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Staff Report 455-10
TO: HONORABLE CITY COUNCIL FROM: CITY MANAGER DEPARTMENT: ADMINISTRATIVE SERVICES DATE: DECEMBER 13, 2010 CMR: 455:10 REPORT TYPE: INFORlVIATION SUBJECT: Transmittal ofthe CaJPERS City of Palo Alto Pension Plan Annual Valuation Reports as of June 30, 2009 This is an informational report and no Council action is required. DISCUSSION The City of Palo Alto provides a defined pension benefit to its employees and participates in the Califomia Public Employees' Retirement System (CaIPERS) to manage and administer the program. City employees vest in the pension program after 5 years of service and over time the City has offered different pension payout formulas. The CalPERS program maintains two trust accounts 1) one for safety employees (fire and police mostly sworn personnel) and 2) the other for miscellaneous employees (all other non-safety personnel such as field personnel, administrative support and managers). The current safety employee retirement formula for Palo Alto is 3 percent for each year worked and eligibility is at 50 years of age (3% @50). For cUll'ent miscellaneous employees the majority earn 2.7 percent per year worked and are eligible at the age of 55 (2.7@55), but since July 2010 the City changed the formula for new miseellaneous employees to 2 percent pel' year with eligibility at the age of 60 (2%@60). CaiPERS annually prepares an actuarial analysis to determine the City'S pension liability and annual required contribution for the two trusts. The actuarial is based on current employees' accrued benefit, ex-employees that are vested but have yet to retire and retired employees as of June 30, 2009. Staff received the actuarial reports dated October 2010 on December 2, 2010. The chart below reflects the rates paid for fiscal year (FY) 10, the new rate for FY 11, and the projected rates for FY 12 and FY 13 compared to the rates as estimated in the Long Range Financial Forecast (LRFF) from October 5,2010. CMR:455:10 Page 1 of3 PERS Actual & Projected Rates Long Range Financial Forecast Estimatad Rates October 5 2010 , , Miscellaneous 17.555% 21.800% I 22.400% , 4.245% Safety 24.695% 30.200% 31.100% 5.505% Difference (LRFF Rates less PERS rates) Miscellaneous 0.075% -0.700% . Safety 0.075% -1.200% 25.200% 0.600% 2.800% 7.645% 35.700% 0.900% 4.600% 11.005% -1.000% I I -1.625% -2.100% I I -3.225% The pension liability and current funding for safety and miscellaneous employees is the following: CalPERS calculations of the annual required contribution is as follows: [Miscellaneous $ 12,353,876 $ 15,687,239 $ 3,333,363 127% 1 1 Safety $ 6,029,286 $ 7,323,707 $ 1,294,421 121% 1 The following table provides a summary of valuation data as of June 30, 2009: CMR:455:1O Page 2 of3 Miscellaneous Safety Active Members 820 192 , Ann .. , Covered Pay $ 80,003 $ 115,036 - Transferred Members Ito other agencYl 280 63 Average Annual Covered Pay I $ 104,408 $ 113,481 Terminated Members Ivel to retlrel 291 32 Average Annual Covered Pay $ 57,937 $ 74,309 ---~-~-- Retired Members and Beneficiaries 811 368 Average Annual Benefit $ 25,726 $ 36,888 In the LRFF revision presented to the Finance Committee during the October 5, 2010 meeting staff included Ca1PERS estimated rates for the next three fiscal years. These rates do not include any savings of the change to the 2% @ 60 formula since the program started after the effective date of valuation (6/30/09). The FY 12 rates used in the LRFF are in line with the final rates released in the current actuarial, but the fonowing two fiscal years (FY 13 and FY 14) in the recent actuarial reflect an increase of 1.625% for miscellaneous and 3.225% for safety beyond the LRFF estimates. There a couple of points to keep in mind: the FY 12 salary base must be reviewed since the LRFF preparation to determine actual impact which is estimated to be minimal; and it is important to note that the FY 12 numbers are based on CalPERS three year amortization of the 24% investment loss experienced in FY 09. The FY 12 rate also includes adjustments in demographics since there are increases in life expectancy and income. It does NOT account for the 11 percent gain in assets experienced in FY 10 which will be reflected in next year's actuarial reports. Theses changes only address the City's employer pension rate and it does not impact any portion of the employee rate share the City pays for its employees. Staff will incorporate the changes to the pension rate assumptions in the projected 2012 budget and to the LRFF to determine ongoing impacts since therc are increases beyond earlier estimates for the outer years. Staff will provide the updates in updated LRFF presented to the Finance Committee in either January or early February. In addition, staff will provide recommendations for addressing any 2012 budget impacts resulting from the increase pension funding requirements during the 2012-13 proposed budget process. ATTACHMENTS ATTACHMENT A: Safety Employees Pension Plan Annual Valuation Report as of June 30, 2009 ATTACHMENT B: Miscellaneous Employees Pension Plan Annual Waluation Report as of June 30,2009 DEPARTMENT APPROVAL: Director, CITY MANAGER APPROVAL: JAMES City Manager CMR:455:10 Page 3 00 , - c .. ") I . "'. -0- ~.') Actuarial Office P.O. Box 1494 Sacramento. CA 95812-1494 ATTACHMENT A TTY for Speech and Hearing Impaired .. (916) 795-3240 (868) CaIPERS (or 888-225-7377) FAX (916) 795-3005 October 2010 SAFETY PLAN OF THE cm OF PALO ALTO (EMPLOYER # 14) Annual valuation Report lIS of June 30, 2009 Dear Employer, As an attachment to this letter, you 1'1111 find a copy of the June 30, 2009 actuarial valuation report of your pension plan. This report contains Important actuarial Information about your pension plan at CaIPERS. Your calPERS staff actuary 15 available to discuss the report with you. Changes Since the Prior Year's valuation The calPERS' Board of Administration adopted updated actuarial assumptions to be used beginning with the June 30, 2009 valuation. In addition, a temporary modification In our method of determining the actuarial value of assets and amortizing gains and losses has been Implemented for the valuations as of lune 30, 2009 through lune 30, 2011. Finally, a cash flow analysis has been added to our process. If such an analysis Indicates that funding progress 1'1111 not be adequate, an additional contribution 1'1111 be required. There may also be changes spedHc to your plan such as contract amendments and funding changes. Further descriptions of changes are Included In the "HIghlights and Executive Summary" section and In Appendix A, "Statement of Actuarial Data, Methods and Assumptions." The effect of the changes on your rate Is Included In the "Reconciliation of Required Employer Contributions." Future Contribution Rates The exhibit below displays the required employer contribution rate and Superfunded status for 2011/2012 along with estimates of the contribution rate for :<012/2013 and 2013/2014 and the prohable Superfunded status for 2012/2013. The estimated rate for :<012/2013 Is based solely on a projection of the Investment return for Hseal 2009/2010, namely 11.0%. The estlmated rate for 2013/2014 uses the valuation assumption of 7.75% as the Investment return for Hseal 2010/2011. See Appendix D, "Investment Retum Sensitivity Analysis", for rate proJections under a variety of Investment retum scenarios. Please disregard any projectiOns that we may have provided to you In the past. Fiscal Year 2011/2012 2012/2013 2013/2014 Employer Contribution Rate 30.125% 32.3% (projected) 37.8% (projected) Superfunded7 NO NO N/A Member contributions (whether paid by the employer or the employee) are In addition In the above rates. The estimates for 2012/2013 and 2013/2014 also assume that there are no future amendments and no liability gains or losses (such as larger than expected pay Increases, more retirements than expected, etc.). This Is a verv important assumption baQIuse these gains and losses do o~tur and can have a significant Impact on your contribution rate. Even for the largest plans, such gains and losses often cause a change In the employer's contribution rate of one or two percent and may be even larger In some less common Instances. These gains and losses cannot be predicted In advance so the projected employer contribution rates are Just estimates. Your actual rate for 2012/20131'1111 be provlded'in next year's report. California Public Employees' Retirement System www.a.lpers.ca.gov / SAFETY PLAN OF THE CITY Of PALO ALTO (EMPLOYER # 14) October 2010 Page 2 We are very busy preparing actuarial valuations for other public agencies and expect In complete all such valuations by the end of October. We understand that you might have a number of questlons about these results. While we are very Interested In discussing these results with your agency, In the Interest of allowing us to give every public agency their result, we ask that, If at all possible, you walt until after October 31 to contact us with questions. If. you have questJons, please call (888) GaIPERS (225-7377). Slnoerely, !/L~ ALAN MILUGAN, MAAA, fCA, fSA, FCIA Chief Actuary .) ,) () ACTUARIAL VALUATION as of June 30, 2009 for the SAFETY PLAN of the CITY OF PALO ALTO (EMPLOYER # 14) REQUIRED CONTRIBUTIONS FOR FISCAL YEAR July 1, 2011 -June 30, 2012 CaIPERS California Public Employees' Retirement System P.O. Box 942709 Sacramento, CA 94229-2709 (888) CaIPERS (225-7377) , f · "') I •. "._' _ ') . ) , '.. ' <. (') TABLE OF CONTENTS ACTUARIAL CERTIFICATION HIGHLIGHTS AND EXECUTIVE SUMMARY Purpose of the Report Required Contributions Funded Status Cost and VolaUilly Changes Since the PrIor Valuation SUMMARY OF LlABIUTIES AND RATES Development of Actrued and Unfunded liabilities (Gain) / Loss Analysis Schedule of Amortization Bases Reconciliation of Required Employer Contributions Employer Contrtbutlon Rate History Funding History SUMMARY OF ASSElS Reconciliation of the Market Value of Assets Development of the Actuarial Value of Assets Asset Allocatlon ( ') .. ' SUM,MARY OF PARTICIPANT DATA Summary of Valuation Dilta Active Members Tl'!lnsferred and Terminated Members Retired Members and Beneficiaries APPENDJXA Statement of Actuarial Data, Methods and Assumptions APPENDIXB Summary of PrIncipal Plan Provisions APPENDIXC GASB Statement No. 27 APPENDIX D Investment Return SenSitIVIty Analysis APPENDIXE Glossary of Actuarial Terms ,) AN PROC6S CONmOl II} {py} 333118 1 5 5 5 5 7 11 12 13 14 15 15 19 19 20 23 24 25 25 REPORT 10 63&03 . . , , .. . . .. ..J ,. . ) () .) CALPERS AcruARIAL VALUATION· June 3D, 2009 SAFElY PLAN OF THE OlY OF PALO ALTO EMPLOYER NUMBER 14 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 oondl~on of the SAFElY PLAN OF THE 0lY OF PALO ALTO. This valuation Is based on the member and financial data as of June 30, 2009 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 prindples, In accordance with standards of practice prescrlbed hy the Actuarial standards Board, and that the assum~ns and methods are Internally oonslstent and .reasonable for this plan, as prescribed by the calPERS Board of Administration according to provisions set forth In the california Public Employees' Retirement Law. The undersigned listed are actuarl!'!s for catPERS. Both are members of the American Academy of Actuaries and the Society of Actuaries and meet the QualiRcation standards of the American Academy of Actuarles to render the actuarial opinion contained herein. David Clement, ASA, MAAA, EA Senior Pension Actuary, CalPERS Plan Actuary !/L~ ALAN MILLIGAN, MAAA, Fell, FSA, FOA Chief Actuary Pagel ·.) . .. l., '., ,-.. ' ') i , ...• ) () HIGHLIGHTS AND EXECUTIVE SUMMARY • PURPOSE OF THE REPORT • REQUIRED CONTRIBUTIONS • FUNDED STATOS • COST AND VOLATILITY • CHANGES SINCE THE PRIOR VALUATION () ) 'J () i"') \ .. , ,) CALPERS ACTUARIAL VALUATION· June 30, 2009 ,SAFETY PlAN OFTHEClTY OF PALO ALTO EMPLOYER NUMBER 14 Purpose of the Report This report presents the results of the June 30, 2009 actuarial valuation of the SAFElY' PlAN OF THE CITY OF PALO .ALTO of the California Public Employees' Retirement system (CaIPERS). The valuation was prepared by the Plan Actuary In order to: . . . . . . . • set f9rth the actuartal assets and aci:rued lIabliltles of this. plan as of June 30, 2009; • 'Certify that ·the actuarlally required employet contribution rate of this plan for the fiscal year July 1, 2Pll through June 30, 2012 Is 30.125%; . . • pFovide actuarial Infbrmatlon as of June 30, 2009 to the CaIPERS Board of Administration and other , Interested parties; and ' • provide penSIon Information as of June 30, 2009 to be used' In financial reports sObJect to Governmental Accounting standards Board (GASS) statement Number 27 for a Single Employer Defined Benefit PenSion P,lan, ' . Use of tillS report for other purposes may be Inapprop~ate. Required Contributions Required Employer ContrIbutions Employer ContJ1butlon Required (In Projected Dollars) Payment for Normal Cost Payment on the AmortizatIOn Bases Total (not less than zero) Annual Lump Sum Prepayment Optlon* Employer Contrlbutlon Required (Percentage of Payroll) Payment for Normal Cost Payment on the Amortization Bases Total (not less than zero) $ $ $ 1'l!ICII1 Year 2010/2011 4,149,583 '1,879;703 6,029,286 . S;B08,410 16.996% 7,699% 24.695% * Payment must be received by CalPERS between July 1 and July 15. $ $ $ fiscal Year 2011/2012 4,330,558 2,993,149 7,323,707 7;055,411 17.813% 12.312% 30.125% Pages CALPER5 ACTUARIAL VALUATION -lune 30, 2009 SAFETY PlAN OF THE CITY OF PALO ALTO EMPLOYER NUMSER 14 Cost and Volatility Actuarial ~ Estimates In General What will this pension plan cost? Unfortunately, there Is no simple answer. There are two major reasons fpr the complexity of the answer. First, all actuarial calculations, Including 'the ones In this report, are based on a number of assumptions about the future. These assumptions can be pMded Into two categotles. , • DQIllographlc assumptions Include the' percentage, of ,employees that will terminate, die, become disabled, and retire In each future year. , . •. ,Economic assumptions Indude future salary IncreaseS for each ,active employee, and the assumption with the greatest Impact, future asset returns at CaIPERS fOr each year Into the future unHI the last ~ollar Is peld to current members of your plan. ", ' 'While CaIPERS has set theSe assumptions to reHee! our best esHmate of the real future of your plan, It must be understood that these assumptions are very long tenm predictors and will surely not be realized In any one year. For example, while the asset earnings at CaIPERS have averaged more than the assumed return of 7.75% for the past twenty year period ending lune 30, 2010 returns for each Hseal year ranged from -24% to +20.1% ' Second, the very nature of actuarial funding produces the answer to the question of plan cost as the sum of two separate pieces. • The Normal Cost (I.e., the future annual premiums In the absence of surplus or unfunded liability) expressed as a p.!l'Cllntage 'of total active payroll. •. The Past Service Cost or Accrued Uablllty (I.e., the current value of the beneHt for all credited past sel'\llce of current members) which Is expressed as a lump sum dollar amount. ' The cost Is the sum of a percent of future pay and a lump sum dollar amount (the sum of an apple and an orange If you will). To communicate the total cost, either the Nonmal Cost (I.e., future percent of payroll) must ,be converted to a lump sum dollar amount (In which case the total cost Is the present value of benefits), or the Past Service Cost (I.e., the lump sum) must be converted to a percent of payroll (In which case the total cost Is expressed as the employer's rate, part of which Is permanent and part temporary). Converting the Past Service Cost lump sum to a percent of payroll requires a spedflc amorHza~on period, and the employer rate will vary depending on the amortization period. chosen. ' RlllteVo,latlllty As IS stated above, the actuarllil calculations supplied In this communication are based on a number of assumptions about very long term demographic and economic behavior. Unless these assumptions (tenmlnatlons, deaths, disabilities, retirements, salary growth, and Investment return) are exactly realized each year, there will be differences on a year to year basis. The year-to-yeardlfferenaes between actual experience and the assumptions are called actuarial gains and losses and serve to lower or raise the employer's rates From one year to the 'next. Therefore, the rates wlillnevitably fluctuate, espedally due to the ups and downs of Investment returns, Plans that have higher asset to payroll ratios produce more volatile employer rates due to Investment return. ,On the following page we have shown your valatlllty Index, a measure of the plan's potential future rate volatility. It should be noted that this ratio Increases over time but generally tends to stabilize as the pia,n matures. Page 6 .J () () CALPERS ACTUARIAL VALUATION -June 30, 2009 SAFETY PLAN Of THE CITY OF PALO ALTO EMPLOYER NUMBER 14 . Market. V~'ue of Assets without Receivables Payroll· VoIatlllty Index AS of Juno 30, 2009 171,665,444 22,066,992 7.8 Changes since the Prior Valuation Actuarial Assumptions CaIPERS recently completed an experience study that analyzed demographic data for the Ye<lrs 1997 to 2007. As a result of this study, the CaIPERS' Boand of Administration adopted updated actuarial assumptions to be used beginning with the June 30, 2009 valuatlon. Nearly all of the demographic assumptions have changed, Including salary Incre<lse assumptions and rates for mortality, disability, termination and retirement. Of these, the change to the post retirement mortality assumptton had the most significant Impact on contribution rates. The new assumptions are described In Appendix A. The effect of the change In assumptions on the unfunded liability Is shown In the "(Galn)f\.Oss Analysis" and the effect on your employer contrlbutlon rate Is Included In the "Reconciliation of Required Employer Contrlbuttons"_ Actuarial Methods In June 2009, the CaIPERS Boand adopted changes to the asset smoothing method as well as changes to the BOard policy on the amortization of gains and losses In order to phase In over a three year period the Impact of the -24% Investment loss experienced by CaIPERS In fiscal year 2008-2009. The following changes were adopted: • Increase the corridor limits for the actuarial value of assets from 80"",-120% of market value to 60%-140% of market value on June 30,2009 • Reduce the corridor limits for the actuarial value of assets to 70%-130% of market value on June 30,2010 • Return to the 80%-120% of market value corridor limits for the actuarial value of assets on June 30, 2011 and thereafter • Isolate and amortize all gains and losses during fiscal year 2008-2009, 2009-2010 and 2010-2011 over fixed and declining 30 year periods (as opposed to the current rolling 30 year amortization) In addition, In February 2010 the GaIPERS Board adopted a resolution requiring additional contributions for any plan or pool If the cash OOl'/s hamper adequate funding progress by preventing the expected funded status on a market value of assets basis of the plan to e~her: • Increase by at least 15% by June 30, 2043; or • Re<lch a level of 75% funded by June 30, 2043 A complete description of all methods is in Appendix A. The detailed calculation of the actuarial value of assets Is shown In the "Development of the Actuarial Value of Assets." The effect of the change In method Page 7 CALPERS ACTUARIAL VALUATION -June 30, 2009 SAFETY PLAN OF THE aTY OF PALO ALTO EMPLOYER NUMBER 14 on the unfunded liability Is shown In the "(Galn)/loss Analysis" and the effect on your employer contribution ~'''''') rate Is Included In the "Reconciliation 01 Required Employer Contributions," Benefits The standard actuarial practice at CllIPERS Is to recognize mandated legislative beneflt changes In the flrst annual valuation with a valuation date on or after the effective date of the legislation, Voluntary benefit changes by plan amendment are generally Included In the ftrst valuation with a report dated alter the amendment effective date, ' , This valuation generally reflects plan changes by amendments effective before the date of the report. Please refer to Appendix B for a summary of the plan provisions used In the valuation. The effect of any mandated benefit changes or plan amendments on the unfunded liability Is shown In the "(GalnJJloss Analysis" and the effect on your employer contribution rate Is shown In the 'Recondllatlon of Required Employer Contributions", It should be nored that no change In liability or rate Is shown foF any plan changes which were already Included In tihe prior year's valuation. ' PageS ") () SUMMARY OF LlABIUTIES AND RATES • DEVELOPMENT OF ACCRUED AND UNFUNDED LIABILITIES • (GAIN) I LOSS ANALYSIS • SCHEDULE OF AMORTIZATION BASES • RECONCILIATION OF REQUIRED EMPLOYER CONTRIBUTIONS • EMPLOYER CONTRIBUTION RATE HISTORY • FUNDING HISTORY '") ," ...... ~ ~ , CALPERS ACTUARIAL VALUATION -June 30, 2009 SAFETY PLAN OF THE CITY OF PALO ALTO EMPLOYEP. NUMBER 14 () Development.of Accrued and Unfunded Liabilities 1. Present Value of Projected Benefits a~ ActIve Members $ 142,761,95B b Transferred Members 16;719,SO~ , c) Tel11llnated Members 4,037,758 d) Members and Beneficiaries Receiving Payments l6S,83B,452 e) Total $ 332,357,977 2. . Present Value of Future EmPloyerNonnal Costs $ 34,516,996 3. Present Value of Future Employee Contributions $ . 17,548,119 4. Entry Age Normal Accrued Liability a) Active Members $ 90,696,843 b) Transferred Members 16,719,809 c) Terminated Members 4,037,758 d) Members and Beneficiaries Receiving Payments 168,838,452 e) Total $ 260,292,662 5. Actuarial Value of Assets $ 236,274,455 6. Unfunded Accrued LIability [(4e) -(5)] $ 44,01~,407 () \. , .. ' '. ,) Page 11 CALPERS ACTUARIAL VALUATION· June 30, 2009 SAFETY PLAN OF THE aTYOF PALO ALTO EMPLOYER NUMBER 14 (Gain)/Loss Analysis 6/30108 -6/30109 To calCIIlate the cost requirements of the' plan, assumptions are made about future events that affect: the amount ami timing of benefits to be paid and assets to be accumulated. Each year aCtu~I .. experience is ci)mpared to the expected experience based on the actuarial assumptions. This results In actuarial gains or losses, ~s shown below. ' , A 'Total (Galn)/Loss for the Year* . 1. Unfunded Accrued Uability (UAL) as of 6/30/08 $ 30,080,374 2. Expacted payment on the UAl during 2008/2009 1,721,331 ~. , Interest through 6/30/09 [.0775 x (Al) -«1.0775)"· 1) x (A2)] , 2,265,772 4. Expected UAL before all other changes [(Al)· (A2) + (A3)) 30,624,815 5. Change due to plan changes 0 6. Change due to assumption change 6,111,851 7. Expected UAL after all other changes [(M) + (A5) + (A6)] 36,736,666 8. Actual UAL as of 6/30/09 44,018,407 . ·9. Total (Galn)fLoss for 2008/2009 [(AS) -(A7)] $ 7,281,741 B Contribution (Galn)/Loss for the Year 1. " Expected Contribution (Employer and Employee) $ 7,674,991 '2. ' IntereSt on Expected Contributions .291,857 3. ActualContributlons 7,446,465 4. Interest on Actual Contributions 2,83,167 5. Expected Contributions with Interest [(Bl) + (82)] 7,966,848 6, Actual Contributions with Interest [(83) + (84)] . 7,729,632 7. Contribution (Galn)/Loss [(BS)· (B6)] $ 237,216 C Asset (Galn)/Loss for the Year 1. Actuarial Value of Assets as of 6/30/08 Including Receivables $ 228,883,308 2-Rllcelvables as of 6/30/08 239,103 3. Actuarial Value of Assets as of 6/30/08 228,644,205 4. Contrlbutons Received 7,446,465 5. Benefits and Refunds Paid (12,960,170) 6. Transfets/Mlsc. Adjustments 6,090 7. Expected rot [.0775 x (C3) + «1.0775)"-1) x «C4) + (CS) + (C6))] 17,510,488 8. Expacted Assets as of 6/30/09 [(0) + (C4) + (C5) + (C6) + (C7)] 240,647,078 9. Receivables as of 6/30/09 212,819 10. Expected Assets Indudlng Receivables 240,859,897 11. Actual Actuarial Value of Assets as of 6/30/09 236,274,455 12. Asset (Galn)/LOss [(cto) • (C11)] $ 4,585,442 P liability (Saln)/Loss for the Year I, Total (Galn)/Loss (A9) $ 7,281,741 2. Contribution (Galn)/loss (B7) 237,216 3. Asset (Galn)/Loss (CI2) 4. liability (Galn)/loss [(01) -(02) • (03)] $ Development of the (Galn)/Loss Balance es of 6/30/09** 1. (Galn)/Loss Balanoe as of 6/30/08 $ 2. Payment Made on the Balance dutlng 2008/2009 3. Interest through 6/30/09 [.0775 x (1) • «1.0775)'/2 -1) x (2)] "I. Scheduled (Galn)/loss Balance as of 6/30/09 [(1) • (2) + (3)] $ * The Total (Galn)/Loss for 2008/2009 IS being amortized over II fixed and declining 30-year period and Is shown as "Special (Galn)fLoss" In the "Schedule of Amortization Bases" on the following page. ** This (Galn)fLoss represents the 6/30/09 balance of the accumulation of (galns)/Iosses through 6/30/08 and Is amortized using a rollmg 30-year period. Gams and losses Incurred after 6/30/2011 will again accumulate to this base. Page 12 .,,) ) ,J ~CTUAR1Al VAlUATION -lune 30, 2009 SAFETY PLAN OF THE aTY OF PALO ALm EMPLOYER NUMBER 14 Schedule of Amortization Bases .r-~, \,--,' There is a two year lag between the Valuation DlIt:e alld the Contnbution 1'il!ca1 Year. • The assets, liabilities alld funded status or the plan are measured as or the valuation date (June 30, 2009). • The employer contribution rate determined by the valuation is lOr the fiscal year beginning two years after the valuation date (fiscal year 2DllJ2(12). ~ .~ This two year lag is necessary due to the amount or time needed to extract alld test the membership and financial data, and due to the need to provide public agencies with their employer contribution rates well in advance or the start of the fiscal year. The Unfunded llability is used to determine the employer contribution and thereIbre must be rolled fOrward two years from the valuation date to the first day of the fiscal year for which the conl7ibution is being clel:ermined. The Unfunded Uability is rolled fOrward each year by subtracting the expected Payment on the Unfunded llability for the fiscal year and adjusting lOr interest. The Expected Payment on the Unfullded UabOity lOr a fiscal year is equal to the Expected Employer Contribution lOr the fiscal year minus the Expected Normal Cost: ror the year. The Employer ConI7ibution RatE for the first fiscal year is determined by the acbJarial valuation two years ago and the rate for the second year is from the actuarial valuation one year ago. The Normal Cost Rate for each of the two fisp;1 years is assumed to be the same as the rate determined by the current valuation. All expected dollar amounts are determined by multiplying the ,tate by the expected payrollror the appflCable 1isca1 year. based on payroll as of the valuation date. expected expected Page 13 CALPERS ACTlJARIAL VALUATION -June 30, 2009 SAFETY PLAN OF THE CITY OF PALO ALTO EMPLOYER NUMBER 14 Reconciliation of Required Employer·Contributions Percentage Estimated $ of Based on Projected Proje<:ted Payroll Payroll 1. COntribution for 7/1/10 -6/30/11 (from prior year annual report) . 24.695% $ 6,029,286 2. Effuct of changes since the prlor·year annual valuation a) Effect of unexpected changes In demographics and ftnandal results 1.613% 440,725 b) Effect of plan changes 0.000% 0 c) Effect of changes In Assumptions 3.617% 879,337 d) Effect of change In' payroll (25,641) e) Effect of elimination of amortization base 0.000% 0 f) Effect of changes due !Xl Fresh Start 0.000% 0 g) Net effect of the changes abolle [sum of (a) through (f)1 5.430% 1,294,421 3. Contribution for 7/1/11-6/30/12 [(1)+(29)] 30.125% 7,323,707 The contribution actually paid (item 1) may be different If a prepayment of unfunded actuarial liability is made or a plan chenge became effective after the prlor year's actuarial valuation was performed. Page 14 . .... ) (J () (,) ) CALPERS ACTUARIAL VALUATlON -June 30, 200f) SAFETY PLAN OF THE CITY OF PALO ALTO EMPLOYER NUMBER 14 Employer Contribution Rate History The table below provides a recent history of the employer contribution rates for your plan, as determined by the annual actuarial valuation. It does not account for prepayments or benefit changes made In the middle of the year. FIscal Year 2007 -2008 2008 -2009 2009·2010 2010·2011 2011 ·2012 R'9yhd By ya1yatign Employer Normal Cost Unfunded R.ate 16.768% 6.843% 16.788% 7.724% 16.812% 7.126% 16.996% 7.699% 17.813% 12.312% Funding History Total Employer Contribution Rate 23.611% 24.512% 23.938% 24.695% 30.125% The Funding History below shows the recent history of the actuarial accrued liability, the market value of assets, the actuarial value of assets, funded ratios and the annual covered payrolL The Actuarial Value of Assets Is used to establish funding requirements and the funded ratio on this basis represents the progress toward fully funding future benefits for current plan partiCipants. The funded ratio based on the Market Value of Assets is an Indicator of the shor!:-term solvency of the plan. Valuation Date 06/30/05 06/30/06 06/30/07 06130/08 06/30/09 $ Accrued Liability 213,682,917 230,185,673 242,952,039 258,963,682 280,292,862 $ Actuarial Value of AS$eI$ (AVA) 169,820,579 $ 202,407,898 216,498,610 228,883,308 236,274,455 Market Value of Assets (MVA) 195,865,789 215,471,365 252,542,112 235,054,144 172,078,263 Funded R.atlo AVA MVA 88.8% 91,7% $ 87.9% 93.6% 89.1% 103.9% 88.4% 90.8% 84.3% 61.4% Annual Covered Payroll 18,952,707 20,469,175 20,907,118 22,181,324 22,086,992 Page 15 () SUMMARY OF ASSETS • RECONCILIATION OF THE MARKET VALUE OF ASSETS • DEVELOPMENT OF THE ACTUARIAL VALUE OF ASSETS • ASSET ALLOCATION () ( .. ) ... J (') \" . ) CALPERS ACTUARIAL VALUATIOt-l-June 30, 2009 SAFElY PLAt-l OF THE CITY OF PALO ALTO EMPLOYER NUMBER 14 Reconciliation of the Market Value of Assets 1. Market Val~e of Assets as of 6/30/08 Inciudlng R&:elvables $ 23S,054,144 .2. Receivables for Sel'\{lce. Buybacl<s as of 6/30/08 ~39,103 3. Market Value of Assets as of 6/30/08 234,815,041. 1. Employer Contributions 5,320,307 5. Employee Contributions 2,126,158 6. Benent Payments to Retlrees and Beneficiaries (12,960,170) 7 •. Refunds 0 8. lump SUm Payments 0 9. Transfers and MIS<::<illianeous Adjustments 6,090 10. Il11Iestmen~ Return " . (57,441,979) 11. . Marliet Value of Assets as of 6/30109 $ 171,865,444 12. Receivables for ServIce Buybacks as of 6/30/09 212,819 13. Market Value of Assets as of 6/30/09 Including Receivables $ 172,078,263 Development of the Actuarial Value of Assets 1. Actuaria! Value of Assets as of 6/30/0B Used For Rate Setting Purposes $ 228,883,308 2. Receivables' for Service Buybacks as of 6/30/08 239,103 3. Actuarial Value of Assets as of 6/30/08 228,644,205 4. Employer Contributions 5,32.0,307 5. Employee Contributions 2,126,158 6. Benent Payments to Retirees and Benenclarles (12,960,170) 7. Refunds 0 8. lump SUm Payments 0 9. Transfers and Miscellaneous Adjustments 6,090 10. Expected Inv,estment Income at 7.75% 17,510,488 11. Expected Actilanal value of Assets $ 240,647,078 12. Market Value of Assets as of 6/30/09 $ 171,86$,444 13. PrelimInary Actuarial Value of Assets [(11) + «12) -(11» /15] 236,061,636 14. Maxlmum Actuarial Value of Assets (140% of (12) 240,611,622 15. MInimum Actuarial Value of Assets (60% of (12» 103,119,266 16. Actuarial Value of Assets {lesser of [(14), Greater of «13), (IS»)]} 236,061,636 17. ActUarIal Value to Market Value Ratlo 137.3% 18. Receivables for Serv1ce Buybacks as of 6/30/09 212,819 19. Actuarial Value of Assets as of 6/30109 Used for Rate Setting Purposes $ 236,274,455 Page 19 CALPERS ACTUARiAL VALUATiON -June 30, 2009 SAFETY PlAN OF THE CITY OF PALO ALTO EMPlOYER NUM6ER 14 Asset Allocation The starting point and most Important element of CaIPERS' successful return on Investment Is the asSet allocatfon or dlversl.ficatlon among stocks, ilorlds, cash and other Investments, . Asset allocation Is not an asset-only or liability-only decision. All factors, Including lIabllitles,beneflt payments, operating expenses, and' employer and member contributions are taken Into account In determining' the appropriate asset allocation mix, The goal Is to maximize returns at a prudent level of risk which presents an ever-changing balancing act between market volatility and long-term goals, CaIPERS follows a strategiC asset allocation policy that Identlfles the percentage of funds to be Invested In each asset class. The asset allocation and market value of assets shown below reflect the Values of the Public Employees Retirement Fund (PERF) In Its entirety as of June 30, 2009. The assets for OTY OF PALO ALTO SAFETY PLAN are part of the Public Employees Retirement Fund (PERF) and are Invested accordingly. (A) A$setClass 1) Total Cash equivalents 2) Total Global Fixed Income 3) Total Equ~!es '0 Inflation Linked (ILAC) 5) Total Real Estate Total Fund 55.6% EqUites (8) Market Value ($ Billion) 12.0 51.6 102.0 4.4 1M 183.Sl 7.4% Real Estate I Target allocation effective January 1, 2009. (C) Current Allocation 6.5% 2B.1% 55,6% 2.4% M% 100.0% 6.5% Cash 2B.1% FiXed Income' (D) Talllet' 0.0% 19.0% 66,0% 5.0% ~. 100.0% 2 Differences between Investment values above and the values on the Summary of Investments on page 26 of the Comprehensive Annual Financial Report (year Ended June 30, 2009) are due to differences In reporting methods. The Summary of Investments Includes Net Investment RecelvablesfPayables, page 20 ,,) ) ) () SUMMARY OF PARTICIPANT DATA • SUMMARY OF VALUATION DATA • ACTIVE MEMBeRS • TRANSFeRRED AND TeRMINATeD MEMBERS • RETIRED MEMBERS AND BENEFICIARIES () ) ') ) () ') ! \, <:ALPERS ACTUARIAL VALUATION -June 30, 2009 SAFETY PlAN OF THE CITY OF PALO ALTO EMPLOYER NUMBER 14 Summary of Valuation Data «, June 30, 2008 lune 30, 2009 1. Active Members al Counts 200 192 bl Average Attained Age 40.95 41.30 c) Average Entry Age to Rate Plan 28.82 28.62 d) Average Years of Service 12.13 12.68 e) Average Annual Covered Pay $ 110,907 $ J15,036 f) Annual Covered Payroll 22,181,324 22,086,992 g) Projected Annual Payroll for Contrlblitlon Year 24,415,052 24,311,220 h) Present Value of Future Payroll <197,266,015 194,979,077 2. Transferred Members a) Counts 71 63 b) Average Attained Age 44.19 43.52 < c) Average Years of Service 6.67 6.60 dl Average Annual Covered Pay $ 110,670 $ 113,481 3. Terminated Members a) Counts < 32 32 b) Average Attained Age 41.20 41.59 c) Average Years of Service 5.22 5.51 dl Average Annual Covered Pay $ 75,565 $ 74,309 4. Retired Members and Benetlclarles a) Counts 352 368 b) Average Attained Age 65.79 66.04 c) Average Annual Benefits $ 35,262 $ 36,BBB 5. Adlve to Retired Ratio 0.57 0.52 Counts of members Induded In the valuation are counts of the records processed bY the valuatlon. Multlple records may exist for thOse who have service In more than one valuation group; This does not result In double counting of liabilities. Page 23 « CALPERS ACTUARIAL VALUATION -June 30, 2009 SAFETY PLAN OF TflE CITY OF PALO ALTO EMPLOYER NUMBER 14 Active Members ~'.) Counts of members Induded 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 lIabll~les , :Dlstrlbutlon of A<:tlve Members by Age and Service Yeai'll of Service at Valuation Date AttaIned ADe 0-4 5-9 10-14 15-19 20-25 ' '25+ ' Total ·15-24 2 0 0 0 0 0 2 2~-19 22 0 0 0 0 ° 22 , ,30·34 8 9 4 0 ,0, 0 21 35-39 12 10 12 0 ° 0 34 40-44 1 11 12 14 4 ° 42 45-49 3 6 8 13 8 3 41 ,50-54 ° 4 1 0 ' 10 8 23 55c59 0 1 1 1 0 4 7 60-64 ° 0 ° 0 ° ° 0 65 and over 0 ° 0 0 0 0 0 " All Ages 48 41 38 28 22, 15 192 ) Distribution of Average Annual SIIlarles by Age and ServIce Yeai'll of Service at Valuation Dllte Attained Age 0-4 5-9 10-14 15-19 20-25 25+ Average 15-24 $93,077 $0 $0 $0 $0 $0 $93,077 .25-29 99,072 0 0 0 0 0 99,072 30-34 98,908 114,190 .124,211 0 ° 0 110,277 35-39 100,482 105,854 117,172 , 0 0 0 107,953 ", "" . . 40-44 . 98,218 105,824 113,212 123,984 135,439 0 116,8B9 45·49 159,502 110,716 112,081 121,105 127,017 134;537 122,770 SO-54 0 125,774 116,374 ° 122,420 132,864 126,373 55-59 0 122,374 182,921 101,472 0 119,694 126,505 60-64 0 0 0 0 ° 0 0 65 and over 0 ° 0 0 ° 0 ° All Ages $102,907 ' $111,002 $117,300 $121,844 $126,459 $129,687 $115,036 Page 24 CALPERS ACTUARIAL VALUATION -June 30, 2009 Sl\PETY PLAN OF THE CITY OF PALO ALTO EMPLOYER NUMBER 14 () Transferred and Terminated Members Distribution of Transfers to Other CaIPERS Plans by Age and Service Years of Service at Vaillation Date AttaIned '"' " Average Age 0-4 . Ii-' 10-14 15-19 20-25 25+ Total Salary 15-24 0 0 0 0 0 0 0 . $0 25-29 5 0 0 0 0 0 5 78,307 30-34 4 1 0 0 0 0 5 99,582 35-39 7 1 1 0 0 0 9 109,331 40-44 10 5 1 0 0 0 16 93,509 45-49 6 1 2 3 4 0 16 144,700· 50-54 3 3 1 1 1 0 9 115,420 55-59 0 0 1 1 0 0 2 130,287 60-64 0 0 0 1 0 0 1 165,180 65 and over a 0 0 0 0 0 0 0 All Ages 35 11 6 6 5 0 63 113,481 ()-Distribution of Terminated Participants with Fllnds on Deposit by Age and Serville Years of Sarvice at Valuation Date Attained .. Average Age 0-4 Ii., 10-14 15-19 20-25 25+ Total Sala!:! 15-24 0 0 0 0 0 0 0 $0 25-29 . 0 1 0 0 0 0 1 91,461 30-34 5 3 ·0 0 0 0 8 85,910 35-39 3 1 0 0 0 0 4 67,552 40-44 4 3 0 o , 0 0 7 69,856 45-49 4 0 1 0 1 1 . 7 63,918 50-54 2 0 0 0 0 1 3 83,2(12 55-59 1 1 0 O. 0 0 2 71,345 60-64 0 0 0 0 0 0 0 0 65 and over 0 0 ·0 0 0 0 0 0 All Ages 19 9 1 0 1 2 32 74,309 ) Page 25 CALPERS ACTUARIAL VALUATION -June 30, 2009 SAFElY PLAN OF THE CITY OF PALO ALTO EMPLOYER NUMBER l'I Retired Members and Beneficiaries ) D~butlon of Ret1re6!' lind Bellefltlarles by Age and Retirement Type* Noll" Non-Death Attained Service Industrial 'Industrial IndUstrial Industrial After Aile Retirement DisabllllI DlsabililI Death Death Retirement Total' Under 30 0 0 '0 0 0 0 0 30-34 , , 0 0 0 0 0 0 0 35-39 0 0 2 0 0 0 2 40-44 0 1 3 0 0 0 4 45-49 0 0 12 0 1 0 13 50-54 22 1 13 0 2 1 39 55-59 27 0 16 0 0 5 48 QO-64 31 1 20 0 0 3 55 65-69 35 0 27 0 0 11 73 '70-74 32 2 23 0 0 1 58 75-79 20 0 20 0 0 8 48 80-84 11 0 5 0 0 3. 19 85 and Over 3 0 2 0 1 3 9 All Ages 181 5 143 0 4 35 368 ) Distribution ot Average Annual Amounts for Retirees and Beneficiaries by Age . and RetlrementType* Non-Non-Death A~ined Servk:e Industrial Industrial Industrial Industrial Atter Age Retirement DlsabililI DlsabllllI Death Death Retirement Average Onder 30 $0 $0 $0 $0 $0 $0 $0 30-34 0 0 0 0 0 0 0 35-39 0 0 44,277 0 0 0 44,277 40'44 0 75 39,445 0 0 0 29,602 45-49 0 0 44,554 0 45,627 0 44,651 50-54 55,405 28,666 44,111 0 32,592 61,003 49,928 55-59 56,4.31 0 34,642 0 0 25,955 45,994 60-64 44,883 15,217 39,638 0 0 39,814 42,160 65-69 39,394 0 25,942 0 0 30,786 33,122 70-74 38,653 10,710 29,482 0 0 13,163 33,613 75-79 32,628 0 23,813 0 0 28,606 28,285 60-Sq 23,076 0 17,335 0 () 12,422 19,863 85 and Over 30,672 0 29,432 0 25,158 11,638 23,439 All Ages $Q2,807 $13,075 $32,603 $0 $3Q,042 $27,517 $36,868 ) Page 26 , -.,-' ..... _." ............... -~" ... . CALPERS ACTUARIAL VALUATION -June 30, 2009 SAFETY PLAN OFTHECITYOF PALO ALTO EMPLOYER NUMBER 14 , C) Retired Members and Beneficiaries (continued) Distribution of Retirees and Beneficfarles by Years Retired and Retirement Type* - Non-Non-Death Yeara Service Industrial Industrial Industrial Industrial After RetIred Retirement Disablll~ Disability Death Death Retirement Total Under 5Yrs 46 1 17 0 1 9 74 5-9 41 0 17 0 0 12 70 10-14 29 1 20 0 1 5 56 15-19 30 1 19 0 0 1 51 20-24 18 0 17 0 0 2 37 25-29 14 1 26 0 1 2 44 30 and OVer 3 1 27 0 1 4 36 All Years 181 5 143 0 4 35 368 Dlstrlhutlon of Average Annual Amounts for Retirees and Beneficiaries by Years Retlred and Retirement Type* Non-Non-Death /). Years Service Industrial Industrial Industrial Industrial After \"'" Under 5 Yrs $75 5-9 52,756 0 47,293 0 0 37,457 48,807 10-14 36,153 28,666 39,434 0 40,571 19,713 35,602 15-19 42,692 15,217 29,838 0 0 30,933 37,134 20-24 30,061 0 23,402 ° ° 20,501 26,485 25-29 31A21 13,232 22,673 ° 24,613 28,443 25,548 30 and Over 30,672 8,187 21,668 0 25,158 11,377 20,997 All Years $42,807 $13,075 $32,603 $0 $34,042 $27,517 $36,888 • Counts of members do not Include alternate payees receiving benefits while tlle member Is stili working. Therefore, tlle total counts may not match InformaUon on page 23 of tlle report. Multiple records may exist for those who have service In more than one coverage group. This does not result In double counUng of Ilabllltles. ) Page 27 I.. '.) J I.,,"., ( ) APPENDICES i .) \.,., ) • APPENDIX A· STATEMI!NT OF ACTUARIAL DATA, METHODS AND ASSUMPTIONS • APPENDIX B • SUMMARY OF PRINCIPAL PLAN PROVISIONS • APPENDIX C· GASa STATEMENT NO. 27 • APPENDIX D -INVS8TMElNT RETURN SENSITIVITY ANALYSIS • APPENDIX E -GLOSSARY OF ACTUARIAL TERMS ,; .J () APPENDIX A • STATEMENT OF ACTUARIAL DATA, METHODS AND ASSUMPTIONS ""',',)" '\, ) 0) C') ) :, .. CALPERS ACfUARIAL VALUATION -June 30, 2009 STATEMENT OF ACTUARIAL METHODS AND ASSUMPTIONS Actuarial Data APPENDIX A As Stated In the Actuarial, Certlflcatlon, the data which serVes as the basis of this valuation has been obtained from the various CaIPl:RS databases. We have reviewed the valuation data and believe that It Is reason~ble and appropriate In aggregate. We are unaware of any potential data Issues that would have a malerlal 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 reoognlze the potential for unusually large salary deviation In oertaln cases such as elected officials. Therefore, salary information In these cases may not be accurate. These situations are relatively Infrequent, however, and when they do occur, they generally do not have a material Impact on the employer contribution rates. Actuarial Methods Fiindlng Method The actuarial funding method used for the Retirement Program Is the Entry Age Normal COst Method. Under this method, projected benefits are determined for all members and the associated liabilities are spread In a manner that produces level annual cost as a percent of pay In each year from the age of hire (entry a~e) to the assumed retirement age. The cost allocated to the current fiscal year Is called the normal cost. The actuartal accrued liability for active members 15 then calculated as the portion of the total cost of the plan alloc~ted to prior years. The actuarial accrued liability for members currently receiving benefits, for active members beyond the assumed retirement age, 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. The excess of the toml actuarial accrued liability over the actuarial value of plan assets Is called the unfunded actuarial accrued liability. Funding requirements are determined by adding the normal cost and an amortization of the unfunded liability as a level percentage of assumed future payrolls. All changes In liability due to plan amendments, changes In actuarial assumptions, or changes In actuarial methodology are amortized separately over a 20-year period. All gains or losses are tracked and amortized over a rolllng.30- year period with the exception of spedal gains and losses In fiscal years 2008-2009, 2009-2010 and 2010· 2011. Eachaf these years speclal gains or losses will be Isolated and amortized over fixed and declining 30 Yea.r,perloas (as opposed to the.current rolling 30 yearamOttizatlon), If a plan's accrued liability exceeds the actuarial value of assets, the annual contribution with respect to the total unfunded liability may not be less than the amount produced by a aa-year amortization of the unfunded liability •. Inaddltlon, In February 2010 the calPERS Iloard adopted a resolution requlrtng additional contributions for any plan or pool If their cash flows hamper adequate funding progress by preventing the expected funded status on i;I market value of assell; basis 01 the plan to either: • . l.ncrease by at leaS! 15% by June 30, 2043; or • . ~ch a level of 75% funded by June 30, 2043 The necessary additional contribUtion will be obtained by changing the amortization period olthe gains and losses plior to 2009 to a period which will result In the satisfaction of the above criteria. calPERS actuaries will reassess the CrIteria above when performing each fuMe valuation to determine whether or not additional contributions are necessary. An exceptIon to the funding rules above Is used whenever the application of such rules results In Inconsistencies. In these cases a "fresh start" approach Is used, This simply means that the current unfunded actuarial liability Is projected and amortized over a set number of years. As mentioned above, If the annual contrlbuHon on the total unfunded liability was less than the amount produced by a 30'year amortlza~on of the unfunded liability, the plan actuary would Implement a 30-year fresh start. However, In the case of a 30-year fresh start, just the unfunded liability not already In the (g8In)/1055 base (which already Is amortized over 30 years) will go Into the new fresh start base, In addition, a fresh start Is needed In the following situations: CALPERS ACTUARIAL VALUATION -June 30, 2009 APPENDIX A . STATEMENT O~ ACTUARIAL METHODS AND ASSUMPTIONS 1} when a positive payment would be required 00 a negative unfunded actuarial liability (or conversely a negatIVe payment on a positive unfunded actuartaillablllty); or 2} when there are excess assets, rather than an unfunded liability. In this situation a 30-year fresh start Is used, unless a longer fresh start Is needed to avoid a negative total rate. It shbuld be noted that the actuary may choose to use a fresh start under other circumstances. In all cases, the fresh' stait period Is set by the actuary at what he deems appropnate, and will not be less than five years nor greater than 30 years. 'ASset ValUation Method In order In dampen the effect of short term market value fluctuations on employer contribution rates, the following asset smoothing technique is used. First an Expected Value of Assets Is computed by bringing forward the prior year's Actuarial Value of Assets and the contributions received and beneflts paid duliog tile year at the assumed actuarial rate of return. The Actuarial Value of Assets Is then computed as the Expected Value of Assets plus one-fifteenth of the difference between the actual Market Value of Assets and the Expected Value of Assets as of tile valuation date. However In no case will the Actuarial Value of Assets be less than 80% or greater than 120% of the actual Market Value of Assets. In JUn~ 2009, the CaIPERS Board adopted cnanges to tne asset smoothing method In order to phase In over a three year period the Impact of the -24% Investment 10ssexper1encedby CaIPERS In fiscal year 2008- 2009; The following changes were adopted: • Increase the corridor limits for tile actuarial value of assets from 80%-120% of market value to . 60%-140% of market value on June 30, 2009 • Reduce the·corrldor limits for the actuanal value of assets to 70%-130% of market value on June .. 30,2010 •. Return to the 80%-120% of market value corridor limits for the actUarial value of aSsets on June 30, 2011 and thereafter Miscellaneous Superfullded Status If a rate pliln Is superfunded (actuarial value of assets exceeds the present value of benefits), as of the most recently completed annual valua~on, the employer may cover their employees' member contributions (both taxed and tax'dererred) using their employer assets du~ng the fisCal year for which thiS valuation applies. This would entail transferring assets within the Public Employees' Retirement Fund (PERF) from the employer account to the member accumulated contribution accounts. This change was Implemented effective January 1, 1999 pursuant to Chapter 231 (Assembly Bill 2099) which added Government Code Section 20816.' Superfunded status applies only to Individual plans, not rtsk pools. For rate plans Within a risk pool, actuarial value of assets Is the sum of the rate plan's side fund plus the rate plan's prO-rata share of non side fund assets. Intemal Revenue Codl! Sedlon 415 The limitations on benefits Imposed by Internal Revenue Code section 415 were not taken Inln account In this Valuation. The effect of these limitations has been deemed Immaterial on the overall results. Internal Revenul! Code Slldlon 401(8)(17) The limitations on compensation Imposed by Internal Revenue Code Section 401(a)(17) were taken Into account In thiS valuation. Each year the Impect of any changes In this compensation limitation since the . prior valuation Is Included and amortized as part of the actuarial gain or loss base. A-2 ) \ ) ) CALP~RS ACTUARIAL VALUATION -June 30, 2009 STATE,MENT OF ACTUARIAL METHODS AND ASSUMPTiONS Actuarial ,Assumptions EcooomlcAwul7lldlo"f Inyestment Return 7.75% oompounde~ annually (net of expenses). This assumption Is used for all plans. S~lary Growth Annual Increases vary by category, 'entry age, and duraHon of service. The assumed Increases are shown below •. Publlc,A!!en9; Miscellaneous Duratlon of ServICe.. Ehtly Age 20 Entry Arul 30 Entry Age 40 0 0.14'15 0.1265 0.1005 1 0.1215 0.1,075 0.0875 2 0.1035 0.0935 0.0775 3 '0;0905 0.0825 0.0695 4 0.0805 0.0735 0.0635 5 0.0725 0.0675 0.0585 10 0.0505 0.0485 0.0435 15 0.0455 0.0435 0.0385 20 0.0'115 ,0.0395 0.0355 25 0.0385 0.0385 0.0355 30 0.0385 ' 0.0385 ' 0.0355 PubllcrAllencl: fire Duration of Service Ehtry A~e 20 Eht'1 Age 30 Entry Age 40 0 0.1075 0.1075 0.1045 1 0.0975 0.0965 0.087,5 2 , 0.0895, 0.0855 0.0725 3 0.0825 0.0775 0.0625 4 0.0765 0.0705 0.0535 5 0.0715 0.0645 0.0'175 10 O.Q53~ 0.0485 0.0375 15 0.0435 0.0415 0.(\365 20 0.0395 0.0385 0.0355 25 0.0375 0.0375 0.0355 , ' 30 0.0375 0.0375 0.0355 pJ~ji<: Alle!!9: POlice Duration' of SerVice ,Ent'1 Age 20 ' Entry Age 30 Entry Age '10 0 0.1115 0.1115 0.1115 1 0.0955 0.0955 0.0955 2 0.0635 0.0835 0.0805 3 0.0745 0.0725 0.0665 4 0.0675 0.0635 0.0575 5 0.0615 0.0575 0.0505 10 0.0475 0.04'15 0.0365 15 0.0435 0.0415 0.0355 20 0.0395 0.0385 0.0355 25 0,0375 0.0365 0,0355 30 0.0375 0.0365 0.0355 A-3 CALp"EIW ACTUARIAL VALUATION -June 30, 2009 , , STAT~MENT OF ACTUARIAL METHODS AND ASSUMPTIONS Public Asensr: Coun!:X Pealle Officers Duration of Service Entl)' Aile 20 Entl)' Age 30 Entl)' Aile 40 0 0.1315 0.1315 0.1315 1 0.1115 0.1085 0.1055 2 0.0965 0.0915 0.0865 " 3' ' 0.0735 0.0845 0.0795 4 0.0755 0.0695 0.0635 '0 0.0685 0.0625 0.0555 10 0.0485 0.0445 0.0405 15 0.0435 0.0405 0.0365 20 ' 0.0395 0.0385 0.0365 25 0.0375 0.0365 0.0355 30 0.0375 0.0365 0.0355 • The Miscellaneops salal)' scale Is used for Local Prosecutors. • The Police salarY scale Is \isedf'or Other SafetY, Local Sheriff, and School Police. Overall Payroll Growth APPENDIX A 3.25% compounded annually (used tn projecting the payroll over which the unfunded liability Is amortized). Thl. assumption Is used for all plans, Inflation " , 3.00% compoun4edannually. This assumption IS,used for all plans. Non-valued Potentlal:Addltlonai Uabltltles The potentlaillablilty loss for a cost-of-lIvlng Increase exceeding the 3% Inflation assumption, and any potential liability loss from future member service purchases are not reflected In the valuation. MlscelIBnBOllf Lgsdlng facf.tJrs ' Credit for Unused Sick I.eavtI ' 'Final Average'Salal)' Is Increased by 1% for those plans with the proVision proViding Credit for Unused Sick Leave. Conversion of Emplover Paid Member Contributions (IlPMC) Final Average ,Salaty Is Incre8S!'ld by the Employee Contl1bu~on Rate for those plans with the provision providing for the Conversion of Employer Paid Member Contributions (EI'MC) during the flnal compensation jierlod. Norris Decision (Best,Factors) Employees hired prior to July 1, 1982 have projected banellt amounts Increased In order to reflect the use of 'Best Factors" In the calculation of optlonal banelll forms. This Is due to a 1983 Supreme Court decisIOn, known as the Norris, decision, whl,ch, required, males and females to be treated equally In the determlnl!tlon of benefll amounts., Coi1sequently" anyone already employed at that time IS gIVen the best poSSible conversion factor when optIOnal benefits are determined. No loading Is necessal)' for employees hired after July 1, 1982. A-4 ) ",) CAlPERS ACTUARIAL VALUATION -June 30, 2009 STATEMENT OF ACTUARIAL METHODS AND ASSUMPTIONS' APPENDIX A () ";;"q,,,j,phlCAlllumptjl1lll (.') \ .... ) Pre-RetIrement Mortal.ltv. . . . Non-Industrial Death Rates vary by age and gender. Industrial Death rates vary by age. See sample rates In table below. The non-Industrial death rates are used for all plans. The Industrial death rates are used for safety Plans (except for lacel Prosecutor safety members where the corresponding Miscellaneous Plan does not have the Industrial Death Benefit). Age 20 25 30 3S 40 4S 50 55 60 65 70 75 80 Non-Industrial Death (Not Job-Related) Male, Female 0.00047 0.00016 0.00050 0.00026 0.00053 0.00036 0.00067 0.00046 0.00087 0.00065 0.00120 0.00093 0.00176 0.00126 . 0.00260' 0.00176 0.00395 0.00266 0.00608 0.00419 0.00914 0.00549 0.01220 o.oOB78 0.01527 0.01108 Industrial Death (Job-Related) Male and Female 0.00003 0.00007 0.00010 0.00012 0.00013 0.00014 ·0.00015 0.00016 0.00017 0.00018 0.00019 0.00020 0.00021 Miscellaneous Plans usually have Industrial Death rates set to zero. unless the agencY has specifically contracted for Industrial Death benefits. If so, each Non-Industrial Death rate shown above will be split Into two components: 99% will become the Non-Industrial Death rate and 1% will become the Industrial Death rate. Post-Retirement Mortality Rates valY by age, type of retirement and gender. See sample rates In table below. These rates are used for all plans. Healthy Recipients Age Male Female 50 0.00239 0.00125 55 0.00474 0.00243 60 O.oonO 0.00431 65 . 0.01069 0.00775 70 0.01675 0.01244 75 0:03080 0.02071 80 0.05270 0.03749 85 0.09775 0.07005 90 0.16747 0.12404 95 0.25659 0.21556 1000.34551 0.31876 105 0.58527 0.56093 110 1.00000 1.00000 Non-lnduslrl!lIly Disabled (Not Job-Related) Male Female 0.016320.01245 0.01936 0.01580 0.02293 0.01628 0.03174 0.01969 0.03870 0.03019 0.06001 0.03915 0.0838B 0.05555 0.14035 0.09577 0.21~54 0.14949 0.31Q25 0.23055 0.45905 0.37662 0.67923 0.61523 1.00000 1.00000 llidustrlaily DISllbhid (Job-Related) Male Female 0.00443 0.00356 0.00563 0.00546 0.00777 0.00798 0.01388 0.01184 0.02236 0.01716 0.03585 0.02665 0.06926 0.04528 0.11799 0.08017 0.16575 0.13775 0.26108 0.23331 0.40918 0.35165 0.64127 0.60135 1.00000 1.00000 A-5 CAL~EI1S ACfUARIAL VALUATION';' June 30, 2009 STATEMENT OF ACfUARlAL METHODS AND ASSUMPTIONS APPENDIX A MarItal Stlltll5 For active members, a percentage married upon retirement Is assumed accordIng to the following table, ' Member Q!tegory MI~cellane9us Mel)1ber . Local Police Local Fire Other Local' Safety S::OOOIPpilce Pel'Qlnt Married 85% 90% 90% 90% 90% Age of Spollse It Is assumed that female spouses are 3 years younger than male spouses, This assumption Is used for all plans, ' TermInated Members It Is assumed that terminated members refund Immediately If non-vested, Terminated members who are vested are assumed to follow the same service retirement pattern as active members but with a load to tefect the expected higher rates of retlrement, especially at lower ages. The following table shOws the load factors thanre applied to the service retirement assumption for active members to obtain the service retirement pattern for separated vested members: Age 50 51 52 through 56 . 57 through 60 61 through 64 65 and above . Load factor 450% 250% 200% . 150% 125% 100% (no change) Termination with Refund Rates vary by entry age and service for Miscellaneous PI~ns. Rates vary by service for Safety Plans. See sample rates In tables below. Public Alleng: Miscellaneolis Duration of Service' Entry All/! 20 Entry Age 25 Ent'X Age 30 EntrY Age 35 EntryA~e40 Entry Age 45 0 0,1742 0.1674 0.1606 0.1537 0.1468 0.1400 1 0.1545 0,1477 0.1400 0.133!) <0.1271 0.1203 2 ,0,1348 0.1280 0.1212 0.1142 0.1074 0.1006 3 0,1151 0.1083 0.1015 0.0945 0.0877 0,0809 4 0.0954 0,0886 . 0,0818 0.0748 0.0680 0.0612 5 0.0212 0.0193 0.0174 0,0155 0.D136 0.0116 10 0,0138 0.0121 0.0104 0.0088 0.0071 0,0055 15 0,0060 0,0051 0.0042 0,0032 0.00:<3 0.0014 20 0.0037 0.0029 0.0021 0,0013 0.0005 0.0001 25 0.0017 0.0011 0.0005 0.0001 0.0001 0.0001 30 0.0005 0.0001 0.0001 0.0001 0.0001 0,0001 35 0.0001 0.0001 0.0001 0.0001 0,0001 0.0001 A-6 ) .J () () J ('ALPERS ACTUARIAL VALUATION -June 30, 2009 'APPENDIX A STATEMENT OF ACTUARIAL METHODS AND ASSUMPTIONS Public AHens: Safe!:X Duration of Service Fire Police County Peace Officer 0 0.0710 ' 0.1013 0.0997 1 0.0554 0.0636 0.0782 2 0.0398 0.0271 0.0566 3 0.0242 0.0258 0.0437 4 , 0.0218 0.0245 0,0414 5 0.0029 0.0006 0,0145 10 0.0009 0.0053 0.0089 .15 0.0006 0,0027 0,0045 20 0,0005 0.0017 0.0020 25 0.0003 0.0012 ,,0.0009 ,30 0.0003 0,0009 0.0006 35 0.0003 0.0009 0.0006 The Police Termination and Refund rates are used for Public Agency Local Prosecutors, Other Safety, Local Sheriff, and School Police. Term/natlon,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 Aliens: Miscellaneous DuratIOn of Ent!J:: Age 20 Ent!J::Age 25 Ently Age 30 Ent!J:: Age 35 Ent!)' Age 40 5 0.0656 0.0597 0.0537 0.0477 0.0418 10 0.0530 0.0466 0.0403 0,0339 0.0000 15 0.0443 0.0373 0.0305 0.0000 0.0000 20 0.0333 0.0261 0.0000 0.0000 0.0000 25 0.0;112 0.0000 0.0000 0.0000 0.0000 30 0.0000 0.0000 0.0000 0.0000 0.0000 35 0.0000 0.0000' 0.0000 0.0000 0.0000 Public Agency Safety Duratlon of County Poace Service Fire Police Officer 5 0.0162 0.0163 0.0265 10 0.0061 0.0126 0.0204 15 0.0058 0.0082 0.0130 20 0.0053 0.0065 0.0074 25 0.(j047 0.00S8 0.0043 30 0.0045 0.0056 0.0030 35 0.0000 0.0000 0:0000 • When a member Is eligible to retlre, the termination with vested benefits probability Is set to zero. • After termination with vested benetlts, a miscellaneous member Is assumed to retire at age 59 and a safety member at age 54. • The Police Termination with vested beneflts rates are used for Public Agency Local Prosecutors, Other Safety, Local Sheriff, and School Police. A·7 I ...... . CAlPERS .ACTUARIAl VALUATION -June 30, 2009 STATEMENT OF ACTUARIAL METHODS AND ASSUMPTIONS. NOll-Industrial (Not Job-Related) Disability Rates vary by age and gender fur MiScellaneous Plans. Rates vary b;i age and category for Safety Plans. APPENI>IX A Miscellaneous Fire Police County Peace Offlcer Age Male Female Male and Female ~lale arid Female Male and Female 20 0.0001 0.0001 0.0001 0.0001 0.0001 25 0.0001 0,0001 0.0001 0.0001 0.0001 30 0.0002 . 0:0002 0.0001 0.0002 0.0001 35 0.0006 0.0009 0,0001 0.0003 0.0004 40 0.0015 0.0016 0,0001 0.0004 0.0007 45 0.0025 . 0.0024 0.0002 0.0005 0.0013 50 0.0033 0.0031 0.0005 0.0008 0.0018 55 0,0037 0.0031 0.0010 0.0013 0.0010 60 0.0038 0.0025 0.0015 0.0020 0,0006 • The Miscellaneous Non-rndustrlal Disability rates are used for local Prosecutors. • The Pollee Non-Industrial Disability rates are used for other Safety, local Sheriff, and School Police. IndustrIal (Job-Related) Disability . Rates vary by age andcategoty. Age Fire Police county Peace Offlcer 20 0.0002 0.0007 0.0003 25 0.0012 0.0032 0.0015 30 0.0025 0.0064 0.0031 35 0.0037 0.0097 0.0046 40 0.0049 0.0129 0.0063 45 0.0061 0.0161 0.0078 50 0.0074. 0.0192 0.0101 55 0.0721 0.0668 0.0173 60 0.0721 0.0668 0.0173 • The Police industrial Disability rates are used fur locai Sheriff and other Safety. • Fifty Percent. of the Police Industrial Disability rates are used for School police. • One Percent.of the Police Industrial Disability rates are used for local Prosecutors. • Nonnally, rates are zero for Miscellaneous Plans unless the agency has speclncally contracred for Industrial Disability benefits; If so, eaen miscellaneous non-Industrial disability rate will be split Into two components: 50% will become the Non-rndustrlal Disability rate and 50% will become the Industrial Disability rate. A-a ~ ) ) CALPERS ACTUARIAL VALUATION -June 30, 2009 APPENDIX A STAT!;MENT OF ACTUARIAL METHODS AND ASSUMPTIONS () Servl~ Retirement Public Agency MIscellaneous lOA> @ 60 Duration of Service :Age 5"Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.011 o.oi5 0.018 0.021 0.023 0.026 ,51 0.009 0.013 0.011; 0.018 0.020 0.023 52 0.013 0.Q18 0.022 0.025 0.026 0.031 , ~3 0.011 0.016 0.019 0.022 0.025 0.028 54 0.Q15 0.021 0.025 0.028 0:032 0.036 55 0.023 0.032 0.039 0.O~4 0.049 0.055 56 0.019 0.027 0.032 0.037 0.041 0.0~6 51 0.025 0.035 0.042 0.048 0.054 0.060 58 0.030 0.042 0.051 0.058 0.065 0.073 59 0.035 0.049 0.060 0.068 0.076 0.085 60 0.062 0.087 0.105 0.119 0.133 0.149 61 0.079 0.110 o.l.H 0.152 0.169 0.190 62 0.132 0.186 0.225 0.255 0.284 0.319 '63 0.126 0;178 0.216 0.244 0.272 Oj05 64 0.122 0.171 0.207 0.234 0.262 0.293 65 0.173 0.243 0.296 0.334 0.373 0.418 66 0.114 0.160 0:194 0.219 0.245 0.274 67 0.159 0.223 0.271 0.307 0.342 0.384 " 68 0.113 0.159 0.193 0.218 0.243 0.273 I , ') 69 0.114 0.161 0.195 0.220 0.246 0.276 \ 70 0.127 0.178 0.216 0.244 0.273 0.306 Public A!!en!)): Mjscellaneous 2% @ 55 Duration of Seovlce Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 !\.O15 0.020 0.024 0.029 0,033 0.039 51 0.013 0.016 0.020 0.024 0.027 0.033 52 0.014 0,018 0.022 0.027 0.030 0.036 53 0.017 0.022 0.027 0.032 0.037 0.043 " 54 0.027 0.034 " 0,p41 O:O~9 0.056 0.067 55 0.050 0.064 0.078 0.094 0.107 0.127 56 0.045 q.057 0.069 0.083 0.095 0.113 57 0.048 0.061 0.074 0.090 0.102 0.122 58 6.052 0.b66 0.080 0.097 0.110 0.131 59 0.060 0.076 0.092 0.111 0.127 0.151 ~O 0.0?2 0.092 0.112 0.134 0.153 0.182 61 0.089 0.113 0.137 0.165 0.188 0.224 62 0.128 0.162 0.197 0.237 0.270 0.322 63. 0.J29 0.164 0.199 0.239 0.273 0.325 64 0.Q6 0.148 0.180 0.216 0.247 0.294 65 0.17:4 0.221 0.269 0.323 0.369 0.439 66 0.i35 0.171 0.208 0.250 0.285 0.340 F ,0.133 0.169 0.20.6 0.247 0.282 0.336 ) 68 0.118 0.150 0.182 0.219 0.250 0.297 69 0.116 0.147 0.179 0.215 0.246 0.293 70 0.138 0.176 0.214 0.257 0.293 0.349 A'9 L. ......... . .... " ..... -....... -.~ .. -.~ ... ~.,~~"" . . .......... _-------,', ...... _." ...... .. ... " .... ., CA~Pj:RS ACTUARIAL VALUATION -June 30,2009 ' APPENDIX A 'STATEMENT OF ACTUARIAL METHODS AND ASSUMPTIONS Public Agenq Miscellaneous 2.5% @ 55 () Duration of Service Age 5 Years 10 Years, l5 Years 20 Years 25 Years 30 Years 50 0.026 0.033 0.040 0.048 0.055 0.062 51 Q.021 0.026 0.032 0.038 .0.043 0.049 ,52 0.021 0.026 0.032 0.038 0.043 0,049 s,3, 0.026 0.033 0.040 0.048 0.055 0.062 54 0.043 ,0.054 0.066 0.078 0.089 0.101 55 0.088 0.112 0.136 0 . .160 0.1~4 0.208 ~6 Q.055 0.070 0.085 0.100 0.115 0.130 57 0.061 0.077 0.094 0.110 0.127 0.143 58 0.072 0.091 O.ln 0.130 0.150 0.169 ,59 0.083 0.1.05 0.lZ8 0.150 0.173 0.195 60, O.,08B Q.112 0.135 0.160 0.184 0.208 61 0.083 0.105 0.128 0.150 0.173 0.195 " 62 0.121 0.15~ 0.187 0.220 0.253 0.286 63 0.105 0.133 0.162 0.190 0.219 0.247 84 0.105 0.133~ 0.162 0.190 0.219 0.247 65 0.143 0.182 0.221 0.260 0.299 0.338 66 0.105 0.133 0.162 0.190 0.219 0.247 67 0.105 0.133 0.162 0.190 0.219 0.247 ,68 0.105 0.133 . 0.162 0.190 0.219 0.247 69' 0.105 0.133 0.162 ,0.190 0.219 D.?,47 " ,70 0.125 0,160 0.194 ,0.228 0.262 0.296 ) Public Agen!:¥: Miscellaneous 2.7% @,55 , Duration of Service Age. S Years 10 Years 15 Years 20 Yeats 25 Years 30 Years 50 0,028 0.035 0.1(13 0.050 0.058 0.065 '51 0;0?2 0.028 0.034 0.040 0.046 0.052 52 0.022 0.028 0.034 '0.040 0.046 0.Q52 53 0.028 0.035 0.0,3 0.050 0.058 0.065 54 '0,044 0.056 O'.06~ 0.080 0.092 0.104 55 0.091 " 0.116 0.i4O 0..165 0.190 0..215 56 0.061 0.,077 0.,Q94 0.110. 0..127 0.143 F 0..0.63 9:081 0.098 0.115 0.132 0.150 58 ,0..0.74 0..095 0.115 0..135 0..155 0.176 59 0.083 0.1~5 0.128 0.150 0.173 0.195 60 0..088 0.112 0.13,6 0.160 0.184 0.208 iii 0.085 0.~O,9 (j.132 0.155 0.178 0.202 62 0.124, 0.158 0.191 0.225 0.259 0.293 63 0,107 0.,,137 0.166 0.195 0.224 0..254 64 0.107 0.137 0.166 0.195 0.224 0.254 65 0..146 0.186 0..225 0..265 0.305 0.345 66 0.107 0..137 0.166 0..195 0..224 0.254 67 0.107 0.137 0.166 0.195 0..224 0..254 66 0..107 0..137 0.166 0.195 0..224 0.254 ~9 0.107 0.137 0.166 0.195 0.224 0..254 .) 70 0.129 0.164 0 • .199 0.234 0.269 0..304 HO () /""')' \ . ) , CAt~ERS ACTUARIAL VALUATION -June 30, 2000 STATEMENT OF ACTUARIAL METHODS AND A~SUMPTIONS Age 50 51 52 53 54 55 56 57 58 , 59 50' 61 62 , 63 '64 65 66, 67 68 69 70 Pubilc A,encyMiscellarieOus 3% @ 60 , 5 Yeats 0.026 ,0.021 0.019 0.025 0.039 o.oS3 0.055 0.061 0.072 0.080 0.004 0.088 0.127 0.110 0;110 0.149 0.110 0,110 0.110 0.110 0.132 10 yJars 0.033 0.026 0.0~5 0:032 0.049 0.105 0.070 0.077 0:091 0.102 0.119 0.112 ,0.161 0.140 0.140 0.189 0.140 0.140 0.140 0.1~ 0.168 Duration of Service 15 Years 20 Years '25 Years 0.040 0.048 0.055 0.032 0.038 0.030 0.035 0.038 0.045 0.060 0.070 0.128 0.085 0.094 0.111 0.123 0.145 0,136 0.196 6.170 0.170 0,230 0.170 0.170 0.170 0.170 0.204 0.150 0.100 0.110 0.130 0.145 0.170 0,160 0.230 0.200 0.200 0.270 0.200 0.200 0.200 0;200 0.240 0.043 0.040 0.052 0.081 0.173 0.115 0.127 0.150 0.167 0.196 0.184 0.265 0.230 0.230 0.311 ,0.230 0.230 0.230 0.230 0.276 Public Arncy Fire Va @ SS and Z°A> @ 5S 30 Years 0.062 0.049 0.046 0.059 0.091 0.195 0.130 0.143 0.169 0.189 0.221 O,20S 0,299 0,260 0.260 0.351 0.260 0.260 0.260 0.260 0.312 &m 'BiIt!: &m 50 O.Q15aS 56 51 '0.00000 57 52 0.03442 58 53 0.01990 59 54 0.04132 60 BiIt!: 0.11079 0.00000 0.09499 0.04409 1.00000 55 0.07513 Public Agency Pollee '10 @ Sland 2% @ 55 8m: ' BiIt!: &m BiIt!: 50 ,0.O?552 56 0.06921 51 0.00000 57 0.05113 52 0.01637 58 0.07241 53 0.02717 S9 0.07043 54 0.00949 60 1.00000 55 0.16674 I~" -.. CALPERS AcruARIAL VALUATION -June 30, 2009 APPENDIX A STATEMENT OF ACTUARIAL METHODS AND ASSuMPTIONS "-:u:) , . Public Agen!:! Poll<le 2'Io@ SO , DUrlltion of SeNlee Age 5 Years 10 Years 1~ Years .20 years 25 Years 30 Years 50 0,014 0.!J~4 O,Ol:t . 0.014 0.025 0,045 51 0.012 0.012 O.0~2 0.012 0.023 0,040 .,52 0.026 0.026 .0;026 0;0:\6 0.048 0,086 53 0,052 0,052 0.052 .0.052 0.096 0.171 54 0.070 0.070 0.070 0.070 0,128 0:227 , . 55 0.090 0.090 0.090 0,090 0.165 0·293 56 0 . .064 0.d64 0.064 .0,064 0.11,7 0.208 ~7, 0,.071 0,071 0.971 0.071 0.13.0 0.232 5~, p.063 0,063 0.063 0.063 0.H5 0.205 59 0.140 0,140 0.140 0.140 6:174 0.254 60 0.140 0.140 0.140 0:140 0.172 0.251 61 0.140 0.140 0.140 0.140 0.172 0.251 62 0.1'10 0.140 0.140 0.140 0.172 0.251 63 0.140 0.140 0.140 0.140 0.172 0.251 64 0.140 0.140 0.140 0,140 0.172 0.251 65 1.000 1.000 .1.000 1,000 1.000 1.000 • These rates aisoapply to Local ProSllcutors, Local Sheriff, School Police, and Other Safety, Public Agell!:I Fire 2Ofo@SO (') .Duratlon 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 0.017 0.017 0.017 0.017 0.027 0.040 53 ,0.047 0.047 0.047 0,947 0,072 0.107 54 0,064 0.064 0.064 0,064 0.098 0.147 55 0.087 0.087 0.087 0,087 0.134 0.200 56 oms 0.078 oms 0.078 0.120 O.lBO 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.lB2 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.~14 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 0.1;'5 0.262 65 1.000 1.000 1.000 1.000 1.000 1.000 J A-12 < .... CAlPERS ACTUARIAL VALUATION -June 30, 2009 APPENDIX A STATEMENT OF ACTUARIAL METHODS AND ASSUMPTIONS () ", Public: Agency Police 30/00 55 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.019 0.019 0.019 0.019 0.040 0.060 51 0.024 0.024 0.024 0.024 0.049 0.074 52, 0.024 0.024 0.,024 0.024 0,051 0.077 53 0.059 0.059 0.059 0.059 0,121 0.183 54 0.069 0.069 0.069 0.069 0,142 0.215 55 0.116 0.116 0.116 0.116 0.240 0.363 56 0.076 0.076 0.076 0.076 0.156 0.236 57 0.058 0.058 0.058 0.058 0.120 0.181 58 0.076 0.076 0.076 0.076 0.157 0.237 59 0.094 0.j)94 0.094 0.094 0.193 0,292 60 0.141 0.141 0.141 0.141 0.290 0.438 61 0.094 0.094 0.094 0,094 0.193 0.292 62 0.118 0.118 0.118 0.118 0.241 0.365 63 0.094 0.094 0.094 0.094 0.193 0.292 64 ,0.094 0.094 0.094 0.094 0.193 0.292 65 1.000 '. 1.000 1.000 . 1.000 1.000 1.000 • These Tat~s also apply to local Prosecutors, local Sheriff, School Police, and Other Safety . I ),' Public Agency fire 3%@55 Duration of SelVlce Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0,012 0.012 0.012 0.018 0.028 0.033 .. 51 0.008 0.008 0.008 0.012 0.019 0.022 52 0.018 0.018 0.018 0.027 0.042 0.050 53. ,,0,043 0.043 0.043 0.062 0.098 0.114 54 0.057 0.057 0,057 0.083 0.131 0.152 55 0.092 0.092 0.092 0.134 0.211 0.246 56 0.081 0.081 0.081 0.118 0.187 0.218 57 0.100 0.100 0.100 0.146 0.230 0.268 ,58 0.081 .0.081 0.Q81 0.119 p.187 0.219 59 0.078 0.078 0.Q78 0.113 0.178 0.208 60 0.117 0.117 . 0.117 0.170 0.2117 0.312 61. O,Q7S 0.078 0.078 Q.113 0.178 0.208 62 0.098 0.098 0.098 0.141 0.223 0.260 63 0.078 ,0.078 0.078 0.113 0.176 0.208 64 0.078 0.078 0.Q78 0.113 0.178 0.208 65 1.000 1.000 1.000 1.000 1.000 1.000 ) A·13 CALPERS ACTUARIAL VALUATION -June 30, 2009 APPENOXX A sTATEMENT OF ACTUARIAL METHODS AND ASSUMPTIONS Public Agencr: Police 3'l1.@ 50 .:'" '" .) Duration of Servtce Aile 5 years Hi Vears 15 Years 20 Years 25 Vears 30 Vears 50 0.070 0.070 0.070 0,131 .Q.193 0.249 , . 51 0.050 0.050 0.050 0.095 9.139 O.lBO 52 0.051 0.061 0.051 \1.116 0.171 . 0.220 53 0.069 0.069 0.069 0.130 0.192 0.247 54 0.071 0;071 . 0.071 0.p4 0.197 0.255 55 0.090 0.090 0.090 0.110 0.250 0.322 56 0.059 0.059 0.069 O.pO 0.191 0.247 57 0.080 0.080 0.080 0.152 0.223 0.2BB 58 0.087 0.087 0.087 0.164 0.242 0.312 59 0.09Q 0.090 0.090 0:170 0.251 0.323 60 0.lJ5 0.135 0.135 0.255 0.377 0.485 61 0.090 0.090 0.090 0.170 0.251 0.323 62 0.113 0.li3 0.11 3 0.213 '0.314 0.404 63 0.090 0.090 0.090 0.170 0.251 0.323 64 0·090 0.090 0.090 0.170 0.251 0.323 65 i.OOO 1.000 I~OOO 1.000 1.000 1.000 • These riltes also apply to l.ocal Prosecutors; Local Sheriff, School POllee, and bther Safety • Public AllIIn!:}: Fire 30Jci@50 .;:") .' Duration of SelVlce Age 'sVears 10 Vears 15 Years 20 Vears 25 Years 30 Years SO' 0.034 0.034 0.034 0.048 (f.06B 0.080 '.' 51 0.046 0.046 0.046 0.065 0.092 0.109 52 0.069 0.069 0.069 0.097 0.138 0.163 53' 0.084 0.084 0.084 Ooil7 0.166 0.197 54 0.103 0.103 0.103 ' 0.143 0.204 0.241 '55' o:t27 0.~27 0.127 0;177 0'.252 0.298 56 0.121 0.121 0.121 0.169 0.241 0.285 57 o.tOl 0.101 0.101 0.141 0.201 0.238 58' O.fts 0.1'1S O.l1S '0.165 0.235 0.279 . 59 0.100 Q.100 0.100 0.140 . 0.199 0.236 60 0.150 0.150 0.150 0.210 0.299 0.354 61 , 0.100 0.100 0.199 0.236 0.100 0.140 , 62' 0.125 0.125 0.125 0.175 0.249 0.295 63 0:100 0.100 0:100 0.140 0.199 0.236 64 0.100 Q.lOO 0.100 0.140 0.199 0.236 65 1.000 1.000 1.000 1.000 1.000 1.000 A-14 1. __ ., .............. _ ., o APPENDIX B • SUMMARY OF MAJOR BI!NEFIT OPTIONS • DescRIPTIONS OF PRINCIPAL PLAN PROVISIONS t) \.," ) \,,-,,' CALPERS ACfUARIAL VALUATION. -June 30, 2009 SAFETY "PLAN OF THE CITY OF PALO ALTO EMPLOYER NUMBER 14 Summary of Major Benefit Options . r, \-.-/ ,~ . v APPENDlXB Shown below is a summary of the major ootional benefits for which your agency has contracted. A desoiption of prindpal standard and optional plan provisions is in the following section of this AppendIX; Coverage Grvup 7'1001 74002 75001 Benefit Provision Benefit Formula 3.0%@50 3.00A. @ 50 3.0%@50 Sodal Security O:lverage No No No Fulf/Modilied fuR Full Full Final Average Compensation Period 12 mos. 12 mos. 12mos. Sick Leave Credit No NO No Non-Industlial DIsability Standan:! Standard Standard Industrial Disability Yes Yes Yes Pre-Retirement Deat:!l Benefits Optional Settlement 2W Yes Yes No 1959 Survivor Benefit Level Levell Level 1 Level 1 Special Yes Yes Yes Alternate (firefighWs) No No No Post-Retirement Death Benefits Lump Sum $500 $500 $500 SurvivOr Allowance (PRSA) No No NO COLA 2% 2% 2% Employee Contributions 9% 9% Contractual Employer Paid No Contractual Employee Cost Sharing 0% 0% 0% IH L ,) CALPERS ACTUARIAL VALUATION -June 30, 2009 SAFETY PLAN OFTHE CITY OF PAlO ALTO EMPLOYER NUMBER 14 AI'PENDlXB () DESCRIPTION OF PRINCIPAL PLAN PROVISIONS ! ) \, ) The following Is a description of the prlnclpal plan provisions used In calculaHng 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 beneflts that apply to a single period of time, such as Golden Handshakes, have not been induded. Many of the statements in this summary are general in natilre, and are Intended to provide an easily understood summary of the complex Public Employees' Retirement Law. The law Itself governs In all situations. Service Retirement EllglblDty A C8IPERS member becomes eligible for service Retirement upon attainment of age 50 WIth at lees! 5 years of credited service (total service across all C8IPERS employers, and with certain other Retirement Systems with which calPERS has redproclty agreements) Benefit The Service Retirement benefit calculated for service eamed by this group of employees Is a monthly allowance equal to the product of the bfJI/eflt fadrJr, yeElr.i or service, and final <X)IT/pensatfon. • The benefit /ilctordepends on the benefit formula speCified In your agenCy's contract. The table below shows the factors for each of the available formulas. Factors vary by the member's age at retlrement. Usted are the factors for retirement at whole year ages: MlsceUaneoya plan Formulas Retirement 2%at60 2% at SS 2.S"AI at S5 2.7oAl at 55 3'0/0 at 60 Age 50 1.0~2% 1.426% 2.0% 2.0% 2.0% 51 U56% 1.522% 2.1% 2.14% 2.1% 52 1.224% 1.628% 2.2% 2.28% 2.2% 53 1.296% 1.742% 2.3% 2.42% 2.3% 54 1.376% 1.866% 2.4% 2.56% 2.40/0 55 1.'160% 2.0% 2.5% 2.7% 2.5% 56 1.552% 2.052% 2.5% 207% 2.6% 57 1.650% 2.104% 2.5% 2.7% 2.7" .. 58 1.758% 2.156% 2.5% 2.7% . 2.8% 59 1.874% 2.210% 2.5% 2.7% 2.9% . 60 2.0% 2.262% 2.5% 2.7% 3.00/0 61 2.134% 2.314% 2.5% 2.7% 3.0% 62 2.272% 2.366% 2.5% 2.7% 3.0% 63&Up 2.418% 2.418% 2.S% 2.7% 3.0% a-3 CALPERS ACfUARIAl VALUATION -June 30, 2009 APPENDIX B SAFETY PlAN OF THE CITY OF PAlO ALTO EMPLOYER NUMBER 14 $Ifetv ~11l1I ElIrmlllll Retirement 'i> at 55 * 2%atSS 2% at 50 3% at 55 30Al at SO Age 50 1.783% 1.426% 2.0% 2.40% 3.0%· 51 1.903% 1.522% 2.14% 2.52% 3:0% 52 2.035% 1.628% 2,28% 2.64% 3.0% 53 2.178% 1.742% 2.42% 2.76% 3.0% 54 2.333% 1.866% 2.56% 2,88% 3.0% 5S&Up 2.5% 2.0% 2.7% 3.0% 3.0% · * For this formula, the benefit factor also varies by entry age. The factors shown are for members with an entry age ,of 35 or larger •. 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 5S Is the same proportion of the age 55 benefit factor . as In the above table. • The YelJrs of salVia!) Is the amount .credlted by CalPERS to a member while he or she Is employed In this group (or for other pertods that are recognized under the employer's contract w~h caIPERS), For a member who has eamed service with multiple calPERS employers, the beneRt 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 stck leave. • The final C()mpensaUon 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 have the option of providing a IInal compensation equal to the highest 12 consecutIVe months. • For employees covered by Social security, the ModIfied fonmula Is the standard benefit. Under this type of formula, the final compansatlon Is offset by $133.33 (or by one third If the IInal compensation Is less than $400). Employers may oontract for the Full t>eneftt with SOCIal Secu~ that will eliminate the offset applicable to the flnal compensatIOn. FOr employees not covered by Social Security, the Full benefit Is paid with no offsets. Auxiliary organizations of the csue 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 Sodal Security. • The Miscellaneous Service Retirement benefit is not capped. The safety Service Retirement benefit Is capped at 90% of final compensation. Vested Deferred Retirement Eligibility for Deferred Status A carPERS 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, lind 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 redproc~ agreements). Eligibility to Start Receiving Benefits The calPERS member becomes eligible to receIVe the deferred retirement benefit upon satisfying the eligibility requirements for Deferred Status and upon attainment of age 50. IH ') ) ) L, ... () C)' CALPERS ACfUARlAL VALUATION -June 30, 2009 SAFETY PLAN OF THE CI1Y OF PALO ALTO EMPLOYER NUMBER 14 Beneflt , APPENDIX a 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 C8IPERS 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 C8IPERS member Is eligible for Non-Industrial Disability Retirement If he or she becomes dIsabled and has at least 5 years of credited service (toml service across ali C8IPERS employers, and with certain other Retirement Systems with which C8IPERS has redprodty agreements). There Is no special age requirement. Dlsabledmeans the member Is unable to perfurm his or her job because of an Illness or Injury which Is expected to be permanent or to last Indefinitely. The Illness or Injury does not have to be job related. A C8IPERS member must be actively employed by any C8IPERS employer at the time of disability In order to be eligible Ibr this benefit. Standard Benefit The standard Non-Industrial Disability Retirement benefit Is a monthly allowance equal to 1.8% of final compensation, mulHplled by service, which Is determined as Ibllows: • service Is C8IPERS credlllld 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 un~1 age 60, for members with at least 10 years but not more than 18.518 years of service,. 1;he maximum benefit In this case Is 33 1/3% of Final Compensa~on. Improved Benefit Employers have the option of providing tile Improved Non-Industrial Disability Retirement benefit. This beneflt 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 lOr 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 noomal retirement age deteomlned by their service retirement benefit formula, will receIVe the same dollar amount for disability retirement as that payable for service· retirement. Rlr members who have earned service with muiliple C8IPERS employers; the benefit al:ttlbuted to 'each employer Is the toml.dlsablllty allowance multiplied by the ratio of service With a particular employer to the total C8IPERS service. Industrial (Job Related) Disability Retirement All safety memJJers have this benefit. For miscellaneous members, employers have the option of providing thiS benefit. An employer may choose to provide the Increased benefit option or the Improved benen! 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 peomanent or to last Indefinitely. A C8IPERS member who has left active employment within this. group Is not eligible for this benefit, except to the extent.cJescrlbed below. Slandard Benefit The standard Industrial Disability RetIrement benefit Is a monthly allowance equal to 50% of final compensatlon. 6-5 CALPERS ACTUARIAL VALUATION -June 30,2009 SAFETY PLAN OFTHE CITY OF PALO ALTO EMPLOYER NUMBER 14 APPENDIXB InCfeased Benefit (75% of Final Compensation) The Increased Industrial Disability Retirement benefit Is a monthly allowance equal to 75% of flnal compensation for total disability. Improved Benefit (50% to 90% of final Compensation) The Improved Industi1al Disability Retirement benefit Is a monthly allowance equal to the Workman's Compensation Appeals Board pennanent disability rate percentage (If 50% or greater, with a maXimum of 90%) times the final compensation. For a CaIPERS member not actively employed In this group who became disabled while employed by some other CaIPERS employer, the benefit Is a return of accumulated member conti1butlons wtth respect to employment In this group •. With the standard or Increased benefit, a member may also choose to receive the annultlzatlon of the aocumulated.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. 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 survlvor(s), or to the retiree's estate. lmpr(iVBdLump Sum Payment Employers have ·the option of providing an Improved lump sum death benefit of $500, $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 fonn 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 deslgnated benefictary 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 IntoaC<Xlunt 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 Allowanoe) Employers have the option to contract for the post retirement survivor allowance. For retirement allowances with respect to service subject to the modified fonnula, 25% of the retirement allowance Will automatically be continued to certain statutory bet\efldarles upon the death of the retiree, wltl\out 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 often referred to as post retirement survivor allowance (PRSA) or simply as survivor continuance. In other words, 25% or 50% of the allowance, the continuanoe' portion, Is paid to the retiree fur as long as he or she is alive, and that same amount Is continued to the rt!tlree's spouse (or If no eligible spouse, to unmarried children until they attain age 18; or, If no eligible children, 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. B-5 .) CAlPERS ACTUARiAl VAlUATION -June 30, 2009 SAFETY PLAN OF lliE CITY OF PALO ALTO EMPLOYER NUMBER 14 APPEND1X B (') The remaining 75% or SO% of the retirement allowance,' which may be referred to as the option portIOn of the .. -benefit, Is pald.to the retiree as an annuity for ~s long as he or she Is alive, Or, the retiree m~y choose tei prollide for some of this option POttion to be paid to any designated beneficiary alter the retiree's death. Benefit options applicable to the opijon 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 optJon portlon. . 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 QlIPERS employer prollidlng 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 beneflt. BenefIt The easle Death Beneflt Is a lump sum In the amount of the member's accumulated ccntrlbutlons, where Interest Is currently credited at 7,75% per year, plus a lump sum In the amount of one month's Salary for eaCh completed year of current service, up to a maximum of six monthS' salary. For purposes of this benefit, one month's salary Is defined as the member's avernge monthly full-time rate of compensation durlng'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 acijvely employed, has attained at least age 50, and.has at leilSt 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 benef1t. An eligible surllivor 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 children under age 18, A member'S survivor who IS eligible for any other pre-retirement death benef1t may choose to receive that death beneflt Instead of this 1957 Survivor benefit. BenefIt The 1957 Survivor benefit Is a monthly allowance equal to one-half of the unmodlfled Service Retirement benefit that the member would have been entitled to receive If the member had retired on the date of his or her deetlh. Ifthe benefit Is payable to the spouse, the benef1t Is discontinued upon the death of the spouse. If the benefit Is payable to a dependent child, the benefit will be dlsccntlnued upon death or attafnment of age 18, unless the child Is disabled. The total amount paid will be at least equal to the Basic Death beneflt. . Optl~nal Settlement 2W Death Benefit This Is an optional benefit. Eligibility An employee's eHglble survIvor may receive the Optional Settlement 2W Deetlh benefit If the member dies while acijvelyemployed, has attained at least age 50, and has at least 5 years of credited service (total service across all 8-7 CAlPERS ACTUARIAL VALUATION -June 30, 2009 SAFETY PLAN OF THE CITY OF PALO ALTO EMPLOYER NUMBER 14 APPENDlX B C~IPERS employers and with certain other Retirement Systems with which calPERS has reciprocity agreements). A ":') i:;aIPERS member who Is no longer actively employed with any calPERS employer Is not eligible for this benefit. An eligible survivor means the sUlVlvlng spouse to whom the member was married at least one year before death. A member's sUlVivor who Is eligible for any other pre-retirement death benefit may choose to receive that death benefit Instead of this Optional Settlement 2W Death benent. Benefit The Optional Settlement ZW Death benefit Is a monthly allowance equal to the SelVlce Retirement benefit that the member would have received had the member retired on the date of Ills or her death and elected Optional Settlement 2W. (A retiree who elects Optional Settlement 2W receives an allowance that has been reduced so that It wIN oontlnue to be paid after his or her death to a sUlVlvlng beneficiary.) The allowance IS payable as long as the surviving spouse liVes, at which time It Is continued to any unmarried children under age 18, If applicable. The total amount paid will be at least equal to the Basic Death Benefit. Special Death Benefit This Is a standard benefit for safety members. An employer may elect 10 prOVide this benefit for miscellaneous members. Eligibility An employee's eligible survivor(s) may receive Ihe Spedal Death benefit If the member dies while actively employed and the death Is Job-related. A CaIPERS member who Is no longer actively employed with any CalPERS emplOYer. Is not eligible for this benefit. An ellgl!)le SUIV!Vormeans the sUlVlvlng 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 sUlVlvor means the member's unmarried children under age· 22. An eligible sUlVlvor who chooses In receive this benefit will not receive any other death beneflt. Benefit The Special Death benefit Is a monthly allowance equal to 50% of final compensation, and will be Increased whenever the compensation paid to actJve employees Is Increased but ceasing In lricrease 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 children 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 physk;al force InCUrred In the performance of the member's duty, and there are eligible sulVlvlng chlldren'{eUglbkl means unmarried children . under age 22) In additIOn to an eligible spouse, then an additional monthly allowance Is' paid equal In ·the following: • . If 1 eligible child: • If 2 eligible children: • If 3 or more eligible children: 12.5% of flnal compensation 20.0% of flnal compensation 25.0% of final compensation AI.ternate Death Benefit for Local Fire Members ThiS 'Is an optional beneflt available only to local flre members. Eligibility An employee's 15l1glblliJ survivor(s) may receive the Altemate Death benefit In lieu of the Basic Death Benefit or the 1957 SUlVlvor Beneflt If the member dies while actively employed an~ has at least 20.years· of total CaIPERS selVlce. A CaIPERS member who Is no longer actively employed with any CaIPERS employer Is not eligible for this benefit. An ellgibkl $/JIVlvor means the surviving spouse to whom the member was married prior to the onset of the hlJUry or Illness that resulted In death. If there Is no eligible spouse, an eligible sulVlvor means the member's unmarried .) children under age 18. · () .' ..... ') \. ... ) CALPERS ACTUARIAL VALUATION -June 30, 2009 SAFETY PLAN OF THE CITY OF PAlO ALTO EMPLOYER NUMBER 14 APPENDIX:S Benefit . . . '. . .The Alternate Death ben,efit Is' a monthly allowance equillto. the Service Retirement benefit that the member would have received had the member retired on the date of his Or her death and elected Optional Settlement 2W. (A reijree who ele<:1S Optional Settlement 2W receives an allowance that has been reduced so that It will continue be be paid after his or her death to a surviving benefiCiary.) If the member has not yet attained age 50, the b,meflt Is equal to that which would be payable If the member had reUrad 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 chlldren under age 18, if applicable. The total amount paid will be at least equal to the Basic Death Beneftt. Cost-of-Living Adjustments standard Benefit Beginning the second calendar year after the year of retirement, retirement and survivor allowances will be annually adjusted on a compound basis by 2%. Improved Benefit Employers have the optlon of providing an Improved cost-of-lIvlng adjustment of 3%, 4% or 5%. The ClJmulaijve adjustment may not be greater than the cumulative change In the Consumer Price Index slnOil the date of retirement. ' PurChasing Power Protection Allowance (PPPA) Retirement and survivor allowances are protected against Inflation by PPPA. PPPA benefits are C05t:-oF-llvlng adjustments that are Intended to maintain an Individual's allowance at 80% of the Initial allowance at retirement adjusted for Inflation since retirement. The PPPA beneftt will be coordinated with other cost-of-lIvlng adjustments provided under the plan. Employee Contributions Each employee contributes toward his or her retlrement based upon the retirement formula. The standard employee o:mtrlbutlon 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 $133.33 for employees covered by the modified formula. The percent contributed above the monthly compensation breakpoint depends upon the benefit formula, as shown In the table below. Benefit formula . Percent Contributed above the lnt Miscellaneous 2% at 60 i 7% MI!iCelianeous 2% at 55 70/. Miscellaneous 2.5% at 55 S% Miscellaneous 2.7% at 55 8% Miscellaneous 3% at 60 8"..6 safetY: ill at 55 Varies bv entrv sa e Safety, 2% at 55 7% _~~Sjfu¥, 2% al 50 9% Safety. 3% at SS 9% Safe )/,3% at 50 ... 9% The employer may choose to "pick-up" these contributions for the employees (Employer Paid Member COntribUtions or EPMC). An employer may also Include Employee Cost Sharing In the contract, where employees contribute an additIOnal percentage of compensation. 6-9 L.._. CALPEfl.S ACTUARIAL VALUATION -June 30, 2009 SAFETY PLAN OF THE CITY OF PALO ALTO . EMPLOYER NUMBER 14 APPENDIX B • Auxiliary organlzatlon$ of the CSUC system may elect reduced contribution rates, In which case the offset Is $317 and the contribution r~te. Is· Q% If members are not· covered by Social Security. If members are covered Ily . sodaiSecurlty the offset Is ~513 and the contribution rate Is5%.· . . Refu'nd 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 contlibutlons, which are credited annually with 6% Interest. 1959 Survivor Benefit This Is a pre-retirement death. benefit aVailable .only to members not covered by Social Security. Any agency Joining CaIPERS subsequent to 1993 was required to provide this benefit If the members were not coVered· by Social Security. The benefit Is optional for agencies Joining CaIPERS p~or 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 must choose the 4th or IndeXed Level. This benefit Is not Included In the results presented In this valuation. More Information on this benefit Is aballable on the CalPERS website at www.calpers.ca.gov. B-I0 . -... ~) ) APPENDIXC • GASB STATeMeNT NO. 27 () ) (,) \, ) •..... o () CALPERS ACTUARIAL VALUATION -June 30, 2009 GASB STATEMENT NO, 27 APPENDIXC SAFETY PLAN of the CITY OF PALO ALTO Information for Compliance with GASB Statement No. 27 Under GASB 27, an employer reports an annual pension cost (APC) equal to the annual required conl1lbuijon (ARC) plus an adjustment for the cumulaijve difference between the APC and the employer'S actual plan contl1butlons for the year. The cumulative difference Is called the net pension obllga~on (NPO). The ARC for the period July 1, 2011 to June 30, 2012 has been determined by an actuarial valuation of the plan as of June 30, 2009. The contribution rate for the Indicated period Is 30.125% of payroll and 0.000% for the 1959 Survivor Program. In order to calculate the dollar value of the ARC for Inclusion In financial statements prepared as of June 30, 2012, this contribution rate, as modlfted by any amendments for the year, would be muRlplled by the payroll of covered employees that was actually paid during the period July 1, 2011 to June 30, 2012. The employer and the employer's auditOr are responsible for detennlnlng the NPO and the APC, Note; If an agency elects tile Annual Lump Sum prepayment Option, the ARC for the period July 1, 2011 through June 30, 2012 Is $7,055,411. A summary of prlnclpal assumptions and methods used to determine the ARC Is shown below. Valuation Date Actuarial Cost Method Amortization Method Average Remaining Period Asset Valuation Method Actuarial Assumptions Investment Rate of Retum projected Salary Increases Inflation Payroll Growth IndiVidual Salary Growth Rstlrsmenteroaram June 30, 2009 ;' Entry Age Nonnal Cost Method Level Percent of Payroll 30 Years as of the Valuallon Date 15 Year Smoothed Market 7.75% (net of administrative expenses) 3.55% to 13,15% depending on Age, Service, and type of employment 3.00% 3.25% A merit scale varyln9 by duration of employment coupled with an assumed annual Inflation 9rowth of 3.00% and an annual production growth of 0.25%. Inilial unfunded liabilities are amortized over a closed period that depends on the plan's date of entry Into CaIPERS. Subsequent plan amendments are amortized as a level percentage of pay over a closed 20-year period, Gains and losses that occur In the operation of the plan are amortized over a 30 year rolling period, which results In an amortization of about 6% of unamortized gains and losses each year. If the plan'. aocrued liability exceeds the actuarial value of plan assets, then the amortization payment on the rotal unfunded liability may not be lower than the payment calculated over a 30 year amortization period. More complete Information on assumptions and maijhods Is provided In Appandlx A of this report. Appendix B contains a description of benefits Included In the valuation. The Schedule of FUnding Progress below shows the recent history of the actuarial accrued liability, actuarial value of assets, their relationship and the relationship of the unfunded actuarial accrued liability to payroll, Date Liability <a) value Funded of Assets (AVA) Liability (UL) hi.VAlTMiirkein Covered Payroll (c) C-l ) ) () APPENDIX D INveSTMENT RETURN SENSITIVITY ANAL VSIS () ) J () CALPERS ACTUARIAL VAUUATI0N -June 30, 2009 INVESTMENT RETURN SENSll1VIlY ANALYSIS APPENDIX D Investment Retum Sensitivity Analysis The Investment retum realized during a fiscal year first affects the contribution rate fo' the fiscal year 2 years later. Specifically, the Investment return for 2009-2010 will first be reflected In the June 30, 2010 actuarial valuation that will be used to set the 2012-2013 ennployer contlibuHori rates and 2010-2011 Investment return will first be reflected In the June 30, 2011 actuarial valuation that will be used to set the 2013-2014 employer contrlbuHon rates. In July 2010, the Investment return for fiscal year 2009-2010 was announced to be 11.4%. Note that this return IS before administrative expenses and· also does not reflect final Investment return Information for real estate and private equities. The final retum Information for these two asset classes Is expected to be available later In October, The preliminary 11.40/. retum for the 2009-2010 fiscal year Is good news as It would help reduce the Impact of the -24% retum In 2008-2009 and the Impact of the three year phase In edopted by the Board In lune 2009, For purposes of proJecHng future employer rates, we are assuming an 11 % Investment return for fiscal year 2009-2010. Based on an 11% Investment return for fiscal year 2009-2010 and assuming that all other actuarial assumptions will be realised and that no further changes to assumptions:, contributions, benefits, or funding will occur between now and the beginning of the fiscal year 2012-2013, the effect on the 2012-2013 Employer Rate Is as follows: Estimated 2012-2013 Employer Rate 32.3% Estimated Increase In Employer Rate between 2011-20llend 2011-2013 2.2% As part of this report, a sensitivity analysis was performed to determine the effects of vartous Investment returns during fiscal year 2010-2011 on the 2013-2014 employer rates. Once agaln, the projected 2013-2014 rate Increases assume that all other actuarial assumptions will be realized and that .no further changes to assumptlons, contrlbutlons, benefits, or funding will occur between now and the beginning of fiscal year 2013-2014. Five different 2010-2011 Investment return scenarios wem selected. o The first scenario Is what one would expect If the markets were to give us a 5(h percentile return. The S'" percentile return corresponds to a -11% return for the 2010-2011 fiscal year. o The second scenario Is what one would expect If the markets were to give us a 25th percentlie return. The 25 th percentile return corresponds to a 0% return for the 2010-2011 fiscal year. o The third scenario assumed the return for 2010-2011 would be our assumed 7.75% Investment return whlcll represents about a 4;li' percentile event. o The fourth scenalio Is what one would expect If the markets were to give us a 75'" percentile return. The 75th percentile return corresponds to a 16% return for the 2010-2011 fiscal year. o Finally, the last scenario Is what one would expect If the markets were to give us a 95" percenHle return. The 95111 percentile return corresponds to a 27% return for the 2010-2011 fiscal year. The table below shows the estimated 2013-2014 contribution rate and the estimated Increase over the 2012-2013 rate for your plan under the five different scenarios. l010-2011 Investment Estimated 2013-2014 Estimated Increase In Employer Rate Return Scenario Emplover Rate bl!ltween 2012-2013 and 2013-2014 -11% 48.8% 16.5% 0% 42.4% 10.1% 7,75% 37.8% 5.5% 16% 33.0% 0.7% 27% 32.6% 0.3% D-l J () APPENDIX E GLOSSARY OF ACTUARIAL TERMS ) ''') (' ' .. " ,') ,) ,- r'): \ .. , , ) CALPERS ACTUARIAL VALUATION -June 30, 2009 GLOSSARY OF ACTUARIAL TERMS Glossary of Actuarial Terms Accrued Uabillty (also called Actuarial Accrued Uability or Entry Age Normal Accrued liability) APPENDIKE The total dollars needed as of the valuation date to fund all benefits earned In the past for cutrent memb.ers. .. . ActuarIal Assumptions Assumptions made about certain events that will affect pension costs. AssumptIOns generally· am be broken down Inio two categories: demographic and economic. Demographic assumptions Include such things as mortality, disability and retirement rates. Economic assumptions Include Inve~ment return, salary growth and Inflation. Actuarial Methods Procedures employed by actuaries to achieve certain goals of a pension plan. These may Include. things such as funding method, setting the length of time to fund the past service liability and determining the actuarial value of assets. Actuarial Valuation The determlnatlon, as of a valuation date, of the normal cost, actuarial aocrued liability, actuarial value of assets and related actuarial present values for a pension plan. These valuations are performed annually or when an employer Is contemplating a change to their plan provisions. Actuarial Value of Assets The actuarial value of assets used for funding purposes Is obtained through an asset smoothing technique where Investment gains and losses are partially recognized In the year they are Incurred, with the remainder recognized In subsequent years. This method helps to dampen large fluctuations In the employer contribution rate. Amortization Bases Separate payment schedules for different portions of the unfunded liability. The total unfunded liability of a risk pool or non-pooled plan can be segregated by "cause", creating "bases" and each such base will be separatelY amortized and paid for over a specific period of time. This can be likened to a home mortgage that has 24 years of remaining payments and a second on that mortgage that has 10 years left. Each base or each mortgage note has Its own terms (payment period, principal, etc.) Generally In an actuarial valuation, the separate bases consist of changes In unfunded liability due to amendments, actuarial assumption changes, actuarial methodology changes, and gains and losses. Payment periods are determined by Board policy and vary based on the cause of the change. Amortization Period The number of years required to payoff an amortization base. Annual Required Contributions (ARC) The employer's periodic required annual contributions to a defined benefit pension plan as set forth In GASB Statement No. 27, calculated In accordance w~h the plan assumptions. The ARC Is detennlned by multiplying the employer contribution rate by the payroll reported to CaIPERS for the applicable flscal year. However, If this contribution Is fully prepaid In a lump sum, then ·the dollar value of the ARC Is equal to the Lump Sum Prepayment. Entry Age The earliest age at which a plan member begins to accrue benefits under a deflned benefit pension plan or risk pool, In most cases, this Is age of the member on their date of hire. Entry Age Normal Cost Method An actuarial cost method designed to fund a member's total plan benefit over the course of his or her career. This method Is designed to yield a rate expressed as a level percentage of payroll. E-1 CALPERS ACTUARIAL VALUATIOi'l-June 30, 2009 GLOSSARY OF ACTUARlAL TERMS APPENDIXE (TIle assumed retirement age less the entry age Is the amount of time required to fund a member's total benefit. Generally, the older a member on the date of hire, the greater the entry age normal cost. This Is mainly because there Is less time to earn Investment Income to fund the future benefits.) . Fresh Start A fresh start Is the single amortlzat1on base created when multiple amortization bases are collapsed Into one base and amortized over a new funding period •. Funded Status A measure of how well funded a plan Is. Or equivalently, how "on track" a plan Is with respect to <lssets Vi. accrued liabilities. A ratio greater than· 100% means the plan or risk pool has more assets than liabilities and a· ratio less than 100% means liabilities are greater than assets. A funded ratio based on the Actuarial Value of Assets Indicates the progress toward fully funding the plan using the actuarial cost methods and assumptions. A funded ratio based on the Market Value of ASSets Indicates the short-term solvency of the plan. GASB27 statement No. 7.7 of the Governmental Accounting standardS Board. The accounting standard governing a state or Iocalgovemmental employer's accounHng for pensions. Lump Sum Contribution A payment made by the employer to reduce or eliminate the unfunded liability. Normal Cost The annual cost of service accrual for the upcoming fiscal year for active employees. The normal cost should be viewed as the long term contribution rate. Pension Actuary A person who Is responsible for the calculations necessary to properly fund a penSion plan. Prepayment Contribution A payment made by the employer to reduce or eliminate the year's required employer contribution. Pr~ent Value of Benefits 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 clIJn1ntnlllmbers. RoIling Amortization Period An amortization period that remains the SlIme each year, rather than declinIng. Superfunded A cond~lon existing when the actuarial value of assets exceeds the· present value of benefits. When this condition exists on a given valuation date for a given plan, employee contributions for the rate year covered by that valuation may be waived. Unfunded Liability or UnfUnded Accrued LIability (UAL) A pian wlll1 an actuarial value of assets below the accrued liability Is said to have an unfunded liability and . must temporarily Increase contrlbutlons to get back on schedule. E-2 , ''',\ f) 0) I.", () , . .; OtlPERS . October 1010 Actuarial Office P.O. Box 1494 Sacramento, CA 95812-1494 ATTACHMENT B TT¥ for Speech and Hearing Impaired -(916) 795-3240 (888) CalPERS (or 888-225-7377) . FAX (916) 795-3005 MISCfLLANEOUS PLAN OFTHE CITY OF PALO ALTO (EMPLOYER # 14) Annual Valuation Report as of lune 30, 2.009 Dear Employer, As an attachment to tills letter, you will flnd a copy of the June 30, 2009 actuarial valua~on report of your pension plan. this report contaills Important actuartal Information about your pension plan at caIPERS, Your calPERS staff actuary Is available to discuss tile report with you. Chanl/es Since the Prior Year's Valuation The caIPERS' Board of Administration adopted updated actuarial assum~ons to be used beginning with the June 30, 2009 valuation. In addition, a temporary modification to our method of determining the actuarial value of assets and amortizing gains and losses has been Implemented for the valuations as of June 30, 2009 through June 30, 2011. Finally, a cash flow analySis has been added to our process. If such an analysis Indicates that funding progress will not be adequate, an addltlonal contrlbutlon will be required. ~: .. ) There may also be changes speclflc to your plan such as contract amendments and funding changes. ,) Further descriptionS of changes are Inctuded In the "Highlights and EXecutIVe Summary" section and In Appendix A, "Stetement of Actuarial Data, Methods and Assumptions." The effect of the changes on your rate Is Induded In the "Reconciliation of ReqUired Employer Contributions." Future Contribution Rates The exhibit below displays the required employer cOntribution rate and Superfunded status for 2011/2012 along with estimates of the contrlbutlon rate for 2012/2013 and 201312014 and the probable Superfunded status for 2012/2013. The estimated rate for 2012/2013 Is based solely on a projection of the Investment return for fiscal 2009/2010, namely 11.0%. The e~mated rate for 2013/2014 uses the I/lIluatlon assumption of 7.75% as the Investment return for fiscal 2010/2011. See Appendix D, "Investment Return Sensitivity Analysls", for rate projections under a variety of . Investment return scenarios. Please disregard any proJections that we may have provided to you In the past. Aseel Year 2011/2012 2012/2013 2013/2014 Employer COntribution Rate 21.725% 23.1% (projected) 26.2% (Pro'ected) Superfunded? NO NO N/A Member contribuHons (whether paid by the employer or the employee) are In addition to the above rates. The estlmates for 2012/2013 and 2013/2014 also assume that there are no future amendments and no liability gains or losses (such as larger than expected pay Increases, more retirements than expected, etc.). Tills 18 II very Important apumptlon because these gains and losses do occur lind can have a slgnlflCllnt Impact on your contribution rate. Even for the largest plans, sudh gains and losses often cause a change In the employer's contribution rate of one or two percent and may be even larger in some less common instances. These gains and losses cannot be predicted In advance so the projected employer contribution rates are just estimates. Your actual rate for 2012/2013.wlll be provided In next year's report. California Public Employees' Retirement System www.calpel.$.ca.gov MISCEUANEOUS PLAN OF THE CITY OF PALO ALTO (EMPlOYER./I 14) October 2010 Page 2 We are very busy preparing actuarial valuations for other public agendas and expect to complete all such valuations by the end of October. We understand that you might have a number of questlons about these results. While we are very Interested In discussing these results with your agency, In the Interest of allowing us to give every public agency their result, we ask that, If at all possible, you walt until after October 31 to contact us with questions. If you have questions, please call (888) CalPERS (225-7377). Sincerely, IL~ ALAN MILUGAN, MAAA, FeA, FSA, FaA Chief Actuary ~~~') -.... - ') " >. a' () C) ) ACTUARIAL VALUATION as of June 30, 2009 for the MISCELLANEOUS PLAN of the CITY OF PALO ALTO (EMPLOYER # 14) REQUIRED CONTRIBUTIONS FOR FISCAL YEAR luly 1, 2011 -lune 30, 2012 CalPERS California Public Employees' Retirement System P.O. Box 942709 Sacramento, CA 94229-2709 (BBB) CalPERS (225-7377) I ... ) ,) C) TABLE OF CONTENTS ACTUARIAL CERTJFICATION 1 (). ) HIGHUGHTS AND EXECUTIVE SUMMARY Purpose oUhe Report Required COntributions Funded Status COst and Volatility Changes Since the Prior Valuation SUMMARY OF LIABIUTIES AND RATES Development of Accrued and Unfunded Liabilities (Gain) I Loss AnalySis Schedule of Amortization Bases Reconciliation of Required Employer Contrlbutlons Employer COntribution Rilla History funding History SUMMARY OF ASSETS Reconciliation of the Market Value of Assets Development of the Actuarial Value of Assets Asset Allocation SUMMARY Of PARTICIPANT DATA Summary of Valuation Data Active Members Transferred and terminated Members Retired Members and Beneftdarles APPENDIX A Statement of Actuarial Data, Methods and Assumptions APPENDIXB Summary of Principal Plan provisions APPENDIXC GASB Statement No. 2.7 APPENDIXD Investment Return Sensitivity AnalySis APPENDIXE Glossary of Actuarial Terms FlN PROCESS COOTROl. IP (cy) 340379 5 5 5 6 7 11 12 13 14 15 15 19 19 20 23 24 25 26 .. ) ) L. .. cO) c.) ,) CALPERS ACTUARIAL VALUATION -June 30, 2009 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO EMPLOYER NUMBER 14 ACTUARIAL CERTIFICATION To the best of our knowledge, this report Is complete and accurate and contains sufficient Information to disclose, fully and fairly, the funded condition of the MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO. This valuation Is based on the member and financial data as of June 30, 2009 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 acccrdance with standards of practice prescribed by llie Actuarial Standards Board, and that the assumptions and methods are Internally consistent and reasonable for this plan, as prescribed by the calPERS Board of Administration according to provisions set forth In the California Public Employees' Retirement Law. The undersigned listed are actuaries for caIPERS. Both are members of the American Academy of Actuaries and the Society of Actuaries and meet the QualiRcatlan Standards of the American Academy of Actuaries to render the actuarial opinion contained herein. David Clement, ASp., MAAA, EA Senior Pension Actuary, calPERS Plan Actuary JL~ ALAN MILLIGAN, MAAA, FCA, FSA, FCIA Chief Actuary Page 1 ) ) () HIGHLIGHTS AND EXECUTIVE SUMMARY .. ,' • PURPOSE OF THE REPORT • REQUIRED CONTRI8UTIONS • PUNDED STATUS • COST AND VOLATILITY • CHANGES SINCE THE PRIOR VALUATION ('.') \. ,) L •. () C) CALPERS ACTUARIAL VALUATION -June 30, 2009 MISCaLANEOUS PlAN OF THE CIlY OF PALO ALTO EMPLOYER NUMBER 14 Purpose of the Report , This report presents the results of the June 30, 2009 actuarial valuation of the MISCELLANEOUS PlAN OF THE GIlY OF PALO ALTO of the california Public Employees' Retirement System (CaIPERS). The valuation was prepared by the Plan Actuary In order to: • 'set forth the actlJarial assets and accrued liabilities of this Plan as of June 30, 2009; • certify that the actlJarlally required employer contribution rate of this plan for the fiscal year July 1, 2011 through June 30, 2012 Is 21,725%; • provide actIJarlal'lnformatlon as of June 30, 2009 to the CaIPERS Board of Administration and other Interested parties; and • provide penslon'lnformatlon as of June 30, 2009 to be used In flnandal reports subject to Governmental Accouhtlng Standards Board (GASB) Statement Number 27 for a Single Employer Defined Benefit Pension Plan. Use of this report for other purposes may be Inappropriate. Required Contributions Reqllired limployer Contributions Employer Contribution Required (In Projected Dollars) . Payment for Normal COst Payment on the Amortization Bases Total (not less than zero) Annual lump Sum Prepayment Optlon* Employer Contribution ReqUired (Percentage of Payroll) Payment for Normal COst payment Of! the Amortization Bases Total (not less than zero) Funded Status Present Value of Projected Benefits !:ntry Age Nonnal Accrued Uability Actuarial Value of Assets (AVA) Unfund!!d lIability Market Value of Assets (MVA) Funded Status (on an MVA basis) Superfunded Stlltus $ $ $ Fiscal Year 2010/2011 7,098,403 $ 5,255,473 12,353,876 $ 11,901,305 $ 10.087% 7.468",4, 17.555% lune 30, 2008 Fiscal Year 2011/2012 7,293,049 8,394,190 15,687,239 15,112,554 10,100% 11.625% 21,725% l"na 30, 2009 $ 534,747,975 $ 58B,098,784 $ ~3,337,130 $ 499,199,907 379,836,875 398,764,60& $ 63,500,255 $ 100,435,301 $ 385,304,560 $ 288,524,538 86.9% 57.8% No No * payment mllst be received by CaIPERS between JulV 1 and JulY. 15. Page 5 CALPERS ACTUARIAl VALUATION -June 30, ZOO9 MrSCELLANEOUS PLAN OF THE CITY OF PALO ALTO EMPLOYER NUMBER 14 Cost and Volatility Actuarial Cost Estlmate$ln General What will this pension plan cost? Unfortunately, there Is no simple answer. There are two major reasons for the complexity of the answer. First, all actuarial calculations, Including the ones In this report, are based on a number of assumptions about the future. These assumptions can be divided Into two categories. • Demographic assumptiOnS Include the percentage of employees thet will terminate, die, beccme disabled, and retire In each future year. • Economic assumptions Indude future salary Increases for each actlve employee, and the assumption with the greatest Impact, future assetretums at CaIPERS for earn year Into the future until the last dOllar Is paid to current members of your plan. While CaIPERS has set these assumptions to reflect our best estimate of the real future of your plan/ It must be understood that these assumptions are verY long term predictors and will surely not be .·reallzed In any one year. For example, while the asset earnings at CaIPERS have averaged more than the assumed return of 7.75% for the past twenty year period ending June 30, 2010 returns for each fiscal year ranged from -24% to +20.1% Second, the very nature of actuarlal funding produces the answer to the question of plan cost as the sum of two separate pieces. • The Normal COst (I.e., the future annual premiums In the absence of surplus or unfunded liability) expressed as a percentage of total actlve payroll. • The Past SelVlce Cost or Accrued Uablllty (I.e., the current value of the benefit fur all credited past service of current members) which Is expressed as a lump sum dollar amount. The cost Is the sum of a percent of future pay and a lump. sum dollar amount (the sum of an apple and an orange If you will). To communicate the total cost, either the Normal Cost (I.e., future percent of payroll) must be <:;onverted to a lump sum dollar amount (In which case the total cost Is the present value of benefItS), ·or the Past Service Cost (I.e., the lump sum) must be converted to a percent of payroll (In which case the total cost Is expressed as the employer's rate, part of which Is parmanent and part temporary). Converting the Past Service COst lump sum to a percent of payroll requires a specific amortization period, and the emplOyer rate will vary depending on the amortization period chosen. Rate Volatility As Is staied above, the actuarial calculations supplied In this communication are based on a number of assumptions about very long term demographic and economic behavior. Unless these assumptions (termlnatlons, deaths, dlsabllttles, retirements, salary growth, and Investment return) are exactly realized each year, there will be differences on a year to year basis. The year-to-year differences between actual experience and the assumptions are called actuarial gains and losses and serve to lower or .raise the employer's rates from one year .to the next. Therefore, the rates will Inevitably fluctuate, especially due to the ups and downs of Investment returns. Plans that have higher asset to payroll ratios produce more volatile employer rates due to Investment return. On the following page we have shown your volatUity Index, a measure of the plan's potential future rate volatility. It should be noted that this ratio Increases over time but generally tends to stabilize as the plan matures. Page 6 ) CALPERS ACTUARIAL VAWATION -June 30, 2009 MISCELLANEOUS PLAN OFTHE CITY OF PALO ALTO EMPLOYER NUMBER 14 Market Value of Assets without Receivables Payroll Volatility Index $ As of lpne 30, 2009 286,915,683 65,602,083 4.4 Changes since the Prior Valuation ActuarIal A5Spmptlons CaIPERS recentiy completed an experience study that analyzed demographic data for the years 1997 to 2007. As a result of this study, the CaIPERS' Board of Administration adopted updated actuarial assumptions to be used beginning with the June 30, 2009 valuatIOn. Nearly all of the demographic assumptions have changed, Indudlng salary Increase assumptions and rates for mortality, disability, termination and retirement. Of these, the change to the post retirement mortality assumption had the most slgnlflcant Impact on contribution rates. The new assumptlons are described In Appendix A, The effect of the dhange In assumptions on the unfunded liability Is shown In the "(Galn)!Loss Analysis" and the effect on your employer contrlbutlon rate Is Included In the'Recondllation of Required Employer Contributions". Actuarial Methods In June 2009, the CaIPERS Board adopted changes to the asset smoothing method as well as changes to the Board policy on the amortiZation of gains and losses In order to phese In over a three year perIOd the Impact of the -24% Investment loss experienced by CalPERS In fiscal ye~r 2008-2009. The following changes were adopted: ' • Increase the corridor limits for the actuarial value of assets from 80%-120% of market value to 60%-140% of market v~lue on June 30, 2009 • Reduce the corridor limits for the actuarial value of assets to 70%-130% of market value on June 30,2010 • Return to the 80%-120% of market value corridor limits for the actuarial value of assets on June 30, 2011 and thereafter • Isolate and amortize all gains and losses during fiscal year 2008-2009,2009-2010 and 2010-2011 over fixed and declining 30 year periods (as opposed to the current roiling 30 year amortization) In addnlon, In February 2010 the CaIPERS Board adopted ~ resolUtion requiring additional contrlb\ltlons for any plan or pool If the cash flows hampar adequate funding progress by preventing the expected funded status on ~ market value of assets basls of the plan to either: • Increase by at least 15% by June 30, 2043; or • Reach a level of 75% funded by June 30, 2043 A complete description of all methods Is In Appendix A, The detailed calculation of the actuarial value of assets Is shown In the "Development of the Actuarial Value of Assets." The effect of the change In method Page 7 CALPERS ACl1JARlAL VAWATION -June 30, 2009 MISCELLANEOUS PlAN OF THE CITY OF PALO ALTO EMPLOYER NUMBER 14 on U1e unfunded liability Is shown In the "(Galnl/Loss Analysis" and the effect on your employer contribution rate Is Included In the "Reconciliation of Required Employer Contributions." Benefits The standard actuarial practice at CaIPERS Is to recognize mandated leglslatlye benefit changes In the first annual valuation with a valuation date on or atter the effective dare of the legislation. Voluntary benefit changes by plan amendment are generally Induded In U1e first valuation with a report dated after the amendment effectIVe date. This valuation generally reffects plan changes by amendments effective before the date of the report. Please refer tn Appendix B for a summary of tlhe plan proVisions used In the valuation. The effect of any mandated beneflt changes or plan amendments on the unfunded liability Is shown In the "(Galn)/Lass An'lllysls" and tlhe effect on your employer contribution rate Is shown In the "Recondllatlon of Required Employer Contributions". It should be noted thet no change In liability or rate Is shown for any plan changes which were already Induded In the prior year's valuation. PageS /") , ,,~, ) -,.,." ! ....... . t'''") \. ..... ' ) SUMMARY OF LIABILITIES AND RATES • DEVELOPMENT 0' ACCRUED AND UNFUNDED LIABILITIES • (GAIN) I LOSS ANAL YIII • SCHEDULE OF AMORTIZATION BASES • RECONCILIATION OF REQUIRED EMPLOYER CONTRIBUTIONS • EMPLOYER CONTRIBUTION RATE HISTORY • FUNDING HISTORY () CO) ..•. ) CALPERS ACTUARIAL VALUATION· June 30,2009 MISCfWlNEOUS PLAN OF THE CITY OF PALO ALTO EMPLOYER NUMBER 14 Development of Accrued and Unfunded Liabilities . 1. Present Value of Projected Benefits a) Active Members $ .·312,285,796 b) Transferred Members . 23,381,625 c) Terminated Members 9,652,775 d) Members and Beneficlal1es Receiving Payments 242,778,588 .e) Total $ .58B,098,784 2. Present Value of Future Employer Normal Costs $ 48,330,813 3. PreseO! Value of Future Employee Contrlbutlons $ . 40,568,064 4. . fntl'( Age Normal Accrued Liability . a) Active Members $ 223,386,919 b) Transferred Members 23,381,625 c) Terminated Members 9,652,775 .d) Members and Beneficiaries Receiving Payments 242,778,588 e) Total $ 499,199,907 5. . Actuarial Value of Assets $ 398,764,606 6. Unfunded Accrued Liability [(4e) -(5)] $ 100,435,301 Page 11 CALPERS ACl'UARIAL VALUATION -June 30, 2009 MISCELLANEOUS PLAN OF THE CtTY OF PAlO ALTO EMPLOYER NUMBER 14 (Galn)/Loss Analysis 6/30108 -6/30109 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 aocumulated. Each year actual experience Is compared to the expected experience based on the actuartal assumptIOns, This results In actu,arlal gains or losses, as shown below. A Totai (Galn)/I.oss for the Year'" 1. . Unlllnded Accrued Liability (UAL) as of 6/30/08 $ 63,500,2.55 2. Expected Payment on the UAL during 2008/2009 4,566,665 3. Interest through 6/30/09 [,0775 x (Al) -«1.0775)'}, -1) x (Al)] 4,747,613 4, ·Expected UAL before all other changes (A1) -(A2) + (A3)] 63,681,203 5, Change due to plan changes 0 6, Change due to.assumptlon change 7. Expected UAL after all other changes [(M) + (AS) + (AG)] 8. Actual UAL as of 6/30/09 9. Total (Galn)/Loss for 2008/2009 [(AS) -(A7)] $ B Ccm~rlblltlon (Galn)/Loss for the Year 1. Expected Contribution (Employer and Employee) $ 16,505,477 2; Interest on Expected Contributions 627,653 3. Actual Conl:l'lbuUons '17,084,480 4. Interest on Actual Conl:l'lbutlons 649,671 S. . Expected Contributions with Interest [(Bl) + (8.2)] 17,133,130 6. Actual Contributions with Interest [(83) + (54)] 17,734,151 7. Contribution (Galn)/Loss [(B5) -(66)] $ (601,021) C Asset (Galn)/Loss for the Year 1. Actuarial Value of Assets as of 6/30/08 Including Receivables $ 379,836,875 2. Receivables as of 6/30/08 2,021,531 3. Actuarial Value of Assets as of 6/30/08 377,815,344 4. Contributions Received 17,084,480 5. Benefits and Refunds Paid (19,129,577) 6. Transfers/Misc. Adjustments 54,791 7. Expected Int. [.0775 x (0) + «1.0775)"' -1) x «C4) + (C5) + (C6»] 29,205,004 8. Expected Assets as of 6/30/09 [(C3) + (C4) + (C5) + (C6) + (C7)] 405,030,042 9. Receivables as of 6/30/09 1,608,855 10. Expected Assets Including Receivables 406,638,897 11. Actual Actuarial Value of Assets as of 6/30/09 398,764,606 12. Asset (Galn)/Loss [(Cl0) • (Cll)] $ 7,874,291 D Liability (Galn)/LOSIiI for the Year 1. Total (Galn)/Loss (A9) $ 13,620,886 2. Conl:l'lbutlon (Galn)/Loss (87) (601,021) 3. Asset (Galn)/Loss (C12) 7,874,291 4. Liability (Galn)/Loss [(01) -(02) -(D3)] $ 6,347,616 Development of the (Gein)/l.oss Balance as of 6/30/09,. ... 1. (Galn)/Loss Balance as of 6/30/08 $ 2. Payment Made on the Balance during 2008/2009 3. Interest through 6/30/09 [.0775 x (1) -«1.0775)112 -1) x (2)] 4 • Scheduled (Galn)/Loss Balance as of 6/30/09 [(1) -(2) + (3)] $ ... The Total (Galn)/Loss for 2008/2009 Is being amortlzed over a fixed and declining 3O-year perlod and Is shown as 'Speclal (Galn)/Loss· In the "Schedule of Amortization Bases" on the following page. *. This (Galn)/Loss represents the 6/30/09 balance of the aocumulatlon of (galns)/Iosses through 6/30/00 and Is amortized using a roiling 30-year period. Gains and losses Incurred after 6/30/2011 will again aocumulate to this base. Page 12 ) ) "---" CALPERS ACTUARIAL VALUATION -June 30, 2009 MISCElLANEOUS PLAN OF THE crry OF PALO AI. TO EMPLOYER NUMBER 14 Schedule of Amortization Bases /,,""-. .. -'. v . There is a two year lag betweeI1 the Valuation Dab! and the Contribution Ascal Year. • The assets, iabilities and funded sta!lJs of the plan are measured as of the valuation date (June 30, 20(9). . • The employer contribution rate dellmnined by the valuation is for the fiscal year beginning two years after the valuation date (fiscal year 2011/2012). .~, \..J This two year lag is necESSary due to the arl1O!lnt of time needed to·extract and test the membership and finandal dm, and due to the need to provide public agenCies with their employer cnnflibution rates well in a~ of the start of the fiscal year. The Unfunded liability is used to deIlmnine the employer contribution and therefore must.be rolled folWarci two years from the valuation date to the first day of the ftscal year for which the contribution is being determined. The Unfunded lialllTIIy is rolled foIWarci each year by subtracting the expe<:ted Payment on the Unfunded Liability for the fiscal year and aqjusting for interest. The El<pected Payment on the Unfundedliabnity for a fiscal year is equal to the ExpeclEd Employer Contnbution for the fiscal year minus the Expected Normal Cost for the year. The Employer ContJibution Rabe for the first fiscal year is debennlned by the actuarial valuation two years ago and the rate for the second year is from the actuarial valuation one year ago. The Normal Cost Rabe for each of the two fiscal years is l1ssumed to be the same as the rate determined by the current valuation. All expected dollar amounts are determined by multiplying the .-by the expected payroll for the applicable fiscal year, besed on payroll as of the valuation date. AmOrti-E1qIected ~. , gain/loss occurring in preVIOus and subsequent years, the galn/lOSS recogn!red year periods so that these annual galn/losseS will be fully paid off In 30 years. Expected payment Page 13 p . , , CAlPERS ACTUARIAL VALUATION· June 30, 2009 MISCELLANEOUS PlAN OF TH E erN OF PALO ALTO EMPlOYER NUMBER 14 . Reconciliation of Required Employer Contributions: Percentage Estimated $ of Bllsed on Projected Projected Payroll Payroll 1. Contrlbutlon·for 7/1/10 -6/30/11 (from prior year annual report) 17.555% $ 12,353,876 2. Effect of changes since the priOr year annual valuation a) Effect of Iln~acted changes In demographics and flnanclal results 1.374% 991,999 b) Effect of plan Changes 0.000% 0 c) Effect of changes In Assumptions 2.796% 2,018,947 d) Effect of change In payroll 322,417 e) Effect of elimination of amortzatlon base 0.000% 0 f) Effect of changes due to Ffesll start 0.000% 0 g) Net effect of the changes above [sum of (8) through (f)] 4.170% 3,333,353 3. Contribution for 711/11-6/30/U [(1)+(2g)] 21.725% 15,687,239 The contribution actually paid (Item 1) 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. Page 14 ,. ... ) \ . ) t ) I C) CO) ) CALPERS ACTUARIAL VAWATION • June 30, 2009 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO EMPLOYER NUMBER 14 Employer Contribution Rate History The table below provides a recent history of the employer contribution rates for your plan, as determined by the annual actuarlal valuation. It does not account for prepayments or benefit changes made In the middle afthe year. Required B~ Yal!latioD Fiscal Employer Total Employer __ =::::y"''''ar'''''':::-___ ..!:N~o~rm!!.!a~l~c:7ost~· _......:u!!Jnwf!l~nd~ed~R~a~te'=--~c~on.trlbutlon Rate 2007· 200B 10.B58% 6.579% 17.437% 2008· 2009 10.574% 6.431% 17.005% 2009·2010 10.142% 6.921% 17.063% 2010·2011 10.087% 7.468% 17.555% 2011-2012 10.100% 11.625% 21.725% Funding History The Funding History below shows the recent history of the actualla! accrued liability, the market value of assets, the actuarlal value of assets, funded ratios· and the annual covered payroll. The Actuarial Value of Assets Is used to establish funding requirements and the funded ratio on this basis represents the progress toward fully funding future benefits for current plan partiCipants. The funded ratio based on the Market Value of ASSEts Is an Indicator of the short-term solvency of the plan. Valuation Acflrued Actuarial Market Value Funded Annual Date Liability Value of of Ratlo Covel'<lld Assets (AVA) Assets (MVA) AVA Payroll MVA 06/30/05 $ 339,641,371 $ 287,138,546 $ 295,239,366 84.5% 86.9% $ 60,954,209 06/30/06 363,773,962 311,105,476 329,458,516 85.5% 90.6% 61,265,526 06/30/07 408,625,099 350,543,062 404,083,607 85.8% 98.9% 61,883,485 06/30/08 443,337,130 379,836,875 385,304,560 85.7% 86.9% 63,933,506 06/30/09 499,199,907 398,764,606 288,524,538 79.9% 57.8% 65,602,083 Page 15 .) L" ..... H • I () SUMMARY OF ASSETS ., ........ • RECONCILIATION OF THE MARKET VALUE OF ASSETS • DEVELOPMI!NT OF THE ACTUARIAL VALUE OF ASSETS • ASSET ALLOCATION ( ) ) ~.''') , , !) ·L () ' .. ,~ CALPERS.ACTUARIAL VALUATION -June 30, 2009 MISCELLANEOUS PlAN OF THE CITY OF PALO ALTO EMPLOYER NUMBER 14 Reconciliation of the Market Value of Assets . 1. Markllt Value of Assets as of 6/30/08 Indudlng Receivables 2. Receivables for service Buybacks as of 6/30/08 3. Market Value·of Assets as of 6/30/08 4. Employer Contributions 5. Employee Contributions 6. ~eneflt Payments to Retirees and Benefldarles 7. Rerunds 8. Lump Sum Payments 9. Transfers and Miscellaneous Adjustments 10. Investment Return 11 •.. Market Value of Assets a5 of 6/30/09 12. Receivables for Service Buybacks as of 6/30/09 13. Markl1t Value of Assets as of 6/30/09 Indudlng Receivables $ $ 385/304,560 2,021,531 383,283,029 11,046,935 ·6,037,545 (18,880,057) (242,483) (7,037) 54,791 (94,377,147) 286,915,683 1,608,855 288,524,538 Development of the Actuarial Value of Assets 1. Actuarial Value of Assets as of 6/30/08 Used For Rate Setting Purposes 2. Receivables for service Buybacks as of 6/30/08 3. Actuarial Value of Assets as of 6/30/06 4. Employer Contrlbuijons 5. Employee Contributions 6. Benefit Payments to Retirees and Beneficiaries 7. Refunds 8. Lump Sum Payments 9. Transfers and Miscellaneous Adjustments 10. Expected Investment Income at 7.75% 11. Expected Actuarial Value of Assets 12. Martet Value of Assets as of 6/30/09 13. Preliminary Actuarial Value of Assets [(11) + «12) -(U» /15] 14. Maximum Actuarial Value of .Assets (140% (if (12» 15. Minimum Acbuarlal Value of Assets (60% of (12)) 16. Actuarial Value of Assets {Lesser of [(14), Greater of «13), (lS»)]} 17. Actuarial Value to Markl1t Value Ratio 18. Receivables for Service Buybad<s as of 6/30/09 19. Actuarial Value of Assets as of 6/30/09 Used for Rate Setting Purposes $ $ $ $ 379,836,875 2,021,531 377,815,344 11,046,935 6,037,545 (18,880,057) (242,483) (7,037) 54,791 29,205,004 405,030,042 286,915,683 397,155,751 401,681,956 172,149,410 397,155,751 138.2% 1,608,855 398,764,606 Page 19 CALPERS ACTUARIAL VALUATION· June 30, 2009 MISCELLANEOUS PLAN Of THE CITY OF PALO ALTO EMPLOYER NUMBER 14 Asset Allocation The starting point and most Important element of caIPERS' successful rerum on Investment Is the asset allocation or diversification among stocks, bonds, cash and other Investments. Asset allocation Is not an asset-only or lIablllty·only decision. All factors, Including Ilabllltles, beneflt payments, operating expenses, and employer and member contributions are taken Into account in determining the appropriate asset allocation mix. The goal Is to maximize rerums at a prudent level of risk \lilhlch presents anever-changlng balancing act between market volatility and long-term goals. calPERS follows a strategic asset allocation policy that IHentlfies the percentage of funds to be Invested In each 'asset class. The asset aliocatlon and market value of assets shown beloW reflect the values of the Public Employees Retirement Fund (PERF) In Its entirety as of June 30, 2009. The assets for CITY OF PAlO ALTO MISCELLANEOUS PLAN are part of the Public Employees Retirement Fund (PERF) and are Invested accordingly. (A) Asset Class 1) Total cash Equivalents 2) Total Global Axed Income 3) Total Equl~es 4) Inflation linked (ILAC) 5) Total Real Estate , TOtal Fund 55.6% Equires (B) Market Value {! Billion) 12.0 51.6 102.0 1.1 W lS3.Sz M%Real Esl:ate 1 Target allocation effective January 1, 2009. (C) CUrrent Allocation 6.5% 28.1% 55.6% 2.4% Z&ti! 100.0% 6.5% cash 28.1% Fixed Income (D) Ta!]let' 0.0% 19.0% 66.0% 5.0% .!.QJ!?& 100.0% Z Differences between investment values above and the values on the SUmmary of Investments on page 26 of the Comprehensive Annual Financial Report (Year Ended June 30, 2009) are due to differences In reporting methods. The Summary of Investments Indudes Net Investment Recelvables/Payables. Page 20 '-") ...• ) , ) .. ../ () SUMMARY OF PARTICIPANT DATA • SUMMARY OF VALUATION DATA • ACTIVE MEMBERS • TRANSFERRED AND TIIRMINATED MEMBERS • RETIRED MEMBERS AND BIINEFICIARIES .) ) () ( ) \ ) CALPERS ACTUARIAL VALUATION -June 30, 2009 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO EMPLOYER NUMBER 14 Summary of Valuation Data Jllne 30, 2008 1. ActIve Members a) Counts 841 b) Average Attained Age 46.~1 c) Average Entry Age to Rate Plan 34.42 d) Average Years of Service 12.09 e) Average Annual Covered Pay $ 76,021 f) Annual Covered Payroll 63,933,506 g) Projected Annual Payroll for Contribution Year 70,371,807 h) Present Value of Future Payroll 526,376,843 . 2. Transferred Members a) Counts 286 b) Average Attained Age 44.96 c) Average Years of Service 3.93 d) Average Annual Covered Pay 100,441 3. Terminated Members a) Counts . 276 b) Average Attained Age 45.16 c) Average Years of Service 3.76 d) Average Annual Covered Pay $ 56,.55] 4. Retired Members and Benellclaries a) Counts 751 b) Average Attained Age 68.64 c) Average Annual Benefits 22,937 5. Active to Retired RatIo 1.12 lune 30, 2009 820 46.08 34.63 11.45 $ 80,003 65,602,083 72,2011,415 507,335,227 280 45.57 3.88 $ 104,408 291 45.66 3.57 $ 57,937 811 68.37 $ 25,726 1.01 Counts of members Included In the valuation are coul1t$ of the records processed by. the valuaUon. Multiple records may exlst for those who have service In more than one valuation group. This does not result In double countlng of liabilities. Page 23 1 __ •• _._ --------_. __ .. '" .. ,"" .. _ ...... -, ·_····T ______ • _ .. _,------_. .--.~--.,-.,' .. -..... --, ..... --~ ... ",--_._----- CALPERS ACTUARIAL VALUATION -June 30, 2009 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO EMPLOYER NUMBER 1'1 • 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 selVlce In more than one valuation group, This does not result In double counting of liabilities Distribution of Active Members bV Age and Service Years arService atValuatioll Date Attained Ale 0-4 5-9 10-14 15-19 20-25 25+ Total .. 1.5-24 10 0 0 0 0 0 10 25-29 50 9 0 a a ° 59 30-34 44 34 6 2 ·0 0 88 35-39 28 25 15 10 0 0 76 40-44 31 28 29 17 3 ° 108 45-49 32 40 23 44 14 12 165 50-54 32 23 31 21 11 31 149 55-59 15 14 16 25 8 18 96 60-64 2 10 5 16 9 10 52 65 and over 2 4 3 5 0 3 17 All Ages 246 187 128 140 45 74 820 Distribution of Average Annual Salaries by Age lind Service ') Years of Service at valuation Dilte Att.lned Afi[e 0-4 5·9 10·14 15-19 20-25 ·25+ Aver'lIe 15·24 $62,534 $0 $0 $0 $0 $0 $62,534 25-29 63,268 69,714 0 0 a a 64,251 30-34 67,269 72,083 BO,237 76,439 ° 0 70,291 35-39 74,826 80,062 93,543 90,785 0 0 82,149 40-44 69,848 77,883 80,947 93,340 83,902 0 79,000 45"49 74,158 78,576 82,054 , 79,686 89,723 100,509 81,041 50-54 76,346 80,422 85,228 93,884 75,888 95,185 85,179 55-59 89,566 87,696 97,811 81,566 92,932 91,994 89,320 60-64 85,582 75,949 88,516 82,314 95,332 84,683 84,328 65 and over 7,200 66,158 79,956 69,641 ° 103,651 69,298 All Agos $70,545 $77,568 $85,928 $84,498 $87,640 $94,196 $80,003 Page 24 l , ., ...... _ .. _ ... . ... . " "", "" .. "." ... ". , ... ,. ... ." ... , .. " ", ,', CALPERS ACTUARIAL VALUATION -June 30, 2009 ,', MISCELLAN EOUS PLAN OfTHE CITY Of PALO ALTO EMPLOYER NUMBER 11 () Transferred and Terminated Members Dlstriblltion ofTransfers to Other C8IPERS Plans by Age and Service ¥earsofServlcilatValuatilln Date. Attained' Average Age 0·4 5·9 10·14 15-19 20-25 lS+ Total Salary 15-24. 1 0 0 0 ° 0 1 $92,952 25·29 17 1 0 0 ° 0 18 86,663 30-34 26 2 0 0 0 0 28 95,365 35-39 30 6 0 0 ° 0 36 97,659 40-44 33 11 1 1 1 0 47 97,540 45-49 ' 37 11 4 1 0 0 53 110,373 50-54 28 8 8 2 1 0 47 117,957 55-59 17 10 3 2 0 0 32 115,520 60-64 7 4 1 0 0 1 13 93,027 65 and QVer 3 2 0 0 a 0 5 100,604 All Ages 199 55 17 6 2 1 280 104,408 '" DIStrlblitlon of Terminated Participants with Funds on Deposit by Age and Service f ) \ Years of Service at Valuation Date Attained' . Average Age 0-4 5-9 10-14 15·19 20·25 25+ Total Salaa 15-24 1 0 0 ° 0 0 1 $46,387 25-29 13 0 0 0 0 0 13 54,2QO 30-34 29 0 0 0 0 0 29 58,521 35-39 26 6 0 0 0 0 32 51,693 4(H4 42 15 1 1 0 0 59 53,601 45-49 43 10 7 3 1 0 64 66,026 SO-54 30 12 '4 1 1 0 46 56,434 55-59 17 5 2 2 0 0 26 44,935 60-64 . 10 4 4 0 0 0 18 47,760 65 and over 1 0 0 0 0 0 1 40,000 All Ages 212 52 18 7 2 0 291 5'1,937 ) Page 25 CALPERS ACTUAAlAL VALUATION -June 30, 2009 MISCELLANEOUS PLAN OFTHE CITY OF PALO ALTO EMPLOYER NUMBER 14 L CAlPERS ACTUARIAl VALUATION -June 30, 2009 MISCELLANEOUS PlAN OFTHE CITY OF PALO ALTO EMPLOYER NUM BER 14 () '. -' Retired Members and Beneficiaries (continued) Distribution of RetIrees and BeneficIaries by Years Retired and Retirement Type* Non-Non-Death Years servIce Indunrlal Industrial Industrial Industrial After Retired Retirement DlsRJ:li!mr ......... DlsablUtv Daath Death Retirement Total Under 5 Yrs 260 12 3 0 0 31 306 5-9 156 9 2 0 0 17 1&1 10014 89 16 4 0 0 15 124 15-19 77 16 0 ·0 0 1 94 20-24 34 2 0 0 0 2 38 25-29 22 3 0 0 0 7 32 30 andOver 17 4 0 0 0 11 32 All Years 655 62 9 0 0 &I 810 Distribution of Average Annual Amounts tor Retirees and Beneficiaries by Years Retired and Retirement Type* Non-Non-Death , Years Ser:vloe Industrial Industrial Industrial Industrial After i·) Retired Retlrer.mmt Disability Disability Death Death Retirement Average , \ ... , Under 5 Yrs $36,770 $16,155 $8,838 $0 $0 $17,351 $33,720 5-9 27,147 16,132 1,491 0 0 18,985 25,575 10-14 23,123 19,272 2,035 0 0 19,295 21,482 15-19 17,606 11,339 0 0 0 42,727 16,807 20-24 17,285 14,661 0 0 0 10,919 16,812 25-29 16,924 10,077 0 () ° 16,404 16,168 30 and Over 15,365 12,261 0 0 0 10,834 13,419 All Years $28,137 $15,120 $4,182 $0 $0 $17,245 $25,745 * Counts of members do not Indude alternate payees receiving beneflts while the member Is stili woridng. Therefore, the total counts may not matd1 Information on page 23 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. ) Page 27 ,) . ) -' .. ' 1... () APPENDICES • APPENDIX A· STATEMENT OF ACTUARIAL DATA, METHODS AND ASSUMPTIONS • APPENDIX B· SUMMARY OF PRINCIPAL PLAN PROVISIONS • APPENDIX C • GASB STATEMENT NO. 27 • APPENDIX D -INVESTMENT RETURN SENSITIVITY ANALYSIS • APPENDIX E -GLOSSARY OF ACTUARIAL TERMS C) L r"") \",. /'. "') \, . ) APPENDIX A • STATEMENT OF ACTUARIAL DATA, METHODS AND ASSUMPTIONS I ,- I ) ) () () ) CALPERS ACTUARIAL VALUATION -lune 30, 2009 STATEMENT OF ACTUARIAL METHODS AND ASSUMPTIONS Actuarial Data APPENDIX A As stated In the Actuarial Certification, the data which serves as the basis of thIs valuation has been obt,l!ned from the various CaIPERS 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 pot~ntlal for unusually large salary deviation In certain cases such as elected officials. Therefore, salary Information In these cases may not be accurate. These situations are relatively Infrequent, however, and when'they do occur, they generally do not have a matel1allmpact on the employer contribution rates. Actuarial Methods Fundlhg Method The actuarial funding method used for the Retirement Program Is the Entry Age Normal Cost Method. Under this method; projected benefits are determined for all members and the associated liabilities are spread In a manner that produces level annual cost as a percent of pay In each year from the age of hire (entry age) to the assumed retirement age. The cost allocated to the ~urrent fiscal year Is called the normal cost. Th~ 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, for actIVe members beyona the assumed reurement age, and for members entitled to defenred benefits, Is eqUal 'to tl1epresent value of the benefits expected to be paid. No normal costs are applicable for these partidpants. ' Tile excess of the total actuarial accrued liability over the actuarial value of plan assets Is called the unfunded actuarial accrued liability. Funding requirements are determined by adding the normal cost and an amortization of tile unfunded liability as a level percentage of assumed future payrolls. All changes In liability due to plan amendments, changes In actuarial assumptions, or changes In actuarial methodology are amortized separately over a 20-year period. All gains or losses are tracked and amortl'led over a roiling 30- year period with the exception of special gains and losses In fiscal years 2008-2009, 2009-2010 and 2010- 2011. Each of these years special gains or losses will be Isolated and amortized over fixed and declining 30 year periods (as opposed to the current roiling 30 year amortization).' If a plan's accrued liability exceeds the actuarial value of assets, the annual eontrlbutlon with respect to the total unfunded liability may not be , less than the amount produced by a 30-year amortization of the unfunded liability. In ad~ltlon, In February 2010 the CaIPERS Board adopted a resolution requiring additional contl1burtons for any plan or pool If their cash flows hamper adequate funding progress by preventing the expected funded status on a market value of assets basis of the plan to either: • In~rease by at least 15% by June 30, 2043; or '. Room a level of 75% funded by June 30, 2043 The necessary addltlonal contribution will be obtained by changing the amortization period of the gains and losses prior to 2009 to a period which will result In the sa~sfactlon of the above <:rIteria. calPERS actuaries will reassess the criteria above when performing each future valuation to determine whether or not additional contl1butlons are necessary. An exception to the funding rules above Is used whenever the application of such rules results In InconSistencies. In these cases a "fresh start" approach Is used. This simply' means that the current unfunded actuariallfabliity Is prQIected and amortized over a set number of years. As mentioned above, If the annual cOntribution on the total unfunded liability was less than the amount produced by a 30'year amortization of the unfunded liability, the plan actuary would Implement a 30-year fresh start. However, In the case of a 30-year fresh start, just the unfunded lIabtUty not already In the (galn)/Ioss base (which already Is amortized over 30 years) will go Into the new fresh start base. In addition, a fresh start Is needed In the following situations: A-l CALPERS ACTUARIAL VALUATION -June 30, 2009 STATEMENT OF ACTUARIAL METHODS AND ASSUMPTIONS APPENDIX A 1) . when a positive payment would be required on a negatlve unfunded actuarial liability (or conversely a negative payment on a positive unfunded actuarlaillablllly); or 2) when there are excess assets, rather than an unfunded lIabliRy. In this situation a 30-year fresh start IS used, unless a longer fresh start Is needed to avoid a negative total rate. It should be noted that the actuary may choose to use a fresh start under otI1ar clrcom$tances. In all cases, the fresh start period IS set by the actuary at what he deems appropriate, and will not be less than ftve years nor greater than 30 years. Asset Valuation Method In order to dampen the effect of short term market value fluctuations on employer contribution rates, the following asset smoothing technique Is used. first an Expected Value of Assets Is computed by bringing forward tI1e prior year's Actuarial Value of Assets and the contributions received and benefits paid during the year at the aSS\Jmed actualial rate of rerum. The Actuarial Value of Assets Is then computed as the Expected Value of Assets plus one·fifteenth of the difference between the actual Market Value of Assets and the Expected Value of Assets as of the valuatIOn date. However In no case will the Actuarial Value of Assets be less than 80% or greater than 120% of the actual Market Value of Assets. In June 2009, tha C8IPERS Board adopted changes to the asset smoothing method In order to phase In over a three year perlod the Impact of the ·24% Investment loss experienCed by C8IPERS In "seal year 2008- 2009. The following changes were adopted: • Increase the corridor limits for the actuarial value of assets from 80%·120% of market value to . 60%-140% of market value on June 30, 2009 0.· ,Reduce the corridor limits for the· actuarial value of assets to 70% .. 130% of market value on June 30,2010 . • Return· to the 80%,120% of market value corridor limits for the actuarial value of assets on June 30, 2011 and thereafter Miscellaneous SUPelfullded status If a· rate plan Is superfunded (actuarial value of assets exceeds the present value of benefits), as of the rn.ost rerently.completect annual valuation, the employer may cover their employees' member contributions (both taxed and tax,deferred) using their employer assets during the flscal year for which this valuation applies. This would entail transferring assets within the Public Employees' Retirement fund (PERf) from the employer account to the member accumulated contribution accounts. This change was Implemented ~ffectlve .January 1, 11>99 pursuant to Chapter 231 (AssemblY Bill 2099) which added Government Code Section 20816. Supetfunded status applies only to Individual plans, not risk pools. For rate plans within a rtsl<. pool, actuarial value of assets Is the sum of the rate plan's side fund plus the rate plan's pro-rata share of non· slde fund assets. Internal Revenue Code Section 415 . . The limitations on beneflts Imposed by Internal Revenue Code Section 415 were not taken Into account In this valuation. The effect of these limitations has been deemed Immeterlal on the overall results. Internal Revenue Code Section 401(a)(17) .The IIml!:atlons or compensation Imposed by Internal Revenue Code Section 401(a)(17) were taken Into account In this valuation. Each year the Impact of any changes In this compensation IImltatlon since the prior valuation Is IndlJded and amortized ;IS part of the actuarial gain or loss base. A-2 ,) I. .. CAlPERS ACTUARIAL VALUATlON -lune 30, 2009 APPENDIX A STATEMENT OF ACTUARIAL METHODS AND ASSUMPTIOt>lS () Actuarial Assumptions ECODDm/cAuumptltW$ Investment Return 7.75% compounded annually (net of expenses). This assumption Is used for all plans. Salary Growth Annual Increases vary by category, entry age, and duratlon of service. The assumed Increases are shown below. Public Allen!:! MIsC<!lIaneous Duratlon of Service Ent!yA~e 20 Ent!Y AQe 30 Ent~ Age 40 0 0.1445 0.1265 0.1005 1 0.1215 0.1075 0.0875 2 0.1035 0.0935 0.0775 3 0.0905 0.0825 0.0695 4 0.0805 0.0735 0.0635 . 5 0.0725 0.0675 0.0565 10 0.0505 0.0485 0.0435 15 0.0455 0.0435 0.0385 20 0.0415 0.0395 0.0355 2S 0.0385 0.0385 0.0355 30 0.0385 0.0385 ·0.0355 () PublIc Allen!:! Fire Duration of Service Entry A2e 20 Entry Age 30 . Entl)' Age 40 0 0.1075 0.1075 0.1045 1 0.0975 0.0965 0;0875 2' 0.0895 0.0855 0.0725 3 0.0825 0.0775 0.0625 4 0.0785 0.0705 0.0535 5 0.0715 0.0645 0.0475 10 0.0535 0.0485 0.0375 15 0.0435 0.0415 0.0365 20 0.0395 0.0385 0.0355 25 0.0375 0.0375 0.0355 30 0.0375 0.0375 0.0355 Public yen!:! PoUC<! Duration of Service Enl!1A!je 20 Entry Age 30 Enll)' Age40 0 0.1115 0:1115 0:1115 1 0.0955 0.0955 0.0955 2 0.0835 0.0635 0.0805 3 0.0745 0.0725 0.0665 4 0.0675 0.0635 0.0575 5 0.0615 0.0575 0.0505 10 0.0475 0.0445 0.0365 15 0.0435 0.0415 0.0355 ,) 20 0.0395 0.0365 0.0355 25 0.0375 0.0365 0.0355 30 0.0375 0.0365. 0.0355 A·3 CAlPERS ACTUARIAL VAlUATION -June 30, 2009 STATEMENT Of ACTUARIAl MElliODS AND ASSUMPTIONS Public AgenS' County Pe!!!j! Officers Duration of Service Entry Age 20 Entry Age 30 Billy Age 4Q. o 0.1315 0.1315 0.1315 1 0.1115 0.1085 0,1055 2 0.0965 0.0915 0.0865 . 3 0.0845 0.0795 0.0735 4 0.0755 0.0695 0.0635 5 0.0685 0.0625 0.0555 10 0.0485 0.0445 0.0405 15 0.0435 0.0405 0.0385 20 0.0395 0.0385 0.0365 .2S 0.0375 0.0365 0.0355 30 0.0375 0.0365 0.0355 • The Miscellaneous salary scale Is used for Local Prosecutors. • The police salary scale Is used for Other Safety, local Sheriff, and School PolICe. Overall Payroll Growth. . APPENDIX A 3.25% compounded annually (useq In projecting the payroll over which the unfunded liability Is amortized). ThiS assumption Is used for all plans. Inflation 3.00% compounded' annually. This assumption Is used for all plans. Non-valued Potential Additional liabilities The porential,lIabllity loss for a cost-of-lIvlng Increase exceeding the 3% Inflation assumption, and any potential liability loss from future member service purchases are not reneered In the valuaUon. M/lt»UaneDII!I load/aD FJ1Cttl11l Credit for Unused Sick Leave Final Average SalarY is Increased QY 1% for 'those plans with the provision providing Crellit for Unused Sick Leave. Conversion of Employer Paid Member Contributions (EPMC) Final Average Salary Is Increased by the Employee COntribution Rate fur those plans with .the provision providing for the Conversion of Employer Paid Member COntrlbuUOns (EPMC) during the final compensation period. Norris Decision (Best factors) Employees hired prior to July 1, 1982 have projected benetlt amounts Increased In order to reflect the use of 'Best Factors" In the calculation of opUonal benefit Ibrms. 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 detennlned. No loading is necessary for employees hired after July 1, 1982. A-4 .). ; h , f I. .() () ) CAlPERS ACTUARIAL VALUATION -June 30, 2009 STATEMENT OF ACTUARIAL METHODS AND ASSUMPTIONS DemoarllDh/c Alfllmntions Pre-Retirement Mortality APPENDIX A Non-Industrial Death·Rates vary by age and gender, IndustrlalDeath rates vary by age, See sample rates In table below, The non-Industrial death rates are used lor all plans. The Industrial death rates are used for Safety Plans (except for Local Prosecutor safety members where the corresponding Miscellaneous Plan does not have the Industrial Death sene/lt). Age 20 25 30 35 40 ,45 5Q 55 60 65 70 75 80 Non-Industrial Death (Not Job-Related) .. Male' . Female' 0.00047 0.00016 0.00050 0.00026 0,00053 0,00036 0,00067 (1,00046 0.00087 0,00065 o.ootlo 0,00093 0,00176 0,00126 0.00260 0;00176 0.00395 0,00266 0.00608 0,00419 0.00914 0.00649 0.01220 0,00878 0.01527 0,01108 Industrial Death (Job-Related) . Maleand Female 0.00003 0,00007 0,00010 0.00012 0,000i3 0,00014 '0,00015 0.00016 0,00017 0,00018 0:00019 0.00020 0.00021 Miscellaneous Plans usually have Industrial Death rates set to 'zero unless the agency has Specifically contracted fOr Industrial Death benefits. If so, each Non-Industrtal. 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, 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. Non-Xndustrlallv Disabled Industrlallv Disabled Heartllv Reclplents (Not Job-Related) (Job-Related) Age Male Female Male Female Male Female 50 0.00239 .0,00125 . 0.01632 ' 0,01245 0.00443 0,00356 55 0,00474 0,00243 0.01936 0.01580 0.00563 0.00546 60 0,00720 0,00131 . 0,02293 0,01628 0.00777 0,00798· 65 0,01069 0.00775 0.03174 0,01969 0,01388 0.01184 70 0,01675 0.01244 ' 0.03670 0,03019 0.02236 0.01716 75 .,0,03080 0.02071, 0.06001 0.03915 0,03585 0.02665 80 Q,05270 0,037~9 ' 0,08388 0.05555 0.06926 0.04528 65 0:09775 0.07005 0,14035 0.09577 0,11799 0.08017 90 '0,16747 0,12404 0.21554 0.14949 0,16575 0,13775 95 0,25659 0,21556 0.31025 0.23055 0.26108 0,23331 100 0.34551 0,31876 0.45905 0.37662 0.40916 0,35165 105 .0,58527 0.56093 0,67923 0.61523 0.M127 0.60135 110 1,00000 1.00000 1.00000 1,00000 1.00000 1.00000 A-S ,-' ..... - CALPERS ACTUARIAL VALUATION -June 30, 2009 STATEMENT OF ACTUARIAL METHODS AND ASSUMPTIONS APPENDIX A Marital status For active members, a percentage married upon retirement Is assumed according to tile following table. Member Cateflory Miscellaneous Member· . local Police Local Fire other local Safety School Police Percent Marr~ 85% 90% 90% 90% 90% Age of Spouse. It Is assume(j thllt female spoUses are. 3 years younger than male spouses. This assumpHon Is used for all plans-. Terminated Membel'6 . It Is assumed that ~rmlnated members refund Immediately If non-vested. Terminated members who are vested are assumed to follow the same service retirement pattel'/1 as active members but with a load to reflect the expected higher rates of retirement, especially at lower ages, The following table shows the load fectors that. are applied to the service re~rement assumption for active members to obt;.ln the service retlrement pattern for separated vested members: Ape .50 . 51 52 through 56 57 through 60 61 through 64 65 and above Load factor 450% 250% 200% ~50% 125% 100% (no change) TermInatIon with Refund Rates vary by entry ~ge and se.rvlce for Miscellaneous Plans. Rates v<ri by service for Safety Plans. See sample oates In tables below_ Public !Jien!lJ: Miscellaneous Duration of· Service . Entry Age 20 .. Entry Age 25 Entry Age 30 Entry Age 35 Ent!)! Age 40. Entry Age 45 0 0.1742 0.1674 0.1606 0.1537 0.1468 0.1400 1 0.1545 0.1477 0.1409 0_1339' 0.1271 0.1203 2 0.1348 0.1280 0.1212 0.1142 0.1074 0.1006 3 .' 0.1151 O.1Q83 0.1015 0.0945 0.0877 0.0809 4 ·0.0954 0.0886 0.0818 0.0748 0.0680 0.0612 5 0_0212 0.0193 0.0174 0.0155 0.0136 0.0116 10 0.0138 0.0121 0.0104 . 0.0088 0.0071 0.0055 15 0.0060 0.0051 0.0042 0.0032 0,0023 0.0014 20 0.0037 0.0029 0.0021 0.0013 0.0005 0.0001 25 0.0017 0.0011 0.0005 0.0001 0.0001 0.0001 30 0.0005 0.0001 0.0001 0,0001 0.0001 0.0001 35 0_0001 0.0001 0.0001 0.0001 0.0001 0.0001 A·5 J to. () ' ... ' ) f \ ) CAL~ERS ACfUARlAl VALUATION -June 30, 2009 AP~ENDlX A STATEMENT OF ACfUARIAL METHODS AND ASSUMPTIONS Public &Iimg: Sa!'!!y Duratlon of Service Fire Police County Peace Officer ° 0.0710 0.1013 0.0997 1 0.0554 0.0636 0.0782 2 0.0398 0.0271 0.0566 3 0.0242 0,0258 0.0437 4 0.0218 0.0245 0.0414 5 0~0029 0.0086 0.0145 .. 10 0.0009 0:0053 0.0089 15 0.0006 0.0027 . 0.0045· 20 0.0005 0.0017 0.0020 25 0.0003 0.0012 0.0009 30 0.0003 0.0009 0.0005 35 0.0003 0.0009 0.0006 The Police Termlnatlon and Refund rallls are used for Public Agency Local Prosecutors, Other Safety, Local Sheriff, and School Police. Termination with VeSted Benefits . Rates vary Jiy entry age and service fur Miscellaneous Plans. Rates vary by service for Safety Plans. See sample rates In tables below. Public Allen!:! Misce"aneous Duration of Service Entty Age 20 Entry Age 25 Entry Age 30 Entry AQe 35 Entry Age 40 5 0.0656 0.0597 0.0537 0.0477 0.0418 10 0.0530 0.0466 0.0403 0.0339 0.0000 15 0.0443 0.0373 0.0305 0.0000 0.0000 20 0.0333 0.0261 0.0000 0.0000 0.0000 25 0.0212 0.0000 0.0000 0.0000 0.0000 30 0.0000 0.0000 0.0000 0.0000 0.0000 35 0.0000 0.0000 0.0000 0.0000 0.0000 Public Age~I Safe!! Duration of County Peace SerVice Fire Police OffIcer 5 0.0162 0.0163 0.0265 10 0.0061 0.0126 0.0204 15 0.0058 0.0082 0.0130 20 0.0053 0.0065 0.0074 25 0.0047 0.0058 0.0043 30 0.0045 0.0056 0.0030 35 0.0000 0.0000 0.0000 • When a member Is eligible to retire, the termination with vesllld beneflts probability Is set to zero, • After termlnaUon 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 used for Public Agency local Prosecutors, Other Safety, local Sheriff, and School Pollee. A-7 , <::ALPERS ACTUARIAL VALUATION -June 30,2009 STATEMENT Of ACTUARIAL METHODS AND ASSU~'PTIONS , APPENDIX A Non-Industrial (Not lob-Related) DI5abllltY Rates vary by age and gender for Miscellaneous Plans. Rates vary by age and category for Safety Plans. Miscellaneous Fire Police Age Male. Female Male and Female Male and Female ---- 20 0.0001 0.0001 0.0001 0.0001 25 0.0001 0.0001 0.0001 0.0001 30 0.0002 0,0002 0.0001 0.0002 35 0.0006 , ,()'o009 0.0001 0.0003 40 0.0015 0.0016 0,0001 0.0004 45 0.0025 ' 0.0024 0.0002 0.0005 50 0.0033 0.0031 0.0005 o.oooe 55 0,0037 0.0031 0.0010 0.0013 60 0.0038 0.0025 0.0015 0.0020 County Peace Officer Male and Female 0.0001 0.0001 0.0001 0.0004 0.0007 0.0013 0,0018 0.0010 0.0006 • The Miscellaneous Non-Industrial Disability rates are used for local Prosacutors. • The Police Non-Industl1al Disabliity rates are used ror other Safety, local Sheriff, and School Police. ' Industrial (Job-Related) Disability . Rates vary by age and category. .. '.' Ale Fire Police Coun~ Peace OffIcer 20 0.0002 0.0007 0,0003 25 0.0012 0,0032 0,0015 30 0.0025, 0.0064 ' 0.0031 35 0.0037 ' 0.0097 0.0046 40 0.0049 ' 0.0129' 0.0063 45 0,0061 0,0161 0.0078 50 0.0074 0,0192 0.0101 55 0.0721 0,06S8 0.0173 60 0.0721 0.0668 0.0173 • The Police Imlustrlal Disability rates are used for local Sheriff and Other Safety. • Fifty Percent of the Police Indu!;trlal Disability rates are used for School Police. • One Pefcent of the Pollee Industrial Disability rates are used for local Prosecutors. • Normally, rates ar~ zero for Miscellaneous Plans unless the agency has specifically contracted for Industrial Dlsa bllity benefits. If so, each miscellaneous non-Industrial disability rate will be split Intil two co,mponents: 50% will become t~e Non-Industrial Disability rate and 50% will become the Industrial Disability rate. A·S () ) (') "-, •• < C) ) CAlPE!,<S ACTUARIAL VALUATION -June 30, 2009 STATEMENT OFACTUARJAl METHODS AND ASSUMPTIONS SelVlce Retirement , Public Agency ,MIscellaneous 2% @ 60 Age 50 51 52 53 54 55 56 57 S8 59 60 61 62 63 64 65 66 67 68 69 70 Age 50 51 52 53 . 54 55 56 57 58 59 60 61 62 63 64 65 '66 67 68 69 70 5 Years 0.011 0.009 0.013 0.011 0.015 ,0.023 0.019 0,025 0.030 0.035 0.062 0.079 0.132 0.126 0.122 '0.173 0.114 0.159 0.113 0.114 0.127 10 Years 0.015 0.013 0.018 0.016 ,0.021 '0.032 0.027 0.035 0.042 0.049 0.087 0.110 0.186 0.178 0.171 0.243 0.160 0.223 0.159 0.161 0.178 Duration of Service 15 Years 20 Years 0.018 0.021 0.016 0.Q18 0,022 0.025 0.019 0,022 0.025 0.028 0.039 0.044 0.032 0.037 0,042 0.048 , 0.051 0.058 0.060 0.068 0.105 0.119 0.134 0.152 0.225 0.255 0.216 0.244 0.207 0.234 0.296 0.334 0.194 0.219 0.271 0.307 0.193 0.218 0.195 0.220 0.216 0.244 25 Years 0.023 0.020 0.028 0.Q25 0.032 0.049 0.041 0.054 0.065 0.076 0.133 0.169 0.284 0.272 0.262 0.373 0.245 0.342 0.243 0.246 0.273 Public Agency ,MIscellaneous 2% @ 55 5 Yeers 0.015 .0.013 ·0.014 0.017 0.027 0.050 0.045 0.048 0.052 0.060 0.072 0.089 0,128 0.129 0,116 0.174 0.135 0.133 0,118 0.116 0.138 10 Years ,0.020 0.016 0.018 0.022 0.034 0.064 0.057 0.061 . 0.066 0.076 0.092 0.113 0.162 0.164 0.148 0.221 0.171 0.169 0.150 0.147 0,176 Duration of Service 15 Years 20 Years 0.024 0.029 0.020 0,024 0.022 0.027 0.027 0.032 0.041 0,049 0.078 0,094 0,069 0.083 0.074 0.090 0.080 0.097 0.092 0.111 0.112 0.134 0.137 0.165 0.197 0.237 0.199 0.239 0.180 0.216 0.269 0.323 0.208 0.250 0.206 0.247 0.182 0.219 0.179 0.215 0.214 0.257 25 Years 0.033 0.027 0.030 0.037 0.056 0.107 0.095 0.102 0.110 0.127 0.153 0.lB8 0.270 0.273 0.247 0,369 0.285 0,282 0.250 0.246 0.293 30 Years 0.026 0.023 0.031 0.028 0.036 0.055 0.046 0.060 0.073 0.085 0.149 0.190 0.319 0.305 0.293 0.418 0.274 0.384 0.273 0.276 0.306 30 Years 0.039 0.033 0.036 0.043 0.067 0.127 0.113 0.122 0.131 0.151 0.182 0.224 0.322 0.325 0.294 0.439 0.340 0.336 0.297 0.293 0.349 APPENDIX A A'9 CALPERS ACTUARIAL VALUATION -- June 30, 2009 STATEMENT OF ACTUARIAL METHODS AND ASSUMPTIONS, APPENDIX A Public Agency Miscellaneous 2.5% @ Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.026 0.033 0,040 0.048 0.055 0,062 51 0,021 0.026 0.032 0.038 0.043 0.049 52 0,021 0.026 0.032 0.038 0.043 0.049 53 0.026 0.033 0.040 0.048 0.055 0.062 54 0.043 0.054 0.066 0.070 0.089 0.101 55 0.088 0.112 0.136 0.160 0.184 0.208 56 0.055 0.070 0,085 0.100 0.115 0.130 57. 0,061 0.077 0.094 0:110 0,127 0.143 58 0.072 0.091 0.111 0.130 0.150 0.169 59 0.083 0.105 0.128 0.150 0.173 0.195 60 0.088 0.112 0.136 0.160 0,184 0.208 61 0.083 0.105 0.128 0.150 0.173 0.195 62' 0.121 0.154 0,187 0.220 0.253 0.286 63 0.105 0.133 0.162 0.790 0.219 0.247 64 0.105 0.133 0.162 0.190 0.219 0.247 65 0.143 0.182 0.221 0.260 0.299 0,338 66 0.105 0.133 0.162 0.190 0.219 0,247 67 0,105 '0.133 0.162 0.190 0.219 0.247 68 0.105 0.133 0.162 0.190 0219 0.247 69 0.105 0.133 0.162 0,190 0.219 0.247 70 0.125 0,160 0,194 0,228 0,262 0.296 Age 50 51 52 53 54' 55 56, 57 58 59 = 60 61 62 63 64 65 66 67 66 69 70 Public Agency Miscellaneous 2.7% © 55 Duration: of Service 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 0.028 0,035. 0.045 0.050 0.058 0.065 0,022 0.028 0:034 0.040 0.046 0.052 0.022 0,028 0.034 0.040 0.046 0.052 0.028 0.035 0.043 0.050 0.058 0.065 0.044 0.056 0.068 0.080 0,092 0.104 0,091 0,116 0.140 0.165 0.190 0.215 0.061 0,077 0.094 0.110 0.127 0.143 0.063 0.081 0.098 0.115 0,132 0.150 0.074 0.095 0.115 0.135 0,155 0.176 0.083 0;105 0,128 0.150 0.173 0.195 0.088 0.112 0,136 0.160 0.184 0.208 0.085 0.109 0:132 0.155 0,178 0.202 0.124 0.158 0.191 0.225 0,259 0.293 0.107 0.137 0.166 0,195 0,224 0.254 0.107 0.137 0.166 0.195 0.224 0.254 0.146 0.186 0.225 0.265 0.305 0,345 0.107 0.137 0.166 0,195 0.224 0.254 0:107 '0.137 0,166 0.195 0.224 0.254 0.107 0.137 0.166 0.195 0.224 0.254 0:107 0.137 0.166 0.195 0.224 0.254 0.129 0.164 0,199 0.234 0.269 0.304 A-10 CALPERS ACTUARIAL VALUATION -June 30, 2009 APPENDIX A STATEMENT OF ACTUARIAL MEIHODS AND ASSUMPTIONS () "0'" Public Agency MIscell'aneoua :W. @ 60 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.026 0.033 0.0~0 0.048 0.055 0.062 ·51 0.021 0.026 0.032 oms 0.043 0.049 52. 0.019 O.Q2S 0.030 0.035 0.040 0.046 53 0.025 0.032 0.038 0.045 0.052 0.059 54 0.039 0.049 0.060 0.070 0.081 0.091 55 o.oa3 0.105 0.128 0.150 0.173 0.195 56 0.055 0.070 0.085 0.100 0.115 0.130 57 0.061 0.077 0.094 0.110 0.127 0.143 58 0.072 0.091 0.111 0.130 0.150 0.169 59 0.080 0,102 0.123 0.145 0.167 0.189 60 M94 0.119 0.145 0.170 0;196 0.221 61 0.088 0.112 0.136 0.160 0.184 0.208 62. 0.127 0.161 0.196 0.230 0.265 0.299 63 0.110 0.140 0.170 0.200 0.230 0.260 64 0.110 0.140 0.170 0.200 0.230 0.260 65 0.149 0.189 0.230 0.270 0.311 0.351 66 0.110 0.140 0.170 0.200 0.230 0.260 67 0.110 0.140 0.170 0.200 0.230 0.260 58 0.110 0.140 0.170 0.200 0.230 0.260 () 69 0.110 0.140 o.po 0.200 0.230 0.260 70 0.132 0.168 0.204 0.240 0.276 0.312 .,,,,' Public AIIEmg: fIre '12 @ 55 IIlId 20/0 @ 55 am: Bal.l: A9f: Bml: 50 0.01588 56 0.11079 51 O.OpOOO 57 0.00000 52 0.03442 58 0.09499 53 0.01990 59 0.04409 54 0.04132 60 1.00000 55' 0.07513 Public Aaeng: Police 'I. @ 55 lind 2% @ 55 A9f: Bittl A9f: IDlm 50 0.02552 56 0.06921 51 0.00000 57 0.05113 52 0.01637 58 0.07241 53 0.02717 59 0.07043 54 0.00949 60 1.00000 55 0.16674 ) ~-....... -~ ----------- 11-11 CAlPERS ACTUARIAL VAlUATION June 30,2009 STATEMENT OF ACTUARIAL METHODS AND ASSUMPTIONS Public Agency Police 2%@ 50 Duratlon .of Service Age 5 Years. 10 Years 15 Years 20 Years . 50' 0'.0'14 0.014 0'.014 0.Of4· 51 ·0.012 0.0'12 0'.0'12 0'.0'12 52 0,0'26 0.026 Q.O'26 0,026 53 0.052 0'.052 0'.0'52 0.052 54 0'.0'10 0.071) 0',0'70 0.070 55 0.090 0'.090 0.090 0.090 '56 0'.0'64 0.064 0'.064 0'.0'64 57 0.071 0.071 0.071 0.071 58 0.0'63 '0.063 0.063 0'.0'63 59 0'.140 0'.140' 0'.140 0.140 60 0.140' 0'.140 0.140 0.140 61 0.140 0.140 0'.140' 0'.140 62 0'.140 0'.140' 0'.140 0.140' 63 0.140 0.140 0.140' 0.140' 64 0.140 0.140' 0'.140 0'.140' ·65 1.000 1.000 1.000 1.000' APPENDIX A 25 Years 30 Years 0'.0'25 0'.045 0'.0'23 0'.0'40' 0.048 0'.086 0.096 0.171 0'.128 0.227 0,165 0'.293 0',117 0,20S 0.130 0':232 0'.115 0'.205 0.174 0.254 0'.172 0'.251 0.172 0.251 0.172 0':251 0.172 0.251 0'.172 0'.251 1.0'00' 1.000' • These rates also apply to lOCljI Prosecutors, local Sheriff, School Pollee, and Other Safety • Public Agen~ Fire 2%@50 'Duratlon of SerVice Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.007 0.00'7 0.007 0.007 0'.0'10 O'.D15 51 0'.00'8 0.008 0'.008 0.008 0.0'13 0.019 52 0'.011 . .. 0.017' MiT 0'.0'17 0.027 0.040 53 '0.047 0.047 0'.047 0'.047 0'.0'72 0.10'7 .. 54 0'.064 0'.0'64 0'.064 0'.0'04 0'.0'98 0'.147 55 0'.087 0'.0'87 ·o.oS7 0'.007 0.134 0'.200 56 0'.0'78 0'.0'78 0'.0'78 0.078 0'.120' 0'.180 57 0.090 0.090 0.090' 0.090 0'.139 D.2DS 58 0.0'79 0'.079 0',0'79 D.Q79 0.122 0.182 59 0.0'73 0'.0'73 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 1.0'00' 1.000 1.000 1.0'00 1.000 A-12 ''') " . .... ' .. ) -'".' ...... ,--" ,,-, . '. CALPERS ACTUARiAL VAlUATION -June 30, 2009 .. APPENDIX A STATEMENT OF ACTUARIAL METHODS AND ASSUMPTIONS (,) Public ~en9: Police 3 0to@ 55 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years . 50 0,019 0,019 ,0.019 0;019 0.040 0.060 51, 0,024 0.024 0.024 0.024 0.049 0,074 52 0.024 0,024 0.024 0.024 0.051 0.077 . 53 0.059 0.059 0.059 0.059 .0.121 0.183 54 0.069 0.069 0.069 0.069 ·0.142 0.215 55 0.U6 0.U6 ,0;116 0.116 0.240 0.363 56 0.076 0.076 0.076 0.076 0.156 0.236 57 0.OS8 0.058 0.OS8 0,OS8 0.120 0.181 58 0.076 . 0.Q76 0.076 0.076 0.157 0.237 59 0.094 0,094 0.094 0.094 0.193 0.292 60 0.141 0.141 0.141 0.141 0.290 Q.438 61 0.094 0.094 0.094 0.094 0.193 0.292 62 0.U8 0.118 0.118 0,118 0.241 0.365 63 0.094 0,094 0.094 0,094 0.193 0.292 64 0.094 0,094 0.094 0.094 0.193 0,292 65 1.000 1.000 1.000 1.000 1.000 1.000 • These rares also apply to LOtal Prosecutors, Local Sheriff, School Police, and Other Safety . (' ) public Agency Fire 3%@55 " DuraHon of Service 5 ,(ears 10 Years 15 Years 20 Years 25 Years 30 Years 56 '0.012 . 0.012 0.012 Om8 0.028 0.033 51' 0.008 0.008 0.008 0.012 0.019 0.022 52 0.Q18 0.Q18 0.018 0.027 0.042 0.056 53 0.043 0.043 ·0.043 0.062 0.098 0.114 54 0.057 0.057 0.057 0.083 0.131 0.152 , 55 0.092 '0.092 0.092 0.134 0.211 0:246 56 0.081 0,081 . 0.081 0.118 0.187 0.218 57 0.100 0,100 . 0.100 0.146 . 0.230 0.268 58 0.081 0,081 0;081 0.119 0.187 0.219 59 0;078 0.078 0.Q78 0.113 0.178 0.208 60 0.117 0.117 0.117 0.170 0.267 0.312 61 0,078 0,078 0.078 0.113 . 0.178 0.208 62 . 0.098 0.098 0.098 0.141 0.223 0.260 63 '0;078 0.Q78 0.078 0.1'13 0.178 0.208 64 0.078 0,078 0.078 0.113 0,178 0.208 65 1.000 1,000 1.000 1.000 1.000 1.000 ) 11.-13 L .... CALPERS ACTUARIAL VALUATION -June 30, 2009 STATEMENT OF ACTUARIAL METHODS AND ASSUMPTIONS Public Agent)' Pollee 30/o@ 50 Duration ()f Servi<;e Age 5 Years 10 Years . 15 Years 20 Years 50 0,070 0.010 0.070 0,U1 51 0,050 O.OSO 0,050 0,095 52 0.061 0.061 0,061 0,116 53 0,069 0.069 0.069 0,130 54 0,071 0.071 0,071 0.134 55 '0.090 0.090 0.090 0.170 56 0,069 a.069 0,069 0.130 57 0.080 0,080 0.080 0,152 58 0.087 0.087 0.087 0.164 59 0,090 0.090 0,090 0.170 60 0,135 0.135 0,135 0.255 61 0.090 0.090 0.090 0.170 62 0,113 0,113 0.113 0,213 63 0,090 0.090 0.090 0,170 64 0.090 0,090 0,090 0,170 65 1.000 1.000 1.000 1.000 APPENDIX A 25 Years 30 Years 0,193 .0.249 0.139 0.180 0.171 0.220 0.192 0.247 0.197 0.255 0.250 0.322 0,191 0.247 0.223 0.288 0.242 0.312 0,251 0.323 0,377 0.485 0,251 0.323 0.314 0.404 0,251 0.323 0,251 0.323 1.000 1.000 • . These rates also apply to Local Prosecutors, Local Sheriff, School Police, and other Safety • Public Agent)' Fire 30/.@50 Duration of Service All!: SYears 10.Years . ,15 Years 20 Years 25 Years 30 Years .SO .0.034 0.034 0,034 0;048 0.068 0,080 51 0,046 0.046 0.046 ·0,065 0.092 0,109 52 0,069 0.069 0.069 0,097 0,138 0.163 53 0.084 0,084 0.084 0.117 0.166 0.197 54 P,103 0.103 0,103 0,143 0.204 0.241 55 0,127 0,127 0,127 0,177 0.252 0,298 56 0,121 0,121 0.121 0.169 0.241 0.285 57 0,101 0.101 0,101 0.141 0.201 0,238 58 0.118 0.118 0,118 0.165 .0.235 0,279 ,·59 0.100 0.100 0.100 0.140 0.199 0,236 60 0.150 0.150 0,150 0.210 0.299 0.354 61 ·0.100 0,100 0.100 0,140 0,199 0,236 62 0.125 0.125 0,125 0.175 0.249 0,295 63 0.100 0.100 0.100 o.t40 0.199 0.236 64 Q.100 0.100 0.100 0.140 0.199 0,236 65 1.000 1.000 1,000 1.000 1.000 1.000 A-14 .) . .. , .. ') ....• ... ) , .. '" ! C' .. ) APPENDIX B • SUMMARY OF MAJOR BENEFIT OPTIONS • DESCRIPTIONS OF PRINCIPAL PLAN PROVISIONS () \ ) ) ) <_/ CALPERS ACTUARIAL VAWATION --June 30, 2009 MISCEllANEOUS PLAN OF THE CITY OF PAl.D ALTO EMPLOYER NUMBER 14 Summary of Major Benefit Options .-"" " .~, '-'. \-J APPENDIXB Shown below is a summary of the major optional benefits for which your agency has contracted. A description of principal standard and optional plan provisions is in the following section of this Appenaox. Coverage Group 70001 70002 Benefit Provision Benefit Formula 2.0%@55 2.7".4>@ 55 SOcial SedJril:y O:werage No No FulVModified Full Full Rnal Ave;age Compensation Period .12 mos. 12 mos. Sick Leave Oedit No I No Non-Industrial DiSability Standard ! Standard Industrial Disability No No Pre-Retirement Death Benefits Optional Se!Ilement 2W No No I 1959 SurvMlr Benefit level Levell Levell Special No No A/terr1atla(firefighters) No No Post-Retirement Death Benefits Lump Sum $500 $500 SurvivOr Allowance (PRSA) No No i 2% 2% COlA Employee Contributions Conb'ad:ual Employer Paid 7% 7% Contractual Employee Cost Shaling 0% 0% -------- ----- 13-1 - ) ) CAlPERS ACTUARIAL VALUATION -June 30, 2009 MISCELLANEOUS PLAN Of THE CITY OF PALO ALTO EMPlOYER NUMBER 14 APPENDIX B () DE$CRIPTION OF PRINCIPAL PLAN PROVISIONS '".' The following IS a oescrlptlon of the principal plan provisions used In calculating costs and liabilities. We have Indicated whether a plan provision Is standard or opHonal. standard benefits are applicable to ali members while optional benefits vary among employers. OptlOnal benefits that apply to a single period of time, suclh as Golden Handshakes, have not been Included. Many of the statements In this summary are general In nature, and are Intended to provide ~r easily understood summary of the complex Public Employees' Retirement law. The law Itself governs In all situations. Service Retirement Eliglbllit;y A CaIPERS member becomes eligible for Service Retlrement upon attainment of age 50 with at least 5 years of credited service (total service across all, CaIPERS employers, and With <:eftaln other Retirement Systems with which CaIPERS has reciprocity agreements) Benefit The, Service Retirement benefit calculated fbr service earned by this group of employees Is a monthly allowance equ~1 to the product of the beneflt factor, year.; of sef1ll~ and flna! compensation. • The benefit factor depends on the benefit formula specified In your agenc.v's contract. The table below shows the factors for each of the available formulas. ' factors vary by the"men\ber's age at retirement. listed are the factors for rellrement at whole year ages: ~ ') Mfscel!jlMOU' Plan Formulas Retirement Age 50 51, 52 53 54 55 56 57 58 59 60 61 62 63&Up 2O/oaUO 1.092% 1.156% 1.224% 1.296% 1.376% 1.460"11> 1.552% 1.650% 1.758% 1.874% 2.0% 2.134%, 2.272% 2.418% 2% at SS 1.426% "1.522% 1.628% 1.742% 1.866% Ul% 2.052% 2.104% 2.156% 2.210% 2.262% 2.314% 2.366% 2,418% 2.S%at55 2.00/0 2,1% 2.2% 2.3% 2.4% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.7'1'0 at 5S 2.0% 2.14% 2.28% 2.42% 2.56% 2.7"10 2.7"10 2.7"Al 2.7% 2.7% 2.7% 2.7% 2.7% 2.7% 3% at 60 2.0% 2.1% 2.2% 2.3% 2.~% 2.5% 2.6% 2.7% 2.8% 2.9% 3.0% 3.0% 3.0% 3.0% B-3 CALPERS ACTUARIAL VALUATION -Juna 30, 2009 APPENDIX B MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO EMPLOYER NUMBER 14 Safety Plan Formulas Retirement 'hat 55 * 2% at 55 20/0 at 50 ,3010 at 55 3% at 50 , Age 50 1.783% 1.426% 2.0% 2.40% 3.0% 51 1.903% 1.522% 2.14% 2.52% 3.0010 52 2.035% 1.628% 2.28% 2.64% 3.0% 53 2.178% 1.742% 2.42% 2.76% 3.0% 54 2.333% 1.865% 2.56% 2.880/. 3.0% S5 &Up 2.5% 2.0% 2.7% 3.0% 3.0% * For this formula, the benefit factor also varies by entry age. The factors shown are for members with an eritry age of 35 or,larger. If entry age Is less than 35, then the age 55 beneflt 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. • The years of servlC/J Is the amount c'redlted 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 CaIPERS). For a member who has earned service with multiple CaIPERS 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 contra,ctfor an optloral 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 CaIPERS employer paid this compensation) •. The standard benefit Is 36 ") months. Employers have the optlOn of providing a final compensation equal to the highest 12 consecutive ' months. .". • For employees covered by Social Secul1ty, the Modified formula Is the standard benefit. Under this type of formula, the flnal compensation Is offset by $133.33 (or by one third If the final compensation Is less than $400). Employers may contract for the Full benefit with Sodal Security that will eliminate the offset applicable to the ~nal compensation. For employees not covered by Sodal Security, the Full benefit Is paid with no offsets. Auxiliary organlzaUons of the csuc system may elect reduced contribution rates, In which case the offset Is $317 If members are not covered by Social Securlty or $513 If members are covered by Social Security. • The Miscellaneous Sarl/loo Retirement beneflt Is not capped. The Safety Servlce Retirement benefit Is capped at 90% of final compensation. Vested Deferred Retirement Eligibility for Defefflld status A caIP~RS member becomes eligible for a deferred ~d retirement benefit when he or she leaves employment, keeps his or her contribution account belance on deposit with CaIPERS, and has earned at least 5 years of credited service (total servlce across all calPERS employers, and with ceitaln other Retirement Systems with which CaIPERS has reciprocity agreements). Ellgjbliity to start Receiving llenel'IbJ The calPERS member becomes eligible to receive the deferred retirement beneflt upon satisfying the eligibility requirements for Deferred Status and upon attainment of age 50. B·" . .. ) . ' () I .... ) \. . ) CALPERS ACTUARIAL VALUATION -June 30, 2009 MISCELLANEOUS PLAN OFTHE CITY OF PALO ALTO EMPLOYER NUMBER 14 Benefit . APPENDIXS The vested deferred retirement benefit Is the same as the 5eIVIce Retirement benefit, where the benefit factor Is based on the member's age at allowance commencement. For members who have earned selVlce with multiple calPERS employers, the benefit from each employer Is calculated separately according to each employer's contract, and then added tcgether for the total allowance. Non-Industrial (Non-Job Related) Disability Retirement l!llg/blllty A calPERs member Is eligible for Non-Indusb1al 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 Re~rement Systems with which CalPERS has reclproclty agreements). There Is no special age requirement. DIsabled means the member Is unable to perform his or her job because of an Illness or Injury which Is expected to be permanent or to last Indefinitely. The Illness or Injury does not have to be job related. A calPERS member must be actively employed by any calPERS employer at the time of disability In order to be eligible for this benefit. Standard Benefit The standard Non·lndusb1a1 Disability Retirement benefit Is a monthly allowance equal to 1.8% of final compensation, multiplied by $fiNke, which Is determined as follows: • servlr:e Is calPfRS credited service, for members wtth less than 10 years of service or greater than 18.518 years of service; or • servfce Is calPERS credited service plus the additional number of years that the member would have worked until age 60, for members with at least 10 years but not more than 18.518 years of service. The maximum benefit In this case Is 33 1/3% of Final Compensation. 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 ead! additional year of service to a maximum of 50% of final ccmpensatlon. Members who are eligible ror a larger service retirement benefit may choose tc recelve that ·benefit In lIeu of a disability benefit. Members eligible to retire, aOO who ha¥e attained the normal retirement age determined by their· service retirement benefit formula, will receive the same (jollar amount Ibr disability retirement as that payable Ibr selVlce retirement •. For members who l1ave earned service with mu~lple calPERS employers, tl1e benefit attributed to each employer Is the total disability allowance multiplied by the ratio of service wtth a particular employer to the total calPERS service. . Industrial (Job Related) Disability Retirement All safety members have this beneHt. For miscellaneous members, employers have the option of providing this benefit. An employer may choose to provide the Increased benefit option or the Improved benefit option. Eligibility An employee Is eligible for Industrial Disability Retirement If he or she becomes disabled while working, where disabled means the member Is unable to perform the duties of the job because of a worn-related Illness or Injury which Is expected to be permanent or to last Indefinitely. A calPERS member who has left active employmentwtthln this group Is not eligible for this benefit, except to the extent described below. Standard Benefit The standard Industrial Disability Retlrement benefit Is a monthly allowance equal to 50% of Rnal compensation. 6-5 . , , CALPERS ACTUARIAL VALUATION -June 30, 2009 MISCELLANEOUS PLAN Of THE CITY OF PALO ALTO EMPlOYER NUMBER 14 Increased Benefit (75010 of final compensation) APPENDIX B The Increased Industrial Disability Retirement beneHt is a monthly allowance equal to 75% crf final compensation for total disability. Improved Benefit (500/0 to 9OOf. of Final Compensation) The Improved Industrial Disability Retirement benefit 15 a monthly allowance equal to the Workman's Compensation IIppeals Board permanent disability rate percentage (If 50% or greater, with a maximum of 90%) times the final compensation. For a calPERS member not actlvely employed In this group who became disabled While employed by some other calPERS employer, the benefit Is a return crf accumulated member contrlbutlons with respect to employment In this group. With the standard or Increased benefit, a member may also choose to receive the annultlzallon of the accumulated member cont~butlons. 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 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 retlree's designated sUIVJvor(s), or to the retiree's estate. Improved Lump Sum Payment Employers have the option of providing an Improved .lump sum death benefit r;J $600, $2,000, $3,000, $4,000 or $5,000. Form of Payment for Retirement Allowance ~ndard form Of PaYment Generally, the retlrement allowance IS paid to the retiree In the furm of an annuity fur as long as he or she Is alive. The retiree may choose to j:irovlde fur a portion of his or her allbwance to be Paid to any designated benellclary after t~e retiree's death. CldPERS provides for a variety of such benefit opUons, Which the retiree pays for by taking a . reduction In his or her retlrement allowance. Sllch reduction takes Into account the amount to be proVided to the beneficiary and the probable duration of payments (based on the ages crf the member and beneficiary) made subsequent to the member's death. Improved form of Payment (Post RetIrement Survivor Allowanoe) 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 retlrement allowance will automatically be continued to certain statutory benefidanes 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 often referred to as post retirement survivor allowance (PRSA) or simply as survivor continuance. In other words, 25% or 50% of the allowance, the contlnuance portion, Is paid to the retiree for as long as he or she 15 alive, and that same amount IS contlnued to the retiree's spouse (or If no eligible spouse, to unmarried children until they attain age 18; or, If no eligible children, to a qualifYing dependent parent) for the rest of his or her lifetime. This benef,t will not be discontinued In the event the spouse remarries. 8-6 . , ! ) L. () ; .) \"" .' ) <::ALPERS ACTUARIAL VAWATION -June 30, 2009 MISCELLANEOUS PlAN OF THE OTY OF PALO ALTO EMPLOYER NUMBER 14 APPENDIXB 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 ·thls option portion to be paid to any designated benefidary 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. Pre-R$tirement 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 CBIPERS member must be actively employed with the calPERS employer providing this benefit to be eligible for this benefit. A member's survivor who Is eligible for any other pre-retirement death benefit may choose to receive that death benefit Instead of this Basic Death benefit. Benefit The Basic Death Benefit Is a lump sum In the amount of the member's accumulated contribUtions, where Interest Is currently creqlted at 7.75% per year, plus a lump sum In the amount of one month's salary for each completed year of current service, up to a maximum of six months' salary, For purposes of this benefit, one montl1's salary Is defined as the member's average monthly full-time rate of compensation during the 12 months pre<:edlng death. 1957 Survivor Benefit This Is a standard benefit. m~~_ .' . . An employee's eligIble surv/vor{s) may receive the 1957 Survivor benefit If the member dies while actively emploYed, has attained at least age 50, and has at least 5 years of credited service (total service across all CB1PERS employers and with certain other Retirement Systems with which calPERS has reclprodty agreements). A CBIPERS member must be actively employed with the calPERS employer providing this benefit to be eligible for this beneHt. An eligible survivor means the surviving spouse to whom the member was marrted at least one year before death or, If H1ere Is no eligible spouse, to the member's unmarried children under age 18. A member's survivor who Is eligible for any other pre .... etlrement death benefit may choose to receive that death benefit Instead of this 1957 Sunlivor benefit. Benefit The 1957 SUIVIvor 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 tha 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 a dependent child, the benefit will be discontinued upon death or attainment of age 18, unless the child Is disabled. The total amount paid will be at least equal to the Basic Death benefit. Optional Settlement 2W Death Benefit This Is an optional beneHt. Eligibility An employee's eligible survivor may receive the Op~onal Settlement 2W Death benefit If the member dies while actively employed, has attained at least age 50, and has at least 5 years of credited service (total service across all 6-7 CALPERS ACfUARIAL VALUATION -June 30, 2009 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO . EMPLOYER NUMBER 14 APPENDIX B CalPERS employers and with certain other Retirement Systems with which CaIPERS has reciprocity agreements). A CaIPERS member who Is ne longer actively employed with any CaIPERS employer Is not eligible for this benefit. An eUglble slJlYivvr means the surviving spouse to whom the member· was married at least one year before death •. A member's survivor who Is eligible for any other pre-retirement death benefit may choose to receive that death benefit Instead of this Optional Settlement 2W Death benefit. ,. Benent The Optional Settlement 2W Death benefit Is a monthly allowance equal to the service Retirement beneftt that the member would have received had the member retired on the date of his or her death and elected Optional settlement 2W, (A retiree who elects Optional Settlement 2W receives an allowance that has been reduced so that It will continue to be paid after his or her death to a surviving beneficiary.) The allowance Is payable as long as the surviving spouse lives, at which time It Is continued to any unmarned children under age 18, If applicable. The total amount paid will be at least equal to the Basic Death Benefit. Special Death Benefit ThiS Isa standprd benefit fur safety members. An employer may elect to provide this benefit for miscellaneous members. Eligibility An employee's el/f!lbie SIJ!VIvor(s) may receive the Special Death benefit If the member dies while actively employed and the death Is Job-related. A CaIPERS member who Is no longer actively employed with any CaIPERS employer Is not eligible· for this benefit. An ellglb/Q IMvtvor means the surviving spouse to whom the member was married prlor to the onset of the IriJuly or Illness that resulted In death. If there Is no eligible spouse, an eligible survivor means the member's unmarried children ·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 ftnal 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 SO. The allowance Is payable to the surviving spouse un~1 death at which time the allowance Is conijnued to any unman1ed children 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 15 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 ellglb/Q surviving children (eligible means unmarried children under age 22) In addition to an eligible spouse, then an additional monthly allowance Is paid equal to the following: • If 1 eligible child: • If 2. eligible children: • If 3 or more eligible children: 12.5% of flnal compensation 20.0% of final compensation 25.0% of final compensatlon Altemate Death Benefit for Local Fire Members This Is an optional beneftt available only to local fire members. Eligibility An employee's ellglb/Q slJ!Vlvor{s) may receive the Mernate Death benefit In lieu of the BaSlc Death Benefit or the 1957 Survivor Benefit If the member dies while actively employed and has at least 20 years of total CaIPERS service. A CaIPERS member who Is no longer actlvely employed with any CaIPERS employer Is net eligible for this benefit. An eUglb/e SlJlYivor means the survlvlng spouse to whom the member was mamed prior to the onset of the Injury or Illness that resulted In death. If there IS 00 eligible spouse, an eligible survivor means the member's unmarried children under age 18. ..) ------------------------..... - 1l-8 •• ) CAlPERS ACTUARIAl VAWATlON -June 30, 2009 MISCELLANEOUS PLAN OF THE CITY OF PAlO ALTO EMPLOYER NUMBER 14 BenefIt APPENDIX B The Alternate Death benefit Is a monthly allowance equal to the Service Retirement benefit that the member would have received had the member retired on the date of his or her <death and elected Optional Settlement 2W. (A retlree who elect'S Optional Settlement 2W receives an allowance thathas been reduced so that It will continue to be paid after his or her death to a SUrviving benefidary.) If the member has not yet attained age 50, the benefit Is equal to that which would be payable If the meinber 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 tlme It Is continued to any unmarried children under age 18, If applicable. The total amount paid will be at least equal to the Basic Death Benefit. Cost-of-Living Adjustments Standard Bentlfit Beginning the second calendar year after the year of retirement, retirement and survivor allowances will be annually adjusted on a compound basis by 2%. <Improved Benefit Employers have the option of proViding an Improved cost-of-lIvlng adjustment of 3%, 4% or 5%. The cumulative adjustment may not be greater than the cumulative change In the Consumer Price Index since the date of retlrement. Purchasing Power Protection Allowance (PPPA) Re~rement and sUlVlvor allowances are protected against InflaHon by PPPA. PPPA benellts are cost-of-lIvlng adjustments that are Intended to maintain an Individual's allowanoe at 80% of the Initial allowanoe at retirement adJusbed for Infiatlon Since reUrement. The PPPA benefit will be coordinated with other cost-at-liVing adjustments provided under the plan. Employee Contributions Each employee contributes toward his or her retirement based upon the retirement formula. The standard employee contribution Is as described below. The peraent contrlbuted 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. Illnefit E!!rmllia p~[QlIli &2Iltl:lllllt!l1I DIl!!v!! til!! ilwllllllllli Miscellaneous 2% at 60 7% Miscellaneous 2% at 55 7% r-----Miscellaneous 2.5% at 55 8% Miscellaneous 2.7% at 55 8% Miscellaneous 3% at 60 8% "". Safet\', U2 at 55 Varies by entry age Safety, 2% at 55 7% safelY. 2% at 50 9% safety, 3% at 55 9% safety, 3% at 50 9% The employer may choose to "pick-up" these contributions for the employees (Employer Paid Member Cont~butlons or EPMC). An employer may also Include Employee Cost Sharing In the contract, where employees contribute an addltlonal percentage of compensatlon. B-9 CALPERS ACTUARIAL VALUATION -June 30, 2009 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO EMPLOYER NUMBER 14 APPENDIXB _Auxiliary organlzaHons of the CSUC system may elect reduced contribution rates, In which case the offset Is $317 ".'p.). and the contribution rate Is 6% If members are not covered by Social Security, If members are covered by . Social Security the offset Is $'51J 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 annually with 6% Interest. 1959 Survivor Benefit this Is a pre-retirement death benefit available only to members not covered by Social Security. Any agency jOining CaIPERS subsequent to 1993 was required to provide this benefit If the members were not ·covered by SoCial Secunty, The benefit is optional for agendes joining CaIPERS prior to 1994. Levels I, 2 and 3 are now dosed. Any new agency or any agency wishing to edd this benefit or Increase the current level must choose the 4111.or Indexed Level. this benefit Is not Included In the results presented in this valuation, More Information on this benefit Is aballable on the CaIPERS website at www.calpers.ca.gov. IHO ') ,,,,, . ) ",.,' () APPENDIXC • GAIB STATEMENT NO. 27 () , . ) ) CAlPERS ACTUARIAL VALUATION -June 30, 2009 APPENDIX C GASB STATEMENT NO. 27 . () MISCELLANEOUS PLAN of the CITY OF PALO ALTO ( ) Information for Compliance with GASB Statement No. 27 . Under GASB 27, an employer reports an annual pension cost (APe) equal to the annual required conb'lbutlon (ARC) plus an adjustment for the cumulatlve difference between the APe and the employer's actual plan contributions for the year. The cumulatlve difference Is called the net pension obllgatlon (NPO). The ARC for the period July 1, 2011 to June 30, 2012 has been determined by an actuarial valuation of the plan as of June 30, 2009. The contribution rate for the Indicated period Is 21.725% of payroll and 0.000% for the 1959 Survivor Program. In order to calculate the dollar value of the ARC for Inclusion In financial statements prepared as of June 30, 2012, this contribution rate, as modified by any amendments for the year, would be multiplied by the payroll of covered employees that was actually paid durIng the period July 1, 2011 to June 30, 2012. The employer and the employer's audItor are responsible for determining the NPO and the APC. Note! If an agency elects the Annual lump Sum Prepayment Option, the ARC for the period July 1, 2011 through June 30, 2012 Is $15,112,55'1, A summary of prindpal assumptions and methods used to determine the ARC Is shown below. Valuation Date Actuarial Cost Method Amortization Method Average Remaining Period Asset Valuation Method Actuarial Assumptions Investment Rate of Return Projected Salary Increases Inflation Payroll Growth Individual Salai)' Growth RetlremeatProqr!IIR June 30, 2009 Entry Age Normal Cost Method level Percent of Payroll 21 Years as of the Valuation Date 15 Year Smoothed Market 7.75% (net of administrative expenses) 3.55% to 1'1.45% depending on Age, Service, and type of employment 3.00% 3.25% A merit scale varying by duration of employment coupled with an assumed annual Inflation growth of 3.00% and an annual production growth of 0.25%, Initial unfunded liabilities are amortized over a closed period that depends on the plan's date of entry Into CaIPERS. Subsequent plan amendments are amortized as a level percentage of pay over a closed 20-year period. Gains and losses that occur In the operation of the plan are amortized over a 30 year roiling period, which results In an amortization of about 6% of unamortized gains and losses each year. If the plan's accrued liability exceeds the actuarial value of plan assets, then the amortization payment on the total unfunded liability may not be lower than the payment calculated over a 30 year amortization period. More complete Information on assumptions and methods Is provided In AppendiX A of thIS report. Appendlx.B contains a description of beneflts Included In the valuation. The SchedUle of Funding Progress below shows the recent history of the actuarial accrued liability, actuarial value of assets, their relationship and the relationship of the. unfunded actuarial accrued liability to payroll. Date Accrued Liability (a) Value of Assets (AVA) Liability (UL) (b) (a)-(b) Covered Payroll (el UI.As II Ofoof C-l ) o ,. APPENDIX D INVESTMENT RETURN SENSITIVITY ANALYSIS /) ) ') .,,) CALPERS ACTuARIAL VALUATION -June 30, 2009 INVESTMENT RETURN SENSITIVITY ANALYSIS APPENDIX D () Investment Return Sensitivity Analysis () The Investment return rellUzed during a fiscal year first affects the contribution rate for the flscal year 2 years later. Specifically, the Investment return ror 2009-2010 will first be reflected In the June 30, 2010 actuarial valuation that will be used to set the 2012-2013 employer contribution rates and 2010-2011 Investment return will first be reflected In the June 30, 2011 actuarial valuation that WIll be used to set the 2013-2014 employer contfibutlon rates. In July 2010, the Investment return for fiscal year 2009-2010 was announced to be 11.4%. Note that this return Is befbre administrative expenses and also does not reflect flnal Investment return Infbrmatlon for real estate and private equities. The flnal return Information for these two asset classes Is expected to be available later In October. The preliminary 11.4% return for the 2009-2010 fiscal year Is good news as It would help re(juce the Impact of the -24% return In 2008-2009 and the Impact of the three year phase In adopted by the Board In June 2009. For purposes of projecting future employer rates, we are assuming an 11% Investment return for fiscal year 2009-2010. Based on an 11% Investment return for fiscal year 2009-2010 and assuming that aU other actuarIal assumptions will be realized and that no further changes to assumptions, contributions, benefits, or funding will occur between now and the beginnIng of the fiscal year 2012-2013, the effect on the 2012-2013 Employer Rate Is as rollows: Estimated 20l2-20l3 Employer Rate 23.1% Estimated Increase In Employer Rate between 2011-2012 and 2012-2013 1.4% As part of thl$ report, a senSitivity analysIs was performed to detennlne the effects of various Investment returns during fiscal year 2010:-2011 on the 2013-2014 employer rates. Once again, the projected 2013-2014 rate Increases assume that all other actuarial assumptIons will be realized and that no further changes to assumptions, contributions, benefits, or funding will occur between now and the beginning of f1scaLyear 2013-2014. Five dIfferent 2010-2011 Investment retum scenarios were selected. • The first scenario Is what one would expect If the markets were to give us a 5'" percentile return. The 5·h percentile return corresponds to a -11% return for the 2010-2011 fiscal year. • The second scenario Is what one would expect If the markets were to gIve us a 2S·h percentlle return. The 25th percentile return corresponds to a 0% return for the 2010-2011 fiscal year. • The third scenario assumed the return fbr 2010-2011 would be our assumed 7.75% Investment return which represents about a 'Ii" percen~le event. • The fourth scenario Is what one would expect If the markets were to gIve us a 75th percentile return. The 75'" percentile return corresponds to a 16% return for the 2010-2011 fiscal year. • Finally, the last scenario Is what one would expect If the markets were to gIve us a 95'" percentile return. The 95'" percentile return corresponds to a 27% return for the 2010-2011 fiscal year. The table below shows the estimated 2013-2014 contribution rate and the estimated Increase over the 2012-2013 rate for your plan under the five different scenarios. 2010-2011l11vestment Estimated 2013-2014 Estimated Increase in Employer Rate Return Scenario EmDlover Rate between 2012-2013 and 29.13-2014 -11% 32.6% 9.5% 0% 28.6% 5.7% 7.75% 26.2% 3.1% -...... 16% 23.5% 0.4% 27% 23.3% 0.2% 0-1 t) J L .. () APPENDIX E GLOSSARY OF ACTUARIAL TERMS ) , ...... ) \ ..... ) CALPERS ACTUARIAL VALUATION -lune 30, 2009 GLOSSARV OF ACTUARIAL TERMS APPENDIX E () Glossary of Actuarial Terms i) ) Accrued L1ablnty (also called Actuarial Accmed liability or Entty Age NoImlll Accrued LlabHtty) The total doliars needed as of the valuation date to fund all beneftts earned In the past for cummt members. Actuarial Assumption, . ... Assumptions made about certain events that will affect pension ccsts. AssumpHons generally can be broken . down Inro two categories: demographic and economic. Demographic assumptlons Indude such things .s . mortality, disability and retirement rates. Economic assumptions Include Investment return, salary growth and Inftallon. ActuarIal Methods Procedures employed by actuaries to achieve certain goals of a pension plan. These may Include things such as funding method, setting the length of time to fund the past service liability .nd determining the actuarial value of assets. Actuarial Valuation The determination, as of a valuation date, of the normal cost, actuarial accrued liability, actuarial value of assets and related actuarial present values for a pension plan. These valuations are performed annually or when an employer Is oontemplatlng a change to their plan provisions. Actuarial Value of A_ts The actuarial value of assets used for funding purposes Is obtained through an asset smoothing technique where Investment gains and losses are partially recognized In the year they are Incurred, with the remainder recognized In subsequent years. This method helps to dampen large fluctuations In tlhe employer contribution rate. Amortization Bases Separate payment schedules for different portions of the unfunded liability. The total unfunded liability of a risk pool or non-pooled plan can be segregated by "cause", creatlng "bases" and each such base will be separatelY amortized and paid for over a spedftc period of time. This can be likened to a home mortgage that has 24 years of remaining payments and a seoond on that mortgage that has 10 years left. Each base or each mortgage note has Its own terms (payment period, principal, el<:.) Generally In an actuarial valuallon, the separate bases consist of changes In unfunded liability due to amendments, actuarial assumption changes, actuarial methodology changes, and gains and losses. Payment periods are determined by Board policy and vat)' based on the cause of the change. Amortlzatlon Period The number of years required to payoff an amortization base. Annual RequlredContrlbutlonli {ARC} The employers parlodlc required annual contributions to a defined benefit pension plan as set forth In GASB Statement No. 27, calculated In accordance with the plan assumptions. The ARC Is determined by multiplying the employer contrlbutlon rate by the payroll reported to calPERS for the applicable fiscal year. However, If this contribution Is fully prepaid In a lump sum, then the dollat value of the ARC Is equal to the Lump Sum Prepayment. ' I!ntry Age The earliest age at which a plan member begins to accrue benefits under a deftned benefit pension plan or risk pool. In most cases, this Is age of tlhe member on their dare of hire. Entry Age Nomal Cost Method An actuarial cost method designed to fund a member's total plan benefit over the course of his or her career. This method Is designed to yield a rate expressed as a level percentage of payroll. E-1 CAlPERS ACTUARIAL VALUATION -June 30, 2009 GLOSSARY OF ACTUARIAL TERMS APPENDIX E (The assumed retirement age less the entry age Is the ·amount of time required to fund a member's total benefit. Generally, the older a member on the date of hire, the greater the entry age nonnal cost. This Is mainly because there Is less time to eam Investment Income to fund the future benefits.) Fresh Start A fresh start Is the single amortization base created when multiple amort1zatlDfl beses are collapsed Into one base and amortized over a new funding period. Funded Status A measure of how well funded a plan Is. Or equivalently, how "on track" a plan Is with respect to assets ys. accrued liabilities. A ratiO greater than 100% means the plan or risk pool has mo(e assets than liabilities and a ratio less than 100% means liabilities are greater than assets. A funded ratio based on the Actuarial Value of Assets Indicates the progress toward fully funding the plan using the actuarial cost methOds and assumptions. A funded ratiO based on the Market Value of Assets Indicates the short-term solvency of the plan. GASB27 . Statement No. 27 of the Governmental Accounting Standards Board. The accounting standard governing a state or local governmental employer's accounting for pensions. Lump Sum Conb1bution A payment made by the employer to reduce or eliminate the unfunded liability. Normal Cost The annual cost of service accrual for the upcoming flscal year for active employees. The normal cost should be viewed as the long term contribution rate. Pension Actuary A person who Is responsible for the calculations necessary to properly fund a pension plan. Prepavment COntribution A payment made by the employer to reduce or eliminate the year's required employer contribution. Present ValUe of Benefits The tIltal doliars needed as of the valuation date to fund all beneflts earned In the past or expected to be earned In the future for cutrentmembers. Roiling Amortization Period An amortization period that remains the same each year, rather than declining. Sliperfunded . A condition existing when the actuarial value of assets exceeds the present value of benefits. When this condition exists on a given valuation date for a given plan, employee contributions for the rate year covered by that valuation may be waived. Unfunded LlBbllitv or Unfunded Accrued Uabllitv (UAL) A plan with an actuarial value of assets below the accrued liability Is said to have an unfunded liability aJ1(! must tempcrarlly Increase contribUtions to get back on schedule, E-2