HomeMy WebLinkAboutStaff Report 1.A 04/10/2017Agenda Item #1.A
CITY OF PETALUMA
MISCELLANEOUS AND SAFETY PLANS
CalPERS Actuarial Issues — 6/30/15 Valuation
Preliminary Results
Presented by John Bartel, President
Prepared by Bianca Lin, Assistant Vice President
Kevin Yang, Actuarial Analyst
Bartel Associates, LLC
n
April 10, 2017
Agenda
Topic
Page
Definitions
1
CalPERS Changes
3
Investment Return
6
Miscellaneous Plan:
Demographic Information
7
Plan Funded Status
9
Contribution Rates & Projections
12
Safety Plan:
Demographic Infonnation
21
Plan Funded Status
23
Contribution Rates & Projections
26
PEPRA Cost Sharing
35
Paying Down the Unfunded Liability
37
Irrevocable Supplemental (§115) Pension trust
39
Estimated Savings for Tier 2 and PEPRA
41
Estimated Savings for Golden Handshake
43
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DEFINITIONS
Present Value of Benefits
.rune 30, 2015
Future Normal
Cn,t,
Current Normal
Cost
Acloari.l
l.iahilily N^
■ PVB - Present Value of all Projected Benefits:
• Discounted value (at valuation date - 6/30/15), of all future expected benefit
payments based on various (actuarial) assumptions
■ Actuarial Liability:
• Discounted value (at valuation date) of benefits earned through valuation date
[value of past service benefit]
• Portion of PVB "earned" at measurement
■ Current Normal Cost:
• Portion of PVB allocated to (or "earned" during) current year
• Value of employee and employer current service benefit
April 10, 2017 1 r.
DEFINITIONS
Present Value of tienerits Present Value of Benefits
.rune 30, 21114 .lune 30, 2015
I nfflndtd 11® R 161fUn&d PN B
(lalaneled
qN nfunsled
rinhilityd 4.iu9snih)
Actuarial ...^t 1 m aria]
liahiliis U.hilne
■ Target- Have money in the bank to cover Actuarial Liability (past service)
■ Unfunded Liability - Money short of target at valuation date
■ Excess Assets / Surplus:
• Money over and above target at that point in time
• Doesn't mean you're done contributing
■ Super Funded:
• Assets cover whole pie (PVB)
• If everything goes exactly like PERS calculated, you'll never have to put another
(employer or employee) dime in
April 10, 2017 2 _.-
CALPERS CHANGES
I I
■ Contribution policy changes:
• No asset smoothing
• No rolling amortization
• 5 -year ramp up
• Included in 6/30/13 valuation (first impact 15/16 rates; full impact 19/20)
■ Assumption changes:
• Anticipate future mortality improvement
• Other, less significant, changes
• Included in 6/30/14 valuation (first impact 16/17 rates; full impact 20/21)
■ CaIPERS Board will change their discount rate:
Rate Initial Full
• 6/30/16 valuation 7.375% 18/19 22/23
• 6/30/17 valuation 7.25% 19/20 23/24
• 6/30/18 valuation 7.00% 20/21 24/25
• Risk mitigation suspended until 6/30/18 valuation
,
April 10 2017
P
3
CALPERS CHANGES
■ CaIPERS Board reviewing their Capital Market Assumptions next summer/fall
May result in further changes to discount rate
■ Risk Mitigation Strategy
• Move to more conservative investments over time
• Only when investment return is better than expected
• Lower discount rate in concert
• Essentially use z50% of investment gains to pay for cost increases
• Likely get to 6.0% over z 20 years
April 10, 2017 4 m.
CALPERS CHANGES
Discount Rate used as of Actuarial Valuation Date
7.75%
7.50%
381°
7.25% 1.e'°
7.00% goo°i° SO.
10
° Foy 6g0..1° I Nr0"�° t
6.75% 6 5°° FOS,,;° h{
� b5°l° n ;5°i° 55"�,.
6.50%br0 F6°...t, ap°p
a0"�°
6.25% ° b b3 ry5°I° b s"l„
0
`501° ,�°lo
\.
'0"
t F !O°l., b. b• ,polo
' 6.00 /)
F\t,°�. bhp bpp bpp
', hOO•l"FOO°,, 1,0\1' FC\\' FOO„,"t Ot\";°FOO�"
5.75°/,
O\\` O�^ O\ ~ O� O�O O Off` O'^ O\ O O` O O�O\'17§1'
� O�� O�� O\a O\ O O'' ~ O\
l� h bl`) b O� l^; 1^ O\" 1� l^` \','� b'� b`) l^� b� l� l 17§ �i'S l^� l'S 1� b l^` b,'§ \'S
5th percentile 25th percentile 50th percentile 75th percentile 95th Percentile
April 10, 2017
5
INVESTMENT RETURN
30.0090
MVA
22.50'4
15.00%
7.5094
0.00"
i
i
-15.00".,
I
-22 .50% X11
-30.0011,
' 19
44 14YcI1446 1Y47 144;i 1944 '_UUU _'(1111 '_UII2 '_U()3 211(It '001,12006,12001,1 '_IIU;i 211(14 '_Ulll ?Ull '_Ul? ''OI31?111 4 '_U1S ?Ulb r)17
sill VII VII 1
\IN'\.'_U"„161".153"11.1 145"1'$".105'-7'^„-fi0 3.7",, lfi G"1'1114^19Y51"°-2J0133",.`.17^.UI 13'"194",'4 0fi",. 9'
Above assumes contributions, payments, etc. received evenly throughout year.
Estimated June 30, 2017 based on Ca1PERS actual return through 1/31/17 and
assumed returns for 5 months.
April 10, 2017 6
SUMMARY OF DEMOGRAPHIC INFORMATION - MISCELLANEOUS
1996 2005 2014 2015
Actives
■ Counts
167
208
184
188
■ Average
Age
44
47
49
48
City Service
10
10
10
10
PERSable Wages
$41,600
$59,300
$68,600
$68,500
■ Total PERSable Wages (millions)
7.8
13.6
13.8
14.1
Receiving Payments
■ Counts
Service
109
198
206
Disablity
15
19
22
Beneficiaries
20
20
22
Total
92
144
237
250
■ Average Annual City Provided Benefit'
Service
$14,400
$22,200
$22,100
Disability
4,600
4,000
5,300
Service Retirements in last 5 years
16,200
23,000
22,500
Average City provided pensions are based on City service & City benefit
formula, and are not
representative of benefits for long service employees.
April 10, 2017 7
300
250
200
150
100
50
MEMBERS INCLUDED IN VALUATION - MISCELLANEOUS
ala A".i17,1 1" 1M, Inr+ Iv? 'N 41 1"') ,'ItS. .'If, ! ;. �'1 '.�I SIN � ,"M. 18i 17.1 M I I
��iransfcr• f,l r.f '' "' '� »7 a? h� Ni w�s d n1. Ills flf 3[§, II0 !4i BI+: 114 17r,1
�>ID l'�;.iavl d.onnnaYx.9u- "'4 f ; C" qa+ ?wI X., ) 5If, •14 -P 110,, f14, 71,Y l__' 1'4 4'i 71' I1"r
�®Fte+Y',n 7'i 1j4 I,w 11x I.I' IAV Ix` 74b4
�YI
April 10, 2017 8 mm.
PLAN FUNDED STATUS - MISCELLANEOUS
Present Value of Benefits Present Value of Benefits
.1 one 30, 2014 J one 30, 2015
1 nfund¢d P{'ll Unflnided PVB
ttlin—&d
a
June 30,2014
$ 30,900,000
Active AAL
56,500,000
Retiree AAL
10,700,000
Inactive AAL
98,100,000
Total AAL
79,300,000
Market Asset Value
(18,800,000)
(Unfunded Liability)
April 10, 2017 9
140'N
120%
1000'.
80%
600,0
40%,,
20%
0%
leJ' dd %I% A
(t aft."ded
June 30, 2015
$ 31,300,000
59,100,000
10,500,000
100,900,000
79,000,000
(21,900,000)
FUNDED RATIO - MISCELLANEOUS
April 10, 2017
6/30/16 & 6/30/17 funded status estimated.
10
FUNDED STATUS (MILLIONS) - MISCELLANEOUS
120
April 10, 2017
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
ER Cm,,,]C t
�T,rtal ER0 tRat.
6/30/16 & 6/30/17 funded status estimated.
CONTRIBUTION RATES - MISCELLANEOUS
April 10, 2017
12
CONTRIBUTION PROJECTIONS — MISCELLANEOUS
■ Market Value Investment Return:
• June 30, 2016 0.6%2
• June 30, 2017 8.2%3
• Future returns based on stochastic analysis using 1,000 trials
Single Year Returns at4 25th Percentile 50th Percentile 75th Percentile
• 7.0% Investment Mix 0.1% 7.0% 14.8%
• 6.0% Investment Mix 0.8% 6.0% 11.4%
• Assumes investment returns will, generally be 6.5% (as compared to 7.0%)
over the next 10 years and higher beyond that
■ No Other: Gains/Losses, Method/Assumption Changes, Benefit Improvements
■ Excludes Employer Paid Member Contributions (EPMC)
Based on CAPERS 6/30/16 CAFR
June 30, 2017 return based on CaIPERS return of 5.4% through 1/31/17 and assumed returns for 5 months.
4 Ntl� percentile means N percentage of our trials result in returns lower than the indicated rates. _
April 10, 2017 13
CONTRIBUTION PROJECTIONS — MISCELLANEOUS
■ Tier 2 (2%@60) effective December 28, 2012
■ New hire assumptions:
• Assumes 50% of 2013 new hires will be Classic Tier 2 Members (2%@60)
and 50% will be New Members with PEPRA benefits
• Assumes Classic Tier 2 Members will decrease from 50% to 0% of new
hires over 20 years
April 10, 2017
14
CONTRIBUTION PROJECTIONS - MISCELLANEOUS
Discount Rate Reduced from 7.5% to 7% over 3 Years
45%
40%
35%Z3°p
30% Z� 2° 5fl p �� 3 �p p °}t1 3♦
25% ° ✓. 1°I° 2' I°IO L 1°/°
'Oo ° Z� ✓5 p°/°
15%
10%
5%
0%
25th Percentile 50th Percentile 75th Percentile
April 10, 2017 15 a -
CONTRIBUTION PROJECTIONS - MISCELLANEOUS
Discount Rate Reduced from 7.5% to 7% over 3 Years
45% - -
40%
35% - ^v
^21°'tib 4°�° •L'i� /�,i\°i° i ':, /p y'.
25% - tiasl° X59 ayl° ti°
1 °o
20% ^°�49s ✓ �,, obi°qyi° �;°
15% ----------------------------------------------------------------------------
10%,
5%
0°/fl
l�\1 ^\`L•�\\a q,��' �\ \nr .ti"'"��,� � 5 �b ,ti`b �,tia .,�0 �"\ .,�^ „"� \,�� „�a �„"b �.,1 „`�• „�a �0 �\ �� \�"� p,�` 'J� 'fib b^ gat•
\ \ ' ♦ \ ti n^,✓ �: �`�'> ,yl` .,� ' ��• ,tial „�O n,\ n� r n'S n,�` n�, n,V n�'� ' n�•' n,°� p� p\ p;r 'k'S' D,�`b`'� pb p'�
25th Percentile 50th Percentile 75th Percentile
April 10, 2017 16
CONTRIBUTION PROJECTIONS — MISCELLANEOUS
Discount Rate Reduced from 7.5% to 7% over 3 Years
45%
40%
35%
April 10, 2017
17
CONTRIBUTION PROJECTIONS — MISCELLANEOUS
Discount Rate Reduced from 7.5% to 7% over 3 Years ($000s)
$7,000
$6,000 5 g9z
5,542 5,6^10
5,2�� 5,349
$5,000 4,905
4,481
$4,000 4,070 g
3,656
$3,000 3,198
2,583
2;188
$2,000
1 1,237 1,325 1,412 5
1,564 1,85 1,632 1,� 05 1;153 1,803 1,852 1,`1k)4
$1,000
$0
16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25 25/26 26/27 27/28
ITotal Normal Cost UAL Payment
April 10, 2017
18
32.0% 30.9% 31.1%
31.1%-
30%
0 - - -- — --
30.0% 30.0%
28.3 %
26.5%
25%
24.5%
22.1 %
H
20%
19.$00
18.7%
°
15%
0
°
10%
0
9.1%
9.5%
10.2%
10.0% 10.0%10.1% 10.1%10.1% 10.1% 10.1%
0 8.$%
5%
0%
16/17 17/18
18/19
19/20
20/21
21/22 22/23 23/24 24/25 25/26 26/27 27/28
ITotal
Normal Cost 47MIUAL Payment
April 10, 2017
17
CONTRIBUTION PROJECTIONS — MISCELLANEOUS
Discount Rate Reduced from 7.5% to 7% over 3 Years ($000s)
$7,000
$6,000 5 g9z
5,542 5,6^10
5,2�� 5,349
$5,000 4,905
4,481
$4,000 4,070 g
3,656
$3,000 3,198
2,583
2;188
$2,000
1 1,237 1,325 1,412 5
1,564 1,85 1,632 1,� 05 1;153 1,803 1,852 1,`1k)4
$1,000
$0
16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25 25/26 26/27 27/28
ITotal Normal Cost UAL Payment
April 10, 2017
18
FUNDED STATUS - MISCELLANEOUS
Funded Status
Discount Rate Reduced from 7.5% to 7% over 3 Years
175%
150%
125%
100%
75°/,,
50%
25%
p
75th Percentile 50th Percentile 25th Percentile
April 10, 2017 19
FUNDED STATUS - MISCELLANEOUS
This page intentionally blank
April 10, 2017 20
SUMMARY OF DEMOGRAPHIC INFORMATION - SAFETY
1994 2005 2014 2015
Actives
■ Counts
113
121
108
111
■ Average
Age
38
38
41
40
City Service
11
10
12
12
PERSable Wages
$61,100
$77,200
$101,000
$99,000
■ Total PERSable Wages (millions)
7.7
10.3
11.9
12.0
Receiving Payments
■ Counts
Service
40
70
78
Disablity
82
97
98
Beneficiaries
6
12
12
Total
77
128
179
188
■ Average Annual City Provided Benefit
Service
$35,500
$56,600
$56,900
Disability
27,400
37,400
38,500
Service Retirements in last 5 years
50,300
52,700
49,800
Average City provided pensions are based on City service & City benefit
formula,
and are not
representative of benefits for long service employees.
April 10, 2017 21
200
190
160
140
120
100
80
60
40
20
MEMBERS INCLUDED IN VALUATION - SAFETY
April 10, 2017
22
PLAN FUNDED STATUS - SAFETY
Wneflas Procni Value of flenerds
June 30 2014 .lune 30. 20 15
Uff-d,d PN H
I N.lM P%'R
June 30, 2014
48,400,000
Active AAL
109,300,000
Retiree AAL
7,700,000
Inactive AAL
165,400,000
Total AAL
115,900,000
Market Asset Value
(49,500,000)
(Unfunded Liability)
April 10, 2017 23
140%
120'!U
100110
8011,0
60%
40'X.
20'/",
0%,
NIVA
June 30, 2015
$ 46,900,000
116,500,000
8,000,000
171,400,000
115,500,000
(55,900,000)
FUNDED RATIO - SAFETY I
April 10, 2017
6/30/16 & 6/30/17 funded status estimated.
24
200
1910
100
1-40
120
100
80
60
40
20
FUNDED STATUS (MILLIONS) — SAFETY
6/30/16 & 6/30/17 funded status estimated.
April 10, 2017 25
60.0%
50.0%
40.0%
CONTRIBUTION RATES — SAFETY
0'0%
99610 III); 01 11111'_
) 0203 03;04 03:0 0506 11607 07(N 0809 09; I0 1011
111;1'_ 1313 131-4' IA; 131 13;1(.
16171 17 IS
FA\,,,mal C,,,1 10.4""
1'_4^„
127"„
IT0"„
175^„
1%3""
Ix.}"„
IYO^„
IX 0",.
179"„
179^„
169'.
I4.J^„
II'„
IF7"., 167"„ 190^„
196"„ IYS^„
I ural FR C'„ni Ra(c 9 fl"„
n 9^„
7 W.
I I K n"„
'fl ti^„
3I 3^"
3J 9""
'_9 7"„
_H 7"„
`% 3"^
_x 1"„
_7 J""
iJ.l"„
i.4 5^„
37 7""' 39 7'^ J'_ S^^
.47 7"" 19 .t"„
i`
r -. 4
April 10, 2017
26
CONTRIBUTION PROJECTIONS - SAFETY
■ Market Value Investment Return:
• June 30, 2016 0.6%6
• June 30, 2017 8.2%7
• Future returns based on stochastic analysis using 1,000 trials
Single Year Returns at 25th Percentile 50th Percentile 75th Percentile
• 7.0% Investment Mix 0.1% 7.0% 14.8%
• 6.0% Investment Mix 0.8% 6.0% 11.4%
• Assumes investment returns will, generally be 6.5% (as compared to 7.0%)
over the next 10 years and higher beyond that
■ No Other: Gains/Losses, Method/Assumption Changes, Benefit Improvements
■ Excludes Employer Paid Member Contributions (EPMC)
e Based on CAPERS 6/30/16 CAFR.
7 June 30, 2017 return based on CaIPERS return of 5.4% through 1/31/17 and assumed returns for 5 months.
R Ntl� percentile means N percentage of our trials result in returns lower than the indicated rates.
April 10, 2017 27
CONTRIBUTION PROJECTIONS - SAFETY
■ Tier 2 (3%@55 FAE3) effective December 15, 2012
■ New hire assumptions:
• Assumes 50% of 2013 new hires will be Classic Tier 2 Members (3%@55)
and 50% will be New Members with PEPRA benefits
• Assumes Classic Tier 2 Members will decrease from 50% to 0% of new
hires over 10 years
April 10, 2017 28 a_-
CONTRIBUTION PROJECTIONS - SAFETY
Discount Rate Reduced from 7.5% to 7% over 3 Years
100%
70%
61 AND/* o{0
60% 10'y o '1
°{° p g o{o o�0 0 0
{° bb 5 �� 6� hh 0 h5 ( {
50% A� loi° 4A 0�{o
40%
30%
20%
10%
0%
LtK D ti 5^b ti 1 L�
ti \ ♦ ti ti ^r `\r `\r ^v `\r `fir ^r
25th Percentile 50th Percentile 75th Percentile
April 10, 2017 29
CONTRIBUTION PROJECTIONS - SAFETY
Discount Rate Reduced from 7.5% to 7% over 3 Years
100%
RO% 4, '31„ ^$ ry� a. °i.
70% °_°Int ti ° ro' I^V
60/
�l°dI1�•°
''
40%
�a•
30%
o h'
20%
10%
0%
�b����°c,�a q\^�O;�iti1��'L �, i��h\'L��i�iyb'y,ti�\\ �•k�a n�'oO�+.��n'1'�^,•''�'+��`'„�c%��b�^'+1�'+��:'''„���`p��p��k✓�p�,b p`p`Ph hDb hP�\'�^�k4
25th Percentile 50th Percentile 75th Percentile
�a
April 10, 2017 30
CONTRIBUTION PROJECTIONS — SAFETY
CONTRIBUTION PROJECTIONS — SAFETY
Discount Rate Reduced from 7.5% to 7% over 3 Years ($000s)
$14,000
$0
16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25 25/26 26/27 27/28
Total Normal Cost UAL Payment '
V,' Y
April 10, 2017 32
Discount Rate Reduced from 7.5% to 7% over 3 Years
100%
90%
80%
74.1% 74.9% 76.0% 76.5%
70%
0
70.3% 72.4 /°
67.0%
63.3%
60%
59.1%
54.1%
.a..s, . %
50%
49.4%
47
40%
0
30%
0
27.1
20%
t9.6% 18.5%
19.1%
19.7% 20,9% 20.6%
20.6%20.9% 20.7%20.6% 20.5% 20.3%
10%
0%
16/17 17/18
18/19
19/20 20/21 21/22
22/23 23/24 24/25 25/26 26/27 27/28
Total Normal Cost
^ UAL Payment
f
April 10, 2017
31
CONTRIBUTION PROJECTIONS — SAFETY
Discount Rate Reduced from 7.5% to 7% over 3 Years ($000s)
$14,000
$0
16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25 25/26 26/27 27/28
Total Normal Cost UAL Payment '
V,' Y
April 10, 2017 32
FUNDED STATUS - SAFETY
Funded Status
Discount Rate Reduced from 7.5% to 7% over 3 Years
175%
150%
y!`n
125%
e'♦�� °io tiyo°g�i�°w
0
100 /�
goio^4'°Y�.A ie ,\'4 Io �yoa,A,oq"b�ogh0 qb.
75% k�o`4._lam_:IeMa.,\�w,.�y`',,,^,,P',^�^�,.�o —oo oioy3�tiao°�,�0°j'�'`��P'^Q^yo�ry�'�ho'°^o 49 __ _—;,,1�,4♦;.!,tib:,
b"ti�ob"� �o ° oIo °�o�o °�o'obb ieb ;�°yobA� bq. b ` ` o^♦^:'o ^.
25%
75th Percentile 50th Percentile 25th Percentile
April 10, 2017 33
FUNDED STATUS - SAFETY
This page intentionally blank
April 10, 2017 34
PEPRA COST SHARING
■ Target of 50% of total normal cost for everyone
■ New members must pay greater of 50% of total normal cost or bargained
amount if higher
■ Employer cannot pay any part of new member required employee contributions
■ Employer may impose Classic employees pay 50% of total normal cost (limited
to 8% Miscellaneous, 12% Safety) if not agreed through collective bargaining
by 1/1/18
■ Miscellaneous Plan:
• Employer Normal Cost
• Member Normal Cost
• Total Normal Cost
• 50% Target
April 10, 2017
Safety Plan:
Classic Members
Tier 1 Tier 2
2%6755 FAE1 2%(&760 FAE3
9.0% 7.3%
'7 not '7 00/
16.0%
8.0%
35
PEPRA COST SHARING
• Employer Non -nal Cost
• Member Normal Cost
• Total Normal Cost
• 50% Target
April 10, 2017
14.3%
7.15%
New Members
PEPRA
2%(&762 FAE3
6.88%
6.25%
13.13%
6.57%
Classic Members New Members
Tier 1 Tier 2 PEPRA
3%600 FAE1 3%(&755 FAE3 2.7%(&,57 FAE3
19.4% 16.1% 10.85%
9.0% 9.0% 11.75%
28.4% 25.1% 22.60%
14.2% 12.55% 11.30%
36
PAYING DOWN THE UNFUNDED LIABILITY
■ Pension Obligation Bond (POB)
• Interest arbitrage between expected CalPERS earnings and rate paid on
POB
• Not guaranteed
■ Borrow from General Fund
• Pay GF back like a loan
• Payments come from all funds
■ One time payments
• City resolution to use portion of one time money
■ Internal Service Fund
• Restricted investments
❑ Likely low (0.5% - 1.0%) investment returns
❑ Short term/high quality
❑ Designed for preservation of principal
• Assets could be used by Council for other purposes
April 10, 2017
37
PAYING DOWN THE UNFUNDED LIABILITY
Approximate Years to Attain Funded Percent
80% 90% 100%
■ Miscellaneous 14 20 26
■ Safety 17 21 26
■ Ad-hoc payments applied to all amortization bases will not shorten
amortization period but will reduce contribution
■ Only ways to shorten period are:
• Request shorter amortization period of CalPERS
❑ Higher short term payments
❑ Less interest and lower long term payments
• Make ad-hoc payment that targets specific bases with longer amortization
periods
❑ Modestly lower (short & long term) payments
❑ Less interest
April 10, 2017
38
IRREVOCABLE SUPPLEMENTAL (§115) PENSION TRUST
■ > 40 trusts established
■ PARS, PFM & Keenan
■ Investments significantly less restricted than City investment funds
• Designed for long term returns
• Likely much higher (5% - 7%) investment return
■ Assets could not be used by the Council for other purposes
■ Can only be used to
• Reimburse City for CalPBRS contributions
• Make payments directly to Ca1PERS
■ GASB will almost certainly weigh in on certain accounting issues
• Can Supplemental Pension Trust assets be included in Fiduciary Net
Position?
• If assets can be included would inclusion impact discount rate?
April 10, 2017 39
IRREVOCABLE SUPPLEMENTAL (§115) PENSION TRUST
■ Parameters:
• Initial seed money?
• Additional amount contributed in future years?
• Target budget rate?
• Year target budget rate kicks in?
❑ Before or after CalPERS rate exceeds budgeted rate?
April 10, 2017 40
ESTIMATED SAVINGS FOR TIER 2 AND PEPRA
■ Miscellaneous Tier 2 (2%@60) effective 12/28/2012
■ Safety Tier 2 (3%@55) effective 12/15/2012
■ PEPRA effective I/ 1 / 13
■ Estimated savings through 6/30/17 ($000s):
Estimated Accumulated
Benefit Formula Savings as of 6/30/17
Miscellaneous Tier 2 $ 60
Safety Tier 2 85
Miscellaneous PEPRA 34
Safety PEPRA 224
Total 403
■ Assumptions
• Estimated Tier 2 and PEPRA payroll from 2012/13 through 2016/17
• Estimated Normal Cost for Tier 1 and Tier 2
• Savings I% Interest Rate
April 10, 2017
April 10, 2017
41
ESTIMATED SAVINGS FOR TIER 2 AND PEPRA
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42
ESTIMATED SAVINGS FOR GOLDEN HANDSHAKE
Miscellaneous
■ Savings
• Payroll Savings:
[$70,000 - $50,000] x 2 (years) _ $40,000
• Normal Cost Savings:
[$70,000 x 9% - $50,000 x 6.88%] x 2 (years) = 5,720
■ Cost of Golden Handshake
• Pay x 2%g55 Age 55 Factor x 2 Years Credit x PV Factor
=$70,000 x 2% x 2 x 15 = 42,000
■ Net Savings/(Cost) 3,720
■ Assumptions:
• Replace Tier 1 employee (age 55) with PEPRA new hire
• Tier 1 Pay at Retirement: $70,000
• PEPRA Pay at hire: $50,000
• Tier 1 employee would have retired in 2 years, so Normal Cost Savings
between Tier 1 and PEPRA for 2 years
April 10, 2017 43
ESTIMATED SAVINGS FOR GOLDEN HANDSHAKE
Safety
■ Savings
• Payroll Savings:
[$114,000 - $93,000] x 2 (years) _ $ 42,000
• Normal Cost Savings:
[$114,000 x 19.4% - $93,000 x 10.85%] x 2 (years) = 24,051
■ Cost of Golden Handshake
• Pay x 3%@50 Age 52 Factor x 2 Years Credit x PV Factor
=$114,000 x 3% x 2 x 16 = 109,440
■ Net Savings/(Cost) (43,389)
■ Assumptions:
• Replace Tier 1 EE (age 52 & 25 years of service) with PEPRA new hire
• Tier 1 Pay at Retirement: $114,000
• PEPRA Pay at hire: $93,000
• Tier 1 employee would have retired in 2 years, so Normal Cost Savings
between Tier 1 and PEPRA for 2 years
April 10, 2017
44