HomeMy WebLinkAboutPresentation 12/18/2017CITY OF PETALUMA
'y MISCELLANEOUS AND SAFETY PLANS
CalPERS Actuarial Issues — 6/30/16 Valuation
Preliminary Results
Presented by John Bartel, President
Prepared by Bianca Lin, Assistant Vice President
Wai Man Yam, Actuarial Analyst
Bartel Associates, LLC
December 18, 2017
Agenda
Topic Page
Definitions 1
How We Got Here 3
Ca1PERS Changes 8
Miscellaneous Plan:
Demographic Information 11
Plan Funded Status 13
Contribution Rates & Projections 17
Safety Plan:
Demographic Information 27
Plan Funded Status 29
Contribution Rates & Projections 33
PEPRA Cost Sharing
43
Paying Down Unfunded Liability & Rate Stabilization 45
R, \ %artcafsUbartel_ associates \clients \city ofpetaluma\ projects \ calpers\6- 30- 16\bapetalumaci 17 -12 -18 calpers misc & safety 16 revised.docx
DEFINITIONS
Present Vniue of Benefits
June 30, 2016
F'ulare Smmal
('urrcnt \Gtmal
.A <luarial
IAaMnit
• PVB - Present Value of all Projected Benefits:
• Discounted value (at valuation date - 6/30/16), 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
December 18, 2017
AcluartA
Llabiuo
Present Value of Benefits
June 30, 2015
DEFINITIONS
Unfunded I'M
(L`afunded
Lbbility)
Aduarial
IAAbnih
Present Value of Benefits
June 30,2016
ilff nmruan
(Unfunded
I,laldlity)
• 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
fiN
P1, �
December t8,2017 2 �tiGe �L4b
How WE GOT HERE
1�1
E Investment Losses
■ Enhanced Benefits
CalPERS Contribution Policy
■ Demographics
P-1 December 18, 2017
HOW WE GOT HERE — INVESTMENT RETURN I
k[.N
Above assumes contributions, payments, etc, received evenly t1noughout year.
PL,�r
F {z �
December 18, 2017 4
How WE GOT HERE — ENHANCED BENEFITS
■ At CalPERS, Enhanced Benefits implemented using all (future & prior) service
■ Typically not negotiated with cost sharing
■ City
Tier 1
Tier 2
PEPRA
• Miscellaneous
2%@55 FAE1
2%@60 FAE3
2%@62 FAE3
• Safety
3%@50 FAE1
3%@55 FAE3
2.7%@57 FAE3
• Note:
❑ FAE 1 is highest one year (typically final) average earnings
❑ FAE3 is highest three years (typically final three) average earnings
t December 18, 2017
C
HOW WE GOT HERE — OLD CONTRIBUTION POLICY
■ Effective with 2003 valuations:
• Slow (15 year) recognition of investment losses into funded status
• Rolling 30 year amortization of all (primarily investment) losses
■ Designed to:
• First smooth rates and
• Second pay off UAL
■ Mitigated contribution volatility
(` December 18, 2017
6
V
V
How WE GOT HERE — OLD CONTRIBUTION POLICY
Around the State
• Large retiree liability compared to actives
• Declining active population
■ City percentage of liability belonging to retirees:
• Miscellaneous
• Safety
December 18, 2017
57%
69%
7
V
CALPERS CHANGES ( ��
■ 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)
■ Ca1PERS 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 Ca1PERS Board reviewing
their Capital Market Assumptions, Likely no further changes to discount rate
R, December 18, 2017
8
Rs
CALPERS CHANGES
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 =50% of investment gains to pay for cost increases
• Likely get to 6.0% over 20+ years
P, V
( December 18, 2017 9
CALPERS CHANGES
17-1 1
Discount Rate used as of Actuarial Valuation Date
7.75%
7.50%
7.25%
a
7.00%
b
6.75%
6)
b I° , �;1� 61�
r as C ;° °
�� v r 61a;; R °ir— , 0' °
PU
°
6.50 /°
i� ` �
i
•—r— g5� a<—
°
6.25%
�Ag °° g. �n0 j0 � � [ g• g� °gam � } g b o
T
g, ol° g,—i —� o��.; �,� �,b
I
6.00%
o� CLf" I
00", "p0'° 601,160°60,001,6OO °
5.75%
o��� o� ^� o�� o�� o��h o� ^� o�y^ o��� o�� o��o o��l o��L o��� o��a o��� �
41 b "1
G 5th percentile sI 25th percentile 50th percentile s+_' 75th percentile 0 95th Percentile
PI, December 18, 2017
10
3
r�+ s,
a`
G
SUMMARY OF DEMOGRAPHIC INFORMATION - MISCELLANEOUS
Average City provided pensions are based on City service & City benefit formula, and are not representative of
benefits for long service employees.
R, 4-
December 18, 2017 11
MEMBERS INCLUDED IN VALUATION - MISCELLANEOUS
300
250
200
150
100
50
P), December 18, 2017 12 #
1996
2006
2015
2016
Actives
• Counts
167
216
188
190
• Average
Age
44
47
48
48
• City Service
10
9
10
10
PERSable Wages
$41,600
$59,100
$68,500
$71,500
• Total PERSable Wages millions
7.8
14.1
14.1
14.9
Receiving Payments
• Counts
• Service
115
206
214
Disablity
15
22
25
Beneficiaries
18
22
23
Total
92
148
250
262
• Average Annual City Provided Benefit'
Service
$15,400
$22,100
$21,700
Disability
4,700
5,300
5,500
• Service Retirements in last 5 years
17,300
22,500
16,900
Average City provided pensions are based on City service & City benefit formula, and are not representative of
benefits for long service employees.
R, 4-
December 18, 2017 11
MEMBERS INCLUDED IN VALUATION - MISCELLANEOUS
300
250
200
150
100
50
P), December 18, 2017 12 #
Aiwa,
L AMM)
FUNDED RATIO - MISCELLANEOUS
Pmsent Value of Benents
June 30, 2015
n.r nd,d PVu
(Untund,d
WNW))
Acinarial
i.l.bililt
Present Value of Benefits,
June 30,2016
June 30, 2015
June 30, 2016
$ 31,300,000
Active AAL
$ 33,700,000
59,100,000
Retiree AAL
60,700,000
10,500,000
Inactive AAL
11,400,000 ".
100,900,000:
Total AAL
105,800,000
P,
December 18, 2017
79,000,000 Market Asset Value 77,400,000
(21,900,000); (Unfunded Liability) (28,400,000)
13
(Untundal
FUNDED RATIO - MISCELLANEOUS
■ What happened between 6/30/15 and 6/30/16?
• Unfunded Liability (Increase)/Decrease $(6.5) million
■ Gains (losses)
• Asset gain/(loss)
• Assumption Change
• Actuarial gain /(loss)
• Average Salary
• Number of Actives
❑ Number of Inactives
❑ Number of Retirees
• Other gain/(loss)
❑ Contributions
❑ Other (expected)
P-1 December 18, 2017
14 #
$(5.5) million
$(1.5) million
$1.0 million
$68,500
$71,500
188
190
227
227
250
262
ti
$(0.5) million
14 #
FUNDED RATIO - MISCELLANEOUS
F--1F
December 18, 2017
6/30/17 & 6/30/18 funded status estimated.
15
v
FUNDED STATUS (MILLIONS ) - MISCELLANEOUS
6/30/17 & 6/30/18 funded status estimated.
v December 18, 2017 16
CONTRIBUTION RATES - MISCELLANEOUS
R, December 18, 2017.
17
CONTRIBUTION RATES - MISCELLANEOUS
R, December 18, 2017
18
y
v
v
6/30/15
6/30/16
2017/2018
2018/2019
•
Total Normal Cost
15.7%
16.0%
•
Employee Normal Cost
6.9%
6.8%
•
Employer Normal Cost
8.8%
9.1%
•
Amortization Bases
11.0%
12.5%
•
Total Employer Contribution Rate
19.8%
21.6%
•
Amortization Period
Multiple
Multiple
•
What Happened from 6/30/15 to 6/30/16:
• 2017/18 Rate
19.8%
• Asset Method Change (4th Year)
1.0%
• 6/30/14 Assumption Change (3rd Year)
0.6%
® 6/30/14 (Gains)/Losses (3rd Year)
(0.9 %)
• 6/30/15 (Gains)/Losses (2nd Year)
0.3%
• 6/30/16 Discount Rate change (1St
Year)
0.6%
• 6/30/16 (Gains)/Losses (1StYear)
0.2%
• 2018/19 Rate
21.6%
R, December 18, 2017
18
y
v
v
CONTRIBUTION PROJECTIONS - MISCELLANEOUS
Market Value Investment Return:
• June 30, 2016 0.6 %2
• June 30, 2017 11.2 %3
• Future returns based on stochastic analysis using 1,000 trials
Single Year Returns at4 25" Percentile 50" 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)
• Includes Classic Tier 2 Members effective December 28, 2012
2 Based on Ca1PERS 6/30/16 CAFR.
3 Based on Ca1PERS press release on 7/14/17, preliminary investment return of 11.2 %.
4 N`h percentile means N percentage of our trials result in returns lower than the indicated rates.
P
December 18, 2017 19
CONTRIBUTION PROJECTIONS - MISCELLANEOUS
i
■ New hire assumptions:
• Assumes 50% of 2013 new hires will be Classic Tier 2 Members and 50%
will be New Members with PEPRA benefits
• Assumes Classic Members will decrease from 50% to 0% of new hires
over 20 years
R
December 18, 2017
20
CONTRIBUTION PROJECTIONS - MISCELLANEOUS
P', December 18, 2017
21
�HtN
CONTRIBUTION PROJECTIONS - MISCELLANEOUS
, I
Discount Rate Reduced from 7.5% to 7% over 3 Years
Discount Rate Reduced from 7.5% to 7% over 3 Years
40%
EI n, '04,
n i t, 3
�- a;°
4.
30%
ry �q ,�q• I
,�`J�'�:8�iP{9r��k'L99e"f�9R?.
�g4 �'4�� �$� tigA ��b � I 1 i C`� � a
30%
ITf,�•�
20 %*�
4 �s�1 I 11,.oya
25%
. FAI
25 $
-
i
� � F ! � � I SC" 3✓O
20%
b
0%
15%
10%
5%
0%
25th Percentile < "'SOthPercentile
F1 75th Percentile
P', December 18, 2017
21
�HtN
CONTRIBUTION PROJECTIONS - MISCELLANEOUS
, I
Discount Rate Reduced from 7.5% to 7% over 3 Years
40%
EI n, '04,
n i t, 3
�- a;°
4.
30%
ry �q ,�q• I
,�`J�'�:8�iP{9r��k'L99e"f�9R?.
�g4 �'4�� �$� tigA ��b � I 1 i C`� � a
51°
20 %*�
4 �s�1 I 11,.oya
. FAI
10%
-
i
� � F ! � � I SC" 3✓O
E.V
0%
❑ 25thPercentile ,50th Percentile [i 75th Percentile
P),
December 18, 2017
22
V
CONTRIBUTION PROJECTIONS - MISCELLANEOUS
R-1 December 18, 2017
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
23
CONTRIBUTION PROJECTIONS - MISCELLANEOUS
Discount Rate Reduced from 7.5% to 7% over 3 Years
0
$0
17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25 25/26 26/27 27/28 28/29
---Total Normal Cost ==UALPayment
R, December 18, 2017
24
�e
FUNDED STATUS - MISCELLANEOUS
Funded Status
Discount Rate Reduced from 7.5% to 7% over 3 Years
175%
�I10
150%
,fie
125%
1
100 %
�-
l
❑ C � 4 i
sN 1= ��t��V�g1Xs�.�6����°
g �y� sq5
%�t
171
♦�',YO �'' �" ( (
1�� �° � L� � � ♦ 1 l °1pl�0,g6�;
L ❑
I � d•
75%
°
i T �,a S°S h ti .
Rp O g�L
"SN A
'.• � ;� °•j,:, I try �� � � ,�4 • �? g1• � ' 6�' '� v
�� I ^.'� � .
L7
_ L1
C
50%
25%
O \�O�jO0 �O0 O01 O0(�O \��
75th Percentile -,50th Percentile ❑ 25th Percentile
nhcl December 18, 2017
25
FUNDED STATUS - MISCELLANEOUS
This page intentionally blank
F'aA
P-1 December 18, 2017 26 RGe
SUMMARY OF DEMOGRAPHIC INFORMATION - SAFETY
5 Average City provided pensions are based on City service & City benefit formula, and are not
representative of benefits for long service employees.
P-1 December 18, 2017 27 use
MEMBERS INCLUDED IN VALUATION - SAFETY
F---1 F
200
180
160
140
120
100
80
60
40
20
R ,
December 18, 2017 28 lFGN �; I
1994 >
2006
2015
2016
Actives
• Counts
113
126
111
117
• Average
Age
38
39
40
40
City Service
11
10
12
11
PERSable Wages
$61,100
$83,700
$99,000
$100,000
• Total PERSable Wages millions
7.7
11.6
12.0
12.8
Receiving Payments
• Counts
• Service
40
78
85
Disablity
83
98
101
Beneficiaries
7
12
13
Total
77
130
188
199
• Average Annual City Provided Benefits
Service
$35,900
$56,900
$55,700
Disability
28,500
38,500
39,200
Service Retirements in last 5 years
48,300
49,800
47,100
5 Average City provided pensions are based on City service & City benefit formula, and are not
representative of benefits for long service employees.
P-1 December 18, 2017 27 use
MEMBERS INCLUDED IN VALUATION - SAFETY
F---1 F
200
180
160
140
120
100
80
60
40
20
R ,
December 18, 2017 28 lFGN �; I
Actuarial
LfaAUU)
FUNDED RATIO - SAFETY
Present Value orBenertts
June 30, 2015
,funded PYn
Acluarhl
Unfunded LiaAlUty
.1411ty)
Present A slue or Benefits
June 30,2016
June 30, 2015
$ 46,900,000 !
Active AAL
116,500,000
Retiree AAL
8,000,000
Inactive AAL
171,400,000
Total AAL
115,500,000
Market Asset Value
(55,900,000)1
(Unfunded Liability)
( December 18, 2017
29
June 30, 2016
$ 48,000,000
125,400,000 !'!,
7,300,000
180,700,000
113,000,000
(67,700,000)!
nfunded PVH
Anded
ABU))
t+n s+ ly
FUNDED RATIO - SAFETY
■ What happened between 6/30/15 and 6/30/16?
• Unfunded Liability (Increase)/Decrease $(11.8) million
■ Gains (losses)
• Asset gain/(loss)
• Assumption Change
• Actuarial gain /(loss)
❑ Average Salary
❑ Number of Actives
❑ Number of Inactives
❑ Number of Retirees
• Other gain /(loss)
❑ Contributions
❑ Other (expected)
Pil December 18, 2017
$(8.1) million
$(2.7) million
$0.3 million
$99,000 $100,000
111 117
78 77
188 199
$(1.3) million
7
30
FUNDED RATIO - SAFETY
, December 18, 2017
6/30/17 & 6/30/18 funded status estimated.
31
ryp +ach 7
F--]F-- FUNDED STATUS (MILLIONS ) - SAFETY F---]
December 18, 2017
6/30/17 & 6/30/18 funded status estimated.
32
v
CONTRIBUTION RATES - SAFETY
December 18, 2017
33
CONTRIBUTION RATES - SAFETY
6/30/15
2017/2018
• Total Normal Cost 27.8%
• Employee Normal Cost 9.2%
• Employer Normal Cost 18.5%
• Amortization Bases 30.9%
• Total Employer Contribution Rate 49.4%
• Amortization Period Multiple
• What Happened from 6/30/15 to 6/30/16:
• 2017/18 Rate
• Payroll > Expected
• Asset Method Change (4t' Year)
® 6/30/14 Assumption Change (3'd Year)
• 6/30/14 (Gains)/Losses (3'd Year)
• 6/30/15 (Gains)/Losses (2 "d Year)
• 6/30/16 Discount Rate change (1St Year)
• 6/30/16 (Gains)/Losses (1St Year)
• 2018/19 Rate
(171) December 18, 2017
34
6/30/16
2018/2019
28.7%
9.4%
19.3%
33.7%
53.0%
Multiple
49.4%
(1.0 %)
2.2%
1.5%
(1.6 %)
0.7%
1.3%
0.5%
53.0%
v
d�
7
�NGN
CONTRIBUTION PROJECTIONS - SAFETY
• Market Value Investment Return:
• June 30, 2016 0,6 %6
• June 30, 2017 11.2 %7
• Future returns based on stochastic analysis using 1,000 trials
Single Year Returns at' 25th Percentile 501 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)
• Includes Classic Tier 2 Members effective December 15, 2012
6 Based on CalPERS 6/30/16 CAFR.
7 Based on CalPERS press release on 7/14/17, preliminary investment return of 11.2 %.
8 Nt" percentile means N percentage of our trials result in returns lower than the indicated rates.
l
December 18, 2017 35 -
CONTRIBUTION PROJECTIONS - SAFETY
■ New hire assumptions:
• Assumes 50% of 2013 new hires will be Classic Tier 2 Members and 50%
will be New Members with PEPRA benefits
• Assumes Classic Members will decrease from 50% to 0% of new hires
over 10 years
P11
December 18, 2017
36
CONTRIBUTION PROJECTIONS - SAFETY
I
100°x°
Discount Rate Reduced from 7.5% to 7% over 3 Years
,;,O,°
90%
80%
,�a9 �
L
70%
°
60%
90%
80%
°p 3
p° ° g'S
I
70%
50%
p1
t7
A
5 AEG
i AA9'��t (
] A3.
I In
'{SAY
0
60%
�f o,Ao�o
�� .5 6p� °�o ��Zo�o
ig
�j5
63Lt
6 8 6 5v 63a
�3A
50%
30%
40%
v�e
,.
30%
10%
20%
0%
❑ 25th Percentile =`--- 50th Percentile 1A 75th Percentile
10%
0%
ti ti ti ti ti
ti ti
ti
ti ti ti
ti
❑ 25th Percentile t
50th Percentile
N 75tliPercentile
R)l December 18, 2017
37
CONTRIBUTION PROJECTIONS - SAFETY
vg
Discount Rate Reduced from 7.5% to 7% over 3 Years
°i°
loo
,;,O,°
90%
80%
,�a9 �
L
70%
9° b
60
G
60%
50%
A
5 AEG
i AA9'��t (
] A3.
I In
40%
30%
v�e
,.
10%
0%
❑ 25th Percentile =`--- 50th Percentile 1A 75th Percentile
December 18, 2017
38
V
CONTRIBUTION PROJECTIONS - SAFETY
P-171, December 18, 2017
W,
CONTRIBUTION PROJECTIONS - SAFETY
Discount Rate Reduced from 7.5% to 7% over 3 Years
$14,000 1 ($000s)
$12,000
$10,000
$8,000
$6,000
$4,000
3,
$2,000'
$0
V
17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25 25/26 26/27 27/28 28/291
- lrotal Normal Cost AL Payment
P, December 18, 2017
40
Lj
ly��
FUNDED STATUS — SAFETY
Funded Status
Discount Rate Reduced from 7.5% to 7% over 3 Years
17s�io
150%
0
Imo$'
°\5`,ati♦ f3
,tiny Cti ) � 3
4��
125%
100 %
75.
/0
€ M
b)3 �'i°q,'t
b 1
9
50%
25%
\�� \11 \111 01 \��O \�� \��
01 \�^ \Iq \�� '0 '0
o O�ryO'0 O O O O��O O O O O
FJ 75thPercentile - =- - �50tliPercentile ❑ 25thPercentile
PDecember 18, 2017
41
F---]) FUNDED STATUS — SAFETY ( ��
RDecember 18, 2017
This page intentionally blank
42
ass
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:
PEPRA COST SHARING
■ Safety Plan:
Classic Members
New Members
Tier 1
Tier 2
PEPRA
Tier 3
2%k55 55 FAE1
2%(7x 60 FAE3
2 %(x762 FAE3
• Er. Normal Cost'
9.8%
7.7%
6.77%
® Mbr. Normal Cost
7.0%
7.0%
6.75%
® Total Normal Cost
16.8%
14.7%
13.52%
• 50% Target
8.4%
7.35%
6.76%
9 Estimated for Tier 1 and Tier 2
•
50% Target
jjjj
13.0%
0.0
December 18, 2017
43
PEPRA COST SHARING
■ Safety Plan:
Classic Members
Tier 2
Tier 3
3 %(a,,50 FAE1
3 %(7x,55 FAE3
•
Er. Normal Cost10
21.0%
17.0%
•
Mbr. Normal Cost
9.0%
9.0%
•
Total Normal Cost
30.0%
26.0%
•
50% Target
15.0%
13.0%
New Members
PEPRA Police
PEPRA Fire
2.7 %(x757 FAE3
2.7 %0x,57 FAE3
•
Er. Normal Cost
11.31%
12.35%
•
Mbr. Normal Cost
11.75%
12.25%
®
Total Normal Cost
23.06%
24.60%
50% Target
11.53%
12.30%
10 Estimated for Tier 1 and Tier 2
December 18, 2017
44
hsa
PAYING DOWN THE UNFUNDED LIABILITY & RATE STABILIZATION
F- I
■ Where do you get the money from?
■ How do you use the money?
RI-, December 18, 2017
�
45
WHERE DO YOU GET THE MONEY FROM?
• Usually thought of as interest arbitrage between expected earnings and rate
paid on POB
• No guaranteed savings
❑ Including paying off Ca1PERS Side Fund
• PEPRA prevents contributions from dropping below normal cost
❑ Savings offset when investment return is good
• GFOA White Paper
■ Borrow from General Fund
• Excess Reserves?
• Pay GF back like a loan
• Payments should come from all funds
P, December 18, 2017
46
WHERE DO YOU GET THE MONEY FROM?
i
■ One time payments
Council.resolution to use a portion of one time money, e.g.
❑ 1/3 to one time projects
❑ 1/3 to replenish reserves and
❑ 1/3 to pay down unfunded liability
P�-, V December 18, 2017 47
HOW DO YOU USE THE MONEY?
■ Make payments directly to Ca1PERS:
• Treat as contribution gain:
❑ CalPERS default
❑ Very modest short term contribution impact
• Apply to all bases in proportion:
❑ Lowers payment
❑ Does not shorten amortization period
• Request shorter amortization period (Fresh Start):
❑ Higher short term payments
❑ Less interest and lower long term payments
❑ PEPRA prevents contributions from dropping below normal cost
O Savings offset when investment return is good
December 18, 2017 48 b��
How Do You USE THE MONEY?
Make payments directly to Ca1PERS (continued):
Target specific amortization bases:
❑ Paying off shorter amortization bases, larger contribution savings over
shorter period:
O e.g. 10 year base gets 12.5¢ for $1
O Less interest savings compared to paying off longer amortization
bases
❑ Paying off longer amortization bases, smaller contribution savings
over longer period:
• e.g. 25 year base gets 6.6¢ for $1
• More interest savings compared to paying off shorter amortization
bases
-7
December 18, 2017
49
ADDITIONAL PAYMENTS TO CALPERS
Illustration
• One -time payment to each plan on 6/30/18
• First impacts 2018/19 contribution rates
• Payments applied to the following amortization bases:
Plan
Amortization
Bases
Amortization
Period
6/30/18 Balance
($000s
Miscellaneous
• Assumption Change 2003
7
$ 2,082
• Golden Handshake 2009
13
557
• Golden Handshake 2010
14
388
• Golden Handshake 2011
15
577
• Subtotal
3,604
Safety
• Assumption Change 2003
13
3,146
Total
6,750
■ Additional payments from accumulated fund originally intended for OPEB:
$739,000 applied to Safety 2009 Golden Handshake Base ($739,000 balance at
6/30/18, 13 year amortization period)
R, December 18, 2017
50
V
ADDITIONAL PAYMENTS TO CALPERS
Miscellaneous ($000s omitted)
FY Pints.,
17/18
18/19
19/20
20/21,
11/22',
22/23
23/24
CalPERS
$494
$506
$518
$533
$549
$566
$583
Loan
391
402
414
427
440
453
466
Savings
103
104
103
106
109
113
116
FY Pmts.
24/25
25/26
26/27
17/28
28/29'
'29/30
54
CalPERS
$176
$ 181
$ 187
$192
$ 198
$204
$129
Loan
125
129
132
136
140
145
90
Savings
51
53
54
56
57
59
39
FY Pmts.
31/32,
Total,
CalPERS
$78
$5,092
Loan
54
3,944
Savings
24
1,148
-December 18, 2017
51
ADDITIONAL PAYMENTS TO CALPERS
Safety ($000s omitted)
V
FY Pmts,
17/18'
18/19
19/10
20/21 '
21/22
22/23,,
, 23/24
CalPERS
$318
$325
$331
$341
$351
$362
$373
Loan
227
233
240
248
255
263
271
Savings
91
92
91
94
96
99
102
FY Pints.
24/25
25/26
26/27
27128
28/29
29130
Total
CalPERS
$384
$396
$407
$420
$432
$445
$4,886
Loan
279
287
296
305
314
323
3,540
Savings
105
108
112
115
118
122
1,346
■ Interest savings to pay off Safety 2009 Golden Handshake Base: $409,000
R), December 18, 2017
52
ADDITIONAL PAYMENTS TO CALPERS
Total ($000s omitted)
FY Pmts.,
17118
18/19
19/20
20/21
21/22
22/23'
23/24
CaIPERS
$ 812
$ 831
$ 849
$ 874
$ 900
$ 928
$ 956
Loan
618
635
654
675
695
716
737
Savings
194
196
194
200
205
212
218
FY Pmts.
24/25
25/26
26/27
27/28
28/29
29/30
30/31'
CaIPERS
$ 560
$ 577
$ 594
$ 612
$ 630
$ 649
$ 129
Loan
404
416
428
441
454
468
90
Savings
156
161
166
171
175
181
39
FY Pmts.
31/32
Total
CaIPERS
$ 78
$ 9,978
Loan
54
7,484
Savings
24
2,494
R)—i December 18, 2017
December 18, 2017
53
ADDITIONAL PAYMENTS TO CALPERS
This page intentionally blank
54
�N z,
ce Y
I
•s
30%
125%
120%
115%
x,
Ot
h Per,
tt December 18, 2017
ADDITIONAL PAYMENTS TO CALPERS
Miscellaneous
55
ADDITIONAL PAYMENTS TO CALPERS
Miscellaneous
17,000 �,j A 4!j; 7
'500
'000
1500
S
V
RDecember 18, 2017
56
scoun
a e tice ofn lobo 7 o over ears
6,328 N4
5 '56
1 1$79�5
5120 ►
4,94H
4,669
4,3 '46 -4,395
4,156
3,814
4=2,719_
h5pth Nrce'h tilt '-YCuri6t '�0th PercenYtHe -'Nym'6t toTaRkS
RDecember 18, 2017
56
ADDITIONAL PAYMENTS TO CALPERS
RI-, December 18, 2017
57
ADDITIONAL PAYMENTS TO CALPERS
7
��z.P
Safety
14,000
Safety
80%
Discount Rate
Reduced fFom 7.5% to 0 over 3 Years
1,G4d�2,`717
12,000
= 112,133
75%
11 %76911612
U - 3311, 277
11,000
0 72 69/073.0 °luZ3 0 72.200
7231. /b 7L8 /b
70%
10 361
��ff
0. °b °
-7.F /o
69s2% 69.,10 9.6%69.9 %ZO
923' 9;813
9,000
"o,. 67.9%
8;629
,67'
66.2 %0
65%
8,000
864.b%
61 �� /ab17%
60%
—
6,'780
57r50/58,4
6;387
55%
5.400
5,000
530%
50%
94 %49.9 o
1 t, Oth Percentile - Current 50th Percentile - Payment to Ca1PERS
45%
40%
17/18 18/19 19/20 20/2121/22 22/23 23/24 24/25 25/26 26/27 27/28 28/29 29/30 30/31 31/32
° = -50th Percentile -
Current I 150th Percentile -Payment to Ca1PERS
RI-, December 18, 2017
57
ADDITIONAL PAYMENTS TO CALPERS
7
��z.P
Safety
14,000
Discount Rate Reduced from 7-. to 0 over 3 ears
13,000
l3 293,170
1,G4d�2,`717
12,000
= 112,133
11 %76911612
U - 3311, 277
11,000
1,(1,80710,869
10,000
10 361
923' 9;813
9,000
050 9,292
8;629
8,000
'
r'r 7,92
7;x'12
7,0007,170
6,'780
6;387
6,000
5,000
4,000
17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25 25/26 26/27 27/28 28/29 29/30 30/31 31/32
1 t, Oth Percentile - Current 50th Percentile - Payment to Ca1PERS
R, December 18, 2017
58
HOW Do YOU USE THE MONEY?
Internal Service Fund
Typically used for rate stabilization
• Restricted investments:
❑ Likely low (0.5 % -1.0 %) investment returns
❑ Short teinAigh quality, designed for preservation of principal
• Assets can be used by Council for other purposes
• Does not reduce Unfunded Liability
December 18, 2017
59
IRREVOCABLE SUPPLEMENTAL ( §115) PENSION TRUST
■ > 100 trusts established
• PARS, PFM & Keenan
■ Investments significantly less restricted than City investment funds:
• Likely higher (4% - 6 %) but more volatile investment returns
■ Trust Assets:
• Can't be used by Council for other purposes
• Can only be used to:
❑ Reimburse City for Ca1PERS contributions
❑ Make payments directly to Ca1PERS
• Will not reduce Net Pension Liability:
❑ City total net financial position will be the same
P
December 18, 2017
60
gF H�'4
IRREVOCABLE SUPPLEMENTAL ( §115) PENSION TRUST
• Consider:
• How much can you put into Trust?
❑ Initial seed money?
❑ Additional amounts in future years?
• When do you take money out?
❑ Target budget rate?
❑ Year target budget rate kicks in?
O Before or after CalPERS rate exceeds budgeted rate?
• Illustrations:
■ Loan:
• 11 year amortization
• 1.75% interest
Payments made from Trust until target rate begins
R�-, December 18, 2017
61
v
R
December 18, 2017
62
v
IRREVOCABLE SUPPLEMENTAL ( §115) PENSION TRUST
F— I
WWI 6/30118 Fund eal4nte(5000)
3,604
StabWation Fund • Rate ofReturn
sm%
��uS Plan RateStA11iMit1011 j'tlll(I1311I�I1CC
Calculate.
Target Rate
26.036
18/19
19/20 20/21. 21122 22/23 23/24 24klS .25/26 26/27
27128 28/29,.
(A) Add'1 C9ntdbu600 5150001
(8) Add'I Convibution - %of pay
0.0%
0.0% 0.0% 0.0 %: OA%: 0.0% 0.0% 0.0% '. 0.0%
0.0% '.. 0.0%
(A) t (B) as %of Pay
0.0%
0.0% 0.0% 0.0% 0.0% 04% 0.0% 0.O% 0.0%
0.0% 0.0%
Budget - CaIPERS Rate
2L6%
23.6% 25.2% 26.8% 26.0% 26.0% 26.0% .26.0%. 26.0%
26.0% 26.0%,
Contribute at Target Rate?
N
N N N Y y y '. If y
' Y y
R
December 18, 2017
62
v
i 7:_1
li December 18, 2017
63
a i
IRREVOCABLE SUPPLEMENTAL ( §115) PENSION TRUST
fI
I
Initial 6/30/18 fund Balance ($000)
3,60.4r
;I
Stabilization Fund - Rate of Return
9.6%
1N'f1SCellaneous Plan Rate Stabilization Fund l3aldI1Ce
Calculate
Target Rate Rate
26.0%
.{
18/19
19/20 20/21 21/22 22/23 23124 >_ 24/2525/26_., _ 26/27
_27/28 28/29
(A) Add'I Contribution $ ($000)
(8) Add'I Contribution • %of pay
0.0%
04% OA4 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
0.0% OA%
(A) . (8) as % of Pay
0.09
0.0% 0.0% 0.0% 0.0% 010% 0.0% 0.0% 0.0%
0.0% 0.0%
Budget - CalPER$Rate
21.6%
23.6% 25.2%, 26.8% 26.0% 26.0% 26.0% 26.0 -% 26.0%
2610% 26,0%
:Contribute at Target Rate?
N '.
N N N Y Y Y ' Y ''. Y
Y 'Y
i 7:_1
li December 18, 2017
63
a i
December 18, 2017
64
CST L!.t�
rFGa
I IRREVOCABLE SUPPLEMENTAL ( §115) PENSION TRUST
I ��
Initial 6/30/18 fund Balance (5000)
31604
'StabilizationFund - Rate of Return
s.ox
i1SCCllaneous Plan Rate Stabilization Fund Balance
Calculate
Target Rate
26,0%
-.__ ._...
18119 j
19120 20/21 21/22 22/23 23/24 24/2$ 25/26 20127
27/28 28/29
(A) Add'I Contribution $($000)
(0) Add'I Contribution . %of pay
0.0%
0.0% 010% O.O%'. 0.0% 0.0% 0.0% 0A% 0.0%
0.0% - O.O%
(A) t (8) as % of Pay
0.0%
0.0% OAK 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
0.0% 0.0%
Budget • CaIPERS Rate.
2L6 %.
23.6% 25.2% 26.8% 26.0% 26.0% 26.0% 26.0% 26.0%
26.0% 26.0%
Contribute at Target Rate?
N
N N N Y Y Y Y I Y
Y ':Y -
December 18, 2017
64
CST L!.t�
rFGa
December 18, 2017
65
v
IRREVOCABLE SUPPLEMENTAL ( §115) PENSION TRUST
F--
Init)al6 /30 /19 fund Balance ($000)
Stabilization fund - Rate of Return
8,146
5.0%
, '
Calculate
Safety Plan Rate Stabilization Fund Balance
Target Rato
68,0%
Safety Plan Rate Stabilization Fund Balance
Target Rate
18/19.
19/20 20/21 21 22 22 23 23(24 24 25 25/26 26/27
m , 1 w. 0 .m .v . _ l ,.j
27/28 28/29M,
(A) Add'I Contribution $ ($000)
18119
19/20 20/21 21/22 22/23 _ _23/24 24/25 25/26 .26/27
18)Addl Contribution - %of pay
04%
0.0% 010% 0.0% 010% 0.0% 0.0% 0.0%! 0.0%1
0.0%'. 010%
,A) + (0) as % of Pay
0.0%
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
0.0% 0.0%
Budget - CalPER5Rate
53.0")0
$7.5% 61.4% .64.8% 67.6% 68.0% 68.0% 68.0'x6 68.0%
68.0% 68.0%.
Contribute at Target Rate?
N
N N N N Y Y Y Y -
Y Y
December 18, 2017
65
v
December 18, 2017
66
7
xna
IRREVOCABLE SUPPLEMENTAL ( §115) PENSION TRUST
�l
Initial 6/30118 fund Balance ($0001
Stabilization fund - Rate of Return
3146
6.0%
Calculate
Safety Plan Rate Stabilization Fund Balance
Target Rate
68,0%
18119
19/20 20/21 21/22 22/23 _ _23/24 24/25 25/26 .26/27
27/28
28/29
(A) Add9 Contribution $ ($000)
'(a)Add'I Contribution -%of pay
0.0%
010% 0.0% 0.0% 010% 0.0% 0.0% 0.0% 0.09A )
010%
0.0%.
(A) 4 (8) as %of Pay
0.0%
0.0% 0.0% 0.0%. 0.0%. 0.0% 0.01.6 0.0% 0.0%
0.0%
0.0%
Budget - CalPERSRate
53.0%
5715% 61.4% 6418% 67.6%. 68.0% 68.0% 68.0% 68.0%
684%
6810%
Contribute at Target Rate?
N
N '` N N` N Y - Y Y Y
Y
Y -
December 18, 2017
66
7
xna
RI-1 ,, r9A
December 18, 2017 67 N Ztrr+
IRREVOCABLE SUPPLEMENTAL ( §115) PENSION TRUST
F�
initial 6 /30/18 Fund Balance ($000)
3,146' -
StabilizationFund - •Rateof Return
s,,
Safehy P1,111 Rate Stabilization tuna [3alance
Calculate
.Target Rate
68.49E
18/19
19/20 IO /21., .71/22., �,m72/23, ar. -, =23/24 la _.. 24/25 w.. 25/26 _.. 26/27
27128 28/29
(A) Add'l Contribution 5 (5000)
18)Add9 Contribution - %otpay
0.0%
0.0% 010% 0.0% 04% 010% 0.0% 010% 0.0%..
0.0% 0.0%
(A) ♦ (0) as %of pay
0.0%'
00% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
0.0% 010%
Budget - CalPERSRate
$3.0%
.57.5% 61.4% 64.8: 6716% 68.01/. 68,0% .6810% 6810%
.6810% 6810%.
Contribute at Target Rate?
N'
N= N N N Y Y Y Y -
Y Y
RI-1 ,, r9A
December 18, 2017 67 N Ztrr+