HomeMy WebLinkAboutStaff Report 3385 City of Palo Alto (ID # 3385)
City Council Informational Report
Report Type: Informational Report Meeting Date: 12/17/2012
December 17, 2012 Page 1 of 6
(ID # 3385)
Title: CalPers Pension 2012
Subject: Transmittal of the CalPERS City of Palo Alto Pension Plan Annual
Valuation Report as of June 30, 2011
From: City Manager
Lead Department: Administrative Services
Discussion
The City of Palo Alto provides a defined pension benefit to its employees through the State of
California Pension Retirement System (CalPERS), which manages and administers the program.
Pursuant to CalPERS rules, 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) for safety employees (fire and police); and 2) for miscellaneous
employees (all other non-safety personnel such as field personnel, administrative support and
managers).
For Fire (safety) employees hired up to June 7, 2012, the retirement formula is 3 percent for
each year worked and eligibility starts at 50 years of age (3%@50). Fire employees hired after
this date receive 3%@55. For Police (safety) employees hired up to December 6, 2012, the
retirement formula is 3 percent for each year worked and eligibility starts at 50 years of age
(3%@50). Fire employees hired after this date receive 3%@55. For the majority of current
miscellaneous employees the formula is 2.7 percent per year worked with eligibility starting at
the age of 55 (2.7%@55). However, effective July 16, 2010 the City changed the formula for
new employees to 2 percent per year with eligibility starting at the age of 60 (2%@60). As a
result of the new formulas, which lower the pension benefit for newer employees, the City
should begin to see savings for miscellaneous employees in the 2012 pension rates just
received and savings associated with pension changes in the firefighter union should appear in
the October 2014 report.
CalPERS prepares an annual 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, former employees that are vested but have yet to retire and retired employees
as of June 30, 2011. Staff received the actuarial reports dated October 2012 in late November
2012. The CalPERS actuarial analysis by practice is completed two years in arrears.
December 17, 2012 Page 2 of 6
(ID # 3385)
As of January 1, 2013, by California State law, a new third tier for new members in the
miscellaneous (2%@62) and safety (2.7%@57) groups will be in effect. Staff will provide details
of the new tier in a separate report.
The chart below reflects the rates paid for 2012/13, the new rate for 2013/14, and the
projected rates for 2014/15 and 2015/16.
PERS Projected Rates
Current Next Year Year to Projected Year to Projected Year to
Payment Payment Year Payment Year Payment Year
2012/13 2013/14 Change 2014/15 Change 2015/16 Change
Miscellaneous1
22.97%
24.60%
26.4%
26.9%
1.63% 1.80% 0.50%
Safety2
31.05%
33.44%
35.90%
36.6%
2.39% 2.46% 0.70%
1) The employee share of pension costs is 7% or 8%, of which the employee pays 2% and the
City pays 5% or 6% depending on the pension formula for 46 positions in the Utilities
Management and Professional Association of Palo Alto (UMPAPA). All other miscellaneous
employees pay the full share. The City and UMPAPA are currently in negotiations.
2) The employee share of pension costs for Safety is 9%
Overall, the projected annual increases for the next three years have increased compared to
the increases projected for the next three years in October 2011. The rates for miscellaneous
employees were projected to increase by 0.8% and are now projected to increase by 3.93%.
For safety, the safety rates were projected to increase by 0.95% and are now projected to
increase by 5.55%. The major impacts are as follows: This is the last year of the three year
smoothing of the -24% return in fiscal year 2008-09; the CalPERS drop in annual rate of return
expected from 7.75% to 7.50%; and the rate of return of 0% for fiscal year 2011-12. There are
other factors, but those three are the major drivers.
The pension liability and current funding for safety and miscellaneous employees is shown here:
December 17, 2012 Page 3 of 6
(ID # 3385)
1) (AVA) Based on a point in time (June 30, 2011) comparison between the smoothed Market
Value of Assets and the Actuarial Liability. Smoothing occurs over a very long (15 years)
period and is not a great indicator of how well funded the plan is. This number will be much
less volatile from one year to the next and is used to determine the City’s 2013/14 fiscal
year contribution.
FY 2012-13
June 30, 2010
FY 2013-14
June 30, 2011
Difference
Safety
1 Present Value of Projected Benefits $347,457,939 $ 367,931,908 $20,473,969 6%
2 Entry Age Normal Accrued Liability $293,895,452 $ 313,183,690 $19,288,238 7%
3 Actuarial Value of Assets $244,413,456 $ 254,304,173 $9,890,717 4%
4 Unfunded Liability (AVA Basis) [(2)-(3)] $49,481,996 $ 58,879,517 $9,397,521 19%
5 Funded Ratio (AVA Basis) [(3)/(2)] 83.2% 81.2% -2.0%
6 Market Value of Assets (MVA) $190,527,731 $ 225,015,089 $34,487,358 18%
7 Unfunded Liability (MVA Basis) [(2)-(6)] $103,367,721 $ 88,168,601 ($15,199,120) -15%
8 Funded Ration (MVA Basis) [(6)/(2)] 64.8% 71.8% 7.0% 11%
Miscellaneous
1 Present Value of Projected Benefits $609,397,781 $ 638,375,787 $28,978,006 5%
2 Entry Age Normal Accrued Liability $521,269,469 $ 552,715,631 $31,446,162 6%
3 Actuarial Value of Assets $416,810,087 $ 434,985,547 $18,175,460 4%
4 Unfunded Liability (AVA Basis) [(2)-(3)] $104,459,382 $ 117,730,084 $13,270,702 13%
5 Funded Ratio (AVA Basis) [(3)/(2)] 80.0% 78.7% -1.3%
6 Market Value of Assets (MVA) $323,971,012 $ 384,056,704 $60,085,692 19%
7 Unfunded Liability (MVA Basis) [(2)-(6)] $197,298,457 $ 168,658,927 ($28,639,530) -15%
8 Funded Ration (MVA Basis) [(6)/(2)] 62.2% 69.5% 7.3% 12%
Total Unfunded Liability (AVA Basis) $153,941,378 $ 176,609,601 $ 22,668,223 15%
Total Unfunded Liability (MVA Basis) $300,666,178 $256,827,528 ($43,838,650) -15%
Total Employer Contribution
Miscellaneous $ 15,800,795 $ 16,208,975 $ 408,180 3%
Safety $ 7,870,938 $ 8,322,938 $ 452,000 6%
Total $ 23,671,733 $ 24,531,913 $ 860,180 4%
December 17, 2012 Page 4 of 6
(ID # 3385)
2) (MVA) - Based on a point in time (June 30, 2011 in this case) comparison between the
Market Value of Assets and the Actuarial Liability. This number will be volatile from one
year to the next but is the best indicator of how well funded the plan is. It also is the likely
amount (with some minor modifications) GASB will require the City to recognize on its
financial statement when GASB Statement No. 27 is implemented.
The following table provides a summary of valuation data as of June 30, 2011:
Miscellaneous Safety Total
Active Members 765 185 950
Average Annual Covered Pay $78,821 $123,105
Transferred Members (to other
agency)
294 62 356
Average Annual Covered Pay $107,846 $113,883
Terminated Members (yet to retire) 305 34 339
Average Annual Covered Pay $59,389 $76,703
Retired Members and Beneficiaries 941 390 1331
Average Annual Covered Pay $29,501 $41,301
New additions to the report
CalPERS was asked by various agencies to provide a hypothetical termination liability. New in
this year’s actuarial is an estimation of the liability. The table below outlines Palo Alto’s liability
based on the assumption that the rate of return would the 30 year US Treasury stripped US
Coupon rate. Please see page 15 of the actuarial reports for further explanations:
December 17, 2012 Page 5 of 6
(ID # 3385)
Hypothetical
termination
Liability
Market
Value of
Assets
(MVA)
Unfunded
Termination
Liability
Termination
Funded
Ration
Disc
ount
Rate
Miscellaneous $
770,280,910
$
384,056,704
$
386,224,206
49.9% 4.82
%
Safety $
458,637,906
$
225,015,089
$
233,622,817
49.1% 4.82
%
Total $
1,228,918,816
$
609,071,793
$
619,847,023
Difference
Total Unfunded
Liability (AVA)
$
176,609,601
$
443,237,422
7.50
%
Total Unfunded
Liability (MVA)
$
256,827,528
$
363,019,495
7.50
%
Another change is the inclusion of an Analysis of Discount Rate Sensitivity. This has also been
an area of discussion among the member agencies and associated governing boards. This is the
language from page D-3 in Appendix D. “The following analysis looks at the 2013-14 employer
contribution rates under two different discount rate scenarios. Shown below are the employer
contribution rates assuming discount rates that are 1% lower and 1% higher than the current
valuation discount rate. This analysis gives an indication of the potential required employer
contribution rates if the PERF were to realize investment returns of 6.50% or 8.50% over the
long-term. This type of analysis gives the reader a sense of the long-term risk of the employer
contribution rate”.
December 17, 2012 Page 6 of 6
(ID # 3385)
2013-14 Employer Contribution Rate
As of June 30, 2011
Miscellaneous
Employees
6.50% Discount Rate
(-1%)
7.50% Discount Rate
(Assumed Rate)
8.50% Discount Rate
(+1%)
Employer Normal Cost 14.69% 10.36% 7.03%
Unfunded Rate
Payment 22.86% 14.24% 7.50%
Total 37.55% 24.60% 14.53%
As of June 30, 2011
Safety Employees
6.50% Discount Rate
(-1%)
7.50% Discount Rate
(Assumed Rate)
8.50% Discount Rate
(+1%)
Employer Normal Cost 25.47% 18.65% 13.40%
Unfunded Rate
Payment 27.71% 14.79% 5.84%
Total 53.18% 33.44% 19.24%
Staff will include the pension payment increases in the FY14 Proposed budget and had included
the increases in the latest Long Range Financial Forecast.
Attachments:
Attachment A: Safety Plan Annual Valuation Report June 30, 2011 (PDF)
Attachment B: Miscellaneous Plan Annual Valuation Report June 30, 2011 (PDF)
California Public Employees’ Retirement System
Actuarial Office
P.O. Box 942701
Sacramento, CA 94229-2701
TTY: (916) 795-3240
(888) 225-7377 phone • (916) 795-2744 fax
www.calpers.ca.gov
October 2012
SAFETY PLAN OF THE CITY OF PALO ALTO (CalPERS ID 6373437857) Annual Valuation Report as of June 30, 2011 Dear Employer,
As an attachment to this letter, you will find a copy of the June 30, 2011 actuarial valuation report of your pension
plan. This report contains important actuarial information about your pension plan at CalPERS. Your CalPERS staff
actuary is 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, 2011 valuation. In addition, a temporary modification to our method of determining the actuarial value of assets and
amortizing gains and losses was implemented for the valuations as of June 30, 2009 through June 30, 2011. The
effect of those modifications continue in this valuation.
There may also be changes specific to your plan such as contract amendments and funding changes.
Further descriptions of general changes are included in the “Highlights and Executive Summary” section and in
Appendix A, “Statement of Actuarial Data, Methods and Assumptions.” The effect of the changes on your rate is
included in the “Reconciliation of Required Employer Contributions.” As noted on page 13 of the report, your plan can elect not to phase-in the cost of the assumption change by notifying your plan actuary prior to
May 1, 2013.
Future Contribution Rates
The exhibit below displays the required employer contribution rate before any cost sharing and Superfunded status for
2013/2014 along with estimates of the contribution rate for 2014/2015 and 2015/2016 and the probable Superfunded status for 2014/2015. The estimated rate for 2014/2015 is based solely on a projection of the investment return for
fiscal 2011/2012, namely 0%. The estimated rate for 2015/2016 uses the valuation assumption of 7.5% as the
investment return for fiscal 2012/2013. See Appendix D, “Analysis of Future Investment Return Scenarios”, for rate
projections under a variety of investment return scenarios. These rates may not be GASB compliant. See
Appendix C for the GASB compliant rate. Please disregard any projections that we may have provided to you in the
past.
Fiscal Year Employer Contribution Rate Superfunded?
2013/2014 33.444% NO
2014/2015 35.9% (projected) NO 2015/2016 36.6% (projected) N/A
Member contributions other than cost sharing, (whether paid by the employer or the employee) are in addition to the
above rates. The estimates for 2014/2015 and 2015/2016 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 very important
assumption because these gains and losses do occur 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 2014/2015 will be
provided in next year’s report.
SAFETY PLAN OF THE CITY OF PALO ALTO (CalPERS ID 6373437857)
October 2012
Page 2
California Actuarial Advisory Panel Recommendations
The report satisfies all basic disclosure requirements under the Model Disclosure Elements for Actuarial Valuation
Reports recommended by the California Actuarial Advisory Panel, except for the original base amounts of the various
components of the unfunded liability amortization.
The report gives the following additional information classified as enhanced risk disclosures under the Model Disclosure Elements for Actuarial Valuation Reports recommended by the California Actuarial Advisory Panel:
“Deterministic stress test”, projecting future results under different investment income scenarios. (See
Appendix D’s Analysis of Future Investment Return Scenarios.)
“Sensitivity analysis”, showing the impact on current valuation results of a plus or minus 1% change in the
discount rate. (See Appendix D’s Analysis of Discount Rate Sensitivity.)
We are very busy preparing actuarial valuations for other public agencies and expect to complete all such valuations by
the end of October. We understand that you might have a number of questions about these results. While we are very interested in discussing these results with your agency, in the interest of allowing us to give every public agency
their result, we ask that, if at all possible, you wait until after October 31 to contact us with questions. If you have
questions, please call (888) CalPERS (225-7377).
Sincerely,
ALAN MILLIGAN
Chief Actuary
ACTUARIAL VALUATION
as of June 30, 2011
for the
SAFETY PLAN
of the
CITY OF PALO ALTO
(CalPERS ID 6373437857)
REQUIRED CONTRIBUTIONS
FOR FISCAL YEAR
July 1, 2013 – June 30, 2014
TABLE OF CONTENTS
ACTUARIAL CERTIFICATION 1
HIGHLIGHTS AND EXECUTIVE SUMMARY
Purpose of the Report 5
Required Employer Contribution 5
Funded Status 6
Cost 6
Changes Since the Prior Valuation 7
SUMMARY OF LIABILITIES AND RATES
Development of Accrued and Unfunded Liabilities 11
(Gain) / Loss Analysis 06/30/10 - 06/30/11 12
Schedule of Amortization Bases 13
Reconciliation of Required Employer Contributions 14
Employer Contribution Rate History 15
Funding History 15 Hypothetical Termination Liability 15
SUMMARY OF ASSETS
Reconciliation of the Market Value of Assets 19
Development of the Actuarial Value of Assets 19
Asset Allocation 20
CalPERS History of Investment Returns 21
SUMMARY OF PARTICIPANT DATA
Summary of Valuation Data 25
Active Members 26
Transferred and Terminated Members 27 Retired Members and Beneficiaries 28
APPENDIX A – ACTUARIAL METHODS AND ASSUMPTIONS
Actuarial Data A-1
Actuarial Methods A-1
Actuarial Assumptions A-3
Miscellaneous A-17
APPENDIX B – PLAN PROVISIONS
Summary of Plan’s Major Benefit Options B-1
Description of CalPERS’ Principal Plan Provisions B-3
APPENDIX C – GASB STATEMENT NO. 27
APPENDIX D – RISK ANALYSIS Volatility Ratios D-1
Analysis of Future Investment Return Scenarios D-2
Analysis of Discount Rate Sensitivity D-3
APPENDIX E – GLOSSARY OF ACTUARIAL TERMS
FIN PROCESS CONTROL ID (CY) 393233 FIN PROCESS CONTROL ID (PY) 360456 REPORT ID 69525
CALPERS ACTUARIAL VALUATION - June 30, 2011
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
Page 1
ACTUARIAL CERTIFICATION
To the best of our knowledge, this report is complete and accurate and contains sufficient information to
disclose, fully and fairly, the funded condition of the SAFETY PLAN OF THE CITY OF PALO ALTO. This
valuation is based on the member and financial data as of June 30, 2011 provided by the various CalPERS
databases and the benefits under this plan with CalPERS as of the date this report was produced. It is our
opinion that the valuation has been performed in accordance with generally accepted actuarial principles, in
accordance with standards of practice prescribed by the Actuarial Standards Board, and that the assumptions and methods are internally consistent and reasonable for this plan, as prescribed by the
CalPERS Board of Administration according to provisions set forth in the California Public Employees’
Retirement Law.
The undersigned is an actuary for CalPERS, who is a member of the American Academy of Actuaries and the
Society of Actuaries and meets the Qualification Standards of the American Academy of Actuaries to render
the actuarial opinion contained herein.
DAVID CLEMENT, ASA, MAAA, EA
Senior Pension Actuary, CalPERS
HIGHLIGHTS AND EXECUTIVE SUMMARY
PURPOSE OF THE REPORT
REQUIRED CONTRIBUTIONS
FUNDED STATUS
COST
CHANGES SINCE THE PRIOR VALUATION
CALPERS ACTUARIAL VALUATION - June 30, 2011
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
Page 5
Purpose of the Report
This report presents the results of the June 30, 2011 actuarial valuation of the SAFETY PLAN OF THE CITY
OF PALO ALTO of the California Public Employees’ Retirement System (CalPERS). The valuation was prepared by the Plan Actuary in order to:
set forth the actuarial assets and accrued liabilities of this plan as of June 30, 2011;
determine the required employer contribution rate for this plan for the fiscal year July 1, 2013 through
June 30, 2014;
provide actuarial information as of June 30, 2011 to the CalPERS Board of Administration and other
interested parties; and provide pension information as of June 30, 2011 to be used in financial reports subject to Governmental Accounting Standards Board (GASB) Statement Number 27 for a Single Employer Defined Benefit
Pension Plan.
The use of this report for any other purposes may be inappropriate. In particular, this report does not
contain information applicable to alternative benefit costs. The employer should contact their actuary
before disseminating any portion of this report for any reason that is not explicitly described above.
Required Employer Contribution
Fiscal Year Fiscal Year
2012/2013 2013/2014
Required Employer Contributions
1. Contribution in Projected Dollars
a) Total Normal Cost $ 6,848,204 $ 6,883,043
b) Employee Contribution1 2,281,467 2,239,764
c) Employer Normal Cost [(1a) – (1b)] 4,566,737 4,643,279
d) Unfunded Contribution 3,304,201 3,679,659
e) Total Employer Contribution [(1c) + (1d)] $ 7,870,938 $ 8,322,938
f ) Employee Cost Sharing 0
g) Net Employer Contribution [(1e) – (1f)] 8,322,938
Annual Lump Sum Prepayment Option2 [(1g) / 1.075^.5] $ 7,582,595 $ 8,027,354
2. Contribution as a Percentage of Payroll
a) Total Normal Cost 27.015% 27.658%
b) Employee Contribution1 9.000% 9.000%
c) Employer Normal Cost [(2a) – (2b)] 18.015% 18.658%
d) Unfunded Rate 13.035% 14.786%
e) Total Employer Rate [(2c) + (2d)] 31.050% 33.444%
f ) Employee Cost Sharing 0.000%
g) Net Employer Contribution Rate [(2e) – (2f)] 33.444%
1This is the percentage specified in the Public Employees Retirement Law, net of any reduction from the use
of a modified formula. Employee cost sharing is shown separately and is therefore not included in this line item.
2Payment must be received by CalPERS before the first payroll reported to CalPERS of the new fiscal year
and after June 30.
CALPERS ACTUARIAL VALUATION - June 30, 2011
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
Page 6
Funded Status
Cost
Actuarial Cost Estimates in 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 that will terminate, die, become
disabled, and retire in each future year. Economic assumptions include future salary increases for each active employee, and the assumption with the greatest impact, future asset returns at CalPERS for each year into the future
until the last dollar is paid to current members of your plan.
While CalPERS 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 realized in any
one year. For example, while the asset earnings at CalPERS have averaged more than the assumed return
of 7.5% for the past twenty year period ending June 30, 2012, returns for each fiscal year ranged from
-24% to +21.7%
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 percentage of total active payroll.
The Past Service Cost or Accrued Liability (i.e., the current value of the benefit for 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 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 specific amortization period,
and the employer rate will vary depending on the amortization period chosen.
June 30, 2010 June 30, 2011
1. Present Value of Projected Benefits $ 347,457,939 $ 367,931,908
2. Entry Age Normal Accrued Liability 293,895,452 313,183,690
3. Actuarial Value of Assets (AVA) 244,413,456 254,304,173
4. Unfunded Liability (AVA Basis) [(2) – (3)] $ 49,481,996 $ 58,879,517
5. Funded Ratio (AVA Basis) [(3) / (2)] 83.2% 81.2%
6. Market Value of Assets (MVA) $ 190,527,731 $ 225,015,089
7. Unfunded Liability (MVA Basis) [(2) – (6)] $ 103,367,721 $ 88,168,601
8. Funded Ratio (MVA Basis) [(6) / (2)] 64.8% 71.8%
Superfunded Status No No
CALPERS ACTUARIAL VALUATION - June 30, 2011
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
Page 7
Changes since the Prior Valuation
Actuarial Assumptions
The CalPERS Actuarial office conducted a study and hired an independent evaluator to assess current
economic assumptions. Based on the information from both studies, the CalPERS Board of Administration
has adopted updated economic assumptions to be used beginning with the June 30, 2011 valuation. In
particular, the recommendation based on both studies was to lower the price inflation from 3.00 to 2.75 percent.
Lowering the price inflation had a direct impact on the Investment Return and the Overall Payroll Growth
assumptions. The Investment Return assumption is calculated as the sum of the price inflation and the real
rate of return. Our assumed real rate of return is 4.75 percent. When added to our new price inflation of
2.75 percent, the resulting investment return is 7.50 percent. The Overall Payroll Growth is calculated as
the sum of the price inflation and real wage inflation. Our assumed real wage inflation is 0.25 percent. When added to our new price inflation of 2.75 percent, the resulting overall payroll growth is 3.00 percent.
The new assumptions are described in Appendix A. The effect of change in assumption on the unfunded
liability is shown in the “(Gain)/Loss Analysis” and the effect on your employer contribution rate is included
in the “Reconciliation of Required Employer Contributions”. As noted on page 13 of the report, your
plan can elect not to phase-in the cost of the assumption change by notifying your plan actuary
prior to May 1, 2013.
The limitations on benefits imposed by Internal Revenue Code Section 415 were taken into account in this
valuation. The effect of these limitations has been deemed immaterial on the overall results and no
additional charge to the change in assumptions base was added.
Actuarial Methods
A method change was adopted by the CalPERS Board in June 2009. We are in the third year of a 3-year
temporary change to the asset smoothing method and the amortization of gains and losses in order to
phase in the impact of the -24% investment loss experienced by CalPERS 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)
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.”
Benefits
The standard actuarial practice at CalPERS is to recognize mandated legislative benefit changes in the first
annual valuation whose valuation date follows the effective date of the legislation. Voluntary benefit
changes by plan amendment are generally included in the first valuation that is prepared after the amendment becomes effective even if the valuation date is prior to the effective date of the amendment.
This valuation generally reflects plan changes by amendments effective before the date of the report.
Please refer to 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 “(Gain)/Loss
Analysis” and the effect on your employer contribution rate is shown in the “Reconciliation of Required
Employer Contributions”. It should be noted that no change in liability or rate is shown for any plan changes which were already included in the prior year’s valuation.
SUMMARY OF LIABILITIES AND RATES
DEVELOPMENT OF ACCRUED AND UNFUNDED LIABILITIES
(GAIN) / LOSS ANALYSIS 06/30/10 - 06/30/11
SCHEDULE OF AMORTIZATION BASES
RECONCILIATION OF REQUIRED EMPLOYER CONTRIBUTIONS
EMPLOYER CONTRIBUTION RATE HISTORY
FUNDING HISTORY
HYPOTHETICAL TERMINATION LIABILITY
CALPERS ACTUARIAL VALUATION - June 30, 2011
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
Page 11
Development of Accrued and Unfunded Liabilities
1. Present Value of Projected Benefits
a) Active Members $ 149,414,099
b) Transferred Members 13,548,827
c) Terminated Members 2,362,189
d) Members and Beneficiaries Receiving Payments 202,606,793
e) Total $ 367,931,908
2. Present Value of Future Employer Normal Costs $ 36,776,313
3. Present Value of Future Employee Contributions $ 17,971,905
4. Entry Age Normal Accrued Liability
a) Active Members [(1a) - (2) - (3)] $ 94,665,881
b) Transferred Members (1b) 13,548,827
c) Terminated Members (1c) 2,362,189
d) Members and Beneficiaries Receiving Payments (1d) 202,606,793
e) Total $ 313,183,690
5. Actuarial Value of Assets (AVA) $ 254,304,173
6. Unfunded Accrued Liability (AVA Basis) [(4e) – (5)] $ 58,879,517
7. Funded Ratio (AVA Basis) [(5) / (4e)] 81.2%
8. Market Value of Assets (MVA) $ 225,015,089
9. Unfunded Liability (MVA Basis) [(4e) - (8)] $ 88,168,601
10. Funded Ratio (MVA Basis) [(8) / (4e)] 71.8%
CALPERS ACTUARIAL VALUATION - June 30, 2011
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
Page 12
(Gain)/Loss Analysis 6/30/10 – 6/30/11
To calculate the cost requirements of the plan, assumptions are made about future events that affect the
amount and timing of benefits to be paid and assets to be accumulated. Each year actual experience is
compared to the expected experience based on the actuarial assumptions. This results in actuarial gains or losses, as shown below.
A Total (Gain)/Loss for the Year*
1. Unfunded Accrued Liability (UAL) as of 6/30/10 $ 49,481,996
2. Expected Payment on the UAL during 2010/2011 1,588,430
3. Interest through 6/30/11 [.0775 x (A1) - ((1.0775)½ - 1) x (A2)] 3,774,452
4. Expected UAL before all other changes [(A1) - (A2) + (A3)] 51,668,018 5. Change due to plan changes 0
6. Change due to assumption change 5,204,620
7. Expected UAL after all other changes [(A4) + (A5) + (A6)] 56,872,638
8. Actual UAL as of 6/30/11 58,879,517
9. Total (Gain)/Loss for 2010/2011 [(A8) - (A7)] $ 2,006,879
B Contribution (Gain)/Loss for the Year
1. Expected Contribution (Employer and Employee) $ 8,012,296
2. Interest on Expected Contributions 304,683
3. Actual Contributions 8,647,232
4. Interest on Actual Contributions 328,828 5. Expected Contributions with Interest [(B1) + (B2)] 8,316,979
6. Actual Contributions with Interest [(B3) + (B4)] 8,976,060
7. Contribution (Gain)/Loss [(B5) - (B6)] $ (659,081)
C Asset (Gain)/Loss for the Year
1. Actuarial Value of Assets as of 6/30/10 Including Receivables $ 244,413,456
2. Receivables as of 6/30/10 193,971
3. Actuarial Value of Assets as of 6/30/10 244,219,485
4. Contributions Received 8,647,232
5. Benefits and Refunds Paid (15,409,624)
6. Transfers and miscellaneous adjustments (15,747) 7. Expected Int. [.0775 x (C3) + ((1.0775)½ - 1) x ((C4) + (C5) + (C6))] 18,669,258
8. Expected Assets as of 6/30/11 [(C3) + (C4) + (C5) + (C6) + (C7)] 256,110,604
9. Receivables as of 6/30/11 285,646
10. Expected Assets Including Receivables 256,396,250
11. Actual Actuarial Value of Assets as of 6/30/11 254,304,173
12. Asset (Gain)/Loss [(C10) - (C11)] $ 2,092,077
D Liability (Gain)/Loss for the Year
1. Total (Gain)/Loss (A9) $ 2,006,879
2. Contribution (Gain)/Loss (B7) (659,081)
3. Asset (Gain)/Loss (C12) 2,092,077
4. Liability (Gain)/Loss [(D1) - (D2) - (D3)] $ 573,883
Development of the (Gain)/Loss Balance as of 6/30/11**
1. (Gain)/Loss Balance as of 6/30/10 $ 31,799,041
2. Payment Made on the Balance during 2010/2011 1,909,564 3. Interest through 6/30/11 [.0775 x (1) - ((1.0775)1/2 - 1) x (2)] 2,391,811
4. Scheduled (Gain)/Loss Balance as of 6/30/11 [(1) - (2) + (3)] $ 32,281,288
* The Total (Gain)/Loss for 2010/2011 is being amortized over a fixed and declining 30-year period and is shown as “Special (Gain)/Loss” in the “Schedule of Amortization Bases” on the following page.
** This (Gain)/Loss represents the 6/30/11 balance of the accumulation of (gains)/losses through 6/30/08
and is amortized using a rolling 30-year period. Gains and losses incurred after 6/30/2011 will again
accumulate to this base.
CALPERS ACTUARIAL VALUATION - June 30, 2011
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
Page 13
Schedule of Amortization Bases
There is a two year lag between the Valuation Date and the Contribution Fiscal Year.
The assets, liabilities and funded status of the plan are measured as of the valuation date (June 30, 2011).
The employer contribution rate determined by the valuation is for the fiscal year beginning two years after the valuation date (fiscal year 2013/2014).
This two year lag is necessary due to the amount of time needed to extract and test the membership and financial data, and due to the need to provide public agencies
with their employer contribution rates well in advance of the start of the fiscal year.
The Unfunded Liability is used to determine the employer contribution and therefore must be rolled forward two years from the valuation date to the first day of the
fiscal year for which the contribution is being determined. The Unfunded Liability is rolled forward each year by subtracting the expected Payment on the Unfunded
Liability for the fiscal year and adjusting for interest. The Expected Payment on the Unfunded Liability for a fiscal year is equal to the Expected Employer Contribution for
the fiscal year minus the Expected Normal Cost for the year. The Employer Contribution Rate for the first fiscal year is determined 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 Rate for each of the two fiscal years is assumed to be the same as the rate determined by the current valuation. All expected dollar amounts are determined by multiplying the rate by the expected payroll for the applicable fiscal year,
based on payroll as of the valuation date.
Amounts for Fiscal 2013/2014
Reason for Base
Date
Established
Amorti-
zation
Period
Balance
6/30/11
Expected
Payment
2011/2012
Balance
6/30/12
Expected
Payment
2012/2013
Balance
6/30/13
Scheduled
Payment for
2013–2014
Payment as
Percent-age of
Payroll
FRESH START 06/30/04 23 $(915,222) $(60,501) $(921,135) $(62,467) $(925,453) $(64,163) (0.258%)
BENEFIT CHANGE 06/30/05 13 $166,374 $15,260 $163,030 $15,755 $158,922 $16,174 0.065%
(GAIN)/LOSS 06/30/08 30 $32,281,288 $1,938,523 $32,692,481 $1,967,921 $33,104,033 $1,987,915 7.988%
ASSUMPTION CHANGE 06/30/09 18 $7,706,760 $582,101 $7,681,232 $601,019 $7,634,175 $617,183 2.480%
SPECIAL (GAIN)/LOSS 06/30/09 28 $8,454,147 $507,680 $8,561,834 $524,179 $8,660,491 $538,511 2.164%
SPECIAL (GAIN)/LOSS 06/30/10 29 $3,773,485 $0 $4,056,496 $244,163 $4,107,580 $250,867 1.008%
ASSUMPTION CHANGE 06/30/11 20 $5,204,620 $(125,030) $5,724,600 $(128,780) $6,287,467 $158,246 0.636%
SPECIAL (GAIN)/LOSS 06/30/11 30 $2,006,879 $0 $2,157,395 $0 $2,319,200 $139,269 0.560%
PAYMENT (GAIN)/LOSS 06/30/11 30 $201,186 $(168,139) $390,605 $(167,706) $593,782 $35,657 0.143%
TOTAL $58,879,517 $2,689,894 $60,506,538 $2,994,084 $61,940,197 $3,679,659 14.786%
The special (gain)/loss bases were established using the temporary modification recognized in the 2009, 2010 and 2011 annual valuations. Unlike the gain/loss
occurring in previous and subsequent years, the gain/loss recognized in the 2009, 2010, and 2011 annual valuations will be amortized over fixed and declining 30 year
periods so that these annual gain/losses will be fully paid off in 30 years.
The discount rate assumption is 7.5% after June 30, 2011 in the amortization schedule above.
Note: The assumption change at June 30, 2011 was phased-in over a two-year period. Without the phase-in, the total payment on the amortization bases would
increase from 14.786% to 16.058%. Your plan can elect not to phase-in the cost of the assumption change by notifying your plan actuary prior to May 1, 2013.
The required employer contribution rate with no phase-in is 34.716%.
CALPERS ACTUARIAL VALUATION - June 30, 2011
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
Page 14
Reconciliation of Required Employer Contributions
Percentage
of
Projected Payroll
Estimated $
Based on
Projected Payroll
1. Contribution for 7/1/12 – 6/30/13 31.050% $ 7,870,938
2. Effect of changes since the prior year annual valuation
a) Effect of unexpected changes in demographics and financial results 1.225% 304,954
b) Effect of plan changes 0.000% 0
c) Effect of changes in Assumptions 1.169% 290,920
d) Effect of change in payroll - (143,874)
e) Effect of elimination of amortization base 0.000% 0
f) Effect of changes due to Fresh Start 0.000% 0
g) Net effect of the changes above [Sum of (a) through (f)] 2.394% 452,000
3. Contribution for 7/1/13 – 6/30/14 [(1)+(2g)] 33.444% 8,322,938
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.
CALPERS ACTUARIAL VALUATION - June 30, 2011
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
Page 15
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.
[required_by_valuation] Required By Valuation
Fiscal Year Employer Normal Cost Unfunded Rate Total Employer Contribution Rate
2009 - 2010 16.812% 7.126% 23.938%
2010 - 2011 16.996% 7.699% 24.695%
2011 - 2012 17.813% 12.312% 30.125%
2012 - 2013 18.015% 13.035% 31.050%
2013 - 2014 18.658% 14.786% 33.444%
Funding History
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 short-term solvency of the plan.
[funding_history]
Valuation
Date
Accrued
Liability
Actuarial
Value of
Assets (AVA)
Market Value
of
Assets (MVA)
Funded
Ratio
AVA MVA
Annual
Covered
Payroll
06/30/07 $ 242,952,039 $ 216,498,610 $ 252,542,112 89.1% 103.9% $ 20,907,118
06/30/08 258,963,682 228,883,308 235,054,144 88.4% 90.8% 22,181,324
06/30/09 280,292,862 236,274,455 172,078,263 84.3% 61.4% 22,086,992
06/30/10 293,895,452 244,413,456 190,527,731 83.2% 64.8% 23,030,400
06/30/11 313,183,690 254,304,173 225,015,089 81.2% 71.8% 22,774,462
Hypothetical Termination Liability
In August 2011, the CalPERS Board adopted an investment policy and asset allocation strategy that more
closely reflects expected benefit payments of the Terminated Agency Pool. With this change, CalPERS increased benefit security for members while limiting its funding risk.
The table below shows the hypothetical termination liability, the market value of assets, the unfunded
termination liability and the termination funded ratio. The assumptions used, including the discount rate,
are stated in Appendix A and take into account the yields available in the US Treasury market on the
valuation date and the mortality load for contingencies. The discount rate is duration weighted and is not necessarily the rate that would be used for this plan if it were to terminate. The discount rate for this plan’s
termination liability would depend on the duration of the liabilities of this plan. For purposes of this
estimate, the discount rate used, 4.82%, is the June 30, 2011 30-year US Treasury Stripped Coupon Rate.
Please note, as of June 30, 2012 the 30-year US Treasury Stripped Coupon Rate was 2.87%.
[estimated_termination_liability]
Valuation
Date
Hypothetical
Termination Liability
Market Value
of Assets (MVA)
Unfunded
Termination Liability
Termination
Funded Ratio
Discount
Rate
06/30/11 $ 458,637,906 $ 225,015,089 $ 233,622,817 49.1% 4.82%
SUMMARY OF ASSETS
RECONCILIATION OF THE MARKET VALUE OF ASSETS
DEVELOPMENT OF THE ACTUARIAL VALUE OF ASSETS
ASSET ALLOCATION
CALPERS HISTORY OF INVESTMENT RETURNS
CALPERS ACTUARIAL VALUATION - June 30, 2011
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
Page 19
Reconciliation of the Market Value of Assets
1. Market Value of Assets as of 6/30/10 Including Receivables $ 190,527,731
2. Receivables for Service Buybacks as of 6/30/10 193,971
3. Market Value of Assets as of 6/30/10 190,333,760
4. Employer Contributions 5,851,514
5. Employee Contributions 2,795,718
6. Benefit Payments to Retirees and Beneficiaries (15,318,382)
7. Refunds (91,242)
8. Lump Sum Payments 0
9. Transfers and Miscellaneous Adjustments (15,747)
10. Investment Return 41,173,822
11. Market Value of Assets as of 6/30/11 $ 224,729,443
12. Receivables for Service Buybacks as of 6/30/11 285,646
13. Market Value of Assets as of 6/30/11 Including Receivables $ 225,015,089
Development of the Actuarial Value of Assets
1. Actuarial Value of Assets as of 6/30/10 Used For Rate Setting Purposes $ 244,413,456
2. Receivables for Service Buybacks as of 6/30/10 193,971
3. Actuarial Value of Assets as of 6/30/10 244,219,485
4. Employer Contributions 5,851,514
5. Employee Contributions 2,795,718
6. Benefit Payments to Retirees and Beneficiaries (15,318,382)
7. Refunds (91,242)
8. Lump Sum Payments 0
9. Transfers and Miscellaneous Adjustments (15,747)
10. Expected Investment Income at 7.75% 18,669,258
11. Expected Actuarial Value of Assets $ 256,110,604
12. Market Value of Assets as of 6/30/11 $ 224,729,443
13. Preliminary Actuarial Value of Assets [(11) + ((12) – (11)) / 15] 254,018,527
14. Maximum Actuarial Value of Assets (120% of (12)) 269,675,332
15. Minimum Actuarial Value of Assets (80% of (12)) 179,783,554
16. Actuarial Value of Assets {Lesser of [(14), Greater of ((13), (15))]} 254,018,527
17. Actuarial Value to Market Value Ratio 113.0%
18. Receivables for Service Buybacks as of 6/30/11 285,646
19. Actuarial Value of Assets as of 6/30/11 Used for Rate Setting Purposes $ 254,304,173
CALPERS ACTUARIAL VALUATION - June 30, 2011
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
Page 20
Asset Allocation
CalPERS follows a strategic asset allocation policy that identifies the percentage of funds to be invested in
each asset class. The current target allocation was adopted by the Board in December 2010.
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, 2011. The assets for CITY OF PALO ALTO SAFETY
PLAN are part of the Public Employees Retirement Fund (PERF) and are invested accordingly.
(A)
Asset Class
(B)
Market Value
($ Billion)
(C)
Current
Allocation
1) Short-Term Investments 7.9 3.3%
2) Domestic Equity 56.3 23.5%
3) International Equity 60.4 25.2%
4) Domestic Debt 49.2 20.6%
5) International Debt 3.9 1.6%
6) Inflation Linked 8.1 3.4%
7) Real Estate 19.1 8.0%
8) Alternative Investment 34.4 14.4%
Total Fund $239.3 100.0%
23.5%
Domestic
Equity
25.2%
International
Equity
1.6%
International
Debt
3.4%
Inflation
Linked
20.6%
Domestic
Debt
8.0% Real
Estate
14.4%
Alternative
Investment
3.3% Short-term
Investments
CALPERS ACTUARIAL VALUATION - June 30, 2011
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
Page 21
CalPERS History of Investment Returns
The following is a chart with historical annual returns of the Public Employees Retirement Fund for each
fiscal year ending on June 30. Beginning with June 30, 2002 the figures are reported as gross of fees.
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
12
.
5
%
14
.
5
%
2.0
%
16
.
3
%
15
.
3
%
20
.
1
%
19
.
5
%
12
.
5
%
10
.
5
%
-7.2
%
-6.1
%
3.7
%
16
.
6
%
12
.
3
%
11
.
8
%
19
.
1
%
-5.1
%
-24
.
0
%
13
.
3
%
21
.
7
%
SUMMARY OF PARTICIPANT DATA
SUMMARY OF VALUATION DATA
ACTIVE MEMBERS
TRANSFERRED AND TERMINATED MEMBERS
RETIRED MEMBERS AND BENEFICIARIES
CALPERS ACTUARIAL VALUATION - June 30, 2011
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
Page 25
Summary of Valuation Data
June 30, 2010 June 30, 2011
1. Active Members
a) Counts 191 185
b) Average Attained Age
41.64 41.39
c) Average Entry Age to Rate Plan 28.88 28.77
d) Average Years of Service 12.76 12.62
e) Average Annual Covered Pay $ 120,578 $ 123,105
f) Annual Covered Payroll 23,030,400 22,774,462
g) Projected Annual Payroll for Contribution Year 25,349,632 24,886,270
h) Present Value of Future Payroll 199,653,441 199,687,822
2. Transferred Members
a) Counts 60 62
b) Average Attained Age 43.90 43.64
c) Average Years of Service 5.99 5.49
d) Average Annual Covered Pay $ 114,673 $ 113,883
3. Terminated Members
a) Counts 35 34
b) Average Attained Age 40.71 41.51
c) Average Years of Service 5.00 4.04
d) Average Annual Covered Pay $ 75,250 $ 76,073
4. Retired Members and Beneficiaries
a) Counts 375 390
b) Average Attained Age 66.65 66.50
c) Average Annual Benefits $ 38,542 $ 41,301
5. Active to Retired Ratio [(1a) / (4a)] 0.51 0.47
Counts of members included in the valuation are counts of the records processed by the valuation. Multiple
records may exist for those who have service in more than one valuation group. This does not result in
double counting of liabilities.
CALPERS ACTUARIAL VALUATION - June 30, 2011
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
Page 26
Active Members
Counts of members included in the valuation are counts of the records processed by the valuation. Multiple
records may exist for those who have service in more than one valuation group. This does not result in
double counting of liabilities.
Distribution of Active Members by Age and Service
Years of Service at Valuation Date
Attained
Age 0-4 5-9 10-14 15-19 20-25 25+ Total
15-24 4 0 0 0 0 0 4
25-29 11 3 0 0 0 0 14
30-34 15 12 2 0 0 0 29
35-39 8 10 19 1 0 0 38
40-44 1 7 10 6 2 0 26
45-49 3 6 7 11 16 5 48
50-54 2 1 3 1 5 10 22
55-59 0 0 1 0 0 1 2
60-64 0 0 0 0 1 1 2
65 and over 0 0 0 0 0 0 0
All Ages 44 39 42 19 24 17 185
Distribution of Average Annual Salaries by Age and Service
Years of Service at Valuation Date
Attained
Age 0-4 5-9 10-14 15-19 20-25 25+ Average
15-24 $98,722 $0 $0 $0 $0 $0 $98,722
25-29 109,484 116,576 0 0 0 0 111,004
30-34 108,767 116,189 130,869 0 0 0 113,362
35-39 113,915 121,556 126,247 143,389 0 0 122,867
40-44 117,295 111,416 117,247 127,773 145,493 0 120,281
45-49 145,090 111,157 119,405 132,568 132,263 147,897 130,250
50-54 133,312 116,426 128,122 141,787 154,108 133,586 137,073
55-59 0 0 133,049 0 0 128,474 130,762
60-64 0 0 0 0 107,194 105,447 106,320
65 and over 0 0 0 0 0 0 0
All Ages $112,755 $115,970 $123,480 $132,108 $136,872 $135,839 $123,105
CALPERS ACTUARIAL VALUATION - June 30, 2011
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
Page 27
Transferred and Terminated Members
Distribution of Transfers to Other CalPERS Plans by Age and Service
Years of Service at Valuation Date
Attained
Age 0-4 5-9 10-14 15-19 20-25 25+ Total
Average
Salary
15-24 0 0 0 0 0 0 0 $0
25-29 3 0 0 0 0 0 3 89,274
30-34 7 1 0 0 0 0 8 89,377
35-39 4 0 1 0 0 0 5 114,183
40-44 10 6 2 0 0 0 18 103,935
45-49 10 1 2 1 3 0 17 128,161
50-54 2 2 1 1 1 0 7 151,092
55-59 2 1 1 0 0 0 4 99,945
60-64 0 0 0 0 0 0 0 0
65 and over 0 0 0 0 0 0 0 0
All Ages 38 11 7 2 4 0 62 113,883
Distribution of Terminated Participants with Funds on Deposit by Age and Service
Years of Service at Valuation Date
Attained Age 0-4 5-9 10-14 15-19 20-25 25+ Total Average Salary
15-24 0 0 0 0 0 0 0 $0
25-29 0 0 0 0 0 0 0 0
30-34 9 1 0 0 0 0 10 84,065
35-39 0 3 0 0 0 0 3 99,447
40-44 5 3 1 0 0 0 9 76,755
45-49 5 0 1 1 1 0 8 59,928
50-54 2 0 0 0 0 0 2 58,966
55-59 1 1 0 0 0 0 2 79,670
60-64 0 0 0 0 0 0 0 0
65 and over 0 0 0 0 0 0 0 0
All Ages 22 8 2 1 1 0 34 76,073
CALPERS ACTUARIAL VALUATION - June 30, 2011
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
Page 28
Retired Members and Beneficiaries
Distribution of Retirees and Beneficiaries by Age and Retirement Type*
Attained
Age
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Total
Under 30 0 0 0 0 0 0 0
30-34 0 0 1 0 0 0 1
35-39 0 0 3 0 0 0 3
40-44 0 1 4 0 0 0 5
45-49 0 0 7 0 1 0 8
50-54 22 1 18 0 2 0 43
55-59 27 0 20 0 0 4 51
60-64 36 1 21 0 0 5 63
65-69 35 0 17 0 0 8 60
70-74 35 2 30 0 0 3 70
75-79 18 0 19 0 0 5 42
80-84 17 0 9 0 0 5 31
85 and Over 8 0 3 0 0 2 13
All Ages 198 5 152 0 3 32 390
Distribution of Average Annual Amounts for Retirees and Beneficiaries by Age
and Retirement Type*
Attained
Age
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Average
Under 30 $0 $0 $0 $0 $0 $0 $0
30-34 0 0 50,040 0 0 0 50,040
35-39 0 0 54,159 0 0 0 54,159
40-44 0 76 48,186 0 0 0 38,564
45-49 0 0 46,291 0 47,682 0 46,465
50-54 69,447 29,825 56,253 0 33,475 0 61,330
55-59 53,966 0 47,020 0 0 40,890 50,216
60-64 57,821 15,716 40,578 0 0 31,658 49,329
65-69 39,673 0 28,411 0 0 32,848 35,572
70-74 43,539 10,769 28,855 0 0 29,041 35,688
75-79 37,457 0 24,754 0 0 26,380 30,392
80-84 29,558 0 24,223 0 0 23,514 27,034
85 and Over 23,983 0 20,099 0 0 12,696 21,350
All Ages $47,210 $13,431 $37,050 $0 $38,210 $29,582 $41,301
CALPERS ACTUARIAL VALUATION - June 30, 2011
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
Page 29
Retired Members and Beneficiaries (continued)
Distribution of Retirees and Beneficiaries by Years Retired and Retirement Type*
Years
Retired
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Total
Under 5 Yrs 47 1 25 0 0 7 80
5-9 50 0 14 0 1 11 76
10-14 25 1 20 0 1 8 55
15-19 32 0 15 0 0 0 47
20-24 21 1 22 0 0 1 45
25-29 15 1 18 0 1 2 37
30 and Over 8 1 38 0 0 3 50
All Years 198 5 152 0 3 32 390
Distribution of Average Annual Amounts for Retirees and Beneficiaries by Years Retired and
Retirement Type*
Years
Retired
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Average
Under 5 Yrs $60,830 $76 $67,077 $0 $0 $24,028 $58,802
5-9 55,150 0 58,688 0 47,682 35,084 52,799
10-14 34,633 29,825 37,961 0 42,209 32,369 35,564
15-19 45,454 0 33,080 0 0 0 41,505
20-24 33,072 15,716 28,106 0 0 32,183 30,239
25-29 32,510 13,301 25,087 0 24,740 29,918 28,029
30 and Over 28,565 8,236 21,257 0 0 13,842 21,721
All Years $47,210 $13,431 $37,050 $0 $38,210 $29,582 $41,301
* Counts of members do not include alternate payees receiving benefits while the member is still working.
Therefore, the total counts may not match information on page 25 of the report. Multiple records may exist for
those who have service in more than one coverage group. This does not result in double counting of liabilities.
APPENDICES
APPENDIX A - ACTUARIAL METHODS AND ASSUMPTIONS
APPENDIX B - PLAN PROVISIONS
APPENDIX C - GASB STATEMENT NO. 27
APPENDIX D - RISK ANALYSIS
APPENDIX E - GLOSSARY OF ACTUARIAL TERMS
APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
ACTUARIAL DATA
ACTUARIAL METHODS
ACTUARIAL ASSUMPTIONS
MISCELLANEOUS
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-1
Actuarial Data
As stated in the Actuarial Certification, the data which serves as the basis of this valuation has been
obtained from the various CalPERS databases. We have reviewed the valuation data and believe that it is
reasonable and appropriate in aggregate. We are unaware of any potential data issues that would have a
material effect on the results of this valuation, except that data does not always contain the latest salary information for former members now in reciprocal systems and does not recognize the potential for
unusually large salary deviation in certain cases such as elected officials. Therefore, salary information in
these cases may not be accurate. These situations are relatively infrequent, however, and when they do
occur, they generally do not have a material impact on the employer contribution rates.
Actuarial Methods
Funding 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 current fiscal year is called the normal
cost.
The actuarial accrued liability for active members is then calculated as the portion of the total cost of the plan allocated to prior years. The actuarial accrued liability for members currently receiving benefits, 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 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 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 rolling 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’ gains or losses will be isolated and amortized over fixed and declining 30 year
periods (as opposed to the current rolling 30 year amortization). 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 30-year amortization of the unfunded liability.
Additional contributions will be required 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:
Increase by at least 15% by June 30, 2043; or
Reach a level of 75% funded by June 30, 2043
The necessary additional 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 satisfaction of the above criteria. CalPERS actuaries
will reassess the criteria above when performing each future 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 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 liability not already in the (gain)/loss 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, 2011 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-2
1) when a positive payment would be required on a negative unfunded actuarial liability (or
conversely a negative payment on a positive unfunded actuarial liability); or
2) when there are excess assets, rather than an unfunded liability. In this situation a 30-year fresh
start is used, 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 other circumstances. In all cases, the fresh start period is set by the actuary at what he deems appropriate, and will not be less than five
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 the prior year’s Actuarial Value of Assets and the contributions received and benefits paid during the
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 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, the CalPERS Board adopted changes to the asset smoothing method in order to phase in over
a three year period the impact of the -24% investment loss experienced by CalPERS 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
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-3
Actuarial Assumptions
Economic Assumptions
Discount Rate
7.5% compounded annually (net of expenses). This assumption is used for all plans.
Termination Liability Discount Rate
The discount rate is set by taking into account the yields available in the US Treasury market on the
valuation date according to treasury rates along the yield curve that match the cash flows of the
plans’ expected benefit payout stream in future years. For purposes of this report, the termination
liability discount rate used, 4.82%, is the 30-year US Treasury Stripped Coupon Rate as of the
valuation date. Please note, as of June 30, 2012 the 30-year US Treasury Stripped Coupon Rate was 2.87%.
Salary Growth
Annual increases vary by category, entry age, and duration of service. Sample assumed increases
are shown below.
Public Agency Miscellaneous
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1420 0.1240 0.0980
1 0.1190 0.1050 0.0850
2 0.1010 0.0910 0.0750
3 0.0880 0.0800 0.0670
4 0.0780 0.0710 0.0610
5 0.0700 0.0650 0.0560
10 0.0480 0.0460 0.0410
15 0.0430 0.0410 0.0360
20 0.0390 0.0370 0.0330
25 0.0360 0.0360 0.0330
30 0.0360 0.0360 0.0330
Public Agency Fire
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1050 0.1050 0.1020
1 0.0950 0.0940 0.0850
2 0.0870 0.0830 0.0700
3 0.0800 0.0750 0.0600
4 0.0740 0.0680 0.0510
5 0.0690 0.0620 0.0450
10 0.0510 0.0460 0.0350
15 0.0410 0.0390 0.0340
20 0.0370 0.0360 0.0330
25 0.0350 0.0350 0.0330
30 0.0350 0.0350 0.0330
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-4
Salary Growth (continued)
Public Agency Police
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1090 0.1090 0.1090
1 0.0930 0.0930 0.0930
2 0.0810 0.0810 0.0780
3 0.0720 0.0700 0.0640
4 0.0650 0.0610 0.0550
5 0.0590 0.0550 0.0480
10 0.0450 0.0420 0.0340
15 0.0410 0.0390 0.0330
20 0.0370 0.0360 0.0330
25 0.0350 0.0340 0.0330
30 0.0350 0.0340 0.0330
Public Agency County Peace Officers
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1290 0.1290 0.1290
1 0.1090 0.1060 0.1030
2 0.0940 0.0890 0.0840
3 0.0820 0.0770 0.0710
4 0.0730 0.0670 0.0610
5 0.0660 0.0600 0.0530
10 0.0460 0.0420 0.0380
15 0.0410 0.0380 0.0360 20 0.0370 0.0360 0.0340
25 0.0350 0.0340 0.0330
30 0.0350 0.0340 0.0330
Schools
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1080 0.0960 0.0820
1 0.0940 0.0850 0.0740
2 0.0840 0.0770 0.0670
3 0.0750 0.0700 0.0620
4 0.0690 0.0640 0.0570
5 0.0630 0.0600 0.0530
10 0.0450 0.0440 0.0410
15 0.0390 0.0380 0.0350
20 0.0360 0.0350 0.0320
25 0.0340 0.0340 0.0320
30 0.0340 0.0340 0.0320
The Miscellaneous salary scale is used for Local Prosecutors.
The Police salary scale is used for Other Safety, Local Sheriff, and School Police.
Overall Payroll Growth 3.00% compounded annually (used in projecting the payroll over which the unfunded liability is
amortized). This assumption is used for all plans.
Inflation
2.75% compounded annually. This assumption is used for all plans.
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-5
Non-valued Potential Additional Liabilities
The potential liability loss for a cost-of-living increase exceeding the 2.75% inflation assumption,
and any potential liability loss from future member service purchases are not reflected in the
valuation.
Miscellaneous Loading Factors
Credit for Unused Sick Leave
Benefit are increased by 1% for those plans with the provision providing Credit for Unused Sick
Leave.
Conversion of Employer Paid Member Contributions (EPMC)
Final Average Salary is increased by the Employee Contribution Rate for those plans with the
provision providing for the Conversion of Employer Paid Member Contributions (EPMC) during the final compensation period.
Norris Decision (Best Factors)
Employees hired prior to July 1, 1982 have projected benefit amounts increased in order to reflect
the use of “Best Factors” in the calculation of optional benefit forms. This is due to a 1983
Supreme Court decision, known as the Norris decision, which required males and females to be
treated equally in the determination of benefit amounts. Consequently, anyone already employed
at that time is given the best possible conversion factor when optional benefits are determined. No loading is necessary for employees hired after July 1, 1982.
Termination Liability
The termination liabilities include a 7% contingency load. This load is for unforeseen
improvements in mortality.
Demographic Assumptions
Pre-Retirement Mortality
Non-Industrial Death Rates vary by age and gender. Industrial Death rates vary by age. See
sample rates in table below. The non-industrial death rates are used for all plans. The industrial
death rates are used for Safety Plans (except for Local Prosecutor safety members where the
corresponding Miscellaneous Plan does not have the Industrial Death Benefit).
Non-Industrial Death Industrial Death (Not Job-Related) (Job-Related)
Age Male Female Male and Female
20 0.00047 0.00016 0.00003
25 0.00050 0.00026 0.00007
30 0.00053 0.00036 0.00010
35 0.00067 0.00046 0.00012
40 0.00087 0.00065 0.00013 45 0.00120 0.00093 0.00014
50 0.00176 0.00126 0.00015
55 0.00260 0.00176 0.00016
60 0.00395 0.00266 0.00017
65 0.00608 0.00419 0.00018
70 0.00914 0.00649 0.00019
75 0.01220 0.00878 0.00020
80 0.01527 0.01108 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.
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-6
Post-Retirement Mortality
Rates vary by age, type of retirement and gender. See sample rates in table below. These rates
are used for all plans.
Healthy Recipients
Non-Industrially Disabled Industrially Disabled
(Not Job-Related) (Job-Related)
Age Male Female Male Female Male Female
50 0.00239 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 0.00431 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 0.03870 0.03019 0.02236 0.01716
75 0.03080 0.02071 0.06001 0.03915 0.03585 0.02665
80 0.05270 0.03749 0.08388 0.05555 0.06926 0.04528 85 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 0.40918 0.35165
105 0.58527 0.56093 0.67923 0.61523 0.64127 0.60135
110 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000
The mortality assumptions are based on mortality rates resulting from the most recent CalPERS Experience Study adopted by the CalPERS Board, first used in the June 30, 2009 valuation. For
purposes of the post-retirement mortality rates, those revised rates include 5 years of projected on-
going mortality improvement using Scale AA published by the Society of Actuaries until June 30, 2010.
There is no margin for future mortality improvement beyond the valuation date. The mortality
assumption will be reviewed with the next experience study expected to be completed for the June 30,
2013 valuation to determine an appropriate margin to be used.
Marital Status
For active members, a percentage married upon retirement is assumed according to the following
table.
Member Category Percent Married
Miscellaneous Member 85%
Local Police 90%
Local Fire 90%
Other Local Safety 90%
School Police 90%
Age of Spouse
It is assumed that female spouses are 3 years younger than male spouses. This assumption is
used for all plans.
Terminated Members
It is assumed that terminated members refund immediately if non-vested. Terminated members
who are vested are assumed to follow the same service retirement pattern as active members but
with a load to reflect the expected higher rates of retirement, especially at lower ages. The following table shows the load factors that are applied to the service retirement assumption for
active members to obtain the service retirement pattern for separated vested members:
Age Load Factor
50 450%
51 250%
52 through 56 200%
57 through 60 150%
61 through 64 125%
65 and above 100% (no change)
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-7
Termination with Refund
Rates vary by entry age and service for Miscellaneous Plans. Rates vary by service for Safety Plans.
See sample rates in tables below.
Public Agency Miscellaneous
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45
0 0.1742 0.1674 0.1606 0.1537 0.1468 0.1400
1 0.1545 0.1477 0.1409 0.1339 0.1271 0.1203
2 0.1348 0.1280 0.1212 0.1142 0.1074 0.1006
3 0.1151 0.1083 0.1015 0.0945 0.0877 0.0809
4 0.0954 0.0886 0.0818 0.0748 0.0680 0.0612
5 0.0212 0.0193 0.0174 0.0155 0.0136 0.0116
10 0.0138 0.0121 0.0104 0.0088 0.0071 0.0055
15 0.0060 0.0051 0.0042 0.0032 0.0023 0.0014
20 0.0037 0.0029 0.0021 0.0013 0.0005 0.0001
25 0.0017 0.0011 0.0005 0.0001 0.0001 0.0001
30 0.0005 0.0001 0.0001 0.0001 0.0001 0.0001
35 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001
Public Agency Safety
Duration of Service Fire Police County Peace Officer
0 0.0710 0.1013 0.0997
1 0.0554 0.0636 0.0782
2 0.0398 0.0271 0.0566
3 0.0242 0.0258 0.0437
4 0.0218 0.0245 0.0414
5 0.0029 0.0086 0.0145
10 0.0009 0.0053 0.0089
15 0.0006 0.0027 0.0045
20 0.0005 0.0017 0.0020
25 0.0003 0.0012 0.0009
30 0.0003 0.0009 0.0006
35 0.0003 0.0009 0.0006
The Police Termination and Refund rates are used for Public Agency Local Prosecutors, Other Safety, Local Sheriff, and School Police.
Schools
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45
0 0.1730 0.1627 0.1525 0.1422 0.1319 0.1217
1 0.1585 0.1482 0.1379 0.1277 0.1174 0.1071
2 0.1440 0.1336 0.1234 0.1131 0.1028 0.0926
3 0.1295 0.1192 0.1089 0.0987 0.0884 0.0781
4 0.1149 0.1046 0.0944 0.0841 0.0738 0.0636
5 0.0278 0.0249 0.0221 0.0192 0.0164 0.0135
10 0.0172 0.0147 0.0122 0.0098 0.0074 0.0049
15 0.0115 0.0094 0.0074 0.0053 0.0032 0.0011
20 0.0073 0.0055 0.0038 0.0020 0.0002 0.0002
25 0.0037 0.0023 0.0010 0.0002 0.0002 0.0002
30 0.0015 0.0003 0.0002 0.0002 0.0002 0.0002
35 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-8
Termination with Vested Benefits
Rates vary by entry age and service for Miscellaneous Plans. Rates vary by service for Safety
Plans. See sample rates in tables below.
Public Agency Miscellaneous
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40
5 0.0656 0.0597 0.0537 0.0477 0.0418
10 0.0530 0.0466 0.0403 0.0339 0.0000
15 0.0443 0.0373 0.0305 0.0000 0.0000
20 0.0333 0.0261 0.0000 0.0000 0.0000
25 0.0212 0.0000 0.0000 0.0000 0.0000
30 0.0000 0.0000 0.0000 0.0000 0.0000
35 0.0000 0.0000 0.0000 0.0000 0.0000
Public Agency Safety
Duration of
Service Fire Police
County Peace
Officer
5 0.0162 0.0163 0.0265
10 0.0061 0.0126 0.0204
15 0.0058 0.0082 0.0130
20 0.0053 0.0065 0.0074
25 0.0047 0.0058 0.0043
30 0.0045 0.0056 0.0030
35 0.0000 0.0000 0.0000
When a member is eligible to retire, the termination with vested benefits probability is set to
zero.
After termination with vested benefits, a miscellaneous member is assumed to retire at age 59
and a safety member at age 54. The Police Termination with vested benefits rates are used for Public Agency Local
Prosecutors, Other Safety, Local Sheriff, and School Police.
Schools
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40
5 0.0816 0.0733 0.0649 0.0566 0.0482
10 0.0629 0.0540 0.0450 0.0359 0.0000
15 0.0537 0.0440 0.0344 0.0000 0.0000
20 0.0420 0.0317 0.0000 0.0000 0.0000
25 0.0291 0.0000 0.0000 0.0000 0.0000
30 0.0000 0.0000 0.0000 0.0000 0.0000
35 0.0000 0.0000 0.0000 0.0000 0.0000
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-9
Non-Industrial (Not Job-Related) Disability
Rates vary by age and gender for Miscellaneous Plans.
Rates vary by age and category for Safety Plans.
Miscellaneous Fire Police County Peace Officer Schools
Age Male Female Male and Female Male and Female Male and Female Male Female
20 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001
25 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001
30 0.0002 0.0002 0.0001 0.0002 0.0001 0.0002 0.0001
35 0.0006 0.0009 0.0001 0.0003 0.0004 0.0006 0.0004
40 0.0015 0.0016 0.0001 0.0004 0.0007 0.0014 0.0009
45 0.0025 0.0024 0.0002 0.0005 0.0013 0.0028 0.0017
50 0.0033 0.0031 0.0005 0.0008 0.0018 0.0044 0.0030
55 0.0037 0.0031 0.0010 0.0013 0.0010 0.0049 0.0034
60 0.0038 0.0025 0.0015 0.0020 0.0006 0.0043 0.0024
The Miscellaneous Non-Industrial Disability rates are used for Local Prosecutors. The Police Non-Industrial Disability rates are used for Other Safety, Local Sheriff, and School Police.
Industrial (Job-Related) Disability
Rates vary by age and category.
Age Fire Police County Peace Officer
20 0.0002 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 for Local Sheriff and Other Safety.
Fifty Percent of the Police Industrial Disability rates are used for School Police.
One Percent of the Police Industrial Disability rates are used for Local Prosecutors.
Normally, rates are zero for Miscellaneous Plans unless the agency has specifically contracted
for Industrial Disability benefits. If so, each miscellaneous non-industrial disability rate will be
split into two components: 50% will become the Non-Industrial Disability rate and 50% will
become the Industrial Disability rate.
Service Retirement
Retirement rate vary by age, service, and formula, except for the safety ½ @ 55 and 2% @ 55
formulas, where retirement rates vary by age only.
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-10
Service Retirement
Public Agency Miscellaneous 1.5% @ 65
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.008 0.011 0.013 0.015 0.017 0.019
51 0.007 0.010 0.012 0.013 0.015 0.017
52 0.010 0.014 0.017 0.019 0.021 0.024
53 0.008 0.012 0.015 0.017 0.019 0.022
54 0.012 0.016 0.019 0.022 0.025 0.028
55 0.018 0.025 0.031 0.035 0.038 0.043
56 0.015 0.021 0.025 0.029 0.032 0.036
57 0.020 0.028 0.033 0.038 0.043 0.048
58 0.024 0.033 0.040 0.046 0.052 0.058
59 0.028 0.039 0.048 0.054 0.060 0.067
60 0.049 0.069 0.083 0.094 0.105 0.118
61 0.062 0.087 0.106 0.120 0.133 0.150
62 0.104 0.146 0.177 0.200 0.223 0.251
63 0.099 0.139 0.169 0.191 0.213 0.239
64 0.097 0.136 0.165 0.186 0.209 0.233
65 0.140 0.197 0.240 0.271 0.302 0.339
66 0.092 0.130 0.157 0.177 0.198 0.222
67 0.129 0.181 0.220 0.249 0.277 0.311
68 0.092 0.129 0.156 0.177 0.197 0.221
69 0.092 0.130 0.158 0.178 0.199 0.224
70 0.103 0.144 0.175 0.198 0.221 0.248
Public Agency Miscellaneous 2% @ 60
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.011 0.015 0.018 0.021 0.023 0.026
51 0.009 0.013 0.016 0.018 0.020 0.023
52 0.013 0.018 0.022 0.025 0.028 0.031
53 0.011 0.016 0.019 0.022 0.025 0.028
54 0.015 0.021 0.025 0.028 0.032 0.036
55 0.023 0.032 0.039 0.044 0.049 0.055
56 0.019 0.027 0.032 0.037 0.041 0.046
57 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 0.134 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 0.305
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
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
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-11
Service Retirement
Public Agency Miscellaneous 2% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.015 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 0.041 0.049 0.056 0.067
55 0.050 0.064 0.078 0.094 0.107 0.127
56 0.045 0.057 0.069 0.083 0.095 0.113
57 0.048 0.061 0.074 0.090 0.102 0.122
58 0.052 0.066 0.080 0.097 0.110 0.131
59 0.060 0.076 0.092 0.111 0.127 0.151
60 0.072 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 0.129 0.164 0.199 0.239 0.273 0.325
64 0.116 0.148 0.180 0.216 0.247 0.294
65 0.174 0.221 0.269 0.323 0.369 0.439
66 0.135 0.171 0.208 0.250 0.285 0.340
67 0.133 0.169 0.206 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
Public Agency Miscellaneous 2.5% @ 55
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 0.078 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 0.190 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 0.219 0.247
69 0.105 0.133 0.162 0.190 0.219 0.247
70 0.125 0.160 0.194 0.228 0.262 0.296
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-12
Service Retirement
Public Agency Miscellaneous 2.7% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.028 0.035 0.043 0.050 0.058 0.065
51 0.022 0.028 0.034 0.040 0.046 0.052
52 0.022 0.028 0.034 0.040 0.046 0.052
53 0.028 0.035 0.043 0.050 0.058 0.065
54 0.044 0.056 0.068 0.080 0.092 0.104
55 0.091 0.116 0.140 0.165 0.190 0.215
56 0.061 0.077 0.094 0.110 0.127 0.143
57 0.063 0.081 0.098 0.115 0.132 0.150
58 0.074 0.095 0.115 0.135 0.155 0.176
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 0.085 0.109 0.132 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
68 0.107 0.137 0.166 0.195 0.224 0.254
69 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
Public Agency Miscellaneous 3% @ 60
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 0.019 0.025 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 0.083 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 0.094 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
68 0.110 0.140 0.170 0.200 0.230 0.260
69 0.110 0.140 0.170 0.200 0.230 0.260
70 0.132 0.168 0.204 0.240 0.276 0.312
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-13
Service Retirement
Public Agency Fire ½ @ 55 and 2% @ 55
Age 50
51
52
53
54
55
Rate 0.01588
0.00000
0.03442
0.01990
0.04132
0.07513
Age 56
57
58
59
60
Rate 0.11079
0.00000
0.09499
0.04409
1.00000
Public Agency Police ½ @ 55 and 2% @ 55
Age
50 51
52
53
54
55
Rate
0.02552 0.00000
0.01637
0.02717
0.00949
0.16674
Age
56 57
58
59
60
Rate
0.06921 0.05113
0.07241
0.07043
1.00000
Public Agency Police 2%@ 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.014 0.014 0.014 0.014 0.025 0.045
51 0.012 0.012 0.012 0.012 0.023 0.040
52 0.026 0.026 0.026 0.026 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 0.064 0.064 0.064 0.117 0.208
57 0.071 0.071 0.071 0.071 0.130 0.232
58 0.063 0.063 0.063 0.063 0.115 0.205
59 0.140 0.140 0.140 0.140 0.174 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 0.140 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 also apply to Local Prosecutors, Local Sheriff, School Police, and Other Safety.
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-14
Service Retirement
Public Agency Fire 2%@50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.007 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 0.047 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 0.078 0.078 0.078 0.078 0.120 0.180
57 0.090 0.090 0.090 0.090 0.139 0.208
58 0.079 0.079 0.079 0.079 0.122 0.182
59 0.073 0.073 0.073 0.073 0.112 0.168
60 0.114 0.114 0.114 0.114 0.175 0.262
61 0.114 0.114 0.114 0.114 0.175 0.262
62 0.114 0.114 0.114 0.114 0.175 0.262
63 0.114 0.114 0.114 0.114 0.175 0.262
64 0.114 0.114 0.114 0.114 0.175 0.262
65 1.000 1.000 1.000 1.000 1.000 1.000
Public Agency Police 3%@ 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 0.094 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 rates also apply to Local Prosecutors, Local Sheriff, School Police, and Other Safety.
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-15
Service Retirement
Public Agency Fire 3%@55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.012 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 0.081 0.119 0.187 0.219
59 0.078 0.078 0.078 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 0.078 0.078 0.113 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
Public Agency Police 3%@ 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.070 0.070 0.070 0.131 0.193 0.249
51 0.050 0.050 0.050 0.095 0.139 0.180
52 0.061 0.061 0.061 0.116 0.171 0.220
53 0.069 0.069 0.069 0.130 0.192 0.247
54 0.071 0.071 0.071 0.134 0.197 0.255
55 0.090 0.090 0.090 0.170 0.250 0.322
56 0.069 0.069 0.069 0.130 0.191 0.247
57 0.080 0.080 0.080 0.152 0.223 0.288
58 0.087 0.087 0.087 0.164 0.242 0.312
59 0.090 0.090 0.090 0.170 0.251 0.323
60 0.135 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 0.113 0.113 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 1.000 1.000 1.000 1.000 1.000 1.000
These rates also apply to Local Prosecutors, Local Sheriff, School Police, and Other Safety.
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-16
Service Retirement
Public Agency Fire 3%@50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.034 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 0.103 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 0.140 0.199 0.236
64 0.100 0.100 0.100 0.140 0.199 0.236
65 1.000 1.000 1.000 1.000 1.000 1.000
Schools 2%@ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.005 0.009 0.013 0.015 0.016 0.018
51 0.005 0.010 0.014 0.017 0.019 0.021
52 0.006 0.012 0.017 0.020 0.022 0.025
53 0.007 0.014 0.019 0.023 0.026 0.029
54 0.012 0.024 0.033 0.039 0.044 0.049
55 0.024 0.048 0.067 0.079 0.088 0.099
56 0.020 0.039 0.055 0.065 0.072 0.081
57 0.021 0.042 0.059 0.070 0.078 0.087
58 0.025 0.050 0.070 0.083 0.092 0.103
59 0.029 0.057 0.080 0.095 0.105 0.118
60 0.037 0.073 0.102 0.121 0.134 0.150
61 0.046 0.090 0.126 0.149 0.166 0.186
62 0.076 0.151 0.212 0.250 0.278 0.311
63 0.069 0.136 0.191 0.225 0.251 0.281
64 0.067 0.133 0.185 0.219 0.244 0.273
65 0.091 0.180 0.251 0.297 0.331 0.370
66 0.072 0.143 0.200 0.237 0.264 0.295
67 0.067 0.132 0.185 0.218 0.243 0.272
68 0.060 0.118 0.165 0.195 0.217 0.243
69 0.067 0.133 0.187 0.220 0.246 0.275
70 0.066 0.131 0.183 0.216 0.241 0.270
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-17
Miscellaneous
Superfunded Status
If a rate plan is superfunded (actuarial value of assets exceeds the present value of benefits), as of the
most recently completed annual valuation, the employer may cover their employees’ member contributions (both taxed and tax-deferred) using their employer assets during 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 risk 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.
Internal Revenue Code Section 415
The limitations on benefits imposed by Internal Revenue Code Section 415 were taken into account in this
valuation. Each year the impact of any changes in this limitation since the prior valuation is included and
amortized as part of the actuarial gain or loss base.
Internal Revenue Code Section 401(a)(17)
The limitations on 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 limitation since the
prior valuation is included and amortized as part of the actuarial gain or loss base.
APPENDIX B
PLAN PROVISIONS
SUMMARY OF PLAN’S MAJOR BENEFIT OPTIONS
DESCRIPTIONS OF CALPERS’ PRINCIPAL PLAN PROVISIONS
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX B
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
Summary of Plan’s Major Benefit Options
Shown below is a summary of the major optional benefits for which your agency has contracted. A description of principal standard and optional plan provisions
is in the following section of this Appendix.
Coverage Group
74001 74002 75001
Benefit Provision
Benefit Formula 3.0% @ 50 3.0% @ 50 3.0% @ 50
Social Security Coverage No No No
Full/Modified Full Full Full
Final Average Compensation Period 12 mos. 12 mos. 12 mos.
Sick Leave Credit No No No
Non-Industrial Disability Standard Standard Standard
Industrial Disability Yes Yes Yes
Pre-Retirement Death Benefits
Optional Settlement 2W Yes Yes No
1959 Survivor Benefit Level Level 1 Level 1 Level 1
Special Yes Yes Yes
Alternate (firefighters) No No No
Post-Retirement Death Benefits Lump Sum $500 $500 $500
Survivor Allowance (PRSA) No No No
COLA 2% 2% 2%
Employee Contributions
Contractual Employer Paid No 9% 9% Contractual Employee Cost Sharing
B-1
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX B
SAFETY PLAN OF THE CITY OF PALO ALTO
EMPLOYER NUMBER 6373437857
Summary of Plan’s Major Benefit Options
Shown below is a summary of the major optional benefits for which your agency has contracted. A description of principal standard and optional plan provisions is in the following section of this Appendix.
Coverage Group
Benefit Provision
Benefit Formula Social Security Coverage
Full/Modified
Final Average Compensation Period
Sick Leave Credit
Non-Industrial Disability
Industrial Disability
Pre-Retirement Death Benefits
Optional Settlement 2W
1959 Survivor Benefit Level Special
Alternate (firefighters)
Post-Retirement Death Benefits
Lump Sum
Survivor Allowance (PRSA)
COLA
Employee Contributions
Contractual employer paid
Contractual Employee Cost sharing
B-2
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX B
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
B-3
Description of CalPERS’ Principal Plan Provisions
The following is a description of the principal plan provisions used in calculating costs and liabilities. We have
indicated whether a plan provision is standard or optional. Standard benefits are applicable to all members while optional benefits vary among employers. Optional benefits that apply to a single period of time, such as Golden
Handshakes, have not been included. Many of the statements in this summary are general in nature, and are
intended to provide an easily understood summary of the complex Public Employees’ Retirement Law. The law itself
governs in all situations.
Service Retirement
Eligibility
A CalPERS member becomes eligible for Service Retirement upon attainment of age 50 with at least 5 years of
credited service (total service across all CalPERS employers, and with certain other Retirement Systems with which
CalPERS has reciprocity agreements). For employees hired into a plan with the 1.5% at 65 formula, eligibility for
service retirement is age 55 with at least 5 years of service.
Benefit The Service Retirement benefit is a monthly allowance equal to the product of the benefit factor, years of service,
and final compensation.
The benefit factor depends on the benefit formula specified in your agency’s contract. The table below shows
the factors for each of the available formulas. Factors vary by the member’s age at retirement. Listed are the
factors for retirement at whole year ages:
Miscellaneous Plan Formulas
Retirement Age 1.5% at 65 2% at 60 2% at 55 2.5% at 55 2.7% at 55 3% at 60
50 0.5000% 1.092% 1.426% 2.0% 2.0% 2.0%
51 0.5667% 1.156% 1.522% 2.1% 2.14% 2.1%
52 0.6334% 1.224% 1.628% 2.2% 2.28% 2.2%
53 0.7000% 1.296% 1.742% 2.3% 2.42% 2.3%
54 0.7667% 1.376% 1.866% 2.4% 2.56% 2.4%
55 0.8334% 1.460% 2.0% 2.5% 2.7% 2.5%
56 0.9000% 1.552% 2.052% 2.5% 2.7% 2.6%
57 0.9667% 1.650% 2.104% 2.5% 2.7% 2.7%
58 1.0334% 1.758% 2.156% 2.5% 2.7% 2.8%
59 1.1000% 1.874% 2.210% 2.5% 2.7% 2.9%
60 1.1667% 2.0% 2.262% 2.5% 2.7% 3.0%
61 1.2334% 2.134% 2.314% 2.5% 2.7% 3.0%
62 1.3000% 2.272% 2.366% 2.5% 2.7% 3.0%
63 1.3667% 2.418% 2.418% 2.5% 2.7% 3.0%
64 1.4334% 2.418% 2.418% 2.5% 2.7% 3.0%
65 & Up 1.5000% 2.418% 2.418% 2.5% 2.7% 3.0%
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX B
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
B-4
Safety Plan Formulas
Retirement Age ½ at 55 * 2% at 55 2% at 50 3% at 55 3% at 50
50 1.783% 1.426% 2.0% 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%
55 & 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 greater. If entry age is less than 35, then the age 55 benefit factor is 50% divided by the difference between age 55 and entry age. The benefit factor for ages prior to age 55 is the same proportion of the age 55
benefit factor as in the above table.
The years of service is the amount credited by CalPERS to a member while he or she is employed in this group
(or for other periods that are recognized under the employer’s contract with CalPERS). For a member who has
earned service with multiple CalPERS employers, the benefit from each employer is calculated separately
according to each employer’s contract, and then added together for the total allowance. An agency may
contract for an optional benefit where any unused sick leave accumulated at the time of retirement will be converted to credited service at a rate of 0.004 years of service for each day of sick leave.
The final compensation is the monthly average of the member’s highest 36 or 12 consecutive months’ full-time
equivalent monthly pay (no matter which CalPERS employer paid this compensation). The standard benefit is 36
months. Employers have the option of providing a final compensation equal to the highest 12 consecutive
months. Final compensation must be defined by the highest 36 consecutive months’ pay under the 1.5% at 65
formula.
Employees must be covered by Social Security with the 1.5% at 65 formula. Social Security is optional for all
other benefit formulas. For employees covered by Social Security, the Modified formula is the standard benefit.
Under this type of formula, the final compensation is offset by $133.33 (or by one third if the final compensation
is less than $400). Employers may contract for the Full benefit with Social Security that will eliminate the offset
applicable to the final compensation. For employees not covered by Social Security, the Full benefit is paid with
no offsets. Auxiliary organizations of the CSUC system may elect reduced contribution rates, in which case the
offset is $317 if members are not covered by Social Security or $513 if members are covered by Social Security.
The Miscellaneous 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 CalPERS member becomes eligible for a deferred vested retirement benefit when he or she leaves employment,
keeps his or her contribution account balance on deposit with CalPERS, and has earned at least 5 years of credited
service (total service across all CalPERS employers, and with certain other Retirement Systems with which CalPERS
has reciprocity agreements).
Eligibility to Start Receiving Benefits The CalPERS member becomes eligible to receive the deferred retirement benefit upon satisfying the eligibility
requirements for Deferred Status and upon attainment of age 50 (55 for employees hired into a 1.5% @ 65 plan).
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX B
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
B-5
Benefit The vested deferred retirement benefit is the same as the Service Retirement benefit, where the benefit factor is
based on the member’s age at allowance commencement. For members who have earned service with multiple
CalPERS employers, the benefit from each employer is calculated separately according to each employer’s contract,
and then added together for the total allowance.
Non-Industrial (Non-Job Related) Disability Retirement
Eligibility
A CalPERS member is eligible for Non-Industrial Disability Retirement if he or she becomes disabled and has at least
5 years of credited service (total service across all CalPERS employers, and with certain other Retirement Systems
with which CalPERS has reciprocity agreements). There is no special age requirement. Disabled means the member
is unable to perform his or her job because of an illness or injury which is expected to be permanent or to last
indefinitely. The illness or injury does not have to be job related. A CalPERS member must be actively employed by any CalPERS employer at the time of disability in order to be eligible for this benefit.
Standard Benefit
The standard Non-Industrial Disability Retirement benefit is a monthly allowance equal to 1.8% of final
compensation, multiplied by service, which is determined as follows:
service is CalPERS credited service, for members with less than 10 years of service or greater than 18.518 years
of service; or
service is CalPERS credited service plus the additional number of years that the member would have worked
until age 60, for members with at least 10 years but not more than 18.518 years of service. The maximum
benefit in this case is 33 1/3% 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 each additional year of service to a maximum of 50% of final compensation.
Members who are eligible for a larger service retirement benefit may choose to receive that benefit in lieu of a
disability benefit. Members eligible to retire, and who have attained the normal retirement age determined by their
service retirement benefit formula, will receive the same dollar amount for disability retirement as that payable for
service retirement. For members who have earned service with multiple CalPERS employers, the benefit attributed to
each employer is the total disability allowance multiplied by the ratio of service with a particular employer to the total CalPERS service.
Industrial (Job Related) Disability Retirement
All safety members have this benefit. For miscellaneous members, employers have the option of providing this
benefit. An employer may choose to provide the Increased benefit option or the Improved benefit option.
Eligibility
An employee is eligible for Industrial Disability Retirement if he or she becomes disabled while working, where
disabled means the member is unable to perform the duties of the job because of a work-related illness or injury
which is expected to be permanent or to last indefinitely. A CalPERS member who has left active employment within
this group is not eligible for this benefit, except to the extent described below.
Standard Benefit
The standard Industrial Disability Retirement benefit is a monthly allowance equal to 50% of final compensation.
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX B
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
B-6
Increased Benefit (75% of Final Compensation) The increased Industrial Disability Retirement benefit is a monthly allowance equal to 75% of final compensation for
total disability.
Improved Benefit (50% to 90% of Final Compensation)
The improved Industrial Disability Retirement benefit is a monthly allowance equal to the Workman’s Compensation
Appeals Board permanent disability rate percentage (if 50% or greater, with a maximum of 90%) times the final
compensation.
For a CalPERS member not actively employed in this group who became disabled while employed by some other
CalPERS employer, the benefit is a return of accumulated member contributions with respect to employment in this
group. With the standard or increased benefit, a member may also choose to receive the annuitization of the
accumulated member contributions.
If a member is eligible for Service Retirement and if the Service Retirement benefit is more than the Industrial
Disability Retirement benefit, the member may choose to receive the larger benefit.
Post-Retirement Death Benefit
Standard Lump Sum Payment Upon the death of a retiree, a one-time lump sum payment of $500 will be made to the retiree’s designated
survivor(s), or to the retiree’s estate.
Improved Lump Sum Payment
Employers have the option of providing an improved lump sum death benefit of $600, $2,000, $3,000, $4,000 or
$5,000.
Form of Payment for Retirement Allowance
Standard Form of Payment
Generally, the retirement allowance is paid to the retiree in the form of an annuity for as long as he or she is alive.
The retiree may choose to provide for a portion of his or her allowance to be paid to any designated beneficiary after the retiree’s death. CalPERS provides for a variety of such benefit options, which the retiree pays for by taking a
reduction in his or her retirement allowance. Such reduction takes into account the amount to be provided to the
beneficiary and the probable duration of payments (based on the ages of the member and beneficiary) made
subsequent to the member’s death.
Improved Form of Payment (Post Retirement Survivor Allowance)
Employers have the option to contract for the post retirement survivor allowance.
For retirement allowances with respect to service subject to the modified formula, 25% of the retirement allowance
will automatically be continued to certain statutory beneficiaries upon the death of the retiree, without a reduction in
the retiree’s allowance. For retirement allowances with respect to service subject to the full or supplemental formula,
50% of the retirement allowance will automatically be continued to certain statutory beneficiaries upon the death of
the retiree, without a reduction in the retiree’s allowance. This additional benefit is often referred to as post
retirement survivor allowance (PRSA) or simply as survivor continuance.
In other words, 25% or 50% of the allowance, the continuance portion, is paid to the retiree for as long as he or she
is alive, and that same amount is continued to the retiree’s spouse (or if no eligible spouse, to unmarried 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.
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX B
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
B-7
The remaining 75% or 50% of the retirement allowance, which may be referred to as the option portion of the benefit, is paid to the retiree as an annuity for as long as he or she is alive. Or, the retiree may choose to provide for
some of this option portion to be paid to any designated beneficiary after the retiree’s death. Benefit options
applicable to the option portion are the same as those offered with the standard form. The reduction is calculated in
the same manner but is applied only to the option portion.
Pre-Retirement Death Benefits
Basic Death Benefit
This is a standard benefit.
Eligibility
An employee’s beneficiary (or estate) may receive the Basic Death benefit if the member dies while actively
employed. A CalPERS member must be actively employed with the CalPERS employer providing this benefit to be
eligible for this benefit. A member’s survivor who is eligible for any other pre-retirement death benefit may choose
to receive that death benefit instead of this Basic Death benefit.
Benefit
The Basic Death Benefit is a lump sum in the amount of the member’s accumulated contributions, where interest is currently credited at 7.5% per year, plus a lump sum in the amount of one month's salary for each completed year of
current service, up to a maximum of six months' salary. For purposes of this benefit, one month's salary is defined
as the member's average monthly full-time rate of compensation during the 12 months preceding death.
1957 Survivor Benefit
This is a standard benefit.
Eligibility An employee’s eligible survivor(s) may receive the 1957 Survivor benefit if the member dies while actively employed,
has attained at least age 50, and has at least 5 years of credited service (total service across all CalPERS employers
and with certain other Retirement Systems with which CalPERS has reciprocity agreements). A CalPERS member
must be actively employed with the CalPERS employer providing this benefit to be eligible for this benefit. An eligible
survivor means the surviving spouse to whom the member was married at least one year before death or, if there is
no eligible spouse, to the member's unmarried children under age 18. A member’s survivor who is eligible for any
other pre-retirement death benefit may choose to receive that death benefit instead of this 1957 Survivor benefit.
Benefit
The 1957 Survivor benefit is a monthly allowance equal to one-half of the unmodified Service Retirement benefit that
the member would have been entitled to receive if the member had retired on the date of his or her death. If the
benefit is payable to the spouse, the benefit is discontinued upon the death of the spouse. If the benefit is payable
to 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 benefit.
Eligibility An employee’s eligible survivor may receive the Optional Settlement 2W Death benefit if the member dies while
actively employed, has attained at least age 50, and has at least 5 years of credited service (total service across all
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX B
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
B-8
CalPERS employers and with certain other Retirement Systems with which CalPERS has reciprocity agreements). A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An
eligible survivor means the surviving spouse to whom the member was married at least one year before death. A
member’s survivor who is eligible for any other pre-retirement death benefit may choose to receive that death benefit
instead of this Optional Settlement 2W Death benefit.
Benefit
The Optional Settlement 2W Death benefit is a monthly allowance equal to the Service Retirement benefit that the
member would have received had the member retired on the date of his or her death and elected Optional Settlement 2W. (A retiree who elects Optional Settlement 2W receives an allowance that has been reduced so that it
will continue to be paid after his or her death to a surviving beneficiary.) The allowance is payable as long as the
surviving spouse lives, at which time it is continued to any unmarried 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 to provide this benefit for miscellaneous
members.
Eligibility
An employee’s eligible survivor(s) may receive the Special Death benefit if the member dies while actively employed
and the death is job-related. A CalPERS member who is no longer actively employed with any CalPERS employer is
not eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married prior
to the onset of the injury or illness that resulted in death. If there is no eligible spouse, an eligible survivor means
the member's unmarried 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 final compensation, and will be increased
whenever the compensation paid to active employees is increased but ceasing to increase when the member would
have attained age 50. The allowance is payable to the surviving spouse until death at which time the allowance is
continued to any unmarried 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 physical force incurred in
the performance of the member’s duty, and there are eligible 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: 12.5% of final compensation
if 2 eligible children: 20.0% of final compensation
if 3 or more eligible children: 25.0% of final compensation
Alternate Death Benefit for Local Fire Members
This is an optional benefit available only to local fire members.
Eligibility
An employee’s eligible survivor(s) may receive the Alternate Death benefit in lieu of the Basic Death Benefit or the
1957 Survivor Benefit if the member dies while actively employed and has at least 20 years of total CalPERS service.
A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married prior to the onset of the injury or
illness that resulted in death. If there is no eligible spouse, an eligible survivor means the member's unmarried children under age 18.
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX B
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
B-9
Benefit The Alternate Death benefit is a monthly allowance equal to the Service Retirement benefit that the member would
have received had the member retired on the date of his or her death and elected Optional Settlement 2W. (A
retiree who elects Optional Settlement 2W receives an allowance that has been reduced so that it will continue to be
paid after his or her death to a surviving beneficiary.) If the member has not yet attained age 50, the benefit is
equal to that which would be payable if the member had retired at age 50, based on service credited at the time of
death. The allowance is payable as long as the surviving spouse lives, at which time it is continued to any unmarried
children under age 18, if applicable. The total amount paid will be at least equal to the Basic Death Benefit.
Cost-of-Living Adjustments (COLA)
Standard Benefit
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-living adjustment of 3%, 4% or 5%. An improved COLA
is not available in conjunction with the 1.5% at 65 formula.
The cumulative adjustment may not be greater than the cumulative change in the Consumer Price Index since the
date of retirement.
Purchasing Power Protection Allowance (PPPA)
Retirement and survivor allowances are protected against inflation by PPPA. PPPA benefits are cost-of-living
adjustments that are intended to maintain an individual’s allowance at 80% of the initial allowance at retirement
adjusted for inflation since retirement. The PPPA benefit will be coordinated with other cost-of-living adjustments
provided under the plan.
Employee Contributions
Each employee contributes toward his or her retirement based upon the retirement formula. The standard employee
contribution is as described below.
The percent contributed below the monthly compensation breakpoint is 0%.
The monthly compensation breakpoint is $0 for full and supplemental formula members and $133.33 for employees covered by the modified formula.
The percent contributed above the monthly compensation breakpoint depends upon the benefit formula, as
shown in the table below.
Benefit Formula Percent Contributed above the
Breakpoint
Miscellaneous, 1.5% at 65 2%
Miscellaneous, 2% at 60 7%
Miscellaneous, 2% at 55 7%
Miscellaneous, 2.5% at 55 8%
Miscellaneous, 2.7% at 55 8%
Miscellaneous, 3% at 60 8%
Safety, 1/2 at 55 Varies by entry age
Safety, 2% at 55 7%
Safety, 2% at 50 9%
Safety, 3% at 55 9%
Safety, 3% at 50 9%
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX B
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
B-10
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 based on any optional benefit for which a contract amendment was made on
or after January 1, 1979.
Auxiliary organizations of the CSUC system may elect reduced contribution rates, in which case the offset is $317 and
the contribution rate is 6% if members are not covered by Social Security. If members are covered by Social
Security the offset is $513 and the contribution rate is 5%.
Refund of Employee Contributions
If the member’s service with the employer ends, and if the member does not satisfy the eligibility conditions for any
of the retirement benefits above, the member may elect to receive a refund of his or her employee contributions,
which are credited 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
CalPERS 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 CalPERS prior to 1994. Levels 1, 2 and 3 are now closed. Any
new agency or any agency wishing to add this benefit or increase the current level 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 available on
the CalPERS website at www.calpers.ca.gov.
APPENDIX C
GASB STATEMENT NO. 27
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX C
GASB STATEMENT NO. 27
C-1
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 contribution (ARC)
plus an adjustment for the cumulative difference between the APC and the employer’s actual plan contributions for
the year. The cumulative difference is called the net pension obligation (NPO). The ARC for the period July 1, 2013 to June 30, 2014 has been determined by an actuarial valuation of the plan as of June 30, 2011. The unadjusted
GASB compliant contribution rate for the indicated period is 33.604% of payroll. In order to calculate the dollar value
of the ARC for inclusion in financial statements prepared as of June 30, 2014, this contribution rate, less any
employee cost sharing, 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, 2013 to June 30, 2014. The employer and the employer’s
auditor are responsible for determining the NPO and the APC.
A summary of principal assumptions and methods used to determine the ARC is shown below.
Retirement Program
Valuation Date June 30, 2011
Actuarial Cost Method Entry Age Normal Cost Method
Amortization Method Level Percent of Payroll
Average Remaining Period 32 Years as of the Valuation Date
Asset Valuation Method 15 Year Smoothed Market
Actuarial Assumptions
Discount Rate 7.50% (net of administrative expenses)
Projected Salary Increases 3.30% to 14.20% depending on Age, Service, and type of employment
Inflation 2.75%
Payroll Growth 3.00%
Individual Salary Growth A merit scale varying by duration of employment coupled with an assumed
annual inflation growth of 2.75% 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 CalPERS.
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’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. 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.
Valuation
Date
Accrued
Liability
(a)
Actuarial Value
of Assets (AVA)
(b)
Unfunded
Liability (UL)
(a)-(b)
Funded Ratios Annual
Covered
Payroll
(c)
UL As a
% of
Payroll
[(a)-(b)]/(c) (AVA)
(b)/(a)
Market
Value
06/30/07 $ 242,952,039 $ 216,498,610 $ 26,453,429 89.1% 103.9% $ 20,907,118 126.5%
06/30/08 258,963,682 228,883,308 30,080,374 88.4% 90.8% 22,181,324 135.6%
06/30/09 280,292,862 236,274,455 44,018,407 84.3% 61.4% 22,086,992 199.3%
06/30/10 293,895,452 244,413,456 49,481,996 83.2% 64.8% 23,030,400 214.9%
06/30/11 313,183,690 254,304,173 58,879,517 81.2% 71.8% 22,774,462 258.5%
APPENDIX D
RISK ANALYSIS
VOLATILITY RATIOS
ANALYSIS OF FUTURE INVESTMENT RETURN SCENARIOS
ANALYSIS OF DISCOUNT RATE SENSITIVITY
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX D
RISK ANALYSIS
D-1
Volatility Ratios
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 (terminations, deaths, disabilities, retirements,
salary growth, and investment return) are exactly realized each year, there will be differences on a year to year
basis. The year-to-year differences between actual experience and the assumptions are called actuarial gains and losses and serve to lower or raise 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.
Asset Volatility Ratio
Plans that have higher asset to payroll ratios produce more volatile employer rates due to investment return. For
example, a plan with an asset to payroll ratio of 8 may experience twice the contribution volatility due to investment return volatility than a plan with an asset to payroll ratio of 4. Below we have shown your asset volatility ratio, a
measure of the plan’s current rate volatility. It should be noted that this ratio is a measure of the current situation.
It increases over time but generally tends to stabilize as the plan matures.
Liability Volatility Ratio
Plans that have higher liability to payroll ratios produce more volatile employer rates due to investment return and
changes in liability. For example, a plan with a liability to payroll ratio of 8 is expected to have twice the contribution volatility of a plan with a liability to payroll ratio of 4. The liability volatility ratio is also included in the table below.
It should be noted that this ratio indicates a longer-term potential for contribution volatility and the asset volatility
ratio, described above, will tend to move closer to this ratio as the plan matures.
Rate Volatility As of June 30, 2011
1. Market Value of Assets without Receivables $ 224,729,443
2. Payroll 22,774,462
3. Asset Volatility Ratio (1. / 2.) 9.9
4. Accrued Liability $ 313,183,690
5. Liability Volatility Ratio (4. / 2.) 13.8
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX D
RISK ANALYSIS
D-2
Analysis of Future Investment Return Scenarios
The investment return for fiscal year 2011-2012 was estimated to be 0%. 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 return information for these two asset classes is expected to be available later in October. For
purposes of projecting future employer rates, we are assuming a 0% investment return for fiscal year 2011-2012.
The investment return realized during a fiscal year first affects the contribution rate for the fiscal year 2 years later.
Specifically, the investment return for 2011-2012 will first be reflected in the June 30, 2012 actuarial valuation that
will be used to set the 2014-2015 employer contribution rates, the 2012-2013 investment return will first be reflected
in the June 30, 2013 actuarial valuation that will be used to set the 2015-2016 employer contribution rates and so
forth.
Based on a 0% investment return for fiscal year 2011-2012 and assuming 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 the fiscal year 2014-2015, the effect on the 2014-2015 Employer Rate is as follows:
Estimated 2014-2015 Employer Rate Estimated Increase in Employer Rate between
2013-2014 and 2014-2015
35.9% 2.5%
As part of this report, a sensitivity analysis was performed to determine the effects of various investment returns
during fiscal years 2012-2013, 2013-2014 and 2014-2015 on the 2015-2016, 2016-2017 and 2017-2018 employer
rates. Once again, the projected rate increases assume that all other actuarial assumptions will be realized and that
no further changes to assumptions, contributions, benefits, or funding will occur.
Five different investment return scenarios were selected.
The first scenario is what one would expect if the markets were to give us a 5th percentile return from July
1, 2012 through June 30, 2015. The 5th percentile return corresponds to a -4.1% return for each of the
2012-2013, 2013-2014 and 2014-2015 fiscal years.
The second scenario is what one would expect if the markets were to give us a 25th percentile return from
July 1, 2012 through June 30, 2015. The 25th percentile return corresponds to a 2.6% return for each of
the 2012-2013, 2013-2014 and 2014-2015 fiscal years. The third scenario assumed the return for 2012-2013, 2013-2014, 2014-2015 would be our assumed 7.5% investment return which represents about a 49th percentile event.
The fourth scenario is what one would expect if the markets were to give us a 75th percentile return from
July 1, 2012 through June 30, 2015. The 75th percentile return corresponds to a 11.9% return for each of
the 2012-2013, 2013-2014 and 2014-2015 fiscal years.
Finally, the last scenario is what one would expect if the markets were to give us a 95th percentile return
from July 1, 2012 through June 30, 2015. The 95th percentile return corresponds to a 18.5% return for
each of the 2012-2013, 2013-2014 and 2014-2015 fiscal years.
The table below shows the estimated projected contribution rates and the estimated increases for your plan under
the five different scenarios.
2012-2015
Investment Return
Scenario
Estimated Employer Rate Estimated Change in
Employer Rate
between 2014-2015
and 2017-2018 2015-2016 2016-2017 2017-2018
-4.1% (5th percentile) 44.0% 51.1% 57.4% 21.5%
2.6% (25th percentile) 39.4% 42.7% 45.9% 10.0%
7.5% 36.6% 37.2% 37.8% 1.9%
11.9%(75th percentile) 36.4% 36.7% 36.8% 0.9%
18.5%(95th percentile) 36.1% 35.9% 35.2% -0.7%
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX D
RISK ANALYSIS
D-3
Analysis of Discount Rate Sensitivity
The following analysis looks at the 2013-2014 employer contribution rates under two different discount rate scenarios. Shown below are the employer contribution rates assuming discount rates that are 1% lower and 1%
higher than the current valuation discount rate. This analysis gives an indication of the potential required employer
contribution rates if the PERF were to realize investment returns of 6.50% or 8.50% over the long-term.
This type of analysis gives the reader a sense of the long-term risk to the employer contribution rates.
2013-2014 Employer Contribution Rate
As of June 30, 2011 6.50% Discount Rate
(-1%) 7.50% Discount Rate
(assumed rate) 8.50% Discount Rate
(+1%)
Employer Normal Cost 25.471% 18.658% 13.406%
Unfunded Rate Payment 27.705% 14.786% 5.839%
Total 53.176% 33.444% 19.245%
APPENDIX E
GLOSSARY OF ACTUARIAL TERMS
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX E
GLOSSARY OF ACTUARIAL TERMS
E-1
Glossary of Actuarial Terms
Accrued Liability (also called Actuarial Accrued Liability or Entry Age Normal Accrued Liability)
The total dollars needed as of the valuation date to fund all benefits earned in the past for current members.
Actuarial Assumptions Assumptions made about certain events that will affect pension costs. Assumptions generally can be broken
down into two categories: demographic and economic. Demographic assumptions include such things as
mortality, disability and retirement rates. Economic assumptions include discount rate, salary growth and
inflation.
Actuarial Methods
Procedures employed by actuaries to achieve certain funding goals of a pension plan. Actuarial methods include funding method, setting the length of time to fund the Accrued Liability and determining the Actuarial Value of
Assets.
Actuarial Valuation
The determination, as of a valuation date, of the Normal Cost, 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 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.) but all bases are amortized using investment
and payroll assumptions from the current valuation.
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 pay off 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 with the plan assumptions. The ARC is determined by multiplying
the employer contribution 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 dollar value of the ARC is equal to the Lump Sum
Prepayment.
Discount Rate
The actuarial assumption that was called “investment return” in earlier CalPERS reports or “actuarial interest
rate” in Section 20014 of the California Public Employees’ Retirement Law (PERL).
Entry Age
The earliest age at which a plan member begins to accrue benefits under a defined benefit pension plan or risk
pool. In most cases, this is age of the member on their date of hire.
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX E
GLOSSARY OF ACTUARIAL TERMS
E-2
(The assumed retirement age less the entry age is the amount of time required to fund a member’s total benefit.
Generally, the older a member on the date of hire, the greater the entry age normal cost. This is mainly
because there is less time to earn investment income to fund the future benefits.)
Entry Age Normal Cost Method
An actuarial cost method designed to fund a member's total plan benefit over the course of his or her career.
This method is designed to yield a rate expressed as a level percentage of payroll.
(The assumed retirement age less the entry age is the amount of time required to fund a member’s total benefit. Generally, the older a member on the date of hire, the greater the entry age normal cost. This is mainly
because there is less time to earn investment income to fund the future benefits.)
Fresh Start
A Fresh Start is the single amortization 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 or risk pool is. Or equivalently, how "on track" a plan or risk pool is with
respect to assets vs. 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.
GASB 27
Statement No. 27 of the Governmental Accounting Standards Board. The accounting standard governing a state
or local governmental employer’s accounting for pensions.
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.
Present Value of Benefits (PVB) The total dollars needed as of the valuation date to fund all benefits earned in the past or expected to be earned
in the future for current members.
Rolling Amortization Period
An amortization period that remains the same each year, rather than declining.
Superfunded A condition existing when a plan’s Actuarial Value of Assets exceeds its 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
When a plan or pool’s Actuarial Value of Assets is less than its Accrued Liability, the difference is the plan or
pool’s Unfunded Liability of the Unfunded Liability is positive, the plan or pool will have to pay contributions exceeding the Normal Cost.
California Public Employees’ Retirement System
Actuarial Office
P.O. Box 942701
Sacramento, CA 94229-2701
TTY: (916) 795-3240
(888) 225-7377 phone • (916) 795-2744 fax
www.calpers.ca.gov
October 2012
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO (CalPERS ID 6373437857) Annual Valuation Report as of June 30, 2011 Dear Employer,
As an attachment to this letter, you will find a copy of the June 30, 2011 actuarial valuation report of your pension
plan. This report contains important actuarial information about your pension plan at CalPERS. Your CalPERS staff
actuary is 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, 2011 valuation. In addition, a temporary modification to our method of determining the actuarial value of assets and
amortizing gains and losses was implemented for the valuations as of June 30, 2009 through June 30, 2011. The
effect of those modifications continue in this valuation.
There may also be changes specific to your plan such as contract amendments and funding changes.
Further descriptions of general changes are included in the “Highlights and Executive Summary” section and in
Appendix A, “Statement of Actuarial Data, Methods and Assumptions.” The effect of the changes on your rate is
included in the “Reconciliation of Required Employer Contributions.” As noted on page 13 of the report, your plan can elect not to phase-in the cost of the assumption change by notifying your plan actuary prior to
May 1, 2013.
Future Contribution Rates
The exhibit below displays the required employer contribution rate before any cost sharing and Superfunded status for
2013/2014 along with estimates of the contribution rate for 2014/2015 and 2015/2016 and the probable Superfunded status for 2014/2015. The estimated rate for 2014/2015 is based solely on a projection of the investment return for
fiscal 2011/2012, namely 0%. The estimated rate for 2015/2016 uses the valuation assumption of 7.5% as the
investment return for fiscal 2012/2013. See Appendix D, “Analysis of Future Investment Return Scenarios”, for rate
projections under a variety of investment return scenarios. These rates may not be GASB compliant. See
Appendix C for the GASB compliant rate. Please disregard any projections that we may have provided to you in the
past.
Fiscal Year Employer Contribution Rate Superfunded?
2013/2014 24.600% NO
2014/2015 26.4% (projected) NO 2015/2016 26.9% (projected) N/A
Member contributions other than cost sharing, (whether paid by the employer or the employee) are in addition to the
above rates. The estimates for 2014/2015 and 2015/2016 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 very important
assumption because these gains and losses do occur 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 2014/2015 will be
provided in next year’s report.
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO (CalPERS ID 6373437857)
October 2012
Page 2
California Actuarial Advisory Panel Recommendations
The report satisfies all basic disclosure requirements under the Model Disclosure Elements for Actuarial Valuation
Reports recommended by the California Actuarial Advisory Panel, except for the original base amounts of the various
components of the unfunded liability amortization.
The report gives the following additional information classified as enhanced risk disclosures under the Model Disclosure Elements for Actuarial Valuation Reports recommended by the California Actuarial Advisory Panel:
“Deterministic stress test”, projecting future results under different investment income scenarios. (See
Appendix D’s Analysis of Future Investment Return Scenarios.)
“Sensitivity analysis”, showing the impact on current valuation results of a plus or minus 1% change in the
discount rate. (See Appendix D’s Analysis of Discount Rate Sensitivity.)
We are very busy preparing actuarial valuations for other public agencies and expect to complete all such valuations by
the end of October. We understand that you might have a number of questions about these results. While we are very interested in discussing these results with your agency, in the interest of allowing us to give every public agency
their result, we ask that, if at all possible, you wait until after October 31 to contact us with questions. If you have
questions, please call (888) CalPERS (225-7377).
Sincerely,
ALAN MILLIGAN
Chief Actuary
ACTUARIAL VALUATION
as of June 30, 2011
for the
MISCELLANEOUS PLAN
of the
CITY OF PALO ALTO
(CalPERS ID 6373437857)
REQUIRED CONTRIBUTIONS
FOR FISCAL YEAR
July 1, 2013 – June 30, 2014
TABLE OF CONTENTS
ACTUARIAL CERTIFICATION 1
HIGHLIGHTS AND EXECUTIVE SUMMARY
Purpose of the Report 5
Required Employer Contribution 5
Funded Status 6
Cost 6
Changes Since the Prior Valuation 7
SUMMARY OF LIABILITIES AND RATES
Development of Accrued and Unfunded Liabilities 11
(Gain) / Loss Analysis 06/30/10 - 06/30/11 12
Schedule of Amortization Bases 13
Reconciliation of Required Employer Contributions 14
Employer Contribution Rate History 15
Funding History 15 Hypothetical Termination Liability 15
SUMMARY OF ASSETS
Reconciliation of the Market Value of Assets 19
Development of the Actuarial Value of Assets 19
Asset Allocation 20
CalPERS History of Investment Returns 21
SUMMARY OF PARTICIPANT DATA
Summary of Valuation Data 25
Active Members 26
Transferred and Terminated Members 27 Retired Members and Beneficiaries 28
APPENDIX A – ACTUARIAL METHODS AND ASSUMPTIONS
Actuarial Data A-1
Actuarial Methods A-1
Actuarial Assumptions A-3
Miscellaneous A-17
APPENDIX B – PLAN PROVISIONS
Summary of Plan’s Major Benefit Options B-1
Description of CalPERS’ Principal Plan Provisions B-3
APPENDIX C – GASB STATEMENT NO. 27
APPENDIX D – RISK ANALYSIS Volatility Ratios D-1
Analysis of Future Investment Return Scenarios D-2
Analysis of Discount Rate Sensitivity D-3
APPENDIX E – GLOSSARY OF ACTUARIAL TERMS
FIN PROCESS CONTROL ID (CY) 393073 FIN PROCESS CONTROL ID (PY) 361258 REPORT ID 69518
CALPERS ACTUARIAL VALUATION - June 30, 2011
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
Page 1
ACTUARIAL CERTIFICATION
To the best of our knowledge, this report is complete and accurate and contains sufficient information to
disclose, fully and fairly, the funded condition of the MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO.
This valuation is based on the member and financial data as of June 30, 2011 provided by the various
CalPERS databases and the benefits under this plan with CalPERS as of the date this report was produced.
It is our opinion that the valuation has been performed in accordance with generally accepted actuarial
principles, in accordance with standards of practice prescribed by the Actuarial Standards Board, and that the assumptions and methods are internally consistent and reasonable for this plan, as prescribed by the
CalPERS Board of Administration according to provisions set forth in the California Public Employees’
Retirement Law.
The undersigned is an actuary for CalPERS, who is a member of the American Academy of Actuaries and the
Society of Actuaries and meets the Qualification Standards of the American Academy of Actuaries to render
the actuarial opinion contained herein.
DAVID CLEMENT, ASA, MAAA, EA
Senior Pension Actuary, CalPERS
HIGHLIGHTS AND EXECUTIVE SUMMARY
PURPOSE OF THE REPORT
REQUIRED CONTRIBUTIONS
FUNDED STATUS
COST
CHANGES SINCE THE PRIOR VALUATION
CALPERS ACTUARIAL VALUATION - June 30, 2011
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
Page 5
Purpose of the Report
This report presents the results of the June 30, 2011 actuarial valuation of the MISCELLANEOUS PLAN OF
THE CITY OF PALO ALTO of the California Public Employees’ Retirement System (CalPERS). The valuation was prepared by the Plan Actuary in order to:
set forth the actuarial assets and accrued liabilities of this plan as of June 30, 2011;
determine the required employer contribution rate for this plan for the fiscal year July 1, 2013 through
June 30, 2014;
provide actuarial information as of June 30, 2011 to the CalPERS Board of Administration and other
interested parties; and provide pension information as of June 30, 2011 to be used in financial reports subject to Governmental Accounting Standards Board (GASB) Statement Number 27 for a Single Employer Defined Benefit
Pension Plan.
The use of this report for any other purposes may be inappropriate. In particular, this report does not
contain information applicable to alternative benefit costs. The employer should contact their actuary
before disseminating any portion of this report for any reason that is not explicitly described above.
Required Employer Contribution
Fiscal Year Fiscal Year
2012/2013 2013/2014
Required Employer Contributions
1. Contribution in Projected Dollars
a) Total Normal Cost $ 12,499,067 $ 12,060,985
b) Employee Contribution1 5,502,479 5,234,882
c) Employer Normal Cost [(1a) – (1b)] 6,996,588 6,826,103
d) Unfunded Contribution 8,804,207 9,382,872
e) Total Employer Contribution [(1c) + (1d)] $ 15,800,795 $ 16,208,975
f ) Employee Cost Sharing 0
g) Net Employer Contribution [(1e) – (1f)] 16,208,975
Annual Lump Sum Prepayment Option2 [(1g) / 1.075^.5] $ 15,221,950 $ 15,633,324
2. Contribution as a Percentage of Payroll
a) Total Normal Cost 18.170% 18.305%
b) Employee Contribution1 7.999% 7.945%
c) Employer Normal Cost [(2a) – (2b)] 10.171% 10.360%
d) Unfunded Rate 12.799% 14.240%
e) Total Employer Rate [(2c) + (2d)] 22.970% 24.600%
f ) Employee Cost Sharing 0.000%
g) Net Employer Contribution Rate [(2e) – (2f)] 24.600%
1This is the percentage specified in the Public Employees Retirement Law, net of any reduction from the use
of a modified formula. Employee cost sharing is shown separately and is therefore not included in this line item.
2Payment must be received by CalPERS before the first payroll reported to CalPERS of the new fiscal year
and after June 30.
CALPERS ACTUARIAL VALUATION - June 30, 2011
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
Page 6
Funded Status
Cost
Actuarial Cost Estimates in 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 that will terminate, die, become
disabled, and retire in each future year. Economic assumptions include future salary increases for each active employee, and the assumption with the greatest impact, future asset returns at CalPERS for each year into the future
until the last dollar is paid to current members of your plan.
While CalPERS 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 realized in any
one year. For example, while the asset earnings at CalPERS have averaged more than the assumed return
of 7.5% for the past twenty year period ending June 30, 2012, returns for each fiscal year ranged from
-24% to +21.7%
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 percentage of total active payroll.
The Past Service Cost or Accrued Liability (i.e., the current value of the benefit for 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 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 specific amortization period,
and the employer rate will vary depending on the amortization period chosen.
June 30, 2010 June 30, 2011
1. Present Value of Projected Benefits $ 609,397,781 $ 638,375,787
2. Entry Age Normal Accrued Liability 521,269,469 552,715,631
3. Actuarial Value of Assets (AVA) 416,810,087 434,985,547
4. Unfunded Liability (AVA Basis) [(2) – (3)] $ 104,459,382 $ 117,730,084
5. Funded Ratio (AVA Basis) [(3) / (2)] 80.0% 78.7%
6. Market Value of Assets (MVA) $ 323,971,012 $ 384,056,704
7. Unfunded Liability (MVA Basis) [(2) – (6)] $ 197,298,457 $ 168,658,927
8. Funded Ratio (MVA Basis) [(6) / (2)] 62.2% 69.5%
Superfunded Status No No
CALPERS ACTUARIAL VALUATION - June 30, 2011
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
Page 7
Changes since the Prior Valuation
Actuarial Assumptions
The CalPERS Actuarial office conducted a study and hired an independent evaluator to assess current
economic assumptions. Based on the information from both studies, the CalPERS Board of Administration
has adopted updated economic assumptions to be used beginning with the June 30, 2011 valuation. In
particular, the recommendation based on both studies was to lower the price inflation from 3.00 to 2.75 percent.
Lowering the price inflation had a direct impact on the Investment Return and the Overall Payroll Growth
assumptions. The Investment Return assumption is calculated as the sum of the price inflation and the real
rate of return. Our assumed real rate of return is 4.75 percent. When added to our new price inflation of
2.75 percent, the resulting investment return is 7.50 percent. The Overall Payroll Growth is calculated as
the sum of the price inflation and real wage inflation. Our assumed real wage inflation is 0.25 percent. When added to our new price inflation of 2.75 percent, the resulting overall payroll growth is 3.00 percent.
The new assumptions are described in Appendix A. The effect of change in assumption on the unfunded
liability is shown in the “(Gain)/Loss Analysis” and the effect on your employer contribution rate is included
in the “Reconciliation of Required Employer Contributions”. As noted on page 13 of the report, your
plan can elect not to phase-in the cost of the assumption change by notifying your plan actuary
prior to May 1, 2013.
The limitations on benefits imposed by Internal Revenue Code Section 415 were taken into account in this
valuation. The effect of these limitations has been deemed immaterial on the overall results and no
additional charge to the change in assumptions base was added.
Actuarial Methods
A method change was adopted by the CalPERS Board in June 2009. We are in the third year of a 3-year
temporary change to the asset smoothing method and the amortization of gains and losses in order to
phase in the impact of the -24% investment loss experienced by CalPERS 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)
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.”
Benefits
The standard actuarial practice at CalPERS is to recognize mandated legislative benefit changes in the first
annual valuation whose valuation date follows the effective date of the legislation. Voluntary benefit
changes by plan amendment are generally included in the first valuation that is prepared after the amendment becomes effective even if the valuation date is prior to the effective date of the amendment.
This valuation generally reflects plan changes by amendments effective before the date of the report.
Please refer to 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 “(Gain)/Loss
Analysis” and the effect on your employer contribution rate is shown in the “Reconciliation of Required
Employer Contributions”. It should be noted that no change in liability or rate is shown for any plan changes which were already included in the prior year’s valuation.
SUMMARY OF LIABILITIES AND RATES
DEVELOPMENT OF ACCRUED AND UNFUNDED LIABILITIES
(GAIN) / LOSS ANALYSIS 06/30/10 - 06/30/11
SCHEDULE OF AMORTIZATION BASES
RECONCILIATION OF REQUIRED EMPLOYER CONTRIBUTIONS
EMPLOYER CONTRIBUTION RATE HISTORY
FUNDING HISTORY
HYPOTHETICAL TERMINATION LIABILITY
CALPERS ACTUARIAL VALUATION - June 30, 2011
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
Page 11
Development of Accrued and Unfunded Liabilities
1. Present Value of Projected Benefits
a) Active Members $ 270,584,173
b) Transferred Members 24,380,817
c) Terminated Members 10,677,123
d) Members and Beneficiaries Receiving Payments 332,733,674
e) Total $ 638,375,787
2. Present Value of Future Employer Normal Costs $ 47,221,334
3. Present Value of Future Employee Contributions $ 38,438,822
4. Entry Age Normal Accrued Liability
a) Active Members [(1a) - (2) - (3)] $ 184,924,017
b) Transferred Members (1b) 24,380,817
c) Terminated Members (1c) 10,677,123
d) Members and Beneficiaries Receiving Payments (1d) 332,733,674
e) Total $ 552,715,631
5. Actuarial Value of Assets (AVA) $ 434,985,547
6. Unfunded Accrued Liability (AVA Basis) [(4e) – (5)] $ 117,730,084
7. Funded Ratio (AVA Basis) [(5) / (4e)] 78.7%
8. Market Value of Assets (MVA) $ 384,056,704
9. Unfunded Liability (MVA Basis) [(4e) - (8)] $ 168,658,927
10. Funded Ratio (MVA Basis) [(8) / (4e)] 69.5%
CALPERS ACTUARIAL VALUATION - June 30, 2011
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
Page 12
(Gain)/Loss Analysis 6/30/10 – 6/30/11
To calculate the cost requirements of the plan, assumptions are made about future events that affect the
amount and timing of benefits to be paid and assets to be accumulated. Each year actual experience is
compared to the expected experience based on the actuarial assumptions. This results in actuarial gains or losses, as shown below.
A Total (Gain)/Loss for the Year*
1. Unfunded Accrued Liability (UAL) as of 6/30/10 $ 104,459,382
2. Expected Payment on the UAL during 2010/2011 4,764,685
3. Interest through 6/30/11 [.0775 x (A1) - ((1.0775)½ - 1) x (A2)] 7,914,416
4. Expected UAL before all other changes [(A1) - (A2) + (A3)] 107,609,113 5. Change due to plan changes 0
6. Change due to assumption change 10,169,282
7. Expected UAL after all other changes [(A4) + (A5) + (A6)] 117,778,395
8. Actual UAL as of 6/30/11 117,730,084
9. Total (Gain)/Loss for 2010/2011 [(A8) - (A7)] $ (48,311)
B Contribution (Gain)/Loss for the Year
1. Expected Contribution (Employer and Employee) $ 16,489,270
2. Interest on Expected Contributions 627,037
3. Actual Contributions 16,921,851
4. Interest on Actual Contributions 643,487 5. Expected Contributions with Interest [(B1) + (B2)] 17,116,307
6. Actual Contributions with Interest [(B3) + (B4)] 17,565,338
7. Contribution (Gain)/Loss [(B5) - (B6)] $ (449,031)
C Asset (Gain)/Loss for the Year
1. Actuarial Value of Assets as of 6/30/10 Including Receivables $ 416,810,087
2. Receivables as of 6/30/10 1,159,213
3. Actuarial Value of Assets as of 6/30/10 415,650,874
4. Contributions Received 16,921,851
5. Benefits and Refunds Paid (26,661,103)
6. Transfers and miscellaneous adjustments (12,179) 7. Expected Int. [.0775 x (C3) + ((1.0775)½ - 1) x ((C4) + (C5) + (C6))] 31,842,125
8. Expected Assets as of 6/30/11 [(C3) + (C4) + (C5) + (C6) + (C7)] 437,741,568
9. Receivables as of 6/30/11 881,754
10. Expected Assets Including Receivables 438,623,322
11. Actual Actuarial Value of Assets as of 6/30/11 434,985,547
12. Asset (Gain)/Loss [(C10) - (C11)] $ 3,637,775
D Liability (Gain)/Loss for the Year
1. Total (Gain)/Loss (A9) $ (48,311)
2. Contribution (Gain)/Loss (B7) (449,031)
3. Asset (Gain)/Loss (C12) 3,637,775
4. Liability (Gain)/Loss [(D1) - (D2) - (D3)] $ (3,237,055)
Development of the (Gain)/Loss Balance as of 6/30/11**
1. (Gain)/Loss Balance as of 6/30/10 $ 13,548,918
2. Payment Made on the Balance during 2010/2011 813,626 3. Interest through 6/30/11 [.0775 x (1) - ((1.0775)1/2 - 1) x (2)] 1,019,101
4. Scheduled (Gain)/Loss Balance as of 6/30/11 [(1) - (2) + (3)] $ 13,754,393
* The Total (Gain)/Loss for 2010/2011 is being amortized over a fixed and declining 30-year period and is shown as “Special (Gain)/Loss” in the “Schedule of Amortization Bases” on the following page.
** This (Gain)/Loss represents the 6/30/11 balance of the accumulation of (gains)/losses through 6/30/08
and is amortized using a rolling 30-year period. Gains and losses incurred after 6/30/2011 will again
accumulate to this base.
CALPERS ACTUARIAL VALUATION - June 30, 2011
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
Page 13
Schedule of Amortization Bases
There is a two year lag between the Valuation Date and the Contribution Fiscal Year.
The assets, liabilities and funded status of the plan are measured as of the valuation date (June 30, 2011).
The employer contribution rate determined by the valuation is for the fiscal year beginning two years after the valuation date (fiscal year 2013/2014).
This two year lag is necessary due to the amount of time needed to extract and test the membership and financial data, and due to the need to provide public agencies
with their employer contribution rates well in advance of the start of the fiscal year.
The Unfunded Liability is used to determine the employer contribution and therefore must be rolled forward two years from the valuation date to the first day of the
fiscal year for which the contribution is being determined. The Unfunded Liability is rolled forward each year by subtracting the expected Payment on the Unfunded
Liability for the fiscal year and adjusting for interest. The Expected Payment on the Unfunded Liability for a fiscal year is equal to the Expected Employer Contribution for
the fiscal year minus the Expected Normal Cost for the year. The Employer Contribution Rate for the first fiscal year is determined 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 Rate for each of the two fiscal years is assumed to be the same as the rate determined by the current valuation. All expected dollar amounts are determined by multiplying the rate by the expected payroll for the applicable fiscal year,
based on payroll as of the valuation date.
Amounts for Fiscal 2013/2014
Reason for Base
Date
Established
Amorti-
zation
Period
Balance
6/30/11
Expected
Payment
2011/2012
Balance
6/30/12
Expected
Payment
2012/2013
Balance
6/30/13
Scheduled
Payment for
2013–2014
Payment as
Percent-age of
Payroll
ASSUMPTION CHANGE 06/30/03 12 $18,835,015 $1,815,811 $18,364,968 $1,874,825 $17,798,481 $1,924,538 2.921%
METHOD CHANGE 06/30/04 13 $(1,393,344) $(127,795) $(1,365,344) $(131,949) $(1,330,937) $(135,457) (0.206%)
BENEFIT CHANGE 06/30/05 13 $30,868,954 $2,831,249 $30,248,624 $2,923,265 $29,486,365 $3,000,992 4.555%
(GAIN)/LOSS 06/30/08 30 $13,754,393 $825,965 $13,929,594 $838,491 $14,104,948 $847,010 1.286%
ASSUMPTION CHANGE 06/30/09 18 $26,840,002 $2,027,256 $26,751,098 $2,093,142 $26,587,215 $2,149,437 3.262%
SPECIAL (GAIN)/LOSS 06/30/09 28 $15,813,934 $949,642 $16,015,369 $980,506 $16,199,911 $1,007,314 1.529%
SPECIAL (GAIN)/LOSS 06/30/10 29 $1,224,064 $0 $1,315,869 $79,203 $1,332,440 $81,378 0.124%
ASSUMPTION CHANGE 06/30/11 20 $10,169,282 $(228,553) $11,168,947 $(235,409) $12,250,695 $308,331 0.468%
SPECIAL (GAIN)/LOSS 06/30/11 30 $(48,310) $0 $(51,933) $0 $(55,828) $(3,353) (0.005%)
PAYMENT (GAIN)/LOSS 06/30/11 30 $1,666,094 $(1,002,230) $2,830,185 $(320,924) $3,375,190 $202,682 0.308%
TOTAL $117,730,084 $7,091,345 $119,207,377 $8,101,150 $119,748,480 $9,382,872 14.240%
The special (gain)/loss bases were established using the temporary modification recognized in the 2009, 2010 and 2011 annual valuations. Unlike the gain/loss occurring in previous and subsequent years, the gain/loss recognized in the 2009, 2010, and 2011 annual valuations will be amortized over fixed and declining 30 year
periods so that these annual gain/losses will be fully paid off in 30 years.
The discount rate assumption is 7.5% after June 30, 2011 in the amortization schedule above.
Note: The assumption change at June 30, 2011 was phased-in over a two-year period. Without the phase-in, the total payment on the amortization bases would
increase from 14.240% to 15.176%. Your plan can elect not to phase-in the cost of the assumption change by notifying your plan actuary prior to May 1, 2013.
The required employer contribution rate with no phase-in is 25.536%.
CALPERS ACTUARIAL VALUATION - June 30, 2011
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
Page 14
Reconciliation of Required Employer Contributions
Percentage
of
Projected Payroll
Estimated $
Based on
Projected Payroll
1. Contribution for 7/1/12 – 6/30/13 22.970% $ 15,800,795
2. Effect of changes since the prior year annual valuation
a) Effect of unexpected changes in demographics and financial results 0.794% 523,608
b) Effect of plan changes 0.000% 0
c) Effect of changes in Assumptions 0.836% 550,832
d) Effect of change in payroll - (666,260)
e) Effect of elimination of amortization base 0.000% 0
f) Effect of changes due to Fresh Start 0.000% 0
g) Net effect of the changes above [Sum of (a) through (f)] 1.630% 408,180
3. Contribution for 7/1/13 – 6/30/14 [(1)+(2g)] 24.600% 16,208,975
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.
CALPERS ACTUARIAL VALUATION - June 30, 2011
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
Page 15
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.
[required_by_valuation] Required By Valuation
Fiscal Year Employer Normal Cost Unfunded Rate Total Employer Contribution Rate
2009 - 2010 10.142% 6.921% 17.063%
2010 - 2011 10.087% 7.468% 17.555%
2011 - 2012 10.100% 11.625% 21.725%
2012 - 2013 10.171% 12.799% 22.970%
2013 - 2014 10.360% 14.240% 24.600%
Funding History
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 short-term solvency of the plan.
[funding_history]
Valuation
Date
Accrued
Liability
Actuarial
Value of
Assets (AVA)
Market Value
of
Assets (MVA)
Funded
Ratio
AVA MVA
Annual
Covered
Payroll
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
06/30/10 521,269,469 416,810,087 323,971,012 80.0% 62.2% 62,496,037
06/30/11 552,715,631 434,985,547 384,056,704 78.7% 69.5% 60,297,783
Hypothetical Termination Liability
In August 2011, the CalPERS Board adopted an investment policy and asset allocation strategy that more
closely reflects expected benefit payments of the Terminated Agency Pool. With this change, CalPERS increased benefit security for members while limiting its funding risk.
The table below shows the hypothetical termination liability, the market value of assets, the unfunded
termination liability and the termination funded ratio. The assumptions used, including the discount rate,
are stated in Appendix A and take into account the yields available in the US Treasury market on the
valuation date and the mortality load for contingencies. The discount rate is duration weighted and is not necessarily the rate that would be used for this plan if it were to terminate. The discount rate for this plan’s
termination liability would depend on the duration of the liabilities of this plan. For purposes of this
estimate, the discount rate used, 4.82%, is the June 30, 2011 30-year US Treasury Stripped Coupon Rate.
Please note, as of June 30, 2012 the 30-year US Treasury Stripped Coupon Rate was 2.87%.
[estimated_termination_liability]
Valuation
Date
Hypothetical
Termination Liability
Market Value
of Assets (MVA)
Unfunded
Termination Liability
Termination
Funded Ratio
Discount
Rate
06/30/11 $ 770,280,910 $ 384,056,704 $ 386,224,206 49.9% 4.82%
SUMMARY OF ASSETS
RECONCILIATION OF THE MARKET VALUE OF ASSETS
DEVELOPMENT OF THE ACTUARIAL VALUE OF ASSETS
ASSET ALLOCATION
CALPERS HISTORY OF INVESTMENT RETURNS
CALPERS ACTUARIAL VALUATION - June 30, 2011
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
Page 19
Reconciliation of the Market Value of Assets
1. Market Value of Assets as of 6/30/10 Including Receivables $ 323,971,012
2. Receivables for Service Buybacks as of 6/30/10 1,159,213
3. Market Value of Assets as of 6/30/10 322,811,799
4. Employer Contributions 10,803,769
5. Employee Contributions 6,118,082
6. Benefit Payments to Retirees and Beneficiaries (26,428,169)
7. Refunds (150,808)
8. Lump Sum Payments (82,126)
9. Transfers and Miscellaneous Adjustments (12,179)
10. Investment Return 70,114,582
11. Market Value of Assets as of 6/30/11 $ 383,174,950
12. Receivables for Service Buybacks as of 6/30/11 881,754
13. Market Value of Assets as of 6/30/11 Including Receivables $ 384,056,704
Development of the Actuarial Value of Assets
1. Actuarial Value of Assets as of 6/30/10 Used For Rate Setting Purposes $ 416,810,087
2. Receivables for Service Buybacks as of 6/30/10 1,159,213
3. Actuarial Value of Assets as of 6/30/10 415,650,874
4. Employer Contributions 10,803,769
5. Employee Contributions 6,118,082
6. Benefit Payments to Retirees and Beneficiaries (26,428,169)
7. Refunds (150,808)
8. Lump Sum Payments (82,126)
9. Transfers and Miscellaneous Adjustments (12,179)
10. Expected Investment Income at 7.75% 31,842,125
11. Expected Actuarial Value of Assets $ 437,741,568
12. Market Value of Assets as of 6/30/11 $ 383,174,950
13. Preliminary Actuarial Value of Assets [(11) + ((12) – (11)) / 15] 434,103,793
14. Maximum Actuarial Value of Assets (120% of (12)) 459,809,940
15. Minimum Actuarial Value of Assets (80% of (12)) 306,539,960
16. Actuarial Value of Assets {Lesser of [(14), Greater of ((13), (15))]} 434,103,793
17. Actuarial Value to Market Value Ratio 113.3%
18. Receivables for Service Buybacks as of 6/30/11 881,754
19. Actuarial Value of Assets as of 6/30/11 Used for Rate Setting Purposes $ 434,985,547
CALPERS ACTUARIAL VALUATION - June 30, 2011
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
Page 20
Asset Allocation
CalPERS follows a strategic asset allocation policy that identifies the percentage of funds to be invested in
each asset class. The current target allocation was adopted by the Board in December 2010.
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, 2011. 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
(B)
Market Value
($ Billion)
(C)
Current
Allocation
1) Short-Term Investments 7.9 3.3%
2) Domestic Equity 56.3 23.5%
3) International Equity 60.4 25.2%
4) Domestic Debt 49.2 20.6%
5) International Debt 3.9 1.6%
6) Inflation Linked 8.1 3.4%
7) Real Estate 19.1 8.0%
8) Alternative Investment 34.4 14.4%
Total Fund $239.3 100.0%
23.5%
Domestic
Equity
25.2% International
Equity
1.6%
International
Debt
3.4%
Inflation
Linked
20.6%
Domestic
Debt
8.0% Real
Estate
14.4%
Alternative
Investment
3.3% Short-term
Investments
CALPERS ACTUARIAL VALUATION - June 30, 2011
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
Page 21
CalPERS History of Investment Returns
The following is a chart with historical annual returns of the Public Employees Retirement Fund for each
fiscal year ending on June 30. Beginning with June 30, 2002 the figures are reported as gross of fees.
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
12
.
5
%
14
.
5
%
2.0
%
16
.
3
%
15
.
3
%
20
.
1
%
19
.
5
%
12
.
5
%
10
.
5
%
-7.2
%
-6.1
%
3.7
%
16
.
6
%
12
.
3
%
11
.
8
%
19
.
1
%
-5.1
%
-24
.
0
%
13
.
3
%
21
.
7
%
SUMMARY OF PARTICIPANT DATA
SUMMARY OF VALUATION DATA
ACTIVE MEMBERS
TRANSFERRED AND TERMINATED MEMBERS
RETIRED MEMBERS AND BENEFICIARIES
CALPERS ACTUARIAL VALUATION - June 30, 2011
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
Page 25
Summary of Valuation Data
June 30, 2010 June 30, 2011
1. Active Members
a) Counts 790 765
b) Average Attained Age
45.29 45.40
c) Average Entry Age to Rate Plan 34.76 34.90
d) Average Years of Service 10.53 10.50
e) Average Annual Covered Pay $ 79,109 $ 78,821
f) Annual Covered Payroll 62,496,037 60,297,783
g) Projected Annual Payroll for Contribution Year 68,789,580 65,889,016
h) Present Value of Future Payroll 500,654,459 484,783,561
2. Transferred Members
a) Counts 276 294
b) Average Attained Age 46.03 46.14
c) Average Years of Service 3.75 3.59
d) Average Annual Covered Pay $ 105,686 $ 107,846
3. Terminated Members
a) Counts 300 305
b) Average Attained Age 45.83 46.66
c) Average Years of Service 3.34 3.47
d) Average Annual Covered Pay $ 58,766 $ 59,389
4. Retired Members and Beneficiaries
a) Counts 903 941
b) Average Attained Age 67.89 67.91
c) Average Annual Benefits $ 27,797 $ 29,501
5. Active to Retired Ratio [(1a) / (4a)] 0.87 0.81
Counts of members included in the valuation are counts of the records processed by the valuation. Multiple
records may exist for those who have service in more than one valuation group. This does not result in
double counting of liabilities.
CALPERS ACTUARIAL VALUATION - June 30, 2011
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
Page 26
Active Members
Counts of members included in the valuation are counts of the records processed by the valuation. Multiple
records may exist for those who have service in more than one valuation group. This does not result in
double counting of liabilities.
Distribution of Active Members by Age and Service
Years of Service at Valuation Date
Attained
Age 0-4 5-9 10-14 15-19 20-25 25+ Total
15-24 5 0 0 0 0 0 5
25-29 43 5 1 0 0 0 49
30-34 54 29 9 1 0 0 93
35-39 35 25 18 7 1 0 86
40-44 34 19 32 15 4 0 104
45-49 38 18 37 39 20 11 163
50-54 29 20 28 21 19 16 133
55-59 17 15 16 15 4 11 78
60-64 8 4 10 9 6 2 39
65 and over 1 2 4 2 2 4 15
All Ages 264 137 155 109 56 44 765
Distribution of Average Annual Salaries by Age and Service
Years of Service at Valuation Date
Attained
Age 0-4 5-9 10-14 15-19 20-25 25+ Average
15-24 $56,507 $0 $0 $0 $0 $0 $56,507
25-29 61,155 60,685 81,464 0 0 0 61,522
30-34 68,776 71,552 74,535 78,595 0 0 70,304
35-39 70,826 74,894 81,112 91,509 78,478 0 75,934
40-44 72,128 88,734 83,808 97,042 83,225 0 82,776
45-49 80,252 78,152 75,508 86,221 84,227 100,554 82,229
50-54 85,901 84,286 76,522 80,225 90,595 102,046 85,400
55-59 70,655 78,577 83,507 85,995 72,621 82,963 79,601
60-64 87,187 55,206 98,548 76,693 86,414 148,096 87,403
65 and over 7,200 42,558 70,580 68,312 78,963 68,749 62,946
All Ages $71,984 $76,743 $80,222 $85,678 $85,431 $95,968 $78,821
CALPERS ACTUARIAL VALUATION - June 30, 2011
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
Page 27
Transferred and Terminated Members
Distribution of Transfers to Other CalPERS Plans by Age and Service
Years of Service at Valuation Date
Attained
Age 0-4 5-9 10-14 15-19 20-25 25+ Total
Average
Salary
15-24 3 0 0 0 0 0 3 $86,021
25-29 14 0 0 0 0 0 14 98,093
30-34 27 1 0 0 0 0 28 96,835
35-39 33 5 0 1 0 0 39 102,603
40-44 32 5 1 0 1 0 39 102,237
45-49 50 13 3 2 0 0 68 112,698
50-54 29 9 4 0 0 0 42 117,036
55-59 22 8 4 3 1 0 38 112,737
60-64 5 8 1 0 0 0 14 113,396
65 and over 4 3 1 0 0 1 9 102,738
All Ages 219 52 14 6 2 1 294 107,846
Distribution of Terminated Participants with Funds on Deposit by Age and Service
Years of Service at Valuation Date
Attained Age 0-4 5-9 10-14 15-19 20-25 25+ Total Average Salary
15-24 0 0 0 0 0 0 0 $0
25-29 7 0 0 0 0 0 7 56,685
30-34 37 2 0 0 0 0 39 59,840
35-39 27 4 0 0 0 0 31 57,150
40-44 36 16 1 0 0 0 53 65,333
45-49 45 13 4 2 1 0 65 63,413
50-54 28 10 6 2 1 0 47 61,939
55-59 23 5 3 1 0 0 32 49,761
60-64 18 4 4 1 0 0 27 47,522
65 and over 4 0 0 0 0 0 4 60,128
All Ages 225 54 18 6 2 0 305 59,389
CALPERS ACTUARIAL VALUATION - June 30, 2011
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
Page 28
Retired Members and Beneficiaries
Distribution of Retirees and Beneficiaries by Age and Retirement Type*
Attained
Age
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Total
Under 30 0 0 0 0 0 3 3
30-34 0 0 1 0 0 1 2
35-39 0 0 1 0 0 0 1
40-44 0 1 0 0 0 0 1
45-49 0 3 1 0 0 1 5
50-54 36 13 1 0 0 1 51
55-59 130 7 2 0 0 7 146
60-64 170 13 2 0 0 11 196
65-69 176 9 1 0 0 12 198
70-74 108 7 1 0 0 7 123
75-79 62 4 1 0 0 13 80
80-84 43 4 0 0 0 18 65
85 and Over 53 1 0 0 0 15 69
All Ages 778 62 11 0 0 89 940
Distribution of Average Annual Amounts for Retirees and Beneficiaries by Age
and Retirement Type*
Attained
Age
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Average
Under 30 $0 $0 $0 $0 $0 $11,533 $11,533
30-34 0 0 236 0 0 10,480 5,358
35-39 0 0 234 0 0 0 234
40-44 0 6,627 0 0 0 0 6,627
45-49 0 10,015 908 0 0 6,062 7,403
50-54 36,159 12,579 1,461 0 0 25,041 29,250
55-59 43,819 17,431 6,212 0 0 21,973 40,991
60-64 36,447 15,529 8,556 0 0 26,584 34,222
65-69 30,152 13,803 1,741 0 0 13,384 28,249
70-74 29,305 18,560 1,640 0 0 26,682 28,319
75-79 24,700 14,249 3,858 0 0 16,045 22,510
80-84 20,562 16,569 0 0 0 21,438 20,559
85 and Over 19,101 14,069 0 0 0 15,779 18,306
All Ages $32,254 $14,768 $3,601 $0 $0 $19,112 $29,521
CALPERS ACTUARIAL VALUATION - June 30, 2011
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
Page 29
Retired Members and Beneficiaries (continued)
Distribution of Retirees and Beneficiaries by Years Retired and Retirement Type*
Years
Retired
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Total
Under 5 Yrs 325 10 3 0 0 29 367
5-9 179 9 2 0 0 22 212
10-14 117 12 5 0 0 14 148
15-19 74 20 1 0 0 7 102
20-24 46 5 0 0 0 1 52
25-29 17 3 0 0 0 7 27
30 and Over 20 3 0 0 0 9 32
All Years 778 62 11 0 0 89 940
Distribution of Average Annual Amounts for Retirees and Beneficiaries by Years Retired and
Retirement Type*
Years
Retired
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Average
Under 5 Yrs $44,563 $9,643 $5,555 $0 $0 $23,923 $41,662
5-9 26,931 18,846 5,690 0 0 17,805 25,441
10-14 25,711 16,395 1,923 0 0 20,271 23,637
15-19 17,323 16,716 1,952 0 0 15,595 16,935
20-24 18,407 10,465 0 0 0 6,128 17,407
25-29 20,586 9,326 0 0 0 16,487 18,272
30 and Over 15,177 12,731 0 0 0 11,218 13,834
All Years $32,254 $14,768 $3,601 $0 $0 $19,112 $29,521
* Counts of members do not include alternate payees receiving benefits while the member is still working.
Therefore, the total counts may not match information on page 25 of the report. Multiple records may exist for
those who have service in more than one coverage group. This does not result in double counting of liabilities.
APPENDICES
APPENDIX A - ACTUARIAL METHODS AND ASSUMPTIONS
APPENDIX B - PLAN PROVISIONS
APPENDIX C - GASB STATEMENT NO. 27
APPENDIX D - RISK ANALYSIS
APPENDIX E - GLOSSARY OF ACTUARIAL TERMS
APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
ACTUARIAL DATA
ACTUARIAL METHODS
ACTUARIAL ASSUMPTIONS
MISCELLANEOUS
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-1
Actuarial Data
As stated in the Actuarial Certification, the data which serves as the basis of this valuation has been
obtained from the various CalPERS databases. We have reviewed the valuation data and believe that it is
reasonable and appropriate in aggregate. We are unaware of any potential data issues that would have a
material effect on the results of this valuation, except that data does not always contain the latest salary information for former members now in reciprocal systems and does not recognize the potential for
unusually large salary deviation in certain cases such as elected officials. Therefore, salary information in
these cases may not be accurate. These situations are relatively infrequent, however, and when they do
occur, they generally do not have a material impact on the employer contribution rates.
Actuarial Methods
Funding 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 current fiscal year is called the normal
cost.
The actuarial accrued liability for active members is then calculated as the portion of the total cost of the plan allocated to prior years. The actuarial accrued liability for members currently receiving benefits, 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 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 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 rolling 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’ gains or losses will be isolated and amortized over fixed and declining 30 year
periods (as opposed to the current rolling 30 year amortization). 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 30-year amortization of the unfunded liability.
Additional contributions will be required 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:
Increase by at least 15% by June 30, 2043; or
Reach a level of 75% funded by June 30, 2043
The necessary additional 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 satisfaction of the above criteria. CalPERS actuaries
will reassess the criteria above when performing each future 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 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 liability not already in the (gain)/loss 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, 2011 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-2
1) when a positive payment would be required on a negative unfunded actuarial liability (or
conversely a negative payment on a positive unfunded actuarial liability); or
2) when there are excess assets, rather than an unfunded liability. In this situation a 30-year fresh
start is used, 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 other circumstances. In all cases, the fresh start period is set by the actuary at what he deems appropriate, and will not be less than five
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 the prior year’s Actuarial Value of Assets and the contributions received and benefits paid during the
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 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, the CalPERS Board adopted changes to the asset smoothing method in order to phase in over
a three year period the impact of the -24% investment loss experienced by CalPERS 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
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-3
Actuarial Assumptions
Economic Assumptions
Discount Rate
7.5% compounded annually (net of expenses). This assumption is used for all plans.
Termination Liability Discount Rate
The discount rate is set by taking into account the yields available in the US Treasury market on the
valuation date according to treasury rates along the yield curve that match the cash flows of the
plans’ expected benefit payout stream in future years. For purposes of this report, the termination
liability discount rate used, 4.82%, is the 30-year US Treasury Stripped Coupon Rate as of the
valuation date. Please note, as of June 30, 2012 the 30-year US Treasury Stripped Coupon Rate was 2.87%.
Salary Growth
Annual increases vary by category, entry age, and duration of service. Sample assumed increases
are shown below.
Public Agency Miscellaneous
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1420 0.1240 0.0980
1 0.1190 0.1050 0.0850
2 0.1010 0.0910 0.0750
3 0.0880 0.0800 0.0670
4 0.0780 0.0710 0.0610
5 0.0700 0.0650 0.0560
10 0.0480 0.0460 0.0410
15 0.0430 0.0410 0.0360
20 0.0390 0.0370 0.0330
25 0.0360 0.0360 0.0330
30 0.0360 0.0360 0.0330
Public Agency Fire
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1050 0.1050 0.1020
1 0.0950 0.0940 0.0850
2 0.0870 0.0830 0.0700
3 0.0800 0.0750 0.0600
4 0.0740 0.0680 0.0510
5 0.0690 0.0620 0.0450
10 0.0510 0.0460 0.0350
15 0.0410 0.0390 0.0340
20 0.0370 0.0360 0.0330
25 0.0350 0.0350 0.0330
30 0.0350 0.0350 0.0330
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-4
Salary Growth (continued)
Public Agency Police
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1090 0.1090 0.1090
1 0.0930 0.0930 0.0930
2 0.0810 0.0810 0.0780
3 0.0720 0.0700 0.0640
4 0.0650 0.0610 0.0550
5 0.0590 0.0550 0.0480
10 0.0450 0.0420 0.0340
15 0.0410 0.0390 0.0330
20 0.0370 0.0360 0.0330
25 0.0350 0.0340 0.0330
30 0.0350 0.0340 0.0330
Public Agency County Peace Officers
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1290 0.1290 0.1290
1 0.1090 0.1060 0.1030
2 0.0940 0.0890 0.0840
3 0.0820 0.0770 0.0710
4 0.0730 0.0670 0.0610
5 0.0660 0.0600 0.0530
10 0.0460 0.0420 0.0380
15 0.0410 0.0380 0.0360 20 0.0370 0.0360 0.0340
25 0.0350 0.0340 0.0330
30 0.0350 0.0340 0.0330
Schools
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1080 0.0960 0.0820
1 0.0940 0.0850 0.0740
2 0.0840 0.0770 0.0670
3 0.0750 0.0700 0.0620
4 0.0690 0.0640 0.0570
5 0.0630 0.0600 0.0530
10 0.0450 0.0440 0.0410
15 0.0390 0.0380 0.0350
20 0.0360 0.0350 0.0320
25 0.0340 0.0340 0.0320
30 0.0340 0.0340 0.0320
The Miscellaneous salary scale is used for Local Prosecutors.
The Police salary scale is used for Other Safety, Local Sheriff, and School Police.
Overall Payroll Growth 3.00% compounded annually (used in projecting the payroll over which the unfunded liability is
amortized). This assumption is used for all plans.
Inflation
2.75% compounded annually. This assumption is used for all plans.
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-5
Non-valued Potential Additional Liabilities
The potential liability loss for a cost-of-living increase exceeding the 2.75% inflation assumption,
and any potential liability loss from future member service purchases are not reflected in the
valuation.
Miscellaneous Loading Factors
Credit for Unused Sick Leave
Benefit are increased by 1% for those plans with the provision providing Credit for Unused Sick
Leave.
Conversion of Employer Paid Member Contributions (EPMC)
Final Average Salary is increased by the Employee Contribution Rate for those plans with the
provision providing for the Conversion of Employer Paid Member Contributions (EPMC) during the final compensation period.
Norris Decision (Best Factors)
Employees hired prior to July 1, 1982 have projected benefit amounts increased in order to reflect
the use of “Best Factors” in the calculation of optional benefit forms. This is due to a 1983
Supreme Court decision, known as the Norris decision, which required males and females to be
treated equally in the determination of benefit amounts. Consequently, anyone already employed
at that time is given the best possible conversion factor when optional benefits are determined. No loading is necessary for employees hired after July 1, 1982.
Termination Liability
The termination liabilities include a 7% contingency load. This load is for unforeseen
improvements in mortality.
Demographic Assumptions
Pre-Retirement Mortality
Non-Industrial Death Rates vary by age and gender. Industrial Death rates vary by age. See
sample rates in table below. The non-industrial death rates are used for all plans. The industrial
death rates are used for Safety Plans (except for Local Prosecutor safety members where the
corresponding Miscellaneous Plan does not have the Industrial Death Benefit).
Non-Industrial Death Industrial Death (Not Job-Related) (Job-Related)
Age Male Female Male and Female
20 0.00047 0.00016 0.00003
25 0.00050 0.00026 0.00007
30 0.00053 0.00036 0.00010
35 0.00067 0.00046 0.00012
40 0.00087 0.00065 0.00013 45 0.00120 0.00093 0.00014
50 0.00176 0.00126 0.00015
55 0.00260 0.00176 0.00016
60 0.00395 0.00266 0.00017
65 0.00608 0.00419 0.00018
70 0.00914 0.00649 0.00019
75 0.01220 0.00878 0.00020
80 0.01527 0.01108 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.
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-6
Post-Retirement Mortality
Rates vary by age, type of retirement and gender. See sample rates in table below. These rates
are used for all plans.
Healthy Recipients
Non-Industrially Disabled Industrially Disabled
(Not Job-Related) (Job-Related)
Age Male Female Male Female Male Female
50 0.00239 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 0.00431 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 0.03870 0.03019 0.02236 0.01716
75 0.03080 0.02071 0.06001 0.03915 0.03585 0.02665
80 0.05270 0.03749 0.08388 0.05555 0.06926 0.04528 85 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 0.40918 0.35165
105 0.58527 0.56093 0.67923 0.61523 0.64127 0.60135
110 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000
The mortality assumptions are based on mortality rates resulting from the most recent CalPERS Experience Study adopted by the CalPERS Board, first used in the June 30, 2009 valuation. For
purposes of the post-retirement mortality rates, those revised rates include 5 years of projected on-
going mortality improvement using Scale AA published by the Society of Actuaries until June 30, 2010.
There is no margin for future mortality improvement beyond the valuation date. The mortality
assumption will be reviewed with the next experience study expected to be completed for the June 30,
2013 valuation to determine an appropriate margin to be used.
Marital Status
For active members, a percentage married upon retirement is assumed according to the following
table.
Member Category Percent Married
Miscellaneous Member 85%
Local Police 90%
Local Fire 90%
Other Local Safety 90%
School Police 90%
Age of Spouse
It is assumed that female spouses are 3 years younger than male spouses. This assumption is
used for all plans.
Terminated Members
It is assumed that terminated members refund immediately if non-vested. Terminated members
who are vested are assumed to follow the same service retirement pattern as active members but
with a load to reflect the expected higher rates of retirement, especially at lower ages. The following table shows the load factors that are applied to the service retirement assumption for
active members to obtain the service retirement pattern for separated vested members:
Age Load Factor
50 450%
51 250%
52 through 56 200%
57 through 60 150%
61 through 64 125%
65 and above 100% (no change)
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-7
Termination with Refund
Rates vary by entry age and service for Miscellaneous Plans. Rates vary by service for Safety Plans.
See sample rates in tables below.
Public Agency Miscellaneous
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45
0 0.1742 0.1674 0.1606 0.1537 0.1468 0.1400
1 0.1545 0.1477 0.1409 0.1339 0.1271 0.1203
2 0.1348 0.1280 0.1212 0.1142 0.1074 0.1006
3 0.1151 0.1083 0.1015 0.0945 0.0877 0.0809
4 0.0954 0.0886 0.0818 0.0748 0.0680 0.0612
5 0.0212 0.0193 0.0174 0.0155 0.0136 0.0116
10 0.0138 0.0121 0.0104 0.0088 0.0071 0.0055
15 0.0060 0.0051 0.0042 0.0032 0.0023 0.0014
20 0.0037 0.0029 0.0021 0.0013 0.0005 0.0001
25 0.0017 0.0011 0.0005 0.0001 0.0001 0.0001
30 0.0005 0.0001 0.0001 0.0001 0.0001 0.0001
35 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001
Public Agency Safety
Duration of Service Fire Police County Peace Officer
0 0.0710 0.1013 0.0997
1 0.0554 0.0636 0.0782
2 0.0398 0.0271 0.0566
3 0.0242 0.0258 0.0437
4 0.0218 0.0245 0.0414
5 0.0029 0.0086 0.0145
10 0.0009 0.0053 0.0089
15 0.0006 0.0027 0.0045
20 0.0005 0.0017 0.0020
25 0.0003 0.0012 0.0009
30 0.0003 0.0009 0.0006
35 0.0003 0.0009 0.0006
The Police Termination and Refund rates are used for Public Agency Local Prosecutors, Other Safety, Local Sheriff, and School Police.
Schools
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45
0 0.1730 0.1627 0.1525 0.1422 0.1319 0.1217
1 0.1585 0.1482 0.1379 0.1277 0.1174 0.1071
2 0.1440 0.1336 0.1234 0.1131 0.1028 0.0926
3 0.1295 0.1192 0.1089 0.0987 0.0884 0.0781
4 0.1149 0.1046 0.0944 0.0841 0.0738 0.0636
5 0.0278 0.0249 0.0221 0.0192 0.0164 0.0135
10 0.0172 0.0147 0.0122 0.0098 0.0074 0.0049
15 0.0115 0.0094 0.0074 0.0053 0.0032 0.0011
20 0.0073 0.0055 0.0038 0.0020 0.0002 0.0002
25 0.0037 0.0023 0.0010 0.0002 0.0002 0.0002
30 0.0015 0.0003 0.0002 0.0002 0.0002 0.0002
35 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-8
Termination with Vested Benefits
Rates vary by entry age and service for Miscellaneous Plans. Rates vary by service for Safety
Plans. See sample rates in tables below.
Public Agency Miscellaneous
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40
5 0.0656 0.0597 0.0537 0.0477 0.0418
10 0.0530 0.0466 0.0403 0.0339 0.0000
15 0.0443 0.0373 0.0305 0.0000 0.0000
20 0.0333 0.0261 0.0000 0.0000 0.0000
25 0.0212 0.0000 0.0000 0.0000 0.0000
30 0.0000 0.0000 0.0000 0.0000 0.0000
35 0.0000 0.0000 0.0000 0.0000 0.0000
Public Agency Safety
Duration of
Service Fire Police
County Peace
Officer
5 0.0162 0.0163 0.0265
10 0.0061 0.0126 0.0204
15 0.0058 0.0082 0.0130
20 0.0053 0.0065 0.0074
25 0.0047 0.0058 0.0043
30 0.0045 0.0056 0.0030
35 0.0000 0.0000 0.0000
When a member is eligible to retire, the termination with vested benefits probability is set to
zero.
After termination with vested benefits, a miscellaneous member is assumed to retire at age 59
and a safety member at age 54. The Police Termination with vested benefits rates are used for Public Agency Local
Prosecutors, Other Safety, Local Sheriff, and School Police.
Schools
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40
5 0.0816 0.0733 0.0649 0.0566 0.0482
10 0.0629 0.0540 0.0450 0.0359 0.0000
15 0.0537 0.0440 0.0344 0.0000 0.0000
20 0.0420 0.0317 0.0000 0.0000 0.0000
25 0.0291 0.0000 0.0000 0.0000 0.0000
30 0.0000 0.0000 0.0000 0.0000 0.0000
35 0.0000 0.0000 0.0000 0.0000 0.0000
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-9
Non-Industrial (Not Job-Related) Disability
Rates vary by age and gender for Miscellaneous Plans.
Rates vary by age and category for Safety Plans.
Miscellaneous Fire Police County Peace Officer Schools
Age Male Female Male and Female Male and Female Male and Female Male Female
20 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001
25 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001
30 0.0002 0.0002 0.0001 0.0002 0.0001 0.0002 0.0001
35 0.0006 0.0009 0.0001 0.0003 0.0004 0.0006 0.0004
40 0.0015 0.0016 0.0001 0.0004 0.0007 0.0014 0.0009
45 0.0025 0.0024 0.0002 0.0005 0.0013 0.0028 0.0017
50 0.0033 0.0031 0.0005 0.0008 0.0018 0.0044 0.0030
55 0.0037 0.0031 0.0010 0.0013 0.0010 0.0049 0.0034
60 0.0038 0.0025 0.0015 0.0020 0.0006 0.0043 0.0024
The Miscellaneous Non-Industrial Disability rates are used for Local Prosecutors. The Police Non-Industrial Disability rates are used for Other Safety, Local Sheriff, and School Police.
Industrial (Job-Related) Disability
Rates vary by age and category.
Age Fire Police County Peace Officer
20 0.0002 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 for Local Sheriff and Other Safety.
Fifty Percent of the Police Industrial Disability rates are used for School Police.
One Percent of the Police Industrial Disability rates are used for Local Prosecutors.
Normally, rates are zero for Miscellaneous Plans unless the agency has specifically contracted
for Industrial Disability benefits. If so, each miscellaneous non-industrial disability rate will be
split into two components: 50% will become the Non-Industrial Disability rate and 50% will
become the Industrial Disability rate.
Service Retirement
Retirement rate vary by age, service, and formula, except for the safety ½ @ 55 and 2% @ 55
formulas, where retirement rates vary by age only.
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-10
Service Retirement
Public Agency Miscellaneous 1.5% @ 65
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.008 0.011 0.013 0.015 0.017 0.019
51 0.007 0.010 0.012 0.013 0.015 0.017
52 0.010 0.014 0.017 0.019 0.021 0.024
53 0.008 0.012 0.015 0.017 0.019 0.022
54 0.012 0.016 0.019 0.022 0.025 0.028
55 0.018 0.025 0.031 0.035 0.038 0.043
56 0.015 0.021 0.025 0.029 0.032 0.036
57 0.020 0.028 0.033 0.038 0.043 0.048
58 0.024 0.033 0.040 0.046 0.052 0.058
59 0.028 0.039 0.048 0.054 0.060 0.067
60 0.049 0.069 0.083 0.094 0.105 0.118
61 0.062 0.087 0.106 0.120 0.133 0.150
62 0.104 0.146 0.177 0.200 0.223 0.251
63 0.099 0.139 0.169 0.191 0.213 0.239
64 0.097 0.136 0.165 0.186 0.209 0.233
65 0.140 0.197 0.240 0.271 0.302 0.339
66 0.092 0.130 0.157 0.177 0.198 0.222
67 0.129 0.181 0.220 0.249 0.277 0.311
68 0.092 0.129 0.156 0.177 0.197 0.221
69 0.092 0.130 0.158 0.178 0.199 0.224
70 0.103 0.144 0.175 0.198 0.221 0.248
Public Agency Miscellaneous 2% @ 60
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.011 0.015 0.018 0.021 0.023 0.026
51 0.009 0.013 0.016 0.018 0.020 0.023
52 0.013 0.018 0.022 0.025 0.028 0.031
53 0.011 0.016 0.019 0.022 0.025 0.028
54 0.015 0.021 0.025 0.028 0.032 0.036
55 0.023 0.032 0.039 0.044 0.049 0.055
56 0.019 0.027 0.032 0.037 0.041 0.046
57 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 0.134 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 0.305
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
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
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-11
Service Retirement
Public Agency Miscellaneous 2% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.015 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 0.041 0.049 0.056 0.067
55 0.050 0.064 0.078 0.094 0.107 0.127
56 0.045 0.057 0.069 0.083 0.095 0.113
57 0.048 0.061 0.074 0.090 0.102 0.122
58 0.052 0.066 0.080 0.097 0.110 0.131
59 0.060 0.076 0.092 0.111 0.127 0.151
60 0.072 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 0.129 0.164 0.199 0.239 0.273 0.325
64 0.116 0.148 0.180 0.216 0.247 0.294
65 0.174 0.221 0.269 0.323 0.369 0.439
66 0.135 0.171 0.208 0.250 0.285 0.340
67 0.133 0.169 0.206 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
Public Agency Miscellaneous 2.5% @ 55
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 0.078 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 0.190 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 0.219 0.247
69 0.105 0.133 0.162 0.190 0.219 0.247
70 0.125 0.160 0.194 0.228 0.262 0.296
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-12
Service Retirement
Public Agency Miscellaneous 2.7% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.028 0.035 0.043 0.050 0.058 0.065
51 0.022 0.028 0.034 0.040 0.046 0.052
52 0.022 0.028 0.034 0.040 0.046 0.052
53 0.028 0.035 0.043 0.050 0.058 0.065
54 0.044 0.056 0.068 0.080 0.092 0.104
55 0.091 0.116 0.140 0.165 0.190 0.215
56 0.061 0.077 0.094 0.110 0.127 0.143
57 0.063 0.081 0.098 0.115 0.132 0.150
58 0.074 0.095 0.115 0.135 0.155 0.176
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 0.085 0.109 0.132 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
68 0.107 0.137 0.166 0.195 0.224 0.254
69 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
Public Agency Miscellaneous 3% @ 60
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 0.019 0.025 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 0.083 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 0.094 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
68 0.110 0.140 0.170 0.200 0.230 0.260
69 0.110 0.140 0.170 0.200 0.230 0.260
70 0.132 0.168 0.204 0.240 0.276 0.312
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-13
Service Retirement
Public Agency Fire ½ @ 55 and 2% @ 55
Age 50
51
52
53
54
55
Rate 0.01588
0.00000
0.03442
0.01990
0.04132
0.07513
Age 56
57
58
59
60
Rate 0.11079
0.00000
0.09499
0.04409
1.00000
Public Agency Police ½ @ 55 and 2% @ 55
Age
50 51
52
53
54
55
Rate
0.02552 0.00000
0.01637
0.02717
0.00949
0.16674
Age
56 57
58
59
60
Rate
0.06921 0.05113
0.07241
0.07043
1.00000
Public Agency Police 2%@ 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.014 0.014 0.014 0.014 0.025 0.045
51 0.012 0.012 0.012 0.012 0.023 0.040
52 0.026 0.026 0.026 0.026 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 0.064 0.064 0.064 0.117 0.208
57 0.071 0.071 0.071 0.071 0.130 0.232
58 0.063 0.063 0.063 0.063 0.115 0.205
59 0.140 0.140 0.140 0.140 0.174 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 0.140 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 also apply to Local Prosecutors, Local Sheriff, School Police, and Other Safety.
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-14
Service Retirement
Public Agency Fire 2%@50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.007 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 0.047 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 0.078 0.078 0.078 0.078 0.120 0.180
57 0.090 0.090 0.090 0.090 0.139 0.208
58 0.079 0.079 0.079 0.079 0.122 0.182
59 0.073 0.073 0.073 0.073 0.112 0.168
60 0.114 0.114 0.114 0.114 0.175 0.262
61 0.114 0.114 0.114 0.114 0.175 0.262
62 0.114 0.114 0.114 0.114 0.175 0.262
63 0.114 0.114 0.114 0.114 0.175 0.262
64 0.114 0.114 0.114 0.114 0.175 0.262
65 1.000 1.000 1.000 1.000 1.000 1.000
Public Agency Police 3%@ 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 0.094 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 rates also apply to Local Prosecutors, Local Sheriff, School Police, and Other Safety.
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-15
Service Retirement
Public Agency Fire 3%@55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.012 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 0.081 0.119 0.187 0.219
59 0.078 0.078 0.078 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 0.078 0.078 0.113 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
Public Agency Police 3%@ 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.070 0.070 0.070 0.131 0.193 0.249
51 0.050 0.050 0.050 0.095 0.139 0.180
52 0.061 0.061 0.061 0.116 0.171 0.220
53 0.069 0.069 0.069 0.130 0.192 0.247
54 0.071 0.071 0.071 0.134 0.197 0.255
55 0.090 0.090 0.090 0.170 0.250 0.322
56 0.069 0.069 0.069 0.130 0.191 0.247
57 0.080 0.080 0.080 0.152 0.223 0.288
58 0.087 0.087 0.087 0.164 0.242 0.312
59 0.090 0.090 0.090 0.170 0.251 0.323
60 0.135 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 0.113 0.113 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 1.000 1.000 1.000 1.000 1.000 1.000
These rates also apply to Local Prosecutors, Local Sheriff, School Police, and Other Safety.
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-16
Service Retirement
Public Agency Fire 3%@50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.034 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 0.103 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 0.140 0.199 0.236
64 0.100 0.100 0.100 0.140 0.199 0.236
65 1.000 1.000 1.000 1.000 1.000 1.000
Schools 2%@ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.005 0.009 0.013 0.015 0.016 0.018
51 0.005 0.010 0.014 0.017 0.019 0.021
52 0.006 0.012 0.017 0.020 0.022 0.025
53 0.007 0.014 0.019 0.023 0.026 0.029
54 0.012 0.024 0.033 0.039 0.044 0.049
55 0.024 0.048 0.067 0.079 0.088 0.099
56 0.020 0.039 0.055 0.065 0.072 0.081
57 0.021 0.042 0.059 0.070 0.078 0.087
58 0.025 0.050 0.070 0.083 0.092 0.103
59 0.029 0.057 0.080 0.095 0.105 0.118
60 0.037 0.073 0.102 0.121 0.134 0.150
61 0.046 0.090 0.126 0.149 0.166 0.186
62 0.076 0.151 0.212 0.250 0.278 0.311
63 0.069 0.136 0.191 0.225 0.251 0.281
64 0.067 0.133 0.185 0.219 0.244 0.273
65 0.091 0.180 0.251 0.297 0.331 0.370
66 0.072 0.143 0.200 0.237 0.264 0.295
67 0.067 0.132 0.185 0.218 0.243 0.272
68 0.060 0.118 0.165 0.195 0.217 0.243
69 0.067 0.133 0.187 0.220 0.246 0.275
70 0.066 0.131 0.183 0.216 0.241 0.270
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-17
Miscellaneous
Superfunded Status
If a rate plan is superfunded (actuarial value of assets exceeds the present value of benefits), as of the
most recently completed annual valuation, the employer may cover their employees’ member contributions (both taxed and tax-deferred) using their employer assets during 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 risk 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.
Internal Revenue Code Section 415
The limitations on benefits imposed by Internal Revenue Code Section 415 were taken into account in this
valuation. Each year the impact of any changes in this limitation since the prior valuation is included and
amortized as part of the actuarial gain or loss base.
Internal Revenue Code Section 401(a)(17)
The limitations on 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 limitation since the
prior valuation is included and amortized as part of the actuarial gain or loss base.
APPENDIX B
PLAN PROVISIONS
SUMMARY OF PLAN’S MAJOR BENEFIT OPTIONS
DESCRIPTIONS OF CALPERS’ PRINCIPAL PLAN PROVISIONS
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX B
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
Summary of Plan’s Major Benefit Options
Shown below is a summary of the major optional benefits for which your agency has contracted. A description of principal standard and optional plan provisions
is in the following section of this Appendix.
Coverage Group
70001 70002
Benefit Provision
Benefit Formula 2.0% @ 55 2.7% @ 55
Social Security Coverage No No
Full/Modified Full Full
Final Average Compensation Period 12 mos. 12 mos.
Sick Leave Credit No No
Non-Industrial Disability Standard Standard
Industrial Disability No No
Pre-Retirement Death Benefits
Optional Settlement 2W No No
1959 Survivor Benefit Level Level 1 Level 1
Special No No
Alternate (firefighters) No No
Post-Retirement Death Benefits Lump Sum $500 $500
Survivor Allowance (PRSA) No No
COLA 2% 2%
Employee Contributions
Contractual Employer Paid 7% 7% Contractual Employee Cost Sharing
B-1
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX B
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
EMPLOYER NUMBER 6373437857
Summary of Plan’s Major Benefit Options
Shown below is a summary of the major optional benefits for which your agency has contracted. A description of principal standard and optional plan provisions is in the following section of this Appendix.
Coverage Group
Benefit Provision
Benefit Formula Social Security Coverage
Full/Modified
Final Average Compensation Period
Sick Leave Credit
Non-Industrial Disability
Industrial Disability
Pre-Retirement Death Benefits
Optional Settlement 2W
1959 Survivor Benefit Level Special
Alternate (firefighters)
Post-Retirement Death Benefits
Lump Sum
Survivor Allowance (PRSA)
COLA
Employee Contributions
Contractual employer paid
Contractual Employee Cost sharing
B-2
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX B
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
B-3
Description of CalPERS’ Principal Plan Provisions
The following is a description of the principal plan provisions used in calculating costs and liabilities. We have
indicated whether a plan provision is standard or optional. Standard benefits are applicable to all members while optional benefits vary among employers. Optional benefits that apply to a single period of time, such as Golden
Handshakes, have not been included. Many of the statements in this summary are general in nature, and are
intended to provide an easily understood summary of the complex Public Employees’ Retirement Law. The law itself
governs in all situations.
Service Retirement
Eligibility
A CalPERS member becomes eligible for Service Retirement upon attainment of age 50 with at least 5 years of
credited service (total service across all CalPERS employers, and with certain other Retirement Systems with which
CalPERS has reciprocity agreements). For employees hired into a plan with the 1.5% at 65 formula, eligibility for
service retirement is age 55 with at least 5 years of service.
Benefit The Service Retirement benefit is a monthly allowance equal to the product of the benefit factor, years of service,
and final compensation.
The benefit factor depends on the benefit formula specified in your agency’s contract. The table below shows
the factors for each of the available formulas. Factors vary by the member’s age at retirement. Listed are the
factors for retirement at whole year ages:
Miscellaneous Plan Formulas
Retirement Age 1.5% at 65 2% at 60 2% at 55 2.5% at 55 2.7% at 55 3% at 60
50 0.5000% 1.092% 1.426% 2.0% 2.0% 2.0%
51 0.5667% 1.156% 1.522% 2.1% 2.14% 2.1%
52 0.6334% 1.224% 1.628% 2.2% 2.28% 2.2%
53 0.7000% 1.296% 1.742% 2.3% 2.42% 2.3%
54 0.7667% 1.376% 1.866% 2.4% 2.56% 2.4%
55 0.8334% 1.460% 2.0% 2.5% 2.7% 2.5%
56 0.9000% 1.552% 2.052% 2.5% 2.7% 2.6%
57 0.9667% 1.650% 2.104% 2.5% 2.7% 2.7%
58 1.0334% 1.758% 2.156% 2.5% 2.7% 2.8%
59 1.1000% 1.874% 2.210% 2.5% 2.7% 2.9%
60 1.1667% 2.0% 2.262% 2.5% 2.7% 3.0%
61 1.2334% 2.134% 2.314% 2.5% 2.7% 3.0%
62 1.3000% 2.272% 2.366% 2.5% 2.7% 3.0%
63 1.3667% 2.418% 2.418% 2.5% 2.7% 3.0%
64 1.4334% 2.418% 2.418% 2.5% 2.7% 3.0%
65 & Up 1.5000% 2.418% 2.418% 2.5% 2.7% 3.0%
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX B
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
B-4
Safety Plan Formulas
Retirement Age ½ at 55 * 2% at 55 2% at 50 3% at 55 3% at 50
50 1.783% 1.426% 2.0% 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%
55 & 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 greater. If entry age is less than 35, then the age 55 benefit factor is 50% divided by the difference between age 55 and entry age. The benefit factor for ages prior to age 55 is the same proportion of the age 55
benefit factor as in the above table.
The years of service is the amount credited by CalPERS to a member while he or she is employed in this group
(or for other periods that are recognized under the employer’s contract with CalPERS). For a member who has
earned service with multiple CalPERS employers, the benefit from each employer is calculated separately
according to each employer’s contract, and then added together for the total allowance. An agency may
contract for an optional benefit where any unused sick leave accumulated at the time of retirement will be converted to credited service at a rate of 0.004 years of service for each day of sick leave.
The final compensation is the monthly average of the member’s highest 36 or 12 consecutive months’ full-time
equivalent monthly pay (no matter which CalPERS employer paid this compensation). The standard benefit is 36
months. Employers have the option of providing a final compensation equal to the highest 12 consecutive
months. Final compensation must be defined by the highest 36 consecutive months’ pay under the 1.5% at 65
formula.
Employees must be covered by Social Security with the 1.5% at 65 formula. Social Security is optional for all
other benefit formulas. For employees covered by Social Security, the Modified formula is the standard benefit.
Under this type of formula, the final compensation is offset by $133.33 (or by one third if the final compensation
is less than $400). Employers may contract for the Full benefit with Social Security that will eliminate the offset
applicable to the final compensation. For employees not covered by Social Security, the Full benefit is paid with
no offsets. Auxiliary organizations of the CSUC system may elect reduced contribution rates, in which case the
offset is $317 if members are not covered by Social Security or $513 if members are covered by Social Security.
The Miscellaneous 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 CalPERS member becomes eligible for a deferred vested retirement benefit when he or she leaves employment,
keeps his or her contribution account balance on deposit with CalPERS, and has earned at least 5 years of credited
service (total service across all CalPERS employers, and with certain other Retirement Systems with which CalPERS
has reciprocity agreements).
Eligibility to Start Receiving Benefits The CalPERS member becomes eligible to receive the deferred retirement benefit upon satisfying the eligibility
requirements for Deferred Status and upon attainment of age 50 (55 for employees hired into a 1.5% @ 65 plan).
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX B
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
B-5
Benefit The vested deferred retirement benefit is the same as the Service Retirement benefit, where the benefit factor is
based on the member’s age at allowance commencement. For members who have earned service with multiple
CalPERS employers, the benefit from each employer is calculated separately according to each employer’s contract,
and then added together for the total allowance.
Non-Industrial (Non-Job Related) Disability Retirement
Eligibility
A CalPERS member is eligible for Non-Industrial Disability Retirement if he or she becomes disabled and has at least
5 years of credited service (total service across all CalPERS employers, and with certain other Retirement Systems
with which CalPERS has reciprocity agreements). There is no special age requirement. Disabled means the member
is unable to perform his or her job because of an illness or injury which is expected to be permanent or to last
indefinitely. The illness or injury does not have to be job related. A CalPERS member must be actively employed by any CalPERS employer at the time of disability in order to be eligible for this benefit.
Standard Benefit
The standard Non-Industrial Disability Retirement benefit is a monthly allowance equal to 1.8% of final
compensation, multiplied by service, which is determined as follows:
service is CalPERS credited service, for members with less than 10 years of service or greater than 18.518 years
of service; or
service is CalPERS credited service plus the additional number of years that the member would have worked
until age 60, for members with at least 10 years but not more than 18.518 years of service. The maximum
benefit in this case is 33 1/3% 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 each additional year of service to a maximum of 50% of final compensation.
Members who are eligible for a larger service retirement benefit may choose to receive that benefit in lieu of a
disability benefit. Members eligible to retire, and who have attained the normal retirement age determined by their
service retirement benefit formula, will receive the same dollar amount for disability retirement as that payable for
service retirement. For members who have earned service with multiple CalPERS employers, the benefit attributed to
each employer is the total disability allowance multiplied by the ratio of service with a particular employer to the total CalPERS service.
Industrial (Job Related) Disability Retirement
All safety members have this benefit. For miscellaneous members, employers have the option of providing this
benefit. An employer may choose to provide the Increased benefit option or the Improved benefit option.
Eligibility
An employee is eligible for Industrial Disability Retirement if he or she becomes disabled while working, where
disabled means the member is unable to perform the duties of the job because of a work-related illness or injury
which is expected to be permanent or to last indefinitely. A CalPERS member who has left active employment within
this group is not eligible for this benefit, except to the extent described below.
Standard Benefit
The standard Industrial Disability Retirement benefit is a monthly allowance equal to 50% of final compensation.
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX B
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
B-6
Increased Benefit (75% of Final Compensation) The increased Industrial Disability Retirement benefit is a monthly allowance equal to 75% of final compensation for
total disability.
Improved Benefit (50% to 90% of Final Compensation)
The improved Industrial Disability Retirement benefit is a monthly allowance equal to the Workman’s Compensation
Appeals Board permanent disability rate percentage (if 50% or greater, with a maximum of 90%) times the final
compensation.
For a CalPERS member not actively employed in this group who became disabled while employed by some other
CalPERS employer, the benefit is a return of accumulated member contributions with respect to employment in this
group. With the standard or increased benefit, a member may also choose to receive the annuitization of the
accumulated member contributions.
If a member is eligible for Service Retirement and if the Service Retirement benefit is more than the Industrial
Disability Retirement benefit, the member may choose to receive the larger benefit.
Post-Retirement Death Benefit
Standard Lump Sum Payment Upon the death of a retiree, a one-time lump sum payment of $500 will be made to the retiree’s designated
survivor(s), or to the retiree’s estate.
Improved Lump Sum Payment
Employers have the option of providing an improved lump sum death benefit of $600, $2,000, $3,000, $4,000 or
$5,000.
Form of Payment for Retirement Allowance
Standard Form of Payment
Generally, the retirement allowance is paid to the retiree in the form of an annuity for as long as he or she is alive.
The retiree may choose to provide for a portion of his or her allowance to be paid to any designated beneficiary after the retiree’s death. CalPERS provides for a variety of such benefit options, which the retiree pays for by taking a
reduction in his or her retirement allowance. Such reduction takes into account the amount to be provided to the
beneficiary and the probable duration of payments (based on the ages of the member and beneficiary) made
subsequent to the member’s death.
Improved Form of Payment (Post Retirement Survivor Allowance)
Employers have the option to contract for the post retirement survivor allowance.
For retirement allowances with respect to service subject to the modified formula, 25% of the retirement allowance
will automatically be continued to certain statutory beneficiaries upon the death of the retiree, without a reduction in
the retiree’s allowance. For retirement allowances with respect to service subject to the full or supplemental formula,
50% of the retirement allowance will automatically be continued to certain statutory beneficiaries upon the death of
the retiree, without a reduction in the retiree’s allowance. This additional benefit is often referred to as post
retirement survivor allowance (PRSA) or simply as survivor continuance.
In other words, 25% or 50% of the allowance, the continuance portion, is paid to the retiree for as long as he or she
is alive, and that same amount is continued to the retiree’s spouse (or if no eligible spouse, to unmarried 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.
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX B
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
B-7
The remaining 75% or 50% of the retirement allowance, which may be referred to as the option portion of the benefit, is paid to the retiree as an annuity for as long as he or she is alive. Or, the retiree may choose to provide for
some of this option portion to be paid to any designated beneficiary after the retiree’s death. Benefit options
applicable to the option portion are the same as those offered with the standard form. The reduction is calculated in
the same manner but is applied only to the option portion.
Pre-Retirement Death Benefits
Basic Death Benefit
This is a standard benefit.
Eligibility
An employee’s beneficiary (or estate) may receive the Basic Death benefit if the member dies while actively
employed. A CalPERS member must be actively employed with the CalPERS employer providing this benefit to be
eligible for this benefit. A member’s survivor who is eligible for any other pre-retirement death benefit may choose
to receive that death benefit instead of this Basic Death benefit.
Benefit
The Basic Death Benefit is a lump sum in the amount of the member’s accumulated contributions, where interest is currently credited at 7.5% per year, plus a lump sum in the amount of one month's salary for each completed year of
current service, up to a maximum of six months' salary. For purposes of this benefit, one month's salary is defined
as the member's average monthly full-time rate of compensation during the 12 months preceding death.
1957 Survivor Benefit
This is a standard benefit.
Eligibility An employee’s eligible survivor(s) may receive the 1957 Survivor benefit if the member dies while actively employed,
has attained at least age 50, and has at least 5 years of credited service (total service across all CalPERS employers
and with certain other Retirement Systems with which CalPERS has reciprocity agreements). A CalPERS member
must be actively employed with the CalPERS employer providing this benefit to be eligible for this benefit. An eligible
survivor means the surviving spouse to whom the member was married at least one year before death or, if there is
no eligible spouse, to the member's unmarried children under age 18. A member’s survivor who is eligible for any
other pre-retirement death benefit may choose to receive that death benefit instead of this 1957 Survivor benefit.
Benefit
The 1957 Survivor benefit is a monthly allowance equal to one-half of the unmodified Service Retirement benefit that
the member would have been entitled to receive if the member had retired on the date of his or her death. If the
benefit is payable to the spouse, the benefit is discontinued upon the death of the spouse. If the benefit is payable
to 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 benefit.
Eligibility An employee’s eligible survivor may receive the Optional Settlement 2W Death benefit if the member dies while
actively employed, has attained at least age 50, and has at least 5 years of credited service (total service across all
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX B
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
B-8
CalPERS employers and with certain other Retirement Systems with which CalPERS has reciprocity agreements). A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An
eligible survivor means the surviving spouse to whom the member was married at least one year before death. A
member’s survivor who is eligible for any other pre-retirement death benefit may choose to receive that death benefit
instead of this Optional Settlement 2W Death benefit.
Benefit
The Optional Settlement 2W Death benefit is a monthly allowance equal to the Service Retirement benefit that the
member would have received had the member retired on the date of his or her death and elected Optional Settlement 2W. (A retiree who elects Optional Settlement 2W receives an allowance that has been reduced so that it
will continue to be paid after his or her death to a surviving beneficiary.) The allowance is payable as long as the
surviving spouse lives, at which time it is continued to any unmarried 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 to provide this benefit for miscellaneous
members.
Eligibility
An employee’s eligible survivor(s) may receive the Special Death benefit if the member dies while actively employed
and the death is job-related. A CalPERS member who is no longer actively employed with any CalPERS employer is
not eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married prior
to the onset of the injury or illness that resulted in death. If there is no eligible spouse, an eligible survivor means
the member's unmarried 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 final compensation, and will be increased
whenever the compensation paid to active employees is increased but ceasing to increase when the member would
have attained age 50. The allowance is payable to the surviving spouse until death at which time the allowance is
continued to any unmarried 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 physical force incurred in
the performance of the member’s duty, and there are eligible 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: 12.5% of final compensation
if 2 eligible children: 20.0% of final compensation
if 3 or more eligible children: 25.0% of final compensation
Alternate Death Benefit for Local Fire Members
This is an optional benefit available only to local fire members.
Eligibility
An employee’s eligible survivor(s) may receive the Alternate Death benefit in lieu of the Basic Death Benefit or the
1957 Survivor Benefit if the member dies while actively employed and has at least 20 years of total CalPERS service.
A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married prior to the onset of the injury or
illness that resulted in death. If there is no eligible spouse, an eligible survivor means the member's unmarried children under age 18.
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX B
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
B-9
Benefit The Alternate Death benefit is a monthly allowance equal to the Service Retirement benefit that the member would
have received had the member retired on the date of his or her death and elected Optional Settlement 2W. (A
retiree who elects Optional Settlement 2W receives an allowance that has been reduced so that it will continue to be
paid after his or her death to a surviving beneficiary.) If the member has not yet attained age 50, the benefit is
equal to that which would be payable if the member had retired at age 50, based on service credited at the time of
death. The allowance is payable as long as the surviving spouse lives, at which time it is continued to any unmarried
children under age 18, if applicable. The total amount paid will be at least equal to the Basic Death Benefit.
Cost-of-Living Adjustments (COLA)
Standard Benefit
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-living adjustment of 3%, 4% or 5%. An improved COLA
is not available in conjunction with the 1.5% at 65 formula.
The cumulative adjustment may not be greater than the cumulative change in the Consumer Price Index since the
date of retirement.
Purchasing Power Protection Allowance (PPPA)
Retirement and survivor allowances are protected against inflation by PPPA. PPPA benefits are cost-of-living
adjustments that are intended to maintain an individual’s allowance at 80% of the initial allowance at retirement
adjusted for inflation since retirement. The PPPA benefit will be coordinated with other cost-of-living adjustments
provided under the plan.
Employee Contributions
Each employee contributes toward his or her retirement based upon the retirement formula. The standard employee
contribution is as described below.
The percent contributed below the monthly compensation breakpoint is 0%.
The monthly compensation breakpoint is $0 for full and supplemental formula members and $133.33 for employees covered by the modified formula.
The percent contributed above the monthly compensation breakpoint depends upon the benefit formula, as
shown in the table below.
Benefit Formula Percent Contributed above the
Breakpoint
Miscellaneous, 1.5% at 65 2%
Miscellaneous, 2% at 60 7%
Miscellaneous, 2% at 55 7%
Miscellaneous, 2.5% at 55 8%
Miscellaneous, 2.7% at 55 8%
Miscellaneous, 3% at 60 8%
Safety, 1/2 at 55 Varies by entry age
Safety, 2% at 55 7%
Safety, 2% at 50 9%
Safety, 3% at 55 9%
Safety, 3% at 50 9%
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX B
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID 6373437857
B-10
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 based on any optional benefit for which a contract amendment was made on
or after January 1, 1979.
Auxiliary organizations of the CSUC system may elect reduced contribution rates, in which case the offset is $317 and
the contribution rate is 6% if members are not covered by Social Security. If members are covered by Social
Security the offset is $513 and the contribution rate is 5%.
Refund of Employee Contributions
If the member’s service with the employer ends, and if the member does not satisfy the eligibility conditions for any
of the retirement benefits above, the member may elect to receive a refund of his or her employee contributions,
which are credited 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
CalPERS 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 CalPERS prior to 1994. Levels 1, 2 and 3 are now closed. Any
new agency or any agency wishing to add this benefit or increase the current level 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 available on
the CalPERS website at www.calpers.ca.gov.
APPENDIX C
GASB STATEMENT NO. 27
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX C
GASB STATEMENT NO. 27
C-1
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 (APC) equal to the annual required contribution (ARC)
plus an adjustment for the cumulative difference between the APC and the employer’s actual plan contributions for
the year. The cumulative difference is called the net pension obligation (NPO). The ARC for the period July 1, 2013 to June 30, 2014 has been determined by an actuarial valuation of the plan as of June 30, 2011. The unadjusted
GASB compliant contribution rate for the indicated period is 24.600% of payroll. In order to calculate the dollar value
of the ARC for inclusion in financial statements prepared as of June 30, 2014, this contribution rate, less any
employee cost sharing, 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, 2013 to June 30, 2014. The employer and the employer’s
auditor are responsible for determining the NPO and the APC.
A summary of principal assumptions and methods used to determine the ARC is shown below.
Retirement Program
Valuation Date June 30, 2011
Actuarial Cost Method Entry Age Normal Cost Method
Amortization Method Level Percent of Payroll
Average Remaining Period 21 Years as of the Valuation Date
Asset Valuation Method 15 Year Smoothed Market
Actuarial Assumptions
Discount Rate 7.50% (net of administrative expenses)
Projected Salary Increases 3.30% to 14.20% depending on Age, Service, and type of employment
Inflation 2.75%
Payroll Growth 3.00%
Individual Salary Growth A merit scale varying by duration of employment coupled with an assumed
annual inflation growth of 2.75% 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 CalPERS.
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’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. 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.
Valuation
Date
Accrued
Liability
(a)
Actuarial Value
of Assets (AVA)
(b)
Unfunded
Liability (UL)
(a)-(b)
Funded Ratios Annual
Covered
Payroll
(c)
UL As a
% of
Payroll
[(a)-(b)]/(c) (AVA)
(b)/(a)
Market
Value
06/30/07 $ 408,625,099 $ 350,543,062 $ 58,082,037 85.8% 98.9% $ 61,883,485 93.9%
06/30/08 443,337,130 379,836,875 63,500,255 85.7% 86.9% 63,933,506 99.3%
06/30/09 499,199,907 398,764,606 100,435,301 79.9% 57.8% 65,602,083 153.1%
06/30/10 521,269,469 416,810,087 104,459,382 80.0% 62.2% 62,496,037 167.1%
06/30/11 552,715,631 434,985,547 117,730,084 78.7% 69.5% 60,297,783 195.2%
APPENDIX D
RISK ANALYSIS
VOLATILITY RATIOS
ANALYSIS OF FUTURE INVESTMENT RETURN SCENARIOS
ANALYSIS OF DISCOUNT RATE SENSITIVITY
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX D
RISK ANALYSIS
D-1
Volatility Ratios
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 (terminations, deaths, disabilities, retirements,
salary growth, and investment return) are exactly realized each year, there will be differences on a year to year
basis. The year-to-year differences between actual experience and the assumptions are called actuarial gains and losses and serve to lower or raise 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.
Asset Volatility Ratio
Plans that have higher asset to payroll ratios produce more volatile employer rates due to investment return. For
example, a plan with an asset to payroll ratio of 8 may experience twice the contribution volatility due to investment return volatility than a plan with an asset to payroll ratio of 4. Below we have shown your asset volatility ratio, a
measure of the plan’s current rate volatility. It should be noted that this ratio is a measure of the current situation.
It increases over time but generally tends to stabilize as the plan matures.
Liability Volatility Ratio
Plans that have higher liability to payroll ratios produce more volatile employer rates due to investment return and
changes in liability. For example, a plan with a liability to payroll ratio of 8 is expected to have twice the contribution volatility of a plan with a liability to payroll ratio of 4. The liability volatility ratio is also included in the table below.
It should be noted that this ratio indicates a longer-term potential for contribution volatility and the asset volatility
ratio, described above, will tend to move closer to this ratio as the plan matures.
Rate Volatility As of June 30, 2011
1. Market Value of Assets without Receivables $ 383,174,950
2. Payroll 60,297,783
3. Asset Volatility Ratio (1. / 2.) 6.4
4. Accrued Liability $ 552,715,631
5. Liability Volatility Ratio (4. / 2.) 9.2
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX D
RISK ANALYSIS
D-2
Analysis of Future Investment Return Scenarios
The investment return for fiscal year 2011-2012 was estimated to be 0%. 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 return information for these two asset classes is expected to be available later in October. For
purposes of projecting future employer rates, we are assuming a 0% investment return for fiscal year 2011-2012.
The investment return realized during a fiscal year first affects the contribution rate for the fiscal year 2 years later.
Specifically, the investment return for 2011-2012 will first be reflected in the June 30, 2012 actuarial valuation that
will be used to set the 2014-2015 employer contribution rates, the 2012-2013 investment return will first be reflected
in the June 30, 2013 actuarial valuation that will be used to set the 2015-2016 employer contribution rates and so
forth.
Based on a 0% investment return for fiscal year 2011-2012 and assuming 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 the fiscal year 2014-2015, the effect on the 2014-2015 Employer Rate is as follows:
Estimated 2014-2015 Employer Rate Estimated Increase in Employer Rate between
2013-2014 and 2014-2015
26.4% 1.8%
As part of this report, a sensitivity analysis was performed to determine the effects of various investment returns
during fiscal years 2012-2013, 2013-2014 and 2014-2015 on the 2015-2016, 2016-2017 and 2017-2018 employer
rates. Once again, the projected rate increases assume that all other actuarial assumptions will be realized and that
no further changes to assumptions, contributions, benefits, or funding will occur.
Five different investment return scenarios were selected.
The first scenario is what one would expect if the markets were to give us a 5th percentile return from July
1, 2012 through June 30, 2015. The 5th percentile return corresponds to a -4.1% return for each of the
2012-2013, 2013-2014 and 2014-2015 fiscal years.
The second scenario is what one would expect if the markets were to give us a 25th percentile return from
July 1, 2012 through June 30, 2015. The 25th percentile return corresponds to a 2.6% return for each of
the 2012-2013, 2013-2014 and 2014-2015 fiscal years. The third scenario assumed the return for 2012-2013, 2013-2014, 2014-2015 would be our assumed 7.5% investment return which represents about a 49th percentile event.
The fourth scenario is what one would expect if the markets were to give us a 75th percentile return from
July 1, 2012 through June 30, 2015. The 75th percentile return corresponds to a 11.9% return for each of
the 2012-2013, 2013-2014 and 2014-2015 fiscal years.
Finally, the last scenario is what one would expect if the markets were to give us a 95th percentile return
from July 1, 2012 through June 30, 2015. The 95th percentile return corresponds to a 18.5% return for
each of the 2012-2013, 2013-2014 and 2014-2015 fiscal years.
The table below shows the estimated projected contribution rates and the estimated increases for your plan under
the five different scenarios.
2012-2015
Investment Return
Scenario
Estimated Employer Rate Estimated Change in
Employer Rate
between 2014-2015
and 2017-2018 2015-2016 2016-2017 2017-2018
-4.1% (5th percentile) 31.7% 36.4% 40.5% 14.1%
2.6% (25th percentile) 28.7% 30.9% 33.0% 6.6%
7.5% 26.9% 27.4% 27.8% 1.4%
11.9%(75th percentile) 26.8% 27.1% 27.2% 0.8%
18.5%(95th percentile) 26.7% 26.6% 26.1% -0.3%
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX D
RISK ANALYSIS
D-3
Analysis of Discount Rate Sensitivity
The following analysis looks at the 2013-2014 employer contribution rates under two different discount rate scenarios. Shown below are the employer contribution rates assuming discount rates that are 1% lower and 1%
higher than the current valuation discount rate. This analysis gives an indication of the potential required employer
contribution rates if the PERF were to realize investment returns of 6.50% or 8.50% over the long-term.
This type of analysis gives the reader a sense of the long-term risk to the employer contribution rates.
2013-2014 Employer Contribution Rate
As of June 30, 2011 6.50% Discount Rate
(-1%) 7.50% Discount Rate
(assumed rate) 8.50% Discount Rate
(+1%)
Employer Normal Cost 14.691% 10.360% 7.030%
Unfunded Rate Payment 22.864% 14.240% 7.500%
Total 37.555% 24.600% 14.530%
APPENDIX E
GLOSSARY OF ACTUARIAL TERMS
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX E
GLOSSARY OF ACTUARIAL TERMS
E-1
Glossary of Actuarial Terms
Accrued Liability (also called Actuarial Accrued Liability or Entry Age Normal Accrued Liability)
The total dollars needed as of the valuation date to fund all benefits earned in the past for current members.
Actuarial Assumptions Assumptions made about certain events that will affect pension costs. Assumptions generally can be broken
down into two categories: demographic and economic. Demographic assumptions include such things as
mortality, disability and retirement rates. Economic assumptions include discount rate, salary growth and
inflation.
Actuarial Methods
Procedures employed by actuaries to achieve certain funding goals of a pension plan. Actuarial methods include funding method, setting the length of time to fund the Accrued Liability and determining the Actuarial Value of
Assets.
Actuarial Valuation
The determination, as of a valuation date, of the Normal Cost, 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 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.) but all bases are amortized using investment
and payroll assumptions from the current valuation.
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 pay off 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 with the plan assumptions. The ARC is determined by multiplying
the employer contribution 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 dollar value of the ARC is equal to the Lump Sum
Prepayment.
Discount Rate
The actuarial assumption that was called “investment return” in earlier CalPERS reports or “actuarial interest
rate” in Section 20014 of the California Public Employees’ Retirement Law (PERL).
Entry Age
The earliest age at which a plan member begins to accrue benefits under a defined benefit pension plan or risk
pool. In most cases, this is age of the member on their date of hire.
CALPERS ACTUARIAL VALUATION – June 30, 2011 APPENDIX E
GLOSSARY OF ACTUARIAL TERMS
E-2
(The assumed retirement age less the entry age is the amount of time required to fund a member’s total benefit.
Generally, the older a member on the date of hire, the greater the entry age normal cost. This is mainly
because there is less time to earn investment income to fund the future benefits.)
Entry Age Normal Cost Method
An actuarial cost method designed to fund a member's total plan benefit over the course of his or her career.
This method is designed to yield a rate expressed as a level percentage of payroll.
(The assumed retirement age less the entry age is the amount of time required to fund a member’s total benefit. Generally, the older a member on the date of hire, the greater the entry age normal cost. This is mainly
because there is less time to earn investment income to fund the future benefits.)
Fresh Start
A Fresh Start is the single amortization 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 or risk pool is. Or equivalently, how "on track" a plan or risk pool is with
respect to assets vs. 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.
GASB 27
Statement No. 27 of the Governmental Accounting Standards Board. The accounting standard governing a state
or local governmental employer’s accounting for pensions.
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.
Present Value of Benefits (PVB) The total dollars needed as of the valuation date to fund all benefits earned in the past or expected to be earned
in the future for current members.
Rolling Amortization Period
An amortization period that remains the same each year, rather than declining.
Superfunded A condition existing when a plan’s Actuarial Value of Assets exceeds its 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
When a plan or pool’s Actuarial Value of Assets is less than its Accrued Liability, the difference is the plan or
pool’s Unfunded Liability of the Unfunded Liability is positive, the plan or pool will have to pay contributions exceeding the Normal Cost.