 0.0145 0.0145
25 0.0179 0.0141 0.0161
30 0.0178 0.0136 0.0179
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation – June 30, 2021 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 0.1238 0.1053 0.0890
1 0.0941 0.0805 0.0674
2 0.0715 0.0616 0.0510
3 0.0544 0.0471 0.0387
4 0.0413 0.0360 0.0293
5 0.0314 0.0276 0.0222
10 0.0184 0.0142 0.0072
15 0.0174 0.0124 0.0073
20 0.0164 0.0108 0.0074
25 0.0155 0.0094 0.0075
30 0.0147 0.0083 0.0077
Schools
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.0275 0.0275 0.0200
1 0.0422 0.0373 0.0298
2 0.0422 0.0373 0.0298
3 0.0422 0.0373 0.0298
4 0.0388 0.0314 0.0245
5 0.0308 0.0239 0.0179
10 0.0236 0.0160 0.0121
15 0.0182 0.0135 0.0103
20 0.0145 0.0109 0.0085
25 0.0124 0.0102 0.0058
30 0.0075 0.0053 0.0019
• The Miscellaneous salary scale is used for Local Prosecutors.
• The Police salary scale is used for Other Safety, Local Sheriff, and School Police.
Price Inflation
2.30% compounded annually.
Wage Inflation
2.80% compounded annually (used in projecting individual salary increases).
Payroll Growth
2.80% compounded annually (used in projecting the payroll over which the unfunded liability is amortized for level percent of payroll bases). This assumption is used for all plans with active
members.
Non-valued Potential Additional Liabilities
The potential liability loss for a cost-of-living increase exceeding the 2.30% price inflation assumption
and any potential liability loss from future member service purchases that are not reflected in the
valuation.
Miscellaneous Loading Factors
Credit for Unused Sick Leave
Total years of service is increased by 1% for those plans that have adopted the provision of providing
Credit for Unused Sick Leave.
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation – June 30, 2021 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% contingency load. This load is for unforeseen improvements
in mortality.
Demographic Assumptions
Pre-Retirement Mortality
The mortality assumptions are based on mortality rates resulting from the most recent CalPERS
Experience Study adopted by the CalPERS Board in November 2021. For purposes of the mortality rates, the rates incorporate generational mortality to capture on-going mortality improvement.
Generational mortality explicitly assumes that members born more recently will live longer than the members born before them thereby capturing the mortality improvement seen in the past and
expected continued improvement. For more details, please refer to the 2021 experience study report
that can be found on the CalPERS website
Rates vary by age and gender are shown in the table below. This table only contains a sample of the
2017 base table rates for illustrative purposes. The non-industrial death rates are used for all plans. The industrial death rates are used for Safety plans (except for local Safety members described in
Section 20423.6 where the agency has not specifically contracted for industrial death benefits.)
Miscellaneous Safety
Non-Industrial Death Non-Industrial Death Industrial Death
(Not Job-Related) (Not Job-Related) (Job-Related)
Age Male Female Male Female Male Female
20 0.00039 0.00014 0.00038 0.00014 0.00004 0.00002
25 0.00033 0.00013 0.00034 0.00018 0.00004 0.00002
30 0.00044 0.00019 0.00042 0.00025 0.00005 0.00003 35 0.00058 0.00029 0.00048 0.00034 0.00005 0.00004
40 0.00075 0.00039 0.00055 0.00042 0.00006 0.00005
45 0.00093 0.00054 0.00066 0.00053 0.00007 0.00006
50 0.00134 0.00081 0.00092 0.00073 0.00010 0.00008
55 0.00198 0.00123 0.00138 0.00106 0.00015 0.00012
60 0.00287 0.00179 0.00221 0.00151 0.00025 0.00017
65 0.00403 0.00250 0.00346 0.00194 0.00038 0.00022
70 0.00594 0.00404 0.00606 0.00358 0.00067 0.00040 75 0.00933 0.00688 0.01099 0.00699 0.00122 0.00078
80 0.01515 0.01149 0.02027 0.01410 0.00225 0.00157
• The pre-retirement mortality rates above are for 2017 and are projected generationally for future
years using 80% of the Society of Actuaries’ Scale MP-2020.
• Miscellaneous plans usually have industrial death rates set to zero unless the agency has
specifically contracted for industrial death benefits. If so, each non-industrial death rate shown
above will be split into two components: 99% will become the non-industrial death rate and 1% will become the industrial death rate.
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation – June 30, 2021 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 0.00267 0.00199 0.01701 0.01439 0.00430 0.00311
55 0.00390 0.00325 0.02210 0.01734 0.00621 0.00550
60 0.00578 0.00455 0.02708 0.01962 0.00944 0.00868
65 0.00857 0.00612 0.03334 0.02276 0.01394 0.01190
70 0.01333 0.00996 0.04001 0.02910 0.02163 0.01858
75 0.02391 0.01783 0.05376 0.04160 0.03446 0.03134 80 0.04371 0.03403 0.07936 0.06112 0.05853 0.05183
85 0.08274 0.06166 0.11561 0.09385 0.10137 0.08045 90 0.14539 0.11086 0.16608 0.14396 0.16584 0.12434
95 0.24665 0.20364 0.24665 0.20364 0.24665 0.20364
100 0.36198 0.31582 0.36198 0.31582 0.36198 0.31582
105 0.52229 0.44679 0.52229 0.44679 0.52229 0.44679
110 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000
The post-retirement mortality rates above are for 2017 and are projected generationally for future years using 80% of the Society of Actuaries’ Scale MP-2020.
Marital Status
For active members, a percentage who are married upon retirement is assumed according to the
member category as shown in the following table.
Member Category Percent Married
Miscellaneous Member 70%
Local Police 85%
Local Fire 85% Other Local Safety 70%
School Police 85% Local County Peace Officers 75%
Age of Spouse
It is assumed that female spouses are 3 years younger than male spouses. This assumption is used
for all plans.
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.
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation – June 30, 2021 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
Male Female Male Female Male Female Male Female Male Female Male Female
0 0.1851 0.1944 0.1769 0.1899 0.1631 0.1824 0.1493 0.1749 0.1490 0.1731 0.1487 0.1713
1 0.1531 0.1673 0.1432 0.1602 0.1266 0.1484 0.1101 0.1366 0.1069 0.1323 0.1037 0.1280
2 0.1218 0.1381 0.1125 0.1307 0.0970 0.1183 0.0815 0.1058 0.0771 0.0998 0.0726 0.0938
3 0.0927 0.1085 0.0852 0.1020 0.0727 0.0912 0.0601 0.0804 0.0556 0.0737 0.0511 0.0669
4 0.0672 0.0801 0.0616 0.0752 0.0524 0.0670 0.0431 0.0587 0.0392 0.0523 0.0352 0.0459
5 0.0463 0.0551 0.0423 0.0517 0.0358 0.0461 0.0292 0.0404 0.0261 0.0350 0.0230 0.0296
10 0.0112 0.0140 0.0101 0.0129 0.0083 0.0112 0.0064 0.0094 0.0048 0.0071 0.0033 0.0049
15 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
20 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
25 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
30 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
35 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
• The police termination and refund rates are also used for Public Agency Local Prosecutors, Other
Safety, Local Sheriff, and School Police.
Public Agency Safety
Duration of
Service Fire Police County Peace Officer
Male Female Male Female Male Female
0 0.1022 0.1317 0.1298 0.1389 0.1086 0.1284
1 0.0686 0.1007 0.0789 0.0904 0.0777 0.0998
2 0.0441 0.0743 0.0464 0.0566 0.0549 0.0759
3 0.0272 0.0524 0.0274 0.0343 0.0385 0.0562
4 0.0161 0.0349 0.0170 0.0206 0.0268 0.0402
5 0.0092 0.0214 0.0113 0.0128 0.0186 0.0276
10 0.0015 0.0000 0.0032 0.0047 0.0046 0.0038
15 0.0000 0.0000 0.0000 0.0000 0.0023 0.0036
20 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
25 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
30 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
35 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
Packet Pg. 141
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CalPERS Actuarial Valuation – June 30, 2021 Appendix A Actuarial Methods and Assumptions
A-10
Termination with Refund (continued)
Schools
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45
Male Female Male Female Male Female Male Female Male Female Male Female
0 0.2054 0.2120 0.1933 0.1952 0.1730 0.1672 0.1527 0.1392 0.1423 0.1212 0.1318 0.1032
1 0.1922 0.2069 0.1778 0.1883 0.1539 0.1573 0.1300 0.1264 0.1191 0.1087 0.1083 0.0910
2 0.1678 0.1859 0.1536 0.1681 0.1298 0.1383 0.1060 0.1086 0.0957 0.0934 0.0853 0.0782
3 0.1384 0.1575 0.1256 0.1417 0.1042 0.1155 0.0829 0.0893 0.0736 0.0774 0.0643 0.0656
4 0.1085 0.1274 0.0978 0.1143 0.0800 0.0925 0.0622 0.0707 0.0542 0.0620 0.0462 0.0533
5 0.0816 0.0991 0.0732 0.0887 0.0590 0.0713 0.0449 0.0539 0.0383 0.0476 0.0317 0.0413
10 0.0222 0.0248 0.0200 0.0221 0.0163 0.0174 0.0125 0.0128 0.0094 0.0100 0.0063 0.0072
15 0.0106 0.0132 0.0095 0.0113 0.0077 0.0083 0.0058 0.0052 0.0040 0.0039 0.0021 0.0026
20 0.0059 0.0065 0.0050 0.0054 0.0035 0.0036 0.0021 0.0019 0.0010 0.0009 0.0000 0.0000
25 0.0029 0.0034 0.0025 0.0029 0.0018 0.0020 0.0010 0.0012 0.0005 0.0006 0.0000 0.0000
30 0.0012 0.0015 0.0011 0.0013 0.0011 0.0011 0.0010 0.0009 0.0005 0.0005 0.0000 0.0000
35 0.0006 0.0007 0.0006 0.0007 0.0005 0.0006 0.0005 0.0005 0.0003 0.0002 0.0000 0.0000
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
Packet Pg. 142
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CalPERS Actuarial Valuation – June 30, 2021 Appendix A Actuarial Methods and Assumptions
A-11
Termination with Vested Benefits
Rates vary by entry age and service for Miscellaneous plans. Rates vary by service for Safety plans.
See sample rates in tables below.
Public Agency Miscellaneous
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40
Male Female Male Female Male Female Male Female Male Female
5 0.0381 0.0524 0.0381 0.0524 0.0358 0.0464 0.0334 0.0405 0.0301 0.0380
10 0.0265 0.0362 0.0265 0.0362 0.0254 0.0334 0.0244 0.0307 0.0197 0.0236
15 0.0180 0.0252 0.0180 0.0252 0.0166 0.0213 0.0152 0.0174 0.0119 0.0132
20 0.0141 0.0175 0.0141 0.0175 0.0110 0.0131 0.0079 0.0087 0.0000 0.0000
25 0.0084 0.0108 0.0084 0.0108 0.0064 0.0076 0.0000 0.0000 0.0000 0.0000
30 0.0047 0.0056 0.0047 0.0056 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
35 0.0038 0.0041 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
• After termination with vested benefits, a Miscellaneous member is assumed to retire at age 59 and a Safety member at age 54.
• The Police termination with vested benefits rates are also used for Public Agency Local
Prosecutors, Other Safety, Local Sheriff, and School Police.
Schools
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40
Male Female Male Female Male Female Male Female Male Female
5 0.0359 0.0501 0.0359 0.0501 0.0332 0.0402 0.0305 0.0304 0.0266 0.0272
10 0.0311 0.0417 0.0311 0.0417 0.0269 0.0341 0.0228 0.0265 0.0193 0.0233
15 0.0193 0.0264 0.0193 0.0264 0.0172 0.0220 0.0151 0.0175 0.0123 0.0142
20 0.0145 0.0185 0.0145 0.0185 0.0113 0.0141 0.0080 0.0097 0.0000 0.0000
25 0.0089 0.0123 0.0089 0.0123 0.0074 0.0093 0.0000 0.0000 0.0000 0.0000
30 0.0057 0.0064 0.0057 0.0064 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
35 0.0040 0.0049 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
Public Agency Safety
Duration of
Service Fire Police County Peace Officer
Male Female Male Female Male Female
5 0.0089 0.0224 0.0156 0.0272 0.0177 0.0266
10 0.0066 0.0164 0.0113 0.0198 0.0126 0.0189
15 0.0048 0.0120 0.0083 0.0144 0.0089 0.0134
20 0.0035 0.0088 0.0060 0.0105 0.0063 0.0095
25 0.0024 0.0061 0.0042 0.0073 0.0042 0.0063
30 0.0012 0.0031 0.0021 0.0037 0.0021 0.0031
35 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
Packet Pg. 143
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CalPERS Actuarial Valuation – June 30, 2021 Appendix A Actuarial Methods and Assumptions
A-12
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 0.0001 0.0000 0.0001 0.0001 0.0001 0.0000 0.0002
25 0.0001 0.0001 0.0001 0.0001 0.0001 0.0000 0.0002
30 0.0002 0.0003 0.0001 0.0001 0.0001 0.0002 0.0002
35 0.0004 0.0007 0.0001 0.0002 0.0003 0.0005 0.0004
40 0.0009 0.0012 0.0001 0.0002 0.0006 0.0010 0.0008
45 0.0015 0.0019 0.0002 0.0003 0.0011 0.0019 0.0015
50 0.0015 0.0019 0.0004 0.0005 0.0016 0.0027 0.0021
55 0.0014 0.0013 0.0006 0.0007 0.0009 0.0024 0.0017
60 0.0012 0.0009 0.0006 0.0011 0.0005 0.0020 0.0010
• The Miscellaneous non-industrial disability rates are used for Local Prosecutors.
• The police non-industrial disability rates are also used for Other Safety, Local Sheriff, and School Police.
Industrial (Job-Related) Disability
Rates vary by age and category.
Age Fire Police County Peace Officer
20 0.0001 0.0000 0.0004
25 0.0002 0.0017 0.0013
30 0.0006 0.0048 0.0025
35 0.0012 0.0079 0.0037
40 0.0023 0.0110 0.0051
45 0.0040 0.0141 0.0067
50 0.0208 0.0185 0.0092
55 0.0307 0.0479 0.0151
60 0.0438 0.0602 0.0174
• The police industrial disability rates are also used for Local Sheriff and Other Safety.
• 50% of the police industrial disability rates are used for School Police.
• 1% of the police industrial disability rates are used for Local Prosecutors.
• Normally, rates are zero for Miscellaneous plans unless the agency has specifically contracted for industrial disability benefits. If so, each Miscellaneous non-industrial disability rate will be
split into two components: 50% will become the non-industrial disability rate and 50% will
become the industrial disability rate.
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
Packet Pg. 144
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CalPERS Actuarial Valuation – June 30, 2021 Appendix A Actuarial Methods and Assumptions
A-13
Service Retirement
Retirement rates vary by age, service, and formula, except for the Safety Half Pay at 55 and 2% at
55 formulas, where retirement rates vary by age only.
Public Agency Miscellaneous 1.5% at 65
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.008 0.011 0.013 0.015 0.017 0.019
51 0.007 0.010 0.012 0.013 0.015 0.017
52 0.010 0.014 0.017 0.019 0.021 0.024
53 0.008 0.012 0.015 0.017 0.019 0.022
54 0.012 0.016 0.019 0.022 0.025 0.028
55 0.018 0.025 0.031 0.035 0.038 0.043
56 0.015 0.021 0.025 0.029 0.032 0.036
57 0.020 0.028 0.033 0.038 0.043 0.048
58 0.024 0.033 0.040 0.046 0.052 0.058
59 0.028 0.039 0.048 0.054 0.060 0.067
60 0.049 0.069 0.083 0.094 0.105 0.118
61 0.062 0.087 0.106 0.120 0.133 0.150
62 0.104 0.146 0.177 0.200 0.223 0.251
63 0.099 0.139 0.169 0.191 0.213 0.239
64 0.097 0.136 0.165 0.186 0.209 0.233
65 0.140 0.197 0.240 0.271 0.302 0.339
66 0.092 0.130 0.157 0.177 0.198 0.222
67 0.129 0.181 0.220 0.249 0.277 0.311
68 0.092 0.129 0.156 0.177 0.197 0.221
69 0.092 0.130 0.158 0.178 0.199 0.224
70 0.103 0.144 0.175 0.198 0.221 0.248
Public Agency Miscellaneous 2% at 60
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.010 0.011 0.014 0.014 0.017 0.017
51 0.017 0.013 0.014 0.010 0.010 0.010
52 0.014 0.014 0.018 0.015 0.016 0.016
53 0.015 0.012 0.013 0.010 0.011 0.011
54 0.006 0.010 0.017 0.016 0.018 0.018
55 0.012 0.016 0.024 0.032 0.036 0.036
56 0.010 0.014 0.023 0.030 0.034 0.034
57 0.006 0.018 0.030 0.040 0.044 0.044
58 0.022 0.023 0.033 0.042 0.046 0.046
59 0.039 0.033 0.040 0.047 0.050 0.050
60 0.063 0.069 0.074 0.090 0.137 0.116
61 0.044 0.058 0.066 0.083 0.131 0.113
62 0.084 0.107 0.121 0.153 0.238 0.205
63 0.173 0.166 0.165 0.191 0.283 0.235
64 0.120 0.145 0.164 0.147 0.160 0.172
65 0.138 0.160 0.214 0.216 0.237 0.283
66 0.198 0.228 0.249 0.216 0.228 0.239
67 0.207 0.242 0.230 0.233 0.233 0.233
68 0.201 0.234 0.225 0.231 0.231 0.231
69 0.152 0.173 0.164 0.166 0.166 0.166
70 0.200 0.200 0.200 0.200 0.200 0.200
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
Packet Pg. 145
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CalPERS Actuarial Valuation – June 30, 2021 Appendix A Actuarial Methods and Assumptions
A-14
Service Retirement
Public Agency Miscellaneous 2% at 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.014 0.014 0.017 0.021 0.023 0.024
51 0.013 0.017 0.017 0.018 0.018 0.019
52 0.013 0.018 0.018 0.020 0.020 0.021
53 0.013 0.019 0.021 0.024 0.025 0.026
54 0.017 0.025 0.028 0.032 0.033 0.035
55 0.045 0.042 0.053 0.086 0.098 0.123
56 0.018 0.036 0.056 0.086 0.102 0.119
57 0.041 0.046 0.056 0.076 0.094 0.120
58 0.052 0.044 0.048 0.074 0.106 0.123
59 0.043 0.058 0.073 0.092 0.105 0.126
60 0.059 0.064 0.083 0.115 0.154 0.170
61 0.087 0.074 0.087 0.107 0.147 0.168
62 0.115 0.123 0.151 0.180 0.227 0.237
63 0.116 0.127 0.164 0.202 0.252 0.261
64 0.084 0.138 0.153 0.190 0.227 0.228
65 0.167 0.187 0.210 0.262 0.288 0.291
66 0.187 0.258 0.280 0.308 0.318 0.319
67 0.195 0.235 0.244 0.277 0.269 0.280
68 0.228 0.248 0.250 0.241 0.245 0.245
69 0.188 0.201 0.209 0.219 0.231 0.231
70 0.229 0.229 0.229 0.229 0.229 0.229
Public Agency Miscellaneous 2.5% at 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.014 0.017 0.027 0.035 0.046 0.050
51 0.019 0.021 0.025 0.030 0.038 0.040
52 0.018 0.020 0.026 0.034 0.038 0.037
53 0.013 0.021 0.031 0.045 0.052 0.053
54 0.025 0.025 0.030 0.046 0.057 0.068
55 0.029 0.042 0.064 0.109 0.150 0.225
56 0.036 0.047 0.068 0.106 0.134 0.194
57 0.051 0.047 0.060 0.092 0.116 0.166
58 0.035 0.046 0.062 0.093 0.119 0.170
59 0.029 0.053 0.072 0.112 0.139 0.165
60 0.039 0.069 0.094 0.157 0.177 0.221
61 0.080 0.077 0.086 0.140 0.167 0.205
62 0.086 0.131 0.149 0.220 0.244 0.284
63 0.135 0.135 0.147 0.214 0.222 0.262
64 0.114 0.128 0.158 0.177 0.233 0.229
65 0.112 0.174 0.222 0.209 0.268 0.273
66 0.235 0.254 0.297 0.289 0.321 0.337
67 0.237 0.240 0.267 0.249 0.267 0.277
68 0.258 0.271 0.275 0.207 0.210 0.212
69 0.117 0.208 0.266 0.219 0.250 0.270
70 0.229 0.229 0.229 0.229 0.229 0.229
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
Packet Pg. 146
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CalPERS Actuarial Valuation – June 30, 2021 Appendix A Actuarial Methods and Assumptions
A-15
Service Retirement
Public Agency Miscellaneous 2.7% at 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.011 0.016 0.022 0.033 0.034 0.038
51 0.018 0.019 0.023 0.032 0.031 0.031
52 0.019 0.020 0.026 0.035 0.034 0.037
53 0.020 0.020 0.025 0.043 0.048 0.053
54 0.018 0.030 0.040 0.052 0.053 0.070
55 0.045 0.058 0.082 0.138 0.208 0.278
56 0.057 0.062 0.080 0.121 0.178 0.222
57 0.045 0.052 0.071 0.106 0.147 0.182
58 0.074 0.060 0.074 0.118 0.163 0.182
59 0.058 0.067 0.086 0.123 0.158 0.187
60 0.087 0.084 0.096 0.142 0.165 0.198
61 0.073 0.084 0.101 0.138 0.173 0.218
62 0.130 0.133 0.146 0.187 0.214 0.249
63 0.122 0.140 0.160 0.204 0.209 0.243
64 0.104 0.124 0.154 0.202 0.214 0.230
65 0.182 0.201 0.242 0.264 0.293 0.293
66 0.272 0.249 0.273 0.285 0.312 0.312
67 0.182 0.217 0.254 0.249 0.264 0.264
68 0.223 0.197 0.218 0.242 0.273 0.273
69 0.217 0.217 0.217 0.217 0.217 0.217
70 0.227 0.227 0.227 0.227 0.227 0.227
Public Agency Miscellaneous 3% at 60
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.015 0.020 0.025 0.039 0.040 0.044
51 0.041 0.034 0.032 0.041 0.036 0.037
52 0.024 0.020 0.022 0.039 0.040 0.041
53 0.018 0.024 0.032 0.047 0.048 0.057
54 0.033 0.033 0.035 0.051 0.049 0.052
55 0.137 0.043 0.051 0.065 0.076 0.108
56 0.173 0.038 0.054 0.075 0.085 0.117
57 0.019 0.035 0.059 0.088 0.111 0.134
58 0.011 0.040 0.070 0.105 0.133 0.162
59 0.194 0.056 0.064 0.081 0.113 0.163
60 0.081 0.085 0.133 0.215 0.280 0.333
61 0.080 0.090 0.134 0.170 0.223 0.292
62 0.137 0.153 0.201 0.250 0.278 0.288
63 0.128 0.140 0.183 0.227 0.251 0.260
64 0.174 0.147 0.173 0.224 0.239 0.264
65 0.152 0.201 0.262 0.299 0.323 0.323
66 0.272 0.273 0.317 0.355 0.380 0.380
67 0.218 0.237 0.268 0.274 0.284 0.284
68 0.200 0.228 0.269 0.285 0.299 0.299
69 0.250 0.250 0.250 0.250 0.250 0.250
70 0.245 0.245 0.245 0.245 0.245 0.245
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
Packet Pg. 147
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CalPERS Actuarial Valuation – June 30, 2021 Appendix A Actuarial Methods and Assumptions
A-16
Service Retirement
Public Agency Miscellaneous 2% at 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 Half Pay at 55 and 2% at 55
Age Rate
Age Rate
50 0.016 56 0.111
51 0.000 57 0.000
52 0.034 58 0.095
53 0.020 59 0.044
54 0.041 60 1.000
55 0.075
Public Agency Police Half Pay at 55 and 2% at 55
Age Rate
Age Rate
50 0.026 56 0.069
51 0.000 57 0.051
52 0.016 58 0.072
53 0.027 59 0.070
54 0.010 60 0.300
55 0.167
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
Packet Pg. 148
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CalPERS Actuarial Valuation – June 30, 2021 Appendix A Actuarial Methods and Assumptions
A-17
Service Retirement
Public Agency Police 2% at 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.018 0.077 0.056 0.046 0.043 0.046
51 0.022 0.087 0.060 0.048 0.044 0.047
52 0.020 0.102 0.081 0.071 0.069 0.075
53 0.016 0.072 0.053 0.045 0.042 0.046
54 0.006 0.071 0.071 0.069 0.072 0.080
55 0.009 0.040 0.099 0.157 0.186 0.186
56 0.020 0.051 0.108 0.165 0.194 0.194
57 0.036 0.072 0.106 0.139 0.156 0.156
58 0.001 0.046 0.089 0.130 0.152 0.152
59 0.066 0.094 0.119 0.143 0.155 0.155
60 0.177 0.177 0.177 0.177 0.177 0.177
61 0.134 0.134 0.134 0.134 0.134 0.134
62 0.184 0.184 0.184 0.184 0.184 0.184
63 0.250 0.250 0.250 0.250 0.250 0.250
64 0.177 0.177 0.177 0.177 0.177 0.177
65 1.000 1.000 1.000 1.000 1.000 1.000
• These rates also apply to County Peace officers, Local Prosecutors, Local Sheriff, School Police, and Other Safety.
Service Retirement
Public Agency Fire 2% at 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.054 0.054 0.056 0.080 0.064 0.066
51 0.020 0.020 0.021 0.030 0.024 0.024
52 0.037 0.037 0.038 0.054 0.043 0.045
53 0.051 0.051 0.053 0.076 0.061 0.063
54 0.082 0.082 0.085 0.121 0.097 0.100
55 0.139 0.139 0.139 0.139 0.139 0.139
56 0.129 0.129 0.129 0.129 0.129 0.129
57 0.085 0.085 0.085 0.085 0.085 0.085
58 0.119 0.119 0.119 0.119 0.119 0.119
59 0.167 0.167 0.167 0.167 0.167 0.167
60 0.152 0.152 0.152 0.152 0.152 0.152
61 0.179 0.179 0.179 0.179 0.179 0.179
62 0.179 0.179 0.179 0.179 0.179 0.179
63 0.179 0.179 0.179 0.179 0.179 0.179
64 0.179 0.179 0.179 0.179 0.179 0.179
65 1.000 1.000 1.000 1.000 1.000 1.000
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
Packet Pg. 149
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CalPERS Actuarial Valuation – June 30, 2021 Appendix A Actuarial Methods and Assumptions
A-18
Service Retirement
Public Agency Police 3% at 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.019 0.053 0.045 0.054 0.057 0.061
51 0.002 0.017 0.028 0.044 0.053 0.060
52 0.002 0.031 0.037 0.051 0.059 0.066
53 0.026 0.049 0.049 0.080 0.099 0.114
54 0.019 0.034 0.047 0.091 0.121 0.142
55 0.006 0.115 0.141 0.199 0.231 0.259
56 0.017 0.188 0.121 0.173 0.199 0.199
57 0.008 0.137 0.093 0.136 0.157 0.157
58 0.017 0.126 0.105 0.164 0.194 0.194
59 0.026 0.146 0.110 0.167 0.195 0.195
60 0.155 0.155 0.155 0.155 0.155 0.155
61 0.210 0.210 0.210 0.210 0.210 0.210
62 0.262 0.262 0.262 0.262 0.262 0.262
63 0.172 0.172 0.172 0.172 0.172 0.172
64 0.227 0.227 0.227 0.227 0.227 0.227
65 1.000 1.000 1.000 1.000 1.000 1.000
• These rates also apply to County Peace officers, Local Prosecutors, Local Sheriff, School Police, and Other Safety.
Service Retirement
Public Agency Fire 3% at 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.003 0.006 0.013 0.019 0.025 0.028
51 0.004 0.008 0.017 0.026 0.034 0.038
52 0.005 0.011 0.022 0.033 0.044 0.049
53 0.005 0.034 0.024 0.038 0.069 0.138
54 0.007 0.047 0.032 0.051 0.094 0.187
55 0.010 0.067 0.046 0.073 0.134 0.266
56 0.010 0.063 0.044 0.069 0.127 0.253
57 0.135 0.100 0.148 0.196 0.220 0.220
58 0.083 0.062 0.091 0.120 0.135 0.135
59 0.137 0.053 0.084 0.146 0.177 0.177
60 0.162 0.063 0.099 0.172 0.208 0.208
61 0.598 0.231 0.231 0.231 0.231 0.231
62 0.621 0.240 0.240 0.240 0.240 0.240
63 0.236 0.236 0.236 0.236 0.236 0.236
64 0.236 0.236 0.236 0.236 0.236 0.236
65 1.000 1.000 1.000 1.000 1.000 1.000
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
Packet Pg. 150
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CalPERS Actuarial Valuation – June 30, 2021 Appendix A Actuarial Methods and Assumptions
A-19
Service Retirement
Public Agency Police 3% at 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.124 0.103 0.113 0.143 0.244 0.376
51 0.060 0.081 0.087 0.125 0.207 0.294
52 0.016 0.055 0.111 0.148 0.192 0.235
53 0.072 0.074 0.098 0.142 0.189 0.237
54 0.018 0.049 0.105 0.123 0.187 0.271
55 0.069 0.074 0.081 0.113 0.209 0.305
56 0.064 0.108 0.113 0.125 0.190 0.288
57 0.056 0.109 0.160 0.182 0.210 0.210
58 0.108 0.129 0.173 0.189 0.214 0.214
59 0.093 0.144 0.204 0.229 0.262 0.262
60 0.343 0.180 0.159 0.188 0.247 0.247
61 0.221 0.221 0.221 0.221 0.221 0.221
62 0.213 0.213 0.213 0.213 0.213 0.213
63 0.233 0.233 0.233 0.233 0.233 0.233
64 0.234 0.234 0.234 0.234 0.234 0.234
65 1.000 1.000 1.000 1.000 1.000 1.000
• These rates also apply to County Peace officers, Local Prosecutors, Local Sheriff, School Police, and Other Safety.
Service Retirement
Public Agency Fire 3% at 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.095 0.048 0.053 0.093 0.134 0.175
51 0.016 0.032 0.053 0.085 0.117 0.149
52 0.013 0.032 0.054 0.087 0.120 0.154
53 0.085 0.044 0.049 0.089 0.129 0.170
54 0.038 0.065 0.074 0.105 0.136 0.167
55 0.042 0.043 0.049 0.085 0.132 0.215
56 0.133 0.103 0.075 0.113 0.151 0.209
57 0.062 0.048 0.060 0.124 0.172 0.213
58 0.124 0.097 0.092 0.153 0.194 0.227
59 0.092 0.071 0.078 0.144 0.192 0.233
60 0.056 0.044 0.061 0.131 0.186 0.233
61 0.282 0.219 0.158 0.198 0.233 0.260
62 0.292 0.227 0.164 0.205 0.241 0.269
63 0.196 0.196 0.196 0.196 0.196 0.196
64 0.197 0.197 0.197 0.197 0.197 0.197
65 1.000 1.000 1.000 1.000 1.000 1.000
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
Packet Pg. 151
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CalPERS Actuarial Valuation – June 30, 2021 Appendix A Actuarial Methods and Assumptions
A-20
Service Retirement
Public Agency Police 2% at 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% at 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
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
Packet Pg. 152
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CalPERS Actuarial Valuation – June 30, 2021 Appendix A Actuarial Methods and Assumptions
A-21
Service Retirement
Public Agency Police 2.5% at 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% at 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
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
Packet Pg. 153
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CalPERS Actuarial Valuation – June 30, 2021 Appendix A Actuarial Methods and Assumptions
A-22
Service Retirement
Public Agency Police 2.7% at 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.050 0.050 0.050 0.050 0.050 0.100
51 0.040 0.040 0.040 0.040 0.058 0.094
52 0.038 0.038 0.038 0.038 0.058 0.083
53 0.038 0.038 0.038 0.038 0.077 0.117
54 0.038 0.038 0.038 0.044 0.093 0.150
55 0.068 0.068 0.068 0.091 0.134 0.242
56 0.063 0.063 0.063 0.084 0.123 0.217
57 0.060 0.060 0.060 0.080 0.118 0.213
58 0.080 0.080 0.080 0.088 0.138 0.228
59 0.080 0.080 0.080 0.092 0.140 0.228
60 0.150 0.150 0.150 0.150 0.150 0.228
61 0.144 0.144 0.144 0.144 0.144 0.170
62 0.150 0.150 0.150 0.150 0.150 0.213
63 0.150 0.150 0.150 0.150 0.150 0.213
64 0.150 0.150 0.150 0.150 0.150 0.319
65 1.000 1.000 1.000 1.000 1.000 1.000
• These rates also apply to County Peace officers, Local Prosecutors, Local Sheriff, School Police, and Other Safety.
Service Retirement
Public Agency Fire 2.7% at 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.007 0.007 0.007 0.007 0.010 0.015
51 0.008 0.008 0.008 0.008 0.013 0.019
52 0.016 0.016 0.016 0.016 0.025 0.038
53 0.044 0.044 0.044 0.044 0.068 0.102
54 0.061 0.061 0.061 0.061 0.093 0.140
55 0.083 0.083 0.083 0.083 0.127 0.190
56 0.074 0.074 0.074 0.074 0.114 0.171
57 0.090 0.090 0.090 0.090 0.139 0.208
58 0.079 0.079 0.079 0.079 0.122 0.182
59 0.073 0.073 0.073 0.073 0.112 0.168
60 0.114 0.114 0.114 0.114 0.175 0.262
61 0.114 0.114 0.114 0.114 0.175 0.262
62 0.114 0.114 0.114 0.114 0.175 0.262
63 0.114 0.114 0.114 0.114 0.175 0.262
64 0.114 0.114 0.114 0.114 0.175 0.262
65 1.000 1.000 1.000 1.000 1.000 1.000
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation – June 30, 2021 Appendix A Actuarial Methods and Assumptions
A-23
Service Retirement
Schools 2% at 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.003 0.004 0.006 0.007 0.010 0.010
51 0.004 0.005 0.007 0.008 0.011 0.011
52 0.005 0.007 0.008 0.009 0.012 0.012
53 0.007 0.008 0.010 0.012 0.015 0.015
54 0.006 0.009 0.012 0.015 0.020 0.021
55 0.011 0.023 0.034 0.057 0.070 0.090
56 0.012 0.027 0.036 0.056 0.073 0.095
57 0.016 0.027 0.036 0.055 0.068 0.087
58 0.019 0.030 0.040 0.062 0.078 0.103
59 0.023 0.034 0.046 0.070 0.085 0.109
60 0.022 0.043 0.062 0.095 0.113 0.141
61 0.030 0.051 0.071 0.103 0.124 0.154
62 0.065 0.098 0.128 0.188 0.216 0.248
63 0.075 0.112 0.144 0.197 0.222 0.268
64 0.091 0.116 0.138 0.180 0.196 0.231
65 0.163 0.164 0.197 0.232 0.250 0.271
66 0.208 0.204 0.243 0.282 0.301 0.315
67 0.189 0.185 0.221 0.257 0.274 0.287
68 0.127 0.158 0.200 0.227 0.241 0.244
69 0.168 0.162 0.189 0.217 0.229 0.238
70 0.191 0.190 0.237 0.250 0.246 0.254
Schools 2% at 62
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.000 0.000 0.000 0.000 0.000 0.000
51 0.000 0.000 0.000 0.000 0.000 0.000
52 0.004 0.007 0.010 0.011 0.013 0.015
53 0.004 0.008 0.010 0.013 0.014 0.016
54 0.005 0.011 0.015 0.018 0.020 0.022
55 0.014 0.027 0.038 0.045 0.050 0.056
56 0.013 0.026 0.037 0.043 0.048 0.055
57 0.013 0.027 0.038 0.045 0.050 0.055
58 0.017 0.034 0.047 0.056 0.062 0.069
59 0.019 0.037 0.052 0.062 0.068 0.076
60 0.026 0.053 0.074 0.087 0.097 0.108
61 0.030 0.058 0.081 0.095 0.106 0.119
62 0.053 0.105 0.147 0.174 0.194 0.217
63 0.054 0.107 0.151 0.178 0.198 0.222
64 0.053 0.105 0.147 0.174 0.194 0.216
65 0.072 0.142 0.199 0.235 0.262 0.293
66 0.077 0.152 0.213 0.252 0.281 0.314
67 0.070 0.139 0.194 0.229 0.255 0.286
68 0.063 0.124 0.173 0.205 0.228 0.255
69 0.066 0.130 0.183 0.216 0.241 0.270
70 0.071 0.140 0.196 0.231 0.258 0.289
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation – June 30, 2021 Appendix A Actuarial Methods and Assumptions
A-24
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 2021 calendar year is $230,000.
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 2021 calendar year is $290,000.
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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Appendix B
Principal Plan Provisions
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation – June 30, 2021 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% at age 65
formula, eligibility for service retirement is age 55 with at least 5 years of service. PEPRA Miscellaneous members
become eligible for service retirement upon 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 the agency’s contract. The table below shows the
factors for each of the available formulas. Factors vary by the member’s age at retirement. Listed are the factors for 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%
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation – June 30, 2021 Appendix B Safety Plan of the City of Palo Alto
Principal Plan Provisions
B-2
Safety Plan Formulas
Retirement
Age Half Pay 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% 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 $128,059 for 2021 and for those employees that do not participate in Social Security the cap for 2021 is $153,671. 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 co mpensation 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.
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation – June 30, 2021 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% 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% at 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 perm anent 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% of final compensation,
multiplied by service, which is determined as follows:
• Service is CalPERS credited service, for members with less than 10 years of service or greater than 18.518 years
of service; or
• Service is CalPERS credited service plus the additional number of years that the member would have worked until
age 60, for members with at least 10 years but not more than 18.518 years of service. The maximum benefit in
this case is 33⅓% of final compensation.
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation – June 30, 2021 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% of final compensation for the first 5 years of service, plus 1% for each additional
year of service to a maximum of 50% of final compensation.
Members who are eligible for a larger service retirement benefit may choose to receive that benefit in lieu of a disability
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
This is a standard benefit for Safety members except those described in Section 20423.6. For excluded Safety members
and all Miscellaneous members, employers have the option of providing this benefit. 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% of final compensation.
Increased Benefit (75% of Final Compensation)
The increased Industrial Disability Retirement benefit is a monthly allowance equal to 75 % of final compensation for total disability.
Improved Benefit (50% to 90% of Final Compensation)
The improved Industrial Disability Retirement benefit is a monthly allowance equal to the Workman’s Compensation
Appeals Board permanent disability rate percentage (if 50% or greater, with a maximum of 90%) times the final
compensation.
For a CalPERS member not actively employed in this group who became disabled while employed by some other CalPERS employer, the benefit is a return of accumulated member contributions with respect to employment in this
group. With the standard or increased benefit, a member may also choose to receive the annuitization of the
accumulated member contributions.
If a member is eligible for service retirement and if the service retirement benefit is more than the industrial disability
retirement benefit, the member may choose to receive the larger benefit.
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation – June 30, 2021 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 % 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% of the retirement allowance will automatically be continued to certain statutory beneficiaries upon the death of
the retiree, without a reduction in the retiree’s allowance. This additional benefit is referred to as post-retirement survivor allowance (PRSA) or simply as survivor continuance.
In other words, 25% or 50% of the allowance, the continuance portion, is paid to the retiree for as long as he or she
is alive, and that same amount is continued to the retiree’s spouse (or if no eligible spouse, to unmarried child (ren)
until they attain 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% or 50% of the retirement allowance, which may be referred to as the option portion of the benefit, is paid to the retiree as an annuity for as long as he or she is alive. Or, the retiree may choose to provide for some of
this option portion to be paid to any designated beneficiary after the retiree’s death. Benefit options applicable to the option portion are the same as those offered with the standard form. The reduction is calculated in the same manner
but is applied only to the option portion.
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation – June 30, 2021 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% or the prevailing discount rate through the date of death, plus a lump sum in the amount of one month's salary for each completed year of current service, up to a maximum of six months' salary.
For purposes of this benefit, one month's salary is defined as the member's average monthly full -time rate of
compensation during the 12 months preceding death.
1957 Survivor Benefit
This is a standard benefit.
Eligibility
An employee’s eligible survivor(s) may receive the 1957 Survivor benefit if the member dies while actively employed,
has attained at least age 50 for classic and PEPRA Safety members and age 52 for PEPRA Miscellaneous members, and
has at least 5 years of credited service (total service across all 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.
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation – June 30, 2021 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 PEPRA Safety members and age 52 for PEPRA Miscellaneous
members, and has at least 5 years of credited service (total service across all CalPERS employers and with certain other
retirement systems with which CalPERS has reciprocity agreements). A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An eligible survivor means the surviving spouse
to whom the member was married at least one year before death. A member’s survivor who is eligible for any other
pre-retirement death benefit may choose to receive that death benefit instead of this Optional Settlement 2 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% 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 except those described in Section 20423.6. For excluded Safety members
and all Miscellaneous members, employers have the option of providing this benefit.
Eligibility
An employee’s eligible survivor(s) may receive the special death benefit if the member dies while actively employed and the death is job-related. A CalPERS member who is no longer actively employed with any CalPERS employer is
not 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% 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% of final compensation
• if 2 eligible children: 20.0% of final compensation
• if 3 or more eligible children: 25.0% of final compensation
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation – June 30, 2021 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%. Annual adjustments are calculated by first determining the lesser of 1) 2% compounded from the end of the year of retirement or 2) actual
rate of price inflation. The resulting increase is divided by the total increase provided in prior years. For any given year, the COLA adjustment may be less than 2% (when the rate of price inflation is low), may be greater than the rate of
price inflation (when the rate of price inflation is low after several years of high price inflation) or may even be greater
than 2% (when price inflation is high after several years of low price inflation).
Improved Benefit
Employers have the option of providing a COLA of 3%, 4%, or 5%, determined in the same manner as described above
for the standard 2% COLA. An improved COLA is not available with the 1.5% at 65 formula.
Purchasing Power Protection Allowance (PPPA)
Retirement and survivor allowances are protected against price inflation by PPPA. PPPA benefits are cost-of-living
adjustments that are intended to maintain an individual’s allowance at 80% of the initial allowance at retirement
adjusted for price inflation since retirement. The PPPA benefit will be coordinated with other cost-of-living adjustments
provided under the plan.
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation – June 30, 2021 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%.
• 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, Half Pay 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% if members are not covered by Social Security. If members are covered by Social Security, the offset is $513 and the contribution rate is 5%.
Refund of Employee Contributions
If the member’s service with the 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% interest compounded annually.
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation – June 30, 2021 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.
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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Appendix C
Participant Data
• Summary of Valuation Data
• Active Members
• Transferred and Terminated Members
• Retired Members and Beneficiaries
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation – June 30, 2021 Appendix C Safety Plan of the City of Palo Alto
Participant Data
C-1
Summary of Valuation Data
June 30, 2020 June 30, 2021
1. Active Members
a) Counts 174 163
b) Average Attained Age
41.44 41.75
c) Average Entry Age to Rate Plan 30.19 29.97
d) Average Years of Credited Service 11.44 11.90
e) Average Annual Covered Pay $155,733 $157,948
f) Annual Covered Payroll 27,097,526 25,745,571
g) Projected Annual Payroll for Contribution Year 29,395,113 27,969,318
h) Present Value of Future Payroll 254,149,091 237,286,623
2. Transferred Members
a) Counts 55 56
b) Average Attained Age 43.37 43.73
c) Average Years of Credited Service 4.09 4.08
d) Average Annual Covered Pay $140,966 $142,019
3. Terminated Members
a) Counts 49 51
b) Average Attained Age 42.8 43.18
c) Average Years of Credited Service 2.66 2.79
d) Average Annual Covered Pay $89,058 $93,180
4. Retired Members and Beneficiaries
a) Counts 435 443
b) Average Attained Age 69.36 69.38
c) Average Annual Benefits $60,483 $61,705
5. Active to Retired Ratio [(1a) / (4a)] 0.40 0.37
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.
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation – June 30, 2021 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 1 0 0 0 0 0 1
25-29 19 1 0 0 0 0 20
30-34 10 7 3 0 0 0 20
35-39 9 13 8 2 0 0 32
40-44 3 6 11 6 2 0 28
45-49 0 5 4 7 17 1 34
50-54 0 0 1 6 4 2 13
55-59 2 0 1 4 3 3 13
60-64 1 0 0 0 0 0 1
65 and Over 0 0 0 0 0 1 1
All Ages 45 32 28 25 26 7 163
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 $113,673 $0 $0 $0 $0 $0 $113,673
25-29 119,682 150,089 0 0 0 0 121,202
30-34 136,288 149,449 155,455 0 0 0 143,770
35-39 135,535 150,859 172,968 160,331 0 0 152,668
40-44 146,487 162,546 168,594 178,693 208,387 0 169,936
45-49 0 171,823 160,592 198,983 182,499 169,203 181,355
50-54 0 0 190,156 157,455 154,435 147,705 157,541
55-59 153,789 0 151,514 157,143 167,536 192,432 166,736
60-64 146,888 0 0 0 0 0 146,888
65 and Over 0 0 0 0 0 160,331 160,331
Average $130,317 $155,993 $167,453 $174,360 $178,446 $171,749 $157,948
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation – June 30, 2021 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 2 123,605
30-34 6 1 0 0 0 0 7 139,581
35-39 5 3 2 0 0 0 10 147,211
40-44 9 3 0 1 0 0 13 137,912
45-49 7 2 0 1 0 0 10 143,906
50-54 6 2 1 0 0 0 9 150,764
55-59 5 0 0 0 0 0 5 133,578
60-64 0 0 0 0 0 0 0 0
65 and Over 0 0 0 0 0 0 0 0
All Ages 40 11 3 2 0 0 56 $142,019
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 2 115,462
30-34 6 0 0 0 0 0 6 95,102
35-39 7 0 0 0 0 0 7 93,158
40-44 16 3 2 0 0 0 21 94,604
45-49 1 3 1 0 0 0 5 108,256
50-54 2 1 0 0 0 0 3 99,355
55-59 5 0 0 0 0 0 5 59,743
60-64 1 1 0 0 0 0 2 86,896
65 and Over 0 0 0 0 0 0 0 0
All Ages 40 8 3 0 0 0 51 $93,180
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation – June 30, 2021 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 2 2
30-34 0 0 0 0 0 0 0
35-39 0 0 0 0 0 1 1
40-44 0 0 3 0 0 0 3
45-49 0 0 9 0 0 0 9
50-54 27 1 7 0 0 0 35
55-59 41 0 18 0 1 1 61
60-64 43 1 20 0 2 0 66
65-69 30 1 17 0 0 4 52
70-74 31 1 19 0 0 6 57
75-79 28 0 13 0 0 15 56
80-84 29 1 21 0 0 9 60
85 and Over 18 0 12 0 0 11 41
All Ages 247 5 139 0 3 49 443
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 $31,677 $31,677
30-34 0 0 0 0 0 0 0
35-39 0 0 0 0 0 28,209 28,209
40-44 0 0 69,490 0 0 0 69,490
45-49 0 0 58,683 0 0 0 58,683
50-54 63,336 90 46,468 0 0 0 58,156
55-59 90,939 0 82,617 0 58,012 50,079 87,273
60-64 94,112 36,355 78,287 0 40,145 0 86,806
65-69 67,188 2,239 56,812 0 0 48,756 61,129
70-74 86,178 19,157 52,245 0 0 27,482 67,513
75-79 46,251 0 34,676 0 0 47,476 43,892
80-84 50,759 15,507 38,661 0 0 26,455 42,292
85 and Over 39,699 0 31,283 0 0 27,869 34,062
All Ages $71,474 $14,670 $55,477 $0 $46,101 $35,885 $61,705
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation – June 30, 2021 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 53 0 10 0 0 20 83
5-9 48 1 18 0 0 6 73
10-14 39 1 19 0 0 4 63
15-19 45 0 16 0 1 9 71
20-24 18 1 18 0 1 7 45
25-29 24 0 10 0 0 0 34
30 and Over 20 2 48 0 1 3 74
All Years 247 5 139 0 3 49 443
Distribution of Average Annual Disbursements to Retirees and Beneficiaries by Years Retired and
Retirement Type*
Years
Retired
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Average
Under 5 Yrs $75,897 $0 $72,514 $0 $0 $32,410 $65,011
5-9 86,025 2,239 80,407 0 0 25,492 78,516
10-14 86,153 90 88,369 0 0 41,575 82,625
15-19 74,951 0 70,293 0 58,012 48,267 70,280
20-24 39,190 36,355 46,543 0 51,453 35,239 41,726
25-29 50,465 0 49,536 0 0 0 50,191
30 and Over 42,655 17,332 29,209 0 28,838 36,607 32,817
All Years $71,474 $14,670 $55,477 $0 $46,101 $35,885 $61,705
* 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.
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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Appendix D
Glossary of Actuarial Terms
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation – June 30, 2021 Appendix D Safety Plan of the City of Palo Alto
Glossary of Actuarial Terms
D-1
Glossary of Actuarial Terms
Accrued Liability (Actuarial Accrued Liability)
The portion of the Present Value of Benefits allocated to prior years. Based on CalPERS funding policies, the
accrued liability is the target level of assets on any valuation date.
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
an actuarial cost method, an amortization policy, and an asset valuation method.
Actuarial Valuation
The determination as of a valuation date of the Normal Cost, Accrued Liability, and related actuarial present values for a pension plan. These valuations are performed annually or when an employer is contemplating a change in
plan provisions.
Amortization Bases
Separate payment schedules for different portions of the Unfunded Accrued Liability (UAL). The total UAL of a rate
plan can be segregated by cause. The impact of such individual causes on the UAL are quantified at the time of their occurrence, resulting in new amortization bases. Each base is separately amortized and paid for over a specific
period of time. Generally, in an actuarial valuation, the separate bases consist of changes in UAL due to contract
amendments, actuarial assumption changes, method changes, and/or gains and losses.
Amortization Period The number of years required to pay off an Amortization Base.
Classic Member (under PEPRA)
A member who joined a public retirement system prior to January 1, 2013 and who is not defined as a new member
under PEPRA. (See definition of New Member below.)
Discount Rate
This is the rate used to discount the expected future benefit payments to the valuation date to determine the Projected Value of Benefits. The discount rate is based on the assumed long-term rate of return on plan assets,
net of investment and administrative expenses. This rate is called the “actuarial interest rate” in Section 20014 of the California Public Employees’ Retirement Law.
Entry Age
The earliest age at which a plan member begins to accrue benefits under a defined benefit pension plan. In most
cases, this is the age of the member on their date of hire.
Entry Age Actuarial Cost Method
An actuarial cost method designed to fund a member's total plan benefit evenly over the course of his or her career. This method yields a total normal cost rate, expressed as a percentage of payroll, which is designed to
remain level throughout the member’s career.
Fresh Start
A Fresh Start is when multiple amortization bases are combined into a single base and amortized over a new
Amortization Period.
Funded Ratio Defined as the Market Value of Assets divided by the Accrued Liability. It is a measure of how well funded a rate
plan is. A ratio greater than 100% means the rate plan has more assets than the target established by CalPERS
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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CalPERS Actuarial Valuation – June 30, 2021 Appendix D Safety Plan of the City of Palo Alto
Glossary of Actuarial Terms
D-2
funding policies on the valuation date and the employer need only contribute the Normal Cost. A ratio less than 100% means assets are less than the funding target and contributions in addition to Normal Cost are required.
GASB 68
Statement No. 68 of the Governmental Accounting Standards Board. The accounting standard governing a state
or local governmental employer’s accounting and financial reporting for pensions.
New Member (under PEPRA)
A new member includes an individual who becomes a member of a public retirement system for the first time on or after January 1, 2013, and who was not a member of another public retirement system prior to that date, and
who is not subject to reciprocity with another public retirement system.
Normal Cost
The portion of the Present Value of Benefits allocated to the upcoming fiscal year for active employees. The normal
cost plus the required amortization of the UAL, if any, make up the required contributions .
Pension Actuary
A business professional proficient in mathematics and statistics who performs the calculations necessary to
properly fund a pension plan and allow the plan sponsor to disclose its liabilities. A pension actuary must satisfy the Qualification Standards for Actuaries Issuing Statements of Actuarial Opinion in the United States with regard
to pensions.
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)
The Accrued Liability minus the Market Value of Assets. If the UAL for a rate plan is positive, the employer is
required to make contributions in excess of the Normal Cost.
Attachment C: CalPERS Safety Valuation as of June 30, 2021 1.c
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