HomeMy WebLinkAboutStaff Report 7308
City of Palo Alto (ID # 7308)
City Council Staff Report
Report Type: Informational Report Meeting Date: 12/12/2016
City of Palo Alto Page 1
Summary Title: CalPERS Pension 2016
Title: Transmittal of the CalPERS City of Palo Alto Pension Plan Annual
Valuation Reports as of June 30, 2015
From: City Manager
Lead Department: Administrative Services
Recommendation
This in an informational item and no Council action is necessary.
Background
Annually staff provides the CalPERS actuarial reports detailing the latest status of the City of
Palo Alto Pension trust plans for employees and retirees. These actuary reports are used to
calculate the annual required contribution to the trust for the pension obligations. In addition,
there updates on the rate of return, funding status, changes to the trust based on various
impacts detailed in the report.
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.
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). This annual report provides updated actuarial
information for both pension plans as of June 30, 2015.
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. Fire (safety) employees
hired up to June 7, 2012 are Tier 1 with a retirement formula of 3 percent for each year worked
and eligibility starts at 50 years of age (3%@50). Fire employees hired after this date are Tier 2
and receive 3%@55. Police (safety) employees hired up to December 6, 2012 are Tier 1 with a
retirement formula of 3 percent for each year worked and eligibility starts at 50 years of age
(3%@50). Police employees hired after this date receive Tier 2, 3%@55. The majority of current
miscellaneous employees are in Tier 1 and the formula is 2.7 percent per year worked with
eligibility starting at the age of 55 (2.7%@55). Effective July 16, 2010 the City changed the
City of Palo Alto Page 2
formula for new employees to Tier 2 and 2 percent per year with eligibility starting at the age of
60 (2%@60).
The California Public Employees’ Pension Reform Act of 2013 (PEPRA) mandated a third tier
pension formula of 2%@62 for Miscellaneous and 2.7%@57 for Safety, effective January 1,
2013. This change provides the lower benefit for those hired and who are new to CalPERS on or
after January 1, 2013. As a result of the new formulas, which lower the pension benefit for
newer employees, the City will experience small savings for employees in the 2017 pension
rates just received. This is due to the increasing number of employees in Tiers 2 and 3. In
addition to the lower pension formula for Tier 3, there is a pension compensation limit of
$140,424 for calendar year 2015 for all employees in this tier.
The breakdown of employees in each tier, as of March 2016, is shown in the table below:
Tier 1 Tier 2 Tier 3
Miscellaneous 65% 15% 20%
Safety 82% 7% 11%
Discussion
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 and former employees that are vested but have yet to retire and retired
employees as of June 30, 2015. The CalPERS actuarial analysis by practice is completed two
years in arrears. The rates outlined below are based on an estimated 0.6 percent investment
return in Fiscal Year 2016 and an assumed 7.5 percent investment return every fiscal year
thereafter. Please note the rate of return for June 30, 2014 was 2.4%, which was also below the
target level.
City of Palo Alto Page 3
The chart below reflects the rates paid for Fiscal Year 2016 and the projected rates for Fiscal
Year 2017.
PERS Projected Rates
Current Next Year Year to
Payment Payment Year
FY16 FY17 Change
Miscellaneous1
27.694% 28.89% 1.196%
Safety2
41.932%
45.426% 3.494%
The chart below reflects the CalPERS projected rates for FY18 - FY22.
PERS Projected Rates
Projected Projected Year to Projected Year to Projected Year to
Projected
Year to
Payment Payment Year Payment Year Payment Year Payment Year
FY18 FY19 Change FY20 Change FY21 Change FY22 Change
Miscellaneous1
31.0%
33.1% 2.1%
35.2% 2.1%
35.9% 0.7%
36.4%
0.5%
Safety2
49.69%
52.1% 2.41%
55.5% 3.4%
56.4% 0.90%
57.3%
0.9%
1 The employee share of pension costs for Miscellaneous employees in Tier 1 are 8 percent, Tier 2 are 7 percent and Tier 3
are 6.25 percent. Safety employees in Tiers 1 and 2 are 9 percent and Tier 3 are 11.25 percent.
2 The employee share of pension costs for Safety employees is 9% or 11.25% also depending on the tier.
City of Palo Alto Page 4
*(MVA) - Based on a point in time (June 30, 2015 in this case) comparison between the Market Value of Assets and
the Actuarial Liability.
Discount Rate Sensitivity
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 21 of the CalPERS actuarial report (Attachment A and B). “The following
analysis looks at the FY18 total normal cost rates and liabilities under two different discount
rate scenarios. Shown below are the total normal cost 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 plan impacts if the Public Employees Retirement Fund 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 rates”.
The pension liability and current funding for safety and miscellaneous employees is shown here:
FY17
FY18
Difference
Safety
1 Present Value of Projected Benefits $426,369,163 $433,980,861 $7,611,698 2%
2 Entry Age Normal Accrued Liability $367,478,634 $377,934,524 $10,455,890 3%
3 Market Value of Assets (MVA)* $264,145,000 $259,169,591 $(4,975,409) 2%
4 Unfunded Accrued Liability (UAL) $103,333,634 $ 118,764,933 $15,431,299 13%
5 Funded Ratio [(5)/(4e)] 71.9% 68.6% -3.3%
Miscellaneous
1 Present Value of Projected Benefits $756,332,825 $788,241,494 $31,908,669 4%
2 Entry Age Normal Accrued Liability $666,978,627 $696,699,220 $ 29,720,593 4%
3 Market Value of Assets (MVA)* $475,566,994 $477,031,099 $ 1,464,105 0%
4 Unfunded Accrued Liability (UAL) $191,411,633 $219,668,121 $28,256,488 13%
5 Funded Ratio 71.3% 68.5% 2.8%
Total Employer Contribution
Miscellaneous $21,404,510 $23,616,949 $2,212,439 9%
Safety $10,560,036 $11,503,389 $ 943,353 8%
Total $31,964,546 $35,120,338 $3,155,792 9%
City of Palo Alto Page 5
Sensitivity Analysis for Safety
As of June 30, 2015 6.50% Discount Rate
(-1%)
7.50% Discount Rate
(assumed rate)
8.50% Discount Rate
(+1%)
Total Normal Cost 35.207% 28.029% 22.530%
Accrued Liability $425,987,913 $377,934,524 $338,195,457
Unfunded Accrued
Liability
$166,818,322 $118,764,933 $ 79,025,866
Sensitivity Analysis for Miscellaneous
As of June 30, 2015 6.50% Discount Rate
(-1%)
7.50% Discount Rate
(assumed rate)
8.50% Discount Rate
(+1%)
Total Normal Cost 21.982% 17.623% 14.305%
Accrued Liability $785,681,736 $696,699,220 $622,745,835
Unfunded Accrued
Liability
$308,650,637 $219,668,121 $145,714,736
Council Direction
The City Council has made addressing the unfunded pension liabilities a priority and has asked
staff to develop a funding plan addressing the issues. Staff hired Bartel & Associate to assist in
the process and has set aside $2.1 million in the General Fund to establish a Section 115 Trust
to offset some of the unfunded pension obligations. Staff will present the establishment of the
trust to the Council in the coming months and later as part of the FY18 proposed budget
additional ongoing funding options for the General Fund and the other funds.
Financial Impacts
Staff will include the required and projected pension contribution rates in the development of
the FY18 Proposed budget. The two actuarial reports are attached for further details. The
annual required payments to CalPERS will be going up due to the lower than expected
investment returns earned by the trust. In the most recent labor agreements the City has
negotiated employee contributions to the employer annual contribution which will help offset
some of the increases.
Attachments:
Attachment A: CalPERS Misc Actuarial Valuation June 2015 (PDF)
Attachment B: CalPERS Safety Actuarial Valuation June 2015 (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
August 2016
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO (CalPERS ID: 6373437857)
Annual Valuation Report as of June 30, 2015
Dear Employer,
As an attachment to this letter, you will find a copy of the June 30, 2015 actuarial valuation
report of your pension plan. Your 2015 actuarial valuation report contains important actuarial
information about your pension plan at CalPERS. Your CalPERS staff actuary, whose signature
appears in the “Actuarial Certification” section on page 1, is available to discuss the report with
you after August 31, 2016.
Future Contributions
The exhibit below displays the minimum employer contributions for Fiscal Year 2017-18 and
projected contributions for Fiscal Year 2018-19, before any cost sharing. The projected
contributions for Fiscal Year 2018-19 are based on the most recent information available,
including an estimate of the investment return for Fiscal Year 2015-16, namely 0.0 percent. For a
projection of employer contributions beyond Fiscal Year 2018-19, please refer to the “Projected
Employer Contributions” in the “Highlights and Executive Summary” section. This 5-year
projection of future employer contributions supersedes any previous projections we have
provided. The “Risk Analysis” section of the valuation report also contains estimated employer
contributions in future years under a variety of investment return scenarios.
Fiscal Year Employer Normal
Cost Rate
Employer Payment
of Unfunded Liability
Employee
PEPRA Rate
2017-18 10.039% $15,765,273 6.25%
2018-19 (projected) 10.0% $18,464,881 N/A
Member contributions other than cost sharing (whether paid by the employer or the employee)
are in addition to the above. The employer contributions in this report do not reflect any
cost sharing arrangement you may have with your employees. The estimates for Fiscal Year 2018-19 also assume that there are no future contract 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 required contributions. These gains and losses cannot
be predicted in advance so the projected employer contributions are just estimates. The actual
required employer contributions for Fiscal Year 2018-19 will be provided in next year’s report.
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
(CalPERS ID: 6373437857)
Annual Valuation Report as of June 30, 2015
Page 2
Changes since the Prior Year’s Valuation
Beginning with Fiscal Year 2017-18 CalPERS will collect employer contributions toward the plan’s
unfunded liability as dollar amounts instead of the prior method of a contribution rate. This
change will address potential funding issues that could arise from a declining payroll or reduction
in the number of active members in the plan. Funding the unfunded liability as a percentage of
payroll could lead to the underfunding of the plans. Although employers will be invoiced at the
beginning of the fiscal year for their unfunded liability payment the plan’s normal cost
contribution will continue to be collected as a percentage of payroll.
The CalPERS Board of Administration adopted a Risk Mitigation Policy which is designed to
reduce funding risk over time. The policy establishes a mechanism whereby CalPERS investment
performance that significantly outperforms the discount rate triggers adjustments to the discount
rate, expected investment return and strategic asset allocation targets. A minimum excess
investment return of 4% above the existing discount rate is necessary to cause a funding risk
mitigation event. The policy has no impact on the current year valuation results but is expected
to have an impact in future years. More details on the Risk Mitigation Policy can be found on our
website.
Besides the above noted changes, there may also be changes specific to the plan such as
contract amendments and funding changes.
Further descriptions of general changes are included in the “Highlights and Executive Summary”
section and in Appendix A, “Actuarial Methods and Assumptions.” The effects of the changes on
the required contributions are included in the “Reconciliation of Required Employer Contributions”
section.
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 results, we ask that you wait until after August 31 to contact us with
actuarial questions. If you have other questions, you may call the Customer Contact Center at
(888)-CalPERS or (888-225-7377).
Sincerely,
ALAN MILLIGAN
Chief Actuary
ACTUARIAL VALUATION
as of June 30, 2015
for the
MISCELLANEOUS PLAN
of the
CITY OF PALO ALTO
(CalPERS ID: 6373437857)
(Rate Plan ID: 8)
REQUIRED CONTRIBUTIONS
FOR FISCAL YEAR
July 1, 2017 – June 30, 2018
TABLE OF CONTENTS
ACTUARIAL CERTIFICATION 1
HIGHLIGHTS AND EXECUTIVE SUMMARY
Introduction 3
Purpose of the Report 3
Required Contributions 4
Plan’s Funded Status 5
Projected Employer Contributions 5
Cost 6 Changes Since the Prior Year’s Valuation 7
Subsequent Events 7
ASSETS
Reconciliation of the Market Value of Assets 9
Asset Allocation 10 CalPERS History of Investment Returns 11
LIABILITIES AND CONTRIBUTIONS
Development of Accrued and Unfunded Liabilities 13
(Gain) / Loss Analysis 06/30/14 - 06/30/15 14
Schedule of Amortization Bases 15 30-Year Amortization Schedule and Alternatives 16
Reconciliation of Required Employer Contributions 18
Employer Contribution History 19
Funding History 19
RISK ANALYSIS
Analysis of Future Investment Return Scenarios 21
Analysis of Discount Rate Sensitivity 22
Volatility Ratios 23
Hypothetical Termination Liability 24
PLAN’S MAJOR BENEFIT PROVISIONS
Plan’s Major Benefit Options 26
APPENDIX A – ACTUARIAL METHODS AND ASSUMPTIONS
Actuarial Data A1
Actuarial Methods A1 – A2
Actuarial Assumptions A3 – A21
Miscellaneous A21
APPENDIX B – PRINCIPAL PLAN PROVISIONS B1 – B10
APPENDIX C – PARTICIPANT DATA
Summary of Valuation Data C1
Active Members C2
Transferred and Terminated Members C3 Retired Members and Beneficiaries C4 – C5
APPENDIX D – DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION RATE D1
APPENDIX E – GLOSSARY OF ACTUARIAL TERMS E1 – E2
(CY) FIN PROCESS CONTROL ID: 480029 (PY) FIN PROCESS CONTROL ID: 463712 REPORT ID: 95691
CALPERS ACTUARIAL VALUATION - June 30, 2015
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, 2015 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
INTRODUCTION
PURPOSE OF THE REPORT
REQUIRED CONTRIBUTIONS
PLAN’S FUNDED STATUS
PROJECTED EMPLOYER CONTRIBUTIONS
COST
CHANGES SINCE THE PRIOR YEAR’S VALUATION
SUBSEQUENT EVENTS
CALPERS ACTUARIAL VALUATION - June 30, 2015
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 3
Introduction
This report presents the results of the June 30, 2015 actuarial valuation of the MISCELLANEOUS PLAN OF
THE CITY OF PALO ALTO of the California Public Employees’ Retirement System (CalPERS). This actuarial
valuation sets the required employer contributions for Fiscal Year 2017-18.
The CalPERS Board of Administration adopted a Risk Mitigation Policy which is designed to reduce funding
risk over time. The policy establishes a mechanism whereby CalPERS investment performance that
significantly outperforms the discount rate triggers adjustments to the discount rate, expected investment
return and strategic asset allocation targets. A minimum excess investment return of 4% above the existing
discount rate is necessary to cause a funding risk mitigation event. The Risk Mitigation Policy does not have
an impact on the current year actuarial valuation. More details on the Risk Mitigation Policy can be found on
our website.
Purpose of the Report
The actuarial valuation was prepared by the CalPERS Actuarial Office using data as of June 30, 2015. The purpose of the report is to:
Set forth the assets and accrued liabilities of this plan as of June 30, 2015;
Determine the required employer contributions for the fiscal year July 1, 2017 through June 30, 2018;
Provide actuarial information as of June 30, 2015 to the CalPERS Board of Administration and other
interested parties.
The pension funding information presented in this report should not be used in financial reports subject to Governmental Accounting Standards Board (GASB) Statement No. 68 for an Agent Employer Defined Benefit
Pension Plan. A separate accounting valuation report for such purposes is available from CalPERS and
details for ordering are available on our website.
The 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.
California Actuarial Advisory Panel Recommendations
This report includes all the basic disclosure elements as described in the Model Disclosure Elements for
Actuarial Valuation Reports recommended in 2011 by the California Actuarial Advisory Panel (CAAP), with
the exception of including the original base amounts of the various components of the unfunded liability in
the Schedule of Amortization Bases shown on page 15.
Additionally, this report includes the following “Enhanced Risk Disclosures” also recommended by the CAAP
in the Model Disclosure Elements document:
A “Deterministic Stress Test,” projecting future results under different investment income
scenarios
A “Sensitivity Analysis,” showing the impact on current valuation results using a 1 percent plus or
minus change in the discount rate.
CALPERS ACTUARIAL VALUATION - June 30, 2015
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 4
Required Contributions
Fiscal Year
Required Employer Contribution 2017-18
Employer Normal Cost Rate 10.039%
Plus Either
1) Monthly Employer Dollar UAL Payment $ 1,313,773
Or
2) Annual UAL Prepayment Option $ 15,205,379
Required PEPRA Member Contribution Rate
6.25%
The total minimum required employer contribution is the sum of the Plan’s Employer Normal Cost Rate
(expressed as a percentage of payroll) plus the Employer Unfunded Accrued Liability (UAL) Contribution
Amount (billed monthly in dollars). Only the UAL portion of the employer contribution can be prepaid
(which must be received in full no later than July 31). Plan Normal Cost contributions will be made as part
of the payroll reporting process. If there is contractual cost sharing or other change, this amount will change. §20572 of the Public Employees’ Retirement Law assesses interest at an annual rate of 10
percent if a contracting agency fails to remit the required contributions when due. For additional detail
regarding the determination of the required contribution for PEPRA members, see Appendix D. Required
member contributions for Classic members can be found in Appendix B.
Fiscal Year Fiscal Year
2016-17 2017-18
Normal Cost Contribution as a Percentage of Payroll
Total Normal Cost 18.014% 17.623%
Employee Contribution1 7.680% 7.584%
Employer Normal Cost 10.334% 10.039%
Projected Annual Payroll for Contribution Year $ 74,090,105 $ 78,211,742
Estimated Employer Contributions Based On
Projected Payroll
Total Normal Cost $ 13,346,592 $ 13,783,255
Employee Contribution1 5,690,120 5,931,579
Employer Normal Cost 7,656,472 7,851,676
Unfunded Liability Contribution 13,748,038 15,765,273
Estimated Total Employer Contribution2 $ 21,404,510 $ 23,616,949
1 For classic members, this is the percentage specified in the Public Employees Retirement Law, net of any reduction from the use of a modified formula or other factors. For PEPRA members, the member contribution rate is based on 50
percent of the normal cost. A development of PEPRA member contribution rates can be found in Appendix D. Employee
cost sharing is not shown in this report. 2 As a percentage of projected payroll the UAL contribution for Fiscal Year 2017-18 is 20.157 percent for an estimated
total employer contribution rate of 30.196 percent. As determined in the June 30, 2014 valuation, the Fiscal Year 2016-17 UAL contribution is 18.556 percent for a total employer contribution rate of 28.890 percent.
CALPERS ACTUARIAL VALUATION - June 30, 2015
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 5
Plan’s Funded Status
Projected Employer Contributions
The estimated employer contribution for Fiscal Year 2018-19 is based on a projection of the most recent
information we have available, including an estimated 0.0 percent investment return for Fiscal Year 2015-
16.
The table below shows projected employer contributions (before cost sharing) for the next five fiscal years,
assuming CalPERS earns 0.0 percent for Fiscal Year 2015-16 and 7.50 percent every fiscal year thereafter,
and assuming that all other actuarial assumptions will be realized and that no further changes to assumptions, contributions, benefits, or funding will occur during the projection period. The projected
normal cost percentages do not reflect that the normal cost will decline over time as new employees are
hired into PEPRA or other lower cost benefit tiers.
Required
Contribution Projected Future Employer Contributions
Fiscal Year 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23
Normal Cost % 10.039% 10.0% 10.0% 10.0% 10.0% 10.0%
UAL $ 15,765,273 18,464,881 21,312,272 23,163,641 24,930,285 26,323,908
For projected contributions under alternate investment return scenarios, please see the “Analysis of Future
Investment Return Scenarios” in the “Risk Analysis” section.
June 30, 2014 June 30, 2015
1. Present Value of Projected Benefits $ 756,332,825 $ 788,241,494
2. Entry Age Normal Accrued Liability 666,978,627 696,699,220
3. Market Value of Assets (MVA) $ 475,566,994 $ 477,031,099
4. Unfunded Accrued Liability (UAL) [(2) – (3)] $ 191,411,633 $ 219,668,121
5. Funded Ratio [(3) / (2)] 71.3% 68.5%
CALPERS ACTUARIAL VALUATION - June 30, 2015
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 6
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, 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 the plan.
While CalPERS has set these assumptions to reflect our best estimate of the real future of the 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 percent for the past twenty year period ending June 30, 2015, returns for each fiscal year ranged from
negative -24 percent to +21.7 percent.
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 annual cost associated with one year of service accrual) 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. In prior years CalPERS converted Past Service Cost to a percent of payroll and expressed the total required employer contribution
as a single rate. Going forward the Past Service Cost will no longer be converted to a percent of payroll and
this cost will be invoiced to the employer as a monthly dollar contribution amount with the option to prepay
the annual amount at the beginning of the fiscal year. The normal cost will continue to be expressed as a
percentage of active payroll with employer and employee contributions payable as part of the payroll
reporting process.
CALPERS ACTUARIAL VALUATION - June 30, 2015
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 7
Changes since the Prior Year’s Valuation
Benefits
The standard actuarial practice at CalPERS is to recognize mandated legislative benefit changes in the first annual valuation following the effective date of the legislation. Voluntary benefit changes by plan
amendment are generally included in the first valuation that is prepared after the amendment becomes
effective, even if the valuation date is prior to the effective date of the amendment.
This valuation generally reflects plan changes by amendments effective before the date of the report. Please
refer to the “Plan’s Major Benefit Options” and Appendix B for a summary of the plan provisions used in this
valuation. The effect of any mandated benefit changes or plan amendments on the unfunded liability is
shown in the “(Gain)/Loss Analysis” and the effect on the employer contribution is shown in the “Reconciliation of Required Employer Contributions.” It should be noted that no change in liability or
contribution is shown for any plan changes which were already included in the prior year’s valuation.
Actuarial Methods and Assumptions
Beginning with Fiscal Year 2017-18 CalPERS will collect employer contributions toward the plan’s unfunded
liability as dollar amounts instead of the prior method of a contribution rate. This change will address potential funding issues that could arise from a declining payroll or reduction in the number of active
members in the plan. Funding the unfunded liability as a percentage of payroll could lead to the
underfunding of the plans. Although employers will be invoiced at the beginning of the fiscal year for their
unfunded liability payment the plan’s normal cost contribution will continue to be collected as a percentage
of payroll.
Subsequent Events
Risk Mitigation
The CalPERS Board of Administration adopted a Risk Mitigation Policy which is designed to reduce funding risk over time. The policy establishes a mechanism whereby CalPERS investment performance that
significantly outperforms the discount rate triggers adjustments to the discount rate, expected investment
return and strategic asset allocation targets. A minimum excess investment return of 4% above the existing
discount rate is necessary to cause a funding risk mitigation event. More details on the Risk Mitigation Policy
can be found on our website.
ASSETS
RECONCILIATION OF THE MARKET VALUE OF ASSETS
ASSET ALLOCATION
CALPERS HISTORY OF INVESTMENT RETURNS
CALPERS ACTUARIAL VALUATION - June 30, 2015
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 9
Reconciliation of the Market Value of Assets
1. Market Value of Assets as of 6/30/14 including Receivables $ 475,566,994
2. Change in Receivables for Service Buybacks as of 6/30/14 (558,036)
3. Employer Contributions 18,610,590
4. Employee Contributions 5,436,814
5. Benefit Payments to Retirees and Beneficiaries (32,746,389)
6. Refunds (233,429)
7. Lump Sum Payments 0
8. Transfers and Miscellaneous Adjustments 850,812
9. Investment Return 10,103,743
10. Market Value of Assets as of 6/30/15 including Receivables $ 477,031,099
CALPERS ACTUARIAL VALUATION - June 30, 2015
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 10
Asset Allocation
CalPERS adheres to an Asset Allocation Strategy which establishes asset class allocation policy targets and
ranges, and manages those asset class allocations within their policy ranges. CalPERS Investment Belief No.
6 recognizes that strategic asset allocation is the dominant determinant of portfolio risk and return. On February 19, 2014, the CalPERS Board of Administration adopted changes to the current asset allocation as
shown in the Policy Target Allocation below expressed as a percentage of total assets. The asset allocation
has an expected long term blended rate of return of 7.5 percent.
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, 2015. The assets for CITY OF PALO ALTO
MISCELLANEOUS PLAN are part of the PERF and are invested accordingly.
(A)
Asset Class
(B)
Market Value
($ Billion)
(C)
Policy Target
Allocation
Global Equity 162.5 51.0%
Private Equity 29.0 10.0%
Global Fixed Income 53.1 20.0%
Liquidity 7.5 1.0%
Real Assets 31.8 12.0%
Inflation Sensitive Assets 15.6 6.0%
Other 2.4 0.0%
Total Fund $301.9 100.0%
Global Equity
53.8%
Private Equity
9.6%
Global Fixed
Income
17.6%
Liquidity
2.5%
Real Assets
10.5%
Inflation
5.2%
Other
0.8%
Asset Allocation at 6/30/2015
CALPERS ACTUARIAL VALUATION - June 30, 2015
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 11
CalPERS History of Investment Returns
The following is a chart with the 20-year historical annual returns of the Public Employees Retirement Fund
for each fiscal year ending on June 30. Beginning in 2002, the figures are reported as gross of fees.
The table below shows historical geometric mean annual returns of the Public Employees Retirement Fund for various time periods ending on June 30, 2015, (figures are reported as gross of fees). The geometric
mean rate of return is the average rate per period compounded over multiple periods. It should be
recognized that in any given year the rate of return is volatile. Although the expected rate of return on the
recently adopted new asset allocation is 7.5 percent, the portfolio has an expected volatility of 11.76
percent per year. The volatility is a measure of the risk of the portfolio expressed in the standard deviation
of the fund’s total return distribution, expressed as a percentage. Consequently, when looking at investment
returns, it is more instructive to look at returns over longer time horizons.
History of CalPERS Geometric Mean Rates of Return and Volatilities
1 year 5 year 10 year 20 year 30 year
Geometric Return 2.4% 10.7% 6.1% 7.7% 9.1%
Volatility – 9.4% 14.0% 11.8% 10.5%
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
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
%
0.
1
%
13
.
2
%
17
.
7
%
2.
4
%
LIABILITIES AND CONTRIBUTIONS
DEVELOPMENT OF ACCRUED AND UNFUNDED LIABILITIES
(GAIN) / LOSS ANALYSIS 06/30/14 - 06/30/15
SCHEDULE OF AMORTIZATION BASES
30-YEAR AMORTIZATION SCHEDULES AND ALTERNATIVES
RECONCILIATION OF REQUIRED EMPLOYER CONTRIBUTIONS
EMPLOYER CONTRIBUTION HISTORY
FUNDING HISTORY
CALPERS ACTUARIAL VALUATION - June 30, 2015
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 13
Development of Accrued and Unfunded Liabilities
June 30, 2014 June 30, 2015
1. Present Value of Projected Benefits
a) Active Members $ 328,196,243 342,215,197
b) Transferred Members 28,487,782 31,772,074
c) Terminated Members 11,097,567 12,787,802
d) Members and Beneficiaries Receiving Payments 388,551,233 401,466,421
e) Total $ 756,332,825 788,241,494
2. Present Value of Future Employer Normal Costs $ 49,756,329 50,436,220
3. Present Value of Future Employee Contributions $ 39,597,869 41,106,054
4. Entry Age Normal Accrued Liability
a) Active Members [(1a) - (2) - (3)] $ 238,842,045 250,672,923
b) Transferred Members (1b) 28,487,782 31,772,074
c) Terminated Members (1c) 11,097,567 12,787,802
d) Members and Beneficiaries Receiving Payments (1d) 388,551,233 401,466,421
e) Total $ 666,978,627 696,699,220
5. Market Value of Assets (MVA) $ 475,566,994 477,031,099
6. Unfunded Accrued Liability (UAL) [(4e) - (5)] $ 191,411,633 219,668,121
7. Funded Ratio [(5) / (4e)] 71.3% 68.5%
CALPERS ACTUARIAL VALUATION - June 30, 2015
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 14
(Gain)/Loss Analysis 6/30/14 – 6/30/15
To calculate the cost requirements of the plan, assumptions are made about future events that affect the
amount and timing of benefits to be paid and assets to be accumulated. Each year, actual experience is
compared to the expected experience based on the actuarial assumptions. This results in actuarial gains or losses, as shown below.
1. Total (Gain)/Loss for the Year
a) Unfunded Accrued Liability (UAL) as of 6/30/14 $ 191,411,633
b) Expected Payment on the UAL during 2014/2015 11,157,164
c) Interest through 6/30/15 [.075 x (1a) - ((1.075)½ - 1) x (1b)] 13,945,043 d) Expected UAL before all other changes [(1a) - (1b) + (1c)] 194,199,512
e) Change due to plan changes 0
f) Change due to assumption change 0
g) Expected UAL after all other changes [(1d) + (1e) + (1f)] 194,199,512
h) Actual UAL as of 6/30/15 219,668,121
i) Total (Gain)/Loss for 2014/2015 [(1h) - (1g)] $ 25,468,609
2. Contribution (Gain)/Loss for the Year
a) Expected Contribution (Employer and Employee) $ 23,606,313
b) Interest on Expected Contributions 869,233
c) Actual Contributions 24,047,404 d) Interest on Actual Contributions 885,475
e) Expected Contributions with Interest [(2a) + (2b)] 24,475,546
f) Actual Contributions with Interest [(2c) + (2d)] 24,932,879
g) Contribution (Gain)/Loss [(2e) - (2f)] $ (457,333)
3. Asset (Gain)/Loss for the Year
a) Market Value of Assets as of 6/30/14 $ 475,566,994
b) Prior Fiscal Year Receivables (3,097,997)
c) Current Fiscal Year Receivables 2,539,961
d) Contributions Received 24,047,404
e) Benefits and Refunds Paid (32,979,818) f) Transfers and Miscellaneous Adjustments 850,812
g) Expected Int. [.075 x (3a + 3b) + ((1.075)½ - 1) x ((3d) + (3e) + (3f))] 35,137,593
h) Expected Assets as of 6/30/15 [(3a) + (3b) + (3c) + (3d) + (3e) + (3f) + (3g)] 502,064,949
i) Market Value of Assets as of 6/30/15 477,031,099
j) Asset (Gain)/Loss [(3h) - (3i)] $ 25,033,850
4. Liability (Gain)/Loss for the Year
a) Total (Gain)/Loss (1i) $ 25,468,609
b) Contribution (Gain)/Loss (2g) (457,333)
c) Asset (Gain)/Loss (3j) 25,033,850
d) Liability (Gain)/Loss [(4a) - (4b) - (4c)] $ 892,092
CALPERS ACTUARIAL VALUATION - June 30, 2015 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 15
Schedule of Amortization Bases
There is a two-year lag between the valuation date and the start of the contribution fiscal year.
The assets, liabilities, and funded status of the plan are measured as of the valuation date: June 30, 2015.
The required employer contributions determined by the valuation are for the fiscal year beginning two years after the valuation date: Fiscal Year 2017-18.
This two-year lag is necessary due to the amount of time needed to extract and test the membership and financial data, and the need to provide public agencies
with their required employer contribution well in advance of the start of the fiscal year.
The Unfunded Accrued Liability (UAL) is used to determine the employer contribution and therefore must be rolled forward two years from the valuation date to the first day of the fiscal year for which the contribution is being determined. The UAL is rolled forward each year by subtracting the expected payment on the UAL for
the fiscal year and adjusting for interest. The expected payment on the UAL for a fiscal year is equal to the Expected Employer Contribution for the fiscal year minus
the Expected Normal Cost for the year. The Employer Contribution for the first fiscal year is determined by the actuarial valuation two years ago and the contribution
for the second year is from the actuarial valuation one year ago. 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.
Reason for Base Date Established
Amorti-
zation Period Balance 6/30/15
Expected
Payment 2015-16 Balance 6/30/16
Expected
Payment 2016-17 Balance 6/30/17
Scheduled
Payment for 2017-18
ASSUMPTION CHANGE 06/30/03 8 $16,368,045 $2,041,742 $15,478,726 $2,102,994 $14,459,200 $2,166,084
METHOD CHANGE 06/30/04 9 $(1,242,428) $(143,706) $(1,186,612) $(148,017) $(1,122,141) $(152,458)
BENEFIT CHANGE 06/30/05 9 $27,525,484 $3,183,753 $26,288,910 $3,279,266 $24,860,563 $3,377,643
ASSUMPTION CHANGE 06/30/09 14 $26,033,681 $2,280,338 $25,621,903 $2,348,748 $25,108,312 $2,419,210
SPECIAL (GAIN)/LOSS 06/30/09 24 $16,522,550 $1,068,659 $16,653,731 $1,100,719 $16,761,511 $1,133,741
SPECIAL (GAIN)/LOSS 06/30/10 25 $1,362,193 $86,333 $1,374,845 $88,923 $1,385,761 $91,591
ASSUMPTION CHANGE 06/30/11 16 $12,138,402 $981,326 $12,031,321 $1,010,766 $11,885,686 $1,041,089
SPECIAL (GAIN)/LOSS 06/30/11 26 $(57,199) $(3,557) $(57,801) $(3,663) $(58,338) $(3,773)
PAYMENT (GAIN)/LOSS 06/30/12 27 $2,987,057 $182,432 $3,021,937 $187,905 $3,053,759 $193,542
(GAIN)/LOSS 06/30/12 27 $25,181,428 $1,537,932 $25,475,473 $1,584,070 $25,743,734 $1,631,592
(GAIN)/LOSS 06/30/13 28 $70,544,959 $992,217 $74,807,078 $2,043,968 $78,298,378 $3,157,930
ASSUMPTION CHANGE 06/30/14 19 $37,964,904 $(415,048) $41,242,604 $785,576 $43,521,296 $1,618,287
(GAIN)/LOSS 06/30/14 29 $(41,129,563) $777,721 $(45,020,639) $(633,217) $(47,740,654) $(1,304,427)
(GAIN)/LOSS 06/30/15 30 $25,468,608 $601,043 $26,755,579 $639,126 $28,099,587 $395,222
TOTAL $219,668,121 $13,171,185 $222,487,055 $14,387,164 $224,256,654 $15,765,273
CALPERS ACTUARIAL VALUATION - June 30, 2015
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 20 Page 16
30-Year Amortization Schedule and Alternatives
The amortization schedule on the previous page shows the minimum contributions required according to
CalPERS amortization policy. There has been considerable interest from many agencies in paying off these unfunded accrued liabilities sooner and the possible savings in doing so. As a result, we have provided
alternate amortization schedules to help analyze the current amortization schedule and illustrate the
advantages of accelerating unfunded liability payments.
Shown on the following page are future year amortization payments based on 1) the current amortization
schedule reflecting the individual bases and remaining periods shown on the previous page, and 2) alternate
“fresh start” amortization schedules using two sample periods that would both result in interest savings relative to the current amortization schedule. Note that the payments under each alternate scenario
increase by 3 percent for each year into the future. The schedules do not attempt to reflect any experience
after June 30, 2015 that may deviate from the actuarial assumptions. Therefore, future amortization
payments displayed in the Current Amortization Schedule may not match projected amortization payments
shown in connection with Projected Employer Contributions provided elsewhere in this report.
The Current Amortization Schedule typically contains individual bases that are both positive and negative. Positive bases result from plan changes, assumption changes or plan experience that result in increases to
unfunded liability. Negative bases result from plan changes, assumption changes or plan experience that
result in decreases to unfunded liability. The combination of positive and negative bases within an
amortization schedule can result in unusual or problematic circumstances in future years such as:
A positive total unfunded liability with a negative total payment,
A negative total unfunded liability with a positive total payment, or
Total payments that completely amortize the unfunded liability over a very short period of time
In any year where one of the above scenarios occurs, the actuary will consider corrective action such as
replacing the existing unfunded liability bases with a single “fresh start” base and amortizing it over a
reasonable period.
The Current Amortization Schedule on the following page may appear to show that, based on the current
amortization bases, one of the above scenarios will occur at some point in the future. It is impossible to
know today whether such a scenario will in fact arise since there will be additional bases added to the amortization schedule in each future year. Should such a scenario arise in any future year, the actuary will
take appropriate action based on guidelines in the CalPERS amortization policy. For purposes of this
display, total payments include any negative payments. Therefore, the amount of estimated savings may
be understated to the extent that negative payments appear in the current schedule.
CALPERS ACTUARIAL VALUATION - June 30, 2015
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 17
30-Year Amortization Schedule and Alternatives
Alternate Schedules
Current Amortization Schedule 20 Year Amortization 15 Year Amortization
Date Balance Payment Balance Payment Balance Payment
6/30/2017 224,256,654 15,765,273 224,256,654 16,932,595 224,256,654 20,557,503
6/30/2018 224,730,121 17,891,172 223,519,815 17,440,572 219,761,430 21,174,228
6/30/2019 223,034,919 20,130,431 222,201,031 17,963,790 214,289,630 21,809,455
6/30/2020 218,890,860 21,337,696 220,240,855 18,502,703 207,748,828 22,463,739
6/30/2021 213,184,281 22,422,654 217,574,908 19,057,784 200,039,090 23,137,651
6/30/2022 205,924,801 23,095,333 214,133,495 19,629,518 191,052,394 23,831,781
6/30/2023 197,423,410 23,788,194 209,841,189 20,218,403 180,672,008 24,546,734
6/30/2024 187,566,042 24,501,838 204,616,392 20,824,956 168,771,813 25,283,136
6/30/2025 176,229,451 22,492,963 198,370,847 21,449,704 155,215,586 26,041,630
6/30/2026 166,125,455 18,959,617 191,009,134 22,093,195 139,856,218 26,822,879
6/30/2027 158,927,118 19,528,404 182,428,107 22,755,991 122,534,881 27,627,565
6/30/2028 150,599,168 20,114,257 172,516,301 23,438,671 103,080,128 28,456,392
6/30/2029 141,039,200 20,717,684 161,153,292 24,141,831 81,306,922 29,310,084
6/30/2030 130,136,587 21,339,216 148,209,006 24,866,086 57,015,599 30,189,387
6/30/2031 117,771,863 18,320,120 133,542,975 25,612,069 29,990,747 31,095,068
6/30/2032 107,610,049 17,609,103 117,003,540 26,380,431
6/30/2033 97,423,293 15,168,298 98,426,993 27,171,844
6/30/2034 89,003,217 14,285,953 77,636,650 27,986,999
6/30/2035 80,866,464 13,337,020 54,441,861 28,826,609
6/30/2036 73,103,331 12,318,294 28,636,936 29,691,407
6/30/2037 65,814,205 12,687,844
6/30/2038 57,595,234 13,068,478
6/30/2039 48,365,190 13,460,532
6/30/2040 38,036,402 13,864,348
6/30/2041 26,514,273 9,835,811
6/30/2042 18,304,856 9,100,702
6/30/2043 10,241,912 7,665,964
6/30/2044 3,061,815 2,074,421
6/30/2045 1,140,646 316,260
6/30/2046 898,289 931,366
Totals 466,129,246 454,985,158 382,347,232
Estimated Savings 11,144,088 83,782,014
CALPERS ACTUARIAL VALUATION - June 30, 2015
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 18
Reconciliation of Required Employer
Contributions
Normal Cost (% of Payroll)
1. For Period 7/1/16 – 6/30/17
a) Employer Normal Cost 10.334%
b) Employee Contribution 7.680%
c) Total Normal Cost 18.014%
2. Effect of changes since the prior year annual valuation
a) Effect of changes in demographics results (0.391%)
b) Effect of plan changes 0.000%
c) Effect of changes in assumptions 0.000%
d) Net effect of the changes above [sum of (a) through (c)] (0.391%)
3. For Period 7/1/17 – 6/30/18
a) Employer Normal Cost 10.039%
b) Employee Contribution 7.584%
c) Total Normal Cost 17.623%
Employer Normal Cost Change [(3a) – (1a)] (0.295%)
Employee Contribution Change [(3b) – (1b)] (0.096%)
Unfunded Liability Contribution ($)
1. For Period 7/1/16 – 6/30/17 13,748,038
2. Effect of changes since the prior year annual valuation
a) Effect of changes in demographics and financial results 395,222
b) Effect of plan changes 0
c) Effect of changes in assumptions 0
d) Effect of progression of amortization payments 1,622,013
e) Effect of changes due to Fresh Start 0
f) Effect of elimination of amortization base 0
g) Net effect of the changes above [sum of (a) through (f)] 2,017,235
3. For Period 7/1/17 – 6/30/18 [(1)+(2g)] 15,765,273
The amounts shown for the period 7/1/16 – 6/30/17 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, 2015
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 19
Employer Contribution History
The table below provides a recent history of the required employer contributions for the plan, as determined
by the annual actuarial valuation. It does not account for prepayments or benefit changes made during a fiscal year.
Required By Valuation
Fiscal
Year
Employer
Normal Cost
Unfunded Rate
Unfunded Liability
Payment ($)
2012 - 13 10.171% 12.799% N/A
2013 - 14 10.360% 14.240% N/A
2014 - 15 10.283% 15.839% N/A
2015 - 16 10.358% 17.336% N/A
2016 - 17 10.334% 18.556% N/A
2017 - 18 10.039% N/A 15,765,273
Funding History
The table below shows the recent history of the actuarial accrued liability, the market value of assets, the
funded ratio and the annual covered payroll.
Valuation
Date
Accrued
Liability
Market Value
of Assets
(MVA)
Unfunded
Liability
Funded
Ratio
Annual
Covered
Payroll
06/30/10 $ 521,269,469 $ 323,971,012 $ 197,298,457 62.2% $ 62,496,037
06/30/11 552,715,631 384,056,704 168,658,927 69.5% 60,297,783
06/30/12 576,182,013 373,592,926 202,589,087 64.8% 62,910,810
06/30/13 602,540,178 412,227,784 190,312,394 68.4% 64,439,680
06/30/14 666,978,627 475,566,994 191,411,633 71.3% 67,802,942
06/30/15 696,699,220 477,031,099 219,668,121 68.5% 71,574,823
RISK ANALYSIS
ANALYSIS OF FUTURE INVESTMENT RETURN SCENARIOS
ANALYSIS OF DISCOUNT RATE SENSITIVITY
VOLATILITY RATIOS
HYPOTHETICAL TERMINATION LIABILITY
CALPERS ACTUARIAL VALUATION - June 30, 2015
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 21
Analysis of Future Investment Return Scenarios
The investment return for Fiscal Year 2015-16 was not known at the time this report was produced. The
investment return in Fiscal Year 2015-16 as of April 30, 2016 is 0.0 percent before administrative expenses. For purposes of projecting future employer contributions, we are assuming a 0.0 percent investment return
for Fiscal Year 2015-16.
The investment return realized during a fiscal year first affects the required contribution for the fiscal year
two years later. For example, the investment return for Fiscal Year 2015-16 will first be reflected in the
June 30, 2016 actuarial valuation that will be used to set the employer contribution for Fiscal Year 2018-19.
The Fiscal Year 2016-17 investment return will first be reflected in the June 30, 2017 actuarial valuation that will be used to set the employer contribution for Fiscal Year 2019-20 and so forth.
As part of this report, a sensitivity analysis was performed to determine the effects of various investment
returns during fiscal years 2016-17, 2017-18 and 2018-19 on the 2019-20, 2020-21 and 2021-22 employer
contributions. Once again, the projections 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 a -3.8 percent return for each of the 2016-17, 2017-18, and 2018-19 fiscal years.
Based on the current investment allocation, this is what one would expect if the markets were to give
us about a 5th percentile return from July 1, 2016 through June 30, 2019.
The second scenario is a 2.8 percent return for each of the 2016-17, 2017-18, and 2018-19 fiscal
years. Based on the current investment allocation, this is what one would expect if the markets were
to give us about a 25th percentile return from July 1, 2016 through June 30, 2019.
The third scenario is a 7.5 percent return for each of the 2016-17, 2017-18, and 2018-19 fiscal years.
Based on the current investment allocation, this is what one would expect if the markets were to give us about a 49th percentile return from July 1, 2016 through June 30, 2019.
The fourth scenario is a 12.0 percent return for each of the 2016-17, 2017-18, and 2018-19 fiscal
years. Based on the current investment allocation, this is what one would expect if the markets were
to give us about a 75th percentile return from July 1, 2016 through June 30, 2019.
Finally, the last scenario is an 18.9 percent return for each of the 2016-17, 2017-18, and 2018-19
fiscal years. Based on the current investment allocation, this is what one would expect if the markets
were to give us about a 95th percentile return from July 1, 2016 through June 30, 2019.
The table below shows the estimated projected contributions and the estimated increases for the plan under
the five different scenarios.
2016-19 Investment
Return Scenario
Fiscal Year Estimated Change Between 2018-19
and 2021-22 2019-20 2020-21 2021-22
(3.8%)
Normal Cost 10.0% 10.0% 10.0% 0.0%
UAL Contribution $22,162,810 $25,721,705 $30,063,395 $11,598,514
2.8%
Normal Cost 10.0% 10.0% 10.0% 0.0%
UAL Contribution $21,666,079 $24,251,089 $27,159,754 $8,694,873
7.5%
Normal Cost 10.0% 10.0% 10.0% 0.0%
UAL Contribution $21,312,272 $23,163,641 $24,930,285 $6,465,404
12.0%
Normal Cost 10.3% 10.5% 10.7% 0.7%
UAL Contribution $20,960,120 $22,136,464 $22,846,622 $4,381,741
18.9%
Normal Cost 10.7% 11.3% 12.0% 2.0%
UAL Contribution $20,422,028 $20,574,871 $19,644,996 $1,180,115
CALPERS ACTUARIAL VALUATION - June 30, 2015
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 22
For the last two scenarios in the table above the results incorporate the impact of CalPERS Risk Mitigation
Policy. A 12.0% return would result in a reduction of the discount rate by 0.05% and a return of 18.9%
would reduce the discount rate by 0.15%. Reducing the discount rate increases both the plan’s accrued
liability and normal cost. While the projections reflect estimated changes to the normal cost due to lower
discount rates, they do not reflect the possible increase in the PEPRA member contribution rate in such
scenarios. More details about the Risk Mitigation policy can be found on our website.
The projected normal cost percentages do not reflect that the normal cost will decline over time as new employees are hired into PEPRA or other lower cost benefit tiers.
Analysis of Discount Rate Sensitivity
The following analysis looks at the Fiscal Year 2017-18 total normal cost rates and liabilities under two
different discount rate scenarios. Shown below are the total normal cost rates assuming discount rates that
are 1 percent lower and 1 percent higher than the current valuation discount rate. This analysis shows the
potential plan impacts if the PERF were to realize investment returns of 6.50 percent or 8.50 percent over
the long-term.
This type of analysis gives the reader a sense of the long-term risk to required contributions.
Sensitivity Analysis
As of June 30, 2015 6.50% Discount Rate
(-1%) 7.50% Discount Rate
(assumed rate) 8.50% Discount Rate
(+1%)
Plan’s Total Normal Cost 21.982% 17.623% 14.305%
Accrued Liability $785,681,736 $696,699,220 $622,745,835
Unfunded Accrued Liability $308,650,637 $219,668,121 $145,714,736
CALPERS ACTUARIAL VALUATION - June 30, 2015
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 23
Volatility Ratios
The actuarial calculations supplied in this communication are based on a number of assumptions about
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 required employer contributions from one year
to the next. Therefore, employer contributions will inevitably fluctuate, especially due to the ups and downs
of investment returns.
Asset Volatility Ratio (AVR)
Plans that have higher asset-to-payroll ratios experience more volatile employer contributions (as a percentage of payroll) 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. Shown below is the asset volatility ratio, a measure of the plan’s current 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 (LVR)
Plans that have higher liability-to-payroll ratios experience more volatile employer contributions (as a
percentage of payroll) 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. The asset volatility ratio, described above, will
tend to move closer to the liability volatility ratio as the plan matures.
Contribution Volatility As of June 30, 2015
1. Market Value of Assets without Receivables $ 474,491,138
2. Payroll 71,574,823
3. Asset Volatility Ratio (AVR) [(1) / ( 2)] 6.6
4. Accrued Liability $ 696,699,220
5. Liability Volatility Ratio (LVR) [(4) / (2)] 9.7
CALPERS ACTUARIAL VALUATION - June 30, 2015
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 24
Hypothetical Termination Liability
The hypothetical termination liability is an estimate of the financial position of the plan had the contract with
CalPERS been terminated as of June 30, 2015. The plan liability on a termination basis is calculated
differently compared to the plan’s ongoing funding liability. For this hypothetical termination liability calculation, both compensation and service are frozen as of the valuation date and no future pay increases
or service accruals are assumed.
A more conservative investment policy and asset allocation strategy was adopted by the CalPERS Board for
the Terminated Agency Pool. The Terminated Agency Pool has limited funding sources since no future
employer contributions will be made. Therefore, expected benefit payments are secured by risk-free assets
and benefit security for members is increased while limiting the funding risk. However, this asset allocation
has a lower expected rate of return than the PERF and consequently, a lower discount rate assumption. The lower discount rate for the Terminated Agency Pool results in higher liabilities for terminated plans.
The effective termination discount rate will depend on actual market rates of return for risk-free securities
on the date of termination. As market discount rates are variable the table below shows a range for the
hypothetical termination liability based on the lowest and highest interest rates observed during an
approximate 2-year period centered around the valuation date.
Market
Value of
Assets (MVA)
Hypothetical
Termination
Liability1,2
@ 2.00%
Funded
Status
Unfunded
Termination
Liability
@ 2.00%
Hypothetical
Termination
Liability1,2
@ 3.25%
Funded
Status
Unfunded
Termination
Liability
@ 3.25%
$477,031,099 $1,361,309,842 35.0% $884,278,743 $1,144,034,631 41.7% $667,003,532
1 The hypothetical liabilities calculated above include a 7 percent mortality contingency load in accordance with Board
policy. Other actuarial assumptions, such as wage and inflation assumptions, can be found in Appendix A.
2 The current discount rate assumption used for termination valuations is a weighted average of the 10-year and 30-year U.S. Treasury yields where the weights are based on matching asset and liability durations as of the termination date.
The discount rates used in the table are based on 20-year Treasury bonds, rounded to the nearest quarter percentage
point, which is a good proxy for most plans. The 20-year Treasury yield was 2.75 percent on June 30, 2015.
In order to terminate the plan, you must first contact our Retirement Services Contract Unit to initiate a
Resolution of Intent to Terminate. The completed Resolution will allow the plan actuary to give you a
preliminary termination valuation with a more up-to-date estimate of the plan liabilities. CalPERS advises
you to consult with the plan actuary before beginning this process.
PLAN’S MAJOR BENEFIT PROVISIONS
CALPERS ACTUARIAL VALUATION – June 30, 2015
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
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.
Contract Package
Active
Misc
Active
Misc
Active
Misc
Inactive
Misc
Receiving
Misc
Benefit Provision
Benefit Formula 2.7% @ 55 2.0% @ 60 2.0% @ 62 2.0% @ 55
Social Security Coverage No No No No Full/Modified Full Full Full Full
Employee Contribution Rate 8.00% 7.00% 6.25%
Final Average Compensation Period One Year One Year Three Year One Year
Sick Leave Credit No No No No
Non-Industrial Disability Standard Standard Standard Standard
Industrial Disability No No No No
Pre-Retirement Death Benefits
Optional Settlement 2W No No No No
1959 Survivor Benefit Level Level 1 Level 1 Level 1 Level 1 Special No No No No
Alternate (firefighters) No No No No
Post-Retirement Death Benefits
Lump Sum $500 $500 $500 $500 $500
Survivor Allowance (PRSA) No No No No No
COLA 2% 2% 2% 2% 2%
Page 26
APPENDICES
APPENDIX A – ACTUARIAL METHODS AND ASSUMPTIONS
APPENDIX B – PRINCIPAL PLAN PROVISIONS
APPENDIX C – PARTICIPANT DATA
APPENDIX D – DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION RATES
APPENDIX E – GLOSSARY OF ACTUARIAL TERMS
APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
ACTUARIAL DATA
ACTUARIAL METHODS
ACTUARIAL ASSUMPTIONS
MISCELLANEOUS
CALPERS ACTUARIAL VALUATION – June 30, 2015 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 required employer contributions.
Actuarial Methods
Actuarial Cost Method
The actuarial cost method used 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 percentage of pay in each year from the member’s age of hire (entry age) to their assumed retirement age on the valuation date. The cost allocated to the current fiscal year is called the normal cost.
The actuarial accrued liability for active members is then calculated as the portion of the total cost of the
plan allocated to prior years. The actuarial accrued liability for members currently receiving benefits and for
members entitled to deferred benefits is equal to the present value of the benefits expected to be paid. No
normal costs are applicable for these participants.
Amortization of Unfunded Actuarial Accrued Liability
The excess of the total actuarial accrued liability over the market value of plan assets is called the unfunded
actuarial accrued liability (UAL). Funding requirements are determined by adding the normal cost and an
amortization payment toward the unfunded liability. Commencing with the June 30, 2013 valuation, all new
gains or losses are tracked and amortized over a fixed 30-year period with a 5 year ramp up at the
beginning and a 5 year ramp down at the end of the amortization period. All changes in liability due to plan
amendments (other than golden handshakes) are amortized over a 20-year period with no ramp. Changes in actuarial assumptions, or changes in actuarial methodology are amortized over a 20-year period with a 5
year ramp up at the beginning and a 5 year ramp down at the end of the amortization period. Changes in
unfunded accrued liability due to a Golden Handshake will be amortized over a period of 5 years.
Exceptions for Inconsistencies:
An exception to the amortization rules above is used whenever their application results in inconsistencies. In these cases, a “fresh start” approach is used. This means that the current unfunded actuarial liability is
projected and amortized over a set number of years. For example, a fresh start is needed in the following
situations:
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.
It should be noted that the actuary may determine that a fresh start is necessary under other
circumstances. In all cases of a fresh start, the period is set by the actuary at what is deemed appropriate;
however, the period will not be greater than 30 years.
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-2
Exceptions for Inactive Plans:
The following exceptions apply to plans classified as Inactive. These plans have no active members and no
expectation to have active members in the future.
Amortization of unfunded liability is on a “level dollar” basis rather than a “level percent of pay”
basis
Actuarial judgment will be used to shorten amortization periods for Inactive plans with existing
periods that are deemed too long given the duration of the liability. In many cases, a Fresh Start
approach with a 20 year closed period will be used. However, the specific demographics of the
plan will be used to determine if periods shorter or longer than 20 years may be more appropriate.
Asset Valuation Method
It is the policy of the CalPERS Board of Administration to use professionally accepted amortization methods
to eliminate a surplus or an unfunded accrued liability in a manner that maintains benefit security for the
members of the System while minimizing substantial variations in required employer contributions. On April
17, 2013, the CalPERS Board of Administration approved a recommendation to change the CalPERS
amortization and rate smoothing policies. Beginning with the June 30, 2013 valuations that set the employer
contribution for Fiscal Year 2015-16, CalPERS employs a policy that amortizes all gains and losses over a fixed 30-year period. The increase or decrease in the rate is then spread directly over a 5-year period. This
method is referred to as “direct rate smoothing.” CalPERS no longer uses an actuarial value of assets and
only uses the market value of assets. The direct rate smoothing method is equivalent to a method using a 5
year asset smoothing period with no actuarial value of asset corridor and a 25-year amortization period for
gains and losses.
PEPRA Normal Cost Rate Methodology
Per Government Code Section 7522.30(b) the “normal cost rate” shall mean the annual actuarially
determined normal cost for the plan of retirement benefits provided to the new member and shall be
established based on actuarial assumptions used to determine the liabilities and costs as part of the annual
actuarial valuation. The plan of retirement benefits shall include any elements that would impact the
actuarial determination of the normal cost, including, but not limited to, the retirement formula, eligibility
and vesting criteria, ancillary benefit provisions, and any automatic cost-of-living adjustments as determined by the public retirement system.
Each non-pooled plan is considered to be stable with a sufficiently large demographic of actives. It is
preferable to determine normal cost using a large active population ongoing so that this rate remains
relatively stable. The total PEPRA normal cost will be calculated using all active members within a non-
pooled plan. Accordingly, plans will be funded equally between employer and employee based on the
demographics of the employees of that employer. As each non-pooled plan builds up to either 100+ active
PEPRA members or half of their active population is under the PEPRA formula, the total PEPRA normal cost will be based on the active PEPRA population in the plan.
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-3
Actuarial Assumptions
In 2014, CalPERS completed a 2-year asset liability management study incorporating actuarial assumptions
and strategic asset allocation. On February 19, 2014, the CalPERS Board of Administration adopted relatively
modest changes to the current asset allocation that will reduce the expected volatility of returns. The
adopted asset allocation is expected to have a long-term blended return that continues to support a
discount rate assumption of 7.5 percent. The Board also approved several changes to the demographic
assumptions that more closely align with actual experience. The most significant of these is mortality
improvement to acknowledge the greater life expectancies we are seeing in our membership and expected
continued improvements. The new actuarial assumptions were first used in the June 30, 2014 valuation to set the Fiscal Year 2016-17 contribution for public agency employers. The increase in liability due to new
actuarial assumptions is amortized over a 20-year period with a 5-year ramp-up/ramp-down in accordance
with Board policy. These new actuarial assumptions are set forth in this section.
For more details and additional rationale for the selection of the actuarial assumptions, please refer to the
CalPERS Experience Study and Review of Actuarial Assumptions report from January 2014 that can be found
on the CalPERS website under: “Forms and Publications”. Click on “View All” and search for Experience Study.
All actuarial assumptions (except the discount rates used for the hypothetical termination liability) represent
an estimate of future experience rather than observations of the estimates inherent in market data.
Economic Assumptions
Discount Rate
7.5 percent compounded annually (net of expenses). This assumption is used for all plans.
Termination Liability Discount Rate
The current discount rate assumption used for termination valuations is a weighted average of the
10-year and 30-year U.S. Treasury yields where the weights are based on matching asset and
liability durations as of the termination date.
The hypothetical termination liabilities in this report are calculated using an observed range of
market interest rates. This range is based on the lowest and highest 20-year Treasury bond
observed during an approximate 2-year period centered around the valuation date. The 20-year
Treasury bond has a similar duration to most plan liabilities and serves as a good proxy for the
termination discount rate. The 20-year Treasury yield was 2.75 percent on June 30, 2015.
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-4
Salary Growth
Annual increases vary by category, entry age, and duration of service. A sample of assumed
increases are shown below.
Public Agency Miscellaneous
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1220 0.1160 0.1020
1 0.0990 0.0940 0.0830
2 0.0860 0.0810 0.0710
3 0.0770 0.0720 0.0630
4 0.0700 0.0650 0.0570
5 0.0640 0.0600 0.0520
10 0.0460 0.0430 0.0390
15 0.0420 0.0400 0.0360
20 0.0390 0.0380 0.0340
25 0.0370 0.0360 0.0330
30 0.0350 0.0340 0.0320
Public Agency Fire
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.2000 0.1980 0.1680
1 0.1490 0.1460 0.1250
2 0.1200 0.1160 0.0990
3 0.0980 0.0940 0.0810
4 0.0820 0.0780 0.0670
5 0.0690 0.0640 0.0550
10 0.0470 0.0460 0.0420
15 0.0440 0.0420 0.0390
20 0.0420 0.0390 0.0360
25 0.0400 0.0370 0.0340
30 0.0380 0.0360 0.0340
Public Agency Police
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1500 0.1470 0.1310
1 0.1160 0.1120 0.1010
2 0.0950 0.0920 0.0830
3 0.0810 0.0780 0.0700
4 0.0700 0.0670 0.0600
5 0.0610 0.0580 0.0520
10 0.0450 0.0430 0.0370
15 0.0450 0.0430 0.0370
20 0.0450 0.0430 0.0370
25 0.0450 0.0430 0.0370
30 0.0450 0.0430 0.0370
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-5
Salary Growth (continued)
Public Agency County Peace Officers
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1770 0.1670 0.1500
1 0.1340 0.1260 0.1140
2 0.1080 0.1030 0.0940
3 0.0900 0.0860 0.0790
4 0.0760 0.0730 0.0670
5 0.0650 0.0620 0.0580
10 0.0470 0.0450 0.0410
15 0.0460 0.0450 0.0390
20 0.0460 0.0450 0.0380
25 0.0460 0.0450 0.0380
30 0.0460 0.0440 0.0380
Schools
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.0900 0.0880 0.0820
1 0.0780 0.0750 0.0700
2 0.0700 0.0680 0.0630
3 0.0650 0.0630 0.0580
4 0.0610 0.0590 0.0540
5 0.0580 0.0560 0.0510
10 0.0460 0.0450 0.0410
15 0.0420 0.0410 0.0380
20 0.0390 0.0380 0.0350
25 0.0370 0.0350 0.0330
30 0.0350 0.0330 0.0310
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 percent compounded annually (used in projecting the payroll over which the unfunded liability
is amortized). This assumption is used for all plans.
Inflation
2.75 percent compounded annually. This assumption is used for all plans.
Non-valued Potential Additional Liabilities
The potential liability loss for a cost-of-living increase exceeding the 2.75 percent inflation
assumption, and any potential liability loss from future member service purchases are not reflected
in the valuation.
Miscellaneous Loading Factors
Credit for Unused Sick Leave
Total years of service is increased by 1 percent for those plans that have accepted the provision
providing Credit for Unused Sick Leave.
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-6
Conversion of Employer Paid Member Contributions (EPMC)
Total years of service is increased by the Employee Contribution Rate for those plans with the
provision providing for the Conversion of Employer Paid Member Contributions (EPMC) during the
final compensation period.
Norris Decision (Best Factors)
Employees hired prior to July 1, 1982 have projected benefit amounts increased in order to reflect
the use of “Best Factors” in the calculation of optional benefit forms. This is due to a 1983
Supreme Court decision, known as the Norris decision, which required males and females to be
treated equally in the determination of benefit amounts. Consequently, anyone already employed
at that time is given the best possible conversion factor when optional benefits are determined. No
loading is necessary for employees hired after July 1, 1982.
Termination Liability
The termination liabilities include a 7 percent 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 0.00031 0.00020 0.00003
25 0.00040 0.00023 0.00007
30 0.00049 0.00025 0.00010
35 0.00057 0.00035 0.00012
40 0.00075 0.00050 0.00013
45 0.00106 0.00071 0.00014 50 0.00155 0.00100 0.00015
55 0.00228 0.00138 0.00016
60 0.00308 0.00182 0.00017
65 0.00400 0.00257 0.00018
70 0.00524 0.00367 0.00019
75 0.00713 0.00526 0.00020
80 0.00990 0.00814 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 percent will become the non-industrial death rate and 1 percent will
become the industrial death rate.
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-7
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 0.00501 0.00466 0.01680 0.01158 0.00501 0.00466
55 0.00599 0.00416 0.01973 0.01149 0.00599 0.00416
60 0.00710 0.00436 0.02289 0.01235 0.00754 0.00518
65 0.00829 0.00588 0.02451 0.01607 0.01122 0.00838
70 0.01305 0.00993 0.02875 0.02211 0.01635 0.01395 75 0.02205 0.01722 0.03990 0.03037 0.02834 0.02319
80 0.03899 0.02902 0.06083 0.04725 0.04899 0.03910
85 0.06969 0.05243 0.09731 0.07762 0.07679 0.06251
90 0.12974 0.09887 0.14804 0.12890 0.12974 0.09887
95 0.22444 0.18489 0.22444 0.21746 0.22444 0.18489
100 0.32536 0.30017 0.32536 0.30017 0.32536 0.30017
105 0.58527 0.56093 0.58527 0.56093 0.58527 0.56093 110 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000
The post-retirement mortality rates above include 20 years of projected on-going mortality
improvement using Scale BB published by the Society of Actuaries.
Marital Status
For active members, a percentage who are married upon retirement is assumed according to member category as shown in the following table.
Member Category Percent Married
Miscellaneous Member 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 Miscellaneous Load Factor Safety
50 190% 310% 51 110% 190%
52 110% 105%
53 through 54 100% 105%
55 100% 140%
56 and above 100% (no change) 100% (no change)
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.
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-8
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 also used for Public Agency Local Prosecutors, Other
Safety, Local Sheriff, and School Police.
Schools
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45
0 0.1730 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, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-9
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 also used for Public Agency Local
Prosecutors, Other Safety, Local Sheriff, and School Police.
Schools
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40
5 0.0816 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, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-10
Non-Industrial (Not Job-Related) Disability
Rates vary by age and gender for miscellaneous plans. Rates vary by age and category for safety
plans.
Miscellaneous Fire Police County Peace Officer Schools
Age Male Female Male and Female Male and Female Male and Female Male Female
20 0.0002 0.0001 0.0001 0.0001 0.0001 0.0003 0.0003
25 0.0002 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001
30 0.0002 0.0002 0.0001 0.0002 0.0001 0.0001 0.0002
35 0.0005 0.0008 0.0001 0.0003 0.0004 0.0005 0.0004
40 0.0012 0.0016 0.0001 0.0004 0.0007 0.0015 0.0010
45 0.0019 0.0022 0.0002 0.0005 0.0013 0.0030 0.0019
50 0.0021 0.0023 0.0005 0.0008 0.0018 0.0039 0.0024
55 0.0022 0.0018 0.0010 0.0013 0.0010 0.0036 0.0021
60 0.0022 0.0014 0.0015 0.0020 0.0006 0.0031 0.0014
The miscellaneous non-industrial disability rates are used for Local Prosecutors.
The police non-industrial disability rates are also used for Other Safety, Local Sheriff, and
School Police.
Industrial (Job-Related) Disability Rates vary by age and category.
Age Fire Police County Peace Officer
20 0.0001 0.0000 0.0004
25 0.0003 0.0017 0.0013
30 0.0007 0.0048 0.0025
35 0.0016 0.0079 0.0037
40 0.0030 0.0110 0.0051
45 0.0053 0.0141 0.0067
50 0.0277 0.0185 0.0092
55 0.0409 0.0479 0.0151
60 0.0583 0.0602 0.0174
The police industrial disability rates are also used for Local Sheriff and Other Safety.
Fifty percent of the police industrial disability rates are used for School Police.
One percent of the police industrial disability rates are used for Local Prosecutors.
Normally, rates are zero for miscellaneous plans unless the agency has specifically contracted
for industrial disability benefits. If so, each miscellaneous non-industrial disability rate will be split into two components: 50 percent will become the non-industrial disability rate and 50
percent will become the industrial disability rate.
Service Retirement
Retirement rates vary by age, service, and formula, except for the safety ½ @ 55 and 2% @ 55
formulas, where retirement rates vary by age only.
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-11
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 0.010 0.013 0.015 0.018 0.019 0.021
51 0.009 0.011 0.014 0.016 0.017 0.019
52 0.011 0.014 0.017 0.020 0.022 0.024
53 0.010 0.012 0.015 0.017 0.020 0.021
54 0.015 0.019 0.023 0.025 0.029 0.031
55 0.022 0.029 0.035 0.040 0.045 0.049
56 0.018 0.024 0.028 0.033 0.036 0.040
57 0.024 0.032 0.038 0.043 0.049 0.053
58 0.027 0.036 0.043 0.049 0.055 0.061
59 0.033 0.044 0.054 0.061 0.068 0.076
60 0.056 0.077 0.092 0.105 0.117 0.130
61 0.071 0.097 0.118 0.134 0.149 0.166
62 0.117 0.164 0.198 0.224 0.250 0.280
63 0.122 0.171 0.207 0.234 0.261 0.292
64 0.114 0.159 0.193 0.218 0.244 0.271
65 0.150 0.209 0.255 0.287 0.321 0.358
66 0.114 0.158 0.192 0.217 0.243 0.270
67 0.141 0.196 0.238 0.270 0.301 0.337
68 0.103 0.143 0.174 0.196 0.219 0.245
69 0.109 0.153 0.185 0.209 0.234 0.261
70 0.117 0.162 0.197 0.222 0.248 0.277
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-12
Service Retirement
Public Agency Miscellaneous 2% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.014 0.018 0.021 0.025 0.027 0.031
51 0.012 0.014 0.017 0.020 0.021 0.025
52 0.013 0.017 0.019 0.023 0.025 0.028
53 0.015 0.020 0.023 0.027 0.030 0.034
54 0.026 0.033 0.038 0.045 0.051 0.059
55 0.048 0.061 0.074 0.088 0.100 0.117
56 0.042 0.053 0.063 0.075 0.085 0.100
57 0.044 0.056 0.067 0.081 0.091 0.107
58 0.049 0.062 0.074 0.089 0.100 0.118
59 0.057 0.072 0.086 0.103 0.118 0.138
60 0.067 0.086 0.103 0.123 0.139 0.164
61 0.081 0.103 0.124 0.148 0.168 0.199
62 0.116 0.147 0.178 0.214 0.243 0.288
63 0.114 0.144 0.174 0.208 0.237 0.281
64 0.108 0.138 0.166 0.199 0.227 0.268
65 0.155 0.197 0.238 0.285 0.325 0.386
66 0.132 0.168 0.203 0.243 0.276 0.328
67 0.122 0.155 0.189 0.225 0.256 0.304
68 0.111 0.141 0.170 0.204 0.232 0.274
69 0.114 0.144 0.174 0.209 0.238 0.282
70 0.130 0.165 0.200 0.240 0.272 0.323
Public Agency Miscellaneous 2.5% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.004 0.009 0.019 0.029 0.049 0.094
51 0.004 0.009 0.019 0.029 0.049 0.094
52 0.004 0.009 0.020 0.030 0.050 0.095
53 0.008 0.014 0.025 0.036 0.058 0.104
54 0.024 0.034 0.050 0.066 0.091 0.142
55 0.066 0.088 0.115 0.142 0.179 0.241
56 0.042 0.057 0.078 0.098 0.128 0.184
57 0.041 0.057 0.077 0.097 0.128 0.183
58 0.045 0.061 0.083 0.104 0.136 0.192
59 0.055 0.074 0.098 0.123 0.157 0.216
60 0.066 0.088 0.115 0.142 0.179 0.241
61 0.072 0.095 0.124 0.153 0.191 0.255
62 0.099 0.130 0.166 0.202 0.248 0.319
63 0.092 0.121 0.155 0.189 0.233 0.302
64 0.091 0.119 0.153 0.187 0.231 0.299
65 0.122 0.160 0.202 0.245 0.297 0.374
66 0.138 0.179 0.226 0.272 0.329 0.411
67 0.114 0.149 0.189 0.229 0.279 0.354
68 0.100 0.131 0.168 0.204 0.250 0.322
69 0.114 0.149 0.189 0.229 0.279 0.354
70 0.127 0.165 0.209 0.253 0.306 0.385
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-13
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 0.004 0.009 0.014 0.035 0.055 0.095
51 0.002 0.006 0.011 0.030 0.050 0.090
52 0.006 0.012 0.017 0.038 0.059 0.099
53 0.010 0.017 0.024 0.046 0.068 0.110
54 0.032 0.044 0.057 0.085 0.113 0.160
55 0.076 0.101 0.125 0.165 0.205 0.265
56 0.055 0.074 0.093 0.127 0.160 0.214
57 0.050 0.068 0.086 0.118 0.151 0.204
58 0.055 0.074 0.093 0.127 0.161 0.215
59 0.061 0.082 0.102 0.138 0.174 0.229
60 0.069 0.093 0.116 0.154 0.192 0.250
61 0.086 0.113 0.141 0.183 0.225 0.288
62 0.105 0.138 0.171 0.218 0.266 0.334
63 0.103 0.135 0.167 0.215 0.262 0.329
64 0.109 0.143 0.177 0.226 0.275 0.344
65 0.134 0.174 0.215 0.270 0.326 0.401
66 0.147 0.191 0.235 0.294 0.354 0.433
67 0.121 0.158 0.196 0.248 0.300 0.372
68 0.113 0.147 0.182 0.232 0.282 0.352
69 0.117 0.153 0.189 0.240 0.291 0.362
70 0.141 0.183 0.226 0.283 0.341 0.418
Public Agency Miscellaneous 3% @ 60
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.012 0.018 0.024 0.039 0.040 0.091
51 0.009 0.014 0.019 0.034 0.034 0.084
52 0.014 0.020 0.026 0.043 0.044 0.096
53 0.016 0.023 0.031 0.048 0.050 0.102
54 0.026 0.036 0.045 0.065 0.070 0.125
55 0.043 0.057 0.072 0.096 0.105 0.165
56 0.042 0.056 0.070 0.094 0.103 0.162
57 0.049 0.065 0.082 0.108 0.119 0.180
58 0.057 0.076 0.094 0.122 0.136 0.199
59 0.076 0.100 0.123 0.157 0.175 0.244
60 0.114 0.148 0.182 0.226 0.255 0.334
61 0.095 0.123 0.152 0.190 0.214 0.288
62 0.133 0.172 0.211 0.260 0.294 0.378
63 0.129 0.166 0.204 0.252 0.285 0.368
64 0.143 0.185 0.226 0.278 0.315 0.401
65 0.202 0.260 0.318 0.386 0.439 0.542
66 0.177 0.228 0.279 0.340 0.386 0.482
67 0.151 0.194 0.238 0.292 0.331 0.420
68 0.139 0.179 0.220 0.270 0.306 0.391
69 0.190 0.245 0.299 0.364 0.414 0.513
70 0.140 0.182 0.223 0.274 0.310 0.396
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-14
Service Retirement
Public Agency Miscellaneous 2% @ 62
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.000 0.000 0.000 0.000 0.000 0.000
51 0.000 0.000 0.000 0.000 0.000 0.000
52 0.010 0.013 0.016 0.019 0.022 0.024
53 0.013 0.017 0.020 0.024 0.027 0.031
54 0.021 0.027 0.033 0.039 0.045 0.050
55 0.044 0.056 0.068 0.080 0.092 0.104
56 0.030 0.039 0.047 0.055 0.063 0.072
57 0.036 0.046 0.056 0.066 0.076 0.086
58 0.046 0.059 0.072 0.085 0.097 0.110
59 0.058 0.074 0.089 0.105 0.121 0.137
60 0.062 0.078 0.095 0.112 0.129 0.146
61 0.062 0.079 0.096 0.113 0.129 0.146
62 0.097 0.123 0.150 0.176 0.202 0.229
63 0.089 0.113 0.137 0.162 0.186 0.210
64 0.094 0.120 0.145 0.171 0.197 0.222
65 0.129 0.164 0.199 0.234 0.269 0.304
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
Service Retirement
Public Agency Fire ½ @ 55 and 2% @ 55
Age
50
51
52 53
54
55
Rate
0.0159
0.0000
0.0344 0.0199
0.0413
0.0751
Age
56
57
58 59
60
Rate
0.1108
0.0000
0.0950 0.0441
1.00000
Public Agency Police ½ @ 55 and 2% @ 55
Age
50
51
52 53
54
55
Rate
0.0255
0.0000
0.0164 0.0272
0.0095
0.1667
Age
56
57
58 59
60
Rate
0.0692
0.0511
0.0724 0.0704
1.0000
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-15
Service Retirement
Public Agency Police 2% @ 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.005 0.005 0.005 0.005 0.017 0.089
51 0.005 0.005 0.005 0.005 0.017 0.087
52 0.018 0.018 0.018 0.018 0.042 0.132
53 0.044 0.044 0.044 0.044 0.090 0.217
54 0.065 0.065 0.065 0.065 0.126 0.283
55 0.086 0.086 0.086 0.086 0.166 0.354
56 0.067 0.067 0.067 0.067 0.130 0.289
57 0.066 0.066 0.066 0.066 0.129 0.288
58 0.066 0.066 0.066 0.066 0.129 0.288
59 0.139 0.139 0.139 0.139 0.176 0.312
60 0.123 0.123 0.123 0.123 0.153 0.278
61 0.110 0.110 0.110 0.110 0.138 0.256
62 0.130 0.130 0.130 0.130 0.162 0.291
63 0.130 0.130 0.130 0.130 0.162 0.291
64 0.130 0.130 0.130 0.130 0.162 0.291
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.
Service Retirement
Public Agency Fire 2% @ 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.009 0.009 0.009 0.009 0.013 0.020
51 0.013 0.013 0.013 0.013 0.020 0.029
52 0.018 0.018 0.018 0.018 0.028 0.042
53 0.052 0.052 0.052 0.052 0.079 0.119
54 0.067 0.067 0.067 0.067 0.103 0.154
55 0.089 0.089 0.089 0.089 0.136 0.204
56 0.083 0.083 0.083 0.083 0.127 0.190
57 0.082 0.082 0.082 0.082 0.126 0.189
58 0.088 0.088 0.088 0.088 0.136 0.204
59 0.074 0.074 0.074 0.074 0.113 0.170
60 0.100 0.100 0.100 0.100 0.154 0.230
61 0.072 0.072 0.072 0.072 0.110 0.165
62 0.099 0.099 0.099 0.099 0.152 0.228
63 0.114 0.114 0.114 0.114 0.175 0.262
64 0.114 0.114 0.114 0.114 0.175 0.262
65 1.000 1.000 1.000 1.000 1.000 1.000
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-16
Service Retirement
Public Agency Police 3% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.004 0.004 0.004 0.004 0.015 0.086
51 0.014 0.014 0.014 0.014 0.034 0.114
52 0.026 0.026 0.026 0.026 0.060 0.154
53 0.038 0.038 0.038 0.038 0.083 0.188
54 0.071 0.071 0.071 0.071 0.151 0.292
55 0.061 0.061 0.061 0.061 0.131 0.261
56 0.072 0.072 0.072 0.072 0.153 0.295
57 0.065 0.065 0.065 0.065 0.140 0.273
58 0.066 0.066 0.066 0.066 0.142 0.277
59 0.118 0.118 0.118 0.118 0.247 0.437
60 0.065 0.065 0.065 0.065 0.138 0.272
61 0.084 0.084 0.084 0.084 0.178 0.332
62 0.108 0.108 0.108 0.108 0.226 0.405
63 0.084 0.084 0.084 0.084 0.178 0.332
64 0.084 0.084 0.084 0.084 0.178 0.332
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.
Service Retirement
Public Agency Fire 3% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.001 0.001 0.001 0.006 0.016 0.069
51 0.002 0.002 0.002 0.006 0.018 0.071
52 0.012 0.012 0.012 0.021 0.040 0.098
53 0.032 0.032 0.032 0.049 0.085 0.149
54 0.057 0.057 0.057 0.087 0.144 0.217
55 0.073 0.073 0.073 0.109 0.179 0.259
56 0.064 0.064 0.064 0.097 0.161 0.238
57 0.063 0.063 0.063 0.095 0.157 0.233
58 0.065 0.065 0.065 0.099 0.163 0.241
59 0.088 0.088 0.088 0.131 0.213 0.299
60 0.105 0.105 0.105 0.155 0.251 0.344
61 0.118 0.118 0.118 0.175 0.282 0.380
62 0.087 0.087 0.087 0.128 0.210 0.295
63 0.067 0.067 0.067 0.100 0.165 0.243
64 0.067 0.067 0.067 0.100 0.165 0.243
65 1.000 1.000 1.000 1.000 1.000 1.000
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-17
Service Retirement
Public Agency Police 3% @ 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.050 0.050 0.050 0.099 0.240 0.314
51 0.034 0.034 0.034 0.072 0.198 0.260
52 0.033 0.033 0.033 0.071 0.198 0.259
53 0.039 0.039 0.039 0.080 0.212 0.277
54 0.045 0.045 0.045 0.092 0.229 0.300
55 0.052 0.052 0.052 0.105 0.248 0.323
56 0.042 0.042 0.042 0.087 0.221 0.289
57 0.043 0.043 0.043 0.088 0.223 0.292
58 0.054 0.054 0.054 0.109 0.255 0.333
59 0.054 0.054 0.054 0.108 0.253 0.330
60 0.060 0.060 0.060 0.121 0.272 0.355
61 0.048 0.048 0.048 0.098 0.238 0.311
62 0.061 0.061 0.061 0.122 0.274 0.357
63 0.057 0.057 0.057 0.115 0.263 0.343
64 0.069 0.069 0.069 0.137 0.296 0.385
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.
Service Retirement
Public Agency Fire 3% @ 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.020 0.020 0.020 0.040 0.130 0.192
51 0.008 0.008 0.008 0.023 0.107 0.164
52 0.023 0.023 0.023 0.043 0.136 0.198
53 0.023 0.023 0.023 0.043 0.135 0.198
54 0.027 0.027 0.027 0.048 0.143 0.207
55 0.043 0.043 0.043 0.070 0.174 0.244
56 0.053 0.053 0.053 0.085 0.196 0.269
57 0.054 0.054 0.054 0.086 0.197 0.271
58 0.052 0.052 0.052 0.084 0.193 0.268
59 0.075 0.075 0.075 0.116 0.239 0.321
60 0.065 0.065 0.065 0.102 0.219 0.298
61 0.076 0.076 0.076 0.117 0.241 0.324
62 0.068 0.068 0.068 0.106 0.224 0.304
63 0.027 0.027 0.027 0.049 0.143 0.208
64 0.094 0.094 0.094 0.143 0.277 0.366
65 1.000 1.000 1.000 1.000 1.000 1.000
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-18
Service Retirement
Public Agency Police 2% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.011 0.011 0.011 0.011 0.020 0.036
51 0.009 0.009 0.009 0.009 0.016 0.028
52 0.018 0.018 0.018 0.018 0.034 0.060
53 0.037 0.037 0.037 0.037 0.067 0.119
54 0.049 0.049 0.049 0.049 0.089 0.159
55 0.063 0.063 0.063 0.063 0.115 0.205
56 0.045 0.045 0.045 0.045 0.082 0.146
57 0.064 0.064 0.064 0.064 0.117 0.209
58 0.047 0.047 0.047 0.047 0.086 0.154
59 0.105 0.105 0.105 0.105 0.130 0.191
60 0.105 0.105 0.105 0.105 0.129 0.188
61 0.105 0.105 0.105 0.105 0.129 0.188
62 0.105 0.105 0.105 0.105 0.129 0.188
63 0.105 0.105 0.105 0.105 0.129 0.188
64 0.105 0.105 0.105 0.105 0.129 0.188
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.
Service Retirement
Public Agency Fire 2% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.005 0.005 0.005 0.005 0.008 0.012
51 0.006 0.006 0.006 0.006 0.009 0.013
52 0.012 0.012 0.012 0.012 0.019 0.028
53 0.033 0.033 0.033 0.033 0.050 0.075
54 0.045 0.045 0.045 0.045 0.069 0.103
55 0.061 0.061 0.061 0.061 0.094 0.140
56 0.055 0.055 0.055 0.055 0.084 0.126
57 0.081 0.081 0.081 0.081 0.125 0.187
58 0.059 0.059 0.059 0.059 0.091 0.137
59 0.055 0.055 0.055 0.055 0.084 0.126
60 0.085 0.085 0.085 0.085 0.131 0.196
61 0.085 0.085 0.085 0.085 0.131 0.196
62 0.085 0.085 0.085 0.085 0.131 0.196
63 0.085 0.085 0.085 0.085 0.131 0.196
64 0.085 0.085 0.085 0.085 0.131 0.196
65 1.000 1.000 1.000 1.000 1.000 1.000
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-19
Service Retirement
Public Agency Police 2.5% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.014 0.014 0.014 0.014 0.025 0.045
51 0.012 0.012 0.012 0.012 0.021 0.038
52 0.025 0.025 0.025 0.025 0.046 0.081
53 0.047 0.047 0.047 0.047 0.086 0.154
54 0.063 0.063 0.063 0.063 0.115 0.205
55 0.076 0.076 0.076 0.076 0.140 0.249
56 0.054 0.054 0.054 0.054 0.099 0.177
57 0.071 0.071 0.071 0.071 0.130 0.232
58 0.057 0.057 0.057 0.057 0.103 0.184
59 0.126 0.126 0.126 0.126 0.156 0.229
60 0.126 0.126 0.126 0.126 0.155 0.226
61 0.126 0.126 0.126 0.126 0.155 0.226
62 0.126 0.126 0.126 0.126 0.155 0.226
63 0.126 0.126 0.126 0.126 0.155 0.226
64 0.126 0.126 0.126 0.126 0.155 0.226
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.
Service Retirement
Public Agency Fire 2.5% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.007 0.007 0.007 0.007 0.010 0.015
51 0.008 0.008 0.008 0.008 0.012 0.018
52 0.016 0.016 0.016 0.016 0.025 0.038
53 0.042 0.042 0.042 0.042 0.064 0.096
54 0.057 0.057 0.057 0.057 0.088 0.132
55 0.074 0.074 0.074 0.074 0.114 0.170
56 0.066 0.066 0.066 0.066 0.102 0.153
57 0.090 0.090 0.090 0.090 0.139 0.208
58 0.071 0.071 0.071 0.071 0.110 0.164
59 0.066 0.066 0.066 0.066 0.101 0.151
60 0.102 0.102 0.102 0.102 0.157 0.235
61 0.102 0.102 0.102 0.102 0.157 0.236
62 0.102 0.102 0.102 0.102 0.157 0.236
63 0.102 0.102 0.102 0.102 0.157 0.236
64 0.102 0.102 0.102 0.102 0.157 0.236
65 1.000 1.000 1.000 1.000 1.000 1.000
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-20
Service Retirement
Public Agency Police 2.7% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.0138 0.0138 0.0138 0.0138 0.0253 0.0451
51 0.0123 0.0123 0.0123 0.0123 0.0226 0.0402
52 0.0249 0.0249 0.0249 0.0249 0.0456 0.0812
53 0.0497 0.0497 0.0497 0.0497 0.0909 0.1621
54 0.0662 0.0662 0.0662 0.0662 0.1211 0.2160
55 0.0854 0.0854 0.0854 0.0854 0.1563 0.2785
56 0.0606 0.0606 0.0606 0.0606 0.1108 0.1975
57 0.0711 0.0711 0.0711 0.0711 0.1300 0.2318
58 0.0628 0.0628 0.0628 0.0628 0.1149 0.2049
59 0.1396 0.1396 0.1396 0.1396 0.1735 0.2544
60 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506
61 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506
62 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506
63 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506
64 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506
65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
These rates also apply to Local Prosecutors, Local Sheriff, School Police, and Other Safety.
Service Retirement
Public Agency Fire 2.7% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.0065 0.0065 0.0065 0.0065 0.0101 0.0151
51 0.0081 0.0081 0.0081 0.0081 0.0125 0.0187
52 0.0164 0.0164 0.0164 0.0164 0.0254 0.0380
53 0.0442 0.0442 0.0442 0.0442 0.0680 0.1018
54 0.0606 0.0606 0.0606 0.0606 0.0934 0.1397
55 0.0825 0.0825 0.0825 0.0825 0.1269 0.1900
56 0.0740 0.0740 0.0740 0.0740 0.1140 0.1706
57 0.0901 0.0901 0.0901 0.0901 0.1387 0.2077
58 0.0790 0.0790 0.0790 0.0790 0.1217 0.1821
59 0.0729 0.0729 0.0729 0.0729 0.1123 0.1681
60 0.1135 0.1135 0.1135 0.1135 0.1747 0.2615
61 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618
62 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618
63 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618
64 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618
65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-21
Service Retirement
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
Miscellaneous
Internal Revenue Code Section 415
The limitations on benefits imposed by Internal Revenue Code Section 415 are taken into account in this
valuation. Each year the impact of any changes in this limitation since the prior valuation is included and
amortized as part of the actuarial gain or loss base. This results in lower contributions for those employers
contributing to the Replacement Benefit Fund and protects CalPERS from prefunding expected benefits in
excess of limits imposed by federal tax law.
Internal Revenue Code Section 401(a)(17)
The limitations on compensation imposed by Internal Revenue Code Section 401(a)(17) are taken into
account in this valuation. Each year, the impact of any changes in the compensation limitation since the
prior valuation is included and amortized as part of the actuarial gain or loss base. The compensation limit
for classic members for the 2015 calendar year is $265,000.
APPENDIX B
PRINCIPAL PLAN PROVISIONS
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-1
The following is a description of the principal plan provisions used in calculating costs and liabilities. We have
indicated whether a plan provision is standard or optional. Standard benefits are applicable to all members while
optional benefits vary among employers. Optional benefits that apply to a single period of time, such as Golden
Handshakes, have not been included. Many of the statements in this summary are general in nature, and are
intended to provide an easily understood summary of the Public Employees’ Retirement Law. The law itself governs in all situations.
Service Retirement
Eligibility
A classic CalPERS member or PEPRA Safety member becomes eligible for Service Retirement upon attainment of age
50 with at least 5 years of credited service (total service across all CalPERS employers, and with certain other
retirement systems with which CalPERS has reciprocity agreements). For employees hired into a plan with the 1.5
percent at 65 formula, eligibility for service retirement is age 55 with at least 5 years of service. PEPRA miscellaneous
members become eligible for service retirement upon attainment of age 52 with at least 5 years of service.
Benefit
The service retirement benefit is a monthly allowance equal to the product of the benefit factor, years of service, and
final compensation.
The benefit factor depends on the benefit formula specified in your agency’s contract. The table below shows
the factors for each of the available formulas. Factors vary by the member’s age at retirement. Listed are the
factors for retirement at whole year ages:
Miscellaneous Plan Formulas
Retirement
Age
1.5% at
65 2% at 60 2% at 55 2.5% at
55
2.7% at
55 3% at 60
PEPRA
2% at 62
50 0.5000% 1.092% 1.426% 2.000% 2.000% 2.000% N/A
51 0.5667% 1.156% 1.522% 2.100% 2.140% 2.100% N/A
52 0.6334% 1.224% 1.628% 2.200% 2.280% 2.200% 1.000%
53 0.7000% 1.296% 1.742% 2.300% 2.420% 2.300% 1.100%
54 0.7667% 1.376% 1.866% 2.400% 2.560% 2.400% 1.200%
55 0.8334% 1.460% 2.000% 2.500% 2.700% 2.500% 1.300%
56 0.9000% 1.552% 2.052% 2.500% 2.700% 2.600% 1.400%
57 0.9667% 1.650% 2.104% 2.500% 2.700% 2.700% 1.500%
58 1.0334% 1.758% 2.156% 2.500% 2.700% 2.800% 1.600%
59 1.1000% 1.874% 2.210% 2.500% 2.700% 2.900% 1.700%
60 1.1667% 2.000% 2.262% 2.500% 2.700% 3.000% 1.800%
61 1.2334% 2.134% 2.314% 2.500% 2.700% 3.000% 1.900%
62 1.3000% 2.272% 2.366% 2.500% 2.700% 3.000% 2.000%
63 1.3667% 2.418% 2.418% 2.500% 2.700% 3.000% 2.100%
64 1.4334% 2.418% 2.418% 2.500% 2.700% 3.000% 2.200%
65 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.300%
66 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.400%
67 & up 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.500%
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-2
Safety Plan Formulas
Retirement
Age ½ at 55 * 2% at 55 2% at 50 3% at 55 3% at 50
50 1.783% 1.426% 2.000% 2.400% 3.000%
51 1.903% 1.522% 2.140% 2.520% 3.000%
52 2.035% 1.628% 2.280% 2.640% 3.000%
53 2.178% 1.742% 2.420% 2.760% 3.000%
54 2.333% 1.866% 2.560% 2.880% 3.000%
55 & Up 2.500% 2.000% 2.700% 3.000% 3.000%
* For this formula, the benefit factor also varies by entry age. The factors shown are for members with an entry age
of 35 or greater. If entry age is less than 35, then the age 55 benefit factor is 50 percent divided by the difference
between age 55 and entry age. The benefit factor for ages prior to age 55 is the same proportion of the age 55
benefit factor as in the above table.
PEPRA Safety Plan Formulas
Retirement Age 2% at 57 2.5% at 57 2.7% at 57
50 1.426% 2.000% 2.000%
51 1.508% 2.071% 2.100%
52 1.590% 2.143% 2.200%
53 1.672% 2.214% 2.300%
54 1.754% 2.286% 2.400%
55 1.836% 2.357% 2.500%
56 1.918% 2.429% 2.600%
57 & Up 2.000% 2.500% 2.700%
The years of service is the amount credited by CalPERS to a member while he or she is employed in this group
(or for other periods that are recognized under the employer’s contract with CalPERS). For a member who has
earned service with multiple CalPERS employers, the benefit from each employer is calculated separately
according to each employer’s contract, and then added together for the total allowance. An agency may contract
for an optional benefit where any unused sick leave accumulated at the time of retirement will be converted to
credited service at a rate of 0.004 years of service for each day of sick leave.
The final compensation is the monthly average of the member’s highest 36 or 12 consecutive months’ full-time
equivalent monthly pay (no matter which CalPERS employer paid this compensation). The standard benefit is 36 months. Employers had the option of providing a final compensation equal to the highest 12 consecutive months
for classic plans only. Final compensation must be defined by the highest 36 consecutive months’ pay under the
1.5% at 65 formula. PEPRA members have a cap on the annual salary that can be used to calculate final
compensation for all new members based on the Social Security contribution and benefit base. For employees
that participate in Social Security this cap is $117,020 for 2015 and for those employees that do not participate
in Social Security the cap for 2015 is $140,424. Adjustments to the caps are permitted annually based on
changes to the CPI for all urban consumers.
Employees must be covered by Social Security with the 1.5% at 65 formula. Social Security is optional for all
other benefit formulas. For employees covered by Social Security, the modified formula is the standard benefit.
Under this type of formula, the final compensation is offset by $133.33 (or by one third if the final compensation
is less than $400). Employers may contract for the full benefit with Social Security that will eliminate the offset
applicable to the final compensation. For employees not covered by Social Security, the full benefit is paid with
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-3
no offsets. Auxiliary organizations of the CSUC system may elect reduced contribution rates, in which case the
offset is $317 if members are not covered by Social Security or $513 if members are covered by Social Security.
The miscellaneous and PEPRA safety service retirement benefit is not capped. The classic service retirement
benefit is capped at 90 percent of final compensation.
Vested Deferred Retirement
Eligibility for Deferred Status
A CalPERS member becomes eligible for a deferred vested retirement benefit when he or she leaves employment,
keeps his or her contribution account balance on deposit with CalPERS, and has earned at least 5 years of credited
service (total service across all CalPERS employers, and with certain other retirement systems with which CalPERS
has reciprocity agreements).
Eligibility to Start Receiving Benefits
The CalPERS classic members and PEPRA safety members become eligible to receive the deferred retirement benefit
upon satisfying the eligibility requirements for deferred status and upon attainment of age 50 (55 for employees
hired into a 1.5% @ 65 plan). PEPRA miscellaneous members become eligible to receive the deferred retirement
benefit upon satisfying the eligibility requirements for deferred status and upon attainment of age 52.
Benefit
The vested deferred retirement benefit is the same as the service retirement benefit, where the benefit factor is
based on the member’s age at allowance commencement. For members who have earned service with multiple
CalPERS employers, the benefit from each employer is calculated separately according to each employer’s contract,
and then added together for the total allowance.
Non-Industrial (Non-Job Related) Disability Retirement
Eligibility
A CalPERS member is eligible for Non-Industrial Disability Retirement if he or she becomes disabled and has at least
5 years of credited service (total service across all CalPERS employers, and with certain other retirement systems with which CalPERS has reciprocity agreements). There is no special age requirement. Disabled means the member is
unable to perform his or her job because of an illness or injury, which is expected to be permanent or to last
indefinitely. The illness or injury does not have to be job related. A CalPERS member must be actively employed by
any CalPERS employer at the time of disability in order to be eligible for this benefit.
Standard Benefit
The standard Non-Industrial Disability Retirement benefit is a monthly allowance equal to 1.8 percent of final
compensation, multiplied by service, which is determined as follows:
Service is CalPERS credited service, for members with less than 10 years of service or greater than 18.518 years
of service; or
Service is CalPERS credited service plus the additional number of years that the member would have worked
until age 60, for members with at least 10 years but not more than 18.518 years of service. The maximum benefit in this case is 33 1/3 percent of final compensation.
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-4
Improved Benefit
Employers have the option of providing the improved Non-Industrial Disability Retirement benefit. This benefit
provides a monthly allowance equal to 30 percent of final compensation for the first 5 years of service, plus 1 percent
for each additional year of service to a maximum of 50 percent of final compensation.
Members who are eligible for a larger service retirement benefit may choose to receive that benefit in lieu of a
disability benefit. Members eligible to retire, and who have attained the normal retirement age determined by their
service retirement benefit formula, will receive the same dollar amount for disability retirement as that payable for
service retirement. For members who have earned service with multiple CalPERS employers, the benefit attributed to
each employer is the total disability allowance multiplied by the ratio of service with a particular employer to the total
CalPERS service.
Industrial (Job Related) Disability Retirement
All safety members have this benefit. For miscellaneous members, employers have the option of providing this
benefit. An employer may choose to provide the increased benefit option or the improved benefit option.
Eligibility
An employee is eligible for Industrial Disability Retirement if he or she becomes disabled while working, where
disabled means the member is unable to perform the duties of the job because of a work-related illness or injury,
which is expected to be permanent or to last indefinitely. A CalPERS member who has left active employment within
this group is not eligible for this benefit, except to the extent described below.
Standard Benefit
The standard Industrial Disability Retirement benefit is a monthly allowance equal to 50 percent of final
compensation.
Increased Benefit (75 percent of Final Compensation)
The increased Industrial Disability Retirement benefit is a monthly allowance equal to 75 percent final compensation
for total disability.
Improved Benefit (50 percent to 90 percent of Final Compensation)
The improved Industrial Disability Retirement benefit is a monthly allowance equal to the Workman’s Compensation
Appeals Board permanent disability rate percentage (if 50 percent or greater, with a maximum of 90 percent) times the final compensation.
For a CalPERS member not actively employed in this group who became disabled while employed by some other
CalPERS employer, the benefit is a return of accumulated member contributions with respect to employment in this
group. With the standard or increased benefit, a member may also choose to receive the annuitization of the
accumulated member contributions.
If a member is eligible for service retirement and if the service retirement benefit is more than the industrial disability
retirement benefit, the member may choose to receive the larger benefit.
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-5
Post-Retirement Death Benefit
Standard Lump Sum Payment
Upon the death of a retiree, a one-time lump sum payment of $500 will be made to the retiree’s designated
survivor(s), or to the retiree’s estate.
Improved Lump Sum Payment
Employers have the option of providing an improved lump sum death benefit of $600, $2,000, $3,000, $4,000 or $5,000.
Form of Payment for Retirement Allowance
Standard Form of Payment
Generally, the retirement allowance is paid to the retiree in the form of an annuity for as long as he or she is alive.
The retiree may choose to provide for a portion of his or her allowance to be paid to any designated beneficiary after
the retiree’s death. CalPERS provides for a variety of such benefit options, which the retiree pays for by taking a
reduction in his or her retirement allowance. Such reduction takes into account the amount to be provided to the
beneficiary and the probable duration of payments (based on the ages of the member and beneficiary) made
subsequent to the member’s death.
Improved Form of Payment (Post-Retirement Survivor Allowance)
Employers have the option to contract for the post-retirement survivor allowance.
For retirement allowances with respect to service subject to the modified formula, 25 percent of the retirement
allowance will automatically be continued to certain statutory beneficiaries upon the death of the retiree, without a reduction in the retiree’s allowance. For retirement allowances with respect to service subject to the full or
supplemental formula, 50 percent of the retirement allowance will automatically be continued to certain statutory
beneficiaries upon the death of the retiree, without a reduction in the retiree’s allowance. This additional benefit is
referred to as post-retirement survivor allowance (PRSA) or simply as survivor continuance.
In other words, 25 percent or 50 percent of the allowance, the continuance portion, is paid to the retiree for as long
as he or she is alive, and that same amount is continued to the retiree’s spouse (or if no eligible spouse, to unmarried child(ren) until they attain age 18; or, if no eligible child(ren), to a qualifying dependent parent) for the
rest of his or her lifetime. This benefit will not be discontinued in the event the spouse remarries.
The remaining 75 percent or 50 percent of the retirement allowance, which may be referred to as the option portion
of the benefit, is paid to the retiree as an annuity for as long as he or she is alive. Or, the retiree may choose to
provide for some of this option portion to be paid to any designated beneficiary after the retiree’s death. Benefit
options applicable to the option portion are the same as those offered with the standard form. The reduction is
calculated in the same manner but is applied only to the option portion.
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-6
Pre-Retirement Death Benefits
Basic Death Benefit
This is a standard benefit.
Eligibility
An employee’s beneficiary (or estate) may receive the basic death benefit if the member dies while actively
employed. A CalPERS member must be actively employed with the CalPERS employer providing this benefit to be
eligible for this benefit. A member’s survivor who is eligible for any other pre-retirement death benefit may choose to
receive that death benefit instead of this basic death benefit.
Benefit
The basic death benefit is a lump sum in the amount of the member’s accumulated contributions, where interest is
currently credited at 7.5 percent 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 for classic and safety PEPRA members and age 52 for miscellaneous PEPRA members,
and has at least 5 years of credited service (total service across all CalPERS employers and with certain other
retirement systems with which CalPERS has reciprocity agreements). A CalPERS member must be actively employed
with the CalPERS employer providing this benefit to be eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married at least one year before death or, if there is no eligible spouse,
to the member's unmarried child(ren) under age 18. A member’s survivor who is eligible for any other pre-retirement
death benefit may choose to receive that death benefit instead of this 1957 Survivor benefit.
Benefit
The 1957 Survivor benefit is a monthly allowance equal to one-half of the unmodified service retirement benefit that
the member would have been entitled to receive if the member had retired on the date of his or her death. If the benefit is payable to the spouse, the benefit is discontinued upon the death of the spouse. If the benefit is payable to
dependent child(ren), the benefit will be discontinued upon death or attainment of age 18, unless the child(ren) is
disabled. The total amount paid will be at least equal to the basic death benefit.
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-7
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 for classic and safety PEPRA members and age 52 for miscellaneous
PEPRA members, and has at least 5 years of credited service (total service across all CalPERS employers and with
certain other retirement systems with which CalPERS has reciprocity agreements). A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An eligible survivor means the
surviving spouse to whom the member was married at least one year before death. A member’s survivor who is
eligible for any other pre-retirement death benefit may choose to receive that death benefit instead of this Optional
Settlement 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 child(ren) under age 18, if applicable. The total
amount paid will be at least equal to the basic death benefit.
Special Death Benefit
This is a standard benefit for safety members. An employer may elect to provide this benefit for miscellaneous
members.
Eligibility
An employee’s eligible survivor(s) may receive the special death benefit if the member dies while actively employed
and the death is job-related. A CalPERS member who is no longer actively employed with any CalPERS employer is
not eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married prior to the onset of the injury or illness that resulted in death. If there is no eligible spouse, an eligible survivor means the
member's unmarried child(ren) under age 22. An eligible survivor who chooses to receive this benefit will not receive
any other death benefit.
Benefit
The special death benefit is a monthly allowance equal to 50 percent of final compensation, and will be increased whenever the compensation paid to active employees is increased but ceasing to increase when the member would
have attained age 50. The allowance is payable to the surviving spouse until death at which time the allowance is
continued to any unmarried child(ren) under age 22. There is a guarantee that the total amount paid will at least
equal the basic death benefit.
If the member’s death is the result of an accident or injury caused by external violence or physical force incurred in
the performance of the member’s duty, and there are eligible surviving child(ren) (eligible means unmarried child(ren) under age 22) in addition to an eligible spouse, then an additional monthly allowance is paid equal to
the following:
if 1 eligible child: 12.5 percent of final compensation
if 2 eligible children: 20.0 percent of final compensation
if 3 or more eligible children: 25.0 percent of final compensation
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-8
Alternate Death Benefit for Local Fire Members
This is an optional benefit available only to local fire members.
Eligibility
An employee’s eligible survivor(s) may receive the alternate death benefit in lieu of the basic death benefit or the
1957 Survivor benefit if the member dies while actively employed and has at least 20 years of total CalPERS service.
A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An
eligible survivor means the surviving spouse to whom the member was married prior to the onset of the injury or illness that resulted in death. If there is no eligible spouse, an eligible survivor means the member's unmarried
child(ren) under age 18.
Benefit
The Alternate Death benefit is a monthly allowance equal to the service retirement benefit that the member would
have received had the member retired on the date of his or her death and elected Optional Settlement 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
child(ren) under age 18, if applicable. The total amount paid will be at least equal to the basic death benefit.
Cost-of-Living Adjustments (COLA)
Standard Benefit
Retirement and survivor allowances are adjusted each year in May for cost of living, beginning the second calendar year after the year of retirement. The standard cost-of-living adjustment (COLA) is 2 percent. Annual adjustments
are calculated by first determining the lesser of 1) 2 percent compounded from the end of the year of retirement or
2) actual rate of inflation. The resulting increase is divided by the total increase provided in prior years. For any
particular year, the COLA adjustment may be less than 2 percent (when the rate of inflation is low), may be greater
than the rate of inflation (when the rate of inflation is low after several years of high inflation) or may even be
greater than 2 percent (when inflation is high after several years of low inflation).
Improved Benefit
Employers have the option of providing a COLA of 3 percent, 4 percent, or 5 percent, determined in the same
manner as described above for the standard 2 percent COLA. An improved COLA is not available with the 1.5% at 65
formula.
Purchasing Power Protection Allowance (PPPA)
Retirement and survivor allowances are protected against inflation by PPPA. PPPA benefits are cost-of-living
adjustments that are intended to maintain an individual’s allowance at 80 percent of the initial allowance at retirement adjusted for inflation since retirement. The PPPA benefit will be coordinated with other cost-of-living
adjustments provided under the plan.
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-9
Employee Contributions
Each employee contributes toward his or her retirement based upon the retirement formula. The standard employee
contribution is as described below.
The percent contributed below the monthly compensation breakpoint is 0 percent.
The monthly compensation breakpoint is $0 for full and supplemental formula members and $133.33 for
employees covered by the modified formula.
The percent contributed above the monthly compensation breakpoint depends upon the benefit formula, as
shown in the table below.
Benefit Formula Percent Contributed above the
Breakpoint
Miscellaneous, 1.5% at 65 2%
Miscellaneous, 2% at 60 7%
Miscellaneous, 2% at 55 7%
Miscellaneous, 2.5% at 55 8%
Miscellaneous, 2.7% at 55 8%
Miscellaneous, 3% at 60 8%
Miscellaneous, 2% at 62 50% of the Total Normal Cost
Miscellaneous, 1.5% at 65 50% of the Total Normal Cost
Safety, 1/2 at 55 Varies by entry age
Safety, 2% at 55 7%
Safety, 2% at 50 9%
Safety, 3% at 55 9%
Safety, 3% at 50 9%
Safety, 2% at 57 50% of the Total Normal Cost
Safety, 2.5% at 57 50% of the Total Normal Cost
Safety, 2.7% at 57 50% of the Total Normal Cost
The employer may choose to “pick-up” these contributions for classic members (Employer Paid Member Contributions
or EPMC). EPMC is prohibited for new PEPRA members.
An employer may also include Employee Cost Sharing in the contract, where employees agree to share the cost of the employer contribution. These contributions are paid in addition to the member contribution.
Auxiliary organizations of the CSUC system may elect reduced contribution rates, in which case the offset is $317 and
the contribution rate is 6 percent if members are not covered by Social Security. If members are covered by Social
Security, the offset is $513 and the contribution rate is 5 percent.
Refund of Employee Contributions
If the member’s service with the employer ends, and if the member does not satisfy the eligibility conditions for any of the retirement benefits above, the member may elect to receive a refund of his or her employee contributions,
which are credited with 6 percent interest compounded annually.
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-10
1959 Survivor Benefit
This is a pre-retirement death benefit available only to members not covered by Social Security. Any agency joining CalPERS subsequent to 1993 is required to provide this benefit if the members are not covered by Social Security.
The benefit is optional for agencies joining CalPERS prior to 1994. Levels 1, 2 and 3 are now closed. Any new agency
or any agency wishing to add this benefit or increase the current level may only choose the 4th or Indexed Level.
This benefit is not included in the results presented in this valuation. More information on this benefit is available on
the CalPERS website at www.calpers.ca.gov.
APPENDIX C
PARTICIPANT DATA
SUMMARY OF VALUATION DATA
ACTIVE MEMBERS
TRANSFERRED AND TERMINATED MEMBERS
RETIRED MEMBERS AND BENEFICIARIES
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX C
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PARTICIPANT DATA
C-1
Summary of Valuation Data
June 30, 2014 June 30, 2015
1. Active Members
a) Counts 802 796
b) Average Attained Age
46.15 46.35
c) Average Entry Age to Rate Plan 35.01 35.01
d) Average Years of Service 11.14 11.34
e) Average Annual Covered Pay $ 84,542 $ 89,918
f) Annual Covered Payroll 67,802,942 71,574,823
g) Projected Annual Payroll for Contribution Year 74,090,105 78,211,742
h) Present Value of Future Payroll 520,997,982 549,799,999
2. Transferred Members
a) Counts 328 347
b) Average Attained Age 46.00 46.34
c) Average Years of Service 3.55 3.55
d) Average Annual Covered Pay $ 109,195 $ 111,297
3. Terminated Members
a) Counts 335 367
b) Average Attained Age 47.91 47.69
c) Average Years of Service 3.27 3.30
d) Average Annual Covered Pay $ 63,122 $ 64,442
4. Retired Members and Beneficiaries
a) Counts 1,011 1,027
b) Average Attained Age 68.88 69.31
c) Average Annual Benefits $ 31,739 $ 32,564
5. Active to Retired Ratio [(1a) / (4a)] 0.79 0.78
Counts of members included in the valuation are counts of the records processed by the valuation. Multiple
records may exist for those who have service in more than one valuation group. This does not result in
double counting of liabilities.
Average Annual Benefits represents benefit amounts payable by this plan only. Some members may have
service with another agency and would therefore have a larger total benefit than would be included as part
of the average shown here.
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX C
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PARTICIPANT DATA
C-2
Active Members
Counts of members included in the valuation are counts of the records processed by the valuation. Multiple records
may exist for those who have service in more than one valuation group. This does not result in double counting of
liabilities.
Distribution of Active Members by Age and Service
Years of Service at Valuation Date
Attained
Age 0-4 5-9 10-14 15-19 20-25 25+ Total
15-24 9 0 0 0 0 0 9
25-29 44 1 0 0 0 0 45
30-34 57 23 6 0 0 0 86
35-39 40 32 30 7 1 0 110
40-44 29 18 24 16 9 0 96
45-49 32 24 18 25 14 4 117
50-54 20 27 24 28 31 30 160
55-59 19 20 12 17 12 16 96
60-64 6 11 9 9 13 6 54
65 and over 2 3 3 5 5 5 23
All Ages 258 159 126 107 85 61 796
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 $63,734 $0 $0 $0 $0 $0 $63,734
25-29 64,285 105,017 0 0 0 0 65,190
30-34 77,493 85,599 75,106 0 0 0 79,494
35-39 80,643 88,773 88,554 89,679 78,000 0 85,717
40-44 86,134 88,852 94,892 95,296 100,494 0 91,706
45-49 107,383 89,193 96,840 96,462 114,059 106,393 100,461
50-54 96,698 93,391 91,570 93,205 93,712 105,916 95,909
55-59 98,286 96,453 84,096 79,257 96,305 97,575 92,395
60-64 104,461 98,147 87,671 108,979 83,214 85,719 93,932
65 and over 101,497 22,869 68,330 85,486 90,936 119,627 85,080
All Ages $83,761 $89,644 $89,910 $92,798 $96,194 $102,897 $89,918
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX C
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PARTICIPANT DATA
C-3
Transferred and Terminated Members
Distribution of Transfers to Other CalPERS Plans by Age 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 2 0 0 0 0 0 2 $78,045
25-29 13 0 0 0 0 0 13 87,759
30-34 37 4 1 0 0 0 42 95,661
35-39 35 8 0 0 0 0 43 106,188
40-44 45 8 0 2 0 0 55 104,754
45-49 42 12 2 3 1 0 60 112,866
50-54 46 14 4 1 1 0 66 120,586
55-59 21 5 5 1 1 0 33 139,634
60-64 16 9 1 1 0 0 27 112,626
65 and over 3 2 1 0 0 0 6 99,709
All Ages 260 62 14 8 3 0 347 111,297
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 4 0 0 0 0 0 4 $51,666
25-29 11 1 0 0 0 0 12 73,116
30-34 27 2 0 0 0 0 29 63,658
35-39 51 3 1 0 0 0 55 63,065
40-44 29 9 1 1 0 0 40 66,737
45-49 46 17 3 1 1 0 68 67,874
50-54 45 11 4 2 1 0 63 68,079
55-59 32 8 6 1 0 0 47 63,460
60-64 21 4 2 0 0 0 27 57,010
65 and over 17 3 1 1 0 0 22 52,539
All Ages 283 58 18 6 2 0 367 64,442
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX C
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PARTICIPANT DATA
C-4
Retired Members and Beneficiaries
Distribution of Retirees and Beneficiaries by Age and Retirement Type*
Attained
Age
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Total
Under 30 0 0 0 0 0 2 2
30-34 0 0 0 0 0 2 2
35-39 0 0 2 0 0 0 2
40-44 0 1 2 0 0 0 3
45-49 0 2 0 0 0 0 2
50-54 22 7 3 0 0 2 34
55-59 102 15 1 0 0 6 124
60-64 170 7 2 0 0 9 188
65-69 190 11 2 0 0 13 216
70-74 173 7 2 0 0 17 199
75-79 84 7 0 0 0 8 99
80-84 57 5 1 0 0 16 79
85 and Over 46 2 0 0 0 29 77
All Ages 844 64 15 0 0 104 1,027
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 $13,093 $13,093
30-34 0 0 0 0 0 11,344 11,344
35-39 0 0 239 0 0 0 239
40-44 0 8,919 264 0 0 0 3,149
45-49 0 10,962 0 0 0 0 10,962
50-54 32,965 12,110 514 0 0 21,847 25,154
55-59 40,509 13,928 1,582 0 0 13,661 35,681
60-64 42,190 18,227 6,724 0 0 38,456 40,741
65-69 38,117 17,463 9,268 0 0 21,262 35,784
70-74 30,994 14,489 1,830 0 0 19,278 29,119
75-79 34,358 20,078 0 0 0 31,212 33,094
80-84 26,848 17,102 4,176 0 0 22,269 25,017
85 and Over 20,765 17,621 0 0 0 22,652 21,394
All Ages $35,551 $15,733 $2,930 $0 $0 $22,958 $32,564
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX C
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PARTICIPANT DATA
C-5
Retired Members and Beneficiaries (continued)
Distribution of Retirees and Beneficiaries by Years Retired and Retirement Type*
Years
Retired
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Total
Under 5 Yrs 184 4 6 0 0 37 231
5-9 305 12 1 0 0 26 344
10-14 158 12 2 0 0 16 188
15-19 97 10 6 0 0 12 125
20-24 56 19 0 0 0 6 81
25-29 28 3 0 0 0 6 37
30 and Over 16 4 0 0 0 1 21
All Years 844 64 15 0 0 104 1,027
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 $37,122 $12,390 $261 $0 $0 $26,848 $34,091
5-9 45,411 10,995 17,544 0 0 24,059 42,515
10-14 30,848 18,663 6,159 0 0 16,960 28,626
15-19 27,053 20,253 2,087 0 0 22,419 24,866
20-24 17,457 16,940 0 0 0 18,868 17,440
25-29 21,212 11,247 0 0 0 18,236 19,921
30 and Over 15,914 10,839 0 0 0 5,778 14,465
All Years $35,551 $15,733 $2,930 $0 $0 $22,958 $32,564
* 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.
APPENDIX D
DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION
RATES
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX D
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
PARTICIPANT DATA
D-1
Development of PEPRA Members Contribution Rates
The table below shows the determination of the Member contribution rates based on 50 percent of the Total Normal Cost for each respective plan on June 30, 2015.
Assembly Bill (AB) 340 created PEPRA that implemented new benefit formulas and a final compensation period as well as new contribution requirements for new employees. In accordance with Section Code 7522.30(b), “new
members … shall have an initial contribution rate of at least 50 percent of the normal cost rate.” The normal cost for
the plan is dependent on the benefit levels, actuarial assumptions and demographics of the plan particularly the entry
age into the plan. The PEPRA total normal cost for the plan is calculated assuming the entire active population,
including classic members, is subject to the adopted PEPRA formula and applicable compensation limits. Should the
total normal cost of the plan change by one percent or more from the base total normal cost established for the plan,
the new member rate shall be 50% of the new normal cost rounded up to the next highest quarter percent.
Basis for Current Rate Rates Effective July 1, 2017
Rate Plan
Identifier Plan Total Normal
Cost
Member
Rate
Total Normal
Cost
Change Change
Needed
Member
Rate
26004 Miscellaneous PEPRA 12.500% 6.250% 11.805% (0.695%) No 6.250%
APPENDIX E
GLOSSARY OF ACTUARIAL TERMS
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX E
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
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 Value of Assets.
Actuarial Valuation
The determination, as of a valuation date of the Normal Cost, Accrued liability, and related actuarial present
values for a pension plan. These valuations are performed annually or when an employer is contemplating a
change to their plan provisions.
Amortization Bases Separate payment schedules for different portions of the Unfunded Liability. The total Unfunded Liability of a
Risk Pool or non-pooled plan can be segregated by "cause,” creating “bases” and each such base will be
separately amortized and paid for over a specific period of time. However, all bases are amortized using
investment and payroll assumptions from the current valuation. This can be likened to a home having a first
mortgage of 24 years remaining payments and a second mortgage that has 10 years remaining payments. Each
base or each mortgage note has its own terms (payment period, principal, etc.)
Generally, in an actuarial valuation, the separate bases consist of changes in unfunded liability due to contract
amendments, actuarial assumption changes, actuarial methodology changes, and/or 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.
Classic Member (under PEPRA)
A classic member is a member who joined CalPERS prior to January, 1, 2013 and who is not defined as a new
member under PEPRA. (See definition of new member below)
Discount Rate Assumption
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. In
most cases, this is the age of the member on their date of hire.
Entry Age Normal Cost Method
An actuarial cost method designed to fund a member's total plan benefit over the course of his or her career.
This method is designed to yield a rate expressed as a level percentage of payroll. (The assumed retirement age less the entry age is the amount of time required to fund a member’s total benefit.
Generally, the older a member on the date of hire, the greater the entry age normal cost. This is mainly because
there is less time to earn investment income to fund the future benefits.)
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX E
MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO
GLOSSARY OF ACTUARIAL TERMS
E-2
Fresh Start
A Fresh Start is when multiple amortization bases are collapsed to one base and amortized together over a new funding period.
Funded Status
A measure of how well funded, or how "on track" a plan or risk pool is with respect to assets versus accrued
liabilities. A ratio greater than 100% means the plan or risk pool has more assets than liabilities and a ratio less
than 100% means liabilities are greater than assets.
GASB 68
Statement No. 68 of the Governmental Accounting Standards Board. The accounting standard governing a state
or local governmental employer’s accounting and financial reporting for pensions. GASB 68 replaces GASB 27
effective the first fiscal year beginning after June 15, 2014.
New Member (under PEPRA)
A new member includes an individual who becomes a member of a public retirement system for the first time on
or after January 1, 2013, and who was not a member of another public retirement system prior to that date, and who is not subject to reciprocity with another public retirement system.
Normal Cost
The annual cost of service accrual for the upcoming fiscal year for active employees. The normal cost should be
viewed as the long term contribution rate.
Pension Actuary A business professional that is authorized by the Society of Actuaries, and the American Academy of Actuaries to
perform the calculations necessary to properly fund a pension plan.
PEPRA
The California Public Employees’ Pension Reform Act of 2013
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.
Superfunded A condition existing when a plan’s Actuarial Value of Assets exceeds its Present Value of Benefits. Prior to the
passage of PEPRA, when this condition existed on a given valuation date for a given plan, employee
contributions for the rate year covered by that valuation could be waived.
Unfunded Liability (UAL)
When a plan or pool’s Value of Assets is less than its Accrued Liability, the difference is the plan or pool’s
Unfunded Liability. If the Unfunded Liability is positive, the plan or pool will have to pay contributions exceeding
the Normal Cost.
California Public Employees’ Retirement System
Actuarial Office
P.O. Box 942701
Sacramento, CA 94229-2701
TTY: (916) 795-3240
(888) 225-7377 phone • (916) 795-2744 fax
www.calpers.ca.gov
August 2016
SAFETY PLAN OF THE CITY OF PALO ALTO (CalPERS ID: 6373437857)
Annual Valuation Report as of June 30, 2015
Dear Employer,
As an attachment to this letter, you will find a copy of the June 30, 2015 actuarial valuation
report of your pension plan. Your 2015 actuarial valuation report contains important actuarial
information about your pension plan at CalPERS. Your CalPERS staff actuary, whose signature
appears in the “Actuarial Certification” section on page 1, is available to discuss the report with
you after August 31, 2016.
Future Contributions
The exhibit below displays the minimum employer contributions for Fiscal Year 2017-18 and
projected contributions for Fiscal Year 2018-19, before any cost sharing. The projected
contributions for Fiscal Year 2018-19 are based on the most recent information available,
including an estimate of the investment return for Fiscal Year 2015-16, namely 0.0 percent. For a
projection of employer contributions beyond Fiscal Year 2018-19, please refer to the “Projected
Employer Contributions” in the “Highlights and Executive Summary” section. This 5-year
projection of future employer contributions supersedes any previous projections we have
provided. The “Risk Analysis” section of the valuation report also contains estimated employer
contributions in future years under a variety of investment return scenarios.
Fiscal Year Employer Normal
Cost Rate
Employer Payment
of Unfunded Liability
Employee
PEPRA Rate
2017-18 18.900% $7,127,885 10.75%
2018-19 (projected) 18.9% $8,469,191 N/A
Member contributions other than cost sharing (whether paid by the employer or the employee)
are in addition to the above. The employer contributions in this report do not reflect any
cost sharing arrangement you may have with your employees. The estimates for Fiscal Year 2018-19 also assume that there are no future contract 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 required contributions. These gains and losses cannot
be predicted in advance so the projected employer contributions are just estimates. The actual
required employer contributions for Fiscal Year 2018-19 will be provided in next year’s report.
SAFETY PLAN OF THE CITY OF PALO ALTO
(CalPERS ID: 6373437857)
Annual Valuation Report as of June 30, 2015
Page 2
Changes since the Prior Year’s Valuation
Beginning with Fiscal Year 2017-18 CalPERS will collect employer contributions toward the plan’s
unfunded liability as dollar amounts instead of the prior method of a contribution rate. This
change will address potential funding issues that could arise from a declining payroll or reduction
in the number of active members in the plan. Funding the unfunded liability as a percentage of
payroll could lead to the underfunding of the plans. Although employers will be invoiced at the
beginning of the fiscal year for their unfunded liability payment the plan’s normal cost
contribution will continue to be collected as a percentage of payroll.
The CalPERS Board of Administration adopted a Risk Mitigation Policy which is designed to
reduce funding risk over time. The policy establishes a mechanism whereby CalPERS investment
performance that significantly outperforms the discount rate triggers adjustments to the discount
rate, expected investment return and strategic asset allocation targets. A minimum excess
investment return of 4% above the existing discount rate is necessary to cause a funding risk
mitigation event. The policy has no impact on the current year valuation results but is expected
to have an impact in future years. More details on the Risk Mitigation Policy can be found on our
website.
Besides the above noted changes, there may also be changes specific to the plan such as
contract amendments and funding changes.
Further descriptions of general changes are included in the “Highlights and Executive Summary”
section and in Appendix A, “Actuarial Methods and Assumptions.” The effects of the changes on
the required contributions are included in the “Reconciliation of Required Employer Contributions”
section.
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 results, we ask that you wait until after August 31 to contact us with
actuarial questions. If you have other questions, you may call the Customer Contact Center at
(888)-CalPERS or (888-225-7377).
Sincerely,
ALAN MILLIGAN
Chief Actuary
ACTUARIAL VALUATION
as of June 30, 2015
for the
SAFETY PLAN
of the
CITY OF PALO ALTO
(CalPERS ID: 6373437857)
(Rate Plan ID: 5080)
REQUIRED CONTRIBUTIONS
FOR FISCAL YEAR
July 1, 2017 – June 30, 2018
TABLE OF CONTENTS
ACTUARIAL CERTIFICATION 1
HIGHLIGHTS AND EXECUTIVE SUMMARY
Introduction 3
Purpose of the Report 3
Required Contributions 4
Plan’s Funded Status 5
Projected Employer Contributions 5
Cost 6 Changes Since the Prior Year’s Valuation 7
Subsequent Events 7
ASSETS
Reconciliation of the Market Value of Assets 9
Asset Allocation 10 CalPERS History of Investment Returns 11
LIABILITIES AND CONTRIBUTIONS
Development of Accrued and Unfunded Liabilities 13
(Gain) / Loss Analysis 06/30/14 - 06/30/15 14
Schedule of Amortization Bases 15 30-Year Amortization Schedule and Alternatives 16
Reconciliation of Required Employer Contributions 18
Employer Contribution History 19
Funding History 19
RISK ANALYSIS
Analysis of Future Investment Return Scenarios 21
Analysis of Discount Rate Sensitivity 22
Volatility Ratios 23
Hypothetical Termination Liability 24
PLAN’S MAJOR BENEFIT PROVISIONS
Plan’s Major Benefit Options 26
APPENDIX A – ACTUARIAL METHODS AND ASSUMPTIONS
Actuarial Data A1
Actuarial Methods A1 – A2
Actuarial Assumptions A3 – A21
Miscellaneous A21
APPENDIX B – PRINCIPAL PLAN PROVISIONS B1 – B10
APPENDIX C – PARTICIPANT DATA
Summary of Valuation Data C1
Active Members C2
Transferred and Terminated Members C3 Retired Members and Beneficiaries C4 – C5
APPENDIX D – DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION RATE D1
APPENDIX E – GLOSSARY OF ACTUARIAL TERMS E1 – E2
(CY) FIN PROCESS CONTROL ID: 480105 (PY) FIN PROCESS CONTROL ID: 466096 REPORT ID: 95693
CALPERS ACTUARIAL VALUATION - June 30, 2015
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, 2015 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
INTRODUCTION
PURPOSE OF THE REPORT
REQUIRED CONTRIBUTIONS
PLAN’S FUNDED STATUS
PROJECTED EMPLOYER CONTRIBUTIONS
COST
CHANGES SINCE THE PRIOR YEAR’S VALUATION
SUBSEQUENT EVENTS
CALPERS ACTUARIAL VALUATION - June 30, 2015
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 3
Introduction
This report presents the results of the June 30, 2015 actuarial valuation of the SAFETY PLAN OF THE CITY
OF PALO ALTO of the California Public Employees’ Retirement System (CalPERS). This actuarial valuation
sets the required employer contributions for Fiscal Year 2017-18.
The CalPERS Board of Administration adopted a Risk Mitigation Policy which is designed to reduce funding
risk over time. The policy establishes a mechanism whereby CalPERS investment performance that
significantly outperforms the discount rate triggers adjustments to the discount rate, expected investment
return and strategic asset allocation targets. A minimum excess investment return of 4% above the existing
discount rate is necessary to cause a funding risk mitigation event. The Risk Mitigation Policy does not have
an impact on the current year actuarial valuation. More details on the Risk Mitigation Policy can be found on
our website.
Purpose of the Report
The actuarial valuation was prepared by the CalPERS Actuarial Office using data as of June 30, 2015. The purpose of the report is to:
Set forth the assets and accrued liabilities of this plan as of June 30, 2015;
Determine the required employer contributions for the fiscal year July 1, 2017 through June 30, 2018;
Provide actuarial information as of June 30, 2015 to the CalPERS Board of Administration and other
interested parties.
The pension funding information presented in this report should not be used in financial reports subject to Governmental Accounting Standards Board (GASB) Statement No. 68 for an Agent Employer Defined Benefit
Pension Plan. A separate accounting valuation report for such purposes is available from CalPERS and
details for ordering are available on our website.
The 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.
California Actuarial Advisory Panel Recommendations
This report includes all the basic disclosure elements as described in the Model Disclosure Elements for
Actuarial Valuation Reports recommended in 2011 by the California Actuarial Advisory Panel (CAAP), with
the exception of including the original base amounts of the various components of the unfunded liability in
the Schedule of Amortization Bases shown on page 15.
Additionally, this report includes the following “Enhanced Risk Disclosures” also recommended by the CAAP
in the Model Disclosure Elements document:
A “Deterministic Stress Test,” projecting future results under different investment income
scenarios
A “Sensitivity Analysis,” showing the impact on current valuation results using a 1 percent plus or
minus change in the discount rate.
CALPERS ACTUARIAL VALUATION - June 30, 2015
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 4
Required Contributions
Fiscal Year
Required Employer Contribution 2017-18
Employer Normal Cost Rate 18.900%
Plus Either
1) Monthly Employer Dollar UAL Payment $ 593,990
Or
2) Annual UAL Prepayment Option $ 6,874,743
Required PEPRA Member Contribution Rate
10.75%
The total minimum required employer contribution is the sum of the Plan’s Employer Normal Cost Rate
(expressed as a percentage of payroll) plus the Employer Unfunded Accrued Liability (UAL) Contribution
Amount (billed monthly in dollars). Only the UAL portion of the employer contribution can be prepaid
(which must be received in full no later than July 31). Plan Normal Cost contributions will be made as part
of the payroll reporting process. If there is contractual cost sharing or other change, this amount will change. §20572 of the Public Employees’ Retirement Law assesses interest at an annual rate of 10
percent if a contracting agency fails to remit the required contributions when due. For additional detail
regarding the determination of the required contribution for PEPRA members, see Appendix D. Required
member contributions for Classic members can be found in Appendix B.
Fiscal Year Fiscal Year
2016-17 2017-18
Normal Cost Contribution as a Percentage of Payroll
Total Normal Cost 28.120% 28.029%
Employee Contribution1 9.143% 9.129%
Employer Normal Cost 18.977% 18.900%
Projected Annual Payroll for Contribution Year $ 23,246,697 $ 23,150,815
Estimated Employer Contributions Based On
Projected Payroll
Total Normal Cost $ 6,536,972 $ 6,488,942
Employee Contribution1 2,125,446 2,113,438
Employer Normal Cost 4,411,526 4,375,504
Unfunded Liability Contribution 6,148,510 7,127,885
Estimated Total Employer Contribution2 $ 10,560,036 $ 11,503,389
1 For classic members, this is the percentage specified in the Public Employees Retirement Law, net of any reduction from the use of a modified formula or other factors. For PEPRA members, the member contribution rate is based on 50
percent of the normal cost. A development of PEPRA member contribution rates can be found in Appendix D. Employee
cost sharing is not shown in this report. 2 As a percentage of projected payroll the UAL contribution for Fiscal Year 2017-18 is 30.789 percent for an estimated
total employer contribution rate of 49.689 percent. As determined in the June 30, 2014 valuation, the Fiscal Year 2016-17 UAL contribution is 26.449 percent for a total employer contribution rate of 45.426 percent.
CALPERS ACTUARIAL VALUATION - June 30, 2015
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 5
Plan’s Funded Status
Projected Employer Contributions
The estimated employer contribution for Fiscal Year 2018-19 is based on a projection of the most recent
information we have available, including an estimated 0.0 percent investment return for Fiscal Year 2015-
16.
The table below shows projected employer contributions (before cost sharing) for the next five fiscal years,
assuming CalPERS earns 0.0 percent for Fiscal Year 2015-16 and 7.50 percent every fiscal year thereafter,
and assuming that all other actuarial assumptions will be realized and that no further changes to assumptions, contributions, benefits, or funding will occur during the projection period. The projected
normal cost percentages do not reflect that the normal cost will decline over time as new employees are
hired into PEPRA or other lower cost benefit tiers.
Required
Contribution Projected Future Employer Contributions
Fiscal Year 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23
Normal Cost % 18.900% 18.9% 18.9% 18.9% 18.9% 18.9%
UAL $ 7,127,885 8,469,191 9,884,561 10,739,149 11,629,663 12,325,997
For projected contributions under alternate investment return scenarios, please see the “Analysis of Future
Investment Return Scenarios” in the “Risk Analysis” section.
June 30, 2014 June 30, 2015
1. Present Value of Projected Benefits $ 426,369,163 $ 433,980,861
2. Entry Age Normal Accrued Liability 367,478,634 377,934,524
3. Market Value of Assets (MVA) $ 264,145,000 $ 259,169,591
4. Unfunded Accrued Liability (UAL) [(2) – (3)] $ 103,333,634 $ 118,764,933
5. Funded Ratio [(3) / (2)] 71.9% 68.6%
CALPERS ACTUARIAL VALUATION - June 30, 2015
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 6
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, 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 the plan.
While CalPERS has set these assumptions to reflect our best estimate of the real future of the 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 percent for the past twenty year period ending June 30, 2015, returns for each fiscal year ranged from
negative -24 percent to +21.7 percent.
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 annual cost associated with one year of service accrual) 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. In prior years CalPERS converted Past Service Cost to a percent of payroll and expressed the total required employer contribution
as a single rate. Going forward the Past Service Cost will no longer be converted to a percent of payroll and
this cost will be invoiced to the employer as a monthly dollar contribution amount with the option to prepay
the annual amount at the beginning of the fiscal year. The normal cost will continue to be expressed as a
percentage of active payroll with employer and employee contributions payable as part of the payroll
reporting process.
CALPERS ACTUARIAL VALUATION - June 30, 2015
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 7
Changes since the Prior Year’s Valuation
Benefits
The standard actuarial practice at CalPERS is to recognize mandated legislative benefit changes in the first annual valuation following the effective date of the legislation. Voluntary benefit changes by plan
amendment are generally included in the first valuation that is prepared after the amendment becomes
effective, even if the valuation date is prior to the effective date of the amendment.
This valuation generally reflects plan changes by amendments effective before the date of the report. Please
refer to the “Plan’s Major Benefit Options” and Appendix B for a summary of the plan provisions used in this
valuation. The effect of any mandated benefit changes or plan amendments on the unfunded liability is
shown in the “(Gain)/Loss Analysis” and the effect on the employer contribution is shown in the “Reconciliation of Required Employer Contributions.” It should be noted that no change in liability or
contribution is shown for any plan changes which were already included in the prior year’s valuation.
Actuarial Methods and Assumptions
Beginning with Fiscal Year 2017-18 CalPERS will collect employer contributions toward the plan’s unfunded
liability as dollar amounts instead of the prior method of a contribution rate. This change will address potential funding issues that could arise from a declining payroll or reduction in the number of active
members in the plan. Funding the unfunded liability as a percentage of payroll could lead to the
underfunding of the plans. Although employers will be invoiced at the beginning of the fiscal year for their
unfunded liability payment the plan’s normal cost contribution will continue to be collected as a percentage
of payroll.
Subsequent Events
Risk Mitigation
The CalPERS Board of Administration adopted a Risk Mitigation Policy which is designed to reduce funding risk over time. The policy establishes a mechanism whereby CalPERS investment performance that
significantly outperforms the discount rate triggers adjustments to the discount rate, expected investment
return and strategic asset allocation targets. A minimum excess investment return of 4% above the existing
discount rate is necessary to cause a funding risk mitigation event. More details on the Risk Mitigation Policy
can be found on our website.
ASSETS
RECONCILIATION OF THE MARKET VALUE OF ASSETS
ASSET ALLOCATION
CALPERS HISTORY OF INVESTMENT RETURNS
CALPERS ACTUARIAL VALUATION - June 30, 2015
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 9
Reconciliation of the Market Value of Assets
1. Market Value of Assets as of 6/30/14 including Receivables $ 264,145,000
2. Change in Receivables for Service Buybacks as of 6/30/14 (209,974)
3. Employer Contributions 8,615,752
4. Employee Contributions 1,994,256
5. Benefit Payments to Retirees and Beneficiaries (20,991,011)
6. Refunds (156,687)
7. Lump Sum Payments 0
8. Transfers and Miscellaneous Adjustments 263,632
9. Investment Return 5,508,623
10. Market Value of Assets as of 6/30/15 including Receivables $ 259,169,591
CALPERS ACTUARIAL VALUATION - June 30, 2015
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 10
Asset Allocation
CalPERS adheres to an Asset Allocation Strategy which establishes asset class allocation policy targets and
ranges, and manages those asset class allocations within their policy ranges. CalPERS Investment Belief No.
6 recognizes that strategic asset allocation is the dominant determinant of portfolio risk and return. On February 19, 2014, the CalPERS Board of Administration adopted changes to the current asset allocation as
shown in the Policy Target Allocation below expressed as a percentage of total assets. The asset allocation
has an expected long term blended rate of return of 7.5 percent.
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, 2015. The assets for CITY OF PALO ALTO SAFETY
PLAN are part of the PERF and are invested accordingly.
(A)
Asset Class
(B)
Market Value
($ Billion)
(C)
Policy Target
Allocation
Global Equity 162.5 51.0%
Private Equity 29.0 10.0%
Global Fixed Income 53.1 20.0%
Liquidity 7.5 1.0%
Real Assets 31.8 12.0%
Inflation Sensitive Assets 15.6 6.0%
Other 2.4 0.0%
Total Fund $301.9 100.0%
Global Equity
53.8%
Private Equity
9.6%
Global Fixed
Income
17.6%
Liquidity
2.5%
Real Assets
10.5%
Inflation
5.2%
Other
0.8%
Asset Allocation at 6/30/2015
CALPERS ACTUARIAL VALUATION - June 30, 2015
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 11
CalPERS History of Investment Returns
The following is a chart with the 20-year historical annual returns of the Public Employees Retirement Fund
for each fiscal year ending on June 30. Beginning in 2002, the figures are reported as gross of fees.
The table below shows historical geometric mean annual returns of the Public Employees Retirement Fund for various time periods ending on June 30, 2015, (figures are reported as gross of fees). The geometric
mean rate of return is the average rate per period compounded over multiple periods. It should be
recognized that in any given year the rate of return is volatile. Although the expected rate of return on the
recently adopted new asset allocation is 7.5 percent, the portfolio has an expected volatility of 11.76
percent per year. The volatility is a measure of the risk of the portfolio expressed in the standard deviation
of the fund’s total return distribution, expressed as a percentage. Consequently, when looking at investment
returns, it is more instructive to look at returns over longer time horizons.
History of CalPERS Geometric Mean Rates of Return and Volatilities
1 year 5 year 10 year 20 year 30 year
Geometric Return 2.4% 10.7% 6.1% 7.7% 9.1%
Volatility – 9.4% 14.0% 11.8% 10.5%
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
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
%
0.
1
%
13
.
2
%
17
.
7
%
2.
4
%
LIABILITIES AND CONTRIBUTIONS
DEVELOPMENT OF ACCRUED AND UNFUNDED LIABILITIES
(GAIN) / LOSS ANALYSIS 06/30/14 - 06/30/15
SCHEDULE OF AMORTIZATION BASES
30-YEAR AMORTIZATION SCHEDULES AND ALTERNATIVES
RECONCILIATION OF REQUIRED EMPLOYER CONTRIBUTIONS
EMPLOYER CONTRIBUTION HISTORY
FUNDING HISTORY
CALPERS ACTUARIAL VALUATION - June 30, 2015
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 13
Development of Accrued and Unfunded Liabilities
June 30, 2014 June 30, 2015
1. Present Value of Projected Benefits
a) Active Members $ 143,593,466 145,227,338
b) Transferred Members 8,951,761 7,219,815
c) Terminated Members 1,471,564 2,371,428
d) Members and Beneficiaries Receiving Payments 272,352,372 279,162,280
e) Total $ 426,369,163 433,980,861
2. Present Value of Future Employer Normal Costs $ 39,135,076 37,166,396
3. Present Value of Future Employee Contributions $ 19,755,453 18,879,941
4. Entry Age Normal Accrued Liability
a) Active Members [(1a) - (2) - (3)] $ 84,702,937 89,181,001
b) Transferred Members (1b) 8,951,761 7,219,815
c) Terminated Members (1c) 1,471,564 2,371,428
d) Members and Beneficiaries Receiving Payments (1d) 272,352,372 279,162,280
e) Total $ 367,478,634 377,934,524
5. Market Value of Assets (MVA) $ 264,145,000 259,169,591
6. Unfunded Accrued Liability (UAL) [(4e) - (5)] $ 103,333,634 118,764,933
7. Funded Ratio [(5) / (4e)] 71.9% 68.6%
CALPERS ACTUARIAL VALUATION - June 30, 2015
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 14
(Gain)/Loss Analysis 6/30/14 – 6/30/15
To calculate the cost requirements of the plan, assumptions are made about future events that affect the
amount and timing of benefits to be paid and assets to be accumulated. Each year, actual experience is
compared to the expected experience based on the actuarial assumptions. This results in actuarial gains or losses, as shown below.
1. Total (Gain)/Loss for the Year
a) Unfunded Accrued Liability (UAL) as of 6/30/14 $ 103,333,634
b) Expected Payment on the UAL during 2014/2015 4,471,850
c) Interest through 6/30/15 [.075 x (1a) - ((1.075)½ - 1) x (1b)] 7,585,360 d) Expected UAL before all other changes [(1a) - (1b) + (1c)] 106,447,144
e) Change due to plan changes 0
f) Change due to assumption change 0
g) Expected UAL after all other changes [(1d) + (1e) + (1f)] 106,447,144
h) Actual UAL as of 6/30/15 118,764,933
i) Total (Gain)/Loss for 2014/2015 [(1h) - (1g)] $ 12,317,789
2. Contribution (Gain)/Loss for the Year
a) Expected Contribution (Employer and Employee) $ 10,664,907
b) Interest on Expected Contributions 392,704
c) Actual Contributions 10,610,008 d) Interest on Actual Contributions 390,682
e) Expected Contributions with Interest [(2a) + (2b)] 11,057,611
f) Actual Contributions with Interest [(2c) + (2d)] 11,000,690
g) Contribution (Gain)/Loss [(2e) - (2f)] $ 56,921
3. Asset (Gain)/Loss for the Year
a) Market Value of Assets as of 6/30/14 $ 264,145,000
b) Prior Fiscal Year Receivables (949,187)
c) Current Fiscal Year Receivables 739,213
d) Contributions Received 10,610,008
e) Benefits and Refunds Paid (21,147,698) f) Transfers and Miscellaneous Adjustments 263,632
g) Expected Int. [.075 x (3a + 3b) + ((1.075)½ - 1) x ((3d) + (3e) + (3f))] 19,361,374
h) Expected Assets as of 6/30/15 [(3a) + (3b) + (3c) + (3d) + (3e) + (3f) + (3g)] 273,022,342
i) Market Value of Assets as of 6/30/15 259,169,591
j) Asset (Gain)/Loss [(3h) - (3i)] $ 13,852,751
4. Liability (Gain)/Loss for the Year
a) Total (Gain)/Loss (1i) $ 12,317,789
b) Contribution (Gain)/Loss (2g) 56,921
c) Asset (Gain)/Loss (3j) 13,852,751
d) Liability (Gain)/Loss [(4a) - (4b) - (4c)] $ (1,591,883)
CALPERS ACTUARIAL VALUATION - June 30, 2015 SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 15
Schedule of Amortization Bases
There is a two-year lag between the valuation date and the start of the contribution fiscal year.
The assets, liabilities, and funded status of the plan are measured as of the valuation date: June 30, 2015.
The required employer contributions determined by the valuation are for the fiscal year beginning two years after the valuation date: Fiscal Year 2017-18.
This two-year lag is necessary due to the amount of time needed to extract and test the membership and financial data, and the need to provide public agencies
with their required employer contribution well in advance of the start of the fiscal year.
The Unfunded Accrued Liability (UAL) is used to determine the employer contribution and therefore must be rolled forward two years from the valuation date to the first day of the fiscal year for which the contribution is being determined. The UAL is rolled forward each year by subtracting the expected payment on the UAL for
the fiscal year and adjusting for interest. The expected payment on the UAL for a fiscal year is equal to the Expected Employer Contribution for the fiscal year minus
the Expected Normal Cost for the year. The Employer Contribution for the first fiscal year is determined by the actuarial valuation two years ago and the contribution
for the second year is from the actuarial valuation one year ago. 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.
Reason for Base Date Established
Amorti-
zation Period Balance 6/30/15
Expected
Payment 2015-16 Balance 6/30/16
Expected
Payment 2016-17 Balance 6/30/17
Scheduled
Payment for 2017-18
FRESH START 06/30/04 19 $(929,441) $(68,070) $(928,572) $(70,112) $(925,521) $(72,216)
BENEFIT CHANGE 06/30/05 9 $148,354 $17,159 $141,689 $17,674 $133,991 $18,204
ASSUMPTION CHANGE 06/30/09 14 $7,475,235 $654,769 $7,356,998 $674,413 $7,209,527 $694,645
SPECIAL (GAIN)/LOSS 06/30/09 24 $8,832,974 $571,306 $8,903,104 $588,446 $8,960,723 $606,099
SPECIAL (GAIN)/LOSS 06/30/10 25 $4,199,302 $266,144 $4,238,306 $274,129 $4,271,956 $282,353
ASSUMPTION CHANGE 06/30/11 16 $6,229,833 $503,649 $6,174,876 $518,759 $6,100,131 $534,322
SPECIAL (GAIN)/LOSS 06/30/11 26 $2,376,169 $147,751 $2,401,190 $152,183 $2,423,493 $156,749
PAYMENT (GAIN)/LOSS 06/30/12 27 $1,531,406 $93,529 $1,549,288 $96,335 $1,565,603 $99,225
(GAIN)/LOSS 06/30/12 27 $43,831,226 $2,676,951 $44,343,046 $2,757,260 $44,809,987 $2,839,977
(GAIN)/LOSS 06/30/13 28 $39,133,547 $550,415 $41,497,881 $1,133,854 $43,434,617 $1,751,805
ASSUMPTION CHANGE 06/30/14 19 $18,188,169 $(167,241) $19,725,680 $375,729 $20,815,542 $774,001
(GAIN)/LOSS 06/30/14 29 $(24,569,630) $(91,238) $(26,317,755) $(370,160) $(27,907,796) $(762,530)
(GAIN)/LOSS 06/30/15 30 $12,317,789 $(150,934) $13,398,115 $(183,242) $14,592,963 $205,251
TOTAL $118,764,933 $5,004,190 $122,483,846 $5,965,268 $125,485,216 $7,127,885
CALPERS ACTUARIAL VALUATION - June 30, 2015
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 20 Page 16
30-Year Amortization Schedule and Alternatives
The amortization schedule on the previous page shows the minimum contributions required according to
CalPERS amortization policy. There has been considerable interest from many agencies in paying off these unfunded accrued liabilities sooner and the possible savings in doing so. As a result, we have provided
alternate amortization schedules to help analyze the current amortization schedule and illustrate the
advantages of accelerating unfunded liability payments.
Shown on the following page are future year amortization payments based on 1) the current amortization
schedule reflecting the individual bases and remaining periods shown on the previous page, and 2) alternate
“fresh start” amortization schedules using two sample periods that would both result in interest savings relative to the current amortization schedule. Note that the payments under each alternate scenario
increase by 3 percent for each year into the future. The schedules do not attempt to reflect any experience
after June 30, 2015 that may deviate from the actuarial assumptions. Therefore, future amortization
payments displayed in the Current Amortization Schedule may not match projected amortization payments
shown in connection with Projected Employer Contributions provided elsewhere in this report.
The Current Amortization Schedule typically contains individual bases that are both positive and negative. Positive bases result from plan changes, assumption changes or plan experience that result in increases to
unfunded liability. Negative bases result from plan changes, assumption changes or plan experience that
result in decreases to unfunded liability. The combination of positive and negative bases within an
amortization schedule can result in unusual or problematic circumstances in future years such as:
A positive total unfunded liability with a negative total payment,
A negative total unfunded liability with a positive total payment, or
Total payments that completely amortize the unfunded liability over a very short period of time
In any year where one of the above scenarios occurs, the actuary will consider corrective action such as
replacing the existing unfunded liability bases with a single “fresh start” base and amortizing it over a
reasonable period.
The Current Amortization Schedule on the following page may appear to show that, based on the current
amortization bases, one of the above scenarios will occur at some point in the future. It is impossible to
know today whether such a scenario will in fact arise since there will be additional bases added to the amortization schedule in each future year. Should such a scenario arise in any future year, the actuary will
take appropriate action based on guidelines in the CalPERS amortization policy. For purposes of this
display, total payments include any negative payments. Therefore, the amount of estimated savings may
be understated to the extent that negative payments appear in the current schedule.
CALPERS ACTUARIAL VALUATION - June 30, 2015
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 17
30-Year Amortization Schedule and Alternatives
Alternate Schedules
Current Amortization Schedule 20 Year Amortization 15 Year Amortization
Date Balance Payment Balance Payment Balance Payment
6/30/2017 125,485,216 7,127,885 125,485,216 9,474,815 125,485,216 11,503,171
6/30/2018 127,506,259 8,160,489 125,072,910 9,759,059 122,969,865 11,848,267
6/30/2019 128,608,254 9,248,636 124,334,970 10,051,831 119,908,061 12,203,715
6/30/2020 128,664,682 9,756,645 123,238,133 10,353,386 116,248,085 12,569,826
6/30/2021 128,198,627 10,280,357 121,746,373 10,663,988 111,934,018 12,946,921
6/30/2022 127,154,624 10,588,766 119,820,694 10,983,907 106,905,416 13,335,328
6/30/2023 125,712,553 10,906,430 117,418,888 11,313,425 101,096,960 13,735,388
6/30/2024 123,832,967 11,233,622 114,495,297 11,652,827 94,438,078 14,147,450
6/30/2025 121,473,174 11,570,631 111,000,535 12,002,412 86,852,546 14,571,873
6/30/2026 118,586,973 11,893,997 106,881,210 12,362,484 78,258,047 15,009,030
6/30/2027 115,149,038 12,250,817 102,079,604 12,733,359 68,565,707 15,459,301
6/30/2028 111,083,297 12,618,344 96,533,347 13,115,360 57,679,591 15,923,080
6/30/2029 106,331,570 12,996,892 90,175,053 13,508,821 45,496,160 16,400,772
6/30/2030 100,830,972 13,386,800 82,931,939 13,914,085 31,903,690 16,892,795
6/30/2031 94,513,566 12,737,689 74,725,404 14,331,508 16,781,644 17,399,579
6/30/2032 88,395,365 12,516,885 65,470,586 14,761,453
6/30/2033 82,047,234 11,413,941 55,075,879 15,204,297
6/30/2034 76,366,550 11,116,709 43,442,420 15,660,425
6/30/2035 70,567,994 10,791,366 30,463,527 16,130,238
6/30/2036 64,671,867 10,563,130 16,024,105 16,614,145
6/30/2037 58,570,172 10,880,023
6/30/2038 51,682,284 11,206,425
6/30/2039 43,939,389 11,542,618
6/30/2040 35,267,201 11,888,895
6/30/2041 25,585,573 9,826,468
6/30/2042 17,316,189 9,105,732
6/30/2043 9,173,877 8,161,145
6/30/2044 1,400,264 971,051
6/30/2045 498,476 66,890
6/30/2046 466,509 483,686
Totals 295,292,964 254,591,825 213,946,496
Estimated Savings 40,701,139 81,346,468
CALPERS ACTUARIAL VALUATION - June 30, 2015
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 18
Reconciliation of Required Employer
Contributions
Normal Cost (% of Payroll)
1. For Period 7/1/16 – 6/30/17
a) Employer Normal Cost 18.977%
b) Employee Contribution 9.143%
c) Total Normal Cost 28.120%
2. Effect of changes since the prior year annual valuation
a) Effect of changes in demographics results (0.091%)
b) Effect of plan changes 0.000%
c) Effect of changes in assumptions 0.000%
d) Net effect of the changes above [sum of (a) through (c)] (0.091%)
3. For Period 7/1/17 – 6/30/18
a) Employer Normal Cost 18.900%
b) Employee Contribution 9.129%
c) Total Normal Cost 28.029%
Employer Normal Cost Change [(3a) – (1a)] (0.077%)
Employee Contribution Change [(3b) – (1b)] (0.014%)
Unfunded Liability Contribution ($)
1. For Period 7/1/16 – 6/30/17 6,148,510
2. Effect of changes since the prior year annual valuation
a) Effect of changes in demographics and financial results 205,251
b) Effect of plan changes 0
c) Effect of changes in assumptions 0
d) Effect of progression of amortization payments 774,124
e) Effect of changes due to Fresh Start 0
f) Effect of elimination of amortization base 0
g) Net effect of the changes above [sum of (a) through (f)] 979,375
3. For Period 7/1/17 – 6/30/18 [(1)+(2g)] 7,127,885
The amounts shown for the period 7/1/16 – 6/30/17 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, 2015
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 19
Employer Contribution History
The table below provides a recent history of the required employer contributions for the plan, as determined
by the annual actuarial valuation. It does not account for prepayments or benefit changes made during a fiscal year.
Required By Valuation
Fiscal
Year
Employer
Normal Cost
Unfunded Rate
Unfunded Liability
Payment ($)
2012 - 13 18.015% 13.035% N/A
2013 - 14 18.658% 14.786% N/A
2014 - 15 18.874% 20.654% N/A
2015 - 16 18.627% 23.305% N/A
2016 - 17 18.977% 26.449% N/A
2017 - 18 18.900% N/A 7,127,885
Funding History
The table below shows the recent history of the actuarial accrued liability, the market value of assets, the
funded ratio and the annual covered payroll.
Valuation
Date
Accrued
Liability
Market Value
of Assets
(MVA)
Unfunded
Liability
Funded
Ratio
Annual
Covered
Payroll
06/30/10 $ 293,895,452 $ 190,527,731 $ 103,367,721 64.8% $ 23,030,400
06/30/11 313,183,690 225,015,089 88,168,601 71.8% 22,774,462
06/30/12 327,608,300 215,605,457 112,002,843 65.8% 20,919,846
06/30/13 338,666,499 233,417,363 105,249,136 68.9% 21,258,082
06/30/14 367,478,634 264,145,000 103,333,634 71.9% 21,274,021
06/30/15 377,934,524 259,169,591 118,764,933 68.6% 21,186,275
RISK ANALYSIS
ANALYSIS OF FUTURE INVESTMENT RETURN SCENARIOS
ANALYSIS OF DISCOUNT RATE SENSITIVITY
VOLATILITY RATIOS
HYPOTHETICAL TERMINATION LIABILITY
CALPERS ACTUARIAL VALUATION - June 30, 2015
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 21
Analysis of Future Investment Return Scenarios
The investment return for Fiscal Year 2015-16 was not known at the time this report was produced. The
investment return in Fiscal Year 2015-16 as of April 30, 2016 is 0.0 percent before administrative expenses. For purposes of projecting future employer contributions, we are assuming a 0.0 percent investment return
for Fiscal Year 2015-16.
The investment return realized during a fiscal year first affects the required contribution for the fiscal year
two years later. For example, the investment return for Fiscal Year 2015-16 will first be reflected in the
June 30, 2016 actuarial valuation that will be used to set the employer contribution for Fiscal Year 2018-19.
The Fiscal Year 2016-17 investment return will first be reflected in the June 30, 2017 actuarial valuation that will be used to set the employer contribution for Fiscal Year 2019-20 and so forth.
As part of this report, a sensitivity analysis was performed to determine the effects of various investment
returns during fiscal years 2016-17, 2017-18 and 2018-19 on the 2019-20, 2020-21 and 2021-22 employer
contributions. Once again, the projections 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 a -3.8 percent return for each of the 2016-17, 2017-18, and 2018-19 fiscal years.
Based on the current investment allocation, this is what one would expect if the markets were to give
us about a 5th percentile return from July 1, 2016 through June 30, 2019.
The second scenario is a 2.8 percent return for each of the 2016-17, 2017-18, and 2018-19 fiscal
years. Based on the current investment allocation, this is what one would expect if the markets were
to give us about a 25th percentile return from July 1, 2016 through June 30, 2019.
The third scenario is a 7.5 percent return for each of the 2016-17, 2017-18, and 2018-19 fiscal years.
Based on the current investment allocation, this is what one would expect if the markets were to give us about a 49th percentile return from July 1, 2016 through June 30, 2019.
The fourth scenario is a 12.0 percent return for each of the 2016-17, 2017-18, and 2018-19 fiscal
years. Based on the current investment allocation, this is what one would expect if the markets were
to give us about a 75th percentile return from July 1, 2016 through June 30, 2019.
Finally, the last scenario is an 18.9 percent return for each of the 2016-17, 2017-18, and 2018-19
fiscal years. Based on the current investment allocation, this is what one would expect if the markets
were to give us about a 95th percentile return from July 1, 2016 through June 30, 2019.
The table below shows the estimated projected contributions and the estimated increases for the plan under
the five different scenarios.
2016-19 Investment
Return Scenario
Fiscal Year Estimated Change Between 2018-19
and 2021-22 2019-20 2020-21 2021-22
(3.8%)
Normal Cost 18.9% 18.9% 18.9% 0.0%
UAL Contribution $10,330,611 $12,069,307 $14,275,946 $5,806,755
2.8%
Normal Cost 18.9% 18.9% 18.9% 0.0%
UAL Contribution $10,070,148 $11,304,826 $12,779,784 $4,310,593
7.5%
Normal Cost 18.9% 18.9% 18.9% 0.0%
UAL Contribution $9,884,561 $10,739,149 $11,629,663 $3,160,472
12.0%
Normal Cost 19.3% 19.6% 20.0% 1.1%
UAL Contribution $9,697,002 $10,200,234 $10,548,940 $2,079,749
18.9%
Normal Cost 20.0% 21.1% 22.1% 3.2%
UAL Contribution $9,409,063 $9,378,430 $8,884,046 $414,855
CALPERS ACTUARIAL VALUATION - June 30, 2015
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 22
For the last two scenarios in the table above the results incorporate the impact of CalPERS Risk Mitigation
Policy. A 12.0% return would result in a reduction of the discount rate by 0.05% and a return of 18.9%
would reduce the discount rate by 0.15%. Reducing the discount rate increases both the plan’s accrued
liability and normal cost. While the projections reflect estimated changes to the normal cost due to lower
discount rates, they do not reflect the possible increase in the PEPRA member contribution rate in such
scenarios. More details about the Risk Mitigation policy can be found on our website.
The projected normal cost percentages do not reflect that the normal cost will decline over time as new employees are hired into PEPRA or other lower cost benefit tiers.
Analysis of Discount Rate Sensitivity
The following analysis looks at the Fiscal Year 2017-18 total normal cost rates and liabilities under two
different discount rate scenarios. Shown below are the total normal cost rates assuming discount rates that
are 1 percent lower and 1 percent higher than the current valuation discount rate. This analysis shows the
potential plan impacts if the PERF were to realize investment returns of 6.50 percent or 8.50 percent over
the long-term.
This type of analysis gives the reader a sense of the long-term risk to required contributions.
Sensitivity Analysis
As of June 30, 2015 6.50% Discount Rate
(-1%) 7.50% Discount Rate
(assumed rate) 8.50% Discount Rate
(+1%)
Plan’s Total Normal Cost 35.207% 28.029% 22.530%
Accrued Liability $425,987,913 $377,934,524 $338,195,457
Unfunded Accrued Liability $166,818,322 $118,764,933 $79,025,866
CALPERS ACTUARIAL VALUATION - June 30, 2015
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 23
Volatility Ratios
The actuarial calculations supplied in this communication are based on a number of assumptions about
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 required employer contributions from one year
to the next. Therefore, employer contributions will inevitably fluctuate, especially due to the ups and downs
of investment returns.
Asset Volatility Ratio (AVR)
Plans that have higher asset-to-payroll ratios experience more volatile employer contributions (as a percentage of payroll) 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. Shown below is the asset volatility ratio, a measure of the plan’s current 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 (LVR)
Plans that have higher liability-to-payroll ratios experience more volatile employer contributions (as a
percentage of payroll) 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. The asset volatility ratio, described above, will
tend to move closer to the liability volatility ratio as the plan matures.
Contribution Volatility As of June 30, 2015
1. Market Value of Assets without Receivables $ 258,430,378
2. Payroll 21,186,275
3. Asset Volatility Ratio (AVR) [(1) / ( 2)] 12.2
4. Accrued Liability $ 377,934,524
5. Liability Volatility Ratio (LVR) [(4) / (2)] 17.8
CALPERS ACTUARIAL VALUATION - June 30, 2015
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
Page 24
Hypothetical Termination Liability
The hypothetical termination liability is an estimate of the financial position of the plan had the contract with
CalPERS been terminated as of June 30, 2015. The plan liability on a termination basis is calculated
differently compared to the plan’s ongoing funding liability. For this hypothetical termination liability calculation, both compensation and service are frozen as of the valuation date and no future pay increases
or service accruals are assumed.
A more conservative investment policy and asset allocation strategy was adopted by the CalPERS Board for
the Terminated Agency Pool. The Terminated Agency Pool has limited funding sources since no future
employer contributions will be made. Therefore, expected benefit payments are secured by risk-free assets
and benefit security for members is increased while limiting the funding risk. However, this asset allocation
has a lower expected rate of return than the PERF and consequently, a lower discount rate assumption. The lower discount rate for the Terminated Agency Pool results in higher liabilities for terminated plans.
The effective termination discount rate will depend on actual market rates of return for risk-free securities
on the date of termination. As market discount rates are variable the table below shows a range for the
hypothetical termination liability based on the lowest and highest interest rates observed during an
approximate 2-year period centered around the valuation date.
Market
Value of
Assets (MVA)
Hypothetical
Termination
Liability1,2
@ 2.00%
Funded
Status
Unfunded
Termination
Liability
@ 2.00%
Hypothetical
Termination
Liability1,2
@ 3.25%
Funded
Status
Unfunded
Termination
Liability
@ 3.25%
$259,169,591 $772,815,847 33.5% $513,646,256 $647,207,635 40.0% $388,038,044
1 The hypothetical liabilities calculated above include a 7 percent mortality contingency load in accordance with Board
policy. Other actuarial assumptions, such as wage and inflation assumptions, can be found in Appendix A.
2 The current discount rate assumption used for termination valuations is a weighted average of the 10-year and 30-year U.S. Treasury yields where the weights are based on matching asset and liability durations as of the termination date.
The discount rates used in the table are based on 20-year Treasury bonds, rounded to the nearest quarter percentage
point, which is a good proxy for most plans. The 20-year Treasury yield was 2.75 percent on June 30, 2015.
In order to terminate the plan, you must first contact our Retirement Services Contract Unit to initiate a
Resolution of Intent to Terminate. The completed Resolution will allow the plan actuary to give you a
preliminary termination valuation with a more up-to-date estimate of the plan liabilities. CalPERS advises
you to consult with the plan actuary before beginning this process.
PLAN’S MAJOR BENEFIT PROVISIONS
CALPERS ACTUARIAL VALUATION – June 30, 2015
SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
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.
Contract Package
Active
Police
Active
Fire
Active
Fire
Active
Police
Active
Fire
Active
Police
Active
Fire
Benefit Provision
Benefit Formula 3.0% @ 50 3.0% @ 50 3.0% @ 50 2.7% @ 57 3.0% @ 55 3.0% @ 55 2.7% @ 57
Social Security Coverage No No No No No No No Full/Modified Full Full Full Full Full Full Full
Employee Contribution Rate 9.00% 9.00% 9.00% 10.75% 9.00% 9.00% 10.75%
Final Average Compensation Period One Year One Year One Year Three Year Three Year Three Year Three Year
Sick Leave Credit No No No No No No No
Non-Industrial Disability Standard Standard Standard Standard Standard Standard Standard
Industrial Disability Yes Yes Yes Yes Yes Yes Yes
Pre-Retirement Death Benefits
Optional Settlement 2W No Yes Yes No Yes No Yes
1959 Survivor Benefit Level Level 1 Level 1 Level 1 Level 1 Level 1 Level 1 Level 1 Special Yes Yes Yes Yes Yes Yes Yes
Alternate (firefighters) No No No No No No No
Post-Retirement Death Benefits
Lump Sum $500 $500 $500 $500 $500 $500 $500
Survivor Allowance (PRSA) No No No No No No No
COLA 2% 2% 2% 2% 2% 2% 2%
Page 26
CALPERS ACTUARIAL VALUATION – June 30, 2015 SAFETY PLAN OF THE CITY OF PALO ALTO
CalPERS ID: 6373437857
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.
Contract Package
Receiving
Fire
Receiving
Police
Benefit Provision
Benefit Formula
Social Security Coverage
Full/Modified
Employee Contribution Rate
Final Average Compensation Period
Sick Leave Credit
Non-Industrial Disability
Industrial Disability
Pre-Retirement Death Benefits
Optional Settlement 2W
1959 Survivor Benefit Level
Special
Alternate (firefighters)
Post-Retirement Death Benefits
Lump Sum $500 $500
Survivor Allowance (PRSA) No No
COLA 2% 2%
Page 27
APPENDICES
APPENDIX A – ACTUARIAL METHODS AND ASSUMPTIONS
APPENDIX B – PRINCIPAL PLAN PROVISIONS
APPENDIX C – PARTICIPANT DATA
APPENDIX D – DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION RATES
APPENDIX E – GLOSSARY OF ACTUARIAL TERMS
APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
ACTUARIAL DATA
ACTUARIAL METHODS
ACTUARIAL ASSUMPTIONS
MISCELLANEOUS
CALPERS ACTUARIAL VALUATION – June 30, 2015 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 required employer contributions.
Actuarial Methods
Actuarial Cost Method
The actuarial cost method used 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 percentage of pay in each year from the member’s age of hire (entry age) to their assumed retirement age on the valuation date. The cost allocated to the current fiscal year is called the normal cost.
The actuarial accrued liability for active members is then calculated as the portion of the total cost of the
plan allocated to prior years. The actuarial accrued liability for members currently receiving benefits and for
members entitled to deferred benefits is equal to the present value of the benefits expected to be paid. No
normal costs are applicable for these participants.
Amortization of Unfunded Actuarial Accrued Liability
The excess of the total actuarial accrued liability over the market value of plan assets is called the unfunded
actuarial accrued liability (UAL). Funding requirements are determined by adding the normal cost and an
amortization payment toward the unfunded liability. Commencing with the June 30, 2013 valuation, all new
gains or losses are tracked and amortized over a fixed 30-year period with a 5 year ramp up at the
beginning and a 5 year ramp down at the end of the amortization period. All changes in liability due to plan
amendments (other than golden handshakes) are amortized over a 20-year period with no ramp. Changes in actuarial assumptions, or changes in actuarial methodology are amortized over a 20-year period with a 5
year ramp up at the beginning and a 5 year ramp down at the end of the amortization period. Changes in
unfunded accrued liability due to a Golden Handshake will be amortized over a period of 5 years.
Exceptions for Inconsistencies:
An exception to the amortization rules above is used whenever their application results in inconsistencies. In these cases, a “fresh start” approach is used. This means that the current unfunded actuarial liability is
projected and amortized over a set number of years. For example, a fresh start is needed in the following
situations:
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.
It should be noted that the actuary may determine that a fresh start is necessary under other
circumstances. In all cases of a fresh start, the period is set by the actuary at what is deemed appropriate;
however, the period will not be greater than 30 years.
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-2
Exceptions for Inactive Plans:
The following exceptions apply to plans classified as Inactive. These plans have no active members and no
expectation to have active members in the future.
Amortization of unfunded liability is on a “level dollar” basis rather than a “level percent of pay”
basis
Actuarial judgment will be used to shorten amortization periods for Inactive plans with existing
periods that are deemed too long given the duration of the liability. In many cases, a Fresh Start
approach with a 20 year closed period will be used. However, the specific demographics of the
plan will be used to determine if periods shorter or longer than 20 years may be more appropriate.
Asset Valuation Method
It is the policy of the CalPERS Board of Administration to use professionally accepted amortization methods
to eliminate a surplus or an unfunded accrued liability in a manner that maintains benefit security for the
members of the System while minimizing substantial variations in required employer contributions. On April
17, 2013, the CalPERS Board of Administration approved a recommendation to change the CalPERS
amortization and rate smoothing policies. Beginning with the June 30, 2013 valuations that set the employer
contribution for Fiscal Year 2015-16, CalPERS employs a policy that amortizes all gains and losses over a fixed 30-year period. The increase or decrease in the rate is then spread directly over a 5-year period. This
method is referred to as “direct rate smoothing.” CalPERS no longer uses an actuarial value of assets and
only uses the market value of assets. The direct rate smoothing method is equivalent to a method using a 5
year asset smoothing period with no actuarial value of asset corridor and a 25-year amortization period for
gains and losses.
PEPRA Normal Cost Rate Methodology
Per Government Code Section 7522.30(b) the “normal cost rate” shall mean the annual actuarially
determined normal cost for the plan of retirement benefits provided to the new member and shall be
established based on actuarial assumptions used to determine the liabilities and costs as part of the annual
actuarial valuation. The plan of retirement benefits shall include any elements that would impact the
actuarial determination of the normal cost, including, but not limited to, the retirement formula, eligibility
and vesting criteria, ancillary benefit provisions, and any automatic cost-of-living adjustments as determined by the public retirement system.
Each non-pooled plan is considered to be stable with a sufficiently large demographic of actives. It is
preferable to determine normal cost using a large active population ongoing so that this rate remains
relatively stable. The total PEPRA normal cost will be calculated using all active members within a non-
pooled plan. Accordingly, plans will be funded equally between employer and employee based on the
demographics of the employees of that employer. As each non-pooled plan builds up to either 100+ active
PEPRA members or half of their active population is under the PEPRA formula, the total PEPRA normal cost will be based on the active PEPRA population in the plan.
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-3
Actuarial Assumptions
In 2014, CalPERS completed a 2-year asset liability management study incorporating actuarial assumptions
and strategic asset allocation. On February 19, 2014, the CalPERS Board of Administration adopted relatively
modest changes to the current asset allocation that will reduce the expected volatility of returns. The
adopted asset allocation is expected to have a long-term blended return that continues to support a
discount rate assumption of 7.5 percent. The Board also approved several changes to the demographic
assumptions that more closely align with actual experience. The most significant of these is mortality
improvement to acknowledge the greater life expectancies we are seeing in our membership and expected
continued improvements. The new actuarial assumptions were first used in the June 30, 2014 valuation to set the Fiscal Year 2016-17 contribution for public agency employers. The increase in liability due to new
actuarial assumptions is amortized over a 20-year period with a 5-year ramp-up/ramp-down in accordance
with Board policy. These new actuarial assumptions are set forth in this section.
For more details and additional rationale for the selection of the actuarial assumptions, please refer to the
CalPERS Experience Study and Review of Actuarial Assumptions report from January 2014 that can be found
on the CalPERS website under: “Forms and Publications”. Click on “View All” and search for Experience Study.
All actuarial assumptions (except the discount rates used for the hypothetical termination liability) represent
an estimate of future experience rather than observations of the estimates inherent in market data.
Economic Assumptions
Discount Rate
7.5 percent compounded annually (net of expenses). This assumption is used for all plans.
Termination Liability Discount Rate
The current discount rate assumption used for termination valuations is a weighted average of the
10-year and 30-year U.S. Treasury yields where the weights are based on matching asset and
liability durations as of the termination date.
The hypothetical termination liabilities in this report are calculated using an observed range of
market interest rates. This range is based on the lowest and highest 20-year Treasury bond
observed during an approximate 2-year period centered around the valuation date. The 20-year
Treasury bond has a similar duration to most plan liabilities and serves as a good proxy for the
termination discount rate. The 20-year Treasury yield was 2.75 percent on June 30, 2015.
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-4
Salary Growth
Annual increases vary by category, entry age, and duration of service. A sample of assumed
increases are shown below.
Public Agency Miscellaneous
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1220 0.1160 0.1020
1 0.0990 0.0940 0.0830
2 0.0860 0.0810 0.0710
3 0.0770 0.0720 0.0630
4 0.0700 0.0650 0.0570
5 0.0640 0.0600 0.0520
10 0.0460 0.0430 0.0390
15 0.0420 0.0400 0.0360
20 0.0390 0.0380 0.0340
25 0.0370 0.0360 0.0330
30 0.0350 0.0340 0.0320
Public Agency Fire
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.2000 0.1980 0.1680
1 0.1490 0.1460 0.1250
2 0.1200 0.1160 0.0990
3 0.0980 0.0940 0.0810
4 0.0820 0.0780 0.0670
5 0.0690 0.0640 0.0550
10 0.0470 0.0460 0.0420
15 0.0440 0.0420 0.0390
20 0.0420 0.0390 0.0360
25 0.0400 0.0370 0.0340
30 0.0380 0.0360 0.0340
Public Agency Police
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1500 0.1470 0.1310
1 0.1160 0.1120 0.1010
2 0.0950 0.0920 0.0830
3 0.0810 0.0780 0.0700
4 0.0700 0.0670 0.0600
5 0.0610 0.0580 0.0520
10 0.0450 0.0430 0.0370
15 0.0450 0.0430 0.0370
20 0.0450 0.0430 0.0370
25 0.0450 0.0430 0.0370
30 0.0450 0.0430 0.0370
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-5
Salary Growth (continued)
Public Agency County Peace Officers
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1770 0.1670 0.1500
1 0.1340 0.1260 0.1140
2 0.1080 0.1030 0.0940
3 0.0900 0.0860 0.0790
4 0.0760 0.0730 0.0670
5 0.0650 0.0620 0.0580
10 0.0470 0.0450 0.0410
15 0.0460 0.0450 0.0390
20 0.0460 0.0450 0.0380
25 0.0460 0.0450 0.0380
30 0.0460 0.0440 0.0380
Schools
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.0900 0.0880 0.0820
1 0.0780 0.0750 0.0700
2 0.0700 0.0680 0.0630
3 0.0650 0.0630 0.0580
4 0.0610 0.0590 0.0540
5 0.0580 0.0560 0.0510
10 0.0460 0.0450 0.0410
15 0.0420 0.0410 0.0380
20 0.0390 0.0380 0.0350
25 0.0370 0.0350 0.0330
30 0.0350 0.0330 0.0310
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 percent compounded annually (used in projecting the payroll over which the unfunded liability
is amortized). This assumption is used for all plans.
Inflation
2.75 percent compounded annually. This assumption is used for all plans.
Non-valued Potential Additional Liabilities
The potential liability loss for a cost-of-living increase exceeding the 2.75 percent inflation
assumption, and any potential liability loss from future member service purchases are not reflected
in the valuation.
Miscellaneous Loading Factors
Credit for Unused Sick Leave
Total years of service is increased by 1 percent for those plans that have accepted the provision
providing Credit for Unused Sick Leave.
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-6
Conversion of Employer Paid Member Contributions (EPMC)
Total years of service is increased by the Employee Contribution Rate for those plans with the
provision providing for the Conversion of Employer Paid Member Contributions (EPMC) during the
final compensation period.
Norris Decision (Best Factors)
Employees hired prior to July 1, 1982 have projected benefit amounts increased in order to reflect
the use of “Best Factors” in the calculation of optional benefit forms. This is due to a 1983
Supreme Court decision, known as the Norris decision, which required males and females to be
treated equally in the determination of benefit amounts. Consequently, anyone already employed
at that time is given the best possible conversion factor when optional benefits are determined. No
loading is necessary for employees hired after July 1, 1982.
Termination Liability
The termination liabilities include a 7 percent 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 0.00031 0.00020 0.00003
25 0.00040 0.00023 0.00007
30 0.00049 0.00025 0.00010
35 0.00057 0.00035 0.00012
40 0.00075 0.00050 0.00013
45 0.00106 0.00071 0.00014 50 0.00155 0.00100 0.00015
55 0.00228 0.00138 0.00016
60 0.00308 0.00182 0.00017
65 0.00400 0.00257 0.00018
70 0.00524 0.00367 0.00019
75 0.00713 0.00526 0.00020
80 0.00990 0.00814 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 percent will become the non-industrial death rate and 1 percent will
become the industrial death rate.
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-7
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 0.00501 0.00466 0.01680 0.01158 0.00501 0.00466
55 0.00599 0.00416 0.01973 0.01149 0.00599 0.00416
60 0.00710 0.00436 0.02289 0.01235 0.00754 0.00518
65 0.00829 0.00588 0.02451 0.01607 0.01122 0.00838
70 0.01305 0.00993 0.02875 0.02211 0.01635 0.01395 75 0.02205 0.01722 0.03990 0.03037 0.02834 0.02319
80 0.03899 0.02902 0.06083 0.04725 0.04899 0.03910
85 0.06969 0.05243 0.09731 0.07762 0.07679 0.06251
90 0.12974 0.09887 0.14804 0.12890 0.12974 0.09887
95 0.22444 0.18489 0.22444 0.21746 0.22444 0.18489
100 0.32536 0.30017 0.32536 0.30017 0.32536 0.30017
105 0.58527 0.56093 0.58527 0.56093 0.58527 0.56093 110 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000
The post-retirement mortality rates above include 20 years of projected on-going mortality
improvement using Scale BB published by the Society of Actuaries.
Marital Status
For active members, a percentage who are married upon retirement is assumed according to member category as shown in the following table.
Member Category Percent Married
Miscellaneous Member 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 Miscellaneous Load Factor Safety
50 190% 310% 51 110% 190%
52 110% 105%
53 through 54 100% 105%
55 100% 140%
56 and above 100% (no change) 100% (no change)
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.
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-8
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 also used for Public Agency Local Prosecutors, Other
Safety, Local Sheriff, and School Police.
Schools
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45
0 0.1730 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, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-9
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 also used for Public Agency Local
Prosecutors, Other Safety, Local Sheriff, and School Police.
Schools
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40
5 0.0816 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, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-10
Non-Industrial (Not Job-Related) Disability
Rates vary by age and gender for miscellaneous plans. Rates vary by age and category for safety
plans.
Miscellaneous Fire Police County Peace Officer Schools
Age Male Female Male and Female Male and Female Male and Female Male Female
20 0.0002 0.0001 0.0001 0.0001 0.0001 0.0003 0.0003
25 0.0002 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001
30 0.0002 0.0002 0.0001 0.0002 0.0001 0.0001 0.0002
35 0.0005 0.0008 0.0001 0.0003 0.0004 0.0005 0.0004
40 0.0012 0.0016 0.0001 0.0004 0.0007 0.0015 0.0010
45 0.0019 0.0022 0.0002 0.0005 0.0013 0.0030 0.0019
50 0.0021 0.0023 0.0005 0.0008 0.0018 0.0039 0.0024
55 0.0022 0.0018 0.0010 0.0013 0.0010 0.0036 0.0021
60 0.0022 0.0014 0.0015 0.0020 0.0006 0.0031 0.0014
The miscellaneous non-industrial disability rates are used for Local Prosecutors.
The police non-industrial disability rates are also used for Other Safety, Local Sheriff, and
School Police.
Industrial (Job-Related) Disability Rates vary by age and category.
Age Fire Police County Peace Officer
20 0.0001 0.0000 0.0004
25 0.0003 0.0017 0.0013
30 0.0007 0.0048 0.0025
35 0.0016 0.0079 0.0037
40 0.0030 0.0110 0.0051
45 0.0053 0.0141 0.0067
50 0.0277 0.0185 0.0092
55 0.0409 0.0479 0.0151
60 0.0583 0.0602 0.0174
The police industrial disability rates are also used for Local Sheriff and Other Safety.
Fifty percent of the police industrial disability rates are used for School Police.
One percent of the police industrial disability rates are used for Local Prosecutors.
Normally, rates are zero for miscellaneous plans unless the agency has specifically contracted
for industrial disability benefits. If so, each miscellaneous non-industrial disability rate will be split into two components: 50 percent will become the non-industrial disability rate and 50
percent will become the industrial disability rate.
Service Retirement
Retirement rates vary by age, service, and formula, except for the safety ½ @ 55 and 2% @ 55
formulas, where retirement rates vary by age only.
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-11
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 0.010 0.013 0.015 0.018 0.019 0.021
51 0.009 0.011 0.014 0.016 0.017 0.019
52 0.011 0.014 0.017 0.020 0.022 0.024
53 0.010 0.012 0.015 0.017 0.020 0.021
54 0.015 0.019 0.023 0.025 0.029 0.031
55 0.022 0.029 0.035 0.040 0.045 0.049
56 0.018 0.024 0.028 0.033 0.036 0.040
57 0.024 0.032 0.038 0.043 0.049 0.053
58 0.027 0.036 0.043 0.049 0.055 0.061
59 0.033 0.044 0.054 0.061 0.068 0.076
60 0.056 0.077 0.092 0.105 0.117 0.130
61 0.071 0.097 0.118 0.134 0.149 0.166
62 0.117 0.164 0.198 0.224 0.250 0.280
63 0.122 0.171 0.207 0.234 0.261 0.292
64 0.114 0.159 0.193 0.218 0.244 0.271
65 0.150 0.209 0.255 0.287 0.321 0.358
66 0.114 0.158 0.192 0.217 0.243 0.270
67 0.141 0.196 0.238 0.270 0.301 0.337
68 0.103 0.143 0.174 0.196 0.219 0.245
69 0.109 0.153 0.185 0.209 0.234 0.261
70 0.117 0.162 0.197 0.222 0.248 0.277
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-12
Service Retirement
Public Agency Miscellaneous 2% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.014 0.018 0.021 0.025 0.027 0.031
51 0.012 0.014 0.017 0.020 0.021 0.025
52 0.013 0.017 0.019 0.023 0.025 0.028
53 0.015 0.020 0.023 0.027 0.030 0.034
54 0.026 0.033 0.038 0.045 0.051 0.059
55 0.048 0.061 0.074 0.088 0.100 0.117
56 0.042 0.053 0.063 0.075 0.085 0.100
57 0.044 0.056 0.067 0.081 0.091 0.107
58 0.049 0.062 0.074 0.089 0.100 0.118
59 0.057 0.072 0.086 0.103 0.118 0.138
60 0.067 0.086 0.103 0.123 0.139 0.164
61 0.081 0.103 0.124 0.148 0.168 0.199
62 0.116 0.147 0.178 0.214 0.243 0.288
63 0.114 0.144 0.174 0.208 0.237 0.281
64 0.108 0.138 0.166 0.199 0.227 0.268
65 0.155 0.197 0.238 0.285 0.325 0.386
66 0.132 0.168 0.203 0.243 0.276 0.328
67 0.122 0.155 0.189 0.225 0.256 0.304
68 0.111 0.141 0.170 0.204 0.232 0.274
69 0.114 0.144 0.174 0.209 0.238 0.282
70 0.130 0.165 0.200 0.240 0.272 0.323
Public Agency Miscellaneous 2.5% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.004 0.009 0.019 0.029 0.049 0.094
51 0.004 0.009 0.019 0.029 0.049 0.094
52 0.004 0.009 0.020 0.030 0.050 0.095
53 0.008 0.014 0.025 0.036 0.058 0.104
54 0.024 0.034 0.050 0.066 0.091 0.142
55 0.066 0.088 0.115 0.142 0.179 0.241
56 0.042 0.057 0.078 0.098 0.128 0.184
57 0.041 0.057 0.077 0.097 0.128 0.183
58 0.045 0.061 0.083 0.104 0.136 0.192
59 0.055 0.074 0.098 0.123 0.157 0.216
60 0.066 0.088 0.115 0.142 0.179 0.241
61 0.072 0.095 0.124 0.153 0.191 0.255
62 0.099 0.130 0.166 0.202 0.248 0.319
63 0.092 0.121 0.155 0.189 0.233 0.302
64 0.091 0.119 0.153 0.187 0.231 0.299
65 0.122 0.160 0.202 0.245 0.297 0.374
66 0.138 0.179 0.226 0.272 0.329 0.411
67 0.114 0.149 0.189 0.229 0.279 0.354
68 0.100 0.131 0.168 0.204 0.250 0.322
69 0.114 0.149 0.189 0.229 0.279 0.354
70 0.127 0.165 0.209 0.253 0.306 0.385
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-13
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 0.004 0.009 0.014 0.035 0.055 0.095
51 0.002 0.006 0.011 0.030 0.050 0.090
52 0.006 0.012 0.017 0.038 0.059 0.099
53 0.010 0.017 0.024 0.046 0.068 0.110
54 0.032 0.044 0.057 0.085 0.113 0.160
55 0.076 0.101 0.125 0.165 0.205 0.265
56 0.055 0.074 0.093 0.127 0.160 0.214
57 0.050 0.068 0.086 0.118 0.151 0.204
58 0.055 0.074 0.093 0.127 0.161 0.215
59 0.061 0.082 0.102 0.138 0.174 0.229
60 0.069 0.093 0.116 0.154 0.192 0.250
61 0.086 0.113 0.141 0.183 0.225 0.288
62 0.105 0.138 0.171 0.218 0.266 0.334
63 0.103 0.135 0.167 0.215 0.262 0.329
64 0.109 0.143 0.177 0.226 0.275 0.344
65 0.134 0.174 0.215 0.270 0.326 0.401
66 0.147 0.191 0.235 0.294 0.354 0.433
67 0.121 0.158 0.196 0.248 0.300 0.372
68 0.113 0.147 0.182 0.232 0.282 0.352
69 0.117 0.153 0.189 0.240 0.291 0.362
70 0.141 0.183 0.226 0.283 0.341 0.418
Public Agency Miscellaneous 3% @ 60
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.012 0.018 0.024 0.039 0.040 0.091
51 0.009 0.014 0.019 0.034 0.034 0.084
52 0.014 0.020 0.026 0.043 0.044 0.096
53 0.016 0.023 0.031 0.048 0.050 0.102
54 0.026 0.036 0.045 0.065 0.070 0.125
55 0.043 0.057 0.072 0.096 0.105 0.165
56 0.042 0.056 0.070 0.094 0.103 0.162
57 0.049 0.065 0.082 0.108 0.119 0.180
58 0.057 0.076 0.094 0.122 0.136 0.199
59 0.076 0.100 0.123 0.157 0.175 0.244
60 0.114 0.148 0.182 0.226 0.255 0.334
61 0.095 0.123 0.152 0.190 0.214 0.288
62 0.133 0.172 0.211 0.260 0.294 0.378
63 0.129 0.166 0.204 0.252 0.285 0.368
64 0.143 0.185 0.226 0.278 0.315 0.401
65 0.202 0.260 0.318 0.386 0.439 0.542
66 0.177 0.228 0.279 0.340 0.386 0.482
67 0.151 0.194 0.238 0.292 0.331 0.420
68 0.139 0.179 0.220 0.270 0.306 0.391
69 0.190 0.245 0.299 0.364 0.414 0.513
70 0.140 0.182 0.223 0.274 0.310 0.396
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-14
Service Retirement
Public Agency Miscellaneous 2% @ 62
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.000 0.000 0.000 0.000 0.000 0.000
51 0.000 0.000 0.000 0.000 0.000 0.000
52 0.010 0.013 0.016 0.019 0.022 0.024
53 0.013 0.017 0.020 0.024 0.027 0.031
54 0.021 0.027 0.033 0.039 0.045 0.050
55 0.044 0.056 0.068 0.080 0.092 0.104
56 0.030 0.039 0.047 0.055 0.063 0.072
57 0.036 0.046 0.056 0.066 0.076 0.086
58 0.046 0.059 0.072 0.085 0.097 0.110
59 0.058 0.074 0.089 0.105 0.121 0.137
60 0.062 0.078 0.095 0.112 0.129 0.146
61 0.062 0.079 0.096 0.113 0.129 0.146
62 0.097 0.123 0.150 0.176 0.202 0.229
63 0.089 0.113 0.137 0.162 0.186 0.210
64 0.094 0.120 0.145 0.171 0.197 0.222
65 0.129 0.164 0.199 0.234 0.269 0.304
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
Service Retirement
Public Agency Fire ½ @ 55 and 2% @ 55
Age
50
51
52 53
54
55
Rate
0.0159
0.0000
0.0344 0.0199
0.0413
0.0751
Age
56
57
58 59
60
Rate
0.1108
0.0000
0.0950 0.0441
1.00000
Public Agency Police ½ @ 55 and 2% @ 55
Age
50
51
52 53
54
55
Rate
0.0255
0.0000
0.0164 0.0272
0.0095
0.1667
Age
56
57
58 59
60
Rate
0.0692
0.0511
0.0724 0.0704
1.0000
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-15
Service Retirement
Public Agency Police 2% @ 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.005 0.005 0.005 0.005 0.017 0.089
51 0.005 0.005 0.005 0.005 0.017 0.087
52 0.018 0.018 0.018 0.018 0.042 0.132
53 0.044 0.044 0.044 0.044 0.090 0.217
54 0.065 0.065 0.065 0.065 0.126 0.283
55 0.086 0.086 0.086 0.086 0.166 0.354
56 0.067 0.067 0.067 0.067 0.130 0.289
57 0.066 0.066 0.066 0.066 0.129 0.288
58 0.066 0.066 0.066 0.066 0.129 0.288
59 0.139 0.139 0.139 0.139 0.176 0.312
60 0.123 0.123 0.123 0.123 0.153 0.278
61 0.110 0.110 0.110 0.110 0.138 0.256
62 0.130 0.130 0.130 0.130 0.162 0.291
63 0.130 0.130 0.130 0.130 0.162 0.291
64 0.130 0.130 0.130 0.130 0.162 0.291
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.
Service Retirement
Public Agency Fire 2% @ 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.009 0.009 0.009 0.009 0.013 0.020
51 0.013 0.013 0.013 0.013 0.020 0.029
52 0.018 0.018 0.018 0.018 0.028 0.042
53 0.052 0.052 0.052 0.052 0.079 0.119
54 0.067 0.067 0.067 0.067 0.103 0.154
55 0.089 0.089 0.089 0.089 0.136 0.204
56 0.083 0.083 0.083 0.083 0.127 0.190
57 0.082 0.082 0.082 0.082 0.126 0.189
58 0.088 0.088 0.088 0.088 0.136 0.204
59 0.074 0.074 0.074 0.074 0.113 0.170
60 0.100 0.100 0.100 0.100 0.154 0.230
61 0.072 0.072 0.072 0.072 0.110 0.165
62 0.099 0.099 0.099 0.099 0.152 0.228
63 0.114 0.114 0.114 0.114 0.175 0.262
64 0.114 0.114 0.114 0.114 0.175 0.262
65 1.000 1.000 1.000 1.000 1.000 1.000
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-16
Service Retirement
Public Agency Police 3% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.004 0.004 0.004 0.004 0.015 0.086
51 0.014 0.014 0.014 0.014 0.034 0.114
52 0.026 0.026 0.026 0.026 0.060 0.154
53 0.038 0.038 0.038 0.038 0.083 0.188
54 0.071 0.071 0.071 0.071 0.151 0.292
55 0.061 0.061 0.061 0.061 0.131 0.261
56 0.072 0.072 0.072 0.072 0.153 0.295
57 0.065 0.065 0.065 0.065 0.140 0.273
58 0.066 0.066 0.066 0.066 0.142 0.277
59 0.118 0.118 0.118 0.118 0.247 0.437
60 0.065 0.065 0.065 0.065 0.138 0.272
61 0.084 0.084 0.084 0.084 0.178 0.332
62 0.108 0.108 0.108 0.108 0.226 0.405
63 0.084 0.084 0.084 0.084 0.178 0.332
64 0.084 0.084 0.084 0.084 0.178 0.332
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.
Service Retirement
Public Agency Fire 3% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.001 0.001 0.001 0.006 0.016 0.069
51 0.002 0.002 0.002 0.006 0.018 0.071
52 0.012 0.012 0.012 0.021 0.040 0.098
53 0.032 0.032 0.032 0.049 0.085 0.149
54 0.057 0.057 0.057 0.087 0.144 0.217
55 0.073 0.073 0.073 0.109 0.179 0.259
56 0.064 0.064 0.064 0.097 0.161 0.238
57 0.063 0.063 0.063 0.095 0.157 0.233
58 0.065 0.065 0.065 0.099 0.163 0.241
59 0.088 0.088 0.088 0.131 0.213 0.299
60 0.105 0.105 0.105 0.155 0.251 0.344
61 0.118 0.118 0.118 0.175 0.282 0.380
62 0.087 0.087 0.087 0.128 0.210 0.295
63 0.067 0.067 0.067 0.100 0.165 0.243
64 0.067 0.067 0.067 0.100 0.165 0.243
65 1.000 1.000 1.000 1.000 1.000 1.000
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-17
Service Retirement
Public Agency Police 3% @ 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.050 0.050 0.050 0.099 0.240 0.314
51 0.034 0.034 0.034 0.072 0.198 0.260
52 0.033 0.033 0.033 0.071 0.198 0.259
53 0.039 0.039 0.039 0.080 0.212 0.277
54 0.045 0.045 0.045 0.092 0.229 0.300
55 0.052 0.052 0.052 0.105 0.248 0.323
56 0.042 0.042 0.042 0.087 0.221 0.289
57 0.043 0.043 0.043 0.088 0.223 0.292
58 0.054 0.054 0.054 0.109 0.255 0.333
59 0.054 0.054 0.054 0.108 0.253 0.330
60 0.060 0.060 0.060 0.121 0.272 0.355
61 0.048 0.048 0.048 0.098 0.238 0.311
62 0.061 0.061 0.061 0.122 0.274 0.357
63 0.057 0.057 0.057 0.115 0.263 0.343
64 0.069 0.069 0.069 0.137 0.296 0.385
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.
Service Retirement
Public Agency Fire 3% @ 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.020 0.020 0.020 0.040 0.130 0.192
51 0.008 0.008 0.008 0.023 0.107 0.164
52 0.023 0.023 0.023 0.043 0.136 0.198
53 0.023 0.023 0.023 0.043 0.135 0.198
54 0.027 0.027 0.027 0.048 0.143 0.207
55 0.043 0.043 0.043 0.070 0.174 0.244
56 0.053 0.053 0.053 0.085 0.196 0.269
57 0.054 0.054 0.054 0.086 0.197 0.271
58 0.052 0.052 0.052 0.084 0.193 0.268
59 0.075 0.075 0.075 0.116 0.239 0.321
60 0.065 0.065 0.065 0.102 0.219 0.298
61 0.076 0.076 0.076 0.117 0.241 0.324
62 0.068 0.068 0.068 0.106 0.224 0.304
63 0.027 0.027 0.027 0.049 0.143 0.208
64 0.094 0.094 0.094 0.143 0.277 0.366
65 1.000 1.000 1.000 1.000 1.000 1.000
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-18
Service Retirement
Public Agency Police 2% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.011 0.011 0.011 0.011 0.020 0.036
51 0.009 0.009 0.009 0.009 0.016 0.028
52 0.018 0.018 0.018 0.018 0.034 0.060
53 0.037 0.037 0.037 0.037 0.067 0.119
54 0.049 0.049 0.049 0.049 0.089 0.159
55 0.063 0.063 0.063 0.063 0.115 0.205
56 0.045 0.045 0.045 0.045 0.082 0.146
57 0.064 0.064 0.064 0.064 0.117 0.209
58 0.047 0.047 0.047 0.047 0.086 0.154
59 0.105 0.105 0.105 0.105 0.130 0.191
60 0.105 0.105 0.105 0.105 0.129 0.188
61 0.105 0.105 0.105 0.105 0.129 0.188
62 0.105 0.105 0.105 0.105 0.129 0.188
63 0.105 0.105 0.105 0.105 0.129 0.188
64 0.105 0.105 0.105 0.105 0.129 0.188
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.
Service Retirement
Public Agency Fire 2% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.005 0.005 0.005 0.005 0.008 0.012
51 0.006 0.006 0.006 0.006 0.009 0.013
52 0.012 0.012 0.012 0.012 0.019 0.028
53 0.033 0.033 0.033 0.033 0.050 0.075
54 0.045 0.045 0.045 0.045 0.069 0.103
55 0.061 0.061 0.061 0.061 0.094 0.140
56 0.055 0.055 0.055 0.055 0.084 0.126
57 0.081 0.081 0.081 0.081 0.125 0.187
58 0.059 0.059 0.059 0.059 0.091 0.137
59 0.055 0.055 0.055 0.055 0.084 0.126
60 0.085 0.085 0.085 0.085 0.131 0.196
61 0.085 0.085 0.085 0.085 0.131 0.196
62 0.085 0.085 0.085 0.085 0.131 0.196
63 0.085 0.085 0.085 0.085 0.131 0.196
64 0.085 0.085 0.085 0.085 0.131 0.196
65 1.000 1.000 1.000 1.000 1.000 1.000
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-19
Service Retirement
Public Agency Police 2.5% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.014 0.014 0.014 0.014 0.025 0.045
51 0.012 0.012 0.012 0.012 0.021 0.038
52 0.025 0.025 0.025 0.025 0.046 0.081
53 0.047 0.047 0.047 0.047 0.086 0.154
54 0.063 0.063 0.063 0.063 0.115 0.205
55 0.076 0.076 0.076 0.076 0.140 0.249
56 0.054 0.054 0.054 0.054 0.099 0.177
57 0.071 0.071 0.071 0.071 0.130 0.232
58 0.057 0.057 0.057 0.057 0.103 0.184
59 0.126 0.126 0.126 0.126 0.156 0.229
60 0.126 0.126 0.126 0.126 0.155 0.226
61 0.126 0.126 0.126 0.126 0.155 0.226
62 0.126 0.126 0.126 0.126 0.155 0.226
63 0.126 0.126 0.126 0.126 0.155 0.226
64 0.126 0.126 0.126 0.126 0.155 0.226
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.
Service Retirement
Public Agency Fire 2.5% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.007 0.007 0.007 0.007 0.010 0.015
51 0.008 0.008 0.008 0.008 0.012 0.018
52 0.016 0.016 0.016 0.016 0.025 0.038
53 0.042 0.042 0.042 0.042 0.064 0.096
54 0.057 0.057 0.057 0.057 0.088 0.132
55 0.074 0.074 0.074 0.074 0.114 0.170
56 0.066 0.066 0.066 0.066 0.102 0.153
57 0.090 0.090 0.090 0.090 0.139 0.208
58 0.071 0.071 0.071 0.071 0.110 0.164
59 0.066 0.066 0.066 0.066 0.101 0.151
60 0.102 0.102 0.102 0.102 0.157 0.235
61 0.102 0.102 0.102 0.102 0.157 0.236
62 0.102 0.102 0.102 0.102 0.157 0.236
63 0.102 0.102 0.102 0.102 0.157 0.236
64 0.102 0.102 0.102 0.102 0.157 0.236
65 1.000 1.000 1.000 1.000 1.000 1.000
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-20
Service Retirement
Public Agency Police 2.7% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.0138 0.0138 0.0138 0.0138 0.0253 0.0451
51 0.0123 0.0123 0.0123 0.0123 0.0226 0.0402
52 0.0249 0.0249 0.0249 0.0249 0.0456 0.0812
53 0.0497 0.0497 0.0497 0.0497 0.0909 0.1621
54 0.0662 0.0662 0.0662 0.0662 0.1211 0.2160
55 0.0854 0.0854 0.0854 0.0854 0.1563 0.2785
56 0.0606 0.0606 0.0606 0.0606 0.1108 0.1975
57 0.0711 0.0711 0.0711 0.0711 0.1300 0.2318
58 0.0628 0.0628 0.0628 0.0628 0.1149 0.2049
59 0.1396 0.1396 0.1396 0.1396 0.1735 0.2544
60 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506
61 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506
62 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506
63 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506
64 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506
65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
These rates also apply to Local Prosecutors, Local Sheriff, School Police, and Other Safety.
Service Retirement
Public Agency Fire 2.7% @ 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.0065 0.0065 0.0065 0.0065 0.0101 0.0151
51 0.0081 0.0081 0.0081 0.0081 0.0125 0.0187
52 0.0164 0.0164 0.0164 0.0164 0.0254 0.0380
53 0.0442 0.0442 0.0442 0.0442 0.0680 0.1018
54 0.0606 0.0606 0.0606 0.0606 0.0934 0.1397
55 0.0825 0.0825 0.0825 0.0825 0.1269 0.1900
56 0.0740 0.0740 0.0740 0.0740 0.1140 0.1706
57 0.0901 0.0901 0.0901 0.0901 0.1387 0.2077
58 0.0790 0.0790 0.0790 0.0790 0.1217 0.1821
59 0.0729 0.0729 0.0729 0.0729 0.1123 0.1681
60 0.1135 0.1135 0.1135 0.1135 0.1747 0.2615
61 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618
62 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618
63 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618
64 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618
65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
A-21
Service Retirement
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
Miscellaneous
Internal Revenue Code Section 415
The limitations on benefits imposed by Internal Revenue Code Section 415 are taken into account in this
valuation. Each year the impact of any changes in this limitation since the prior valuation is included and
amortized as part of the actuarial gain or loss base. This results in lower contributions for those employers
contributing to the Replacement Benefit Fund and protects CalPERS from prefunding expected benefits in
excess of limits imposed by federal tax law.
Internal Revenue Code Section 401(a)(17)
The limitations on compensation imposed by Internal Revenue Code Section 401(a)(17) are taken into
account in this valuation. Each year, the impact of any changes in the compensation limitation since the
prior valuation is included and amortized as part of the actuarial gain or loss base. The compensation limit
for classic members for the 2015 calendar year is $265,000.
APPENDIX B
PRINCIPAL PLAN PROVISIONS
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B
SAFETY PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-1
The following is a description of the principal plan provisions used in calculating costs and liabilities. We have
indicated whether a plan provision is standard or optional. Standard benefits are applicable to all members while
optional benefits vary among employers. Optional benefits that apply to a single period of time, such as Golden
Handshakes, have not been included. Many of the statements in this summary are general in nature, and are
intended to provide an easily understood summary of the Public Employees’ Retirement Law. The law itself governs in all situations.
Service Retirement
Eligibility
A classic CalPERS member or PEPRA Safety member becomes eligible for Service Retirement upon attainment of age
50 with at least 5 years of credited service (total service across all CalPERS employers, and with certain other
retirement systems with which CalPERS has reciprocity agreements). For employees hired into a plan with the 1.5
percent at 65 formula, eligibility for service retirement is age 55 with at least 5 years of service. PEPRA miscellaneous
members become eligible for service retirement upon attainment of age 52 with at least 5 years of service.
Benefit
The service retirement benefit is a monthly allowance equal to the product of the benefit factor, years of service, and
final compensation.
The benefit factor depends on the benefit formula specified in your agency’s contract. The table below shows
the factors for each of the available formulas. Factors vary by the member’s age at retirement. Listed are the
factors for retirement at whole year ages:
Miscellaneous Plan Formulas
Retirement
Age
1.5% at
65 2% at 60 2% at 55 2.5% at
55
2.7% at
55 3% at 60
PEPRA
2% at 62
50 0.5000% 1.092% 1.426% 2.000% 2.000% 2.000% N/A
51 0.5667% 1.156% 1.522% 2.100% 2.140% 2.100% N/A
52 0.6334% 1.224% 1.628% 2.200% 2.280% 2.200% 1.000%
53 0.7000% 1.296% 1.742% 2.300% 2.420% 2.300% 1.100%
54 0.7667% 1.376% 1.866% 2.400% 2.560% 2.400% 1.200%
55 0.8334% 1.460% 2.000% 2.500% 2.700% 2.500% 1.300%
56 0.9000% 1.552% 2.052% 2.500% 2.700% 2.600% 1.400%
57 0.9667% 1.650% 2.104% 2.500% 2.700% 2.700% 1.500%
58 1.0334% 1.758% 2.156% 2.500% 2.700% 2.800% 1.600%
59 1.1000% 1.874% 2.210% 2.500% 2.700% 2.900% 1.700%
60 1.1667% 2.000% 2.262% 2.500% 2.700% 3.000% 1.800%
61 1.2334% 2.134% 2.314% 2.500% 2.700% 3.000% 1.900%
62 1.3000% 2.272% 2.366% 2.500% 2.700% 3.000% 2.000%
63 1.3667% 2.418% 2.418% 2.500% 2.700% 3.000% 2.100%
64 1.4334% 2.418% 2.418% 2.500% 2.700% 3.000% 2.200%
65 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.300%
66 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.400%
67 & up 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.500%
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B
SAFETY PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-2
Safety Plan Formulas
Retirement
Age ½ at 55 * 2% at 55 2% at 50 3% at 55 3% at 50
50 1.783% 1.426% 2.000% 2.400% 3.000%
51 1.903% 1.522% 2.140% 2.520% 3.000%
52 2.035% 1.628% 2.280% 2.640% 3.000%
53 2.178% 1.742% 2.420% 2.760% 3.000%
54 2.333% 1.866% 2.560% 2.880% 3.000%
55 & Up 2.500% 2.000% 2.700% 3.000% 3.000%
* For this formula, the benefit factor also varies by entry age. The factors shown are for members with an entry age
of 35 or greater. If entry age is less than 35, then the age 55 benefit factor is 50 percent divided by the difference
between age 55 and entry age. The benefit factor for ages prior to age 55 is the same proportion of the age 55
benefit factor as in the above table.
PEPRA Safety Plan Formulas
Retirement Age 2% at 57 2.5% at 57 2.7% at 57
50 1.426% 2.000% 2.000%
51 1.508% 2.071% 2.100%
52 1.590% 2.143% 2.200%
53 1.672% 2.214% 2.300%
54 1.754% 2.286% 2.400%
55 1.836% 2.357% 2.500%
56 1.918% 2.429% 2.600%
57 & Up 2.000% 2.500% 2.700%
The years of service is the amount credited by CalPERS to a member while he or she is employed in this group
(or for other periods that are recognized under the employer’s contract with CalPERS). For a member who has
earned service with multiple CalPERS employers, the benefit from each employer is calculated separately
according to each employer’s contract, and then added together for the total allowance. An agency may contract
for an optional benefit where any unused sick leave accumulated at the time of retirement will be converted to
credited service at a rate of 0.004 years of service for each day of sick leave.
The final compensation is the monthly average of the member’s highest 36 or 12 consecutive months’ full-time
equivalent monthly pay (no matter which CalPERS employer paid this compensation). The standard benefit is 36 months. Employers had the option of providing a final compensation equal to the highest 12 consecutive months
for classic plans only. Final compensation must be defined by the highest 36 consecutive months’ pay under the
1.5% at 65 formula. PEPRA members have a cap on the annual salary that can be used to calculate final
compensation for all new members based on the Social Security contribution and benefit base. For employees
that participate in Social Security this cap is $117,020 for 2015 and for those employees that do not participate
in Social Security the cap for 2015 is $140,424. Adjustments to the caps are permitted annually based on
changes to the CPI for all urban consumers.
Employees must be covered by Social Security with the 1.5% at 65 formula. Social Security is optional for all
other benefit formulas. For employees covered by Social Security, the modified formula is the standard benefit.
Under this type of formula, the final compensation is offset by $133.33 (or by one third if the final compensation
is less than $400). Employers may contract for the full benefit with Social Security that will eliminate the offset
applicable to the final compensation. For employees not covered by Social Security, the full benefit is paid with
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B
SAFETY PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-3
no offsets. Auxiliary organizations of the CSUC system may elect reduced contribution rates, in which case the
offset is $317 if members are not covered by Social Security or $513 if members are covered by Social Security.
The miscellaneous and PEPRA safety service retirement benefit is not capped. The classic service retirement
benefit is capped at 90 percent of final compensation.
Vested Deferred Retirement
Eligibility for Deferred Status
A CalPERS member becomes eligible for a deferred vested retirement benefit when he or she leaves employment,
keeps his or her contribution account balance on deposit with CalPERS, and has earned at least 5 years of credited
service (total service across all CalPERS employers, and with certain other retirement systems with which CalPERS
has reciprocity agreements).
Eligibility to Start Receiving Benefits
The CalPERS classic members and PEPRA safety members become eligible to receive the deferred retirement benefit
upon satisfying the eligibility requirements for deferred status and upon attainment of age 50 (55 for employees
hired into a 1.5% @ 65 plan). PEPRA miscellaneous members become eligible to receive the deferred retirement
benefit upon satisfying the eligibility requirements for deferred status and upon attainment of age 52.
Benefit
The vested deferred retirement benefit is the same as the service retirement benefit, where the benefit factor is
based on the member’s age at allowance commencement. For members who have earned service with multiple
CalPERS employers, the benefit from each employer is calculated separately according to each employer’s contract,
and then added together for the total allowance.
Non-Industrial (Non-Job Related) Disability Retirement
Eligibility
A CalPERS member is eligible for Non-Industrial Disability Retirement if he or she becomes disabled and has at least
5 years of credited service (total service across all CalPERS employers, and with certain other retirement systems with which CalPERS has reciprocity agreements). There is no special age requirement. Disabled means the member is
unable to perform his or her job because of an illness or injury, which is expected to be permanent or to last
indefinitely. The illness or injury does not have to be job related. A CalPERS member must be actively employed by
any CalPERS employer at the time of disability in order to be eligible for this benefit.
Standard Benefit
The standard Non-Industrial Disability Retirement benefit is a monthly allowance equal to 1.8 percent of final
compensation, multiplied by service, which is determined as follows:
Service is CalPERS credited service, for members with less than 10 years of service or greater than 18.518 years
of service; or
Service is CalPERS credited service plus the additional number of years that the member would have worked
until age 60, for members with at least 10 years but not more than 18.518 years of service. The maximum benefit in this case is 33 1/3 percent of final compensation.
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B
SAFETY PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-4
Improved Benefit
Employers have the option of providing the improved Non-Industrial Disability Retirement benefit. This benefit
provides a monthly allowance equal to 30 percent of final compensation for the first 5 years of service, plus 1 percent
for each additional year of service to a maximum of 50 percent of final compensation.
Members who are eligible for a larger service retirement benefit may choose to receive that benefit in lieu of a
disability benefit. Members eligible to retire, and who have attained the normal retirement age determined by their
service retirement benefit formula, will receive the same dollar amount for disability retirement as that payable for
service retirement. For members who have earned service with multiple CalPERS employers, the benefit attributed to
each employer is the total disability allowance multiplied by the ratio of service with a particular employer to the total
CalPERS service.
Industrial (Job Related) Disability Retirement
All safety members have this benefit. For miscellaneous members, employers have the option of providing this
benefit. An employer may choose to provide the increased benefit option or the improved benefit option.
Eligibility
An employee is eligible for Industrial Disability Retirement if he or she becomes disabled while working, where
disabled means the member is unable to perform the duties of the job because of a work-related illness or injury,
which is expected to be permanent or to last indefinitely. A CalPERS member who has left active employment within
this group is not eligible for this benefit, except to the extent described below.
Standard Benefit
The standard Industrial Disability Retirement benefit is a monthly allowance equal to 50 percent of final
compensation.
Increased Benefit (75 percent of Final Compensation)
The increased Industrial Disability Retirement benefit is a monthly allowance equal to 75 percent final compensation
for total disability.
Improved Benefit (50 percent to 90 percent of Final Compensation)
The improved Industrial Disability Retirement benefit is a monthly allowance equal to the Workman’s Compensation
Appeals Board permanent disability rate percentage (if 50 percent or greater, with a maximum of 90 percent) times the final compensation.
For a CalPERS member not actively employed in this group who became disabled while employed by some other
CalPERS employer, the benefit is a return of accumulated member contributions with respect to employment in this
group. With the standard or increased benefit, a member may also choose to receive the annuitization of the
accumulated member contributions.
If a member is eligible for service retirement and if the service retirement benefit is more than the industrial disability
retirement benefit, the member may choose to receive the larger benefit.
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B
SAFETY PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-5
Post-Retirement Death Benefit
Standard Lump Sum Payment
Upon the death of a retiree, a one-time lump sum payment of $500 will be made to the retiree’s designated
survivor(s), or to the retiree’s estate.
Improved Lump Sum Payment
Employers have the option of providing an improved lump sum death benefit of $600, $2,000, $3,000, $4,000 or $5,000.
Form of Payment for Retirement Allowance
Standard Form of Payment
Generally, the retirement allowance is paid to the retiree in the form of an annuity for as long as he or she is alive.
The retiree may choose to provide for a portion of his or her allowance to be paid to any designated beneficiary after
the retiree’s death. CalPERS provides for a variety of such benefit options, which the retiree pays for by taking a
reduction in his or her retirement allowance. Such reduction takes into account the amount to be provided to the
beneficiary and the probable duration of payments (based on the ages of the member and beneficiary) made
subsequent to the member’s death.
Improved Form of Payment (Post-Retirement Survivor Allowance)
Employers have the option to contract for the post-retirement survivor allowance.
For retirement allowances with respect to service subject to the modified formula, 25 percent of the retirement
allowance will automatically be continued to certain statutory beneficiaries upon the death of the retiree, without a reduction in the retiree’s allowance. For retirement allowances with respect to service subject to the full or
supplemental formula, 50 percent of the retirement allowance will automatically be continued to certain statutory
beneficiaries upon the death of the retiree, without a reduction in the retiree’s allowance. This additional benefit is
referred to as post-retirement survivor allowance (PRSA) or simply as survivor continuance.
In other words, 25 percent or 50 percent of the allowance, the continuance portion, is paid to the retiree for as long
as he or she is alive, and that same amount is continued to the retiree’s spouse (or if no eligible spouse, to unmarried child(ren) until they attain age 18; or, if no eligible child(ren), to a qualifying dependent parent) for the
rest of his or her lifetime. This benefit will not be discontinued in the event the spouse remarries.
The remaining 75 percent or 50 percent of the retirement allowance, which may be referred to as the option portion
of the benefit, is paid to the retiree as an annuity for as long as he or she is alive. Or, the retiree may choose to
provide for some of this option portion to be paid to any designated beneficiary after the retiree’s death. Benefit
options applicable to the option portion are the same as those offered with the standard form. The reduction is
calculated in the same manner but is applied only to the option portion.
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B
SAFETY PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-6
Pre-Retirement Death Benefits
Basic Death Benefit
This is a standard benefit.
Eligibility
An employee’s beneficiary (or estate) may receive the basic death benefit if the member dies while actively
employed. A CalPERS member must be actively employed with the CalPERS employer providing this benefit to be
eligible for this benefit. A member’s survivor who is eligible for any other pre-retirement death benefit may choose to
receive that death benefit instead of this basic death benefit.
Benefit
The basic death benefit is a lump sum in the amount of the member’s accumulated contributions, where interest is
currently credited at 7.5 percent 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 for classic and safety PEPRA members and age 52 for miscellaneous PEPRA members,
and has at least 5 years of credited service (total service across all CalPERS employers and with certain other
retirement systems with which CalPERS has reciprocity agreements). A CalPERS member must be actively employed
with the CalPERS employer providing this benefit to be eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married at least one year before death or, if there is no eligible spouse,
to the member's unmarried child(ren) under age 18. A member’s survivor who is eligible for any other pre-retirement
death benefit may choose to receive that death benefit instead of this 1957 Survivor benefit.
Benefit
The 1957 Survivor benefit is a monthly allowance equal to one-half of the unmodified service retirement benefit that
the member would have been entitled to receive if the member had retired on the date of his or her death. If the benefit is payable to the spouse, the benefit is discontinued upon the death of the spouse. If the benefit is payable to
dependent child(ren), the benefit will be discontinued upon death or attainment of age 18, unless the child(ren) is
disabled. The total amount paid will be at least equal to the basic death benefit.
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B
SAFETY PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-7
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 for classic and safety PEPRA members and age 52 for miscellaneous
PEPRA members, and has at least 5 years of credited service (total service across all CalPERS employers and with
certain other retirement systems with which CalPERS has reciprocity agreements). A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An eligible survivor means the
surviving spouse to whom the member was married at least one year before death. A member’s survivor who is
eligible for any other pre-retirement death benefit may choose to receive that death benefit instead of this Optional
Settlement 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 child(ren) under age 18, if applicable. The total
amount paid will be at least equal to the basic death benefit.
Special Death Benefit
This is a standard benefit for safety members. An employer may elect to provide this benefit for miscellaneous
members.
Eligibility
An employee’s eligible survivor(s) may receive the special death benefit if the member dies while actively employed
and the death is job-related. A CalPERS member who is no longer actively employed with any CalPERS employer is
not eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married prior to the onset of the injury or illness that resulted in death. If there is no eligible spouse, an eligible survivor means the
member's unmarried child(ren) under age 22. An eligible survivor who chooses to receive this benefit will not receive
any other death benefit.
Benefit
The special death benefit is a monthly allowance equal to 50 percent of final compensation, and will be increased whenever the compensation paid to active employees is increased but ceasing to increase when the member would
have attained age 50. The allowance is payable to the surviving spouse until death at which time the allowance is
continued to any unmarried child(ren) under age 22. There is a guarantee that the total amount paid will at least
equal the basic death benefit.
If the member’s death is the result of an accident or injury caused by external violence or physical force incurred in
the performance of the member’s duty, and there are eligible surviving child(ren) (eligible means unmarried child(ren) under age 22) in addition to an eligible spouse, then an additional monthly allowance is paid equal to
the following:
if 1 eligible child: 12.5 percent of final compensation
if 2 eligible children: 20.0 percent of final compensation
if 3 or more eligible children: 25.0 percent of final compensation
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B
SAFETY PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-8
Alternate Death Benefit for Local Fire Members
This is an optional benefit available only to local fire members.
Eligibility
An employee’s eligible survivor(s) may receive the alternate death benefit in lieu of the basic death benefit or the
1957 Survivor benefit if the member dies while actively employed and has at least 20 years of total CalPERS service.
A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An
eligible survivor means the surviving spouse to whom the member was married prior to the onset of the injury or illness that resulted in death. If there is no eligible spouse, an eligible survivor means the member's unmarried
child(ren) under age 18.
Benefit
The Alternate Death benefit is a monthly allowance equal to the service retirement benefit that the member would
have received had the member retired on the date of his or her death and elected Optional Settlement 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
child(ren) under age 18, if applicable. The total amount paid will be at least equal to the basic death benefit.
Cost-of-Living Adjustments (COLA)
Standard Benefit
Retirement and survivor allowances are adjusted each year in May for cost of living, beginning the second calendar year after the year of retirement. The standard cost-of-living adjustment (COLA) is 2 percent. Annual adjustments
are calculated by first determining the lesser of 1) 2 percent compounded from the end of the year of retirement or
2) actual rate of inflation. The resulting increase is divided by the total increase provided in prior years. For any
particular year, the COLA adjustment may be less than 2 percent (when the rate of inflation is low), may be greater
than the rate of inflation (when the rate of inflation is low after several years of high inflation) or may even be
greater than 2 percent (when inflation is high after several years of low inflation).
Improved Benefit
Employers have the option of providing a COLA of 3 percent, 4 percent, or 5 percent, determined in the same
manner as described above for the standard 2 percent COLA. An improved COLA is not available with the 1.5% at 65
formula.
Purchasing Power Protection Allowance (PPPA)
Retirement and survivor allowances are protected against inflation by PPPA. PPPA benefits are cost-of-living
adjustments that are intended to maintain an individual’s allowance at 80 percent of the initial allowance at retirement adjusted for inflation since retirement. The PPPA benefit will be coordinated with other cost-of-living
adjustments provided under the plan.
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B
SAFETY PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-9
Employee Contributions
Each employee contributes toward his or her retirement based upon the retirement formula. The standard employee
contribution is as described below.
The percent contributed below the monthly compensation breakpoint is 0 percent.
The monthly compensation breakpoint is $0 for full and supplemental formula members and $133.33 for
employees covered by the modified formula.
The percent contributed above the monthly compensation breakpoint depends upon the benefit formula, as
shown in the table below.
Benefit Formula Percent Contributed above the
Breakpoint
Miscellaneous, 1.5% at 65 2%
Miscellaneous, 2% at 60 7%
Miscellaneous, 2% at 55 7%
Miscellaneous, 2.5% at 55 8%
Miscellaneous, 2.7% at 55 8%
Miscellaneous, 3% at 60 8%
Miscellaneous, 2% at 62 50% of the Total Normal Cost
Miscellaneous, 1.5% at 65 50% of the Total Normal Cost
Safety, 1/2 at 55 Varies by entry age
Safety, 2% at 55 7%
Safety, 2% at 50 9%
Safety, 3% at 55 9%
Safety, 3% at 50 9%
Safety, 2% at 57 50% of the Total Normal Cost
Safety, 2.5% at 57 50% of the Total Normal Cost
Safety, 2.7% at 57 50% of the Total Normal Cost
The employer may choose to “pick-up” these contributions for classic members (Employer Paid Member Contributions
or EPMC). EPMC is prohibited for new PEPRA members.
An employer may also include Employee Cost Sharing in the contract, where employees agree to share the cost of the employer contribution. These contributions are paid in addition to the member contribution.
Auxiliary organizations of the CSUC system may elect reduced contribution rates, in which case the offset is $317 and
the contribution rate is 6 percent if members are not covered by Social Security. If members are covered by Social
Security, the offset is $513 and the contribution rate is 5 percent.
Refund of Employee Contributions
If the member’s service with the employer ends, and if the member does not satisfy the eligibility conditions for any of the retirement benefits above, the member may elect to receive a refund of his or her employee contributions,
which are credited with 6 percent interest compounded annually.
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B
SAFETY PLAN OF THE CITY OF PALO ALTO
PRINCIPAL PLAN PROVISIONS
B-10
1959 Survivor Benefit
This is a pre-retirement death benefit available only to members not covered by Social Security. Any agency joining CalPERS subsequent to 1993 is required to provide this benefit if the members are not covered by Social Security.
The benefit is optional for agencies joining CalPERS prior to 1994. Levels 1, 2 and 3 are now closed. Any new agency
or any agency wishing to add this benefit or increase the current level may only choose the 4th or Indexed Level.
This benefit is not included in the results presented in this valuation. More information on this benefit is available on
the CalPERS website at www.calpers.ca.gov.
APPENDIX C
PARTICIPANT DATA
SUMMARY OF VALUATION DATA
ACTIVE MEMBERS
TRANSFERRED AND TERMINATED MEMBERS
RETIRED MEMBERS AND BENEFICIARIES
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX C
SAFETY PLAN OF THE CITY OF PALO ALTO
PARTICIPANT DATA
C-1
Summary of Valuation Data
June 30, 2014 June 30, 2015
1. Active Members
a) Counts 187 179
b) Average Attained Age
40.06 40.91
c) Average Entry Age to Rate Plan 29.11 29.21
d) Average Years of Service 10.95 11.70
e) Average Annual Covered Pay $ 113,765 $ 118,359
f) Annual Covered Payroll 21,274,021 21,186,275
g) Projected Annual Payroll for Contribution Year 23,246,697 23,150,815
h) Present Value of Future Payroll 214,199,671 205,334,914
2. Transferred Members
a) Counts 63 59
b) Average Attained Age 44.06 43.87
c) Average Years of Service 3.71 3.22
d) Average Annual Covered Pay $ 106,767 $ 109,275
3. Terminated Members
a) Counts 31 39
b) Average Attained Age 42.38 42.63
c) Average Years of Service 3.10 3.54
d) Average Annual Covered Pay $ 81,322 $ 89,331
4. Retired Members and Beneficiaries
a) Counts 411 414
b) Average Attained Age 67.44 67.81
c) Average Annual Benefits $ 50,485 $ 51,863
5. Active to Retired Ratio [(1a) / (4a)] 0.45 0.43
Counts of members included in the valuation are counts of the records processed by the valuation. Multiple
records may exist for those who have service in more than one valuation group. This does not result in
double counting of liabilities.
Average Annual Benefits represents benefit amounts payable by this plan only. Some members may have
service with another agency and would therefore have a larger total benefit than would be included as part
of the average shown here.
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX C
SAFETY PLAN OF THE CITY OF PALO ALTO
PARTICIPANT DATA
C-2
Active Members
Counts of members included in the valuation are counts of the records processed by the valuation. Multiple records
may exist for those who have service in more than one valuation group. This does not result in double counting of
liabilities.
Distribution of Active Members by Age and Service
Years of Service at Valuation Date
Attained
Age 0-4 5-9 10-14 15-19 20-25 25+ Total
15-24 1 0 0 0 0 0 1
25-29 14 3 0 0 0 0 17
30-34 16 12 3 0 0 0 31
35-39 12 12 11 2 0 0 37
40-44 3 5 6 17 0 0 31
45-49 1 1 10 8 13 4 37
50-54 1 1 4 4 6 3 19
55-59 0 1 0 1 0 2 4
60-64 0 0 0 0 0 1 1
65 and over 0 0 0 0 1 0 1
All Ages 48 35 34 32 20 10 179
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 $98,189 $0 $0 $0 $0 $0 $98,189
25-29 94,483 102,706 0 0 0 0 95,934
30-34 103,209 118,641 120,152 0 0 0 110,822
35-39 106,808 119,764 126,296 142,715 0 0 118,745
40-44 102,889 109,100 129,234 128,829 0 0 123,215
45-49 110,592 124,726 106,715 113,144 126,869 151,310 120,599
50-54 199,617 113,398 116,143 116,219 130,059 146,263 129,558
55-59 0 119,177 0 144,632 0 189,123 160,514
60-64 0 0 0 0 0 120,678 120,678
65 and over 0 0 0 0 122,007 0 122,007
All Ages $103,601 $116,337 $119,319 $124,694 $127,583 $154,296 $118,359
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX C
SAFETY PLAN OF THE CITY OF PALO ALTO
PARTICIPANT DATA
C-3
Transferred and Terminated Members
Distribution of Transfers to Other CalPERS Plans by Age 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 99,443
30-34 7 0 0 0 0 0 7 101,136
35-39 10 0 0 0 0 0 10 95,837
40-44 9 1 0 0 0 0 10 118,340
45-49 8 5 2 0 0 0 15 116,876
50-54 7 1 1 0 0 0 9 101,475
55-59 0 2 1 0 0 0 3 131,220
60-64 0 1 1 0 0 0 2 119,533
65 and over 0 0 0 0 0 0 0 0
All Ages 44 10 5 0 0 0 59 109,275
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 2 0 0 0 0 0 2 91,679
30-34 2 1 0 0 0 0 3 87,002
35-39 9 4 0 0 0 0 13 89,779
40-44 2 3 0 0 0 0 5 109,949
45-49 4 3 1 0 0 0 8 93,514
50-54 4 0 0 0 0 0 4 55,820
55-59 2 1 0 0 0 0 3 81,607
60-64 0 1 0 0 0 0 1 106,475
65 and over 0 0 0 0 0 0 0 0
All Ages 25 13 1 0 0 0 39 89,331
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX C
SAFETY PLAN OF THE CITY OF PALO ALTO
PARTICIPANT DATA
C-4
Retired Members and Beneficiaries
Distribution of Retirees and Beneficiaries by Age and Retirement Type*
Attained
Age
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Total
Under 30 0 0 0 0 0 0 0
30-34 0 0 1 0 0 0 1
35-39 0 0 2 0 0 0 2
40-44 0 0 5 0 0 0 5
45-49 0 1 5 0 0 0 6
50-54 30 0 14 0 1 0 45
55-59 40 2 20 0 2 0 64
60-64 27 0 18 0 0 4 49
65-69 37 1 18 0 0 4 60
70-74 29 0 23 0 0 9 61
75-79 30 2 19 0 0 5 56
80-84 19 0 14 0 0 7 40
85 and Over 14 0 5 0 0 6 25
All Ages 226 6 144 0 3 35 414
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 57,268 0 0 0 57,268
35-39 0 0 55,085 0 0 0 55,085
40-44 0 0 58,085 0 0 0 58,085
45-49 0 83 38,337 0 0 0 31,962
50-54 86,847 0 64,408 0 51,611 0 79,083
55-59 77,689 17,165 69,460 0 36,032 0 71,924
60-64 65,796 0 45,778 0 0 43,294 56,606
65-69 64,576 17,011 47,573 0 0 35,097 56,717
70-74 48,202 0 31,568 0 0 38,700 40,528
75-79 43,580 11,519 35,814 0 0 11,765 36,959
80-84 39,546 0 27,744 0 0 27,485 33,305
85 and Over 28,572 0 19,084 0 0 18,893 24,351
All Ages $60,776 $12,410 $45,216 $0 $41,225 $29,327 $51,863
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX C
SAFETY PLAN OF THE CITY OF PALO ALTO
PARTICIPANT DATA
C-5
Retired Members and Beneficiaries (continued)
Distribution of Retirees and Beneficiaries by Years Retired and Retirement Type*
Years
Retired
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Total
Under 5 Yrs 60 1 17 0 0 5 83
5-9 36 1 20 0 0 6 63
10-14 42 0 14 0 1 11 68
15-19 24 1 19 0 1 6 51
20-24 31 0 16 0 0 2 49
25-29 15 1 19 0 0 3 38
30 and Over 18 2 39 0 1 2 62
All Years 226 6 144 0 3 35 414
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 $84,922 $2,048 $72,095 $0 $0 $10,154 $76,792
5-9 61,093 83 74,237 0 0 30,179 61,353
10-14 64,481 0 64,971 0 51,611 40,369 60,492
15-19 43,320 32,282 41,727 0 45,687 34,148 41,478
20-24 50,538 0 42,127 0 0 30,323 46,967
25-29 34,925 17,011 26,541 0 0 27,070 29,641
30 and Over 33,461 11,519 23,591 0 26,376 1,902 25,412
All Years $60,776 $12,410 $45,216 $0 $41,225 $29,327 $51,863
* 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.
APPENDIX D
DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION
RATES
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX D
SAFETY PLAN OF THE CITY OF PALO ALTO
PARTICIPANT DATA
D-1
Development of PEPRA Members Contribution Rates
The table below shows the determination of the Member contribution rates based on 50 percent of the Total Normal Cost for each respective plan on June 30, 2015.
Assembly Bill (AB) 340 created PEPRA that implemented new benefit formulas and a final compensation period as well as new contribution requirements for new employees. In accordance with Section Code 7522.30(b), “new
members … shall have an initial contribution rate of at least 50 percent of the normal cost rate.” The normal cost for
the plan is dependent on the benefit levels, actuarial assumptions and demographics of the plan particularly the entry
age into the plan. The PEPRA total normal cost for the plan is calculated assuming the entire active population,
including classic members, is subject to the adopted PEPRA formula and applicable compensation limits. Should the
total normal cost of the plan change by one percent or more from the base total normal cost established for the plan,
the new member rate shall be 50% of the new normal cost rounded up to the next highest quarter percent.
Basis for Current Rate Rates Effective July 1, 2017
Rate Plan
Identifier Plan Total Normal
Cost
Member
Rate
Total Normal
Cost
Change Change
Needed
Member
Rate
25006 Safety Fire PEPRA 21.276% 10.750% 21.336% 0.060% No 10.750%
25007 Safety Police PEPRA 21.276% 10.750% 21.336% 0.060% No 10.750%
APPENDIX E
GLOSSARY OF ACTUARIAL TERMS
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX E
SAFETY PLAN OF THE CITY OF PALO ALTO
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 Value of Assets.
Actuarial Valuation
The determination, as of a valuation date of the Normal Cost, Accrued liability, and related actuarial present
values for a pension plan. These valuations are performed annually or when an employer is contemplating a
change to their plan provisions.
Amortization Bases Separate payment schedules for different portions of the Unfunded Liability. The total Unfunded Liability of a
Risk Pool or non-pooled plan can be segregated by "cause,” creating “bases” and each such base will be
separately amortized and paid for over a specific period of time. However, all bases are amortized using
investment and payroll assumptions from the current valuation. This can be likened to a home having a first
mortgage of 24 years remaining payments and a second mortgage that has 10 years remaining payments. Each
base or each mortgage note has its own terms (payment period, principal, etc.)
Generally, in an actuarial valuation, the separate bases consist of changes in unfunded liability due to contract
amendments, actuarial assumption changes, actuarial methodology changes, and/or 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.
Classic Member (under PEPRA)
A classic member is a member who joined CalPERS prior to January, 1, 2013 and who is not defined as a new
member under PEPRA. (See definition of new member below)
Discount Rate Assumption
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. In
most cases, this is the age of the member on their date of hire.
Entry Age Normal Cost Method
An actuarial cost method designed to fund a member's total plan benefit over the course of his or her career.
This method is designed to yield a rate expressed as a level percentage of payroll. (The assumed retirement age less the entry age is the amount of time required to fund a member’s total benefit.
Generally, the older a member on the date of hire, the greater the entry age normal cost. This is mainly because
there is less time to earn investment income to fund the future benefits.)
CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX E
SAFETY PLAN OF THE CITY OF PALO ALTO
GLOSSARY OF ACTUARIAL TERMS
E-2
Fresh Start
A Fresh Start is when multiple amortization bases are collapsed to one base and amortized together over a new funding period.
Funded Status
A measure of how well funded, or how "on track" a plan or risk pool is with respect to assets versus accrued
liabilities. A ratio greater than 100% means the plan or risk pool has more assets than liabilities and a ratio less
than 100% means liabilities are greater than assets.
GASB 68
Statement No. 68 of the Governmental Accounting Standards Board. The accounting standard governing a state
or local governmental employer’s accounting and financial reporting for pensions. GASB 68 replaces GASB 27
effective the first fiscal year beginning after June 15, 2014.
New Member (under PEPRA)
A new member includes an individual who becomes a member of a public retirement system for the first time on
or after January 1, 2013, and who was not a member of another public retirement system prior to that date, and who is not subject to reciprocity with another public retirement system.
Normal Cost
The annual cost of service accrual for the upcoming fiscal year for active employees. The normal cost should be
viewed as the long term contribution rate.
Pension Actuary A business professional that is authorized by the Society of Actuaries, and the American Academy of Actuaries to
perform the calculations necessary to properly fund a pension plan.
PEPRA
The California Public Employees’ Pension Reform Act of 2013
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.
Superfunded A condition existing when a plan’s Actuarial Value of Assets exceeds its Present Value of Benefits. Prior to the
passage of PEPRA, when this condition existed on a given valuation date for a given plan, employee
contributions for the rate year covered by that valuation could be waived.
Unfunded Liability (UAL)
When a plan or pool’s Value of Assets is less than its Accrued Liability, the difference is the plan or pool’s
Unfunded Liability. If the Unfunded Liability is positive, the plan or pool will have to pay contributions exceeding
the Normal Cost.