RPVCCA_CC_SR_2013_04_16_03_Updated_Pension_Liability_Memo_From_FACCITY OF
MEMORANDUM
f4
o RANCHO PALOS VERDES
TO:
FROM:
DATE:
SUBJECT:
REVIEWED:
HONORABLE MAYOR &CITY COUNCIL MEMBERS
DENNIS McLEAN,DIRECTOR OF FINANCE &~
INFORMATION TECHNOLOGY
APRIL 16,2013
UPDATED PENSION LIABILITY MEMORANDUM FROM
THE FINANCE ADVISORY COMMITTEE (Supports
2013 City Council Goal of Government Efficiency,
Fiscal Control and Transparency)
CAROLYN LEHR,CITY MANAGER ~
Project Manager:Kathryn Downs,Deputy Director of Finance &Information
Technology ({j)
RECOMMENDATION
Receive and file the March 6,2013 updated version of the Memorandum from the
Finance Advisory Committee (FAC)titled "Calculation of the City's Unfunded Pension
Liability"(Attachment A).
BACKGROUND
The City Council approved 2012-13 Wo'rk Plan FAC includes the following task:
"Receive the 2012 CalPERS Actuarial Valuation Report,update the Committee's
Memorandum to the City Council dated April 25,2012 and titled "Calculation of the City's
Unfunded Pension Liability",and consider any other pension related issues which City
Council may direct".
Staff provided the FAC with updated information and developed its updated Memorandum
at its meetings on January 30 th and March 6th
.Updated information included:
1.The California Public Employees'Retirement System (CaIPERS)Actuarial Valuation
Report (AVR)dated June 30,2011,received in December 2012 (Attachment B).
2.Information about the new pronouncement:Governmental Accounting Standards
Board (GASB)Statement No.68 -Accounting and Financial Reporting for Pensions
3-1
UPDATED PENSION LIABILITY MEMORANDUM FROM THE FINANCE ADVISORY
COMMITTEE
April 16,2013
Page 2 of 3
(GASB 68).
The January 30th and March 6th Staff Reports to the FAC are attached (Attachments C &
D).
DISCUSSION
With the adoption of GASB 68,financial reporting for pension liability will be expanded.
GASB 68 must be implemented with the June 30,2015 financial statements.The City
must rely upon CalPERS to provide the information necessary for implementation of the
new reporting standard.CalPERS improved the pension liability information provided with
the most recent AVR,but it is not yet sufficient to comply with the requirements of GASB
68.The 'Chief Actuary at CalPERS recently indicated to the CalPERS Board that the
CalPERS computer system will need to be updated before CalPERS can provide timely
reporting to member agencies for compliance with GASB 68.In addition,the City will need
to implement other new accounting pronouncements before it can implement GASB 68.
Due to these factors,the City's independent financial statement auditor recommends that
the City not attempt early implementation of GASB 68.
However,in the City's June 30,2012 Notes to the Financial Statements,Staff included the
City's share of its CalPERS risk pool's unfunded actuarial accrued liability,as reported by
CalPERS in the most recent AVR for June 30,2011.Staff did not include the market value
in the Notes,as the value reported by CalPERS was as of June 30,2011.Due to wide
variations in market value over the last few years,the disclosure may have been
misleading for the City's financial statements dated June 30,2012.
Until GASB 68 is implemented with the June 30,2015 financial statements,the FAC
recommends expanding the Notes to the Financial Statements with the estimated market
value of the unfunded pension liability,as reported by CaIPERS.Although not ideal,with
very clear disclosure developed with the help of the City's independent financial statement
auditor,Staff is willing to expand the Notes in the June 30,2013 financial statements to
include the additional information.
The CalPERS Senior Actuary assigned to the City's plan recently indicated that no
agencies have terminated their plans since implementation of the new termination
calculation methodology in 2011;but that about 20 agencies have requested pre-
termination valuations,and one agency is in the process offinal termination.The request
for pre-termination valuations may be used by other agencies to merely learn what the
cost,terms and conditions of a termination might be,with no genuine intention to terminate
from CaIPERS.Upon making an inquiry with CalPERS for a list of agencies that have
requested the termination valuation,Staff was informed that a formal California Public
Records Act (PRA)request would need to be submitted for the information.The PRA was
made on March 15,2013,and has been followed up with several inquiries since then.As
of the release of this report,the list of agencies has not yet been provided by CaIPERS.
The FAC also recommends that it "continue to monitor our relationship with CalPERS,
including but not limited to,contacting other agencies that have sought termination data3-2
UPDATED PENSION LIABILITY MEMORANDUM FROM THE FINANCE ADVISORY
COMMITTEE
April 16,2013
Page 3 of 3
from CaIPERS,and to report our findings,and if appropriate our recommendations,backto
City Council at a future date."
Attachments:
A -FAC Memorandum dated March 6,2013 and titled Calculation of the City's Unfunded
Pension Liability
B -June 30,2011 Actuarial Valuation Report from CalPERS
C -Staff Report to the FAC dated January 30,2013
D -Staff Report to the FAC dated March 6,2013
3-3
Attachment A
FAC Memorandum dated March 6,2013 and titled
Calculation of the City's Unfunded Pension Liability
3-4
Attachment A
MEMORANDUM
To:
From:
Date:
Subject:
Rancho PalQs Verdes City Council
Finance Advisory Committee
March 6,2013
Update re the City's Unfunded Pension Liability
In its Actuarial Valuation Report for the City of Rancho Palos Verdes as of June 30,
2010,CalPERS provided a number which was stated to be the pool's "actuarial unfunded
liability".Our City's share of that amount was estimated to be approximately $3.2
million.
Because the unfunded portions of CalPERS risk pools had reached significant levels,the
City Council requested the Finance Advisory Committee ("FAC")to look into the
methodology used to calculate the City's unfunded pension liability.
On April 25,2012,we submitted a memorandum to the Council discussing alternative
calculations of the City's unfunded pension liability and concluding that an estimate of
RPV's share ofthe unfunded liability of our risk pool as of June 30,2010,based upon the
market value of the pool's assets,was as much as three times the actuarial value.1
At the conclusion of our memorandum,we recommended that the City Council continue
the matter for further discussion until after (1)the then anticipated announcement ofa
new Governmental Accounting Standards Board ("GASB")statement,2 and (2)the
Actuarial Valuation Report from CalPERS for the fiscal year ending June 30,2011,
which was anticipated to address market and termination values for the first time.
1.GASB Statement 68.
On June 12,2012,GASB promulgated Statement 68 which requires:(1)that the City's
unfunded pension liability be reported as a liability on its financial statements,and (2)
We also reported that CalPERS had,in 2011,adopted an entirely different methodology to be used
when calculating the payout requirement for a terminating agency,a methodology that could require a city
such as RPV to payout as much as lOx the amount of the actuarial liability .
2 Pronouncements ofthe GASB apply to financial reports of all state and local governmental entities in
California,including cities such as Rancho Palos Verdes.
3-5
Attachment A
that it use the market value of the pension fund's assets for such purpose.3 The Statement
requires such reporting for fiscal years beginning after June 15,2014,but states that
"earlier application is encouraged,"emphasizing that the "requirements of this Statement
will improve the decision-usefulness of information in ...financial reports and will
enhance its value for assessing accountability and interperiod equity by requiring
recognition of the entire net pension liability and a more comprehensive measure of
pension expense.Decision-usefulness and accountability also will be enhanced
through new note disclosures and required supplementary information ...[and that]...
consistency and transparency ofthe information reported ...about pension transactions
will be improved."
Staff has informed us that the City's independent auditors have advised the City to refrain
from early implementation ofthe new accounting standard until more current and
complete information is available.
2.CalPERS June 30,2011 Actuarial Valuation Report.
In its June 30,20 II Actuarial Valuation Report,CalPERS did provide statements of our
risk pool's unfunded liability based upon both actuarial and market calculations.
CalPERS reported that RPV's unfunded pension liability for fiscal 2011 was:(1)
approximately $3.7 million based upon its actuarial assumptions (up from $3.2 million
for the prior year),and (2)approximately $6 million based upon market assumptions
(down from our estimated $9.6 million for the prior year).4
The majority ofthe reason for the increase in the first figure was the reduction in
CaIPERS'discount rate from 7.75%to 7.50%.5
The primary reason that the market figure is substantially below our estimate for the prior
year is that CalPERS reported a 13%rate of return on its investments for the fiscal year
ending June 30,2011,which was well above their 7.5%assumed figure.Unfortunately,
since their rate of return on investments for the following fiscal year was around 0%,we
can anticipate a substantial increase in the market value of the City's unfunded pension
liability in the following year.
CalPERS also provided a calculation of the amount the City would have had to pay if it
had terminated its plan on June 30,2011.This number,$16,571,853,is not particularly
useful since Rancho Palos Verdes cannot go back in time and terminate its plan on June
30,2011.The discount rate at that time was 4.82%.CalPERS notes in its own report
3 Statement 68 actually includes other requirements,but these two are the most important for purposes of
this discussion.
4 These numbers are simply based on our City's shares ofthe total pool and do not reflect changes at the
local level.
5 Actually,CalPERS lowered its actuarial assumption of price inflation from 3.00%to 2.75%.Its 7.50%
investment return assumption is the sum of the price inflation and a 4.75%assumed real rate of return.
2
3-6
Attachment A
that the discount rate as of June 30,2012 was 2.87%but does not provide a hypothetical
termination value based on that rate.Our best estimate is that the current termination
value for our City would be a little over $23 million.6
According to CaIPERS,no agencies have terminated their plans since the implementation
of the 2011 rules,but about 20 agencies have requested pre-termination valuations and
one agency (not a city)is in the process of final termination.
3.Recommendation.
The problems surrounding CalPERS are much greater than lack oftransparency.In an
article this month entitled How Not to Run a Pension,author John Mauldin contends that:
."CaIPERS manages $230 billion.The fund now calculates that it is
underfunded by $80 billion.The management arrives at this number by
assuming they will make 7.5%(which they only recently dropped from
7.75%).In 2009,they estimated that the fund was underfunded by only $49
billion.That means they missed their targets by $30 billion in a roaring bull
market.lIn a December 2011 study,former Democratic assemblyman Joe
Nation,a public finance expert at Stanford University,estimated that
CaIPERS's long-term pension debt is a sizable $170 billion ifCalPERS
achieves an average annual investment return of 6.2 percent in years to come.
Ifthe return is just 4.5 percent annually -a rate close to what more
conservative private pensions often shoot for -the fund's long-term liability
rises to a forbidding $290 billion.'(quoting Steven Malanga,The Pension
Fund that Ate California,City Journal,Winter,2013)."
There are also numerous allegations of abuse and mismanagement,some of which have
resulted in lawsuits.
But the current assignment to the FAC from the City Council was limited to looking at
the methodologies available for calculating the City's unfunded pension liability.
Although it has not been as straightforward or timely as it might have been,CalPERS has
6 The calculation is complicated.According to CalPERS Circular Letter 200-058-11,''The discount rate
assumption to be used for actuarial valuations for employers terminating a contract (or portion of a
contract)with CaIPERS,and for the annual actuarial valuation of the Terminated Agency Pool,will be a
weighted average of the 10 and 30 year US Treasury yields in effect on the valuation date.The weighted
average percentages will be the weights that when applied to the duration ofthe 10 and 30
year US Treasury,determined at current spot rates,equal the duration of the expected
benefit payment cash flows of the contract (or portion of a contract in the case of a partial termination)
being terminated or the terminated Agency Pool.In addition,the inflation assumption used to project the
expected benefit payment cash flows of the contract (or portion of a contract in the case of a partial
termination)being terminated or the terminated Agency Pool will be the inflation imbedded in the US
Treasury Inflation Protected Securities (TIPS)on the valuation date.The wage growth assumption used for
the same calculation will be 0.25%higher than the inflation assumption.This wage growth assumption will
be used in combination with the merit,seniority and promotion component of individual salary increases
previously adopted by the Board to project individual salaries into the future."
3
3-7
Attachment A
now provided at least some data which confirms that our unfunded pension liability is
substantially more than it was previously advertised to be.
This additional information is not,however,reflected in our own City's financial
statements.A note to the recent Comprehensive Annual Financial Report ("CAFR")for
the fiscal year ended June 30,2012,states that:
"The City'sshare of the risk pool's unfunded actuarial accrued liability,as
reported by CaIPERS,is $3,714,970.Currently,the City's share ofthe Risk
Pool's liability is not a reportable liability ofthe City.However,with
implementation of GASB Statement No.68 expected with the June 30,2015
financial statements,the City's share of the Risk Pool's liability will be a
reportable liability ofthe City."(CAFR,p.64)
We understand that Staff is limited by financial reporting rules and by the fact that
CalPERS has not provided all of the necessary data,but we believe that ifRPV is unable
to comply with GASB Statement 68 by the next CAFR,the above note should be
expanded.At a minimum,the notes to the financial statement could include a statement
concerning the then estimated market value of our unfunded pension liability.
That number is significant and providing it to our citizens would be consistent with the
spirit ofGASB Statement 68 which emphasizes the importance of both transparency and
usefulness of information.
We also recommend that the City Council direct the FAC to continue to monitor our
relationship with CaIPERS,including but not limited to,contacting other agencies that
have sought termination data from CaIPERS,and to report our findings,and if
appropriate our recommendations,back to City Council at a future date.
4.Conclusion.
A Staff Report on this subject was presented to the FAC at its January 30,2013 meeting.
The topic was discussed at that meeting and again at its March 6,2013 meeting when this
Memorandum was reviewed,and the final recommendation added by the FAC and
adopted unanimously.
Chair,Finance Advisory Committee
4
3-8
Attachment 8
June 30,2011 Actuarial Valuation Report from CalPERS
3-9
A
CalPERS
October 2012
California Public Employees'Retirement System
Actuarial Office
P.O.Box 942701
Sacramento,CA 94229-2701
TTY:(916)795-3240
(888)225-7377 phone.(916)795-2744 fax
www.calpers.ca.gov
Attachment B
MISCELLANEOUS PLAN OF THE CITY OF RANCHO PALOS VERDES (CaIPERS ID 3846845523)
Annual Valuation Report as of June 30,2011
Dear Employer,
As an attachment to this letter,you will find a copy of Section 1 of the June 30,2011 actuarial valuation report of
your pension plan.Since your plan had less than 100 active members In at least one valuation since June 30,2003,
It is required to participate in a risk pool.The valuation report is divided into two Sections:
• .Section 1 contains specific information for your plan,Including the development of your pooled employer
contribution rate,and
•Section 2 contains the Risk Pool Actuarial Valuation appropriate to your plan,as of June 30,201l.
Section 2 may be found on the CalPERS website (www.calpers.ca.gov)then selecting Employers >Actuarial &GASB
27 Information >Rlsk Pooling >Risk Pool Annual Valuation Report,or at the follOWing address:http://ow.ly/eNpMg.
This report contains important actuarial Information about your pension plan at caIPERS.Your calPERS staff actuary
is allaila.bleto Olscuss the rePOrt:with you.
Changes Since the Prior Valuation
The CaIPERS'Board of Administration adopted updated actuarial assumptions to be used beginning with the June 30,
2011 valuation.The infiatlon rate changed from 3%to 2.75%and the discount rate changed from 7.75%to 7.5%.
In addition,a temporary modification to our method of determining the actuarial value of assets and amortizing gains
and losses was implemented for the valuations as of June 30,2009 through June 30,2011.The effect of those
modifications continues in this valuation.
There may also be changes specific to your plan such as contract amendments and funding changes.
Future Contribution Rates
The exhibit below displays the required employer contribution rate and Superfunded status for 2013/2014 along with
an estimate of the contribution rate and Superfunded status for 2014/2015.The estimated rate for 2014/2015 is
based on a projection of the most recent information we have available,including an estimate of the investment
return for fiscal 2011/2012,namely 0%.See Section 2 Appendix E,"Analysis of Future Investment Return
Scenarios",for how much the Risk Pool's portion of your rate is expected to Increase in 2015/2016 rate'projections
under a variety of Investment return scenarios for the Risk Pool's portion of your rate.Please disregard any
projections that we may have provided to you in the past.
Fiscal Year Employer Contribution Rate Superfunded?
2013/2014 14.660%No
2014/2015 15.7%(projected)No
Member contributions (whether paid by the employer or the employee)are in addition to the above rates.Further,
these rates do not reflect any cost sharing.
The estimate for 2014/2015 assumes that there are no future amendments and no liability gains or losses {such as
larger than expected pay Increases,more retirements than expected,etc.).This is a very important assumption
because these gains and losses do occur and can have a significant effect on your contribution rate.Even for the
largest plans,such gains and losses can Impact the employer's contribution rate by one or two percent or even more
in some less common instances.These gains and losses cannot be predicted in advance so the projected empioyer
contribution rate for 2014/2015 is just an estimate.Your actual rate for 2014/2015 will be prOVided in next year's
report.
3-10
Attachment B
MISCELLANEOUS PLAN OF THE CITY OF RANCHO PALOS VERDES (caIPERS ID 3846845523)
October 2012
Page 2
California Actuarial Advisory Panel Recommendations
The report satisfies all basic disclosure'requirements under the Model Disclosure Elements for Actuarial Valuation
Reports recommended by the California Actuarial Advisory Panel,except for the original base amounts of the
unfunded liability amortization.
The report gives the follOWing additional information classified as enhanced risk disclosures under the Model
Disclosure Elements for Actuarial Valuation Reports recommended by the california Actuarial Advisory Panel:
•"Deterministic stress test",projecting future results under different Investment Income scenarios.(See
AppendiX E's Analysis of Future Investment Return Scenarios,from Section 2 of this report.)
•"Sensitivity analYSis",showing the impact on current valuation results of a plus or minus 1%change in the
discount rate.(see Appendix E's Analysis of Discount Rate Sensitivity,from Section 2 of this report.)
We are very busy preparing actuarial valuations for other public agencies and expect to complete all such valuations
by the ~nd of October.We understand that you might have a number of questions about these results.While we
are very iFiterested in discussing these results with your agency,in the Interest of allOWing us to give every public
agency their result,we ask that,If at all possible,you walt until after October 31 to contact us with questions.If you
have questions,please call (888)calPERS (225-7377).
Sincerely,
JL--~
ALAN MILUGAN,
Chief Actuary
3-11
A
CalPERS
November 2012
CalPERS Actuarial Office
P.O.Box 942709
Sacramento,CA 94229-2709
TTY:(877)249·7442
(888)CalPERS (or 888-225-7377)phone
(916)795-2744 fax www.calpers.ca.gov
Attachment B
Business Partner Name:CITY OF RANCHO PALOS VERDES
calPERS 10:3846845523
Rate Plan Name:MISCELLANEOUS SECOND TIER PLAN
Rate Plan ID:23274
Re:FiS~1 Year 2013-2014 Employer Contribution Rate
Dear Business Partner:
The employer contribution rate stated in our last rate letter to you for the above named rate plan expires
on June 30,2013.The purpose of this letter is to inform you of your employer contribution rate beyond
June 30,2013.
The current employer contribution rate for the above named rate plan is 7.846%of payroll.For the
fiscal year 2013-2014,the employer contribution rate will change to 8.049%of payroll.In fall 2013 you
will receive an actuarial valuation report that will Indicate your employer contribution rate for fiscal year
2014-2015.
Below Is a comparison of changes to your plan's contribution rate:
Pool's Net Normal Cost
Pool's Payment on Amortization Base
Plan's Surcharges for Class 1 Benefits
Amortization of Side Fund
Total Employer Rate
Fiscal Year
2012-2013
6.640%
1.206%
0.000%
0.000%
7.846%
Fiscal Year
2013-2014
6.786%
1.263%
0.000%
0.000%
8.049%
If you should have any further questions,please call the calPERS Customer Contact Center at
(888)CalPERS (or 888-225-7377).
KUNG-PEl HWANG,ASA,MAAA
Senior Pension Actuary,calPERS
3-12
Attachment B
A.
CalPERS
ACTUARIAL VALUATION
as of June 30,2011
for the
MISCELLANEOUS PLAN
of the
CITY OF RANCHO PALOS VERDES
(Cal.PERS ID 3846845523)
REQUIRED CONTRIBUTIONS
FOR FISCAL YEAR
July 1,2013 -June 30,2014
3-13
TABLE Of CONTENTS
SECTION 1 -PLAN SPECIFIC INFORMATION
SECTION 2 -RISK POOL ACTUARIAL VALUATION INFORMATION
Attachment B
FIN PROCESS CONTROL ID (CY):399640 FIN PROCESS CONTROL ID (PY):36909B REPORT ID:70696
3-14
Attachment B
Section 1
CALIFORNrA PUBLIC EMPLOYEES'RETIREMENT SYSTEM
Plan Specific Information for
the MISCELLANEOUS PLAN
of the CITY OF RANCHO PALOS
VERDES
(CaIPERS ID 3846845523)
(Rate Plan #1107)
3-15
Attachment B
TABLE Of CONTENTS
ACTUARIAL CERTIFICATION
HIGHLIGHTS AND EXECUTIVE SUMMARY
•PURPOSE OF SECTION 1
•REQUIRED EMPLOYER CONTRIBUTIONS
•PLAN'S FUNDED STATUS
•SUPERFUNDED STATUS
•PROJECTED CONTRIBUTIONS
•RATE VOLATILITY
SUMMARY OF FINANCIAL AND DEMOGRAPHIC INFORMATION
PLAN'S SIDE FUND
•DEVELOPMENT OF THE ACTUARIAL VALUE OF ASSETS
FUNDING HISTORY
•PLAN'S TOTAL NORMAL COST RATE
•HYPOTHETICAL TERMINATION LIABILITY
•SUMMARY OF PARTICIPANT DATA
•LIST OF CLASS 1 BENEFIT PROVISIONS
1
3
3
4
5
5
5
6
7
7
8
8
8
9
9
9
INFORMATION FOR COMPLIANCE WITH GASB STATEMENT NO.27 10
SUMMARY OF PLAN'S MAJOR BENEFIT OPTIONS 11
3-16
Attachment B
SECTION 1 -PLAN SPECIFIC INfORMATION fOR THE MISCELLANEOUS PLAN Of THE CITY Of
RANCHO PALOS VERDES
ACTUARIAL CERTifiCATION
Section 1 of this report is based Oil the member and financial data contained In our records as of June 30,
2011 which was provided by your agency and the benefit provisions under your contract with caIPERS.
Section 2 of this report Is based on the member and financial data as of June 30,2011 provided by
employers participating In the risk pool to which your plan belongs and benefit provisions under the CalPERS
contracts for those agencies.
As set forth In Section 2 of this report,the Pool Actuary has certified that,In her opinion,the valuation of
the Risk Pool containing your MISCELLANEOUS PLAN has been performed in accordance with generally
accepted actuarial principles consistent with standards of practice prescribed by the Actuarial Standards
Board,and that the assumptions and methods are Internally consistent and reasonable for the Risk Pool,as
prescribed by the calPERS Board of Administration according to provisions set forth in the california Public
Employees'Retirement Law.
Havin!il relied upon the Information set forth in Section 2 of this report and based on the census and benefit
provision Information for your plan,it is my opinion as your Plan Actuary that the Side Fund as of June 30,
2011 and employer contribution rate as of July 1,2013,have been properly and accurately determined in
accordance with the principles and standards stated above.
The undersigned Is an actuary for CalPERS,who Is a member of both the American Academy of Actuaries
and Society of Actuaries and meets the Qualification Standards of the American Academy of Actuaries to
render the actuarial opinion contained herein.
KUNG-PEl HWANG,ASA,MAAA
Senior Pension Actuary,calPERS
Plan Actuary
CalPERS Actuarial Valuation -June 30,2011
Rate Plan belonging to Miscellaneous 2.5%at 55 Risk Pool
Page 1
3-17
Attachment B
SECTION 1 -PLAN SPECIFIC INFORMATION FOR THE MISCELLANEOUS PLAN OF THE CITY OF
RANCHO PALOS VERDES
THIS PAGE
INTENTIONALLY
LEfT BLANK
calPERS Actuarial Valuation -June 30,2011
Rate Plan belonging to Miscellaneous 2.5%at 55 Risk Pool
Page 2
3-18
Attachment B
SECTIO"1 _.P!4'N SP~CXFICINFORMATIONFOR THEMISCJ5LLANEOUS PLAN OF THE CITY OF
RANCHOPALOS·VERDE$
Purpose of Section 1
This section 1 report for the MISCELLANEOUS PLAN of the CITY OF RANCHO PALOS VERDES of the
California Public Employees'Retirement System (CaIPERS)was prepared by the Plan Actuary in order to:
•set forth the actuarial assets and accrued liabilities of this plan as of June 30,2011;
•determine the required employer contribution rate for this plan for the fiscal year July 1,2013 through
June 30,2014;
provide actuarial Information as of June 30,2011 to the calPERS Board of Administration and other
interested parties;and
•provide pension information as of June 30,2011 to be used in financial reports subject to Governmental
.Accounting Standards Board (GASB)Statement Number 27 for a Cost Sharing Multiple Employer
Defined Benefit Pension Plan.
The use of this report for any other purposes may be Inappropriate.In particular,this report does not
contain informatiol"\applicable to alternative benefit costs.The employer should contact their actuary
before disseminating any portion of this report for any reason that is not explicitly described above.
CalPERS Actuarial Valuation -June 30,2011
Rate Plan belonging to Miscellaneous 2.5%at 55 Risk Pool
Page 3
3-19
Attachment B
SECTION 1 -PLAN SPECifIC INFORMATXoN FOR THE MISCELLANEOUS PLAN OF THE CITY OF
RANCHO PALOS VERDES
Required Employer Contributions
Fiscal Year Fiscal Year
2012/2013 2013/2014
Employer Contribution Required (In Projected Dollars)
Risk Pool's Net Employer Normal Cost $457,529 $505,857
Risk Pool's Payment on Amortization Bases 235,903 278,032
Surcharge for Class 1 Benefits
a)FAC 1 31,631 32,117
Phase out of Normal Cost Difference 0 0
Amortization of Side Fund 0 0
Total Employer Contribution $725,063 $816,006
Employee Cost Sharing N/A 0
Net Employer Contribution N/A 816,006
Annual Lump Sum Prepayment Option*$698,501 $787,026
Projected Payroll for the Contribution Fiscal Year $5,211,033 $5,566,207
Employer Contribution Required (Percentage of Payroll)
Risk Pool's Net Employer Normal Cost 8.780%9.088%
Risk Pool's Payment on Amortization Bases 4.527%4.995%
Surcharge for Class 1 Benefits
a)FAC 1 0.607%0.577%
Phase out of Normal Cost Difference 0.000%0.000%
Amortization of Side Fund 0.000%0.000%
Total Employer Contribution 13.914%14.660%
Employee Cost Sharing N/A (0.000%)
Net Employer Contribution N/A 14.660%
Appendix C of Section 2 of this report contains a list of Class 1 benefits and corresponding surcharges for
each benefit.
Risk pooling was Implemented as of June 30,2003.The normal cost difference Is scheduled to be phased
out over a five year period.The phase out of normal cost difference Is 100%for the first year of pooling,
and is incrementally reduced by 20%of the original normal cost difference for each subsequent year.
*Payment must be received by calPERS before the first payroll reported to CalPERS of the new fiscal year
and after June 30.
CaIPERS Actuarial Valuation -June 30,2011
Rate Plan belonging to Miscellaneous 2.5%at 55 Risk Pool
Page 4
3-20
Attachment B
SECTION 1 -PLAN SPECIFIC INFORMATION FOR THE MISCELLANEOUS PLAN OF THE CITY OF
RANCHO PALOS VERDES
Plan"s funded Status
1.Present Value of Projected Benefits (PVB)
2.Entry Age Normal Accrued liability
3.Plan's Actuarial Value of Assets (AVA)
4.Unfunded Liability (AVA Basis)[(2)-(3)]
5.Funded Ratio (AVA Basis)[(3)/(2)]
6.Plan's Market Value of Assets (MVA)
7.Unfunded liability (MVA Basis){(2)•(6)]
8.Funded Ratio (MVA Basis)[(6)/(2)]
Superfunded Status
June 30,2010 June 30,2011
N/A $31,808,573
N/A 25,552,394
N/A $21,837,424
N/A $3,714,970
N/A 85.5%
N/A $19,543,745
N/A 6,008,649
N/A 76.5%
Is the plan Superfunded?
[Yes if AVA exceeds PVB,No otherwise]
Projected Contributions
June 30,2010
No
June 30,2011
No
The rate shown below is an estimate for the employer contribution for Fiscal Year 2014/2015.The
estimated rate Is based on a projection of the most recent information we have available,including an
estimate of the Investment return for fiscal year 2011/2012,namely 0%:
Projected Employer Contribution Rate:15.7%
The estimate also assumes that there are no liability gains or losses among the plans In your risk pool,that
your plan has no new amendments In the next year,and that your plan's and your risk pool's payrolls both
Increase exactly 3.0%in the 2011/2012 fiscal year.Therefore,the projected employer contribution rate for
2014/2015 is just an estimate.Your actual rate for 2014/2015 will be prOVided In next year's report.
CaIPERS Actuarial Valuation -June 30,2011
Rate Plan belonging to Miscellaneous 2.5%at 55 Risk Pool
Page 5
3-21
Attachment B
SECTION 1 -PLAN SPECIFIC INFORMATION FOR THE MISCELLANEOUS PLAN OF THE CITY OF
RANCHO PALOS VERDES
Rate Volatility
Your plan's employer contribution rate will InevItably fluctuate,for many reasons.However,the biggest
fluctuations are generally due to changes in the side fund rate resulting from unexpected changes in payroll.
The following figure shows how much your 2014/2015 side fund rate would change for each 1%deviation
between our 3.0%payroll growth a~umption and your actual 2011/2012 payroll growth.
POTENTIAL 2014/2015 RATE IMPACT
FROM 2011/2012 PAYROLL DEVIATION
%Rate Change per 1%Deviation from Assumed 3.0%Payroll Growth:0.000%
Examples:To see how your employer contribution rate might be affected by unexpected payroll change,
suppose the following:
'..The %Rate Change per 1%Deviation figure given above Is -0.400%
•Your plan's payroll Increased 10%In 2011/2012 (7.0%more than our 3.0%assumption).
Then your 2014/2015 rate would decrease -0.400%x (10 -3.0)=-2.80%from that cause alone.
Or conversely,using the same %Rate Change per 1%Deviation figure given above,suppose your plan's
payroll remained the same in 2011/2012 (3.0%less than our 3.0%assumption).
Then your 2014/2015 rate would Increase -0.400%x (0 -3.0)=1.2%from that cause alone.
Note that if your plan had a negative side fund,an unexpected payroll increase would spread the payback of
the negative side fund over a bigger payroll,which would decrease your plan's side fund percentage rate
and the total employer contribution rate.On the other hand,If your plan had a positive side fund,an
unexpected payroll Increase would spread the payback of the positive side fund over a larger payroll,which
would Increase your plan's side fund percentage rate and the total employer contribution rate.In either"
case,the amortization of Side Fund dollar amount would not change.
CaIPERS Actuarial Valuation -June 30,2011
Rate Plan belonging to Miscellaneous 2.5%at 55 Risk Pool
Page 6
3-22
Attachment B
SUMMARY Of fINANC&Al AND DEMOGRAPHIC
IDNFO~MATmON
Plan's Side fund
At the time your plan joined the Risk Pool,a side fund was created to account for the difference between
the funded status of the pool and the funded status of your plan,In addition to your existing unfunded
liability.The side fund for your plan as of the June 30,2011 valuation is shown In the folloWing table.
June 30,2011
$0
o
o
$0
o
o
$0
12
$0
Side Fund as of valuation date*
Adjustments
Side Fund Payment
Side Fund one year later
Adjustments
Side Fund Payment
Side Fund two years later
Amortization Period
Side Fund Payment during last year
Your side fund will be credited,on an annual basis,with the actuarial Investment return assumption.This
assumption Is 7.75%prior to July 1,2012 and 7.5%after June 30,2012.A positive side fund will cause
your required employer contribution rate to be reduced by the Amortization of Side Fund shown above In
Required Employer Contributions.A negative side fund will cause your reqUired employer contribution rate
to be Increased by the Amortization of Side Fund.In the absence of subsequent contract amendments or
funding changes,the side fund will disappear at the end of the amortization period shown below.
Plan's Side Fund Reconciliation
June 30,2010
$0
o
o
$0
o
o
$0
13
$0
*If your agency employed superfunded vouchers In fiscal year 2010/2011 to pay employee contributions,
the June 30,2011 Side Fund amount has been adjusted by a like amount without any further adjustment to
the Side Fund's amortization period.Similarly,the Side Fund has been adjusted for the Increase in liability
from any recently adopted Oass 1 or Class 2 contract amendments.Also,the Side Fund may be adjusted or
eliminated due to recent lump sum payments.Contract amendments and lump sum payments may result
In an adjustment to the Side Fund amortization period.
CaiPERS Actuarial Valuation -June 30,2011
Rate Plan belonging to Miscellaneous 2.5%at 55 Risk Pool
Page 7
3-23
Attachment B
SECTION 1-PLAN SPECIFIC INFORMATION FOR THE MISCELLANEOUS PLAN OF THE CITY OF
RANCHO PALOS VERDES .
Development of the Actuarial Value of Assets
1.Plan's Accrued liability $
2.Plan's Side Fund
3.Pool's Accrued Liabllity
4.Pool's Side Fund
5.Pool's Actuarial Value of Assets Including Receivables
6.Plan's Actuarial Value of Assets (AVA)Including Receivables [(1 +2)1(3 +4)x 5]$
7.Pool's Market Value of Assets (MVA)Including Receivables
8.Plan's Market Value of Assets (MVA)Including Receivables [(1 +2)1(3 +4)x 7]$
June 30,2011
25,552,394
o
2,135,350,204
(117,829,589)
1,724,200,585
21,837,424
1,543,100,350
19,543,745
The Funding History below shows the actuarial accrued liability,the actuarial value of assets,the market
value of assets,funded ratios and the annual covered payroll.The actuarial value of assets is used to
establish ,funding requirements.an9',the funded ratlp on this basis represents the progress toward fully
funding fu~re benefits for current plan participants.The funded ratio based on the market value of assets
Is an indicator of the short-term solvency of the plan.
Valuation
Date
06/30/11 $
Accrued
Liability
25,552,394
Actuarial
Value of
Assets (AVA)
$21,837,424
Market Value
of
Assets (MVA)
$19,543,745
Funded
Ratio
AVA MVA
85.5%76.5%$
Annual
Covered
Payroll
5,093,868
Plan's Total Normal Cost Rate
The Public Employees'Pension Reform Act of 2013 requires that new employees pay at least 50%of the
total annual normal cost and that current employees approach the same goal through collective bargaining.
Please refer to the calPERS website for more details.
Shown below is the total annual normal cost rate for your plan.Note that this rate Is for current members
only.
Pool's Net Total Normal Cost Rate
Surcharge for Class 1 Benefits
a)FAC 1
Plan's Total Normal Cost Rate
CalPERS Actuarial Valuation -June 30,2011
Rate Plan belonging to Miscellaneous 2.5%at 55 Risk Pool
Fiscal Year
2012/2013
N/A
N/A
N/A
Fiscal Year
2013/2014
16.976%
0.577%
17.553%
Page 8
3-24
Attachment B
SECTION 1 -PLANSpeCIF1C INFORMATION ~OR THE MISCELLANeOUS PLAN OF THE CITY OF
RANCHO PALOS VERDES
Hypothetical Termination liability
In August 2011,tile CalPERS Board adopted an Investment policy and asset allocation strategy that more
closely reflects expected benefit payments of the Terminated Agency Pool.With this change,calPERS
Increased benefit security for members while limiting its funding risk.
The table below shows the hypothetical termination liability,the market value of assets,the unfunded
termination liability and the termination funded ratio.The assumptions used,Including the discount rate,
are stated In Appendix A and take Into account the yields available in the US Treasury market on the
valuation date and the mortality load for contingencies.The discount rate is duration weighted and is not
necessarily the rate that would be used for this plan If It were to terminate.The discount rate for this plan's
termination liability would depend on the duration of the liabilities of this plan.For purposes of this
estimate,the discount rate of 4.82%is based on the June 30,2011 30-year US Treasury Stripped Coupon
Rate.Please note,as of June 30,2012 the 30-year US Treasury Stripped Coupon Rate was 2.87%.
Valuation Hypothetical Market Value Unfunded Termination Discount
Date Termination of Assets Termination Funded Rate
Liability (MVA)Liability Ratio
06/30/11 $36,115,598 $19,543,745 $16,571,853 54.1%4.82%
Summary of Participant Data
The table below shows a summary of your plan's member data upon which this valuation Is based:
Projected Payroll for Contribution Purposes
Number of Members
Active
Transferred
Separated
Retired
June 3D,2010
$5,211,033
85
53
95
34
June 30,2011
$5,566,207
85
52
95
38
list of Class 1 Benefit Provisions
•One Year Final Compensation
calPERS Actuarial Valuation -June 30,2011
Rate Plan belonging to Miscellaneous 2.5%at 55 Risk Pool
Page 9
3-25
Attachment B
SECTION 1 -PLAN SPECIFIC INFORMATION FOR THE MISCELLANEOUS PLAN OF THE CITY OF
RANCHO PALOS VERDES
Information for Compliance with GASH Statement No..21
for Cost..sharing Multiple-Empbyer Defined Benefit Plan
Your plan is part of the Miscellaneous 2.5%at 55 Risk Pool,a cost-shaling multlple-employer defined benefit
plan.Under GASB 27,an employer should recognize annual pension expenditures/expense equal to Its
contractually required contributions to the plan.Pension liabilities and assets result from the difference
between contributions required and contlibutlons made.The contractually required contribution for the
period JUly 1,2013 to June 30,2014 has been determined by an actuarial valuation of the plan as of June
30,2011.Your unadjusted contribution rate for the indicated period Is 14.660%of payroll.In order to
calculate the dollar value of the contractually required contributions for inclusion in financial statements
prepared as of June 30,2014,this contlibutlon rate,less any employee cost sharing,and as modified by any
subsequent financing changes or contract amendments for the year,would be multiplied by the payroll of
covered employees that was actually paid dUling the period July 1,2013 to June 30,2014.However,If this
contlibution is fully prepaid in a lump sum,then the dollar value of contractually required contributions Is
equal.to the lump sum prepayment.The employer and the employer's auditor are responsible for
determining the contractually required contlibutlons.Further,the required contributions In dollars and the
percentage of that amount contlibuted for the current year and each of the two preceding years is to be
disclosed under GASB 27.
A summary of principal assumptions and methods used to determine the contractually required
contlibutions Is shown below for the cost-shaling multiple-employer defined benefit plan.
June 30,2011
Entry Age Normal Cost Method
Level Percent of Payroll
21 Years as of the Valuation Date
15 Year Smoothed Market
Valuation Date
Actuarial Cost Method
Amortization Method
Average Remaining Period
Asset Valuation.Method
Actuarial Assumptions
Discount Rate
Projected Salary Increases
Inflation
Payroll Growth
Individual Salary Growth
7.50%(net of administrative expenses)
3.30%to 14.20%depending on Age,Service,and type of employment
2.75%
3.00%
A merit scale varying by duration of employment coupled with an
assumed annual inflation growth of 2.75%and an annual production
growth of 0.25%.
Complete information on assumptions and methods Is prOVided in AppendiX A of Section 2 of the report.
Appendix B of Section 2 of the report contains a description of benefits Included In the Risk Pool Actuarial
Valuation.
A Schedule of Funding for the Risk Pool's actuarial value of assets,accrued liability,their relationship,and
the relationship of the unfunded liability (UL)to payroll for the risk pool(s)to which your plan belongs can
be found In Section 2 of the report.
calPERS Actuarial Valuation -June 30,2011
Rate Plan belonging to Miscellaneous 2.5%at 55 Risk Pool
Page 10
3-26
SECTION 1-PLAN SPECIFIC INFORMATION FOR THE MISCELLANEOUS PLAN OF THE CITY OF RANCHO PALOS VERDES
Summary of Plan's Major Benefit Options
Shown below is a summary of the major ~benefits for which your agency has contracted.A desctiption of prindpal standard and optional plan provisions
is in Appendix B within Section 2 of this report
Coverage Group
70002 70001*
Benefit Provision
Benefit Formula 2.5%@55 2.0%@55
Social security Coverage no no
Full/Modified full full
Final Average Compensation Period 12 mos.12 mos.
Sick Leave Credit yes yes
Non-Industrial Disability standard standard
Industrial Disability no no
Pre-Retirement Death Benefits
Optional settlement 2W yes yes
1959 SUlVivor Benefit Level level 4 level 4
Special no no
Alternate (firefighters)no no
Post-Retirement Death Benefits
Lump Sum $500 $500
SurVivor Allowance (PRSA)no no
COLA 2%2%
Employee Contributions
Contractual employer paid no no
*Inactive Coverage Group
calPERS Actuarial Valuation -June 30,2011
Rate Plan belonging to Miscellaneous 2.5%at 55 Risk Pool
Page 11
~......
l.\)o::::r
3
CD
:::J......
OJ
3-27
Attachment B
Section 2
CALIFORNIA PUBLIC EMPLOYEES'RETIREMENT SYSTEM
--_.._-----------------------------..
Section 2 may be found on the calPERS website
(www.calpers.ca{IOV)then selecting:
•Employers
•Actuarial &GASB 27 Information
•Risk Pooling
•Risk Pool Annual Valuation Report
Or at the following address:http://ow.ly/eNpMg
3-28
Attachment B
Section 2
CALIFORNIA PCBLIC EMPLOYEES'RETIREMENT SYSTEM
Miscellaneous 2.5%at 55 Risk Pool
as of June 30,2011
3-29
TABLE OF CONTENTS
ACTUARIAL CERTIFICATION
HIGHLIGHTS AND EXECUTIVE SUMMARY
.Purpose of Section 2
Risk Pool's Required Employer Contribution
Risk Pool's Required Base Employer Rate
Risk Pool's Net Total Normal Cost Rate
Funded Status of the Risk Pool
COst
Changes Since the Prior Valuation
Subsequent Events
SUMMARY OF LIABILmES AND RATES
Development of Pool's Accrued and Unfunded liabilities
(Galn)/Loss Analysis 06/30/10 -06/30/11
Schedule of Amortization Bases for the Risk Pool
Development of Risk Pool's Annual Required Base COntribution
Pool's Employer Contribution Rate History
Funding History
SUMMARY OF ASSETS
Reconciliation of the Market Value of Assets
Development of the Actuarial Value of Assets
Asset Allocation
calPERS History of Investment Returns
SUMMARY OF PARTICIPANT DATA
Source of the Participant Data
Data Validation Tests and Adjustments
Summary of Valuation Data
Active Members
Transferred and Terminated Members
Retired Members and Beneficiaries
APPENDIX A-ACTUARIAL METHODS AND ASSUMPTIONS
Actuarial Data
Actuarial Methods
Actuarial Assumptions
Miscellaneous
APPENDIX B-SUMMARY OF PRINCIPAL PLAN PROVISIONS
APPENDIX C-PLAN OPTIONS AND VARIABLES
Classification of Optional Benefits
Example of Individual Agency's Rate calculation
Distribution of Class 1 Benefits
APPENDIX D-LIST OF PARTICIPATING EMPLOYERS
APPENDIX E•RISK ANALYSIS
Volatility Ratios
Analysis of Future Investment Return SCenarios
Analysis of Discount Rate SensitiVity
APPENDIX F-GLOSSARY OF ACTUARIAL TERMS
Risk POOl Valuallon Job 10:457
1
5
5
5
6
6
6
7
7
11
12
13
14
15
15
19
19
20
21
23
23
24
25
26
27
A-l
A-l
A-3
A-17
C-l
C-3
C-3
E-l
E-2
E-3
Attachment B
3-30
Attachment B
Actuariam Certification
To the best of my knowledge,Section 2 of this report Is complete and accurate and contains sufficient
information to disclose,fully and fairly,the funded condition of the Miscellaneous 2.5%at 55 Risk Pool.This
valuation is based on the member and financial data as of June 3D,2011 prOVided by the various CalPERS
databases and the benefits under this Risk Pool with calPERS as of the date this report was produced.It is
my opinion that the valuation has been performed in accordance with generally accepted actuarial
principles,in accordance with standards of practice prescribed by the Actuarial Standards Board,and that
the assumptions and methods are internally consistent and reasonable for this risk pool,as prescribed by
the calPERS Board of Administration according to provisions set forth in the california Public Employees'
Retirement Law.
The u[lderslgned is an actuary for calPERS,who Is a member of the American Academy of Actuaries and the
Society of Actuaries and meets the Qualification Standards of the American Academy of Actuaries to render
the actuarial opinion contained herein.
SHELLY CHU,ASA,MAAA
Senior Pension Actuary,CalPERS
Pool Actuary
calPERS Actuarial Valuation -June 3D,2011
Miscellaneous 2.5%at 55 Risk Pool
1
3-31
HiGHlU3HTS AND EXECU1TVE SUMMARY
•PURPOSE OF SECTION 2
•RISK POOL'S REQUIRED EMPLOYER CONTRIBUTIONS
•RISK POOL'S REQUIRED BASE EMPLOYER RATE
•RISK POOL'S NET TOTAL NORMAL COST RATE
•FUNDED STATUS OF THE RISK POOL
'.'COST
•CHANGES SINCE THE PRIOR VALUATION
•SUBSEQUENT EVENTS
Attachment B
3-32
Attachment B
HIGHLIGHTS AND EXECUTIVE SUMMARY
Purpose of Section 2
This Actuarial Valuation for the Miscellaneous 2.5%at 55 Risk Pool of the california Public Employees'Retirement
System (CaIPERS)was performed by GaIPERS'staff actuaries using data as of June 30,2011 In order to:
•set forth the actuarial assets and accrued liabilities of this risk pool as of June 30,2011
•determine the reqUired contribution rate of the pool for the fiscal year July 1,2013 through June 30,
2014
•provide actuarial information as of June 30,2011 to the CalPERS Board and other Interested parties
The use of this report for any other purposes may be inappropriate.In particular,this report does not contain
information applicable to alternative benefit costs.The employer should contact their actuary before
disseminating any portion of this report for any reason that is not explicitly described above.
Risk Pool's Required Employer Contribution·.
Contribution in Projected Dollars
a)Total Pool's Normal Cost
b)Employee Contribution
c)Pool's Gross Employer Normal Cost
d)Payment on Pool's Amortization Bases
e)Payment on Employer Side Funds
f)Total ReqUired Employer Contribution*
*Total may not add up due to rounding
Fiscal Year Fiscal Year
2012/2013 2013/2014
67,937,728 67,890,150
30,822,916 30,178,501
$37,114,812 $37,711,649
17,571,554 19,111,950
13,464.620 13,147,145
$68,151,210 $69,967,600
Contribution as a Ofo of Projected Pay
a)Total Pool's Normal Cost
b)Employee COntribution
c)Pool's Gross Employer Normal Cost
d)Payment on Pool's Amortization Bases
e)Payment on Employer Side Funds
f)Total Required Employer Contribution
17.503%
7.941%
9.562%
4.527%
~
17.558%
17,745%
7.888%
9.857%
4.995%
~
18.288%
These rates are the total required employer contributions to the pool for fiscal years 2012/2013 and 2013/2014.
The Pool's Gross Employer Normal Cost includes the Class 1 surcharges for all employers that contract for the
Class 1 type benefits.The payment on the pool's amortization bases is the payment on the ongoing cumulative
gains and losses experienced by the pool since its June 30,2003 inception.The payment on employer side funds
Is the combination of all expected IndiVidual amortization payments on every side fund in the pool.
Risk Pool"s Required Base Employer Rate
1.Pool's Gross Employer Normal Cost
Less:Surcharges for Ciass 1 Ben~fits
2.Pool's Net Employer Normal Cost
3.Payment on Pool's Amortization Bases
4.Pool's Base Employer Rate
GaIPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
Fiscal Year
2012/2013
9.562%
0.782%
8.780%
4.527%
13.307%
Fiscal Year
2013/2014
9.857%
~
9.088%
~
14.083%
5
3-33
Attachment B
HIGHLIGHTS AND eXEcUTive SUMMARY
The base employer contribution rate is the rate that each plan within the pool pays before any adjustments are
made.It represents the pool funding for basic benefits (no Class 1 surcharges)for the fiscal year shown.To
arrive at a plan's total contribution rate,several components must be added to this base rate.These components
are Class 1 benefit surcharges,normal cost phase-out and any side fund payment.More information about those
additional components can be found In section 1 of this report.
Risk Pool115 Net Total Normal Cost Rate
1.Pool's Net Employer Normal Cost
2.Pool's Employee Contribution Rate
3.Pool's Net Total Normal Cost Rate
Funded Status of the Risk Pool
Fiscal Year
2012/2013
8.780%
~
16.721%
Fiscal Year
2013/2014
9.088%
~
16.976%
June 30,2010 June 30,2011
1.Present Value of Projected Benefits $2,433,151,039 $2,594,764,339
2.Entry Age Normal Accrued Liability $1,972,910,641 $2,135,350,204
3.Actuarial Value of Assets $1,603,482,152 $1,724,200,585
4.Unfunded Liability (AVA Basis)[(2)-(3)]369,428,489 411,149,619
5.Funded Ratio (AVA Basis)[(3)I (2)]81.3%80.8%
6.Market Value of Assets $1,261,453,576 $1,543,100,350
7.Unfunded Liability (MVA Basis)[(2)-(6)]$711,457,065 $592,249,854
8,Funded Ratio (MVA Basis)[(6)I (2)]63.9%72.3%
Cost
Actuarial Cost Estimates in General
What will this pension plan cost?Unfortunately,there is no simple answer.There are two major reasons for the
complexity of the answer:
First,all actuarial calCUlations,Including those in this report,are based on a number of assumptions about the
future.These assumptions can be divided into two categories.
•Demographic assumptions Include the percentage of employees that will terminate,die,become
disabled,and retire In each future year.
•Economic assumptions include future salary increases for each active employee,and the assumption
with the greatest impact,future asset returns at calPERS for each year into the future until the last
dollar is paid to current members of your plan.
While calPERS has set these assumptions as our best estimate of the real future of your plan,it must be
understood that these assumptions are very long term predictors and will surely not be realized in anyone year.
For example,while the asset earnings at CalPERS have averaged more than the assumed return of 7.5%for the
past twenty year period ending June 30,2012,returns for each fiscal year ranged from -24%to +21.7%
Second,the very nature of actuarial funding produces the answer to the question of plan or pool cost as the sum
of two separate pieces:
•The Normal Cost (I.e.,the future annual premiums in the absence of surplus or unfunded liability)
expressed as a percentage of total active payroll,and
CalPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
6
3-34
Attachment B
HIGHLIGHTS AND eXECUTive SUMMARY
•The Past Service Cost or Accrued liability (i.e.,representing the current value of the benefit for all
credited past service of current members)which is expressed as a lump sum dollar amount.
The cost is the sum of a percent of future pay and a lump sum dollar amount (the sum of an apple and an orange
if you will).To communicate the total cost,either the Normal Cost (i.e.,future percent of payroll)must be
converted to a lump sum dollar amount (in which case the total cost is the present value of benefits),or the Past
Service Cost (i.e.,the lump sum)must be converted to a percent of payroll (in which case the total cost is
expressed as the employer's rate,part of which is permanent and part temporary).Converting the Past Service
Cost lump sum to a percent of payroll requires a specific amortization period,and the plan or pool rate will vary
depending on the amortization period chosen.
Changes since the Prior Valuation
Actuarial Assumptions
The CalPERS Actuarial office conducted a study and hired an Independent evaluator to assess current economic
assumptions.Based on the information from both studies,the CalPERS Board of Administration has adopted
updated'economic assumptions to be used beginning with the June 30,2011 valuation.In particular,the
recommendation based on both studies was to lower the price inflation from 3.00 to 2.75 percent.
Lowering the price Inflation had a direct impact on the Investment Return and the Overall Payroll Growth
assumptions.The Investment Return assumption is calculated as the sum of the price inflation and the real rate
of return.Our assumed real rate of return is 4.75 percent.When added to our new price inflation of 2.75
percent,the resulting investment return Is 7.50 percent.The Overall Payroll Growth Is calculated as the sum of
the price inflation and real wage inflation.Our assumed real wage Inflation is 0.25 percent.When added to our
new price inflation of 2.75 percent,the resulting overall payroll growth is 3.00 percent.
The new assumptions are described in Appendix A.The effect of the change in assumptions on the unfunded
liability Is shown in the "(Gain)/Loss Analysis"and the effect on your employer contribution rate is included in the
"Reconciliation of Required Employer Contributions".
The limitations on benefits Imposed by Internal Revenue Code Section 415 were taken Into account in this
valuation.The effect of these limitations has been deemed immaterial on the overall results and no
additional charge to the change in assumptions base was added.
Actuarial Methods
A method change was adopted by the CalPERS Board in June 2009.We are In the third year of a 3-year
temporary change to the asset smoothing method and the amortization of gain and losses In order to phase in
the impact of the -24%investment loss experienced by the pension fund in fiscal year 2008-2009.The following
changes were adopted:
•Increase the corridor limits for the actuarial value of assets from 80%-120%of market value to
60%-140%of market value on June 30,2009
•Reduce the corridor limits for the actuarial value of assets to 70%-130%of market value on June
30,2010
•Return to the 80%-120%of market value corridor limits for the actuarial value of assets on June
30,2011 and thereafter
•Isolate and amortize all gains and losses during fiscal year 2008-2009,2009-2010 and 2010-2011
over fixed and declining 30 year periods (as opposed to the current rolling 30 year amortization)
A complete description of all methods Is In AppendiX A.The detailed calculation of the actuarial value of assets is
shown in the "Development of the Actuarial Value of Assets."
Benefits
The standard actuarial practice at CalPERS is to recognize mandated legislative benefit changes in the first
annual valuation whose valuation date follows the effective date of the legislation.Voluntary benefit changes by
employers within the risk pool are generally included in the first valuation that Is prepared after the amendment
becomes effective even If the valuation date is prior to the effective date of the amendment.
CalPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
7
3-35
Attachment B
HIGHLIGHTS AND EXECUTIVE SUMMARY
The valuation generally reflects plan changes by amendments effective prior to July 1,2012.Please refer to
Appendix B for a summary of the plan provisions used in this valuation report.The provisions in Appendix B do
not Indicate the class of benefits voluntarily contracted for by Individual employers within the risk pool.Refer to
Section 1 of the valuation report for a list of your specific contracted benefits.The increase in the pool's
unfunded liabilities due to Class 1 or 2 amendments by individual employers within the pool Is embedded in the
Liability (Gain)I Loss shown in the (Gain)I Loss section of this report.This amount,however,is offset by
additional contributions through a surcharge for employers who voluntarily contract for those benefits.
Subsequent Events
There were no significant subsequent events to report in this valuation.
GaIPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
8
3-36
Attachment B
SUMMARY OF LIABBLITIES AND RATES
DEVELOPMENT OF POOL'S ACCRUED AND UNFUNDED LIABILITIES
•(GAIN)/LOSS ANALYSIS 06/30/10·06/30/11
•SCHEDULE OF AMORTIZATION BASES FOR THE RISK POOL
•'DEVELOPMENT OF RISK POOL'S ANNUAL REQUIRED BASE CONTRIBUTION
•POOL'S EMPLOYER CONTRIBUTION RATE HISTORY
•FUNDING HISTORY
3-37
SUMMARY OF LIABILITY AND RATES
Attachment B
Development of Pool's Accrued and Unft.nided Liabilities
1-Present Value of Projected Benefits June 30,2010 June 30,2011
a)Active Members $1,339,987,980 $1,362,409,479
b)Transferred Members 177,631,215 178,048,445
c)Separated Members 51,059,941 58,120,625
d)Members and Beneficiaries Receiving Payments 864,471.903 996,185,]90
e)Total $2,433,151,039 $2,594,764,339
2.Present Value of Future Employer Normal Costs $242,963,283 $246,813,830
3.Present Value of Future Employee Contributions $217,277,115 $212,600,305
4.Entry Age Normal Accrued liability
.a)·Active Members [(la)-(2)-(3)]$879,747,582 $902,995,344
b)Transferred Members (lb)177,631,215 178,048,445
c)Separated Members (lc)51,059,941 58,120,625
d)Members and Beneficiaries Receiving Payments (ld)864.471,903 996,185,]90
e)Total $1,972,910,641 $2,135,350,204
5.Actuarial Value of Assets (AVA)Including ReceiVables $1,603,482,152 $1,724,200,585
6.Unfunded Accrued Liability (AVA Basis)[(4e)-(5)]369,428,489 411,149,619
7.Funded Ratio (AVA Basis)[(5)I (4e)]81.3%80.8%
8.Side Funds $(131,287,074)$(117,829,589)
9.Unfunded Liability excluding Side Funds [(4e)-(5)•(8)]238,141,415 293,320,030
10.Market Value of Assets (MVA)Including Receivables $1,261,453,576 $1,543,100,350
11,Funded Ratio (MVA Basis)[(10)I (4e)]63.9%72.3%
CaiPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
11
3-38
Attachment B
SUMMARY OF LIABILITY AND RATES
(Gain)/l.os5 Analysis 06/30/10 ..06/30/11
To calculate the cost requirements of your pool,we use assumptions about future events that affect the amount
and timing of benefits to be paid and assets to be accumulated.Each year actual experience Is contrasted against
the expected experience based on the actuarial assumptions.The differences are reflected below as your pool's
actuarial gains or losses.
1.Total (Gain)/Loss for the Year
a)Unfunded Liability/(Surplus)as of June 30,2010
b)Expected payment on the Unfunded Liability
c)Interest accumulation [.0775 X (la)-«1.0775)".5 -1)X (lb))
d)Expected Unfunded Liability before other changes [(la)-(lb)+(lc)]
e)Change due to assumption changes
f)Expected Unfunded Liability after changes[(ld)+(le)]
g)Actual Unfunded Llabillty/(Surplus)as of June 30,2011
h)Total (Gain)/Loss [(lg)-(1f)]
2.Contribution (Gain)/Loss for the Year
a)Expected contribution (Employer and Employee)
b)Interest on Expected Contributions
c)Total expected Contributions with interest [(2a)+(2b)]
d)Actual Contributions
e)Interest on Actual Contributions
f)Total Actual Contributions with Interest [(2d)+(2e)]
g)Contribution (Gain)/Loss [(2c)-(2f)]
3.Asset (Gain}/Loss for the Year
a)Actuarial Value of Assets as of 06/30/10 Including Receivables
b)Receivables as of 06/30/10
c)Actuarial Value of Assets as of 06/30/10
d)Contributions received
e)Benefits and Refunds Paid
f)Transfers and miscellaneous adjustments
g)Expected interest
h)Transfers Into the pool (AVA Basis)
i)Transfers out of the pool (AVA Basis)
j)Expected Assets as of 06/30/11 [Sum (3c)through (31)]
k)Receivables as of 06/30/11
I)Expected Assets Including Receivables
m)Actual Actuarial Value of Assets as of 06/30/11 Including Receivables
n)Asset (Gain)/Loss [(31)-(3m)]
4.Liability (Galn}/Loss for the Year
a)Total (Gain)/Loss (lh)
b)Contribution (Galn)/Loss (2g)
c)Asset (Galn)/Loss exclUding side fund (3n)
d)Liability (Galn)/Loss [(4a)-(4b)-(4c)]*
*Includes (Galn)/Loss on plans transferring into the pool.
CalPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
$238,141,415
(1,150,275)
18,499,701
257,791,391
38,358,413
296,149,804
293.320,030
$(2,829,774)
$86,749,627
3,298,826
90,048,453
89,177,415
3,391,147
92.568.562
$(2,520,109)
$1,603,482,152
3.856,869
1,599,625,283
89,177,415
(79,488,685)
(184,403)
124,332,380
23,971
Q
1,733,485,961
3.655,982
1,737,141,943
1,724.200,585
$12,941,358
$(2,829[774)
(2,520,109)
12,941.358
$(13,251,023)
12
3-39
SUMMARY OF LIABILITY AND RATES
Schedtde of Amortization Bases fer the Risk Pool
The schedule below shows the development of the payment on the Pool's amortization ba~used to determine the Total Required Employer Contributions to the
Pool.Each row of the schedule gives a brief description of a base (or portion of the Unfunded Actuarial Liability),the balance of the base on the valuation date,
and the number of years remaining in the amortization period.In addition,we show the expected payments for the two years immediately follOWing the valuation
date,the balances on the dates a year and two years after the valuation date,and the scheduled payment for fiscal year 2013-2014.Please refer to Appendix A
for an explanation of how amortization periods are determined.
Scheduled Payment as
Amortization Balance on Expected Balance Expected Balance Payment for a percentage
Reason for Base Period June 30,2011 Payment 11-12 June 30,2012 Payment 12-13 June 30,2013 2013-2014 of payroll
2004 FRESH START 23 $4,947,588 $327,062 $4,979,552 $337,692 $5,002,892 $346,856 0.091%
2005 (GAIN)/LOSS 30 $74,911,710 $4,498,520 $75,865,923 $4,566,743 $76,820,968 $4,613,140 1.206%
2005 PAYMENT (GAIN)/LOSS 30 $(767,928) $(236,215)$(580,609)$(1,441,013)$869,920 $52,240 0.015%
2009 ASSUMPTION OiANGE 18 $102,514,451 $7,743,035 $102,174,885 $7,994,684 $101,548,937 $8,209,700 2.146%
2009 SPECIAL (GAIN)/LOSS 28 $58,821,357 $3,532,280 $59,570,613 $3,647,079 $60,257,037 $3,746,795 0.979%
2010 SPECIAL (GAIN)/LOSS 29 $17,364,211 $0 $18,666,527 $1,123,550 $18,901,595 $1,154,397 0.302%
2011 ASSUMPTION OiANGE 20 $38,358,413 $(1,265,795)$42,547,698 $(1,303,769)$47,090,552 $1,185,197 0.310%
2011 SPECIAL (GAIN)/LOSS 30 $(2.829JZ2)iQ $(3.042,005)iQ $(3,270.155)$(196,375)(0,051%)
Total $293,~~O,O30 $14,598~7_~300,182,584 $14,924,966 $307,221,746 $19,111,950 4.995%
The special (gain)/Ioss bases are special bases established for the gain/loss that is recognized in the 2009, 2010,and 2011 annual valuations.Unlike the gain/loss
occurring in previous and subsequent years,the gain/loss recognized in the 2009, 2010,and 2011 annual valuations will be amortized over fIXed and declining 30 year
periods so that these annual gain/losses will be fully paid off in 30 years.
The discount rate assumption is 7.5%after June 30,2011 in the amortization schedule above.
Note:The assumption change at June 30,2011 was phased-in over a two-year period.Without the phase-in,the 2011 ASSUMPTION CHANGE amortization base
would have increased from 0.310%to 0.930%.
calPERS Actuarial Valuation -June 30,2011
Miscellaneous 2,5%at 55 Risk Pool
13
~
Q)
(')::r
3
CD
:::J-OJ
3-40
Attachment B
SUMMARY OF LIAaILlTV~NDrRATES
Development of Risk Pool's Annual Required Base
Contribution
Fiscal Year Fiscal Year
2012/2013 2013/2014
1.Contribution in Projected Dollars
a)Total Normal Cost $67,937,728 $67,890,150
b)Employee Contribution 30,822,916 30,178,501
c)Pool's Gross Employer Normal Cost [(la)-(1b)]37,114,812 37,711,649
d)Total Surcharges for Class 1 Benefits 3,035,326 2,942,098
e)Net Employer Normal Cost [(1c)•(ld)]34,079,487 34,769,551
f)'Payment on Pool's Amortization Bases $17,571.554 $19.111.950
g)Total Required Employer Contributions [(le)+(If)]51,651,041 53,881,501
2.Annual Covered Payroll as of Valuation Date $352,637,380 $350,121,750
3.Projected Payroll for Contribution Fiscal Year $388,149,050 $382,587,490
4.Contribution as a Ofo of Projected Pay
a)Total Normal Cost [(la)/(3)]17.503%17.745%
b)Employee Contribution [(lb)/(3)]7.941%7.888%
c).Pool's Gross Employer Normal Cost [(lc)/(3)]9.562%9,857%
d)Total Surcharges for Class 1 Benefits [(ld)/(3)]0.782%0,769%
e)Net Employer Normal Cost [(1e)/(3)]8.780%9.088%
f)Payment on Pool's Amortization Bases [(1f)/(3)]4.527%4.995%
g)Total Required Employer Contributions [(lg)/(3)]13,307%14.083%
CalPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
14
3-41
Attachment B
SUMMARY OF LlABILITYANDRATIES
Pool's Employer Contribution Rate History
Total Gross Payment on Total
Net Surcharges Employer Pool's Payment On Total
Valuation Employer for Class 1 Normal Amortization Employer Employer
Date Normal Cost Benef"1ts Cost Bases Side Funds Contribution
06/30/2007 8.403%0.775%9.178%0.762%3.817%13.757%
06/30/2008 8.478%0.756%9.234%1.202%3.690%14.126%
06/30/2009 8.715%0.774%9.489%4.034%3.660%17.183%
06/30/2010 8.780%0.782%9.562%4.527%3.469%17.558%
06/30/2Cl11 9.088%0.769%9.857%4.995%3.436%18.288%
Valuation
Date
06/30/2007
06/30/2008
06/30/2009
06/30/2010
06/30/2011
Accrued
Liabilities
(AL)
$1,315,454,361
$1,537,909,933
$1,834,424,640
$1,972,910,641
$2,135,350,204
Market Value
of Assets
(MVA)
$1,322,660,245
$1,353,157,484
$1,088,733,372
$1,261,453,576
$1,543,100,350
Funded
Ratio
(MVA/AL)
100.6%
88.0%
59.4%
63.9%
72.3%
Accrued Actuarial Unfunded Funded Annual
Valuation Liabilities Value of Liabilities Ratio Covered ULAs a Ofo
Date (AL)Assets (AVA)(UL)(AVA/AL)Payroll of Payroll
06/30/2007 $1,315,454,361 $1,149,247,298 $166,207,063 87.4%$289,090,187 57.5%
06/30/2008 $1,537,909,933 $1,337,707,835 $200,202,098 87.0%$333,307,600 60.1%
06/30/2009 $1,834,424,640 $1,493,430,831 $340,993,809 81.4%$355,150,151 96.0%
06/30/2010 $1,972,910,641 $1,603,482,152 $369,428,489 81.3%$352,637,380 104.8%
06/30/2011 $2,135,350,204 $1,724,200,585 $411,149,619 80.8%$3~0,121,750 117.4%
Information shown here Is for compliance with GASB No.27 for a cost-sharing multiple-employer defined benefit
plan.
calPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
15
3-42
•RECONCILIATION OF THE MARKET VALUE OF ASSETS
•DEVELOPMENT OF THE ACTUARIAL VALUE OF ASSETS
•ASSET ALLOCATION
•CALPERS HISTORY OF INVESTMENT RETURNS
Attachment B
3-43
Attachment B
SUMMARY OF ASSETS
ReconciUation of the Market Value of Assets
1.Market Value of Assets as of June 30,2010 Including Receivables
2.Receivables for Service Buybacks as of June 30,2010
3.Market Value of Assets as of June 30,2010 [1 -2]
4.Employer Contributions
5.Employee COntributions
6.Benefit Payments to Retirees and Beneficiaries
7.Refunds
8.Lump Sum Payments
9.Transfers and Miscellaneous Adjustments
10.Investment Return
11.Market Value of Assets as of June 30,2011 (w/o Pool Transfers)
i2..Transfers Into and out of the Risk Pool
13.Market Value of Assets as of June 30,2011
14.Receivables for service Buybacks as of June 30,2011
15.Market Value of Assets as of June 30,2011 Including Receivables [13 +14]
$1,261,453,576
3,856,869
1,257,596,707
56,427,821
32,749,594
(77,257,496)
(2,126,502)
(104,687)
(184,403)
272,321,886
$1,539,422,920
21,448
$1,539,444,368
3,655,982
1,543,100,350
Development of the Actuarial Value of Assets
1,603,482,152
3/85u/869
1,599,625,283
56/427,821
32,749,594
(77,257,496)
(2,126,502)
(104,687)
(184,403)
124,332,380
$1,733,461,990
1,539,422,920
1,720,526,052
111.8%
111.8%
1,539,444,368
1,720,544,603
3,655,982
1,724,200,585
1.Actuarial Value of Assets as of June 30,2010 Used for Rate Setting Purposes
2.Receivables for service Buyback as of June 30,2010
3.Actuarial Value of Assets as of June 30,2010 [1 -2]
4.Employer COntributions
5.Employee COntributions
6.Benefit Payments to Retirees and Beneficiaries
7.Refunds
8.Lump Sum Payments
9.Transfers and Miscellaneous Adjustments
10.Expected Investment Income at 7.75%
11.Expected Actuarial Value of Assets (w/o Pool Transfers)
12.Market Value of Assets June 30,2011 (w/o Pool Transfers)
13.Preliminary Actuarial Value of Assets (w/o Pool Transfers)[(11)+«12)-(11»/15]
14.Preliminary Actuarial Value to Market Value Ratio
15.Final Actuarial Value to Market Value Ratio (minimum 80%,maximum 120%)
16.Market Value of Assets June 30,2011
17.Actuarial Value of Assets as of June 30,2011
18.Receivables for Service Buybacks as of June 30,2011
19.Actuarial Value of Assets as of June 30,2011 Used for Rate Setting Purposes [17 +18]
calPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
19
3-44
Attachment B
SUMMARY OF ASSETS
CalPERS follows a strategIc asset allocation policy that Identifies the percentage of funds to be invested in
each asset class.
The asset allocation and market value of assets shown below reflect the values of the Public Employees
Retirement Fund (PERF)as Invested as of June 30,2011.The assets for Miscellaneous 2.5%at 55 Risk
Pool are part of the Public Employees Retirement Fund (PERn and are Invested accordingly.
(B)(C)
(A)Market Value Current
Asset Class ($Billion)Allocation
1)Short-Term Investments 7.9 3.3%
2)Domestic Equity 56.3 23.5%
3)International Equity 60.4 25.2%
4)Domestic Debt 49,2 20,6%
5)International Debt 3.9 1.6%
6)Inflation Linked 8.1 3.4%
7)Real Estate 19.1 8.0%
8)Alternative Investment 34.4 14.4%
Total Fund $239.3 100.0%
14.4%
Altematlve
Investment
8.0%Real
Estate
3.4%
Inflation
Linked
1.6%
International
Debt
20.6%
Domestic
Debt
CalPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
3.3%Short-term
Investments
25.2%
International
Equity
20
3-45
Attachment B
SUMMARY OF ASSETS
CalPERS History of Investment Returns
The following Is a chart with historical annual returns of the Public Employees Retirement Fund for each
fiscal year ending on June 30.Beginning with June 3D,2002 the figures are reported as gross of fees.
;::
10 11
25.0%
20.0%
15.0%
10.0%
5:0%
0.0%
-5.0%
-10.0%
-15.0%
-20.0%
N
I-~-r------
~~~-~~~~
2 93 94 95 96 97 98 99 00 (
I-__--111-----
-
-25.0%JC==========================================~====:7
CalPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
21
3-46
SUMMARY Of PARTICIPANT DATA
•SOURCE OF THE PARTICIPANT DATA
•DATA VALIDATION TESTS AND AO"USTMENTS
•SUMMARY OF VALUATION DATA
•ACTIVE MEMBERS
•TRANSFERRED AND TERMINATED MEMBERS
•RETIRED MEMBERS AND BENEFICIARIES
Attachment B
3-47
Attachment B
SUMMARY OF PARTICIPANT DATA
Source of the Participant Data
The data was extracted from various databases within calPERS and placed in a database by a series of
extract programs.Included in this data are:
•individual member and beneficiary information,
•employment and payroll Information,
•accumulated contributions with interest,
•service information,
•benefit payment information,
•information about the various organizations which contract with caIPERS,and
•detailed Information about the plan provisions applicable to each group of members.
Data Validation Tests and Adjustments
Once the Information is extracted from the various computer systems Into the database,update queries are
then run against this data to correct for flaws found in the data.This part of the process Is intended to
validate the participant data for all calPERS plans.The data is then checked for reasonableness and
consistency with data from the prior valuation.
Checks on the data Include:
• a reconciliation of the membership of the plans,
•comparisons of various member statistics (average attained age,average entry age,average
salary,etc.)for each plan with those from the plior valuation,
•comparisons of pension amounts for each retiree and beneficiary receiving payments with those
from the prior valuation,
•checks for invalid ages and dates,and
•reasonableness checks on various key data elements such as service and salary.
As a result of the tests on the data,a number of adjustments were determined to be necessary.These
included:
•dates of hire and dates of entry were adjusted where necessary to be consistent with the service
fields,the date of birth and each other.
CalPERS Actuarial Valuation -June 3D,2011
Miscellaneous 2.5%at 55 Risk Pool
23
3-48
Attachment B
SUMMARY OF PARTICIPANT DATA
Summary of Valuation Data
June 30,2010 June 30,2011
1.Number of Plans in the Risk Pool 164 165
2.Active Members
a)Counts 5,441 5,276
b)Average Attained Age 45.76 45.96
c)Average Entry Age on Rate Plan 36.58 36.44
d)Average Years of Service 9.18 9.52
e)Average Annual Covered Pay $64,811 $66,361
.f)Annual Covered Payroll $352,637,380 $350,121,750
g)'Projected Annual Payroll for Contribution Year $388,149,050 $382,587,490
h)Present Value of Future Payroll $2,731,254,788 $2,690,905,777
3.Transferred Members
a)Counts 2,555 2,501
.",b)'Average Attained Age 47.40 47.62
c)Average Years of Service 3.89 3.85
d)Average Annual Covered Pay $85,281 $85,483
4.Terminated Members
a)counts 2,483 2,555
b)Average Attained Age 45.78 46.04
c)Average Years of Service 3.05 3.08
d)Average Annual Covered Pay $40,968 $42,249
5.Retired Members and Beneficiaries
a)Counts*4,657 4,963
b)Average Attained Age 67.99 68.03
c)Average Annual Benefits*$15,542 $16,531
6.Active to Retired Ratio [(2a)I (Sa)]1.17 1.06
Counts of members included In the valuation are counts of the records processed by the valuation.Multiple
records may exist for those who have service in more than one valuation group.This does not result in double
counting of liabilities.
*Values may not match those on pages 27 and 28 due to indusion of community property settlements.
CalPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
24
3-49
SUMMARY OF·PARTICIPANT DATA
Active Members
Attachment B
Counts of members included in the valuation are counts of the records processed by the valuation.MUltiple
records may exist for those who have service in more than one valuation group.This does not result in double
counting of liabilities.
Distribution of Active Members by Age and Service
Years of Service at Valuation Date
Attained
Age 0-4 5-9 10-14 15-19 20-24 25+Total
15-24 134 4 0 0 0 0 138
25-29 302 88 7 0 0 0 397
30-34 269 199 43 4 0 0 515
35-3l9 246 200 106 24 3 0 579
40-44 227 188 141 68 29 4 657
45-49 260 218 139 86 93 46 842
50-54 253 199 185 95 113 105 950
55-59 169 167 119 80 73 101 709
60-64 86 96 65 41 35 43 366
65 and over 35 30 29 13 7 9 123
All Ages 1981 1389 834 411 353 308 5,276
Distribution of Average Annual Salaries by Age and Service
Years of Service at Valuation Date
Attained
Age 0-4 5-9 10-14 15-19 20-24 25+Average
15-24 $30,780 $41,684 $0 $0 $0 $0 $31,096
25-29 45,262 56,043 55,490 0 0 0 47,832
30-34 51,730 60,867 62,724 53,793 0 0 56,194
35-39 58,303 64,993 67,661 78,152 60,418 0 63,161
40-44 63,552 71,953 68,958 77,103 69,650 75,520 68,861
45-49 63,746 71,285 73,487 75,708 78,947 83,755 71,300
50-54 69,984 69,471 73,878 84,988 84,760 78,005 74,779
55-59 68,017 74,106 68,972 79,110 84,558 80,024 74,277
60-64 72,487 66,633 67,589 70,773 72,254 713,402 70,562
65 and over 31,551 53,376 71,984 44,553 60,895 80,913 53,063
Average 57,340 67,297 70,205 77,198 80,025 79,634 66,361
calPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
25
3-50
SUMMARY OF PARTICIPANT DATA
Attachment B
Transferred and Terminated Members
Distribution of Transfers to Other CalPERS Plans by Age and Service
Years of Service at Valuation Date
Attained Average
Age 0-4 5-9 10-14 15-19 20-25 25+Total Salary
15-24 15 0 0 0 0 0 15 $44,556
25-29 99 5 0 0 0 0 104 62,692
30-34 178 22 0 0 0 0
200 65,479
35-39 199 34 10 0 0 0 243 73,201
40-44 247 74 14 6 1 0 342 86,425
45-49 332 106 28 12 1 1 480 88,717
50-54 334 115 39 17 3 0 508 94,430
55-59 272 78 36 6 4 0 396 89,565
60-64 114 39 16 6 1 0 176 95,497
65 and over 28 4 4 1 0 0 37 90,121
All Ages 1818 477 147 48 10 1 2,501 85,483
Distribution of Terminated Participants with Funds on Deposit by Age and Service
Years of Service at Valuation Date
Attained Average
Age 0-4 5-9 10-14 15-19 20-25 25+Total Salary
15-24 40 0 0 0 0 0 40 $27,299
25-29 165 6 0 0 0 0 171 33,800
30-34 250 20 1 0 0 0 271 38,704
35-39 262 38 4 0 0 0 304 40,267
40-44 259 77 16 3 0 0 355 46,655
45-49 342 70 23 9 3 3 450 48,849
50-54 276 91 28 14 4 1 414 43,674
55-59 206 63 13 3 0 1 286 42,387
60-64 142 31 14 3 1 0 191 37,368
65 and over 57 13 3 0 0 0 73 33,678
All Ages 1999 409 102 32 8 5 2,555 42,249
calPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
26
3-51
SUMMARY OF PARTICIPANT DATA
Attachment B
Retired Members and Beneficiaries
Distribution of Retirees and Beneficiaries by Age and Retirement Type*
Non-Non-Death
Attained Service Industrial Industrial Industrial Industrial After
Age Retirement Disability Disability Death Death Retirement Total
Under 30 0 0 0 0 0 1 1
30-34 0 1 0 0 0 1 2
35-39 0 3 4 0 0 1 8
40-44 0 3 8 0 0 4 15
45-49 0 10 11 1 0 8 30
50-94 .150 37 14 2 2 15 220
55-59 669 44 15 1 0 21 750
60-64 1044 55 18 3 0 35 1,155
65-69 882 42 13 7 1 60 1,005
70-74 524 31 2 4 0 75 636
75-79 342 18 2 3 0 93 458
80-84 249 7 0 1 0 88 345
85 and Over 207 5 0 5 0 116 333
All Ages 4067 256 87 27 3 518 4,958
Distribution of Average Annual Amounts for Retirees and Beneficiaries by Age and Retirement
Type*
Non-Non-
Attained service Industrial Industrial Industrial Industrial Death After
Age Retirement Disability Disability Death Death Retirement Average
Under 30 $0 $0 $0 $0 $0 $6,804 $6,804
30-34 0 11,932 0 0 0 883 6,408
35-39 0 13,028 164 0 0 19,578 7,415
40-44 0 8,628 2,818 0 0 3,919 4,273
45-49 0 9,633 2,337 24,610 0 13,139 8,392
50-54 17,476 10,171 3,199 14,695 498 12,787 14,840
55-59 23,068 14,056 3,641 7,959 0 14,472 21,890
60-64 19,930 12,489 3,828 8,362 0 12,512 19,070
65-69 17,692 10,787 5,264 13,618 45 11,119 16,804
70-74 15,730 9,174 3,603 10,956 0 11,357 14,827
75-79 13,929 5,834 1,055 4,491 0 12,024 13,106
80-84 12,709 10,292 0 1,768 0 10,102 11,963
85 and Over 11,137 6,826 0 5,857 0 9,434 10,400
All Ages 17,935 10,951 3,390 10,027 347 11,008 16,542
CalPERS Actuarial Valuation -June 30,2011 27
Miscellaneous 2.5%at 55 Risk Pool
3-52
Attachment B
SUMMARY OF PARTICIPANT DATA
Retired Members and Beneficiaries (continued)
Distribution of Retirees and Beneficiaries by Years Retired and Retirement Type*
Non-Non-Death
Years Service Industrial Industrial Industrial Industrial After
Retired Retirement Disability Disability Death Death Retirement Total
Under 5 Yrs 1670 34 26 8 °204 1,942
5·9 1049 47 20 3 °121 1,240
10-14 589 70 24 4 °82 769
15-19 370 51 7 8 2 49 487
20-24 220 31 5 1 °18 275
25-29 122 14 4 1 °20 161
30 and Over 47 9 1 2 1 24 84
All Years 4067 256 87 27 3 518 4,958
Distribution of Average Annual Amounts for Retirees and Beneficiaries by Years Retired and
Retirement Type*
Years
Retired
Under 5 Yrs
5-9
10-14
15-19
20-24
25-29
30 and Over
All Years
Service
Retirement
$23,124
17,231
13,519
11,573
11,885
9,552
4,789
17,935
'l\Ion-
Industrial
Disability
$10,073
17,433
10,256
9,733
8,910
7,308
5,436
10,951
Industrial
Disability
$1,014
4,798
5,152
3,249
4,895
429
40
3,390
Non-.
Industrial
Death
$14,068
10,880
12,605
5,808
2,836
10,380
7,718
10,027
Industrial
Death
$0
o
°498
o
o
45
347
Death
·After
Retirement
$13,687
10,560
8,557
8,928
11,067
6,855
6,531
11,008
Average
$21,571
16,372
12,427
10,854
11,336
8,801
5,313
16,542
*Counts of members do not Include alternate payees receiving benefits while the member is still working.
Therefore,the total counts may not match information on page 24 of the report.Multiple records may exist for
those who have service in more than one coverage group.This does not result in double counting of liabilities.
CalPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
28
3-53
APPENDIX A
ACTUARIAL METHODS AND ASSUMPTiONS
•ACTUARIAL DATA
•ACTUARIAL METHODS
•ACTUARIAL ASSUMPTIONS
•MISCELLANEOUS
Attachment B
3-54
Attachment B
APPEND.IXA
As stated in the Actuarial Certification,the data which serves as the basis of this valuation has been obtained from
the various calPERS databases.We have reviewed the valuation data and believe that it is reasonable and
appropriate In aggregate.We are unaware of any potential data issues that would have a material effect on the
results of this valuation,except that data does not always contain the latest salary information for former members
now in reciprocal systems and does not recognize the potential for usually large salary deviation in certain cases such
as elected officials.Therefore,salary information in these cases may not be accurate.These situations are relatively
infrequent,however,and when they do occur,they generally do not have a material impact on the employer
contribution rates.
Fundi~g Method
The actuarial funding method used for the Retirement Program Is the Entry Age Normal Cost Method.Under this
method,projected benefits are determined for all members and the associated liabilities are spread in a manner that
produces level annual cost as a percent of pay In each year from the age of hire (entry age)to the assumed
retirement age.The cost allocated to the current fiscal year is called the normal cost.
The actuarial accrued liability for active members is then calculated as the portion of the total cost of the pool
allocated to prior years.The actuarial accrued liability for members currently receiving benefits,for active members
beyond the assumed retirement age,and for members entitled to deferred benefits,Is equal to the present value of
the benefits expected to be paid.No normal costs are applicable for these participants.
The excess of the total actuarial accrued liability over the actuarial value of plan assets is called the unfunded
actuarial accrued liability.Funding requirements are determined by adding the normal cost and an amortization of
the unfunded liability as a level percentage of assumed future payrolls.All changes in liability due to changes in
actuarial assumptions,or changes In actuarial methodology are amortized separately over a 20-year period.All gains
or losses are tracked and amortized over a rolling 30-year period with the exception of gains and losses in fiscal
years 2008-2009,2009-2010 and 2010-2011 in which each year's gains or losses will be isolated and amortized over
flxed and declining 30 year periods (as opposed to the current rolling 30-year amortization).If a pool's accrued
liability exceeds the actuarial value of assets,the annual contribution with respect to the total unfunded liability may
not be less than the amount produced by a 30-year amortization of the unfunded liability.
Additional contributions will be required for any plan or pool If their cash flows hamper adequate funding progress by
preventing the expected funded status on a market value of assets basis of the plan to either:
•Increase by at least 15%by June 30,2043;or
•Reach a level of 75%funded by June 30/2043
The necessary additional contribution wllJ be obtained by changing the amortization period of the gains and losses
prior to 2009 to a period which will result in the satisfaction of the above criteria.calPERS actuaries will reassess the
criteria above when performing each future valuation to determine whether or not additional contributions are
necessary.
An exception to the funding rules above is used whenever the application of such rules results in inconsistencies.In
these cases a "fresh start"approach is used.This simply means that the current unfunded actuarial liability is
projected and amortized over a set number of years.As mentioned above,if the annual contribution on the total
unfunded liability was less than the amount produced by a 30-year amortization of the unfunded liability,the plan
actuary would implement a 30-year fresh start.However,in the case of a 30-year fresh start/just the unfunded
liability not already in the (galn)/Ioss base (which already is amortized over 30 years)will go Into the new fresh start
base.In addition,a fresh start is needed in the following situations:
calPERS Actuarial Valuation -June 30/2011
Miscellaneous 2.5%at 55 Risk Pool
A-l
3-55
Attachment B
APPENDIX A
1)when a positive payment would be required on a negative unfunded actuarial liability (or conversely a
negative payment on a positive unfunded actuarial liability);or
2)when there are excess assets,.rather than an unfunded liability.In this situation a 30-year fresh start is
used,unless a larger fresh start is needed to avoid a negative total rate.
It should be noted that the actuary may choose to use a fresh start under other drcumstances.In all cases,the
period of the fresh start is chosen by the actuary according to his or her best judgment,and will not be less than five
years nor greater than 30 years.
Asset Valuation Method
In order to dampen the effect of short term market value fluctuations on employer contribution rates,the following
asset smoQthing technique is used.First an Expected Value of Assets is computed by bringIng forward the prior
year's Actuarial Value of ASsets and the contributions received and benefits paid during the year at the assumed
actuarial rate of return.The Actuariai Value of Assets is then computed as the Expected Value of Assets plus one-
fifteenth of the difference between the actual Market Vaiue of Assets and the Expected Value of Assets as of the
valuation date.However in no case will the Actuarial Value of Assets be less than 80%nor greater than 120%of the
actual Market Value of Assets.
In June 2009,the calPERS Board adopted changes to the asset smoothing method In order to phase in over a three
year period the impact of the -24%investment loss experienced by calPERS in fiscal year 2008-2009.The following
changes were adopted:
•Increase the corridor limits for the actuarial value of assets from 80%-120%of market value to 60%-140%
of market value on June 30,2009
•Reduce the corridor limits for the actuarial value of assets to 70%-130%of market value on June 30,2010
•Return to the 80%-120%of market value corridor limits for the actuarial value of assets on June 30,2011
and thereafter
CalPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
A-2
3-56
Attachment B
APPENDIX A
EconomjcAssumptjons
Discount Rate
7.5%compounded annually (net of expenses).This assumption is used for ail plans.
Termination Liability Discount Rate
The discount rate Is set by taking into account the yields available in the US Treasury market on the
valuation date according to treasury rates along the yield curve that match the cash flows of the plans'
expected benefit payout stream In future years.For purposes of this report,the termination liability
discount rate used is the 30-year US Treasury Stripped Rate as of the valuation date.Please note,as of
June 30,2012 the 30-year US Treasury Stripped Rate was 2.87%,
Salary Growth
.Annual increases vary by category,entry age,and duration of service.Sample which is assumed increases
are shown below.
Public Agency Miscellaneous
Duration of service (Entry Age 20)(Entry Age 30)
o 0.1420 0.1240
1 0.1190 0.1050
2 0.1010 0.0910
3 0.0880 0.0800
4 0.0780 0.0710
5 0.0700 0.0650
10 0.0480 0.0460
15 0.0430 0.0410
20 0.0390 0.0370
25 0.0360 0.0360
30 0.0360 0.0360
(Entry Age 40)
0.0980
0.0850
0.0750
0.0670
0.0610
0.0560
0,0410
0.0360
0.0330
0.0330
0.0330
Duration of Service
o
1
2
3
4
5
10
15
20
25
30
CaIPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
Public Agency Fire
(Entry Age 20)(Entry Age 30)
0.1050 0.1050
0.0950 0.0940
0.0870 0.0830
0.0800 0.0750
0.0740 0.0680
0.0690 0.0620
0.0510 0.0460
0.0410 0.0390
0.0370 0.0360
0.0350 0.0350
0.0350 0.0350
(Entry Age 40)
0.1020
0.0850
0.0700
0.0600
0.0510
0.0450
0.0350
0.0340
0.0330
0.0330
0.0330
A-3
3-57
Attachment B
APPEtlQIXA
Public Agency Police
Duration of Service (Entry Age 20)(Entry Age 30)(Entry Age 40)
0 0,1090 0.1090 0.1090
1 0.0930 0.0930 0.0930
2 0.0810 0,0810 0.0780
3 0.0720 0.0700 0.0640
4 0.0650 0.0610 0.0550
5 0.0590 0.0550 0.0480
10 0.0450 0.0420 0.0340
15 0.0410 0.0390 0.0330
20 0.0370 0.0360 0.0330
25 0.0350 0,0340 0.0330
30 0.0350 0,0340 0.0330
Public Agency County Peace Officers
Duration of service (Entry Age 20)(Entry Age 30)(Entry Age 40)
0 0.1290 0.1290 0.1290
1 0.1090 0,1060 0.1030
2 0.0940 0.0890 0.0840
3 0.0820 0.0770 0.0710
4 0.0730 0.0670 0.0610
5 0,0660 0.0600 0.0530
10 0,0460 0.0420 0.0380
15 0,0410 0.0380 0.0360
20 0.0370 0.0360
0.0340
25 0,0350 0.0340 0.0330
30 0,0350 0,0340 0.0330
SChools
Duration of Service (Entry Age 20)(Entry Age 30)(Entry Age 40)
0 0,1080 0,0960 0.0820
1 0.0940 0,0850 0.0740
2 0.0840 0,0770 0.0670
3 0.0750 0,0700 0.0620
4 0.0690 0.0640 0.0570
5 0.0630 0.0600 0.0530
10 0.0450 0.0440 0.0410
15 0.0390 0,0380 0.Q350
20 0.0360 0.0350 0.03io
25 0.0340 0.0340 0,0320
30 0.0340 0.0340 0.0320
•The Miscellaneous salary scale Is used for Local Prosecutors.
•The Pollee salary scale Is used for Other Safety,Local Sheriff,and School Pollee.
Overall Payroll Growth
3.00%compounded annually (used in projecting the payroll over which the unfunded liability is amortized),
This assumption Is used for all plans.
Inflation
2,75%compounded annually,This assumption is used for all plans.
CalPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
A-4
3-58
Attachment B
APPENDIX A
Non-valued Potential Additional Uabilities
The potential liability loss for a cost-of-livlng increase exceeding the 2.75%Inflation assumption,and any
potential liability loss from future member service purchases are not reflected in the valuation.
t:tfscellaneous LOadina Factors
Credit for Unused Sick Leave
Final Average Salary Is Increased by 1%for those agencies that have accepted the provision providing
Credit for Unused Sick Leave.
Conversion of Employer Paid Member Contributions (EPMC)
Final Average salary Is Increased by the Employee Contribution Rate for those agencies that have
contracted for the provision providing for the Conversion of Employer Paid Member Contributions (EPMC)
dl,Jrlng the final compensation period.
Norris Decision (Best Factors)
.Employees hired prior to July 1,1982 have projected benefit amounts Increased in order to reflect the use of
"Best Factors"for these employees in the calculation of optional benefit forms.This is due to a 1983
Supreme Court decision,known as the Norris decision,which reqUired males and females to be treated
equally In the determination of benefit amounts.Consequently,anyone already employed at that time is
given the best possible conversion factor when optional benefits are determined.No loading is necessary for
employees hired after July 1,1982.
Termination Liability
The termination liabilities include a 7%contingency load.This load Is for unforeseen Improvements in
mortality.
DemograohicAssumotions
Pre-Retirement Mortality
Non-Industrial Death Rates vary by age and gender.Industrial Death rates vary by age.See sample rates
In table below.The non-industrial death rates are used for all plans.The industrial death rates are used for
Safety Plans (except for Local Prosecutor safety members where the corresponding Miscellaneous Plan does
not have the Industrial Death Benefit).
Age
20
25
30
35
40
45
50
55
60
65
70
75
80
Non-Industrial Death
(Not Job-Related)
Male Female
0.00047 0.00016
0.00050 0.00026
0.00053 0.00036
0.00067 0.00046
0.00087 0.00065
0.00120 0.00093
0.00176 0.00126
0.00260 0.00176
0.00395 0.00266
0.00608 0.00419
0.00914 0.00649
0.01220 0.00878
0.01527 0.01108
Industrial Death
(Job-Related)
Male and Female
0.00003
0.00007
0.00010
0.00012
0.00013
0.00014
0.00015
0.00016
0.00017
0.00018
0.00019
0.00020
0.00021
Miscellaneous Plans usually have Industrial Death rates set to zero unless the agency has specifically
contracted for Industrial Death benefits.If so,each Non-Industrial Death rate shown above will be split Into
two components:99%will become the Non-Industrial Death rate and 1%will become the Industrial Death
rate.
CalPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
A-5
3-59
Attachment B
APPENDIX A
Post-Retirement Mortality
Rates vary by age,type of retirement and gender.See sample rates in table below.These rates are used
for all plans.
..
Healthy Recipients
Age Male Female
"50 0.00239 0.00125
55 0.00474 0.00243
60 0.00720 0.00431
65 0.01069 0.00775
70 0.01675 0.01244
75 0.03080 0.02071
80 0.05270 0.03749
85 0.09775 0.07005
90 0.16747 0.12404
95 0.25659 0.21556
100 0.34551 0.31876
105 0.58527 0.56093
110 1.00000 1.00000
Non-Industrially Disabled
(Not Job-Related)
Male Female
0.01632 0.01245
0.01936 0.01580
0.02293 0.01628
0.03174 0.01969
0.03870 0.03019
0.06001 0.03915
0.08388 0.05555
0.14035 0.09577
0.21554 0.14949
0.31025 0.23055
0.45905 0.37662
0.67923 0.61523
1.00000 1.00000
Industrlallv Disabled
(Job-Related)
Male Female
0.00443 0.00356
0.00563 0.00546
0.00777 0.00798
0.01388 0.01184
0.02236 0.01716
0.03585 0.02665
0.06926 0.04528
0.11799 0.08017
0.16575 0.13775
0.26108 0.23331
0.40918 0.35165
0.64127 0.60135
1.00000 1.00000
The mortality assumptions are based on mortality rates resulting from the most recent calPERS Experience
Study adopted by the CalPERS Board,first used in the June 30,2009 valuation.For purposes of the post-
retirement mortality rates,those revised rates include 5 years of projected on-going mortality Improvement
using Scale AA published by the Society of Actuaries until June 30,2010.There is no margin for future mortality
improvement beyond the valuation date.The mortality assumption will be reviewed with the next experience
study expected to be completed for the June 30,2013 valuation to determine an appropriate margin to be used.
Marital Status
For active members,a percentage married upon retirement is assumed according to the follOWing table.
Member Category
Miscellaneous Member
Local Police
Local Fire
Other Local Safety
School Pollee
Percent Married
85%
90%
90%
90%
90%
Age of Spouse
It Is assumed that female spouses are 3 years younger than male spouses.This assumption is used for all
plans.
Terminated Members
It is assumed that terminated members refund immediately if.non-vested.Terminated members who are
vested are assumed to follow the same service retirement pattern as active members but with a load to
reflect the expected higher rates of retirement,especially at lower ages.The following table shows the load
factors that are applied to the service retirement assumption for active members to obtain the service
retirement pattern for separated vested members:
Age
SO
51
52 through 56
57 through 60
61 through 64
65 and above
calPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
Load Factor
450%
250%
200%
150%
125%
100%(no change)
A-6
3-60
Attachment B
Termination with Refund
Rates vary by entry age and servIce for Miscellaneous Plans.Rates vary by service for Safety Plans.See
sample rates in tables below.
Public Agency Miscellaneous
Duration of
Service
o
1
2
3
4
5
10
15
20
25
30
35
Entry Age 20
0.1742
0.1545
0.1348
0.1151
0.0954
0.0212
0.0138
0.0060
0.0037
0.0017
0.0005
0.0001
Entry Age 25
0.1674
0.1477
0.1280
0.1083
0.0886
0.0193
0.0121
0.0051
0.0029
0.0011
·0.0001
0.0001
Entry Age 30
0.1606
0.1409
0.1212
0.1015
0.0818
0.0174
0.0104
0.0042
0.0021
0.0005
0.0001
0.0001
Entry Age 35
0.1537
0.1339
0.1142
0.0945
0.0748
0.0155
0.0088
0.0032
0.0013
0.0001
0.0001
0.0001
Entry Age 40
0.1468
0.1271
0.1074
0.0877
0.0680
0.0136
0.0071
0.0023
0.0005
0.0001
0.0001
0.0001
Entry Age 45
0.1400
0.1203
0.1006
0.0809
0.0612
0.0116
0.0055
0.0014
0.0001
0.0001
0.0001
0.0001
Public Agency Safety
Duration of Service
o
1
2
3
4
5
10
15
20
25
30
35
Fire Police
0.0710 0.1013
0.0554 0.0636
0.0398 0.0271
0.0242 0.0258
0.0218 0.0245
0.0029 .0.0086 .
0.0009 0.0053
0.0006 .0.0027
0.0005 0.0017
0.0003 0.0012
0.0003 0.0009
0.0003 0.0009
County Peace Officer
0.0997
0.0782
0.0566
0.0437
0.0414
0.0145
0.0089
0.0045
0.0020
0.0009
0.0006
0.0006
The Police Termination and Refund rates are used for Public Agency Local Prosecutors,Other safety,Local Sheriff,
and School Police.
Schools
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45
0 0.1730 0.1627 0.1525 0.1422 0.1319 0.1217
1 0.1585 0.1482 0.1379 0.1277 0.1174 0.1071
2 0.1440 0.1336 0.1234 0.1131 0.1028 0.0926
3 0.1295 0.1192 0.1089 0.0987 0.0884 0.0781
4 0.1149 0.1046 0.0944 0.0841 0.0738 0.0636
5 0.0278 0.0249 0.0221 0.0192 0.0164 0.0135
10 0.0172 0.0147 0.0122 0.0098 0.0074 0.0049
15 0.0115 0.0094 0.0074 0.0053 0.0032 0.0011 .
20 0.0073 0.0055 0.0038 0.0020 0.0002 0.0002
25 0.0037 0.0023 0.0010 0.0002 0.0002 0.0002
30 0.0015 0.0003 0.0002 0.0002 0.0002 0.0002
35 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002
CalPERS Actuarial Valuation -June 30,2011 A-7
Miscellaneous 2.5%at 55 Risk Pool
3-61
Attachment B
APPENDIK.A
Termination with Vested Benefits
Rates vary by entry age and service for Miscellaneous Plans.Rates vary by service for Safety Plans.See
sample rates in tables below.
Public Agency Miscellaneous
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40
5 0.0656 0.0597 0.0537 0.0477 0.0418
10 0.0530 0.0466 0.0403 0.0339 0.0000
15 0.0443 0.0373 0.0305 0.0000 0.0000
20 0.0333 0.0261 0.0000 0.0000 0.0000
25 0.0212 0.0000 0.0000 0.0000 0.0000.
30 0.0000 0.0000 0.0000 0.0000
0.0000
35 0.0000 0.0000 0.0000 0.0000 0.0000
Public Agency Safety
Duration of
I County Peace
Service Fire Pollee Officer
5 0.0162 0.0163 0.0265
10 0.0061 0.0126 0.0204
15 0.0058 0.0082 0.0130
20 0.0053 0.0065 0.0074
25 0.0047 0.0058 0.0043
30 0.0045 0.0056 0.0030
35 0.0000 0.0000 0.0000
•When a member Is eligible to retire,the termination with vested benefits probability Is set to zero.
•After termination·with vested benefits,a.miscellaneous member is assumed to retire at age 59 and a
safety member at age 54.
•The Pollee Termination with vested benefits rates are used for Public Agency Local Prosecutors,other
Safety,local Sheriff,and SChool Pollee.
SChools
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40
5 0.0816 0.0733 0.0649 0.0566 0.0482
10 0.0629 0.0540 0.0450 0.0359 0.0000
15 0.0537 0.0440 0.0344 0.0000 0.0000
20 0.0420 0.0317 0.0000 0.0000 0.0000
25 0.0291 0.0000 0.0000 0.0000 0.0000
30 0.0000 0.0000 0.0000 0.0000 0.0000
35 0.0000 0.0000 0.0000 0.0000 0.0000
CalPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
A-B
3-62
Attachment B
APPENDIX A
Non-Industrial (Not Job-Related)Disability
Rates vary by age and gender for Miscellaneous Plans.
Rates vary by age for Safety Plans
SChoolsMiscellaneous
Age Male Female
20 0.0001 0.0001
25 0.0001 0.0001
30 0.0002 0,0002
35 0.0006 0,0009
40 0.0015 0,0016
45 0.0025 0,0024
50 0.0033 0,0031
5S ,0.0037 0.0031
60 0.0038 0.0025
Fire
Male and Female
0.0001
0.0001
0.0001
0.0001
0.0001
0.0002
0,0005
0,0010
0.0015
Police
Male and Female
0.0001
0.0001
0.0002
0.0003
0.0004
0.0005
0.0008
0.0013
0.0020
County Peace Officer
Male and Female
0.0001
0.0001
0.0001
0,0004
0.0007
0,0013
0.0018
0.0010
0.0006
Male
0.0001
0.0001
0.0002
0,0006
0,0014
0,0028
0,0044
0.0049
0.0043
Female
0.0001
0.0001
0.0001
0.0004
0.0009
0.0017
0.0030
0.0034
0.0024
•The Miscellaneous Non-Industrial Disability rates are used for Local Prosecutors.
•The Police Non-Industrial Disabllity rates are used for Other safety,Local Sheriff,and School Police.
Industrial (Job-Related)Disability
Rates vary by age and category.
Age
20
25
30
35
40
45
50
55
60
Fire
0,0002
0.0012
0.0025
0.0037
0.0049
0.0061
0.0074
0.0721
0.0721
Police
0.0007
0.0032
0.0064
0,0097
0.0129
0,0161
0,0192
0.0668
0.0668
County Peace Officer
0.0003
0,0015
0.0031
0.0046
0.0063
0.0078
0.0101
0.0173
0.0173
•The Police Industrial Disability rates are used for Local Sheriff and Other Safety.
Fifty Percent of the Police Industrial Disability rates are used for School Police.
•One Percent of the Pollee Industrial Disability rates are used for Local Prosecutors.
•Normally,rates are zero for Miscellaneous Plans unless the agency has specifically contracted for
Industrial Disability benefits.If so,each Miscellaneous Non-Industrial Disability rate will be split into two
components:50%will become the Non-Industrial Disability rate and 50%will become the Industrial
Disability rate.
Service Retirement
Retirement rate vary by age,service,and formula,except for the safety liz @ 55 and 2%@ 55 formUlas,where
retirement rates vary by age only,
CaIPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
A-9
3-63
Attachment B
APPENDIX A
Public Agency Miscellaneous 1.5%@ 65
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.008 0.011 0.013 0.015 0.017 0.019
51 0.007 0.010 0.012 0.013 0,015 0.017
52 0.010 0.014 0.017 0.019 0.021 0.024
53 0.008 0.012 0.015 0.017 0.019 0.022
54 0.012 0.016 0.019 0.022 0.025 0.028
55 0.018 0.025 0.031 0.035 0.038 0.043
56 0.015 0.021 0.025 0.029 0.032 0.036
57 0.020 0.028 0.033 0.038 0.043 0.048
58 0.024 0.033 0.040 0.046 0.052 0.058
59 0.028 0.039 0.048 0.054 0.060 0.067
60 0.049 0.069 0.083 0.094 0.105 0.118
61 0.062 0.087 0.106 0.120 0.133 0.150
62 0.104 0.146 0.177 0.200 0.223 0.251
63 0.099 0.139 0.169 0.191 0.213 0.239
64 0.097 0.136 0.165 0.186 0.209 0.233
65 0.140 0.197 0.240 0.271 0.302 0.339
66 0.092 0.130 0.157 0.177 0.198 0.222
67 0.129 0.181 0.220 0,249 0.277 0,311
68 0.092 0.129 0.156 0.177 0.197 0.221
69 0.092 0.130 0.158 0,178 0.199 0,224
70 0.103 0.144 0.175 0,198 0,221 0.248
Public Agency Miscellaneous 2%@ 60
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.011 0.015 0.018 0.021 0.023 0.026
51 0.009 0.013 0.016 0.018 0.020 0.023
52 0.013 0,018 0.022 0.025 0.028 0.031
53 0.011 0.016 0.019 0,022 0.025 0.028
54 0,015 0.021 0.025 0,028 0.032 0.036
55 0.023 0.032 0.039 0,044 0.049 0.055
56 0,019 0.027 0.032 0,037 0.041 0.046
57 0.025 0.035 0.042 0,048 0.054 0.060
58 0.030 0.042 0.051 0,058 0.065 0.073
59 0.035 0.049 0.060 0,068 0.076 0.085
60 0.062 0.087 0.105 0,119 0.133 0.149
61 0.079 0.110 0.134 0,152 0.169 0.190
62 0.132 0.186 0.225 0.255 0.284 0.319
63 6.126 0.178 0.216 0.244 0.272 0.305
64 0.122 0.171 6,207 0.234 0.262 0.293
65 0.173 0.243 0,296 0.334 0.373 0,418
66 0.114 0.160 0.194 0.219 0.245 0.274
67 0.159 0.223 0.271 0.307 0.342 0,384
68 0.113 0.159 0.193 0.218 0.243 0.273
69 0.114 0.161 0.195 0.220 0.246 0,276
70 0.127 0.178 0.216 0.244 0.273 0.306
CaIPERS Actuarial Valuation -June 30,2011 A-l0
Miscellaneous 2.5%at 55 Risk Pool
3-64
Attachment B
APPENDIX A
PUblic Agency Miscellaneous 2%@ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.015 0.020 0.024 0.029 0.033 0.039
51 0.013 0.016 0.020
0.024 0.027 0.033
52 0.014 0-018 0.022 0.027
0.030 0.036
53 0.017 0.022 0.027 0.032 0.037 0.043
54 0.027 0.034 0.041 0.049 0.056 0.067
55 0.050 0.064 0.078 0.094 0.107 0.127
56 0.045 0.057 0.069 0.083 0.095 0.113
57 0.048 0.061 0.074 0.090 0.102 0.122
58 0.052 0.066 0.080 0.097 0.110 0.131
59 0.060 0.076 0.092 0.111 0.127 0.151
60 0.072 0.092 0.112 0.134 0.153 0.182
61 0.089 0.113 0.137 0.165 0.188 0.224
62 0.128 0.162 0.197 0.237 0.270 0.322
63 0.129 0.164 0.199 0.239 0.273 0.325
64 0.116 0.148 0.180 0.216 0.247 0.294
65 0.174 0.221 0.269 0.323 0.369 0.439
66 0.135 0.171 0.208 0.250 0.285 0.340
67 0.133 0.169 0.206 0.247 0.282 0.336
68 0.118 0.150 0.182 0.219 0.250 0.297
69 0.116 0.147 0.179 0.215 0.246 0.293
70 0.138 0.176 0.214 0.257 0.293 0.349
Public Agency Miscellaneous 2.5%@ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.026 0.033 0.040 0.048 0.055 0.062
51 0.021 0.026 0.032 0.038 0.043 0.049
52 0.021 0.026 0.032 0.038 0.043 0.049
53 0.026 0.033 0.040 0.048 0.055 0.062
54 0.043 0.054 0.066 0.078 0.089 0.101
55 0.088 0.112 0.136 0.160 0.184 0.208
56 0.055 0.070 0.085 0.100 0.115 0.130
57 0.061 0.077 0.094 0.110 0.127 0.143
58 0.072 0.091 0.111 0.130 0.150 0.169
59 0.083 0.105 0.128 0.150 0.173 0.195
60 0.088 0.112 0.136 0.160 0.184 0.208
61 0.083 0.105 0.128 0.150 0.173 0.195
62 0.121 0.154 0.187 0.220 0.253 0.286
63 0.105 0.133 0.162 0.190 0.219 0.247
64 0.105 0.133 0.162 0.190 0.219 0.247
65 0.143 0.182 0.221 0.260 0.299 0.338
66 0.105 0.133 0.162 0.190 0.219 0.247
67 0.105 0.133 0.162 0.190 0.219 0.247
68 0.105 0.133 0.162 0.190 0.219 0.247
69 0.105 0.133 0.162 0.190 0.219 0.247
70 0.125 0.160 0.194 0.228 0.262 0.296
calPERS Actuarial Valuation -June 30,2011 A-ll
Miscellaneous 2.5%at 55 Risk Pool .
3-65
Attachment B
APPENDIX A
Public Agency Miscellaneous 2.7%@ 55
Duration of service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.028 0.035 0.043 0.050 0.058 0.065
51 0.022 0.028 0.034 0.040 0.046 0.052
52 0.022 0.028 0.034 0.040 0.046 0.052
53 0.028 0.035 0.043 0.050 0.058 0.065
54 0.044 0.056 0.068 0.080 0.092 0.104
55 0.091 0.116 0.140 0.165 0.190 0.215
56 0.061 0.077 0.094 0.110 0.127 0.143
57 0.063 0.081 0.098 0.115 0.132 0.150
58 0.074 0.095 0.115 0.135 0.155 0.176
59 0.083 0.105 0.128 0.150 0.173 0.195
60 0.088 0.112 0.136 0.160 0.184 0.208
61 0.085 0.109 0.132 0.155 0.178 0.202
62 0.124 0.158 0.191 0.225 0.259 0.293
63 0.107 0.137 0.166 0.195 0.224 0.254
64 0.107 0.137 0.166 0.195 0.224 0.254
65 0.146 0.186 0.225 0.265 0.305 0.345
66 0.107 0.137 0.166 0.195 0.224 0.254
67 0.107 0.137 0.166 0.195 0.224 0.254
68 0.107 0.137 0.166 0.195 0.224 0.254
69 0.107 0.137 0.166 0.195 0.224 0.254
70 0.129 0.164 0.199 0.234 0.269 0.304
Public Agency Miscellaneous 3%@ 60
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.026 0.033 0.040 0.048 0.055 0.062
51 0.021 0.026 0.032 0.038 0.043 0.049
52 0.019 0.025 0.030 0.D35 0.040 0.046
53 0.025 0.032 0.038 0.045 0.052 0.059
54 0.039 0.049 0.060 0.070 0.081 0.091
55 0.083 0.105 0.128 0.150 0.173 0.195
56 0.055 0.070 0.085 0.100 0.115 0.130
57 0.061 0.077 0.094 0.110 0.127 0.143
58 0.072 0.091 0.111 0.130 0.150 0.169
59 0.080 0.102 0.123 0.145 0.167 0.189
60 0.094 0.119 0.145 0.170 0.196 0.221
61 0.088 0.112 0.136 0.160 0.184 0.208
62 0.127 0.161 0.196 0.230 0.265 0.299
63 0.110 0.140 0.170 0.200 0.230 0.260
64 0.110 0.140 0.170 0.200 0.230 0.260
65 0.149 0.189 0.230 0.270 0.311 0.351
66 0.110 0.140 0.170 0.200 0.230 0.260
67 0.110 0.140 0.170 0.200 0.230 0.260
68 0.110 0.140 0.170 0.200 0.230 0.260
69 0.110 0.140 0.170 0.200 0.230 0.260
70 0.132 0.168 0.204 0.240 0.276 0.312
CalPERS Actuarial Valuation -June 30,2011 A-12
Miscellaneous 2.5%at 55 Risk Pool
3-66
APpeNDIX A
Attachment B
~
50
51
52
53
54
55
Public Agency Fire 1/z @ 55 and 2%@ 55
Bam ~
0.01588 56
.0.00000 57
0.03442 58
0.01990 59
0.04132 60
0.07513
Bam
0.11079
0.00000
0.09499
0.04409
1.00000
Public Agency Police 1/z @ 55 and 2%@ 55
Agg B2m ~B2m
50 0.02552 56 0.06921
51 0.00000 57 0.05113
52 0.01637 58 0.07241
53 0.02717 59 0.07043
54 0.00949 60 1.00000
55 0.16674
Public Agency Police 2010@ 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.014 0.014 0.014 0.014 0.025 0.045
51 0.012 0.012 0.012 0.012 0.023 0.040
52 0.026 0.026 0.026 0.026 0.048 0.086
53 0.052 0.052 0.052 0.052 0.096 0.171
54 0.070 0.070 0.070 0.070 0.128 0.227
55 0.090 0.090 0.090 0.090 0.165 0.293
56 0.064 0.064 0.064 0.064 0.117 0.208
57 0.071 0.071 0.071 0.071 0.130 0.232
58 0.063 0.063 0.063 0.063 0.115 0.205
59 0.140 0.140 0.140 0.140 0.174 0.254
60 0.140 0.140 0.140 0.140 0.172 0.251
61 0.140 0.140
0.140 0.140 0.172 0.251
62 0.140 0.140 0.140 0.140 0.172 0.251
63 0.140 0.140 0.140 0.140 0.172 0.251
64 0.140 0.140 0.140 0.140 0.172 0.251
65 1.000 1.000 1.000 1.000 1.000 1.000
•These rates also apply to Local Prosecutors,Local Sheriff,School Police,and Other Safety •
CalPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
A-13
3-67
APPENDIX A
Public Agency Fire 20f0@50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.007 0.007 0.007 0.007 0.010 0.015
51 0.008 0.008 0.008 0.008 0.013 0.019
52 0.017 0.017
0.017 0.017 0.027 0.040
53 0.047 0.047 0.047 0.047 0.072 0.107
54 0.064 0.064 0.064 0.064 0.098 0.147
55 0.087 0.087 0.087 0.087 0.134 0.200
56 0.Q78 0.078 0.078 0.Q78 0.120 0.180
57 0.090 0.090 0.090 0.090 0.139 0.208
58 0.079 0.079 0.079 0.079 0.122 0.182
59 0.073 0.073 0.073 0.073 0.112 0.168
60 0.114 0.114 0.114 0.114 0.175
0.262
61 0.114 0.114 0.114 0.114 0.175
0.262
62 0.114 0.114 0.114 0.114
0.175 0.262
63 0.114 0.114 0.114 0.114 0.175 0.262
64 0.114 0.114 0.114 0.114 0.175
0.262
65 1.000 1.000 1.000 1.000 1.000 1.000
Public Agency Police 3%@ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.019 0.019 0.019 0.019 0.040 0.060
51 0.024 0.024 0.024 0.024 0.049 0.074
52 0.024 0.024 0.024 0.024 0.051
0.077
53 0.059 0.059 0.059 0.059 0.121 0.183
54 0.069 0.069 0.069 0.069 0.142 0.215
55 0.116 0.116 0.116 0.116 0:240 0.363
56 0.076 0.076 0.076 0.076 0.156 0.236
57 0.058 0.058 0.058 0.058 0.120 0.181
58 0.076 0.076 0.076 0.076 0.157 0.237
59 0.094 0.094 0.094 0.094 0.193 0.292
60 0.141 0.141 0.141 0.141 0.290 0.438
61 0.094 0.094 0.094 0.094 0.193 0.292
62 0.118 0.118 0.118 0.118 0.241 0.365
63 0.094 0.094 0.094 0.094 0.193 0.292
64 0.094 0.094 0.094 0.094 0.193 0.292
65 1.000 1.000 1.000 1.000 1.000 1.000
•These rates also apply to Local Prosecutors,Local Sheriff,School Police,and Other Safety .
CalPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
Attachment B
A-14
3-68
APPENDIX A
Public Agency Fire 3%@55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.012 0.012 0.012 0.018 0.028 0.033
51 0.008 0.008 0.008 0.012 0.019 0.022
52 0.018 0.018 0.018 0.027 0.042 0.050
53 0.043 0.043 0.043 0.062 0.098 0.114
54 0.057 0.057 0.057 0.083 0.131 0.152
55 0.092 0.092 0.092 0.134 0.211 0.246
56 0.081 0.081 0.081 0.118 0.187 0.218
57 0.100 0.100 0.100 0.146 0.230 0.268
58 0.081 0.081 0.081 0.119 0.187 0.219
59 0.078 0.078 0.078 0.113 0.178 0.208
60 0.117 0.117 0.117 0.170 0.267 0.312
61 0.078 0.078 0.078 0.113 0.178 0.208
62 0.098 0.098 0.098 0.141 0.223 0.260
63 0.078 0.078 0.078 0.113 0.178 0.208
64 0.078 0.078 0.078 0.113 0.178 0.208
65 1.000 1.000 1.000 1.000 1.000 1.000
Public Agency Police 3%@ 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.070 0.070 0.070 0.131 0.193 0.249
51 0.050 0.050 0.050 0.095 0.139 0.180
52 0.061 0.061 0.061 0.116 0.171 0.220
53 0.069 0.069 0.069 0.130 0.192 0.247
54 0.071 0.071 0.071 0.134 0.197 0.255
55 0.090 0.090 0.090 0.170 0.250 0.322
56 0.069 0.069 0.069 0.130 0.191 0.247
57 .0.080 0.080 0.080 0.152 0.223 0.288
58 0.087 0.087 0.087 0.164 0.242 0.312
59 0.090 0.090 0.090 0.170 0.251 0.323
60 0.135 0.135 0.135 0.255 0.377 0.485
61 0.090 0.090 0.090 0.170 0.251 0.323
62 0.113 0.113 0.113 0.213 0.314 0.404
63 0.090 0.090 0.090 0.170 0.251 0.323
64 0.090 0.090 0.090 0.170 0.251 0.323
65 1.000 1.000 1.000 1.000 1.000 1.000
•These rates also apply to Local Prosecutors,Local Sheriff,SChool Pollee,and Other Safety.
CalPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
Attachment B
A-15
3-69
APPENDIX A
Public Agency Fire 3%@SO
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years,
50 0.034 0.034 0.034 0.048 0.068 0.080
51 0.046 0.046 0.046 0.065 0.092 0.109
52 0.069 0.069 0.069 0.097 0.138 0.163
53 0.084 0.084 0.084 0.117 0.166 0.197
54 0.103 0.103 0.103 0.143 0.204 0.241
55 0.127 0.127 0.127 0.177 0.252 0.298
56 0.121 0.121 0.121 0.169 0.241 0.285
57 0.101 0.101 0.101 0.141 0.201 0.238
58 0.118 0.118 0.118 0.165 0.235 0.279
59 0.100 0.100 0.100 0.140 0.199 0.236
60 0.150 0.150 0.150 0.210 0.299 0.354
61 0.100 0.100 0.100 0.140 0.199 0.236
62 0.125 0.125 0.125 0.175 0.249 0.295
63 0.100 0.100 0.100 0.140 0.199 0.236
64 0.100 0.100 0.100 0.140 0.199 0.236
65 1.000 1.000 1.000 1.000 1.000 1.000
Schools 2%@ SS
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.005 0.009 0.013 0,015 0.016 0.018
51 0.005 0.010 0.014 0.017 0.019 0.021
52 0.006 0.012 0.017 0.020 0.022 0.025
53 0.007 0.014 0.019 0.023 0.026 0.029
54 0,012 0.024 0.033 0.039 0.044 0.049
55 0.024 0,048 0,067 0.079 0.088 0.099
56 0,020 0.039 0.055 0.065 0,072 0.081
57 0.021 0.042 0.059 0.070 0.078 0.087
58 0.025 0.050 0.070 0.083 0.092 0.103
59 0.029 0.057 0.080 0,095 0.105 0.118
60 0.037 0.073 0.102 0,121 0.134 0.150
61 0.046 0,090 0.126 0,149 0.166 0.186
62 0.076 0.151 0.212 0.250 0.278 0.311
63 0.069 0.136 0.191 0.225 0.251 0.281
64 0.067 0.133 0.185 0.219 0.244 0.273
65 0.091 0.180 0.251 0.297 0.331 0.370
66 0.072 0.143 0.200 0.237 0.264 0.295
67 0.067 0.132 0.185 0.218 0.243 0.272
68 0.060 0.118 0.165 0.195 0.217 0.243
69 0.067 0.133 0.187 0,220 0.246 0.275
70 0.066 0.131 0.183 0.216 0.241 0.270
CalPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
Attachment B
A-16
3-70
Attachment B
APPENDIX A
Superfunded Status
If a rate plan is superfunded (actuarial value of assets exceeds the present value of benefits),as of the most recently
completed annual valuation,the employer may cover their employees'member contributions (both taxed and tax-
deferred)using their employer assets during the fiscal year for which this valuation applies.This would entail
transferring assets within the Public Employees'Retirement Fund (PERF)from the employer account to the member
accumulated contribution accounts.This change was Implemented effective January 1,1999 pursuant to Chapter
231 (Assembly Bill 2099)which added Government Code Section 20816.
Superfunded status applies only to individual plans,not risk pools.For rate plans within a risk pool,actuarial value of
assets is the sum of the rate plan's side fund piUS the rate plan's pro-rata share of non-side fund assets.
Internal Revenue Code Section 415..
The limitations on benefits imposed by Internal Revenue Code Section 415 were taken into account In this valuation.
Each year the impact of any changes in this limitation since the prior valuation Is included and amortized as part of
the actuarial gain or loss base..
Internal Revenue Code section 401(a)(17)
The limitations on compensation Imposed by Internal Revenue Code Section 401(a)(17)were taken into account in
this valuation.Each year the Impact of any changes in this compensation limitation since the prior valuation is
included and amortized as part of the actuarial gain or loss base.
CalPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
A-!7
3-71
APPENDIXB
SUMMARY Of PRINCIPAL PLAN PROVISIONS
Attachment B
3-72
Attachment B
APPIENQI)(B
DESCRIPTION OF PRINCIPAL PLAN PROVISIONS
The following is a description of the principal plan provisions used In calculating the liabilities of the Miscellaneous
2.5%at 55 Risk Pool.Plan provisions are divided based on whether they are standard,Class 1,Class 2 or Class 3
benefits.Standard benefits are applicable to all members of the risk pool while Class 1,2 or 3 benefits vary
among employers.Provided at the end of the listing Is a table providing the percentage of members participating
in the pool that are subject to each benefit.
Many of the statements in this summary are general In nature,and are intended to proVide an easily understood
summary of the complex Public Employees'Retirement Law.The law itself governs in all situations.
Service Retirement
EJigi bility
A calPERS member becomes eligible for Service Retirement upon attainment of age 50 with at least 5 years of
credited'service (total service across all calPERS employers,and with certain other Retirement Systems with
which calPERS has reciprocity agreements).For employees hired into a plan with the 1.5%at 65 formUla,
eligibility for service retirement is age 55 with at least 5 years of service.
Benefit
The Service Retirement benefit is a monthly allowance equal to the prodUct of the benefit factor,years ofservice,
and final compensation.
•The benefit factor for this group of employees comes from the 2.5%at 55 Miscellaneous benefit formula
factor·table.The factor depends on the member's age at retirement.Usted below are the factors for
retirement at whole year ages:
Retirement Age 2.5%at 55 Miscellaneous
Factor
50 2.0%
51 2.1%
52 2.2%
53 2.3%
54 2.4%
55&Up 2.5%
•The years of service is the al)'lount credited by calPERS to a member while he or she Is employed In this
group (or for other periods that are recognized under the employer's contract with caIPERS).For a member
who has earned service with mUltiple calPERS employers,the benefit from each employer Is calculated
separately according to each employer's contract,and then added together for the total allowance.Any
unused sick leave accumulated at the time of retirement will be converted to credited service at a rate of
0.004 years of service for each day of sick leave.
The final compensation is the monthly average of the member's highest 36 or 12 consecutive months'full-
time equivalent monthly pay (no matter which calPERS employer paid this compensation).The standard
benefit available to all members is 36 months.Employers have the option of providing a final compensation
equal to the highest 12 consecutive months by contracting for this class 1 optional benefit.
•For employees covered by the modified formula,the final compensation is offset by $133.33 (or by one third
if the final compensation is less than $400).Employers have the option to contract for the class 3 benefit
that will eliminate the offset applicable to the final compensation of employees covered by a modified
formula.
CalPERS Actuarial Valuation -June 3D,2011
Miscellaneous 2.5%at 55 Risk Pool
6-1
3-73
Attachment B
APPENDIX B
DESCRIPTION OF PRINCIPAL PLAN PROVISIONS
The Miscellaneous Service Retirement benefit is not capped.The Safety Service Retirement benefit is capped
at 90%of final compensation.
Eligibility for Deferred Status
A CaIPERS member becomes eligible for a deferred vested retirement benefit when he or she leaves employment,
keeps his or her contribution account balance on deposit with CaIPERS,and has earned at least 5 years of
credited service (total service across all CaIPERS employers,and with certain other Retirement Systems with
which CaIPERS has reciprocity agreements).
Eligibility to Start Receiving Benefits
The CaIPfRS member becomes eligible to receive the deferred retirement benefit upon satisfying the eligibility
requirements for Deferred Status and upon attainment of age 50.
Benefit·
The vested deferred retirement benefit Is the same as the Service Retirement benefit,where the benefit factor is
based on the member's age at allowance commencement.For members who have earned service with multiple
CaIPERS employers,the benefit from each employer Is calculated separately according to each employer's
contract,and then added together for the total allowance.
Non-Industrial (Non--Job Related)Disability Retirement
Eligibility
A CaIPERS member Is eligible for Non-Industrial Disability Retirement If he or she becomes disabled and has at
least 5 years of credited service (total service across all CaIPERS employers,and with certain other Retirement
Systems with whichCalPERS has reciprocity agreements).There is no special age requirement.Dlsabledmeans
the member is unable to perform his or her job because of an illness or Injury which is expected to be permanent
or to last indefinitely.The illness or injury does not have to be job related.A CaIPERS member must be actively
working with any CaIPERS employer at the time of disability In order to be eligible for this benefit.
Standard Benefit
The standard Non-Industrial Disability Retirement benefit Is a monthly allowance equal to 1.8%of final
compensation,multiplied by service,which Is determined as follows:
•service is CaIPERS credited service,for members with less than 10 years of service or greater than 18.518
years of service;or
•service Is CaIPERS credited service plus the additional number of years that the member would have worked
until age 60,for members with at least 10 years but not more than 18.518 years of service.The maximum
benefit in this case Is 33 1/3%of Final Compensation.
Members who are eligible for a larger service retirement benefit may choose to receive that benefit in lieu of a
disability benefit.Members eligible to retire,and who have attained the normal retirement age determined by
their service retirement benefit formula,will receive the same dollar amount for disability retirement as that
payable for service retirement.For members who have earned service with multiple CalPERS employers,the
benefit attributed to each employer is the total disability allowance mUltiplied by the ratio of service with a
partiCUlar employer to the total CaIPERS service.
Improved Benefit
Employers have the option of providing this Improved benefit by contracting for this ciass 3 optional benefit.
The improved Non-Industrial Disability Retirement benefit Is a monthly allowance equal to 30%of final
compensation for the first 5 years of service,plus 1%for each additional year of service to a maximum of 50%of
final compensation..
CalPERS Actuarial Valuation -June 30,2011 B-2
Miscellaneous 2.5%at 55 Risk Pool
3-74
Attachment B
APPENDIX B
DESCRIPTION OF PRINCIPAL PLAN PROVISIONS
Members who are eligible for a larger service retirement benefit may choose to receive that benefit in lieu of a
disability benefit.Members eligible to retire,and who have attained the normal retirement age determined by
their service retirement benefit formula,will receive the same dollar amount for disability retirement as that
payable for service retirement.For members who have earned service with multiple CaIPERS employers,the
benefit attributed to each employer is the total disability allowance multiplied by the ratio of service with a
particular employer to the total CalPERS service.
mndusmal (Job Related)Disability Retirement
Employers have the option of providing this Improved benefit by contracting for this class 1 optional benefit.
Eligibility
An employee is eligible for Industrial Disability Retirement If he or she becomes disabled while working,where
disabled means the member is unable to perform the duties of the job because of a work-related illness or injury
whlcn IS'expected to be permanent or to last indefinitely.A CaIPERS member who has left active employment
within this group is not eligible for this benefit,except to the extent described in the next paragraph.
Standard Benefit
The standard Industrial Disability Retirement benefit Is a monthly allowance equal to 50%of final compensation.
For a CaIPERS member not actively employed In this group who became disabled while employed by some other
CaIPERS employer,the benefit Is a return of or annultizatlon of the accumulated member contributions with
respect to employment In this group.However,If a member Is eligible for Service Retirement and if the Service
Retirement benefit is more than the Industrial Disability Retirement benefit,the member may choose to receive
the larger benefit.
Increased Benefit (75%of Final Compensation)
The increased Industrial Disability Retirement benefit Is a monthly allowance equal to 75%of final compensation
for total disability.For a CaIPERS member not actively employed in this group who became disabled while
employed by some other CaIPERS employer,the benefit Is a return of or annuitization of the accumulated
member contributions with respect to employment In this group.However,If a member Is eligible for Service
Retirement and if the Service Retirement benefit is more than the Industrial Disability Retirement benefit,the
member may choose to receive the larger benefit.
Standard Lump Sum Payment
Upon the death of a retiree,a one-time lump sum payment of $500 will be made to the retiree's designated
survivor(s),or to the retiree's estate.
IinprovedLump Sum Payment .
Employers have the option of providing any of these Improved lump sum death benefit by contracting for any of
these class 3 optional benefits.
Upon the death of a retiree,a one-time lump sum payment of $600,$2,000,$3,000,$4,000 or $5,000 will be
made to the retiree's designated survlvor(s),or to the retiree's estate.
form of Payment for Retirement Allowance
Standard Form of Payment
Generally,the retirement allowance is paid to the retiree in the form of an annuity for as long as he or she is
alive.The retiree may choose to prOVide for a portion of his or her allowance to be paid to any designated
beneficiary after the retiree's death.CaIPERS provides for a variety of such benefit options,which the retiree
CaIPERS Actuarial Valuation -June 30,2011 B-3
Miscellaneous 2.5%at 55 Risk Pool
3-75
Attachment B
APP~NDIX B
DESCRIPTION OF'PRINCIPAL P.(.I.N.PROVISIONS
pays for by taking a reduction in his or her retirement allowance.The larger the amount to be provided to the
beneficiary is,and the younger the beneficiary is,the greater the reduction to the retiree's allowance.
Improved Form of Payment (Post ,Retirement Survivor Allowance)
Employers have the option to contract for this dass 1 benefit providing an improved post retirement survivor
allowance.
For retirement allowances with respect to service subject to the modified formula,25%of the retirement
allowance will automatically be continued to certain statutory beneficiaries upon the death of the retiree,Without
a reduction in the retiree's allowance.For retirement allowances with respect to service subject to the full
formula,50%of the retirement allowance will automatically be continued to certain statutory beneficiaries upon
the death of the retiree,without a reduction in the retiree's allowance.This additional benefit is often referred to
as post retirement survivor allowance (PRSA)or simply as survivor continuance.
In other words,25%or 50%of the allowance,the continuance portion,Is paid to the retiree for as long as he or
she is alive,and that same amount Is continued to the retiree's spouse (or If no eligible spouse,to unmarried
childfen .until they attain age 18;or,If no eligible children,to a qualifying dependent parent)for the rest of his or
her lifetime.This benefit will not be discontinued in the event the spouse remarries.
The remaining 75%or 50%of the retirement allowance,which may be referred to as the option portion of the
benefit,is paid to the retiree as an annuity for as long as he or she is alive.Or,the retiree may choose to
provide for some of this option portion to be paid to any designated beneficiary after the retiree's death.CaIPERS
offers a variety of such benefit options,which the retiree pays for by taking a reduction to the option portion of
his or her retirement allowance.
Pre-Retirement Death Benefits
Eligibility
An employee's beneficiary (or estate)may receive the Basic Death benefit If the member dies while actively
employed,A CalPERS member must be actively employed with the CaIPERS employer providing this benefit to be
eligible for this benefit.A member's survivor who is eligible for any other pre-retirement death benefit described
below may choose to receive that death benefit Instead of this Basic Death benefit.
Standard Benefit
The Basic Death Benefit Is a lump sum In the amount of the member's accumulated contributions,where Interest
is currently credited at 7.5%per year,plus a lump sum in the amount of one month's salary for each completed
year of current service,up to a maximum of six months'salary.For purposes of this benefit,one month's salary
is defined as the member's average monthly full-time rate of compensation during the 12 months preceding
death.
Eligibility
An employee's eligible survivor(s)may receive the 1957 Survivor benefit if the member dies while actively
employed,has attained at least age 50,and has at least 5 years of credited service (total service across all
CaIPERS employers and with certain other Retirement Systems with which CaIPERS has reciprocity agreements).
A CaIPERS member must be actively employed with the CaIPERS employer providing this benefit to be eligible for
this benefit.An eligible survivor means the surviving spouse to whom the member was married at least one year
before death or,If there is no eligible spouse,to the member's unmarried children under age 18.A member's
survivor may choose this benefit in lieu of the Basic Death benefit or the Special Death benefit.
CaIPERS Actuarial Valuation -June 30,2011 B-4
Miscellaneous 2.5%at 55 Risk Pool
3-76
Attachment B
APPENDIX B
DESCRIPTION OF PRINCIPAL PLAN PROVISIONS
Standard Benefit
The 1957 Survivor benefit Is a monthly allowance equal to one-half of the unmodified Service Retirement benefit
that the member would have been entitled to receive if the member had retired on the date of his or her death.
If the benefit is payable to the spouse,the benefit is discontinued upon the death of the spouse.If the benefit is
payable to a dependent child,the benefit will be discontinued upon death or attainment of age 18,unless the
child is disabled.There is a guarantee that the total amount paid will at least equal the Basic Death benefit.
Optional Settlement 2W Death Benefit
Eligibility
An employee's eligible survivor may receive the Optional Settlement 2W Death benefit if the member dies while
actively employed,has attained at least age 50,and has at least 5 years of credited service (total service across
all CaIPERS employers and with certain other Retirement Systems with which calPERS has reciprocity
agreements).A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible
for this benefit.An eligible survivor means the surviving spouse to whom the member was married at least one
year before death.A member's survivor may choose this benefit in lieu of the Basic Death benefit or the 1957
Survivor benefit.
Standard Benefit
The Optional Settlement 2W Death benefit is a monthly allowance equal to the Service Retirement benefit that
the member would have received had the member retired on the date of his or her death and elected Optional
Settlement 2W.(A retiree who elects Optional Settlement 2W receives an allowance that has been reduced so
that it will continue to be paid after his or her death to a surviving beneficiary.)The allowance Is payable as long
as the surviving spouse lives,at which time It is continued to any unmarried children under age 18,if applicable.
There is a guarantee that the total amount paid will at least equal the Basic Death Benefit.
Eligibility
An employee's elIgIble survlvor(s)may receive the Special Death benefit If the member dies while actively
employed and the death Is job-related.A calPERS member who is no longer actively employed with any calPERS
employer Is not eligible for this benefit.An eligIble survivor means the surviving spouse to whom the member
was married prior to the onset of the injury or Illness that resulted In death.If there is no eligible spouse,an
eligible survivor means the member's unmarried children under age 22.An eligible survivor who chooses to
receive this benefit will not receive any other death benefit.
Improved Benefit
The Special Death benefit is a monthly allowance equal to 50%of final compensation,and will be increased
whenever the compensation paid to active employees is Increased but ceasing to Increase when the member
would have attained age 50.The allowance is payable to the surviving spouse until death at which time the
allowance is continued to any unmarried children under age 22.There is a guarantee that the total amount paid
will at least equal the Basic Death Benefit.
If the member's death is the result of an accident or InjUry caused by external violence or physical force incurred
in the performance of the member's duty,and there are eligIble surviving children (eligible means unmarried
children under age 22)in addition to an eligible spouse,then an additional monthly allowance is paid equal
to the following:
•if 1 eligible child:
•if 2 eligible children:
•If 3 or more eligible children:
calPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
12.5%of final compensation
20.0%of final compensation
25.0%of final compensation
B-5
3-77
Attachment B
APPENDIX B
DESCRIPTION OF PRINCIPAL PLAN PROVISIONS
Standard Benefit
Beginning the second calendar year after the year of retirement,retirement and survivor allowances will be
annually adjusted on a compound basis by 2%,However,the cumulative adjustment may not be greater than
the cumulative change in the Consumer Price Index since the date of retirement.
Improved Benefit
Employers have the option of providing any of these improved cost-of-Iiving adjustments by contracting for any
one of these class 1 optional benefits.
Beginning the second calendar year after the year of retirement,retirement and survivor allowances will be
annually adjusted on a compound basis by either 3%,4%or 5%.However,the cumulative adjustment may not
be greater than the cumulative change in the COnsumer Price Index since the date of retirement.
Purchasirlg Power Protection Allowance (PPPA)
Retirement and survivor allowances are protected against inflation by PPPA.PPPA benefits are cost-of-Iiving
adjustments that are Intended to maintain an Individual's allowance at 80%of the initial allowance at retirement
adjusted for Inflation since retirement.The PPPA benefit will be coordinated with other cost-of-living adjustments
provided under the plan.
Each employee contributes toward his or her retirement based upon the follOWing schedule.
The percent contributed below the monthly compensation breakpoint is 0%.
The monthly compensation breakpoint is $0 for full and supplemental formula members,except for those
members in the CSU auxiliary organizations where the breakpoint Is $513.
The monthly compensation breakpoint is $133.33 for employees covered by the modified formUla.
The percent contributed above the monthly compensation breakpoint is 8%except for those members in the
CSU auxiliary organizations where the contribution rate has been set at the State member level.
The employer may choose to "pick-up"these contributions for the employees (Employer Paid Member
Contributions or EMPC).An employer may also include Employee Cost Sharing In the contract,where employees
contribute an additional percentage of compensation based on any optional benefit for which a contract
amendment was made on or after January 1,1979.
If the member's service with the employer ends,and If the member does not satisfy the eligibility conditions for
any of the retirement benefits above,the member may elect to receive a refund of his or her employee
contributions,which are credited annually with 6%interest.
CalPERS Actuarial Valuation -June 30,2011
Miscellaneous 2,5%at 55 Risk Pool
B-6
3-78
Attachment B
APPENDIX B
DESCRIPTION OF PRINCIPAL PLAN PROVISIONS
This Is a pre-retirement death benefit available only to members not covered by Social Security.Any agency
joining calPERS subsequent to 1993 was required to provide this benefit jf the members were not covered by
Social Security.The benefit is optional for agencies joining CalPERS prior to 1994.Levels 1,2 and 3 are now
closed.Any new agency or any agency wishing to add this benefit or increase th!i)current level must choose the
4th or Indexed Level.
This benefit is not included in the results presented in this valuation.More information on this benefit Is available
on the calPERS website at www.calpers.ca.gov.
GaIPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
6-7
3-79
APPEND~:XC
PlAN OPTIONS AND VAmABLES
•CLASSIFICATION OF OPTIONAL BENEFITS
•EXAMPLE OF INDIVIDUAL AGENCY'S RATE CALCULATION
•DISTRIBUTION OF CLASS 1 BENEFITS
Attachment B
3-80
Attachment B
APPENDIX C
Below Is the list of the available optional benefit provisions and their initial classification upon establishment
of risk pools.When new benefits become available as a result of legislation,the Chief actuary will determine
their dasslficatlon in accordance with the criteria established In the board policy.
Class 1 benefits have been identified to be additional benefits which have a significant,ongoing effect on
the total plan cost.In some cases,a Class 1 benefit may be an alternate benefit formula.These benefits
vary by employer across the risk pool.Agencies contracting for a Class 1 benefit wlll be responsible for the
past service Iiablilty associated with such benefit and will be reqUired to pay a surcharge established by the
actuary to cover the ongoing cost (normal cost)of the Class 1 benefit.
The table below shows the list of Class 1 benefits and their applicable surcharge for the Miscellaneous 2.5%
at 55 Risk Pool.Last year's surcharges are shown for comparison.
•One Year Final Compensation
•EPMC by contract,7%
•EPMC by contract,8%
•EPMC by contract,9%
•25%PRSA
•50%PRSA
•3%Annual COLA
•4%Annual COLA
•5%Annual COLA
•lOR For Local Miscellaneous Members
•Increased lOR Allowance to 75%of Compensation
•Improved Industrial Disability Allowance for Local safety Members
•Employee Cost Sharing
•Employee Contribution Rate for CSUC Auxiliary Organizations
Reduced to State Member Level -Covered by Social Security
•Employee Contribution Rate for CSUC Auxiliary Organizations
Reduced to State Member Level -Not Covered by Social Security
June 30,2010
0.607%
1.069%
1.221 %
N{A
0.908%
0.908%
1.367%
1.367%
1.367%
0.469%
0.821 %
N{A
varies
2.000%
1.000%
June 30,2011
0.577%
1.081%
1.236%
N{A
0.917%
0.917%
1.100%
1.100%
1.100%
0.473%
0.829%
N{A
varies
2.000%
1.000%
For employers contracting for more than one Class 1 benefit,the surcharges listed In this table will be added
together
CaIPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
C-l
3-81
Attachment B
APPENDIX C
Class 2 benefits have been identified to be the ancillary benefits providing one-time increases in benefits.
These benefits vary by employer across the risk pool.Agencies contracting for a Oass 2 benefit will be
responsible for the past service liability associated with such benefit.
The follOWing benefits shall be classified as Class 2:
•One-time 1%to 6%Ad Hoc COLA Increases for members who retired or died prior to
January 1,1998 (Section 21328)
•"Golden Handshakes"-Section 20903 Two Years Additional Service Credit
•Credit for Prior Service Paid for by the Employer
•Military Service Credit (section 20996)
•Credit for Local Retirement System Service for Employees of Agencies Contracted on a Prospective
basis (section 20530.1)
.'Prior Service Credit for Employees of an Assumed Agency Function (Section 20936)
•Limit Prior service to Members Employed on Contract Date (Section 20938)
•Public service Credit for Limited Prior service (Section 21031)
•Public service Credit for Employees of an Assumed Agency or Function (section 21025)
Class 3 benefits have been identified to be additional benefits which have a minimal effect on the total
plan cost.Class 3 benefits may vary by rate plan within each risk pool.However,the employer
contribution rate will not vary within the risk pool due to the Class 3 benefits.
The following benefits shall be classified as Class 3:
•Full formula plus social security
•Post Retirement Lump Sum Death Benefit
•$600 lump sum retired death benefit (Section 21622)
•$2,000 lump sum retired death benefit (Section 21623.5)
•$3,000 lump sum retired death benefit (Section 21623.5)
•$4,000 lump sum retired death benefit (Section 21623.5)
•$5,000 lump sum retired death benefit (Section 21623.5)
•Improved non-Industrial disability allowance (Section 21427)
•Special death benefit for local miscellaneous members (Section 21540.5)
•Service Credit Purchased by Member
•Partial Service Retirement (Section 21118)
•Optional Membership for Part Time Employees (Section 20325)
•Extension of Reciprocity Rights for Elective Officers (Section 20356)
•Removal of Contract ExclUsions Prospectively Only (section 20503)
•Altemate Death Benefit for Local Fire Members credited with 20 or more years of service (Section
21547.7)
calPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
C-2
3-82
Attachment B
APPENDIX C
Example Of Individual Agency's Rate Calculation
An individual employer rate Is comprised of several components.These include the pool's net employer
normal cost,payment on the pool's unfunded liability,additional surcharge payments for contracted Oass 1
benefits,the normal cost phase-out and an agency's payment for their own side fund.An example of the
total rate for an employer might look something like this:
Net Pool's Employer Normal Cost
Rate Plan Surcharges
Total Employer Normal Cost
Plus:Plan's share of Pool's Payment on the Amortization Bases
Side Fund Amortization Payment
Total Employer Rate for fiscal year 2013-2014
Your plan's actual required contribution can be found in Section 1.
Distribution of Class '1 Benefits
9.088%
0.577%
9.665%
4.995%
2.600%
17.260%
Final Compensation
One Year Final Compensation
Three Years Final Compensation
Post Retirement Survivor Continuance (PRSA)
No PRSA
With PRSA
Cost-oHivlng Adjustments (COLA)
2%COLA
3%COLA
4%COLA
5%COLA
%of members in the pool
with contracted benefit
79.4%
20.6%
75.7%
24.3%
96.4%
0.9%
1.9%
0.9%
Industrial Disability Benent
None
Standard Industrial Disability Benefit (50%of Final Compensation)
Improved Industrial Disability Benefit (75%of Final Compensation)
Improved Industrial Disability Benefit (50%-90%of Final Compensation)
CalPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
95.3%
3.4%
1.3%
0.0%
C-3
3-83
APPENDIXl)
LIST OF PARTICIPATING EMPLOYERS
Attachment B
3-84
APPENDIX D
Employer Narne
ALAMEDA COUNTY CONGESTION MANAGEMENT AGENCY
ALAMEDA COUNTY SCHOOLS INSURANCE GROUP
ALAMEDA COUNTY TRANSPORTATION IMPROVEMENT AUTHORITY
ALAMEDA COUNTY WASTE MANAGEMENT AUTHORITY
ALBANY MUNIOPAL SERVICES JOINT POWERS AUTHORITY
ANDERSON FIRE PROTECTION DISTRICT
ARROYO GRANDE DISTRICT CEMETERY
ASSOCIATION OF BAY AREA GOVERNMENTS
ASSOOATION OF CAUFORNIA WATER AGENOES
BEAUMONT DISTRICT UBRARY
BUTTE COUNTY MOSQUITO AND VECTOR CONTROL DISTRICT
CAUFORNIA ASSOCIATION FOR PARK AND RECREATION INDEMNITY
CAYUCOS SANITARY DISTRICT
CAYUCOS-MORRO BAY CEMETERY DISTRICT
CENTRAL COUNTY FIRE DEPARTMENT
CENTRAL FIRE PROTECTION DISTRICT OF SANTA CRUZ COUNTY
CHESTER PUBUC UTIurv DISTRICT
CHINO BASIN WATERMASTER
CHINO VALLEY INDEPENDENT FIRE DISTRICT
CITY OF ALBANY
CITY OF ARROYO GRANDE
CITY OF ATASCADERO
CITY OF BLUE LAKE
CITY OF BLYTHE
CITY OF CALISTOGA
CITY OF CAPITOLA
CITY OF CHOWCHILLA
CITY OF CRESCENT CITY
CITY OF DIXON
CITY OF DUARTE
CITY OF EAST PALO ALTO
CITY OF FIREBAUGH
CITY OF FOUNTAIN VALLEY
CITY OF GRASS VALLEY
CITY OF GROVER BEACH
CITY OF GUSTINE .
CITY OF HEALDSBURG
CITY OF HOLLISTER
CITY OFIONE
CITY OF JACKSON
CITY OF LA PUENTE
CITY OF LA QUINTA
CITY OF LA VERNE
CITY OF LAKE ELSINORE
CITY OF LAKEPORT
CITY OF LARKSPUR
CITY OF LEMON GROVE
CITY OF LOMITA
CITY OF MILL VALLEY
CITY OF NEVADA CITY
CITY OF OAKDALE
CITY OF OAKLEY
CITY OF PINOLE
CITY OF PISMO BEACH
CITY OF PLACERVILLE
CITY OF RANCHO MIRAGE
CITY OF RANCHO PALOS VERDES
CalPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
Attachment B
D-1
3-85
APpeNDIX D
CITY OF RANCHO SANTA MARGARITA
CITY OF SAN CARLOS
CITY OF SAN PABLO
CITY OF SANGER
CITY OF SANTA PAULA
CITY OF SAUSAUTO
CITY OF scons VALLEY
CITY OF SIERRA MADRE
CITY OF SOLANA BEACH
CITY OF SOLVANG
CITY OF SOUTH EL MONTE
CITY OF TEMPLE CITY
CITY OF TWENTYNINE PALMS
CITY OF WATERFORD
COASTSIDE COUNTY WATER DISTRICT
CRESTLINE VILLAGE WATER DISTRICT
DE LUZ COMMUNITY SERVICES DISTRICT
DENAIR COMMUNITY SERVICES DISTRICT
DESERT WATER AGENCY
EAST BAY DISCHARGERS AUTHORITY
EASTERN SIERRA TRANSIT AUTHORITY
EXPosmON METRO UNE CONSTRUCTION AUTHORITY
FALLBROOK PUBUC UTIUTY DISTRICT
FEATHER RNER AIR QUAUTY MANAGEMENT DISTRICT
GOLDEN SIERRA JOB TRAINING AGENCY
GREAT BASIN UNIFIED AIR POLLUTION CONTROL DISTRICT
HEBER PUBUC UTIUTY DISTRICT
HERITAGE RANCH COMMUNITY SERVICES DISTRICT
HERLONG PUBUC UTIUTY DISTRICT
HI-DESERT WATER DISTRICT
HIDDEN VALLEY LAKE COMMUNITY SERVICES DISTRICT
HIGGINS AREA ARE PROTECTION DISTRICT
KERN COUNTY COUNCIL OF GOVERNMENTS
KIRKWOOD MEADOWS PUBUC UTIUTlES DISTRICT
LAKE ARROWHEAD COMMUNITY SERVICES DISTRICT
LOS ANGELES COUNTY AREA E CIVIL DEFENSE AND DISASTER BOARD
LOS ANGELES COUNTY LAW LIBRARY
LOS ANGELES MEMORIAL COUSEUM COMMISSION
MADERA HOUSING AUTHORITY,THE CITY OF
MC FARLAND RECREATION AND PARK DISTRICT
METRO GOLD UNE FOOTHILL EXTENSION CONSTRUCTION AUTHORITY
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
MONTE VISTA COUNTY WATER DISTRICT
NAPA COUNTY TRANSPORTATION AND PLANNING AGENCY
NEVADA COUNTY RESOURCE CONSERVATION DISTRICT
NORTH MARIN WATER DISTRICT
OUVENHAIN MUNICIPAL WATER DISTRICT
ORO LOMA SANITARY DISTRICT
OXNARD HARBOR DISTRICT
PEBBLE BEACH COMMUNITY SERVICES DISTRICT
PLEASANT VALLEY RECREATION AND PARK DISTRICT
PUBUC AGENCY RISK SHARING AUTHORITY OF CALIFORNIA
RAINBOW MUNICIPAL WATER DISTRICT
RANCHO CUCAMONGA ARE PROTECTION DISTRICT
REDWOOD EMPIRE SCHOOL INSURANCE GROUP
REGIONAL COUNCIL OF RURAL COUNTIES
ROSAMOND COMMUNITY SERVICES DISTRICT
ROSE BOWL OPERATING COMPANY
ROWLAND WATER DISTRICT
CalPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
Attachment B
D-2
3-86
APPENDIX D
SACRAMENTO AREA COUNCIL OF GOVERNMENTS
SACRAMENTO TRANSPORTATION AUTHORITY
SACRAMENTO-YOLO MOSQUITO AND VECTOR CONTROL DISTRICT
SAN BENITO COUNTY WATER DISTRICT
SAN BERNARDINO VALLEY WATER ,CONSERVATION DISTRICT
SAN EWO JOINT POWERS AUTHORITY
SAN FRANCISCO BAY AREA WATER EMERGENCY TRANSPORTATION AUTHORITY
SAN LUIS WATER OISTRICT
SAN MATEO COUNTY HARBOR DISTRICT
SANTA CLARA COUNTY LAW LIBRARY
SANTA CRUZ PORT DISTRICT
SEWERAGE COMMISSION--OROVILLE REGION
SHASTA LAKE FIRE PROTECTION DISTRICT
SHASTA LOCAL AGENCY FORMATION COMMISSION
SOQUEL CREEK WATER DISTRICT
SOUTH COUNTY SUPPORT SERVICES AGENCY
SOUTH ORANGE COUNTY WASTE WATER AUTHORITY
SOUTH SAN JOAQUIN IRRIGATION DISTRICT
SOUTH SAN LUIS OBISPO COUNTY SANITATION DISTRICT
SOUTHEAST AREA SOCIAL SERVICES FUNDING AUTHORITY
SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY
SOUTHWEST TRANSPORTATION AGENCY
SUMMIT CEMETERY DISTRICT
SUSANVILLE CONSOLIDATED SANITARY DISTRICT
TOWN OF COLMA
TOWN OF CORTE MADERA
TOWN OF FAIRFAX
TOWN OF WOODSIDE
TRABUCO CANYON WATER DISTRICT
TRI-DAM HOUSING AND PERSONNEL AGENCY
TRINDEL INSURANCE FUND
TWIN CITIES POLICE AUTHORITY
UNITED WATER CONSERVATION DISTRICT
VALLEY OF THE MOON WATER DISTRICT
VALLEY SANITARY DISTRICT
VALLEY-WIDE RECREATION AND PARK DISTRICT
VICTOR VALLEY WASTEWATER RECLAMATION AUTHORITY
WATER FACILITIES AUTHORITY-JOINT POWERS AGENCY
WEST BAY SANITARY DISTRICT
WEST CONTRA COSTA INTEGRATED WASTE MANAGEMENT AUTHORITY
WEST VA!-LEY MOSQUITO AND VECTOR CONTROL DISTRICT
WEST VALLEY SANITATION DISTRICT OF SANTA CLARA COUNTY
WESTERN MUNICIPAL WATER DISTRICT
WILLOW COUNTY WATER DISTRICT
WILLOW CREEK COMMUNITY SERVICES DISTRICT
WINTERS CEMETERY DISTRICT
YOLO COUNTY PUBLIC AGENCY RISK MANAGEMENT INSURANCE AUTHORITY
YOLO COUNTY TRANSPORTATION DISTRICT
CalPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
Attachment B
D-3
3-87
APPENDIXE
RISK ANALYSIS
•\.I01A1TUrYRA"IlOS
•~Y5SOF~~mmm~
•ANALYSSOf~1ESENSllMtY
Attachment B
3-88
Attachment B
APPENDIX E
The actuarial calculations supplied In this communication are based on a number of assumptions about very long
term demographic and economic behavior.Unless these assumptions (terminations,deaths,disabilities,
retirements,salary growth,and investment return)are exactly realized each year,there will be differences on a
year to year basis,The year-to-year differences between actual experience and the assumptions are called
actuarial gains and losses and serve to lower or raise the employer's rates from one year to the next.Therefore,
the rates will IneVitably fluctuate,especially due to the ups and downs of investment returns.
Asset Volatility Ratio
Pools that have higher asset to payroll ratios produce more volatile employer rates due to investment return.For
example,a pool with an asset to payroll ratio of 8 may experience twice the contribution volatility due to
investment return volatility than a pool with an asset to payroll ratio of 4.Below we have shown your asset
volatility ratio,a measure·of the pool's potential future rate volatility.It should be noted that .this ratio increases
over time ~ut generally tends to stabilize as the pool matures.
Liability Volatility Ratio
Pools that have higher asset to liability ratios produce more volatile employer rates due to investment return.For
example,a pool With an asset to liability ratio of 8 may experience twice the contribution volatility due to
investment return volatility than a pool with an asset to liability ratio of 4.Below we have shown your volatility
index,a measure of the plan's potential future rate volatility.It should be noted that this ratio increases over time
but generally tends to stabilize as the pool matures.
1.Market Value of Assets without Receivables
2.Payroll
3.Asset Volatility Ratio (1./2.)
4.Accrued liability
5.Payroll
6.liability Volatility Ratio (4./5.)
CalPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
As of Jun.e 30,2011
$1,539,444,368
350,121,750
4.4
2,135,350,204
350,121,750
6.1
E-l
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Attachment B
APPENDIX E
Ancdysis of future Investment Return Scenarios
In July 2012,the investment return for fiscal year 2011-2012 was announced to be 1.1%.Note that this return is
before administrative expenses and also'does not refiect final Investment return information for real estate and
private equities.The final return information for these two asset dasses is expected to be available later in
October.For purposes of projecting future employer rates,we are assuming a 0%investment return for fiscal
year 2011-2012.
The investment return realized during a fiscal year first affects the contribution rate for the fiscal year 2 years later.
Specifically,the Investment return for 2011-2012 will first be reflected In the June 30,2012 actuarial valuation that
will be used to set the 2014-2015 employer contribution rates,the 2012-2013 investment return wiD first be
reflected In the June 30,2013 actuarial valuation that will be used to set the 2015-2016 employer contribution
rates and so forth.
Based on a 0%Investment return for fiscal year 2011-2012 and assuming that all other actuarial assumptions will
be reallz.ed and that no further changes to assumptions,contributions,benefits,or funding will occur between now
and the beginning of the fiscal year 2014-2015,the effect on the 2014-2015 Employer Rate Is as follows:
Estimated 2014-2015 Pool's Base
Employer Rate
15.1%
Estimated Increase In Pool's Base Employer Rate
between 2013-2014 and 2014-2015
1.0%
As part of this report,a sensitivity analysis was performed to determine the effects of various Investment returns
during fiscal years 2012-2013,2013-2014 and 2014-2015 on the 2015-2016,2016-2017 and 2017-2018 employer
rates.Once again,the projected rate Increases assume that all other actuarial assumptions will be realized and
that no further changes to assumptions,contributions,benefits,or funding will occur.
Five different investment return scenarios were selected.
•The first scenario Is what one would expect if the markets were to give us a 5
th percentile return from
July 1,2012 through June 30,2015.The 5th percentile return corresponds to a -4.10%return for the
each of the 2012-2013,2013-2014 and 2014-2015 fiscal years.
•The second scenario Is what one would expect if the markets were to give us a 25th percentile return
from July 1,2012 through June 30,2015.The 2~percentile return corresponds to a 2.60%return for
the each of the 2012-2013,2013-2014 and 2013-2014 fiscal years.
•The third scenario assumed the return for 2012-2013,2013-2014,2014-2015 would be our assumed
7.5%Investment return which represents about a 49th percentile event.
The fourth scenario Is what one would expect if the markets were to give us a·75 th percentile return
from july 1,2012 through June 30,2015.The 75th percentile return corresponds to a 11.90%return for
the each of the 2012-2013,2013-2014 and 2014-2015 fiscal years.
•Finally,the last scenario is what one would expect if the markets were to give us a 95 th percentile return
from july 1,2012 through June 30,2015.The 95 th percentile return corresponds to a 18.50%return for
the each of the 2012-2013,2013-2014 and 2014-2015 fiscal years.
The table below shows the estimated changes in the Pool's Base rate for 2015-2016,2016-2017 and 2017-2018
under the five different scenarios.
Total Estimated
2012-2015 Investment
Estimated Change in Pool's Base Rate Between Increase in Pool's Base
Return Scenario
Year Shown and Preceding Year Employer Rate
2015-2016
between 2014-2015
2016-2017 2017-2018 and 2017-2018
-4.10%(5th oercentile)3.3%3.4%3.1%9.7%
2.60%(25 tn percentile)1.1%1.5%1.5%4.1%
7.5%0.3%0.3%0.3%1.0%
11.90%(75tn oercentile)0.3%0.2%0.1%0.5%
18.50%(95tn percentile)0.1 %-0.1%-0.4%-0.3%
CalPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
E-2
3-90
Attachment B
APPENDIX E
Analysis of Discount Rate Sensitivity
The following analysis looks at the 2013-2014 employer contribution rates under two different discount rate
scenarios.Shown below are the employer contribution rates assuming discount rates that are 1%lower and 1%
higher than the current valuation discount rate.This analysis gives an indication of the potential required employer
contribution rates if the PERF were to realize investment returns of 6.50%or 8.50%over the long-term.
This type of analysis gives the reader a sense of the long-term risk to the risk pool contribution rates.
2013-2014 Employer Contribution Rate
As of June 30,2011 6.50%Discount 7.50%Discount Rate 8.50%Discount
Rate (-1%)(assumed rate)Rate (+1%)
Pool's Gross Emolover Normal Cost 13.8%9.9%6.8%
Pavment on Pool's Amortization Bases 11.6%5.0%-0.3%
Total'25.4%14.9%6.5%
CalPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
E-3
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APPENDIXf
GLOSSARY OF ACTUAmAll'ERMS
Attachment B
3-92
Attachment B
APPENDIX F
Glossary of Actuarial Terms
Accrued Uability (also called Actuarial Accrued Liability or Entry Age Normal Accrued liability)
The total dollars needed as of the valuation date to fund all benefits earned In the past for current
members.
Actuarial Assumptions
Assumptions made about certain events that will affect pension costs.Assumptions generally can be
broken down into two categories:demographic and economic.Demographic assumptions include
mortality,disability and retirement rates.Economic assumptions include discount rate,salary growth and
inflation.
Actuarial Methods
Procedures employed by actuaries to achieve certain funding goals of a pension plan.Actuarial methods
Include funding method,setting the length of time to fund the Accrued liability and determining the
Actuarial Value of Assets.
Actuarial Valuation
The determination,as of a valuation date,of the Normal Cost,Accrued liability,Actuarial Value of Assets
and related actuarial present values for a pension plan.These valuations are performed annually or when
an employer is contemplating a change to their plan provisions.
Actuarial Value of Assets
The Actuarial Value of Assets used for funding purposes Is obtained through an asset smoothing
technique where investment gains and losses are partially recognized in the year they are incurred,with
the remainder recognized In subsequent years.
This method helps to dampen large fluctuations in the employer contribution rate.
Amortization Bases
Separate payment schedules for different portions of the Unfunded liability.The total Unfunded Liability
of a Risk Pool or non-pooled plan can be segregated by "cause",creating "bases"and each such base will
be separately amortized and paid for over a specific period of time.This can be likened to a home
mortgage that has 24 years of remaining payments and a second on that mortgage that has 10 years left.
Each base or each mortgage note has Its own terms (payment period,principal,etc.)but all bases are
amortized using investment and payroll assumptions from the current valuation.
Generally In an actuarial valuation,the separate bases consist of changes in unfunded liabilities due to
amendments,actuarial assumption changes,actuarial methodology changes,and gains and losses.
Payment periods are determined by Board policy and vary based on the cause of the change.
Amortization Period
The number of years reqUired to payoff an Amortization Base.
Annual Required Contributions (ARC)
The employer's periodic required annual contributions to a defined benefit pension plan,calculated In
accordance with the plan assumptions.The ARC is determined by multiplying the employer contribution
rate by the payroll reported to calPERS for the applicable fiscal year.However,if this contribution is fully
prepaid in a lump sum,then the dollar value of the ARC Is equal to the Lump Sum Prepayment.
Class 1 Benefits
Class 1 benefits have been Identified to be additional benefits which have a significant,ongoing effect on
the total plan cost.In some cases,a Class 1 benefit may be an alternate benefit formula.These benefits
vary by employer across the risk pool.Agencies contracting for a Class 1 benefit will be responsible for
the past service liability associated with such benefit and will be required to pay a surcharge established
by the actuary to cover the ongoing cost (normal cost)of the Class 1 benefit.
CalPERS Actuarial Valuation -June 3D,2011
Miscellaneous 2.5%at 55 Risk Pool
F-1
3-93
Attachment B
APPENDIX F
Class 2 Benefits
Class 2 benefits have been identified to be the ancillary benefits providing one-time increases in
benefits.These benefits vary by employer across the risk pool.Agencies contracting for a Class 2
benefit will be responsible for the past service liability associated with such benefit.
Class 3 Benefits
Class 3 benefits have been identified to be additional benefits which have a minimal effect on the total
plan cost.Class 3 benefits may vary by rate plan within each risk pool.However,the employer
contribution rate will not vary within the risk pool due to the Class 3 benefits.
Discount Rate
The actuarial assumption that was called "Investment return"in earlier calPERS reports or "actuarial
interest rate"in Section 20014 of the california Public Employees'Retirement Law (PERL).
Entry Age
The earliest age at which a plan member begins to accrue benefits under a defined benefit pension plan
.or Risk Pool.In most cases,this is the same as the date of hire.
(The assumed retirement age less the entry age is the amount of time required to fund a member's total
benefit.Generally,the older a member is at hire,the greater the Normal Cost.This is mainly because
there is less time to earn investment income to fund the future benefits.)
Entry Age Normal Cost Method
An actuarial cost method designed to fund a member's total plan benefit over the course of his or her
career.This method is designed to produce stable employer contributions in amounts that increase at
the same rate as the employer's payroll (I.e.level %of payroll).
Fresh Start
A Fresh Start is the single amortization base created when multiple amortization bases are collapsed into
one base and amortized over a new funding period.
Funded Status
A measure of how well funded a plan or risk pool Is.Or equivalently,how "on track"a plan or risk pool
is With respect to assets vs.accrued liabilities.A ratio greater than 100%means the plan or risk pool
has more assets than liabilities and a ratio less than 100%means liabilities are greater than assets.A
funded ratio based on the Actuarial Value of Assets indicates the progress toward fully funding the plan
using the actuarial cost methods and assumptions.A funded ratio based on the Market Value of Assets
Indicates the short-term solvency of the plan.
GASB27
Statement No.27 of the Governmental Accounting Standards Board.The accounting standard
governing a state or local governmental employer's accounting for pensions.
Normal Cost (also called Total Normal Cost)
The annual cost of service accrual for the upcoming fiscal year for active employees.The required
employee contributions are part of the Total Normal Cost.The remaining portion,called the employer
normal cost,Includes surcharges for applicable class 1 benefits and should be viewed as the long term
employer contribution rate.
Pension Actuary
A person who is responsible for the calculations necessary to properly fund a pension plan.
Prepayment Contribution
A payment made by the employer to reduce or eliminate the year's required employer contribution.
Present Value of Benefits (PVB)
The total dollars needed as of the valuation date to fund all benefits earned in the past or expected to
be earned in the future for current members.
calPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
F-2
3-94
Attachment B
APPENDIX F
Risk Pool
Using the benefit of the law of large numbers,a risk pool Is a collection of employer plans for the
purpose of sharing risk.
Roiling Amortization Period
An amortization period that remains the same each year,rather than declining.
Side Fund
At the time a plan joined a risk pool,a Side Fund was created to account for the difference between the
funded status of the pool and the funded status of the plan.The plan's Side Fund is amortized on an
annual basis,with the discount rate net of,for active plans,the payroll growth rate assumption.The
actuarial investment return assumption is currently 7.5%.A positive Side Fund cause the plan's required
employer contribution rate to be reduced by the Amortization of Side Fund rate component shown In the
Required Employer Contributions section.A negative Side Fund cause the plan's required employer
contribution rate to be increased by the Amortization of Side Fund rate component In the absence of
subsequent contract amendments or funding changes,a plan's Side Fund will disappear at the end of
the Amortization Period.
Sup~rfunded
A condition existing when a plan's Actuarial Value of Assets exceeds Its Present Value of Benefits.When
this condition exists on a given valuation date for a given plan,employee contributions for the rate year
covered by that valuation may be waived.
Unfunded Liability
When a plan or pool's Actuarial Value of Assets is less than Its Accrued Liability,the difference Is the
plan or pool's Unfunded Liability of the Unfunded Liability is positive,the plan or pool will have to pay
contributions exceeding the Normal Cost.
CalPERS Actuarial Valuation -June 30,2011
Miscellaneous 2.5%at 55 Risk Pool
F-3
3-95
Attachment C
Staff Report to the FAC dated January 30,2013
3-96
CITY OF
MEMORANDUM
Attachment C
RANCHO PALOS VERDES
TO:
FROM:
DATE:
SUBJECT:
REVIEWED:
HONORABLE CHAIR &MEMBERS OF THE FINANCE
ADVISORY COMMITTEE
KATHRYN DOWNS,DEPUTY DIRECTOR OF FINANCE
&INFORMATION TECHNOLOGY
JANUARY 30,2013
PENSION UPDATE
DENNIS McLEAN,DIRECTOR OF FINANCE &
INFORMATION TECHNOLOGY
RECOMMENDATION
Update the Finance Advisory Committee Memorandum to the City Council regarding the
calculation of the City's unfunded pension liability.
BACKGROUND
The City Council approved 2012-13 Work Plan for the Finance Advisory Committee
(FAC)includes the following task:
"Receive the 2012 CalPERS Actuarial Valuation Report,update the Committee's
Memorandum to the City Council dated April 25,2012 and titled "Calculation of the City's
Unfunded Pension Liability",and consider any other pension related issues which City
Council may direct".
The California Public Employees'Retirement System (CaIPERS)Actuarial Valuation
Report (AVR)dated June 30,2011,received in December 2012,is attached (see
Attachment A).The FAC's Memorandum dated April 25,2012 is also attached for
reference (see Attachment B).
DISCUSSION
As a reminder,the Governmental Accounting Standards Board (GAS B)adopted
Statement No.68 -Accounting and Financial Reporting for Pensions.This new
accounting standard will require the City's unfunded pension liability to be reported as a
liability on the City's financial statements beginning with the fiscal year ended June 30,
3-97
Attachment C
PENSION UPDATE
January 30,2013
Page 2 of 3
2015.
CalPERS indicated that it will provide the information necessary to comply with the new
standard to its member agencies by the required reporting date.With the June 30,
2011 AVR,CalPERS provided some,but not all,of the required information.Of
significant note,CalPERS provided the City's share of its risk pool's unfunded liability
based upon the Actuarial,Market,and Hypothetical Termination Amounts (summarized
below).
As the City has less than 100 active members,the City is required to participate in a risk
pool with other small employer agencies that have the same benefit formula.An
actuarial valuation is prepared for the risk pool as a whole.Previously,information such
as the Gity's share of the risk pool's unfunded liability was not available.Staff could
only estimate the City's unfunded liability by calculating a proportionate share of the risk
pool.
Market Amount
Hypothetical Termination Amount
3,197,129
~~551,~53 .
N/A
3,714,970
6,008,fj49 .
16,571,853
The Actuarial Amount is calculated as the accrued pension liability for .benefitsearned,
less the actuarial value of plan assets.The Market Amount is calculated as the accrued
pension liability for benefits earned,less the market value of plan assets.
The Hypothetical Termination Amount (HTA)is what the City may owe if it were to
separate from CalPERS as of the date of the AVR (June 30,2011).The HTA is
calculated by discounting the accrued pension liability by a 30-year U.S.Treasury rate
and SUbtracting the market value of plan assets.The purpose of the HTA is to estimate
the mitigation of CalPERS future funding risk for terminating agencies only.The HTA
calculated for June 30,2011 was based upon a U.S.Treasury discount rate of 4.82%.
The corresponding U.S.Treasury discount rate for June 30,2012 is 2.87%.Therefore,
it appears likely that the calculated HTA presented in the June 30,2012 AVR will be
greater.
If the City had all the required information for early implementation of the new
accounting standard,the liability to be included in the financial statements would be
$6,008,649 as of June 30,2011.The City is about to issue its June 30,2012 financial
statements.White Nelson Diehl Evans LLP,the City's independent auditors,has
advised the City to refrain from early implementation of the new accounting standard
until more current and complete information is available.
The employer contribution rates for FY13-14 are summarized below.If all 58 full-time
positions were filled at today's salary rates,the increase in the employer contribution
3-98
Attachment C
PENSION UPDATE
January 30,2013
Page 3 of 3
rates would result in an approximate $37,000 impact to the City's bUdget.
7.846%8.049%
Not Available Yet Not Available Yet
L~'!1plqYE:!<rC::()l1tti~lJti()n ~ates:
Existin&emploYE:!es
Classic members (1)
New members (2)
13.914%14.660016
Notes:
(1)Classic members are new hires who previously participated in a reciprocating California
public employee pension system prior to January 1,2013,and will have a benefit
formula of 2%@ 60.
(2)New members are those hired after January 1,2013 that do not fit the Classic member
definition,and will have a benefit formula of 2%@ 62.
On January 14,2013,CalPERS announced that it earned a 13.3%return on its
investments for the 12-month period that ended December 31,2012.As a reminder,
the actuarial assumption for investment return is 7.5%.A 10-year summary of
investment returns by calendar year follows.
2003 23.3%
2004 13.4%.
2005 11.1%
2006 15.7%
2007 10.2%
2008 -27.8%<
2009 12.1%·
2010:12.6%:
2011 1.1%;
2012:13.3%
3-99
Attachment D
Staff Report to the FAC dated March 6,2013
3-100
Attachment D
CrTYOF
MEMORANDUM
TO:
FROM:
DATE:
SUBJECT:
REVIEWED:
HONORABLE CHAIR &MEMBERS OF THE FINANCE
ADVISORY COMMITTEE
KATHRYN DOWNS,DEPUTY DIRECTOR OF FINANCE
&INFORMATION TECHNOLOGY
MARCH 6,2013
PENSION UPDATE
DENNIS McLEAN,DIRECTOR OF FINANCE &
INFORMATION TECHNOLOGY
RECOMMENDATION
1.Receive and file the additional information provided;and
2.Finalize an updated version of the April 25,2012 Memorandum from the Finance
Advisory Committee (FAC)to the City Council titled "Calculation of the City's
Unfunded Pension Liability".
DISCUSSION
The FAC received updated information about the City's pension plan on January 30,
2013.The information was primarily from the June 30,2011 Actuarial Valuation Report
(2011 AVR)that was received at the end of 2012.As a reminder,a summary of the
City's estimated unfunded pension liability is presented below.
Unfunded Liability:
Actuarial Amount
Market Amount
Hypothetical Termination Amount
$3,197,129 $
$~,551l553 $
N!A$
3,714,970
6,008,t),49
16,571,853
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Attachment 0
PENSION UPDATE
March 6,2013
Page 2 of 2
Since that meeting,Staff obtained the following additional information from the
CalPERS Actuary assigned to the City's contract.
1.One agency is currently in the process of final termination with CaIPERS.About
20 agencies have requested pre-termination valuations in the past 12 months.
2.The 2011 AVR included a statement that the U.S.Treasury discount rate used to
calculate the Hypothetical Termination Amount (HTA)was 4.82%,and that the
corresponding rate for June 30,2012 was 2.87%.When asked how the lower
discount rate at June 30,2012 would affect the HTA,the Actuary affirmed that a
good method to estimate the impact is to increase the HTA by the same
percentage as the decrease of the discount rate.For example,the discount rate
decreased by 40%from 2011 to 2012;therefore,applying a 40%increase to the
2911 HTA would be one way to roughly estimate the 2012 HTA ($16.6 million X
140%=$23.2 million).However,one cannot accurately estimate the HTA when
it is based upon an unfunded liability that changes near daily depending upon
investment returns,market value of the portfolio,and actual retirement benefit
payments;and the discount rate upon which the HT A is calculated can fluctuate
significantly.
3.The rate used for termination valuation is a weighted average of the 10 and 30-
year U.S.Treasury rates on the termination date.On January 31,2013,the 10
and 30-year rates were 2.02%and 3.17%,respectively.
Staff inquired with the City Attorney about whether there is a legal basis to appeal the
HTA calculation imposed by CaIPERS.There is an administrative appeal process
whereby an administrative law judge hears the matter and renders a proposed decision
to the CALPERS Board,which makes the final decision.Presumably,the Board's
decision can be appealed.The City would likely need to go through the termination
process and receive an actual termination calculation from CalPERS to proceed with a
case.
Finally,Staff received the contribution rates for New Members,defined as employees
hired after January 1,2013 who do not fit the Classic Member definition of those who
previously participated in a reciprocating California pUblic employee pension system
prior to January 1,2013.New Members will have a benefit formula of 2%@ 62.
Employer Contribution Rates:
Existing employees
Classic members
New members
13.914%
7.846%
6.250%
14.660%
8.049%
6.250%
A copy of the draft FAC Memorandum dated March 6,2013 and titled "Update re the
City's Unfunded Pension Liability"is attached.
3-102