HomeMy WebLinkAboutStaff Report 2605-6340CITY OF PALO ALTO
Finance Committee
Regular Meeting
Tuesday, May 19, 2026
Agenda Item
2.Accept the Bi-Annual Actuarial Valuation Report of Palo Alto’s Retiree Healthcare and
Other Post Employment Benefits (OPEB) Actuarial Evaluation Bi-Annual Evalution as of
June 30, 2025 and Recommend that the City Council Approve the Annual Actuarially
Determined Contribution for Fiscal Years 2027 and 2028; CEQA Status – Not a
Project Agenda Item Reordered, Late Packet Report Added, Title Updated, Staff
Presentation
Finance Committee
Staff Report
Report Type: ACTION ITEMS
Lead Department: City Clerk
Meeting Date: May 19, 2026
Report #:2605-6340
TITLE
Other Post Employment Benefits (OPEB) Actuarial Evaluation Bi-Annual Report
This will be a late packet report published on May 14, 2026.
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Finance Committee
Staff Report
From: City Manager
Report Type: ACTION ITEMS
Lead Department: Administrative Services
Meeting Date: May 19, 2026
Report #:2512-5689
TITLE
Accept the Bi-Annual Actuarial Valuation Report of Palo Alto's Retiree Healthcare and Other
Post-Employment Benefits (OPEB) as of June 30, 2025 and Recommend that the City Council
Approve Annual Actuarially Determined Contribution for Fiscal Years 2027 and 2028; CEQA
Status – Not a Project
RECOMMENDATION
Staff recommends that the Finance Committee:
1. Review and accept the June 30, 2025 actuarial valuation of Palo Alto's Retiree
Healthcare Plan (Attachment B); and
2. Recommend funding the annual Actuarially Determine Contribution (ADC) for Fiscal Year
2027 and 2028
EXECUTIVE SUMMARY
The June 30, 2025 actuarial valuation updates the City’s Other Post Employment Benefits
(OPEB) liabilities, funded status, and Actuarially Determined Contributions (ADCs) for FY
2026/27 and FY 2027/28. Under the baseline 6.25% valuation discount rate, the total ADC is
$18.8 million for FY 2027. Consistent with City Council direction through the Retiree Benefits
Funding Policy1, staff uses a more conservative 5.75% discount rate and an accelerated
amortization with 11 remaining years as of June 30, 2025. On that basis, the adjusted FY 2027
ADC is $26.1 million.
As of June 30, 2025, the City’s actuarial accrued liability for OPEB is $325.2 million, assets are
$201.1 million, and the resulting unfunded actuarial accrued liability (UAAL) is $124.1 million,
for a funded ratio of 62%.
1City Council, June 7, 2022; SR # 14502;
https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=64042&dbid=0&repo=PaloAlto&searchid=ee592823
-f85b-480c-a259-248cd01a3b75
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BACKGROUND
The City of Palo Alto offers its employees and retirees a Retiree Healthcare benefit plan which is
managed and administered by the California Public Employees' Retirement System (CalPERS), a
State of California Retiree Healthcare Trust program. Bi-annually staff contracts with an actuary
firm that provides an actuarial report detailing the latest status of the City of Palo Alto's Retiree
Healthcare plans for employees and retirees. The actuarial report is used to calculate the
annual ADC and pre-funding to the trust based on baseline assumptions and Council policy. In
addition, updates on the rate of return, funding status, and changes to the trust based on
various impacts are detailed in the report. This valuation details impacts by Fund and
Department, which inform the development of the annual budget. The FY 2027 Proposed
Operating Budget incorporated the June 30, 2025 valuation. This staff report transmits the full
valuation. This staff report transmits the full valuation in accordance with GASB Statement No.
75, which requires a biennial measurement of the City’s retiree healthcare liability.
There are four groups of benefits within the CalPERS Retiree Healthcare benefit plans.
Attachment A outlines the different benefits levels by Group. These benefit levels are
negotiated and approved as part of the employee contracts. Employees and retirees have an
open enrollment window in October each year in which they can make changes to their
healthcare plans that take effect in January of the following year.
CALPERS Projected Contribution Levels
The actuary report has two components to the annual billing of the employer portion of retiree
healthcare contributions that comprise the Actuarial Determined Contribution (ADC), (1) the
Normal Cost (NC), and (2) the Unfunded Actuarial Accrued Liability (UAAL).
NC: This reflects a rate of contribution for the plan of retirement healthcare benefits
provided to current employees based on the current set of assumptions.
Employer Amortization of UAAL: This is an annual payment calculated to pay down an
agency's unfunded accrued liability. If every assumption in the actuarial valuation was
accurate, an organization would eliminate its unfunded pension liability if it made these
payments annually for 30 years. The City Council approved a closed period to amortize
the entire net pension liability over a specific timeframe. The total liability will vary from
one year to the next because of assumption changes and actuarial experience that is
different from anticipated, such as actual investment returns that do not meet
expectations.
As established by the City Council, the City's California Employers’ Retiree Benefit Trust (CERBT)
Fund is invested in a Strategy 1 asset allocation at a 6.25% discount rate. With the adoption of
the Retiree Benefits Funding Policy, directed staff to calculate additional discretionary
payments ("prefunding") equivalent to a 5.75% discount rate and transmit amounts above
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payments at a 6.25% discount rate to the CERBT Fund. The City's CERBT Fund was established in
May 2008 at a level of $33 million and it has grown to $220.0 million as of March 31, 2026.
ANALYSIS
Table 1: Key Actuarial Results
Measure
Prior Valuation
(June 30, 2023)
Current Valuation
(June 30, 2025)
ADC (6.25%, baseline)FY 2025: $16.4M
FY 2026: $16.9M
FY 2027: $18.8M
FY 2028: $19.3M
Adjusted ADC
(5.75%, City Policy)
FY 2025: $19.4M*
FY 2026: $22.6M
FY 2027: $26.1M
FY 2028: $26.8M
Implied Subsidy FY 2025: $3.0M*
FY 2026: $2.8M
FY 2027: $3.2M
FY 2028: $3.1M
Unfunded Actuarial Accrued Liability
(UAAL)
$120.5M $124.1M
Funded Ratio 56.4%61.8%
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employees is lower than retirees. Palo Alto had 974 active employees and 1,050 retirees as of
June 30, 2025.
Chart #1: Historical Returns of the OPEB Trust
(Market Value of Plan Assets and Expected Return)
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and shortened amortization period), the City is on track to meet the goal of reaching 90%
funded level by 2036.
FISCAL/RESOURCE IMPACT
STAKEHOLDER ENGAGEMENT
ENVIRONMENTAL REVIEW
ATTACHMENTS
APPROVED BY:
Attachment A: 4 Benefit Groups in the CalPERS Retiree Healthcare benefit plans
City of Palo Alto Retiree Healthcare Benefit Plans and Tiers
nd nd nd
(All active Group 3 IAFF &
FCA
(All active Group 3 POA & PMA
elected into Group 4)
CITY OF PALO ALTO
RETIREE HEALTHCARE PLAN
June 30, 2025 Actuarial Valuation
Contributions for 2026/27 & 2027/28
Drew Ballard, FSA, EA, MAAA
Braeleen Ballard, FSA, EA, MAAA
Joseph Herm
Foster & Foster, Inc.
March 11, 2026
CONTENTS
L:\PaloAltoCity\OPEB\2025_Val\Reports\F&F_PaloAltoCity_26-03-11_OPEB_6-30-25_Funding_Report.docx
Topic Page
Benefit Summary 1
Implicit Subsidy 7
Participant Statistics 9
Actuarial Assumptions Highlights 15
Actuarial Methods 20
Assets 21
Results 23
Results – Details 35
Sensitivity Analysis 43
Actuarial Certification 49
Exhibits 50
March 11, 2026 1
BENEFIT SUMMARY
Eligibility Retire directly from the City under CalPERS (age 501 and 5 years
of CalPERS service or disability)
Medical
Provider
CalPERS health plans (PEMHCA)
CalPERS administrative fees paid by City
Retiree Medical
Benefit for
Current
Retirees:
Hired < 1/1/04
(1/1/05 SEIU,
1/1/06 PAPOA)
&
Did Not Elect
into Group 4
GROUP 1 Retirees: Retired < 1/1/07 (3/1/09 for PAPOA)
Benefit = Full premium up to family coverage
GROUP 2 Retirees: Retired after GROUP 1 and before
5/1/11 (12/1/11 IAFF/FCA, 6/1/12 PMA, 4/1/15 POA)
Benefit = Same as above but premium limited to 2nd most
expensive Basic (non-Medicare) medical plan in PEMHCA
Region 1 (PERS Platinum in 2025 and Anthem Traditional in
2026)
GROUP 3 Retirees: Retired after GROUP 2
Benefit = same amount as active employees, which may change
from time to time and in the future as bargaining agreements
change (see next section for cap amounts)
1 Age 52 for Miscellaneous New Hires under PEPRA
March 11, 2026 2
BENEFIT SUMMARY
Retiree Medical
Benefit for
Current
Actives:
Hired < 1/1/04
(1/1/05 SEIU,
1/1/06 PAPOA)
&
Did Not Elect
into Group 4
GROUP 3 Future Retirees: Currently active and did not elect into
Group 4
No active Group 3 POA, PMA, IAFF or FCA
Only remaining Group 3 actives in MGMT, SEIU, UMPAPA
(36 active members)
Benefit = up to full premium, but limited to flat dollar caps same
as active contribution
SEIU
Mgmt/UMPAPA/
Other Groups
2025 2026 2025 & 2026
Single $ 943 $ 943 $ 943
2-Party 1,885 1,885 1,885
Family 2,444 2,444 2,444
March 11, 2026 3
BENEFIT SUMMARY
Retiree Medical
Benefit for
those:
Hired ≥ 1/1/04
(1/1/05 SEIU,
1/1/06 PAPOA)
&
Employees
Hired Before
These Dates
Electing into
Group 42
GROUP 4 Future Retirees: Government Code §22893 “Vesting
Schedule” (based on all CalPERS Service)3:
Years of Service % Years of Service %
< 10 0% 13 65%
10 50% 14 70%
11 55% ↓ ↓
12 60% > 20 100%
100% vesting for disability retirements
Vesting applies to 100/90 formula amounts, which are the
maximum amounts payable by the City (retirees pay any difference
between these amounts and actual premiums):
2025 2026
Single $ 1,060 $ 1,084
2-Party 2,039 2,057
Family 2,551 2,638
If have 20 years City service do not need to retire directly from
City
2 All currently active POA/PMA, IAFF/FCA are Group 4. Some Mgmt/Conf and some SEIU remained in Group 3, and some
elected into Group 4.
3 Minimum 5 years City Service.
March 11, 2026 4
BENEFIT SUMMARY
Dental, Vision
& Medicare
Part B
None
Surviving
Spouse Benefit
100% of retiree benefit continues to surviving spouse if retiree
elects CalPERS pension survivor allowance
Waived Re-
election
Waived retirees/beneficiaries may re-elect coverage at a future
date
Summary of
Changes Since
the Prior
Valuation
None
March 11, 2026 5
BENEFIT SUMMARY
Pay-As-You-
Go ($000s)
Fiscal
Year
Cash
Implicit
Subsidy
Total
2024/25 $ 13,163 $ 2,745 $ 15,908
2023/24 11,800 3,073 14,873
2022/23 11,269 3,025 14,294
2021/22 10,880 2,619 13,499
2020/21 10,631 2,346 12,977
2019/20 10,344 2,384 12,728
2018/19 9,960 2,197 12,157
2017/18 9,660 2,444 12,104
2016/17 9,713 2,203 11,916
2015/16 9,681 1,960 11,641
2014/15 8,995 1,916 10,911
2013/14 7,317 - 7,317
2012/13 8,766 - 8,766
2011/12 8,165 - 8,165
March 11, 2026 6
BENEFIT SUMMARY
Monthly Benefit Cap Amounts
2025 2026
Group Single 2-Party Family Single 2-Party Family
Group 14 $1,500.40 $3,000.80 $3,901.04 $1,670.14 $3,340.28 $4,342.36
Group 2 1,476.10 2,952.20 3,837.86 1,612.08 3,224.16 4,191.41
Group 3 SEIU 943.00 1,885.00 2,444.00 943.00 1,885.00 2,444.00
Group 3 Others5 943.00 1,885.00 2,444.00 943.00 1,885.00 2,444.00
Group 4 (100% vest) 1,060.00 2,039.00 2,551.00 1,084.00 2,057.00 2,638.00
% Decrease from Group 1 (assumes Group 1 is in most expensive plan)
Group 2 2% 2% 2% 3% 3% 3%
Group 3 SEIU 37% 37% 37% 44% 44% 44%
Group 3 Others 37% 37% 37% 44% 44% 44%
Group 4 29% 32% 35% 35% 38% 39%
4 No cap for Group 1. Amount shown is most expensive Non-Medicare Region 1 premium.
5 UMPAPA, Mgmt, IAFF, FCA, PMA, and PAPOA.
March 11, 2026 7
IMPLICIT SUBSIDY
For PEMHCA, employer cost for allowing retirees to participate at active rates.
Kaiser 2026 Region 1 plan:
The City included the implicit subsidy beginning with the June 30, 2013 valuation.
25 30 35 40 45 50 55 60 64
Premium 1,169 1,169 1,169 1,169 1,169 1,169 1,169 1,169 1,169
Male Cost by Age 449 494 576 676 804 989 1,238 1,546 1,829
Female Cost by Age 713 895 979 1,000 1,056 1,184 1,349 1,556 1,767
$-
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
$C
o
s
t
/
P
r
e
m
i
u
m
Age
Kaiser 2026 -Single Coverage
March 11, 2026 8
IMPLICIT SUBSIDY
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March 11, 2026 9
PARTICIPANT STATISTICS
Participant Statistics
6 Excludes all waived retirees, regardless of age, except as noted.
7 Excludes all waived retirees over 65; includes 38 waived under 65 retirees.
6/30/17 6/30/19 6/30/21 6/30/23 6/30/25
Actives
Count 967 930 874 902 974
Average Age 45.6 44.8 45.0 44.6 44.4
Average City Service 10.9 10.8 11.2 10.4 9.7
Average PERS Service 11.9 11.7 12.1 11.4 10.8
Average Salary $90,739 $110,969 $120,207 $134,338 $153,088
Total Salary (000’s) 87,745 103,201 105,061 121,173 149,108
Retirees:
Count6 9597 974 1,009 1,031 1,050
Average Age 68.9 70.0 70.9 71.5 72.1
Average Retirement Age
o Service 57.7 58.0 58.2 58.2 58.3
o Disability 45.9 46.1 46.3 45.8 45.7
March 11, 2026 10
PARTICIPANT STATISTICS
Historical Active and Retiree Counts8
8 Retiree count is subscribers: retirees and surviving spouses
6/30/09 6/30/11 6/30/13 6/30/15 6/30/17 6/30/19 6/30/21 6/30/23 6/30/25
Active 955 923 948 955 967 930 874 902 974
Retired 710 860 968 1,007 959 974 1,009 1,031 1,050
43%48% 50% 51% 50%51%54%53%52%
57%52% 50% 49% 50%49%46%47%48%
-
500
1,000
1,500
2,000
2,500
March 11, 2026 11
PARTICIPANT STATISTICS
Participant Statistics
June 30, 2025
9 Based on June 30, 2025 PERSable pay rate.
10 Excludes retirees who have waived coverage, regardless of age.
Group 1 Group 2 Group 3 Group 4 Total
Actives
Count n/a n/a 36 938 974
Average Age n/a n/a 56.1 43.9 44.4
Average Entry Age n/a n/a 30.2 34.9 34.7
Average City Service n/a n/a 25.9 9.1 9.7
Average PERS Service n/a n/a 25.9 10.2 10.8
Average Salary n/a n/a $ 142,757 $ 153,484 $ 153,088
Total Salary (000’s)9 n/a n/a 5,139 143,968 149,108
Benefitting Retirees10:
Count 353 273 178 246 1,050
Average Age 80.7 72.7 67.3 62.5 72.1
Avg Service Ret Age 57.0 57.8 59.4 59.3 58.3
Avg Disability Ret Age 44.1 46.9 52.2 46.9 45.7
March 11, 2026 12
PARTICIPANT STATISTICS
Participant Statistics
June 30, 2023
11 Actual June 30, 2023 PERSable pay rate.
12 Excludes retirees who have waived coverage, regardless of age.
Group 1 Group 2 Group 3 Group 4 Total
Actives
Count n/a n/a 57 845 902
Average Age n/a n/a 55.8 43.9 44.6
Average Entry Age n/a n/a 31.5 34.4 34.2
Average City Service n/a n/a 24.3 9.5 10.4
Average PERS Service n/a n/a 24.4 10.5 11.4
Average Salary n/a n/a $134,880 $134,302 $134,338
Total Salary (000’s)11 n/a n/a 7,688 113,485 121,173
Benefitting Retirees12:
Count 396 280 165 190 1,031
Average Age 79.3 70.7 65.7 61.5 71.5
Avg Service Ret Age 57.3 57.8 59.1 59.0 58.2
Avg Disability Ret Age 44.7 46.9 51.2 48.1 45.8
March 11, 2026 13
PARTICIPANT STATISTICS
Data Reconciliation13
6/30/2023 to 6/30/2025
Actives Retirees Disabled Benefic. Total
June 30, 2023 902 805 141 85 1,933
New Hires/Rehires 220 - - - 220
Disabled (8) - 8 - -
Terminated (74) - - - (74)
Died with Beneficiary - (7) (1) 8 -
Died, no Beneficiary - (29) (11) (8) (48)
Retired/covered (61) 61 - - -
Retired/waived (5) - - - (5)
Waived Retiree - (4) (3) (2) (9)
Adjustment/Other - 3 2 2 7
June 30, 2025 974 829 136 85 2,024
13 Excludes retirees who have waived coverage.
March 11, 2026 14
PARTICIPANT STATISTICS
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March 11, 2026 15
ACTUARIAL ASSUMPTIONS HIGHLIGHTS
June 30, 2023 Valuation June 30, 2025 Valuation
Valuation
Date
June 30, 2023
ADC for Fiscal Years
2024/25 & 2025/26
(end of year)
1 year lag
June 30, 2025
ADC for Fiscal Years
2026/27 & 2027/28
(end of year)
1 year lag
Funding
Policy
Full Pre-funding through
CalPERS trust (CERBT)
Strategy #1
City may contribute additional
amounts based on lower
discount rate
Same
Discount Rate 6.25%, net of expenses based on
CERBT Strategy #1
Same
General
Inflation
2.50% Same
March 11, 2026 16
ACTUARIAL ASSUMPTIONS HIGHLIGHTS
June 30, 2023 Valuation June 30, 2025 Valuation
Payroll
Increases
Aggregate Increases: 2.75%
Merit Increases: CalPERS 2000-
2019 Experience Study
Aggregate Increases: 2.75%
Merit Increases: CalPERS
2000-2023 Experience Study
Increase to
Group 3 Flat
Dollar Caps
½ of Medical Trend, not less
than assumed inflation (2.50%)
Same
Medical
Trend
Non-Medicare: 8.50% for 2025,
decreasing to an ultimate rate of
3.45% in 2076
Medicare: 7.50% (non-Kaiser)
and 6.25% (Kaiser) for 2025,
decreasing to an ultimate rate of
3.45% in 2076
Same
March 11, 2026 17
ACTUARIAL ASSUMPTIONS HIGHLIGHTS
June 30, 2023 Valuation June 30, 2025 Valuation
Participation
at Retirement
Group 3: 98%
Group 4: if eligible for City
contribution: 95%; if not: 0%
Based on Plan experience
Same
Retirement,
Mortality,
Termination,
Disability
CalPERS 2000-2019 Experience
Study
Society of Actuaries mortality
improvement scale MP-21
CalPERS 2000-2023
Experience Study
Society of Actuaries mortality
improvement scale MP-21
Implicit
Subsidy
Included
Due to age-risk adjusted federal
subsidies, no age-based claims
costs were included for
Medicare Advantage plans
Same
March 11, 2026 18
ACTUARIAL ASSUMPTIONS HIGHLIGHTS
June 30, 2023 Valuation June 30, 2025 Valuation
Basis for
Assumptions
(6/30/25
Valuation)
No experience study performed for this Plan
CalPERS experience study covering 2000 to 2023 experience was
used
Mortality improvement is a Society of Actuaries table
Inflation based on our estimate for the Plan’s long time horizon
Capital market assumptions based on 2021 Foster & Foster
stochastic analysis, taking into account capital market assumptions
of investment advisory firms
Medical trends were based on expectations over the short term
blended into long term medical trends developed using the Society
of Actuaries Getzen Model of Long-Run Medical Cost Trends
Age-based claims costs are based on tables published by the Society
of Actuaries and demographic data for the CalPERS health plans
provided by CalPERS
Medical coverage and participation based in part on Plan experience
March 11, 2026 19
ACTUARIAL ASSUMPTIONS HIGHLIGHTS
Discount Rate
Future expected returns
Stochastic simulations of geometric average returns over 20 years – 5,000 trials
2.50% inflation assumption
Projections based on 8 independent Investment Advisors 2021 10-year Capital Market
Assumptions and where available, investment advisors long-term trends
Confidence levels:
Strategy 1 Strategy 2 Strategy 3
50% Confidence Level 6.25% 5.75% 5.25%
55% Confidence Level 6.00% 5.50% 5.00%
60% Confidence Level 5.75% 5.25% 4.75%
Expected returns, 50th percentile:
Strategy 1 Strategy 2 Strategy 3
Expected Real Rate of Return14 3.90% 3.39% 2.92%
Inflation Assumption 2.50% 2.50% 2.50%
Investment Expenses (0.05%) (0.05%) (0.05%)
Nominal Rate of Return 6.35% 5.84% 5.37%
Rounded to nearest 0.25% 6.25% 5.75% 5.25%
City currently in Strategy 1: Recommend 6.25% discount rate
14 Includes investment expenses
March 11, 2026 20
ACTUARIAL METHODS
Method June 30, 2023 Valuation June 30, 2025 Valuation
Cost Method Entry Age Normal Level %
of Pay
Same
Unfunded Liability
Amortization
20 years closed period
Level % of pay (2.75%
annual escalation)
Sensitivity analysis:
18 years
18 years closed period
Level % of pay (2.75%
annual escalation)
Sensitivity analysis:
16 years
Actuarial Asset Value Market Value of Assets Same
Future New Entrants Closed group – no new participants
Implicit Subsidy Implicit subsidy valued
Plan Continuance For purposes of financial projections, the plan and benefits
are assumed to continue unchanged. The calculation of this
obligation does not imply that there is any legal liability to
provide or continue providing the benefits valued.
March 11, 2026 21
ASSETS
Market Value of Plan Assets (MVA)
Invested in CERBT Strategy 1 Fund
(Amounts in 000’s)
2021/22
2022/23
2023/24
2024/25
MVA (Beg. of Year) $164,170 $144,745 $156,061 $175,207
Contributions 2,904 2,032 1,928 4,282
Benefit Payments - - - -
Admin. Expenses (80) (72) (80) (60)
Net Investment Return (22,249) 9,356 17,299 21,684
MVA (End of Year) 144,745 156,061 175,207 201,112
Approx. Annual Return (13.5)% 6.4% 11.0% 12.3%
March 11, 2026 22
ASSETS
Historical Returns
08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25
Market Value -22.5 15.1% 24.4% 0.1% 11.2% 18.2% -0.2% 1.1% 10.4% 7.8% 6.3% 3.6% 27.5% -13.5 6.4% 11.0% 12.3%
Expected Return 7.75% 7.75% 7.75% 7.75% 7.75% 7.75% 7.61% 7.25% 7.25% 6.75% 6.75% 6.75% 6.75% 6.25% 6.25% 6.25% 6.25%
(25%)
(20%)
(15%)
(10%)
(5%)
0%
5%
10%
15%
20%
25%
30%
March 11, 2026 23
RESULTS
Actuarial Obligations
(Amounts in 000’s)
Valuation Date 6/30/2023 6/30/2025
Discount Rate 6.25% 6.25%
Present Value of Benefits PVB
Actives future retirees $154 864 $180 922
Retirees 192,253 232,197
Total 347 117 413 119
Actuarial Accrued Liabilit AAL
Actives future retirees 84 319 93 000
Retirees 192,253 232,197
Total 276 572 325 197
Market Value of Assets (MVA) 156,061 201,112
Unfunded AAL UAAL 120 511 124 085
Funded Ratio 56% 62%
Normal Cost15 7 614 9 260
Pa -As-You-Go Cost Cash 12 827 15 466
Pa -As-You-Go Cost IS 2 745 3 163
15 Includes Administration fees.
March 11, 2026 24
RESULTS
Historical Funded Status
(Amounts in 000’s)
24% 27%
29%
33%37%
49%
67%56%
62%
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
1/1/11 6/30/11 6/30/13 6/30/15 6/30/17 6/30/19 6/30/21 6/30/23 6/30/25
Retiree pay-go Retiree AAL less pay-go Active AAL AVA MVA
X% FundedRatio
March 11, 2026 25
RESULTS
Actuarial Gain/Loss
(Amounts in $000’s)
AAL Assets UAAL
Actual 6/30/23 $276,572 $156,061 $120,511
Expected 6/30/25 295,578 172,984 122,594
Ex erience (Gains)/Losses
Premiums/Caps different than expected 26,748 26,748
Demographic & other 3,977 3,977
Assum tion Chan es increasin /(decreasin ) AAL
Medical Plan election percentages changed (90) (90)
Updated CalPERS decrement assumptions (1,016) (1,016)
Contribution and Benefit Payment Gain 9,499 (9,499)
Investment Gain 18,629 (18,629)
Total UAAL (Gain)/Loss 29,619 28,128 1,491
Actual 6/30/25 325,197 201,112 124,085
March 11, 2026 26
RESULTS
Actuarially Determined Contribution (ADC)
(Amounts in 000’s)
6/30/23 Valuation 6/30/25 Valuation
2024/25 2025/26 2026/27 2027/28
Discount Rate 6.25% 6.25%
ADC - $
Normal Cost $ 7,489 $ 7,674 $9,110 $9,352
Administrative Expenses16 125 133 151 158
UAAL Amortization 8,802 9,044 9,492 9,753
Total 16,416 16,851 18,752 19,263
Projected Payroll 127,929 131,447 157,422 161,751
ADC – Percent of Pay
Normal Cost 5.9% 5.8% 5.8% 5.8%
Administrative Expenses 0.1% 0.1% 0.1% 0.1%
UAAL Amortization 6.9% 6.9% 6.0% 6.0%
Total 12.8% 12.8% 11.9% 11.9%
16 Includes PEMHCA and CERBT administration fees.
March 11, 2026 27
RESULTS
Actuarially Determined Contribution (ADC) Payment to Trust
(Amounts in 000’s)
6/30/25 Valuation
2026/27 2027/28
Discount Rate 6.25%
ADC - $
Normal cost $9,110 $9,352
Administrative expenses17 151 158
UAAL amortization 9,492 9,753
Total 18,752 19,263
Less: Implicit subsidy benefit payments 3,163 3,110
Remaining ADC 15,589 16,153
Less: Estimated cash benefit payments 15,466 16,202
Total Trust contribution
(If negative, indicates a reimbursement for City
out-of-pocket payments may be requested.)
123 (49)
17 Includes PEMHCA and CERBT administration fees.
March 11, 2026 28
RESULTS
Historical Recommended Funding Contributions
(Amounts in 000’s)
March 11, 2026 29
RESULTS
Amortization Bases & Payments
(Amounts in 000’s)
6/30/23 Valuation 6/30/25 Valuation
6/30/24 6/30/25 6/30/26 6/30/27
Discount Rate 6.25% 6.25%
Payment Escalator 2.75% 2.75%
UAAL Balance $ 122,790 $ 121,662 $ 122,796 $ 120,979
Amortization Payment 8,802 9,044 9,492 9,753
Amortization Period
(years) 20 19 18 17
March 11, 2026 30
RESULTS
10 Year Contribution Projection
(Amounts in 000’s)
FYE ADC18
Contribution
Payroll
ADC
% of
Pay
Fund
%
Cash
Benefit
Payment
Implicit
Subsidy
BP
Trust
Pre-
Funding Total
UAAL
Beg. Of
FY
2027 $18,752 $15,466 $3,163 $123 $18,752 $157,422 11.9% $122,796 63%
2028 19,263 16,202 3,110 (49) 19,263 161,751 11.9% 120,979 65%
2029 19,808 17,066 3,218 (476) 19,808 166,199 11.9% 118,787 67%
2030 20,343 17,938 3,390 (985) 20,343 170,769 11.9% 116,190 69%
2031 20,900 18,684 3,429 (1,213) 20,900 175,466 11.9% 113,155 70%
2032 21,467 19,425 3,553 (1,511) 21,467 180,291 11.9% 109,648 72%
2033 22,057 20,068 3,621 (1,632) 22,057 185,249 11.9% 105,630 74%
2034 22,623 20,688 3,590 (1,655) 22,623 190,343 11.9% 101,062 76%
2035 23,232 21,407 3,628 (1,803) 23,232 195,578 11.9% 95,901 77%
2036 23,842 22,169 3,783 (2,110) 23,842 200,956 11.9% 90,103 79%
18 Actuarially Determined Contribution
March 11, 2026 31
RESULTS
-$20
-$10
$0
$10
$20
$30
$40
$
M
i
l
l
i
o
n
s
Net Trust Payment/Reimbursement Benefit Payments Total ADC
ADC, Benefitand Trust Payment/Reimbursement Projection
(6.25% Discount Rate, 18 years level % of pay amortization)
March 11, 2026 32
RESULTS
0%
20%
40%
60%
80%
100%
120%
$0
$20
$40
$60
$80
$100
$120
$140
Fu
n
d
e
d
R
a
t
i
o
UA
A
L
(
$
M
i
l
l
i
o
n
s
)
UAAL Funded Ratio
UAAL and Funded Ratio Projection
(6.25% Discount Rate, 18 years amortization)
March 11, 2026 33
RESULTS
% of Total Actuarial Accrued Liability for Actives and Retirees
Miscellaneous
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
6/30/09 6/30/11 6/30/13 6/30/15 6/30/17 6/30/19 6/30/21 6/30/23 6/30/25
Actives Retirees
March 11, 2026 34
RESULTS
% of Total Actuarial Accrued Liability for Actives and Retirees
Safety
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
6/30/09 6/30/11 6/30/13 6/30/15 6/30/17 6/30/19 6/30/21 6/30/23 6/30/25
Actives Retirees
March 11, 2026 35
RESULTS - DETAILS
Actuarial Obligations by Pre/Post 65 Benefits
June 30, 2025
(Amounts in 000’s)
Benefits
Paid
Before
Age 65
Benefits
Paid On
or After
Age 65 Total
Present Value of Benefits
Actives (future retirees) $84,792 $96,131 $180,922
Retirees 53,045 179,153 232,197
Total 137,837 275,284 413,119
Actuarial Accrued Liability
Actives (future retirees) 41,029 51,972 93,000
Retirees 53,045 179,153 232,197
Total 94,074 231,125 325,197
Normal Cost 2026/2719 4,386 4,873 9,260
19 Includes Administration fees.
March 11, 2026 36
RESULTS - DETAILS
Actuarial Obligations by Group
June 30, 2025
(Amounts in 000’s)
Group 1 Group 2 Group 3 Group 4 Total
Present Value of Benefits
Actives (future retirees) $ - $ - $8,692 $172,230 $180,922
Retirees 49,937 60,320 41,342 80,598 232,197
Total 49,937 60,320 50,034 252,828 413,119
Actuarial Accrued
Liability
Actives (future retirees) - - 7,534 85,466 93,000
Retirees 49,937 60,320 41,342 80,598 232,197
Total 49,937 60,320 48,876 166,064 325,197
Normal Cost 2026/2720 n/a n/a 226 9,034 9,260
NC as % of Payroll n/a n/a 4.7% 5.9% 5.9%
Active Count n/a n/a 36 938 974
Projected Payroll n/a n/a 4,787 152,634 157,422
20 Includes Administration fees.
March 11, 2026 37
RESULTS - DETAILS
Actuarial Obligations by Cash/Implicit Subsidy
June 30, 2025
(Amounts in 000’s)
Cash
Subsidy
Implicit
Subsidy Total
Present Value of Benefits
Actives (future retirees) $161,377 $19,546 $180,922
Retirees 197,984 34,213 232,197
Total 359,361 53,759 413,119
Actuarial Accrued Liability
Actives (future retirees) 82,437 10,563 93,000
Retirees 197,984 34,213 232,197
Total 280,421 44,776 325,197
Normal Cost 2026/2721 8,325 934 9,260
Pay-As-You-Go Cost 2026/27 15,466 3,163 18,628
21 Includes Administration fees.
March 11, 2026 38
RESULTS - DETAILS
Actuarial Obligations by Misc/Safety
June 30, 2025
(Amounts in 000’s)
Misc Safety Total
Present Value of Benefits
Actives (future retirees) $130,006 $50,917 $180,922
Retirees 142,593 89,604 232,197
Total 272,599 140,521 413,119
Actuarial Accrued Liability
Actives (future retirees) 69,268 23,732 93,000
Retirees 142,593 89,604 232,197
Total 211,861 113,336 325,197
Normal Cost 2026/2722 6,681 2,579 9,260
Pay-As-You-Go Cost 2026/27 12,192 6,436 18,628
22 Includes Administration fees.
March 11, 2026 39
RESULTS - DETAILS
Actuarial Obligations by Bargaining Unit
June 30, 2025
(Amounts in 000’s)
FCA IAFF M/C PAPOA PMA SEIU UMPAPA Total
PVB
Actives $1,529 $24,319 $38,933 $19,775 $3,188 $83,849 $9,328 $180,922
Retirees 2,933 42,974 63,749 33,137 2,896 75,689 10,817 232,197
Total 4,462 67,293 102,682 52,912 6,084 159,538 20,145 413,119
AAL
Actives 1,242 10,573 21,028 7,747 2,539 43,738 6,133 93,000
Retirees 2,933 42,974 63,749 33,137 2,896 75,689 10,817 232,197
Total 4,175 53,547 84,777 40,884 5,435 119,427 16,950 325,197
MVA23 2,582 33,115 52,429 25,284 3,361 73,857 10,482 201,112
UAAL 1,593 20,432 32,348 15,600 2,074 45,570 6,468 124,085
NC 26/2724 55 1,171 2,080 1,125 136 4,260 434 9,260
Pay-Go 229 3,277 5,329 2,090 231 6,625 847 18,628
23 Allocated in proportion to the Actuarial Accrued Liability.
24 Includes Administration fees.
March 11, 2026 40
RESULTS - DETAILS
Actuarially Determined Contribution by Bargaining Unit
2026/27 Fiscal Year
(Amounts in 000’s)
FCA IAFF M/C PAPOA PMA SEIU UMPAPA Total
ADC - $
Normal Cost $53 $1,147 $2,041 $1,106 $134 $4,204 $426 $9,110
Admin. Expenses 2 25 39 19 3 56 8 151
UAAL Amort 120 1,548 2,453 1,198 160 3,518 494 9,492
ADC 175 2,719 4,532 2,323 297 7,778 928 18,752
Projected Payroll 934 13,419 44,161 12,917 2,367 73,257 10,365 157,422
ADC - %
Normal Cost 5.6% 8.5% 4.6% 8.6% 5.7% 5.7% 4.1% 5.8%
Admin. Expenses 0.2% 0.2% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1%
UAAL Amort 12.9% 11.5% 5.6% 9.3% 6.8% 4.8% 4.8% 6.0%
ADC 18.7% 20.3% 10.3% 18.0% 12.5% 10.6% 9.0% 11.9%
March 11, 2026 41
RESULTS - DETAILS
Actuarially Determined Contribution by Bargaining Unit
2027/28 Fiscal Year
(Amounts in 000’s)
FCA IAFF M/C PAPOA PMA SEIU UMPAPA Total
ADC - $
Normal Cost $54 $1,177 $2,095 $1,135 $137 $4,316 $437 $9,352
Admin. Expenses 2 26 41 20 3 59 8 158
UAAL Amort 124 1,591 2,520 1,231 165 3,615 508 9,753
ADC 180 2,794 4,656 2,386 305 7,990 953 19,263
Projected Payroll 960 13,788 45,376 13,272 2,432 75,271 10,650 161,751
ADC - %
Normal Cost 5.6% 8.5% 4.6% 8.6% 5.6% 5.7% 4.1% 5.8%
Admin. Expenses 0.2% 0.2% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1%
UAAL Amort 12.9% 11.5% 5.6% 9.3% 6.8% 4.8% 4.8% 6.0%
ADC 18.7% 20.3% 10.3% 18.0% 12.5% 10.6% 8.9% 11.9%
March 11, 2026 42
RESULTS - DETAILS
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March 11, 2026 43
SENSITIVITY ANALYSIS
Discount Rate Sensitivity
(Amounts in 000’s)
CERBT Strategy
#1 (Current) #2 #3
Discount Rate 6.25% 5.75% 5.25%
Present Value of Benefits $413,119 $447,440 $486,698
Funded Status 6/30/23
Actuarial Accrued Liability 325,197 344,709 366,190
Assets 201,112 201,112 201,112
Unfunded AAL 124,085 143,597 165,078
Funded Ratio 61.8% 58.3% 54.9%
ADC 2026/27
Normal Cost $9,110 $10,192 $11,430
Administrative Expenses 151 151 151
UAAL Amortization25 9,492 10,600 11,738
Total 18,752 20,943 23,318
ADC % of Payroll 11.9% 13.3% 14.8%
25 UAAL amortized over 18 years for all scenarios.
March 11, 2026 44
SENSITIVITY ANALYSIS
Amortization Period Sensitivity
Discount Rate – 6.25%, Level % of Pay with 2.75% Payment Escalation
(Amounts in 000’s)
Amortization Period
Current
18 Years 16 Years
Funded Status 6/30/25
Actuarial Accrued Liability $325,197 $325,197
Assets 201,112 201,112
Unfunded AAL 124,085 124,085
Total Projected Payroll 2026/27 157,422 157,422
ADC 2026/27
Normal Cost 9,110 9,110
Administrative Expenses 151 151
UAAL Amortization 9,492 10,359
Total 18,752 19,620
ADC % of Payroll 11.9% 12.5%
March 11, 2026 45
SENSITIVITY ANALYSIS
Amortization Period Sensitivity
Discount Rate – 5.75%, Level % of Pay with 2.75% Payment Escalation
(Amounts in 000’s)
Amortization Period
Current
18 Years 16 Years
Funded Status 6/30/25
Actuarial Accrued Liability $344,709 $344,709
Assets 201,112 201,112
Unfunded AAL 143,597 143,597
Total Projected Payroll 2026/27 157,422 157,422
ADC 2026/27
Normal Cost 10,192 10,192
Administrative Expenses 151 151
UAAL Amortization 10,600 11,613
Total 20,943 21,957
ADC % of Payroll 13.3% 13.9%
March 11, 2026 46
SENSITIVITY ANALYSIS
Actuarial Obligations by Bargaining Unit – 5.75%
June 30, 2025
(Amounts in 000’s)
FCA IAFF M/C PAPOA PMA SEIU UMPAPA Total
PVB
Actives $1,663 $27,613 $43,459 $22,394 $3,465 $94,310 $10,298 $203,201
Retirees 3,094 45,259 66,816 35,157 3,085 79,413 11,415 244,239
Total 4,757 72,872 110,275 57,551 6,550 173,723 21,713 447,440
AAL
Actives 1,331 11,433 22,693 8,392 2,720 47,289 6,613 100,470
Retirees 3,094 45,259 66,816 35,157 3,085 79,413 11,415 244,239
Total 4,425 56,692 89,509 43,549 5,805 126,702 18,028 344,709
MVA26 2,582 33,076 52,222 25,408 3,387 73,921 10,518 201,112
UAAL 1,843 23,616 37,287 18,141 2,418 52,781 7,510 143,597
NC 26/2727 61 1,312 2,311 1,254 153 4,769 482 10,342
Pay-Go 229 3,277 5,329 2,090 231 6,625 847 18,628
26 Allocated in proportion to the Actuarial Accrued Liability.
27 Includes Administration fees.
March 11, 2026 47
SENSITIVITY ANALYSIS
10 Year Contribution Projection – 5.75%
11 Year Amortization
(Amounts in 000’s)
FYE ADC28
Contribution
Payroll
ADC
% of
Pay
Fund
%
Cash
Benefit
Payment
Implicit
Subsidy
BP
Trust
Pre-
Funding Total
UAAL
Beg. Of
FY
2027 $26,131 $15,466 $3,163 $7,502 $26,131 $157,422 16.6% $142,810 60%
2028 26,805 16,202 3,110 7,493 26,805 161,751 16.6% 135,233 63%
2029 27,565 17,066 3,218 7,281 27,565 166,199 16.6% 126,786 67%
2030 28,318 17,938 3,390 6,990 28,318 170,769 16.6% 117,407 70%
2031 29,101 18,684 3,429 6,988 29,101 175,466 16.6% 107,031 73%
2032 29,900 19,425 3,553 6,922 29,900 180,291 16.6% 95,587 77%
2033 30,728 20,068 3,621 7,039 30,728 185,249 16.6% 83,001 81%
2034 31,536 20,688 3,590 7,258 31,536 190,343 16.6% 69,194 84%
2035 32,395 21,407 3,628 7,360 32,395 195,578 16.6% 54,083 88%
2036 33,261 22,169 3,783 7,309 33,261 200,956 16.6% 37,577 92%
28 Actuarially Determined Contribution
March 11, 2026 48
SENSITIVITY ANALYSIS
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March 11, 2026 49
ACTUARIAL CERTIFICATION
This report presents the City of Palo Alto Retiree Healthcare Plan (“Plan”) June 30, 2025 actuarial valuation. The
purpose of this valuation is to:
Determine the June 30, 2025 Benefit Obligations,
Determine the Plan’s June 30, 2025 Funded Status, and
Calculate the 2026/27 and 2027/28 Actuarially Determined Contributions.
The report provides information intended for funding the City’s Plan, but may not be appropriate for other purposes.
Future actuarial measurements may differ significantly from the current measurements presented in this report due to
such factors as: plan experience differing from that anticipated by the assumptions; changes in assumptions; changes
expected as part of the natural progression of the plan; and changes in plan provisions or applicable law. Actuarial models
necessarily rely on the use of estimates and are sensitive to changes. Small variations in estimates may lead to significant
changes in actuarial measurements. Due to the limited scope of this assignment, we did not perform an analysis of the
potential range of such measurements.
The valuation is based on Plan provisions, participant data, and asset information provided by the City as summarized in
this report, which we relied on and did not audit. We reviewed the participant data for reasonableness.
To the best of our knowledge, this report is complete and accurate and has been conducted using generally accepted
actuarial principles and practices. As members of the American Academy of Actuaries meeting the Academy
Qualification Standards, we certify the actuarial results and opinions herein.
Respectfully submitted,
Drew Ballard, FSA, MAAA, EA Foster & Foster, Inc.
Braeleen Ballard, FSA, MAAA, EA
Foster & Foster, Inc.
March 11, 2026 50
EXHIBITS
Topic Page
Premiums E- 1
Data Summary E- 5
Additional Actuarial Assumptions E-23
Results by Fund E-31
Results by GF Department E-33
Definitions E-35
March 11, 2026 E-1
PREMIUMS
2025 PEMHCA Monthly Premiums
Region 1
Non-Medicare Eligible Medicare Eligible
Medical Plan Single 2-Party Family Single 2-Party Family
Anthem Select $1,256.65 $2,513.30 $3,267.29 $487.56 $975.12 $1,462.68
Anthem Traditional 1,500.40 3,000.80 3,901.04 487.56 975.12 1,462.68
Blue Shield Access+ 1,170.17 2,340.34 3,042.44 448.28 896.56 1,344.84
Blue Shield Trio 1,134.79 2,269.58 2,950.45 448.28 896.56 1,344.84
Kaiser 1,112.90 2,225.80 2,893.54 n/a n/a n/a
Kaiser Senior Advantage n/a n/a n/a 343.08 686.16 1,029.24
Kaiser SA Summit n/a n/a n/a 408.31 816.62 1,224.93
UnitedHealthcare Alliance 1,184.58 2,369.16 3,079.91 n/a n/a n/a
UnitedHealthcare Harmony 1,005.02 2,010.04 2,613.05 n/a n/a n/a
UnitedHealthcare Group n/a n/a n/a 442.25 884.50 1,326.75
Western Health Advantage 914.27 1,828.54 2,377.10 n/a n/a n/a
PERS Platinum 1,476.10 2,952.20 3,837.86 584.70 1,169.40 1,754.10
PERS Gold 1,013.70 2,027.40 2,635.62 546.13 1,092.26 1,638.39
PORAC 975.00 2,218.00 2,777.00 507.00 1,123.00 1,521.00
March 11, 2026 E-2
PREMIUMS
2026 PEMHCA Monthly Premiums
Region 1
Non-Medicare Eligible Medicare Eligible
Medical Plan Single 2-Party Family Single 2-Party Family
Anthem Select $1,336.29 $2,672.58 $3,474.35 $571.70 $1,143.40 $1,715.10
Anthem Traditional 1,612.08 3,224.16 4,191.41 571.70 1,143.40 1,715.10
Blue Shield Access+ 1,301.95 2,603.90 3,385.07 539.43 1,078.80 1,618.29
Blue Shield Trio 1,166.58 2,333.16 3,033.11 539.43 1,078.80 1,618.29
Kaiser 1,168.86 2,337.72 3,039.04 n/a n/a n/a
Kaiser Senior Advantage n/a n/a n/a 356.83 713.66 1,070.49
Kaiser SA Summit n/a n/a n/a 426.31 852.62 1,278.93
UnitedHealthcare Alliance 1,290.06 2,580.12 3,354.16 n/a n/a n/a
UnitedHealthcare Harmony 1,133.09 2,266.18 2,946.03 n/a n/a n/a
UnitedHealthcare Group n/a n/a n/a 481.29 962.58 1,443.87
Western Health Advantage 969.58 1,939.16 2,520.91 n/a n/a n/a
PERS Platinum 1,670.14 3,340.28 4,342.36 665.50 1,331.00 1,996.50
PERS Gold 1,120.58 2,241.16 2,913.51 597.57 1,195.14 1,792.71
PORAC 1,063.00 2,418.00 3,027.00 597.00 1,322.00 1,791.00
March 11, 2026 E-3
PREMIUMS
PEMHCA Monthly Premium Increases/(Decreases)
Region 1
Non-Medicare Eligible Medicare Eligible
Medical Plan 2025 2026 2025 2026
Anthem Select 10.3% 6.3% 20.1% 17.3%
Anthem Traditional 12.0% 7.4% 20.1% 17.3%
Blue Shield Access+ 8.7% 11.3% 14.2% 20.3%
Blue Shield Trio 19.9% 2.8% 14.2% 20.3%
Kaiser 9.0% 5.0% n/a n/a
Kaiser Senior Advantage n/a n/a 5.6% 4.0%
Kaiser SA Summit n/a n/a 5.6% 4.4%
UnitedHealthcare Alliance 8.6% 8.9% n/a n/a
UnitedHealthcare Harmony 7.2% 12.7% n/a n/a
UnitedHealthcare Group n/a n/a 29.4% 8.8%
Western Health Advantage 13.3% 6.0% n/a n/a
PERS Platinum 12.3% 13.1% 30.5% 13.8%
PERS Gold 10.8% 10.5% 34.3% 9.4%
PORAC 4.7% 9.0% 9.0% 17.8%
March 11, 2026 E-4
PREMIUMS
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March 11, 2026 E-5
DATA SUMMARY
Participant Statistics by Bargaining Unit
June 30, 2025
FCA IAFF M/C PAPOA PMA SEIU UMPAPA Total
Actives
Count 4 87 226 68 8 538 43 974
Avg Age 50.0 39.0 46.0 38.6 49.4 44.7 50.2 44.4
Avg City Svc 24.4 9.6 9.9 8.4 22.0 9.1 14.8 9.7
Avg PERS Svc 24.4 10.4 12.1 9.1 22.4 9.8 17.0 10.8
Avg Salary $221,156 $146,096 $185,085 $179,933 $280,303 $128,974 $228,314 $153,088
Total Salary29 $885 $12,710 $41,829 $12,235 $2,242 $69,388 $9,818 $149,108
Retirees30:
Count 8 145 320 97 7 435 38 1,050
Avg Age 66.3 71.7 73.9 65.4 56.0 73.4 63.9 72.1
Avg Service
Ret Age 55.8 54.6 58.2 52.3 51.9 59.9 58.6 58.3
Avg Disab Ret
Age 50.1 48.9 49.4 42.0 n/a 46.5 n/a 45.7
29 Amount in 000’s. Based on June 30, 2025 PERSable pay rate.
30 Excludes retirees who have waived coverage.
March 11, 2026 E-6
DATA SUMMARY
Participant Statistics by Bargaining Unit
June 30, 2023
FCA IAFF M/C PAPOA PMA SEIU UMPAPA Total
Actives
Count 4 84 202 66 7 494 45 902
Avg Age 48.0 39.1 46.9 38.9 48.9 44.8 50.5 44.6
Avg City Svc 22.4 9.8 10.7 9.2 23.4 9.7 16.4 10.4
Avg PERS Svc 22.4 10.3 12.4 10.2 24.2 10.4 17.6 11.4
Avg Salary $190,356 $122,075 $159,976 $160,358 $254,449 $114,477 $198,351 $134,338
Total Salary31 $761 $10,254 $32,315 $10,584 $1,781 $56,552 $8,926 $121,173
Retirees32:
Count 8 147 313 96 6 432 29 1,031
Avg Age 64.3 71.4 73.0 66.4 53.2 72.6 62.9 71.5
Avg Service
Ret Age 55.8 54.7 58.1 52.5 50.4 59.7 58.2 58.2
Avg Disab Ret
Age 50.1 48.8 50.5 41.8 n/a 46.7 n/a 45.8
31 Amount in 000’s. Based on June 30, 2023 PERSable pay rate.
32 Excludes retirees who have waived coverage.
March 11, 2026 E-7
DATA SUMMARY
Participant Statistics by CalPERS Pension Category
June 30, 2025
33 Based on June 30, 2025 PERSable payrate.
34 Excludes retirees who have waived coverage.
Miscellaneous Police Fire Total
Actives
Count 802 77 95 974
Average Age 45.3 40.0 40.0 44.4
Average City Service 9.5 10.1 10.8 9.7
Average PERS Service 10.7 10.7 11.4 10.8
Average Salary $148,524 $195,926 $156,897 $153,088
Total Salary (000’s)33 $119,116 $15,086 $14,905 $149,108
Retirees34:
Count 771 116 163 1,050
Average Age 73.2 65.5 71.4 72.1
Avg Service Ret Age 59.3 52.3 54.6 58.3
Avg Disability Ret Age 46.6 42.1 49.0 45.7
March 11, 2026 E-8
DATA SUMMARY
Participant Statistics by CalPERS Pension Category
June 30, 2023
35 Based on June 30, 2023 PERSable payrate.
36 Excludes retirees who have waived coverage.
Miscellaneous Police Fire Total
Actives
Count 738 72 92 902
Average Age 45.6 40.3 39.9 44.6
Average City Service 10.3 10.8 10.8 10.4
Average PERS Service 11.3 11.8 11.2 11.4
Average Salary $130,866 $173,099 $131,856 $134,338
Total Salary (000’s)35 $96,579 $12,463 $12,131 $121,173
Retirees36:
Count 751 113 167 1,031
Average Age 72.4 65.9 71.2 71.5
Avg Service Ret Age 59.2 52.2 54.7 58.2
Avg Disability Ret Age 47.1 41.9 48.9 45.8
March 11, 2026 E-9
DATA SUMMARY
Medical Plan Participation – June 30, 2025
All Retirees
Medical Plan Actives Under 65 65 or Older Total
Miscellaneous/Sa et M S M S M S M S
Anthem Select 2% 1% 3% - 1% - 1% -
Anthem Traditional 1% 1% 2% 4% 6% 5% 5% 4%
Blue Shield Access+ 12% 4% 11% 3% 3% 2% 4% 2%
Blue Shiel Trio - 1% 1% 1% - - - -
Kaiser 67% 46% 47% 27% 28% 21% 32% 24%
Kaiser Summit - - - 1% 3% 1% 3% 1%
UnitedHealthcare 3% - - - 16% 9% 13% 5%
UnitedHealthcare Harmony 1% - - - - - - -
Western Health Advanta e - 1% - - - - - -
PERS Gol 6% 5% 6% - 1% - 2% -
PERS Platinum 8% 1% 30% 12% 41% 40% 39% 30%
PORAC - 40% - 52% 1% 22% 1% 34%
Total 100% 100% 100% 100% 100% 100% 100% 100%
March 11, 2026 E-10
DATA SUMMARY
Medical Plan Participation – June 30, 2023
All Retirees
Medical Plan Actives Under 65 65 or Older Total
Miscellaneous/Sa et M S M S M S M S
Anthem Select 2% 2% 3% - 1% - 1% -
Anthem Traditional 3% 1% 5% 4% 6% 5% 6% 5%
Blue Shield Access+ 10% 3% 7% 3% 1% 1% 3% 2%
Blue Shiel Trio - - - 1% - - - -
Health Net SmartCare - - 1% - - - - -
Kaiser 68% 50% 43% 26% 29% 21% 32% 23%
Kaiser Summit - - - - 2% - 2% -
UnitedHealthcare - - 1% 1% 17% 10% 13% 7%
UnitedHealthcare Ed e - - - - - - - -
Western Health Advanta e - 1% - - - - - -
PERS Gol 7% 4% 4% - 1% - 1% -
PERS Platinum 10% 2% 35% 16% 42% 47% 41% 34%
PORAC - 37% 1% 49% 1% 16% 1% 29%
Total 100% 100% 100% 100% 100% 100% 100% 100%
March 11, 2026 E-11
DATA SUMMARY
Active Medical Coverage – Miscellaneous
Medical Plan Single 2-Party Family Waived Total
Anthem Select 5 1 5 - 11
Anthem Traditional 3 - 2 - 5
Blue Shield Access+ 23 20 42 - 85
Blue Shield Trio - - 1 - 1
Kaiser 179 99 193 - 471
UnitedHealthcare Alliance 10 3 6 - 19
UnitedHealthcare Harmony 5 2 2 - 9
Western Health Advantage - - 1 - 1
PERS Gold 20 7 16 - 43
PERS Platinum 23 10 21 - 54
PORAC 1 - - - 1
Waived - - - 102 102
Total 269 142 289 102 802
% as of June 30, 2025 33% 18% 36% 13% 100%
% as of June 30, 2023 31% 18% 40% 11% 100%
March 11, 2026 E-12
DATA SUMMARY
Active Medical Coverage – Safety
Medical Plan Single 2-Party Family Waived Total
Anthem Select 1 - 1 - 2
Anthem Traditional 1 - - - 1
Blue Shield Access+ 1 - 5 - 6
Blue Shield Trio - - 1 - 1
Kaiser 21 9 46 - 76
UnitedHealthcare Alliance - - - - -
UnitedHealthcare Harmony - - - - -
Western Health Advantage - - 1 - 1
PERS Gold 5 1 2 - 8
PERS Platinum - - 2 - 2
PORAC 17 12 37 - 66
Waived - - - 9 9
Total 46 22 95 9 172
% as of June 30, 2025 27% 13% 55% 5% 100%
% as of June 30, 2023 24% 14% 55% 7% 100%
March 11, 2026 E-13
DATA SUMMARY
Retiree Medical Coverage - Miscellaneous
Medical Plan
Single 2-Party Family Total
<65 65+ <65 65+ <65 65+
Anthem Select 2 4 2 1 - 2 11
Anthem Traditional 3 16 - 16 - 2 37
Blue Shield Access+ 4 4 10 12 4 - 34
Blue Shield Trio - - - - 1 - 1
Kaiser 21 91 39 78 14 5 248
Kaiser Summit - 12 - 6 - 1 19
UnitedHealthcare Alliance - 63 - 35 - - 98
UnitedHealthcare Harmony - - - - - - 0
Western Health Advantage - - - - - - 0
PERS Gold 2 2 4 3 4 1 16
PERS Platinum 17 126 26 122 5 5 301
PORAC - 3 - 2 - 1 6
Total 49 321 81 275 28 17 771
% as of June 30, 2025 6% 42% 10% 36% 4% 2% 100%
% as of June 30, 2023 8% 42% 12% 33% 3% 2% 100%
March 11, 2026 E-14
DATA SUMMARY
Retiree Medical Coverage - Safety
Medical Plan
Single 2-Party Family Total
<65 65+ <65 65+ <65 65+
Anthem Select - - - - - - 0
Anthem Traditional 1 - 1 5 2 3 12
Blue Shield Access+ 1 1 1 2 1 - 6
Blue Shield Trio - - - - 1 - 1
Kaiser 5 13 11 23 13 1 66
Kaiser Summit - 1 1 1 - - 3
UnitedHealthcare Alliance - 8 - 6 - 1 15
UnitedHealthcare Harmony - - - - - - 0
Western Health Advantage - - - - - - 0
PERS Gold - - - - - - 0
PERS Platinum 4 36 4 31 5 2 82
PORAC 11 8 13 26 33 3 94
Total 22 67 31 94 55 10 279
% as of June 30, 2025 8% 24% 11% 34% 20% 3% 100%
% as of June 30, 2023 10% 24% 13% 32% 19% 3% 100%
March 11, 2026 E-15
DATA SUMMARY
Retirees Medical Coverage by Age – Miscellaneous
Age Single 2-Party Family Total
Under 50 - - - -
50-54 2 5 4 11
55-59 11 15 10 36
60-64 36 61 14 111
65-69 54 78 9 141
70-74 74 69 6 149
75-79 71 63 - 134
80-84 70 45 2 117
85 & Over 52 20 - 72
Total 370 356 45 771
Average Age 75.6 71.9 63.7 73.2
March 11, 2026 E-16
DATA SUMMARY
Retirees Medical Coverage by Age – Police
Age Single 2-Party Family Total
Under 50 3 2 10 15
50-54 - 1 7 8
55-59 3 - 6 9
60-64 6 8 6 20
65-69 6 14 4 24
70-74 8 5 2 15
75-79 4 9 - 13
80-84 3 3 - 6
85 & Over 3 3 - 6
Total 36 45 35 116
Average Age 68.7 70.6 55.7 65.5
March 11, 2026 E-17
DATA SUMMARY
Retirees Medical Coverage by Age – Fire
Age Single 2-Party Family Total
Under 50 - - 1 1
50-54 - 2 5 7
55-59 6 6 10 22
60-64 4 12 10 26
65-69 4 20 4 28
70-74 3 9 - 12
75-79 5 15 - 20
80-84 14 7 - 21
85 & Over 17 9 - 26
Total 53 80 30 163
Average Age 77.7 71.9 59.1 71.4
March 11, 2026 E-18
DATA SUMMARY
Retirees Medical Coverage by Age – Total
Age Single 2-Party Family Total
Under 50 3 2 11 16
50-54 2 8 16 26
55-59 20 21 26 67
60-64 46 81 30 157
65-69 64 112 17 193
70-74 85 83 8 176
75-79 80 87 - 167
80-84 87 55 2 144
85 & Over 72 32 - 104
Total 459 481 110 1,050
Average Age 75.3 71.7 59.9 72.1
March 11, 2026 E-19
DATA SUMMARY
Actives by Age and Service – Miscellaneous
City Service
Age < 1 1-4 5-9 10-14 15-19 20-24 ≥ 25 Total
< 25 8 7 - - - - - 15
25-29 12 41 2 - - - - 55
30-34 18 55 41 2 - - - 116
35-39 7 41 41 15 - - - 104
40-44 6 35 22 24 11 2 - 100
45-49 7 29 28 20 24 20 6 134
50-54 7 14 15 13 11 21 12 93
55-59 4 14 13 14 16 12 17 90
60-64 1 13 9 8 14 3 19 67
≥ 65 2 5 1 5 7 2 6 28
Total 72 254 172 101 83 60 60 802
March 11, 2026 E-20
DATA SUMMARY
Actives by Age and Service – Police
City Service
Age < 1 1-4 5-9 10-14 15-19 20-24 ≥ 25 Total
< 25 - - - - - - - -
25-29 - 10 2 - - - - 12
30-34 - 6 8 1 - - - 15
35-39 2 4 5 1 - - - 12
40-44 1 2 1 4 5 - - 13
45-49 - 1 1 6 3 3 2 16
50-54 - 1 - - - 1 3 5
55-59 - - - - 1 1 - 2
60-64 - - - - - 1 - 1
≥ 65 - - 1 - - - - 1
Total 3 24 18 12 9 6 5 77
March 11, 2026 E-21
DATA SUMMARY
Actives by Age and Service – Fire
City Service
Age < 1 1-4 5-9 10-14 15-19 20-24 ≥ 25 Total
< 25 - 3 - - - - - 3
25-29 - 13 2 - - - - 15
30-34 - 14 6 - - - - 20
35-39 - 3 3 3 3 - - 12
40-44 - 1 2 5 2 2 - 12
45-49 1 1 1 3 4 3 - 13
50-54 - - 1 2 1 3 6 13
55-59 - - - - - 3 3 6
60-64 - - - - 1 - - 1
≥ 65 - - - - - - - -
Total 1 35 15 13 11 11 9 95
March 11, 2026 E-22
DATA SUMMARY
Actives by Age and Service – Total
City Service
Age < 1 1-4 5-9 10-14 15-19 20-24 ≥ 25 Total
< 25 8 10 - - - - - 18
25-29 12 64 6 - - - - 82
30-34 18 75 55 3 - - - 151
35-39 9 48 49 19 3 - - 128
40-44 7 38 25 33 18 4 - 125
45-49 8 31 30 29 31 26 8 163
50-54 7 15 16 15 12 25 21 111
55-59 4 14 13 14 17 16 20 98
60-64 1 13 9 8 15 4 19 69
≥ 65 2 5 2 5 7 2 6 29
Total 76 313 205 126 103 77 74 974
March 11, 2026 E-23
ADDITIONAL ACTUARIAL ASSUMPTIONS
June 30, 2023 Valuation June 30, 2025 Valuation
Retirement CalPERS 2000-2019
Experience Study- Expected
retirement age for each tier
Misc Fire & Police
Tier 1 2.7%@55 3%@50
Tier 2 2%@60 3%@55
PEPRA 2.5%@67 2.7%@57
CalPERS 2000-2023
Experience Study - Expected
retirement age for each tier
Misc Fire & Police
Tier 1 2.7%@55 3%@50
Tier 2 2%@60 3%@55
PEPRA 2.5%@67 2.7%@57
Spousal
Coverage at
Retirement
70% of covered retirees are
assumed to cover spouses
Based on Plan experience
Same
Waived Retiree
Re-election
0% Same
March 11, 2026 E-24
ADDITIONAL ACTUARIAL ASSUMPTIONS
June 30, 2023 Valuation June 30, 2025 Valuation
Medical Trend Increase from Prior Year
Pre-
Medicare
Post-
Medicare
Other
Post-
Medicare
Year Kaiser
2023 Actual Premiums
2024 Actual Premiums
2025 8.50% 7.50% 6.25%
2026 7.90% 6.90% 5.65%
2027 7.35% 6.50% 5.45%
2028 6.75% 6.10% 5.25%
2029 6.20% 5.70% 5.05%
2030 5.60% 5.25% 4.85%
2031 5.05% 4.85% 4.65%
2032-38 4.45% 4.45% 4.45%
2039-40 4.35% 4.35% 4.35%
2041 4.30% 4.30% 4.30%
↓ ↓ ↓ ↓
2076+ 3.45% 3.45% 3.45%
Increase from Prior Year
Pre-
Medicare
Post-
Medicare
Other
Post-
Medicare
Year Kaiser
2023 n/a
2024 n/a
2025 Actual Premiums
2026 Actual Premiums
2027 7.35% 6.50% 5.45%
2028 6.75% 6.10% 5.25%
2029 6.20% 5.70% 5.05%
2030 5.60% 5.25% 4.85%
2031 5.05% 4.85% 4.65%
2032-38 4.45% 4.45% 4.45%
2039-40 4.35% 4.35% 4.35%
2041 4.30% 4.30% 4.30%
↓ ↓ ↓ ↓
2076+ 3.45% 3.45% 3.45%
March 11, 2026 E-25
ADDITIONAL ACTUARIAL ASSUMPTIONS
June 30, 2023 Valuation June 30, 2025 Valuation
Medical Plan at
Retirement &
Retirees Attaining
age 65
Miscellaneous: <65 65+
Anthem Traditional 10% 5%
Blue Shield Access+ 5% 0%
Kaiser 45% 30%
PERS Gold 5% 0%
PERS Platinum 35% 45%
UnitedHealthcare 0% 20%
Safety: <65 65+
Anthem Traditional 5% 5%
Blue Shield Access+ 5% 0%
Kaiser 30% 25%
PERS Gold 0% 0%
PERS Platinum 15% 45%
PORAC 45% 15%
UnitedHealthcare 0% 10%
Based on Plan experience
Miscellaneous: <65 65+
Anthem Traditional 5% 5%
Blue Shield Access+ 10% 0%
Kaiser 50% 30%
PERS Gold 5% 0%
PERS Platinum 30% 45%
UnitedHealthcare 0% 20%
Safety: <65 65+
Anthem Traditional 5% 5%
Blue Shield Access+ 5% 0%
Kaiser 30% 25%
PERS Gold 0% 0%
PERS Platinum 10% 40%
PORAC 50% 20%
UnitedHealthcare 0% 10%
Based on Plan experience
March 11, 2026 E-26
ADDITIONAL ACTUARIAL ASSUMPTIONS
June 30, 2023 Valuation June 30, 2025 Valuation
Family Coverage
at Retirement
(for future
retirees)
Misc: 15% until age 65
5% age 65-75
Safety: 50% until age 65
5% age 65-80
Based on Plan experience
Same
Spouse Age Actives – Males 3 years older
than females
Retirees – Males 3 years
older than females if spouse
birth date not available
Same
March 11, 2026 E-27
ADDITIONAL ACTUARIAL ASSUMPTIONS
June 30, 2023 Valuation June 30, 2025 Valuation
Medicare
Eligibility
Actives and retirees hired
before 4/1/86:
Miscellaneous – 80%
Safety – 90%
Actives and retirees hired on
or after 4/1/86: 100%
Retirees before 65 with
unknown hire date: 90%
Everyone eligible for
Medicare will elect Part B
coverage
Same
Future New
Participants
None – Closed Group Same
Retirees Missing
Fund
No retirees missing Fund
information.
Same
March 11, 2026 E-28
ADDITIONAL ACTUARIAL ASSUMPTIONS
June 30, 2023 Valuation June 30, 2025 Valuation
Retirees Missing
Department
Assumed to have the same
department as the prior
valuation
Liability for retirees assumed
to be 75% GF allocated
proportionately across all
Departments
Same
Actuarial Models Our valuation was performed using and relying on ProVal, an
actuarial model leased from Wintech. Our use of ProVal is
consistent with its intended purpose. We have reviewed and
understand ProVal and its operation, sensitivities and
dependencies.
Data Quality Our valuation used census data provided by the City and
CalPERS OPEB data extract. We reviewed the data for
reasonableness and resolved any questions with the City. We
believe the resulting data can be relied on for all purposes of this
valuation without limitation.
March 11, 2026 E-29
ADDITIONAL ACTUARIAL ASSUMPTIONS
June 30, 2023 Valuation June 30, 2025 Valuation
Sample Medical
Claims Costs
2026
Sample estimated monthly claims costs:
Region 1 – Non-Medicare Eligible
Kaiser PERS Platinum PORAC
Age M F M F M F
55 $1,238 $1,349 $1,618 $1,760 $1,390 $1,516
60 1,546 1,556 2,013 2,026 1,739 1,751
65 1,904 1,826 2,474 2,373 2,146 2,057
70 2,280 2,134 2,957 2,770 2,574 2,408
75 2,675 2,463 3,465 3,193 3,023 2,782
80 3,080 2,812 3,986 3,641 3,483 3,178
85 3,451 3,152 4,463 4,079 3,905 3,565
Region 1 – Medicare Eligible
Kaiser PERS Platinum PORAC
Age M F M F M F
65 n/a n/a $608 $582 $545 $523
70 n/a n/a 658 630 591 565
75 n/a n/a 701 672 629 604
80 n/a n/a 723 698 649 627
85 n/a n/a 715 696 642 625
March 11, 2026 E-30
ADDITIONAL ACTUARIAL ASSUMPTIONS
This page intentionally blank
March 11, 2026 E-31
RESULTS BY FUND
Actuarial Obligations – June 30, 2025 – 6.25% Discount Rate
(Amounts in 000’s)
FUND AAL Assets37 UAAL
Airport $ 550 $ 340 $ 210
CIP 5,784 3,577 2,207
Elec38 35,297 21,830 13,467
Gas38 14,517 8,978 5,539
GF 211,171 130,594 80,577
ISF – Technology 8,111 5,016 3,095
ISF – Vehicle 2,668 1,650 1,018
ISF – Printing & Mailing 159 99 60
ISF – Workers Comp 137 85 52
PARKING 945 584 361
Refuse 6,135 3,793 2,342
Storm Drain 2,770 1,714 1,056
Water38 12,505 7,732 4,773
WWC38 5,302 3,279 2,023
WWT 19,146 11,841 7,305
Total 325,197 201,112 124,085
37 Assets allocated in proportion to AAL.
38 AAL for UTL employees allocated to Elec, Gas, Water, and WWC in proportion to each Fund’s AAL
March 11, 2026 E-32
RESULTS BY FUND
Actuarially Determined Contribution (ADC) – 6.25% Discount Rate
(Amounts in 000’s)
FUND 2026/27 2027/28
Airport $ 70 $ 72
CIP 502 515
Elec 1,993 2,048
Gas 858 882
GF 11,906 12,229
ISF – Technology 511 525
ISF – Vehicle 146 150
ISF – Printing & Mailing 8 8
ISF – Workers Comp 18 18
PARKING 97 100
Refuse 284 292
Storm Drain 172 177
Water 732 752
WWC 356 366
WWT 1,099 1,129
Total 18,752 19,263
March 11, 2026 E-33
RESULTS BY GF DEPARTMENT
Actuarial Obligations – June 30, 2025 – 6.25% Discount Rate
(Amounts in 000’s)
GF Department AAL Assets39 UAAL
ASD $ 10,845 $ 6,707 $ 4,138
ATT 2,647 1,637 1,010
AUD 149 93 56
CLK 806 499 307
COU 1,439 890 549
CSD 19,288 11,929 7,360
DSD 8,311 5,139 3,171
FIR 59,859 37,017 22,842
HRD 2,825 1,747 1,078
LIB 7,448 4,606 2,842
MGR 2,925 1,809 1,116
PLA 8,325 5,148 3,176
POL 67,043 41,461 25,582
PWD 19,261 11,912 7,350
Total 211,171 130,594 80,577
39 Assets allocated in proportion to AAL.
March 11, 2026 E-34
RESULTS BY GF DEPARTMENT
Actuarially Determined Contribution (ADC) – 6.25% Discount Rate
(Amounts in 000’s)
GF Department 2026/27 2027/28
ASD $ 664 $ 682
ATT 154 158
AUD 4 4
CLK 45 46
COU 68 70
CSD 1,184 1,216
DSD 656 673
FIR 2,936 3,016
HRD 182 187
LIB 644 661
MGR 224 230
PLA 490 504
POL 3,657 3,757
PWD 998 1,025
Total 11,906 12,229
March 11, 2026 E-35
DEFINITIONS
Present Value of Benefits
March 11, 2026 E-36
DEFINITIONS
Actuarially
Determined
Contribution
(ADC)
Contribution for the current period including:
Normal Cost
Administrative expenses
Amortization of:
Initial Unfunded AAL
AAL for plan, assumption, and method changes
Experience gains/losses (difference between expected and actual)
Contribution gains/losses (difference between ADC and actual)
May 19, 2026 www.paloalto.gov/budget
FY 2027 PROPOSEDBUDGET HEARINGS
Other Post Employment Benefits (OPEB)
June 30, 2025 Actuarial Valuation
1
The City completes a biennial actuarial valuation of its Other Post-Employment Benefits
(OPEB), primarily retiree healthcare. The valuation provides an updated view of:
•Long-term liabilities
•Trust assets
•Funded status
•Required annual contributions
This report supports the City’s budget planning for FY 2027 and FY 2028.
2
OPEB ACTUARIAL VALUATION
VALUATION IMPACT SUMMARY
3
FY 2026
Adopted
FY 2027
Proposed
%
change
$ change
ADC (5.75%, City Policy)$22.6 M $26.1 M 15.5%$3.5 M
Unfunded Actuarial
Accrued Liability $120.5 M $124.1 M 3.0%$3.6 M
Funded Status 56.4%61.8%9.6%-
•Cost escalation
•$3.5 M increase from FY 2026
•Included in FY 2027 Proposed Budget
•Funded status improved
•From 56% to 62%
•On track to meet City policy goal of 90% funded by 2036
CITY POLICY FUNDING GOAL
4
•City Council policy
requires
contributions above
the baseline
valuation approach to
prefund liabilities and
improve long -term
funded status.
•5.75% discount
rate
•Shortened
amortization
•90% funded by 2036
STAFF RECOMMENDATION
5
•Staff recommends that the Finance Committee:
•Review and accept the June 30,2025 actuarial valuation
of Palo Alto's Retiree Healthcare; and
•Recommend funding the annual Actuarially Determined
Contribution (ADC) for Fiscal Year 2027 and 2028
City of Palo Alto
Retiree Healthcare Plan
June 30, 2025 Actuarial Valuation
May 19, 2026
Presented By:
Drew Ballard, FSA, EA, MAAA
Overview
➢June 30, 2025 Retiree Healthcare Valuation Report (OPEB)
▪OPEB = Other Post-Employment Benefits
▪Purpose: Funding
•Biennial valuations
•2026/27 and 2027/28 trust contributions
•City pre-funding with CalPERS CERBT trust since March 2008
•Actuarially Determined Contribution (ADC):
•Normal Cost
•Amortization of Unfunded Actuarial Accrued Liability
•Determines underlying liabilities for accounting disclosures
(2025/26 and 2026/27)
2All information contained herein is considered proprietary and confidential.
Benefit Summary
➢Retire directly from City
➢Portion of retiree medical premium paid by City
➢Generally, cover most of premium for retiree and dependents
➢Approx 96% of actives have ‘Group 4’ benefit:
▪5 years City service required
▪2026 monthly caps:
▪Vesting schedule (CalPERS Service): 50% at 10 years, increasing by
5% per year until 100% at 20 years
3All information contained herein is considered proprietary and confidential.
Single 2-Party Family
$943 $1,885 $2,444
Funding Basics
4All information contained herein is considered proprietary and confidential.
Contributions
+
Investment Income
=
Benefit Payments
+
Expenses C I B E
Gain/Loss Summary (in 000s)
➢Primary gain/loss contributors
▪Gain: Investment performance
(11.0% and 12.3% returns compared to 6.25% assumption)
▪Loss: CalPERS medical premium increases larger than expected, especially for non-Kaiser Medicare
retirees
5All information contained herein is considered proprietary and confidential.
AAL Assets UAAL
◼ Actual 6/30/23 $276,572 $156,061 $120,511
◼ Expected 6/30/25 295,578 172,984 122,594
◼ Experience (Gains)/Losses
• Premiums/Caps different than expected 26,748 26,748
• Demographic & other 3,977 3,977
◼ Assumption Changes increasing/(decreasing) AAL
• Medical Plan election percentages changed (90) (90)
• Updated CalPERS decrement assumptions (1,016) (1,016)
◼ Contribution and Benefit Payment Gain 9,499 (9,499)
◼ Investment Gain 18,629 (18,629)
◼ Total UAAL (Gain)/Loss 29,619 28,128 1,491
◼ Actual 6/30/25 325,197 201,112 124,085
CalPERS Premium Increases
6All information contained herein is considered proprietary and confidential.
Non-Medicare Eligible Medicare Eligible
Medical Plan 2025 2026 2025 2026
Anthem Select 10.3% 6.3% 20.1% 17.3%
Anthem Traditional 12.0% 7.4% 20.1% 17.3%
Blue Shield Access+ 8.7% 11.3% 14.2% 20.3%
Blue Shield Trio 19.9% 2.8% 14.2% 20.3%
Kaiser 9.0% 5.0% n/a n/a
Kaiser Senior Advantage n/a n/a 5.6% 4.0%
Kaiser SA Summit n/a n/a 5.6% 4.4%
UnitedHealthcare Alliance 8.6% 8.9% n/a n/a
UnitedHealthcare Harmony 7.2% 12.7% n/a n/a
UnitedHealthcare Group n/a n/a 29.4% 8.8%
Western Health Advantage 13.3% 6.0% n/a n/a
PERS Platinum 12.3% 13.1% 30.5% 13.8%
PERS Gold 10.8% 10.5% 34.3% 9.4%
PORAC 4.7% 9.0% 9.0% 17.8%
Baseline ADC (in 000s)
➢Baseline assumptions
▪6.25% discount rate
▪18-Year Amortization Period
7All information contained herein is considered proprietary and confidential.
6/30/23 Valuation 6/30/25 Valuation
2024/25 2025/26 2026/27 2027/28
◼ Discount Rate 6.25% 6.25%
◼ ADC - $
• Normal Cost $ 7,489 $ 7,674 $9,110 $9,352
• Administrative Expenses 125 133 151 158
• UAAL Amortization 8,802 9,044 9,492 9,753
• Total 16,416 16,851 18,752 19,263
◼ Projected Payroll 127,929 131,447 157,422 161,751
◼ ADC – Percent of Pay
• Normal Cost 5.9% 5.8% 5.8% 5.8%
• Administrative Expenses 0.1% 0.1% 0.1% 0.1%
• UAAL Amortization 6.9% 6.9% 6.0% 6.0%
• Total 12.8% 12.8% 11.9% 11.9%
Baseline ADC (in 000s)
➢Baseline assumptions
▪6.25% discount rate
▪18-Year Amortization Period
8All information contained herein is considered proprietary and confidential.
6/30/25 Valuation
2026/27 2027/28
◼ Discount Rate 6.25%
◼ ADC - $
• Normal cost $9,110 $9,352
• Administrative expenses 151 158
• UAAL amortization 9,492 9,753
• Total 18,752 19,263
• Less: Implicit subsidy benefit payments 3,163 3,110
• Remaining ADC 15,589 16,153
• Less: Estimated cash benefit payments 15,466 16,202
• Total Trust contribution
(If negative, indicates a reimbursement for City
out-of-pocket payments may be requested.)
123 (49)
Projection – City Funding Policy (in 000s)
➢Alternate assumptions
▪5.75% discount rate
▪11-Year Amortization Period
9All information contained herein is considered proprietary and confidential.
FYE ADC
Contribution
Payroll
ADC
% of
Pay
Fund
%
Cash
Benefit
Payment
Implicit
Subsidy
BP
Trust Pre-
Funding Total
UAAL
Beg. Of
FY
2027 $26,131 $15,466 $3,163 $7,502 $26,131 $157,422 16.6% $142,810 60%
2028 26,805 16,202 3,110 7,493 26,805 161,751 16.6% 135,233 63%
2029 27,565 17,066 3,218 7,281 27,565 166,199 16.6% 126,786 67%
2030 28,318 17,938 3,390 6,990 28,318 170,769 16.6% 117,407 70%
2031 29,101 18,684 3,429 6,988 29,101 175,466 16.6% 107,031 73%
2032 29,900 19,425 3,553 6,922 29,900 180,291 16.6% 95,587 77%
2033 30,728 20,068 3,621 7,039 30,728 185,249 16.6% 83,001 81%
2034 31,536 20,688 3,590 7,258 31,536 190,343 16.6% 69,194 84%
2035 32,395 21,407 3,628 7,360 32,395 195,578 16.6% 54,083 88%
2036 33,261 22,169 3,783 7,309 33,261 200,956 16.6% 37,577 92%
10
Thank you.
Questions?
Drew Ballard, FSA, EA, MAAA
Foster & Foster, Inc.
drew.ballard@foster-foster.com
(650) 377-1600