CC SR 20211221 G - CalPERS Annual Actuarial Valuation Report
CITY COUNCIL MEETING DATE: 12/21/2021
AGENDA REPORT AGENDA HEADING: Consent Calendar
AGENDA TITLE:
Consideration and possible action to receive a report of the CalPERS annual Actuarial
Valuation Report (AVR) as of June 30, 2020.
RECOMMENDED COUNCIL ACTION:
(1) Receive and file the Actuarial Valuation Report (AVR) as of June 30, 2020.
FISCAL IMPACT: N/A
Amount Budgeted: N/A
Additional Appropriation: N/A
Account Number(s): N/A
ORIGINATED BY: Christopher Browning, Senior Administrative Analyst
REVIEWED BY: Trang Nguyen, Director of Finance
APPROVED BY: Ara Mihranian, AICP, City Manager
ATTACHED SUPPORTING DOCUMENTS:
A. Actuarial Valuation Report (AVR) Tier 1 (Attachment A-1)
B. Actuarial Valuation Report (AVR) Tier 2 (Attachment B-1)
C. Actuarial Valuation Report (AVR) Tier 3 (Attachment C-1)
D. Pension Guidelines (Attachment D-1)
BACKGROUND AND DISCUSSION:
Staff has prepared this report to present and discuss the City’s annual employee pension
plan Actuarial Valuation Reports (AVR) to the City Council. This process is completed
annually by staff in our process of monitoring updates to pension plan. On November 4,
2021, Staff presented the same information to the Finance Advisory Committee (FAC). At
this meeting, FAC approved to receive and file the report, as presented.
1
CITYOF RANCHO PALOS VERDES
Actuarial Valuation Report as of June 30, 2020
Retirement benefits are valued on an annual basis by CalPERS certified actuaries and
the results are reported to member agencies through an Actuarial Valuation Report (AVR)
each year. These reports (Attachments A, B, & C) inform the City of our obligation, both
current and future, represented in the report as the Accrued Liability (AL).
The AL is comprised of the liability incurred by not only active members, but also
transferred members (employees that have moved to a reciprocal retirement system),
terminated employees, and members or their beneficiaries that are currently receiving
payments. As expected, Tier 1 makes up the largest portion of the AL and contains nearly
the entirety of the liability attributed to those receiving payments. Tier 2 and Tier 3, Public
Employees’ Pension Reform Act (PEPRA) were created much more recently and are
typically made up of employees that previously worked for another CalPERS agency, and
employees that are new to CalPERS. Also, Tier 2 and Tier 3 employees that are no longer
with the City are likely still in the workforce since the majority of these member have not
yet reached retirement age. The distribution of the City’s AL is detailed in Table 1 below.
Table 1: Accrued Liability by Member Status as of June 30, 2020
The AL is then assessed against the current market value of the assets CalPERS invests
on the City’s behalf, which results in the City’s Unfunded Actuarial Liability (UAL). This
represents the estimated value of unfunded benefits already earned.
In the latest AVR from CalPERS, the City’s total UAL for all employee groups is $1 4.2
million as of June 30, 2020 as shown in Table 2. The UAL of $14.2 is calculated by taking
the City’s total accrued pension liability of $50.2 million and subtracting from it the market
value of the City’s assets, $36.1 million.
Tier 1 Tier 2 Tier 3 Total
Active Members $9,966,516 $1,210,300 $1,253,608 $12,430,424
Transferred Members $5,921,671 $310,282 $426,798 $6,658,751
Terminated Members $2,704,376 $86,302 $39,595 $2,830,273
Members & Beneficiaries
Receiving Payments $27,480,518 $838,033 $0 $28,318,551
Total $46,073,081 $2,444,917 $1,720,001 $50,237,999
Accrued Liability
2
Table 2: Unfunded Actuarial Liability as of June 30, 2020
As the City’s AL increased as of June 30, 2020, accordingly, the City’s funded status has
decreased with time as the AL has grown at a faster rate than the value of the City’s
assets. In line with this decrease in funded status, the City’s UAL has continued to grow
due to investment returns failing to meet expectations, resulting in a funded status of
71.8% by June 30, 2020. These changes are illustrated in Table 3 below.
City’s Historical Data and AVR Ratios
Table 3: Historical Funded Status
Therefore, as the City’s total UAL increases, the required annual UAL payment also
increases as shown in Table 4.
Table 4: Employer Historical Annual Unfunded Accrued Liability Payments
Tier 1 Tier 2 Tier 3 Total
Accrued Liability $46,073,081 $2,444,917 $1,720,001 $50,237,999
Market Value of Assets $32,343,280 $2,192,472 $1,524,582 $36,060,334
Unfunded Accrued Liability $13,729,801 $252,445 $195,419 $14,177,665
Funded Ratio 70.2%89.7%88.6%71.8%
Fiscal Year Ending 6/30/2016 6/30/2017 6/30/2018 6/30/2019 6/30/2020
Tier 1 70.7%73.2%71.8%71.6%70.2%
Tier 2 90.3%94.8%92.0%91.1%89.7%
Tier 3 89.9%94.8%91.8%90.3%88.6%
Combined 71.2%74.1%72.9%72.9%71.8%
UAL Payment % of Total UAL Payment % of Total UAL Payment % of Total UAL Payment % Change
2019-20 $739,621 99.3% $3,107 0.4% $2,239 0.3%$744,967 21%
2020-21 $835,213 96.7% $15,889 1.8% $12,837 1.5%$863,939 16%
2021-22 $971,580 96.9% $17,301 1.7% $13,868 1.4%$1,002,749 16%
2022-23 $1,105,780 96.9% $20,057 1.8% $15,841 1.4%$1,141,678 14%
2023-24 $1,187,000 96.8% $22,000 1.8% $17,000 1.4%$1,226,000 7%
Fiscal Year
Employer Contribution History
TotalTier 1 Tier 2 Tier 3
3
Furthermore, for the City’s employee tier distribution, Tier 1 makes up nearly 97% of the
total UAL cost and is projected to remain at this same level next year. Tier 1 contains the
largest number of both active and former employees (See Table 5) and provides a higher
retirement benefit. For this reason, its liability grows at a higher rate than both Tier 2 and
Tier 3 employees.
Table 5: Employee Tier Distribution
However, the percentage of staff in Tier 1 has decreased each year as employees retire
or end employment with the City. Employee turnover does not decrease the City’s current
UAL, however, over time, this will decrease future CalPERS costs as Tier 1 employees
are replaced with Tier 2 and Tier 3 staff. Employees in the lower tiers create lower future
liability costs since they would be entitled to lower pension benefits than Tier 1 employees.
Table 6: Historical Employee Tier Distribution
As pension plans mature, they become more sensitive to risks. Understanding plan
maturity and how it affects the ability of a pension plan to tolerate risk is important in
understanding how the plan is impacted by investment return volatility, other economic
variables and changes in longevity or other demographic assumptions. One way to look
at the maturity level of CalPERS and its plans is to look at the ratio of a plan’s retiree
liability to its total liability. A pension plan in its initial stages will have a very low ratio of
retiree liability to total liability. As the plan matures, the ratio starts increasing. A mature
plan will often have a ratio above 60%-65%. The City’s Retiree-to-Liability ratio is at or
below the CalPERS benchmark across all tiers. Tier 3 has a ratio of 0 due to the fact that
no employees at this tier have retired.
Tier 1 Tier 2 Tier 3 Total by Status
Number of Actives 24 14 57 95
Number of Retirees 99 4 0 103
Total by Tier 123 18 57 198
Tier 2016 2017 2018 2019 2020
Tier 1 50 41 32 28 24 -26 -52%
Tier 2 14 16 17 16 14 0 0%
Tier 3 26 33 54 52 57 31 119%
Cumulative Change
4
Table 7: Retiree-to-Liability Ratio
Another measure of the maturity level of CalPERS and its plans is to look at the ratio of
active-to-retired members, also known as the Support Ratio. A pension plan in its initial
stages will have a very high ratio of active-to-retired members. As the plan matures, and
members retire, the ratio starts declining. A mature plan will often have a ratio near or
below one. The average support ratio for CalPERS public agency plans is roughly 1.25.
The City is slightly below the CalPERS average with a combined ratio across all tiers of
0.92. The City’s lower ratio can be attributed to having a relatively small workforce which
has decreased over the years, leaving fewer active employees to support the plan and
the retired employees.
Table 8: Support Ratio
City’s CalPERS Contributions
Every employer makes contributions to CalPERS in two parts:
Normal Cost – Pays for a year of benefit accrual (i.e., an employee works a full year
of service for the City)
Amortization of UAL – Pays for any deficit or surplus accrued over the prior years
of service.
Total Annual Contribution Rate = Normal Cost + UAL
Table 9 on the next page provides a breakdown of the City’s total minimum annual
contribution for FY 2022-23.
Retired Accrued Liability $27,480,518 $838,033 $0
Total Accrued Liability $46,073,081 $2,444,917 $1,720,001
Ratio of Retiree AL to Total AL 0.60 0.34 0.00
Tier 1 Tier 2 Tier 3
Tier 1 Tier 2 Tier 3 Combined
Number of Actives 24 14 57 95
Number of Retirees 99 4 0 103
Support Ratio 0.24 3.50 -0.92
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Table 9: FY 2022-23 Total Annual Contribution
The City does receive a lump sum discount if they pay the UAL payment all at once
upfront. Table 10 below breaks down the cost savings of roughly $38,000 received when
making this lump sum payment.
Table 10: CalPERS UAL Lump Sum Payment Discount
In its most recent valuation, CalPERS has indicated that our required annual UAL
contributions are expected to increase through Fiscal Year 202 7-28 reaching a total of
$1.5 million. The prepayment discount to be received in FY 2022 -23 is $36,782.
Normal Cost
Rate
Employer
Normal Cost UAL Payment Total
Tier 1 12.21% $231,743 $1,105,780 $1,337,523
Tier 2 8.63% $146,224 $20,057 $166,281
Tier 3 7.47% $224,053 $15,841 $239,894
Total $602,020 $1,141,678 $1,743,698
Tier
FY 22-23
UAL - Annual
PMT
UAL - Annual
PMT (Discount)Savings
Tier 1 $1,105,780 $1,068,998 $36,782
Tier 2 $20,057 $19,390 $667
PEPRA $15,841 $15,314 $527
Total $1,141,678 $1,103,702 $37,976
Tier
FY 22-23
6
Table 11: Estimated Employer Contribution Based on Projected Payroll
CalPERS allows employers to make additional discretionary payments (ADPs) at any
time and in any amount. These optional payments serve to reduce the UAL and future
required contributions and can result in significant long-term savings. These ADPs can
also be used to stabilize annual contributions as a fixed dollar amount, percent of payroll
or percent of revenue.
CalPERS provides several ADP options (Table 12) that would allow the City to accelerate
the payment of the UAL. However, it is important to note that these calculations are based
on the projected UAL as of June 30, 2021, as determined in the June 30, 2019, actuarial
valuation reports. New unfunded liabilities can emerge in future years due to assumption
or method changes, changes in plan provisions and actuarial experience different than
assumed.
The ADP options in Table 12 on the next page are divided in to four scenarios: 20 years,
15 years, 10 years, and 5 years. Each of the scenarios detail a payment plan that would
allow the UAL to be repaid for each tier by the stated number of years if the listed Annual
ADP is made each fiscal year. For example, if an annual total ADP of $397,965 is made
the City’s total UAL could be repaid within 15 years based on the data available today. It
should be noted, as explained in the previous paragraph, that these scenarios are based
on the information and data available at the time these AVRs were created. This
information can change with factors such as employee tier distribution, investment
returns, and the discount rate.
Required Contr.
Tier FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 FY 27-28
Tier 1 $1,105,780 $1,187,000 $1,273,000 $1,328,000 $1,380,000 $1,414,000
Tier 2 $20,057 $22,000 $24,000 $26,000 $28,000 $28,000
Tier 3 $15,841 $17,000 $19,000 $20,000 $21,000 $22,000
Total $1,141,678 $1,226,000 $1,316,000 $1,374,000 $1,429,000 $1,464,000
Projected Future Employer Contributions
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Table 12: Additional Discretionary Employer Contributions
Funding Target - Current
Tier
Estimated
Normal Cost
Minimum UAL
Payment Annual ADP
Total UAL
Contribution
Estimated Total
Contribution
Tier 1 $231,743 $1,105,780 $0 $1,105,780 $1,337,523
Tier 2 $146,224 $20,057 $0 $20,057 $166,281
Tier 3 $224,053 $15,841 $0 $15,841 $239,894
Total $602,020 $1,141,678 $0 $1,141,678 $1,743,698
Funding Target - 20 Years
Tier
Estimated
Normal Cost
Minimum UAL
Payment Annual ADP
Total UAL
Contribution
Estimated Total
Contribution
Tier 1 $231,743 $1,105,780 $152,583 $1,258,363 $1,490,106
Tier 2 $146,224 $20,057 $3,079 $23,136 $169,360
Tier 3 $224,053 $15,841 $1,970 $17,811 $241,864
Total $602,020 $1,141,678 $157,632 $1,299,310 $1,901,330
Funding Target - 15 Years
Tier
Estimated
Normal Cost
Minimum UAL
Payment Annual ADP
Total UAL
Contribution
Estimated Total
Contribution
Tier 1 $231,743 $1,105,780 $357,905 $1,463,685 $1,695,428
Tier 2 $146,224 $20,057 $6,855 $26,912 $173,136
Tier 3 $224,053 $15,841 $4,876 $20,717 $244,770
Total $602,020 $1,141,678 $369,636 $1,511,314 $2,113,334
Funding Target - 10 Years
Tier
Estimated
Normal Cost
Minimum UAL
Payment Annual ADP
Total UAL
Contribution
Estimated Total
Contribution
Tier 1 $231,743 $1,105,780 $792,271 $1,898,051 $2,129,794
Tier 2 $146,224 $20,057 $14,841 $34,898 $181,122
Tier 3 $224,053 $15,841 $11,024 $26,865 $250,918
Total $602,020 $1,141,678 $818,136 $1,959,814 $2,561,834
Funding Target - 5 Years
Tier
Estimated
Normal Cost
Minimum UAL
Payment Annual ADP
Total UAL
Contribution
Estimated Total
Contribution
Tier 1 $231,743 $1,105,780 $2,145,555 $3,251,335 $3,483,078
Tier 2 $146,224 $20,057 $39,723 $59,780 $206,004
Tier 3 $224,053 $15,841 $30,179 $46,020 $270,073
Total $602,020 $1,141,678 $2,215,457 $3,357,135 $3,959,155
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CalPERS Projected Funding Level for All Plans
The COVID-19 pandemic caused a significant slowdown to the nation’s economy and a
subsequent sharp, but temporary, drop in the stock market. The market hit its low point
during the second quarter as the CalPERS fiscal year drew to a close. This resulted in
the CalPERS portfolio earning a return of 4.7%, failing to meet its annual investment
target of 7% as of June 30, 2020. The impact of this shortfall was felt across all plans
which saw their funded status fall. The City of Rancho Palos Verdes saw its funded status
fall from 72.9% to 71.8%.
As of the close of the fiscal year end ing June 30, 2021, CalPERS’ portfolio experienced
a return of 21.3%. CalPERS is estimating that this will result in the total combined funding
status of CalPERS increasing from 71% to 82%. CalPERS' FY 2020-21 investment
performance will be calculated based on audited figures and any impact to the City’s
funded status as a result of this investment return will be reflected in the FY 2023-24 AVR.
The return of 21.3% also triggered CalPERS’s risk mitigation policy which automatically
causes a reduction in the discount rate. As shown below in Graphic 1, this policy is
automatically triggered when investment returns reach certain thresholds.
Graphic 1: CalPERS Funding Risk Mitigation Policy Trigger
9
82% funded status (from 71%)
'
50 -60 % 70-80 %
If
investment returns outperform discount rate by :
+2 pp ➔ 9 %
+7pp ➔14 %
+10 pp ➔ 17 %
90-100 %
then
resulting discount rate will be :
6.95 %
6.90 %
6.85 %
------------------------From Risk
6 .80 % r-M!tigat~on Policy +13 pp ➔ 20 %
-------------------------triggering
+17pp ➔24 % 6.75 %
In this instance, investment returns ended the fiscal year at 21.3%, 14.3% over the current
discount rate of 7%. This triggered a drop in the discount rate from 7% to 6.8%. The area
highlighted in orange on Graphic 1 shows that an investment return of at least 13 pp
(percentage points), but less than 17 pp, over the 7% dis count rate triggers a reduction
in the discount rate to 6.8%. CalPERS implemented this policy in order to use larger than
normal returns to offset the effects a decrease in the discount rate has on the UAL.
CalPERS estimates that a move to a 6.2% discount rate over time would more accurately
reflect an appropriate long-term expectation for investment returns.
Graphic 2 below shows the gradual reduction in the discount rate that CalPERS has
phased in over the past several fiscal years.
Graphic 2: Past CalPERS Discount Rate Reductions
ADDITIONAL INFORMATION
Pension Guidelines
Pursuant to City Council Goal Number 71, Staff presented the Pension Guidelines as
recommended by the Finance Advisory Committee (FAC) to the City Council at the
January 19, 2021, meeting. The City Council unanimously approved the guidelines as
presented on February 2, 2021 (Attachment D). Additionally, the City Council approved a
transfer of $307,000 from the General Fund surplus into the newly created Employee
Pension Plan Service Fund in the FY 2021-22 adopted budget.
On December 9, 2021, Staff presented the year-end report to the Finance Advisory
Committee (FAC) and supported Staff’s recommendation to increase the initial
contribution of $307,000 to $640,000 due to the operating surplus as reported in the FY
2020-21 Year-End Report. The City Council is being asked to allocate an additional
$333,000 to increase the contribution to $640,000 to the Employee Pension Fund as part
of the year-end staff report on tonight’s agenda.
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Discount Rate Changes
2017-18* (State). . . . 7.5 % --+ 7.375 %
2018-19 * (School/PA) . 7.5 % --+ 7.375 %
2018-19 * (State) ... . 7.375 % --+ 7.25 %
2019 -20 * (School/PA). . 7.375 % --+ 7.25 %
2019-20 * (State) . . . . 7.25 % --+ 7.0 %
2020-21 * (School/PA). . 7.25 % --+ 7.0 %
2012 . . 7.75 % --+ 7.5 %
2004 . 8.25 % --+ 7.75 %
* FY req uire d co ntrib ution
For the future years, the guidelines states that the City Council may consider an annual
contribution of at least 10% but no more than 25% of the annual General Fund surplus
(revenues minus expenditures, including transfers) to the Employee Pension Plan Service
Fund during its annual budget adoption.
CONCLUSION:
The City’s retirement benefits are valued on an annual basis by CalPERS’ certified
actuaries and the results are reported through an AVR. The report is the documentation
for the City’s current and future pension obligations, therefore the fiscal year required
payments made to CalPERS are reflected in the City’s Annual Comprehensive Financial
Report. Any assumptions outside the report are utilized by Staff for long-term financial
planning and possible future policy decisions for City Council’s consideration.
In summary, as of June 30, 2020, the AVR indicates that the City’s Market Value of Assets
increased by $1.1 million, and AL increased by $2.3 million when compared to the prior
year’s report. The variances resulted in an increase to the UAL by 9.2% or $1.2 million,
ending the fiscal year at $14.2 million. The City’s funded status decreased from 72.9% to
71.8%. The decreased amounts in the City’s reports are due to accrued liability growing
faster than the City’s value of assets, and investment returns ending the year at 4.7%
instead of 7%. The positive impact of the 21.3% return at the end of June 30, 2021, will
be reflected in next year’s actuarial reports along with the reduction in the discount rate.
ALTERNATIVES:
In addition to the Staff recommendation, the following alternative action is available for
the City Council’s consideration:
1. Take other action, as deemed appropriate.
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California Public Employees’ Retirement System
Actuarial Office
400 Q Street, Sacramento, CA 95811 | Phone: (916) 795-3000 | Fax: (916) 795-2744
888 CalPERS (or 888-225-7377) | TTY: (877) 249-7442 | www.calpers.ca.gov
July 2021
Miscellaneous Plan of the City of Rancho Palos Verdes
(CalPERS ID: 3846845523)
Annual Valuation Report as of June 30, 2020
Dear Employer,
Attached to this letter, you will find the June 30, 2020 actuarial valuation report of your CalPERS pension plan.
Provided in this report is the determination of the minimum required employer contributions for fiscal
year 2022-23. In addition, the report contains important information regarding the current financial status of the
plan as well as projections and risk measures to aid in planning for the future.
Because this plan is in a risk pool, the following valuation report has been separated into two sections:
• Section 1 contains specific information for the plan including the development of the current and projected
employer contributions, and
• Section 2 contains the Risk Pool Actuarial Valuation appropriate to the plan as of June 30, 2020.
Section 2 can be found on the CalPERS website (calpers.ca.gov). From the home page, go to “Forms & Publications”
and select “View All”. In the search box, enter “Risk Pool” and from the results list download the Miscellaneous Risk
Pool Actuarial Valuation Report for June 30, 2020.
Your June 30, 2020 actuarial valuation report contains important actuarial information about your pension plan at
CalPERS. Your assigned CalPERS staff actuary, whose signature appears in the Actuarial Certification section on page
1, is available to discuss the report with you.
Actuarial valuations are based on assumptions regarding future plan experience including investment return and payroll
growth, eligibility for the types of benefits provided, and longevity among retirees. The CalPERS Board of Administration
adopts these assumptions after considering the advice of CalPERS actuarial and investment teams and other
professionals. Each actuarial valuation reflects all prior differences between actual and assumed experience and adjusts
the contribution rates as needed. This valuation is based on an investment return assumption of 7.0% which was
adopted by the board in December 2016. Other assumptions used in this report are those recommended in the CalPERS
Experience Study and Review of Actuarial Assumptions report from December 2017.
Required Contribution
The exhibit below displays the minimum employer contributions for fiscal year 2022-23 along with estimates of the
required contributions for fiscal year 2023-24. Member contributions other than cost sharing (whether paid by the
employer or the employee) are in addition to the results shown below. The employer contributions in this report
do not reflect any cost sharing arrangements you may have with your employees.
Fiscal Year Employer Normal
Cost Rate
Employer Amortization of
Unfunded Accrued Liability
2022-23 12.21% $1,105,780
Projected Results
2023-24 12.2% $1,187,000
A-1
J~_CalPERS
Miscellaneous Plan of the City of Rancho Palos Verdes
(CalPERS ID: 3846845523)
Annual Valuation Report as of June 30, 2020
Page 2
The actual investment return for fiscal year 2020-21 was not known at the time this report was prepared. The
projections above assume the investment return for that year would be 7.00%. To the extent the actual
investment return for fiscal year 2020-21 differs from 7.00%, the actual contribution requirements for
fiscal year 2023-24 will differ from those shown above. For additional details regarding the assumptions and
methods used for these projections please refer to the “Projected Employer Contributions” in the “Highlights and
Executive Summary” section. This section also contains projected required contributions through fiscal year 2027-28.
Changes from Previous Year’s Valuation
There are no significant changes in actuarial assumptions or policies in your 2020 actuarial valuation. Your annual
valuation report is an important tool for monitoring the health of your CalPERS pension plan. Your report contains
useful information about future required contributions and ways to control your plan’s funding progress. In addition to
your annual actuarial report my office has developed tools for employers to plan, project and protect the retirement
benefits of your employees. Pension Outlook is a tool to help plan and budget pension costs into the future with easy
to understand results and charts.
You will be able to view the projected funded status and required employer contributions for pension plans in
different potential scenarios for up to 30 years into the future — which will make budgeting more predictable. While
Pension Outlook can't predict the future, it can provide valuable planning information based on a variety of future
scenarios that you select.
Pension Outlook can help you answer specific questions about your plans, including:
• When is my plan’s funded status expected to increase?
• What happens to my required contributions in a down market?
• How does the discount rate assumption affect my contributions?
• What is the impact of making an additional discretionary payment to my plan?
To get started, visit our Pension Outlook page at www.calpers.ca.gov/page/employers/actuarial-resources/pension-
outlook-overview and take the steps to register online.
CalPERS will be completing an Asset Liability Management (ALM) review process in November 2021 that will review the
capital market assumptions and the strategic asset allocation and ascertain whether a change in the discount rate and
other economic assumptions is warranted. In addition, the Actuarial Office will be completing its Experience Study to
review the demographic experience within the pension system and make recommendations to modify future
assumptions where appropriate.
Furthermore, this valuation does not reflect any impacts from the COVID-19 pandemic on your pension plan. The
impact of COVID-19 on retirement plans is not yet known and CalPERS actuaries will continue to monitor the effects
and where necessary make future adjustments to actuarial assumptions.
Further descriptions of general changes are included in the “Highlights and Executive Summary” section and in Appendix
A of the Section 2 report, “Actuarial Methods and Assumptions.”
Questions
We understand that you might have questions about these results, and your assigned CalPERS actuary whose signature
is on the valuation report is available to discuss. If you have other questions, you may call the Customer Contact Center
at (888)-CalPERS or (888-225-7377).
Sincerely,
SCOTT TERANDO, ASA, EA, MAAA, FCA, CFA
Chief Actuary
A-2
Actuarial Valuation
as of June 30, 2020
for the
Miscellaneous Plan
of the
City of Rancho Palos Verdes
(CalPERS ID: 3846845523)
Required Contributions
for Fiscal Year
July 1, 2022 - June 30, 2023
A-3
A
CalPERS
Table of Contents
Section 1 – Plan Specific Information
Section 2 – Risk Pool Actuarial Valuation Information
A-4
Section 1
CALIFORNIA PUBLIC EM PLOYEES’ RETIREMENT SYSTEM
Plan Specific Information
for the
Miscellaneous Plan
of the
City of Rancho Palos Verdes
(CalPERS ID: 3846845523)
(Rate Plan ID: 1107)
A-5
Rate Plan belonging to the Miscellaneous Risk Pool
Table of Contents
Actuarial Certification 1
Highlights and Executive Summary
Introduction 3
Purpose of Section 1 3
Required Employer Contributions 4
Additional Discretionary Employer Contributions 5
Plan’s Funded Status 6
Projected Employer Contributions 6
Other Pooled Miscellaneous Risk Pool Rate Plans 7
Cost 8
Changes Since the Prior Year’s Valuation 9
Subsequent Events 9
Assets and Liabilities
Breakdown of Entry Age Accrued Liability 11
Allocation of Plan’s Share of Pool’s Experience/Assumption Change 11
Development of Plan’s Share of Pool’s Market Value of Assets 11
Schedule of Plan’s Amortization Bases 12
Amortization Schedule and Alternatives 14
Employer Contribution History 16
Funding History 16
Risk Analysis
Future Investment Return Scenarios 18
Discount Rate Sensitivity 19
Mortality Rate Sensitivity 19
Maturity Measures 20
Maturity Measures History 21
Hypothetical Termination Liability 22
Participant Data 23
List of Class 1 Benefit Provisions 23
Plan’s Major Benefit Options 24
A-6
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 1
Actuarial Certification
Section 1 of this report is based on the member and financial data contained in our records as of June 30, 2020
which was provided by your agency and the benefit provisions under your contract with CalPERS. Section 2 of
this report is based on the member and financial data as of June 30, 2020 provided by employers participating
in the Miscellaneous Risk Pool to which the plan belongs and benefit provisions under the CalPERS contracts for
those agencies.
As set forth in Section 2 of this report, the pool actuaries have certified that, in their 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 of the date of this valuation
and as prescribed by the CalPERS Board of Administration according to provisions set forth in the California Public
Employees’ Retirement Law.
Having relied upon the information set forth in Section 2 of this report and based on the census and benefit
provision information for the plan, it is my opinion as the plan actuary that the Unfunded Accrued Liability
amortization bases as of June 30, 2020 and employer contribution as of July 1, 2022 have been properly and
accurately determined in accordance with the principles and standards stated above.
The undersigned is an actuary who satisfies the Qualification Standards for Actuaries Issuing Statements of
Actuarial Opinion in the United States with regard to pensions.
STUART BENNETT, ASA, MAAA
Senior Pension Actuary, CalPERS
A-7
Highlights and Executive Summary
• Introduction
• Purpose of Section 1
• Required Employer Contributions
• Additional Discretionary Employer Contributions
• Plan’s Funded Status
• Projected Employer Contributions
• Other Pooled Miscellaneous Risk Pool Rate Plans
• Cost
• Changes Since the Prior Year’s Valuation
• Subsequent Events
A-8
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 3
Introduction
This report presents the results of the June 30, 2020 actuarial valuation of the Miscellaneous Plan of the City of
Rancho Palos Verdes of the California Public Employees’ Retirement System (CalPERS). This actuarial valuation
sets the required employer contributions for fiscal year 2022-23.
Purpose of Section 1
This Section 1 report for the Miscellaneous Plan of the City of Rancho Palos Verdes of CalPERS was prepared by
the plan actuary in order to:
• Set forth the assets and accrued liabilities of this plan as of June 30, 2020;
• Determine the minimum required employer contribution for this plan for the fiscal year July 1, 2022
through June 30, 2023; and
• Provide actuarial information as of June 30, 2020 to the CalPERS Board of Administration and other
interested parties.
The pension funding information presented in this report should not be used in financial reports subject to
Governmental Accounting Standards Board (GASB) Statement No. 68 for a Cost Sharing Employer Defined
Benefit Pension Plan. A separate accounting valuation report for such purposes is available on the CalPERS
website.
The measurements shown in this actuarial valuation may not be applicable for other purposes. The employer
should contact their actuary before disseminating any portion of this report for any reason that is not explicitly
described above.
Future actuarial measurements may differ significantly from the current measurements presented in this report
due to such factors as the following: plan experience differing from that anticipated by the economic or
demographic assumptions; changes in economic or demographic assumptions; changes in actuarial policies; and
changes in plan provisions or applicable law.
Assessment and Disclosure of Risk
This report includes the following risk disclosures consistent with the recommendations of Actuarial Standards
of Practice No. 51 and recommended by the California Actuarial Advisory Panel (CAAP) in the Model Disclosure
Elements document:
• A “Scenario Test,” projecting future results under different investment income returns.
• A “Sensitivity Analysis,” showing the impact on current valuation results using alternative discount rates
of 6.0% and 8.0%.
• A “Sensitivity Analysis,” showing the impact on current valuation results assuming rates of mortality
are 10% lower or 10% higher than our current post- retirement mortality assumptions adopted in
2017.
• Pension Plan maturity measures quantifying the risks the employer bears.
A-9
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 4
Required Employer Contributions
Fiscal Year
Required Employer Contributions 2022-23
Employer Normal Cost Rate 12.21%
Plus
Required Payment on Amortization Bases1 $1,105,780
Paid either as
1) Monthly Payment $92,148.33
Or
2) Annual Prepayment Option* $1,068,998
The total minimum required employer contribution is the sum of the Plan’s Employer Normal Cost Rate
(expressed as a percentage of payroll and paid as payroll is reported) plus the Employer Unfunded Accrued
Liability (UAL) Contribution Amount (billed monthly (1) or prepaid annually (2) in dollars).
* Only the UAL portion of the employer contribution can be prepaid (which must be received in full no
later than July 31).
Fiscal Year Fiscal Year
2021-22 2022-23
Development of Normal Cost as a Percentage of Payroll
Base Total Normal Cost for Formula 19.55% 19.55%
Surcharge for Class 1 Benefits2
a) FAC 1 0.61% 0.62%
Phase out of Normal Cost Difference3 0.00% 0.00%
Plan’s Total Normal Cost 20.16% 20.17%
Formula's Expected Employee Contribution Rate 7.96% 7.96%
Employer Normal Cost Rate 12.20% 12.21%
1 The required payment on amortization bases does not take into account any additional discretionary payment made after
April 30, 2021.
2 Section 2 of this report contains a list of Class 1 benefits and corresponding surcharges for each benefit.
3 The normal cost change is phased out over a five-year period in accordance with the CalPERS contribution allocation policy.
A-10
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 5
Additional Discretionary Employer Contributions
The minimum required employer contribution towards the Unfunded Accrued Liability (UAL) for this rate plan
for the 2022-23 fiscal year is $1,105,780. CalPERS allows employers to make additional discretionary payments
(ADPs) at any time and in any amount. These optional payments serve to reduce the UAL and future required
contributions and can result in significant long-term savings. Employers can also use ADPs to stabilize annual
contributions as a fixed dollar amount, percent of payroll or percent of revenue.
Provided below are select ADP options for consideration. Making such an ADP during fiscal year 2022-23 does
not require an ADP be made in any future year, nor does it change the remaining amortization period of any
portion of unfunded liability. For information on permanent changes to amortization periods, see the
“Amortization Schedule and Alternatives” section of the report.
If you are considering making an ADP, please contact your actuary for additional information.
Minimum Required Employer Contribution for Fiscal Year 2022-23
Estimated
Normal Cost
Minimum UAL
Payment
ADP Total UAL
Contribution
Estimated Total
Contribution
$231,743 $1,105,780 $0 $1,105,780 $1,337,523
Alternative Fiscal Year 2022-23 Employer Contributions for Greater UAL Reduction
Funding
Target
Estimated
Normal Cost
Minimum UAL
Payment
ADP1 Total UAL
Contribution
Estimated Total
Contribution
20 years $231,743 $1,105,780 $152,583 $1,258,363 $1,490,106
15 years $231,743 $1,105,780 $357,905 $1,463,685 $1,695,428
10 years $231,743 $1,105,780 $792,271 $1,898,051 $2,129,794
5 years $231,743 $1,105,780 $2,145,555 $3,251,335 $3,483,078
1 The ADP amounts are assumed to be made in the middle of the fiscal year. A payment made earlier or later in the fiscal
year would have to be less or more than the amount shown to have the same effect on the UAL amortization.
Note that the calculations above are based on the projected Unfunded Accrued Liability as of June 30, 2022 as
determined in the June 30, 2020 actuarial valuation. New unfunded liabilities can emerge in future years due to
assumption or method changes, changes in plan provisions and actuarial experience different than assumed.
Making an ADP illustrated above for the indicated number of years will not result in a plan that is exactly 100%
funded in the indicated number of years. Valuation results will vary from one year to the next and can diverge
significantly from projections over a period of several years.
A-11
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 6
Plan’s Funded Status
June 30, 2019 June 30, 2020
1. Present Value of Projected Benefits (PVB) $47,090,224 $48,055,650
2. Entry Age Accrued Liability (AL) 44,696,421 46,073,081
3. Plan’s Market Value of Assets (MVA) 32,015,078 32,343,280
4. Unfunded Accrued Liability (UAL) [(2) - (3)] 12,681,343 13,729,801
5. Funded Ratio [(3) / (2)] 71.6% 70.2%
This measure of funded status is an assessment of the need for future employer contributions based on the
selected actuarial cost method used to fund the plan. The UAL is the present value of future employer
contributions for service that has already been earned and is in addition to future normal cost contributions for
active members. For a measure of funded status that is appr opriate for assessing the sufficiency of plan assets
to cover estimated termination liabilities, please see “Hypothetical Termination Liability” in the “Risk Analysis”
section.
Projected Employer Contributions
The table below shows the required and projected employer contributions (before cost sharing) for the next six
fiscal years. The projection assumes that all actuarial assumptions will be realized and that no further changes
to assumptions, contributions, benefits, or funding will occur during the projection period. Actual contribution
rates during this projection period could be significantly higher or lower than the projection shown below.
Required
Contribution
Projected Future Employer Contributions
(Assumes 7.00% Return for Fiscal Year 2020-21)
Fiscal Year 2022-23 2023-24 2024-25 2025-26 2026-27 2027-28
Rate Plan 1107 Results
Normal Cost % 12.21% 12.2% 12.2% 12.2% 12.2% 12.2%
UAL Payment $1,105,780 $1,187,000 $1,273,000 $1,328,000 $1,380,000 $1,414,000
For some sources of UAL, the change in UAL is amortized using a 5-year ramp up. For more information, please
see “Amortization of the Unfunded Actuarial Accrued Liability” under “Actuarial Methods” in Appendix A of the
Section 2 Report. This method phases in the impact of the change in UAL over a 5-year period in order to reduce
employer cost volatility from year to year. As a result of this methodology, dramatic changes in the required
employer contributions in any one year are less likely. However, required contributions can change gradually
and significantly over the next five years. In years when there is a large increase in UAL, the relatively small
amortization payments during the ramp up period could result in a funded ratio that is projected to decrease
initially while the contribution impact of the increase in the UAL is phased in.
For projected contributions under alternate investment return scenarios, please see the “Future Investment
Return Scenarios” in the “Risk Analysis” section.
Our online pension plan modeling and projection tool, Pension Outlook, is available in the Employers section of
the CalPERS website. Pension Outlook is a tool to help plan and budget pension costs into the future with results
and charts that are easy to understand.
A-12
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 7
Other Pooled Miscellaneous Risk Pool Rate Plans
All of the results presented in this Section 1 report, except those shown below, correspond to rate plan 1107.
In many cases, employers have additional rate plans within the same risk pool. For cost analysis and budgeting
it is useful to consider contributions for these rate plans as a whole rather than individually. The estimated
contribution amounts and rates for all of the employer’s rate plans in the Miscellaneous Risk Pool are shown
below and assume that the payroll for each rate plan will grow according to the overall payroll growth assumption
of 2.75% per year for three years.
Fiscal Year Fiscal Year
2021-22 2022-23
Estimated Combined Employer Contributions for all Pooled Miscellaneous Rate Plans
Projected Payroll for the Contribution Year $6,845,623 $6,591,713
Estimated Employer Normal Cost $639,524 $602,020
Required Payment on Amortization Bases $1,002,749 $1,141,678
Estimated Total Employer Contributions $1,642,273 $1,743,698
Estimated Total Employer Contribution Rate (illustrative only) 23.99% 26.45%
A-13
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 8
Cost
Actuarial Determination of Pension Plan Cost
Contributions to fund the pension plan are comprised of two components:
• Normal Cost, expressed as a percentage of total active payroll
• Amortization of the Unfunded Accrued Liability (UAL), expressed as a dollar amount
For fiscal years prior to 2016-17, the Amortization of UAL component was expressed as a percentage of total
active payroll. Starting with fiscal year 2016-17, the Amortization of UAL component was expressed as a dollar
amount and invoiced on a monthly basis. There continues to be an option to prepay this amount during July of
each fiscal year.
The Normal Cost component is expressed as a percentage of active payroll with employer and employee
contributions payable as part of the regular payroll reporting process.
The determination of both components requires complex actuarial calculations. The calculations are based on a
set of actuarial assumptions which can be divided into two categories:
• Demographic assumptions (e.g., mortality rates, retirement rates, employment termination rates,
disability rates)
• Economic assumptions (e.g., future investment earnings, inflation, salary growth rates)
These assumptions reflect CalPERS’ best estimate of future experience of the plan and are long term in nature.
We recognize that all assumptions will not be realized in any given year. For example, the investment earnings
at CalPERS have averaged 5.5% over the 20 years ending June 30, 2020, yet individual fiscal year returns have
ranged from -23.6% to +20.7%. In addition, CalPERS reviews all actuarial assumptions by conducting in-depth
experience studies every four years, with the most recent experience study completed in 2017.
A-14
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 9
Changes Since the Prior Year’s Valuation
Benefits
The standard actuarial practice at CalPERS is to recognize mandated legislative benefit changes in the first
annual valuation following the effective date of the legislation. Voluntary benefit changes by plan amendment
are generally included in the first valuation that is prepared after the amendment becomes effective, even if the
valuation date is prior to the effective date of the amendment.
This valuation generally reflects plan changes by amendments effective before the date of the report. Please
refer to the “Plan’s Major Benefit Options” and Appendix B of the Section 2 Report for a summary of the plan
provisions used in this valuation.
Actuarial Methods and Assumptions
The are no significant changes to the actuarial methods or assumptions for the 2020 actuarial valuation.
Subsequent Events
The contribution requirements determined in this actuarial valuation report are based on demographic and
financial information as of June 30, 2020. Changes in the value of assets subsequent to that date are not
reflected. Investment returns below the assumed rate of return will increase future required contributions while
investment returns above the assumed rate of return will decrease future required contributions.
CalPERS will be completing an Asset Liability Management (ALM) process in November 2021 that will review the
capital market assumptions and the strategic asset allocation and ascertain whether a change in the discount
rate and other economic assumptions is warranted. As part of the ALM process the Actuarial Office will be
completing an Experience Study to review the demographic experience of the retirement system and make
recommendations to modify future assumptions where appropriate.
Furthermore, this valuation does not reflect any impacts from the COVID-19 pandemic on your pension plan.
The impact of COVID-19 on retirement plans is not yet known and CalPERS actuaries will continue to monitor
the effects and where necessary make future adjustments to actuarial assumptions.
The projected employer contributions on Page 6 are calculated under the assumption that the discount rate
remains at 7.0% going forward and that the realized rate of return on assets for fiscal year 2020-21 is 7.0%.
This actuarial valuation report reflects statutory changes, regulatory changes and CalPERS Board actions through
January 2021. Any subsequent changes or actions are not reflected.
A-15
Assets and Liabilities
• Breakdown of Entry Age Accrued Liability
• Allocation of Plan’s Share of Pool’s Experience/Assumption Change
• Development of Plan’s Share of Pool’s Market Value of Assets
• Schedule of Plan’s Amortization Bases
• Amortization Schedule and Alternatives
• Employer Contribution History
• Funding History
A-16
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 11
Breakdown of Entry Age Accrued Liability
Active Members $9,966,516
Transferred Members 5,921,671
Terminated Members 2,704,376
Members and Beneficiaries Receiving Payments 27,480,518
Total $46,073,081
Allocation of Plan’s Share of Pool’s
Experience/Assumption Change
It is the policy of CalPERS to ensure equity within the risk pools by allocating the pool’s experience
gains/losses and assumption changes in a manner that treats each employer equitably and maintains benefit
security for the members of the System while minimizing substantial variations in employer contributions.
The Pool’s experience gains/losses and impact of assumption/method changes is allocated to the plan as
follows:
1. Plan’s Accrued Liability $46,073,081
2. Projected UAL balance at 6/30/2020 12,821,336
3. Pool’s Accrued Liability1 19,314,480,060
4. Sum of Pool’s Individual Plan UAL Balances at 6/30/20201 4,306,566,797
5. Pool’s 2019/20 Investment (Gain)/Loss1 344,968,792
6. Pool’s 2019/20 Non-Investment (Gain)/Loss1 60,428,629
7. Plan’s Share of Pool’s Investment (Gain)/Loss: [(1) - (2)] ÷ [(3) - (4)] × (5) 764,318
8. Plan’s Share of Pool’s Non-Investment (Gain)/Loss: (1) ÷ (3) × (6) 144,147
9. Plan’s New (Gain)/Loss as of 6/30/2020: (7) + (8) 908,465
1 Does not include plans that transferred to Pool on the valuation date.
Development of the Plan’s Share of Pool’s Market
Value of Assets
10. Plan’s UAL: (2) + (9) $13,729,801
11. Plan’s Share of Pool’s MVA: (1) - (10) $32,343,280
A-17
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 12
Schedule of Plan’s Amortization Bases
Note that there is a two-year lag between the valuation date and the start of the contribution fiscal year.
• The assets, liabilities, and funded status of the plan are measured as of the valuation date: June 30, 2020.
• The required employer contributions determined by the valuation are for the fiscal year beginning two years after the valuation date: fiscal year 2022-23.
This two-year lag is necessary due to the amount of time needed to extract and test the membership and financial data, and the need to provi de public agencies with
their required employer contribution well in advance of the start of the fiscal year.
The Unfunded Accrued Liability (UAL) is used to determine the employer contribution and therefore must be rolled forward two years from the valuat ion date to the first
day of the fiscal year for which the contribution is being determined. The UAL is rolled forward each year by subtracting the expected payment on the UAL for the fiscal
year and adjusting for interest. The expected payment for the first fiscal year is determined by the actuarial valuation two years ago and the contribution for the second
year is from the actuarial valuation one year ago. Additional discretionary payments are reflected in the Expected Payments column in the fiscal year they were made by
the agency.
Reason for Base
Date
Est.
Ramp
Level
2022-23
Ramp
Shape
Escala-
tion
Rate
Amort.
Period
Balance
6/30/20
Expected
Payment
2020-21
Balance
6/30/21
Expected
Payment
2021-22
Balance
6/30/22
Minimum
Required
Payment
2022-23
Share of Pre-2013 Pool UAL 6/30/13 No Ramp 2.75% 14 4,013,348 345,573 3,936,819 355,076 3,845,103 364,841
Non-Investment (Gain)/Loss 6/30/13 100% Up/Down 2.75% 23 (37,721) (2,559) (37,714) (2,629) (37,635) (2,702)
Investment (Gain)/Loss 6/30/13 100% Up/Down 2.75% 23 4,089,671 277,431 4,088,971 285,060 4,080,331 292,900
Non-Investment (Gain)/Loss 6/30/14 100% Up/Down 2.75% 24 3,418 226 3,423 232 3,423 239
Investment (Gain)/Loss 6/30/14 100% Up/Down 2.75% 24 (2,992,054) (197,855) (2,996,835) (203,296) (2,996,322) (208,887)
Assumption Change 6/30/14 100% Up/Down 2.75% 14 1,878,702 178,644 1,825,420 183,557 1,763,327 188,605
Non-Investment (Gain)/Loss 6/30/15 100% Up/Down 2.75% 25 (160,532) (8,396) (163,084) (10,784) (163,345) (11,081)
Investment (Gain)/Loss 6/30/15 100% Up/Down 2.75% 25 1,899,061 99,329 1,929,249 127,575 1,932,332 131,084
Non-Investment (Gain)/Loss 6/30/16 100% Up/Down 2.75% 26 (294,868) (11,588) (303,522) (15,875) (308,347) (20,390)
Investment (Gain)/Loss 6/30/16 100% Up/Down 2.75% 26 2,290,889 90,029 2,358,125 123,340 2,395,610 158,414
Assumption Change 6/30/16 100% Up/Down 2.75% 16 717,221 39,049 727,034 53,497 722,589 68,710
Non-Investment (Gain)/Loss 6/30/17 80% Up/Down 2.75% 27 (63,823) (1,697) (66,535) (2,615) (68,487) (3,582)
Investment (Gain)/Loss 6/30/17 80% Up/Down 2.75% 27 (1,198,661) (31,862) (1,249,609) (49,108) (1,286,284) (67,278)
Assumption Change 6/30/17 80% Up/Down 2.75% 17 823,512 30,030 850,095 46,283 861,726 63,408
Non-Investment (Gain)/Loss 6/30/18 60% Up/Down 2.75% 28 186,795 2,551 197,232 5,243 205,615 8,080
Investment (Gain)/Loss 6/30/18 60% Up/Down 2.75% 28 (364,975) (4,985) (385,367) (10,244) (401,746) (15,788)
Assumption Change 6/30/18 60% Up/Down 2.75% 18 1,312,657 24,474 1,379,227 50,294 1,423,748 77,516
Method Change 6/30/18 60% Up/Down 2.75% 18 365,787 6,820 384,337 14,015 396,743 21,601
Non-Investment (Gain)/Loss 6/30/19 No Ramp 0.00% 19 184,563 0 197,482 18,021 192,665 18,021
A-18
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 13
Schedule of Plan’s Amortization Bases (continued)
Reason for Base
Date
Est.
Ramp
Level
2022-23
Ramp
Shape
Escala-
tion
Rate
Amort.
Period
Balance
6/30/20
Expected
Payment
2020-21
Balance
6/30/21
Expected
Payment
2021-22
Balance
6/30/22
Minimum
Required
Payment
2022-23
Investment (Gain)/Loss 6/30/19 40% Up Only 0.00% 19 168,346 0 180,130 3,938 188,666 7,877
Non-Investment (Gain)/Loss 6/30/20 No Ramp 0.00% 20 144,147 0 154,237 0 165,034 15,060
Investment (Gain)/Loss 6/30/20 20% Up Only 0.00% 20 764,318 0 817,820 0 875,067 19,132
Total 13,729,801 835,214 13,826,935 971,580 13,789,813 1,105,780
The (gain)/loss bases are the plan’s allocated share of the risk pool’s (gain)/loss for the fiscal year as disclosed in “Allocation of Plan’s Share of Pool’s Experience/Assumption
Change” earlier in this section. These (gain)/loss bases will be amortized in accordance with the CalPERS amortization policy in effect at the time the base was established.
A-19
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool
Page 14
Amortization Schedule and Alternatives
The amortization schedule on the previous page shows the minimum contributions required according to the CalPERS
amortization policy. Many agencies have expressed a desire for a more stable pattern of payments or have indicated interest
in paying off the unfunded accrued liabilities more quickly than required. As such, we have provided alternative amortization
schedules to help analyze the current amortization schedule and illustrate the potential savings of accelerating unfunded
liability payments.
Shown on the following page are future year amortization payments based on 1) the current amortization schedule reflecting
the individual bases and remaining periods shown on the previous page, and 2) alternative “fresh start” amortization schedules
using two sample periods that would both result in interest savings relative to the current amortization schedule. To initiate
a Fresh Start, please consult with your plan actuary.
The Current Amortization Schedule typically contains both positive and negative bases. Positive bases result from plan
changes, assumption changes, method changes or plan experience that increase unfunded liability. Negative bases result
from plan changes, assumption changes, method changes, or plan experience that decrease unfunded liability. The
combination of positive and negative bases within an amortization schedule can result in unusual or problematic circumstances
in future years, such as:
• When a negative payment would be required on a positive unfunded actuarial liability; or
• When the payment would completely amortize the total unfunded liability in a very short time period, and results in
a large change in the employer contribution requirement.
In any year when one of the above scenarios occurs, the actuary will consider corrective action such as replacing the existing
unfunded liability bases with a single “fresh start” base and amortizing it over a reasonable period.
The Current Amortization Schedule on the following page may appear to show that, based on the current amortization bases,
one of the above scenarios will occur at some point in the future. It is impossible to know today whether such a scenario will
in fact arise since there will be additional bases added to the amortization schedule in each future year. Should such a scenario
arise in any future year, the actuary will take appropriate action based on guidelines in the CalPERS amortization policy.
A-20
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool
Page 15
Amortization Schedule and Alternatives (continued)
Alternate Schedules
Current Amortization
Schedule 15 Year Amortization 10 Year Amortization
Date Balance Payment Balance Payment Balance Payment
6/30/2022 13,789,813 1,105,780 13,789,813 1,463,685 13,789,813 1,898,051
6/30/2023 13,611,271 1,186,999 13,241,052 1,463,685 12,791,741 1,898,051
6/30/2024 13,336,222 1,272,594 12,653,878 1,463,685 11,723,804 1,898,051
6/30/2025 12,953,377 1,327,742 12,025,602 1,463,685 10,581,111 1,898,051
6/30/2026 12,486,688 1,379,832 11,353,347 1,463,685 9,358,430 1,898,051
6/30/2027 11,933,448 1,413,696 10,634,034 1,463,685 8,050,161 1,898,051
6/30/2028 11,306,454 1,448,490 9,864,369 1,463,685 6,650,313 1,898,051
6/30/2029 10,599,575 1,484,240 9,040,827 1,463,685 5,152,476 1,898,051
6/30/2030 9,806,237 1,520,976 8,159,637 1,463,684 3,549,790 1,898,051
6/30/2031 8,919,366 1,558,720 7,216,765 1,463,684 1,834,916 1,898,052
6/30/2032 7,931,371 1,548,025 6,207,892 1,463,685
6/30/2033 6,885,277 1,535,678 5,128,397 1,463,684
6/30/2034 5,778,729 1,502,561 3,973,338 1,463,685
6/30/2035 4,628,982 1,444,021 2,737,424 1,463,684
6/30/2036 3,459,305 799,537 1,414,997 1,463,684
6/30/2037 2,874,409 723,354
6/30/2038 2,327,374 642,491
6/30/2039 1,825,691 578,539
6/30/2040 1,355,043 536,525
6/30/2041 894,910 412,305
6/30/2042 531,062 281,817
6/30/2043 276,722 218,309
6/30/2044 70,272 72,690
6/30/2045
6/30/2046
6/30/2047
6/30/2048
6/30/2049
6/30/2050
6/30/2051
Total 23,994,921 21,955,270 18,980,511
Interest Paid 10,205,108 8,165,457 5,190,698
Estimated Savings 2,039,651 5,014,410
A-21
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 16
Employer Contribution History
The table below provides a recent history of the required employer contributions for the plan. The amounts are
based on the actuarial valuation from two years prior and does not account for prepayments or benefit changes
made during a fiscal year. Additional discretionary payments before July 1, 2019 or after June 30, 2020 are not
included.
[
Fiscal
Year
Employer
Normal Cost
Unfunded Liability
Payment ($)
Additional Discretionary
Payments
2016 - 17 10.069% $413,568 N/A
2017 - 18 10.110% 495,784 N/A
2018 - 19 10.609% 613,118 N/A
2019 - 20 11.432% 739,621 0
2020 - 21 12.361% 835,213
2021 - 22 12.20% 971,580
2022 - 23 12.21% 1,105,780
Funding History
The table below shows the recent history of the actuarial accrued liability, share of the pool’s market value of
assets, unfunded accrued liability, funded ratio, and annual covered payroll.
Valuation
Date
Accrued
Liability
(AL)
Share of Pool’s
Market Value of
Assets (MVA)
Unfunded
Accrued
Liability (UAL)
Funded
Ratio
Annual
Covered
Payroll
06/30/2011 $25,552,394 $19,543,745 $6,008,649 76.5% $5,093,868
06/30/2012 28,080,069 20,206,710 7,873,359 72.0% 5,447,523
06/30/2013 30,369,005 23,138,924 7,230,081 76.2% 5,026,814
06/30/2014 32,822,157 26,128,062 6,694,095 79.6% 4,349,951
06/30/2015 34,740,823 26,564,734 8,176,089 76.5% 3,599,187
06/30/2016 36,088,996 25,521,188 10,567,808 70.7% 3,009,689
06/30/2017 39,354,331 28,819,602 10,534,729 73.2% 2,750,098
06/30/2018 42,896,179 30,796,160 12,100,019 71.8% 2,172,158
06/30/2019 44,696,421 32,015,078 12,681,343 71.6% 1,953,729
06/30/2020 46,073,081 32,343,280 13,729,801 70.2% 1,749,626
A-22
Risk Analysis
• Future Investment Return Scenarios
• Discount Rate Sensitivity
• Mortality Rate Sensitivity
• Maturity Measures
• Maturity Measures History
• Hypothetical Termination Liability
A-23
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 18
Future Investment Return Scenarios
Analysis was performed to determine the effects of various future investment returns on required employer
contributions. The projections below provide a range of results based on five investment return scenarios
assumed to occur during the next four fiscal years (2020-21, 2021-22, 2022-23 and 2023-24). The projections
also assume that all other actuarial assumptions will be realized and that no further changes to assumptions,
contributions, benefits, or funding will occur.
For fiscal years 2020-21, 2021-22, 2022-23, and 2023-24, each scenario assumes an alternate fixed annual
return. The fixed return assumptions for the five scenarios are 1.0%, 4.0%, 7.0%, 9.0% and 12.0%.
These alternate investment returns were chosen based on stochastic analysis of possible future investment
returns over the four-year period ending June 30, 2024. Using the expected returns and volatility of the asset
classes in which the funds are invested, we produced five thousand stochastic outcomes for this period based
on the most recently completed Asset Liability Management process. We then selected annual returns that
approximate the 5th, 25th, 50th, 75th, and 95th percentiles for these outcomes. For example, of all the 4-year
outcomes generated in the stochastic analysis, approximately 25% had an average annual return of 4.0% or
less.
Required contributions outside of this range are also possible. In particular, whereas it is unlikely that investment
returns will average less than 1.0% or greater than 12.0% over this four-year period, the likelihood of a single
investment return less than 1.0% or greater than 12.0% in any given year is much greater.
Assumed Annual Return From
2020-21 through 2023-24
Projected Employer Contributions
2023-24 2024-25 2025-26 2026-27
1.0%
Normal Cost 12.2% 12.2% 12.2% 12.2%
UAL Contribution $1,236,000 $1,419,000 $1,620,000 $1,869,000
4.0%
Normal Cost 12.2% 12.2% 12.2% 12.2%
UAL Contribution $1,211,000 $1,346,000 $1,477,000 $1,632,000
7.0%
Normal Cost 12.2% 12.2% 12.2% 12.2%
UAL Contribution $1,187,000 $1,273,000 $1,328,000 $1,380,000
9.0%
Normal Cost 12.5% 12.7% 13.0% 13.2%
UAL Contribution $1,173,000 $1,234,000 $1,253,000 $1,254,000
12.0%
Normal Cost 12.5% 12.7% 13.0% 13.2%
UAL Contribution $1,149,000 $1,159,000 $1,096,000 $982,000
A-24
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 19
Discount Rate Sensitivity
The discount rate assumption is calculated as the sum of the assumed real rate of return and the assumed
annual price inflation, currently 4.50% and 2.50%, respectively. Changing either the price inflation assumption
or the real rate of return assumption will change the discount rate. The sensitivity of the valuation results to the
discount rate assumption depends on which component of the discount rate is changed. Shown below are
various valuation results as of June 30, 2020 assuming alternate discount rates by changing the two components
independently. Results are shown using the current discount rate of 7.0% as well as alternate discount rates of
6.0% and 8.0%. The rates of 6.0% and 8.0% were selected since they illustrate the impact of a 1.0% increase
or decrease to the 7.0% assumption.
Sensitivity to the Real Rate of Return Assumption
As of June 30, 2020 1% Lower
Real Return Rate
Current
Assumptions
1% Higher
Real Return Rate
Discount Rate 6.0% 7.0% 8.0%
Inflation 2.5% 2.5% 2.5%
Real Rate of Return 3.5% 4.5% 5.5%
a) Total Normal Cost 25.25% 20.17% 16.29%
b) Accrued Liability $52,023,368 $46,073,081 $41,164,111
c) Market Value of Assets $32,343,280 $32,343,280 $32,343,280
d) Unfunded Liability/(Surplus) [(b) - (c)] $19,680,088 $13,729,801 $8,820,831
e) Funded Status 62.2% 70.2% 78.6%
Sensitivity to the Price Inflation Assumption
As of June 30, 2020 1% Lower
Inflation Rate
Current
Assumptions
1% Higher
Inflation Rate
Discount Rate 6.0% 7.0% 8.0%
Inflation 1.5% 2.5% 3.5%
Real Rate of Return 4.5% 4.5% 4.5%
a) Total Normal Cost 21.54% 20.17% 18.57%
b) Accrued Liability $48,656,725 $46,073,081 $42,809,722
c) Market Value of Assets $32,343,280 $32,343,280 $32,343,280
d) Unfunded Liability/(Surplus) [(b) - (c)] $16,313,445 $13,729,801 $10,466,442
e) Funded Status 66.5% 70.2% 75.6%
Mortality Rate Sensitivity
The following table looks at the change in the June 30, 2020 plan costs and funded status under two different
longevity scenarios, namely assuming post-retirement rates of mortality are 10% lower or 10% higher than our
current mortality assumptions adopted in 2017. This type of analysis highlights the impact on the plan of
improving or worsening mortality over the long-term.
As of June 30, 2020 10% Lower
Mortality Rates
Current
Assumptions
10% Higher
Mortality Rates
a) Total Normal Cost 20.51% 20.17% 19.85%
b) Accrued Liability $46,967,981 $46,073,081 $45,246,960
c) Market Value of Assets $32,343,280 $32,343,280 $32,343,280
d) Unfunded Liability/(Surplus) [(b) - (c)] $14,624,701 $13,729,801 $12,903,680
e) Funded Status 68.9% 70.2% 71.5%
A-25
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 20
Maturity Measures
As pension plans mature they become more sensitive to risks. Understanding plan maturity and how it affects
the ability of a pension plan sponsor to tolerate risk is important in understanding how the pension plan is
impacted by investment return volatility, other economic variables and changes in longevity or other
demographic assumptions. Since it is the employer that bears the risk, it is appropriate to perform this analysis
on a pension plan level considering all rate plans. The following measures are for one rate plan only.
One way to look at the maturity level of CalPERS and its plans is to look at the ratio of a plan’s retiree liability
to its total liability. A pension plan in its infancy will have a very low ratio of retiree liability to total liability. As
the plan matures, the ratio starts increasing. A mature plan will often have a ratio above 60%-65%.
Ratio of Retiree Accrued Liability to
Total Accrued Liability June 30, 2019 June 30, 2020
1. Retired Accrued Liability 26,051,236 27,480,518
2. Total Accrued Liability 44,696,421 46,073,081
3. Ratio of Retiree AL to Total AL [(1) / (2)] 0.58 0.60
Another measure of maturity level of CalPERS and its plans is to look at the ratio of actives to retirees, also
called the Support Ratio. A pension plan in its infancy will have a very high ratio of active to retired members.
As the plan matures, and members retire, the ratio starts declining. A mature plan will often have a ratio near
or below one. The average support ratio for CalPERS public agency plans is 1.25.
Support Ratio June 30, 2019 June 30, 2020
1. Number of Actives 28 24
2. Number of Retirees 91 99
3. Support Ratio [(1) / (2)] 0.31 0.24
A-26
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 21
Maturity Measures (Continued)
The actuarial calculations supplied in this communication are based on various assumptions about long-term
demographic and economic behavior. Unless these assumptions (e.g., terminations, deaths, disabilities,
retirements, salary growth, and investment return) are exactly realized e ach year, there will be differences on
a year-to-year basis. The year-to-year differences between actual experience and the assumptions are called
actuarial gains and losses and serve to lower or raise required employer contributions from one year to the
next. Therefore, employer contributions will inevitably fluctuate, especially due to the ups and downs of
investment returns.
Asset Volatility Ratio (AVR)
Shown in the table below is the asset volatility ratio (AVR), which is the ratio of market value of assets to payroll.
Plans that have higher AVR experience more volatile employer contributions (as a percentage of payroll) due to
investment return. For example, a plan with an asset-to-payroll ratio of 8 may experience twice the contribution
volatility due to investment return volatility than a plan with an asset-to-payroll ratio of 4. It should be noted
that this ratio is a measure of the current situation. It increases over time but generally tends to stabilize as t he
plan matures.
Liability Volatility Ratio (LVR)
Also shown in the table below is the liability volatility ratio (LVR), which is the ratio of accrued liability to payroll.
Plans that have a higher LVR experience more volatile employer contributions (as a percentage of payroll) due
to investment return and changes in liability. For example, a plan with LVR ratio of 8 is expected to have twice
the contribution volatility of a plan with LVR of 4. It should be noted that this ratio indicates a longer-term
potential for contribution volatility. The AVR, described above, will tend to move closer to the LVR as a plan
matures.
Contribution Volatility June 30, 2019 June 30, 2020
1. Market Value of Assets $32,015,078 $32,343,280
2. Payroll 1,953,729 1,749,626
3. Asset Volatility Ratio (AVR) [(1) / (2)] 16.4 18.5
4. Accrued Liability $44,696,421 $46,073,081
5. Liability Volatility Ratio (LVR) [(4) / (2)] 22.9 26.3
Maturity Measures History
Valuation Date
Ratio of
Retiree Accrued Liability
to
Total Accrued Liability
Support
Ratio
Asset
Volatility
Ratio
Liability
Volatility
Ratio
06/30/2017 0.48 0.57 10.5 14.3
06/30/2018 0.52 0.40 14.2 19.7
06/30/2019 0.58 0.31 16.4 22.9
06/30/2020 0.60 0.24 18.5 26.3
A-27
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 22
Hypothetical Termination Liability
The hypothetical termination liability is an estimate of the financial position of the plan had the contract with
CalPERS been terminated as of June 30, 2020. The plan liability on a termination basis is calculated differently
compared to the plan’s ongoing funding liability. For the hypothetical termination liability calculation, both
compensation and service are frozen as of the valuation date and no future pay increases or service accruals
are assumed. This measure of funded status is not appropriate for assessing the need for future employer
contributions in the case of an ongoing plan, that is, for an employer that continues to provide CalPERS
retirement benefits to active employees.
A more conservative investment policy and asset allocation strategy was adopted by the CalPERS Board for the
Terminated Agency Pool. The Terminated Agency Pool has limited funding sources since no future employer
contributions will be made. Therefore, expected benefit payments are secured by risk-free assets and benefit
security for members is increased while limiting the funding risk. However, this asset allocation has a lower
expected rate of return than the PERF and consequently, a lower discount rate is assumed. The lower discount
rate for the Terminated Agency Pool results in higher liabilities for terminated plans.
The effective termination discount rate will depend on actual market rates of return for risk-free securities on
the date of termination. As market discount rates are variable, the table below shows a range for the hypothetical
termination liability based on the lowest and highest interest rates observed during an approximate 19 -month
period from 12 months before the valuation date to 7 months after.
Market
Value of
Assets (MVA)
Hypothetical
Termination
Liability1,2
at 0.75%
Funded
Status
Unfunded
Termination
Liability
at 0.75%
Hypothetical
Termination
Liability1,2
at 2.50%
Funded
Status
Unfunded
Termination
Liability
at 2.50%
$32,343,280 $108,522,668 29.8% $76,179,388 $82,725,250 39.1% $50,381,970
1 The hypothetical liabilities calculated above include a 5% mortality contingency load in accordance with Board policy. Other
actuarial assumptions can be found in Appendix A of the Section 2 report.
2 The current discount rate assumption used for termination valuations is a weighted average of the 10-year and 30-year U.S.
Treasury yields where the weights are based on matching asset and liability durations as of the termination date. The
discount rates used in the table are based on 20-year Treasury bonds, rounded to the nearest quarter percentage point,
which is a good proxy for most plans. The 20-year Treasury yield was 1.18% on June 30, 2020, and was 1.68% on January
31, 2021.
In order to terminate the plan, you must first contact our Retirement Services Contract Unit to initiate a
Resolution of Intent to Terminate. The completed Resolution will allow the plan actuary to give you a preliminary
termination valuation with a more up-to-date estimate of the plan liabilities. CalPERS advises you to consult with
the plan actuary before beginning this process.
A-28
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 23
Participant Data
The table below shows a summary of your plan’s member data upon which this valuation is based:
June 30, 2019 June 30, 2020
Active Members
Counts 28 24
Average Attained Age N/A 52.7
Average Entry Age to Rate Plan N/A 34.5
Average Years of Credited Service N/A 15.4
Average Annual Covered Pay $69,776 $72,901
Annual Covered Payroll $1,953,729 $1,749,626
Projected Annual Payroll for Contribution Year $2,119,385 $1,897,976
Present Value of Future Payroll $12,595,451 $10,378,645
Transferred Members 39 38
Separated Members 103 98
Retired Members and Beneficiaries
Counts* 91 99
Average Annual Benefits* N/A $21,256
Counts of members included in the valuation are counts of the recor ds 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 include community property settlements.
List of Class 1 Benefit Provisions
This plan has the additional Class 1 Benefit Provisions:
• One Year Final Compensation (FAC 1)
A-29
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 24
Plan’s Major Benefit Options
Shown below is a summary of the major optional benefits for which your agency has contracted. A description of principal standard and optional plan provisions
is in Section 2.
Benefit Group
Member Category Misc Misc Misc
Demographics
Actives No Yes No
Transfers/Separated Yes Yes No
Receiving Yes Yes Yes
Benefit Group Key 103140 103141 207228
Benefit Provision
Benefit Formula 2% @ 55 2.5% @ 55
Social Security Coverage No No
Full/Modified Full Full
Employee Contribution Rate 8.00%
Final Average Compensation Period One Year One Year
Sick Leave Credit Yes Yes
Non-Industrial Disability Standard Standard
Industrial Disability No No
Pre-Retirement Death Benefits
Optional Settlement 2 Yes Yes
1959 Survivor Benefit Level Level 4 Level 4
Special No No
Alternate (firefighters) No No
Post-Retirement Death Benefits
Lump Sum $500 $500 $500
Survivor Allowance (PRSA) No No No
COLA 2% 2% 2%
A-30
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 25
Section 2
CALIFORNIA PUBLIC EM PLOYEES’ RETIREMENT SYSTEM
Risk Pool Actuarial Valuation Information
Section 2 may be found on the CalPERS website
(calpers.ca.gov) in the Forms and
Publications section
A-31
California Public Employees’ Retirement System
Actuarial Office
400 Q Street, Sacramento, CA 95811 | Phone: (916) 795-3000 | Fax: (916) 795-2744
888 CalPERS (or 888-225-7377) | TTY: (877) 249-7442 | www.calpers.ca.gov
July 2021
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
(CalPERS ID: 3846845523)
Annual Valuation Report as of June 30, 2020
Dear Employer,
Attached to this letter, you will find the June 30, 2020 actuarial valuation report of your CalPERS pension plan.
Provided in this report is the determination of the minimum required employer contributions for fiscal
year 2022-23. In addition, the report contains important information regarding the current financial status of the
plan as well as projections and risk measures to aid in planning for the future.
Because this plan is in a risk pool, the following valuation report has been separated into two sections:
• Section 1 contains specific information for the plan including the development of the current and projected
employer contributions, and
• Section 2 contains the Risk Pool Actuarial Valuation appropriate to the plan as of June 30, 2020.
Section 2 can be found on the CalPERS website (calpers.ca.gov). From the home page, go to “Forms & Publications”
and select “View All”. In the search box, enter “Risk Pool” and from the results list download the Miscellaneous Risk
Pool Actuarial Valuation Report for June 30, 2020.
Your June 30, 2020 actuarial valuation report contains important actuarial information about your pension plan at
CalPERS. Your assigned CalPERS staff actuary, whose signature appears in the Actuarial Certification section on page
1, is available to discuss the report with you.
Actuarial valuations are based on assumptions regarding future plan experience including investment return and payroll
growth, eligibility for the types of benefits provided, and longevity among retirees. The CalPERS Board of Administration
adopts these assumptions after considering the advice of CalPERS actuarial and investment teams and other
professionals. Each actuarial valuation reflects all prior differences between actual and assumed experience and adjusts
the contribution rates as needed. This valuation is based on an investment return assumption of 7.0% which was
adopted by the board in December 2016. Other assumptions used in this report are those recommended in the CalPERS
Experience Study and Review of Actuarial Assumptions report from December 2017.
Required Contribution
The exhibit below displays the minimum employer contributions for fiscal year 2022-23 along with estimates of the
required contributions for fiscal year 2023-24. Member contributions other than cost sharing (whether paid by the
employer or the employee) are in addition to the results shown below. The employer contributions in this report
do not reflect any cost sharing arrangements you may have with your employees.
Fiscal Year Employer Normal
Cost Rate
Employer Amortization of
Unfunded Accrued Liability
2022-23 8.63% $20,057
Projected Results
2023-24 8.6% $22,000
B-1
J~_CalPERS
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
(CalPERS ID: 3846845523)
Annual Valuation Report as of June 30, 2020
Page 2
The actual investment return for fiscal year 2020-21 was not known at the time this report was prepared. The
projections above assume the investment return for that year would be 7.00%. To the extent the actual
investment return for fiscal year 2020-21 differs from 7.00%, the actual contribution requirements for
fiscal year 2023-24 will differ from those shown above. For additional details regarding the assumptions and
methods used for these projections please refer to the “Projected Employer Contributions” in the “Highlights and
Executive Summary” section. This section also contains projected required contributions through fiscal year 2027-28.
Changes from Previous Year’s Valuation
There are no significant changes in actuarial assumptions or policies in your 2020 actuarial valuation. Your annual
valuation report is an important tool for monitoring the health of your CalPERS pension plan. Your report contains
useful information about future required contributions and ways to control your plan’s funding progress. In addition to
your annual actuarial report my office has developed tools for employers to plan, project and protect the retirement
benefits of your employees. Pension Outlook is a tool to help plan and budget pension costs into the future with easy
to understand results and charts.
You will be able to view the projected funded status and required employer contributions for pension plans in
different potential scenarios for up to 30 years into the future — which will make budgeting more predictable. While
Pension Outlook can't predict the future, it can provide valuable planning information based on a variety of future
scenarios that you select.
Pension Outlook can help you answer specific questions about your plans, including:
• When is my plan’s funded status expected to increase?
• What happens to my required contributions in a down market?
• How does the discount rate assumption affect my contributions?
• What is the impact of making an additional discretionary payment to my plan?
To get started, visit our Pension Outlook page at www.calpers.ca.gov/page/employers/actuarial-resources/pension-
outlook-overview and take the steps to register online.
CalPERS will be completing an Asset Liability Management (ALM) review process in November 2021 that will review the
capital market assumptions and the strategic asset allocation and ascertain whether a change in the discount rate and
other economic assumptions is warranted. In addition, the Actuarial Office will be completing its Experience Study to
review the demographic experience within the pension system and make recommendations to modify future
assumptions where appropriate.
Furthermore, this valuation does not reflect any impacts from the COVID-19 pandemic on your pension plan. The
impact of COVID-19 on retirement plans is not yet known and CalPERS actuaries will continue to monitor the effects
and where necessary make future adjustments to actuarial assumptions.
Further descriptions of general changes are included in the “Highlights and Executive Summary” section and in Appendix
A of the Section 2 report, “Actuarial Methods and Assumptions.”
Questions
We understand that you might have questions about these results, and your assigned CalPERS actuary whose signature
is on the valuation report is available to discuss. If you have other questions, you may call the Customer Contact Center
at (888)-CalPERS or (888-225-7377).
Sincerely,
SCOTT TERANDO, ASA, EA, MAAA, FCA, CFA
Chief Actuary
B-2
Actuarial Valuation
as of June 30, 2020
for the
Miscellaneous Second Tier Plan
of the
City of Rancho Palos Verdes
(CalPERS ID: 3846845523)
Required Contributions
for Fiscal Year
July 1, 2022 - June 30, 2023
B-3
A
CalPERS
Table of Contents
Section 1 – Plan Specific Information
Section 2 – Risk Pool Actuarial Valuation Information
B-4
Section 1
CALIFORNIA PUBLIC EM PLOYEES’ RETIREMENT SYSTEM
Plan Specific Information
for the
Miscellaneous Second Tier Plan
of the
City of Rancho Palos Verdes
(CalPERS ID: 3846845523)
(Rate Plan ID: 23274)
B-5
Rate Plan belonging to the Miscellaneous Risk Pool
Table of Contents
Actuarial Certification 1
Highlights and Executive Summary
Introduction 3
Purpose of Section 1 3
Required Employer Contributions 4
Additional Discretionary Employer Contributions 5
Plan’s Funded Status 6
Projected Employer Contributions 6
Other Pooled Miscellaneous Risk Pool Rate Plans 7
Cost 8
Changes Since the Prior Year’s Valuation 9
Subsequent Events 9
Assets and Liabilities
Breakdown of Entry Age Accrued Liability 11
Allocation of Plan’s Share of Pool’s Experience/Assumption Change 11
Development of Plan’s Share of Pool’s Market Value of Assets 11
Schedule of Plan’s Amortization Bases 12
Amortization Schedule and Alternatives 13
Employer Contribution History 15
Funding History 15
Risk Analysis
Future Investment Return Scenarios 17
Discount Rate Sensitivity 18
Mortality Rate Sensitivity 18
Maturity Measures 19
Maturity Measures History 20
Hypothetical Termination Liability 21
Participant Data 22
List of Class 1 Benefit Provisions 22
Plan’s Major Benefit Options 23
B-6
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 1
Actuarial Certification
Section 1 of this report is based on the member and financial data contained in our records as of June 30, 2020
which was provided by your agency and the benefit provisions under your contract with CalPERS. Section 2 of
this report is based on the member and financial data as of June 30, 2020 provided by employers participating
in the Miscellaneous Risk Pool to which the plan belongs and benefit provisions under the CalPERS contracts for
those agencies.
As set forth in Section 2 of this report, the pool actuaries have certified that, in their opinion, the valuation of the
risk pool containing your Miscellaneous Second Tier 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 of the date
of this valuation and as prescribed by the CalPERS Board of Administration according to provisions set forth in
the California Public Employees’ Retirement Law.
Having relied upon the information set forth in Section 2 of this report and based on the census and benefit
provision information for the plan, it is my opinion as the plan actuary that the Unfunded Accrued Liability
amortization bases as of June 30, 2020 and employer contribution as of July 1, 2022 have been properly and
accurately determined in accordance with the principles and standards stated above.
The undersigned is an actuary who satisfies the Qualification Standards for Actuaries Issuing Statements of
Actuarial Opinion in the United States with regard to pensions.
STUART BENNETT, ASA, MAAA
Senior Pension Actuary, CalPERS
B-7
Highlights and Executive Summary
• Introduction
• Purpose of Section 1
• Required Employer Contributions
• Additional Discretionary Employer Contributions
• Plan’s Funded Status
• Projected Employer Contributions
• Other Pooled Miscellaneous Risk Pool Rate Plans
• Cost
• Changes Since the Prior Year’s Valuation
• Subsequent Events
B-8
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 3
Introduction
This report presents the results of the June 30, 2020 actuarial valuation of the Miscellaneous Second Tier Plan
of the City of Rancho Palos Verdes of the California Public Employees’ Retirement System (CalPERS). This
actuarial valuation sets the required employer contributions for fiscal year 2022-23.
Purpose of Section 1
This Section 1 report for the Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes of CalPERS was
prepared by the plan actuary in order to:
• Set forth the assets and accrued liabilities of this plan as of June 30, 2020;
• Determine the minimum required employer contribution for this plan for the fiscal year July 1, 2022
through June 30, 2023; and
• Provide actuarial information as of June 30, 2020 to the CalPERS Board of Administration and other
interested parties.
The pension funding information presented in this report should not be used in financial reports subject to
Governmental Accounting Standards Board (GASB) Statement No. 68 for a Cost Sharing Employer Defined
Benefit Pension Plan. A separate accounting valuation report for such purposes is available on the CalPERS
website.
The measurements shown in this actuarial valuation may not be applicable for other purposes. The employer
should contact their actuary before disseminating any portion of this report for any reason that is not explicitly
described above.
Future actuarial measurements may differ significantly from the current measurements presented in this report
due to such factors as the following: plan experience differing from that anticipated by the economic or
demographic assumptions; changes in economic or demographic assumptions; changes in actuarial policies; and
changes in plan provisions or applicable law.
Assessment and Disclosure of Risk
This report includes the following risk disclosures consistent with the recommendations of Actuarial Standards
of Practice No. 51 and recommended by the California Actuarial Advisory Panel (CAAP) in the Model Disclosure
Elements document:
• A “Scenario Test,” projecting future results under different investment income returns.
• A “Sensitivity Analysis,” showing the impact on current valuation results using alternative discount rates
of 6.0% and 8.0%.
• A “Sensitivity Analysis,” showing the impact on current valuation results assuming rates of mortality
are 10% lower or 10% higher than our current post- retirement mortality assumptions adopted in
2017.
• Pension Plan maturity measures quantifying the risks the employer bears.
B-9
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 4
Required Employer Contributions
Fiscal Year
Required Employer Contributions 2022-23
Employer Normal Cost Rate 8.63%
Plus
Required Payment on Amortization Bases1 $20,057
Paid either as
1) Monthly Payment $1,671.42
Or
2) Annual Prepayment Option* $19,390
The total minimum required employer contribution is the sum of the Plan’s Employer Normal Cost Rate
(expressed as a percentage of payroll and paid as payroll is reported) plus the Employer Unfunded Accrued
Liability (UAL) Contribution Amount (billed monthly (1) or prepaid annually (2) in dollars).
* Only the UAL portion of the employer contribution can be prepaid (which must be received in full no
later than July 31).
Fiscal Year Fiscal Year
2021-22 2022-23
Development of Normal Cost as a Percentage of Payroll
Base Total Normal Cost for Formula 15.57% 15.56%
Surcharge for Class 1 Benefits2
None 0.00% 0.00%
Phase out of Normal Cost Difference3 0.00% 0.00%
Plan’s Total Normal Cost 15.57% 15.56%
Formula's Expected Employee Contribution Rate 6.92% 6.93%
Employer Normal Cost Rate 8.65% 8.63%
1 The required payment on amortization bases does not take into account any additional discretionary payment made after
April 30, 2021.
2 Section 2 of this report contains a list of Class 1 benefits and corresponding surcharges for each benefit.
3 The normal cost change is phased out over a five-year period in accordance with the CalPERS contribution allocation policy.
B-10
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 5
Additional Discretionary Employer Contributions
The minimum required employer contribution towards the Unfunded Accrued Liability (UAL) for this rate plan
for the 2022-23 fiscal year is $20,057. CalPERS allows employers to make additional discretionary payments
(ADPs) at any time and in any amount. These optional payments serve to reduce the UAL and future required
contributions and can result in significant long-term savings. Employers can also use ADPs to stabilize annual
contributions as a fixed dollar amount, percent of payroll or percent of revenue.
Provided below are select ADP options for consideration. Making such an ADP during fiscal year 2022-23 does
not require an ADP be made in any future year, nor does it change the remaining amortization period of any
portion of unfunded liability. For information on permanent changes to amortization periods, see the
“Amortization Schedule and Alternatives” section of the report.
If you are considering making an ADP, please contact your actuary for additional information.
Minimum Required Employer Contribution for Fiscal Year 2022-23
Estimated
Normal Cost
Minimum UAL
Payment
ADP Total UAL
Contribution
Estimated Total
Contribution
$146,224 $20,057 $0 $20,057 $166,281
Alternative Fiscal Year 2022-23 Employer Contributions for Greater UAL Reduction
Funding
Target
Estimated
Normal Cost
Minimum UAL
Payment
ADP1 Total UAL
Contribution
Estimated Total
Contribution
20 years $146,224 $20,057 $3,079 $23,136 $169,360
15 years $146,224 $20,057 $6,855 $26,912 $173,136
10 years $146,224 $20,057 $14,841 $34,898 $181,122
5 years $146,224 $20,057 $39,723 $59,780 $206,004
1 The ADP amounts are assumed to be made in the middle of the fiscal year. A payment made earlier or later in the fiscal
year would have to be less or more than the amount shown to have the same effect on the UAL amortization.
Note that the calculations above are based on the projected Unfunded Accrued Liability as of June 30, 2022 as
determined in the June 30, 2020 actuarial valuation. New unfunded liabilities can emerge in future years due to
assumption or method changes, changes in plan provisions and actuarial experience different than assumed.
Making an ADP illustrated above for the indicated number of years will not result in a plan that is exactly 100%
funded in the indicated number of years. Valuation results will vary from one year to the next and can diverge
significantly from projections over a period of several years.
B-11
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 6
Plan’s Funded Status
June 30, 2019 June 30, 2020
1. Present Value of Projected Benefits (PVB) $5,032,033 $5,195,179
2. Entry Age Accrued Liability (AL) 1,892,664 2,444,917
3. Plan’s Market Value of Assets (MVA) 1,724,042 2,192,472
4. Unfunded Accrued Liability (UAL) [(2) - (3)] 168,622 252,445
5. Funded Ratio [(3) / (2)] 91.1% 89.7%
This measure of funded status is an assessment of the need for future employer contributions based on the
selected actuarial cost method used to fund the plan. The UAL is the present value of future employer
contributions for service that has already been earned and is in addition to future normal cost contributions for
active members. For a measure of funded status that is appr opriate for assessing the sufficiency of plan assets
to cover estimated termination liabilities, please see “Hypothetical Termination Liability” in the “Risk Analysis”
section.
Projected Employer Contributions
The table below shows the required and projected employer contributions (before cost sharing) for the next six
fiscal years. The projection assumes that all actuarial assumptions will be realized and that no further changes
to assumptions, contributions, benefits, or funding will occur during the projection period. Actual contribution
rates during this projection period could be significantly higher or lower than the projection shown below.
Required
Contribution
Projected Future Employer Contributions
(Assumes 7.00% Return for Fiscal Year 2020-21)
Fiscal Year 2022-23 2023-24 2024-25 2025-26 2026-27 2027-28
Rate Plan 23274 Results
Normal Cost % 8.63% 8.6% 8.6% 8.6% 8.6% 8.6%
UAL Payment $20,057 $22,000 $24,000 $26,000 $28,000 $28,000
For some sources of UAL, the change in UAL is amortized using a 5-year ramp up. For more information, please
see “Amortization of the Unfunded Actuarial Accrued Liability” under “Actuarial Methods” in Appendix A of the
Section 2 Report. This method phases in the impact of the change in UAL over a 5-year period in order to reduce
employer cost volatility from year to year. As a result of this methodology, dramatic changes in the required
employer contributions in any one year are less likely. However, required contributions can change gradually
and significantly over the next five years. In years when there is a large increase in UAL, the relatively small
amortization payments during the ramp up period could result in a funded ratio that is projected to decrease
initially while the contribution impact of the increase in the UAL is phased in.
For projected contributions under alternate investment return scenarios, please see the “Future Investment
Return Scenarios” in the “Risk Analysis” section.
Our online pension plan modeling and projection tool, Pension Outlook, is available in the Employers section of
the CalPERS website. Pension Outlook is a tool to help plan and budget pension costs into the future with results
and charts that are easy to understand.
B-12
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 7
Other Pooled Miscellaneous Risk Pool Rate Plans
All of the results presented in this Section 1 report, except those shown below, correspond to rate plan 23274.
In many cases, employers have additional rate plans within the same risk pool. For cost analysis and budgeting
it is useful to consider contributions for these rate plans as a whole rather than individually. The estimated
contribution amounts and rates for all of the employer’s rate plans in the Miscellaneous Risk Pool are shown
below and assume that the payroll for each rate plan will grow according to the overall payroll growth assumption
of 2.75% per year for three years.
Fiscal Year Fiscal Year
2021-22 2022-23
Estimated Combined Employer Contributions for all Pooled Miscellaneous Rate Plans
Projected Payroll for the Contribution Year $6,845,623 $6,591,713
Estimated Employer Normal Cost $639,524 $602,020
Required Payment on Amortization Bases $1,002,749 $1,141,678
Estimated Total Employer Contributions $1,642,273 $1,743,698
Estimated Total Employer Contribution Rate (illustrative only) 23.99% 26.45%
B-13
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 8
Cost
Actuarial Determination of Pension Plan Cost
Contributions to fund the pension plan are comprised of two components:
• Normal Cost, expressed as a percentage of total active payroll
• Amortization of the Unfunded Accrued Liability (UAL), expressed as a dollar amount
For fiscal years prior to 2016-17, the Amortization of UAL component was expressed as a percentage of total
active payroll. Starting with fiscal year 2016-17, the Amortization of UAL component was expressed as a dollar
amount and invoiced on a monthly basis. There continues to be an option to prepay this amount during July of
each fiscal year.
The Normal Cost component is expressed as a percentage of active payroll with employer and employee
contributions payable as part of the regular payroll reporting process.
The determination of both components requires complex actuarial calculations. The calculations are based on a
set of actuarial assumptions which can be divided into two categories:
• Demographic assumptions (e.g., mortality rates, retirement rates, employment termination rates,
disability rates)
• Economic assumptions (e.g., future investment earnings, inflation, salary growth rates)
These assumptions reflect CalPERS’ best estimate of future experience of the plan and are long term in nature.
We recognize that all assumptions will not be realized in any given year. For example, the investment earnings
at CalPERS have averaged 5.5% over the 20 years ending June 30, 2020, yet individual fiscal year returns have
ranged from -23.6% to +20.7%. In addition, CalPERS reviews all actuarial assumptions by conducting in-depth
experience studies every four years, with the most recent experience study completed in 2017.
B-14
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 9
Changes Since the Prior Year’s Valuation
Benefits
The standard actuarial practice at CalPERS is to recognize mandated legislative benefit changes in the first
annual valuation following the effective date of the legislation. Voluntary benefit changes by plan amendment
are generally included in the first valuation that is prepared after the amendment becomes effective, even if the
valuation date is prior to the effective date of the amendment.
This valuation generally reflects plan changes by amendments effective before the date of the report. Please
refer to the “Plan’s Major Benefit Options” and Appendix B of the Section 2 Report for a summary of the plan
provisions used in this valuation.
Actuarial Methods and Assumptions
The are no significant changes to the actuarial methods or assumptions for the 2020 actuarial valuation.
Subsequent Events
The contribution requirements determined in this actuarial valuation report are based on demographic and
financial information as of June 30, 2020. Changes in the value of assets subsequent to that date are not
reflected. Investment returns below the assumed rate of return will increase future required contributions while
investment returns above the assumed rate of return will decrease future required contributions.
CalPERS will be completing an Asset Liability Management (ALM) process in November 2021 that will review the
capital market assumptions and the strategic asset allocation and ascertain whether a change in the discount
rate and other economic assumptions is warranted. As part of the ALM process the Actuarial Office will be
completing an Experience Study to review the demographic experience of the retirement system and make
recommendations to modify future assumptions where appropriate.
Furthermore, this valuation does not reflect any impacts from the COVID-19 pandemic on your pension plan.
The impact of COVID-19 on retirement plans is not yet known and CalPERS actuaries will continue to monitor
the effects and where necessary make future adjustments to actuarial assumptions.
The projected employer contributions on Page 6 are calculated under the assumption that the discount rate
remains at 7.0% going forward and that the realized rate of return on assets for fiscal year 2020-21 is 7.0%.
This actuarial valuation report reflects statutory changes, regulatory changes and CalPERS Board actions through
January 2021. Any subsequent changes or actions are not reflected.
B-15
Assets and Liabilities
• Breakdown of Entry Age Accrued Liability
• Allocation of Plan’s Share of Pool’s Experience/Assumption Change
• Development of Plan’s Share of Pool’s Market Value of Assets
• Schedule of Plan’s Amortization Bases
• Amortization Schedule and Alternatives
• Employer Contribution History
• Funding History
B-16
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 11
Breakdown of Entry Age Accrued Liability
Active Members $1,210,300
Transferred Members 310,282
Terminated Members 86,302
Members and Beneficiaries Receiving Payments 838,033
Total $2,444,917
Allocation of Plan’s Share of Pool’s
Experience/Assumption Change
It is the policy of CalPERS to ensure equity within the risk pools by allocating the pool’s experience
gains/losses and assumption changes in a manner that treats each employer equitably and maintains benefit
security for the members of the System while minimizing substantial variations in employer contributions.
The Pool’s experience gains/losses and impact of assumption/method changes is allocated to the plan as
follows:
1. Plan’s Accrued Liability $2,444,917
2. Projected UAL balance at 6/30/2020 193,035
3. Pool’s Accrued Liability1 19,314,480,060
4. Sum of Pool’s Individual Plan UAL Balances at 6/30/20201 4,306,566,797
5. Pool’s 2019/20 Investment (Gain)/Loss1 344,968,792
6. Pool’s 2019/20 Non-Investment (Gain)/Loss1 60,428,629
7. Plan’s Share of Pool’s Investment (Gain)/Loss: [(1) - (2)] ÷ [(3) - (4)] × (5) 51,761
8. Plan’s Share of Pool’s Non-Investment (Gain)/Loss: (1) ÷ (3) × (6) 7,649
9. Plan’s New (Gain)/Loss as of 6/30/2020: (7) + (8) 59,411
1 Does not include plans that transferred to Pool on the valuation date.
Development of the Plan’s Share of Pool’s Market
Value of Assets
10. Plan’s UAL: (2) + (9) $252,445
11. Plan’s Share of Pool’s MVA: (1) - (10) $2,192,472
B-17
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 12
Schedule of Plan’s Amortization Bases
Note that there is a two-year lag between the valuation date and the start of the contribution fiscal year.
• The assets, liabilities, and funded status of the plan are measured as of the valuation date: June 30, 2020.
• The required employer contributions determined by the valuation are for the fiscal year beginning two years after the valuation date: fiscal year 2022-23.
This two-year lag is necessary due to the amount of time needed to extract and test the membership and financial data, and the need to provi de public agencies with
their required employer contribution well in advance of the start of the fiscal year.
The Unfunded Accrued Liability (UAL) is used to determine the employer contribution and therefore must be rolled forward two years from the valuat ion date to the first
day of the fiscal year for which the contribution is being determined. The UAL is rolled forward each year by subtracting the expected payment on the UAL for the fiscal
year and adjusting for interest. The expected payment for the first fiscal year is determined by the actuarial valuation two years ago and the contribution for the second
year is from the actuarial valuation one year ago. Additional discretionary payments are reflected in the Expected Payments column in the fiscal year they were made by
the agency.
Reason for Base
Date
Est.
Ramp
Level
2022-23
Ramp
Shape
Escala-
tion
Rate
Amort.
Period
Balance
6/30/20
Expected
Payment
2020-21
Balance
6/30/21
Expected
Payment
2021-22
Balance
6/30/22
Minimum
Required
Payment
2022-23
Fresh Start 6/30/18 No Ramp 2.75% 13 176,165 15,889 172,061 16,326 167,218 16,775
Non-Investment (Gain)/Loss 6/30/19 No Ramp 0.00% 19 7,815 0 8,362 763 8,158 763
Investment (Gain)/Loss 6/30/19 40% Up Only 0.00% 19 9,055 0 9,689 212 10,148 424
Non-Investment (Gain)/Loss 6/30/20 No Ramp 0.00% 20 7,649 0 8,184 0 8,757 799
Investment (Gain)/Loss 6/30/20 20% Up Only 0.00% 20 51,761 0 55,384 0 59,261 1,296
Total 252,445 15,889 253,680 17,301 253,542 20,057
The (gain)/loss bases are the plan’s allocated share of the risk pool’s (gain)/loss for the fiscal year as disclosed in “Allocation of Plan’s Share of Pool’s Experience/Assumption
Change” earlier in this section. These (gain)/loss bases will be amortized in accordance with the CalPERS amortization polic y in effect at the time the base was established.
B-18
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool
Page 13
Amortization Schedule and Alternatives
The amortization schedule on the previous page shows the minimum contributions required according to the CalPERS
amortization policy. Many agencies have expressed a desire for a more stable pattern of payments or have indicated interest
in paying off the unfunded accrued liabilities more quickly than required. As such, we have provided alternative amortization
schedules to help analyze the current amortization schedule and illustrate the potential savings of accelerating unfunded
liability payments.
Shown on the following page are future year amortization payments based on 1) the current amortization schedule reflecting
the individual bases and remaining periods shown on the previous page, and 2) alternative “fresh start” amortization schedules
using two sample periods that would both result in interest savings relative to the current amortization schedule. To initiate
a Fresh Start, please consult with your plan actuary.
The Current Amortization Schedule typically contains both positive and negative bases. Positive bases result from plan
changes, assumption changes, method changes or plan experience that increase unfunded liability. Negative bases result
from plan changes, assumption changes, method changes, or plan experience that decrease unfunded liability. The
combination of positive and negative bases within an amortization schedule can result in unusual or problematic circumstances
in future years, such as:
• When a negative payment would be required on a positive unfunded actuarial liability; or
• When the payment would completely amortize the total unfunded liability in a very short time period, and results in
a large change in the employer contribution requirement.
In any year when one of the above scenarios occurs, the actuary will consider corrective action such as replacing the existing
unfunded liability bases with a single “fresh start” base and amortizing it over a reasonable period.
The Current Amortization Schedule on the following page may appear to show that, based on the current amortization bases,
one of the above scenarios will occur at some point in the future. It is impossible to know today whether such a scenario will
in fact arise since there will be additional bases added to the amortization schedule in each future year. Should such a scenario
arise in any future year, the actuary will take appropriate action based on guidelines in the CalPERS amortization policy.
B-19
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool
Page 14
Amortization Schedule and Alternatives (continued)
Alternate Schedules
Current Amortization
Schedule 15 Year Amortization 10 Year Amortization
Date Balance Payment Balance Payment Balance Payment
6/30/2022 253,542 20,057 253,542 26,912 253,542 34,898
6/30/2023 250,543 22,025 243,452 26,912 235,191 34,898
6/30/2024 245,300 24,006 232,656 26,912 215,556 34,898
6/30/2025 237,639 26,001 221,104 26,911 194,546 34,898
6/30/2026 227,378 27,798 208,744 26,911 172,065 34,898
6/30/2027 214,539 28,311 195,519 26,912 148,011 34,898
6/30/2028 200,272 28,840 181,367 26,911 122,273 34,898
6/30/2029 184,460 29,382 166,226 26,912 94,733 34,897
6/30/2030 166,980 29,941 150,024 26,911 65,267 34,898
6/30/2031 147,697 30,514 132,689 26,912 33,737 34,898
6/30/2032 126,472 31,103 114,139 26,911
6/30/2033 103,152 31,708 94,292 26,912
6/30/2034 77,574 32,330 73,054 26,911
6/30/2035 49,562 9,103 50,331 26,912
6/30/2036 43,614 9,099 26,016 26,911
6/30/2037 37,254 9,099
6/30/2038 30,449 9,100
6/30/2039 23,168 9,103
6/30/2040 15,373 9,099
6/30/2041 7,036 7,278
6/30/2042
6/30/2043
6/30/2044
6/30/2045
6/30/2046
6/30/2047
6/30/2048
6/30/2049
6/30/2050
6/30/2051
Total 423,897 403,673 348,979
Interest Paid 170,355 150,131 95,437
Estimated Savings 20,224 74,918
B-20
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 15
Employer Contribution History
The table below provides a recent history of the required employer contributions for the plan. The amounts are
based on the actuarial valuation from two years prior and does not account for prepayments or benefit changes
made during a fiscal year. Additional discretionary payments before July 1, 2019 or after June 30, 2020 are not
included.
[
Fiscal
Year
Employer
Normal Cost
Unfunded Liability
Payment ($)
Additional Discretionary
Payments
2016 - 17 7.159% $0 N/A
2017 - 18 7.200% 198 N/A
2018 - 19 7.634% 1,413 N/A
2019 - 20 8.081% 3,107 0
2020 - 21 8.794% 15,889
2021 - 22 8.65% 17,301
2022 - 23 8.63% 20,057
Funding History
The table below shows the recent history of the actuarial accrued liability, share of the pool’s market value of
assets, unfunded accrued liability, funded ratio, and annual covered payroll.
Valuation
Date
Accrued
Liability
(AL)
Share of Pool’s
Market Value of
Assets (MVA)
Unfunded
Accrued
Liability (UAL)
Funded
Ratio
Annual
Covered
Payroll
06/30/2013 $10,846 $9,146 $1,700 84.3% $193,164
06/30/2014 112,112 117,095 (4,983) 104.4% 789,242
06/30/2015 267,196 258,118 9,078 96.6% 1,214,520
06/30/2016 557,863 503,485 54,378 90.3% 1,636,677
06/30/2017 945,109 895,554 49,555 94.8% 1,905,466
06/30/2018 1,446,497 1,330,795 115,702 92.0% 1,979,072
06/30/2019 1,892,664 1,724,042 168,622 91.1% 1,933,912
06/30/2020 2,444,917 2,192,472 252,445 89.7% 1,561,936
B-21
Risk Analysis
• Future Investment Return Scenarios
• Discount Rate Sensitivity
• Mortality Rate Sensitivity
• Maturity Measures
• Maturity Measures History
• Hypothetical Termination Liability
B-22
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 17
Future Investment Return Scenarios
Analysis was performed to determine the effects of various future investment returns on required employer
contributions. The projections below provide a range of results based on five investment return scenarios
assumed to occur during the next four fiscal years (2020-21, 2021-22, 2022-23 and 2023-24). The projections
also assume that all other actuarial assumptions will be realized and that no further changes to assumptions,
contributions, benefits, or funding will occur.
For fiscal years 2020-21, 2021-22, 2022-23, and 2023-24, each scenario assumes an alternate fixed annual
return. The fixed return assumptions for the five scenarios are 1.0%, 4.0%, 7.0%, 9.0% and 12.0%.
These alternate investment returns were chosen based on stochastic analysis of possible future investment
returns over the four-year period ending June 30, 2024. Using the expected returns and volatility of the asset
classes in which the funds are invested, we produced five thousand stochastic outcomes for this period based
on the most recently completed Asset Liability Management process. We then selected annual returns that
approximate the 5th, 25th, 50th, 75th, and 95th percentiles for these outcomes. For example, of all the 4-year
outcomes generated in the stochastic analysis, approximately 25% had an average annual return of 4.0% or
less.
Required contributions outside of this range are also possible. In particular, whereas it is unlikely that investment
returns will average less than 1.0% or greater than 12.0% over this four-year period, the likelihood of a single
investment return less than 1.0% or greater than 12.0% in any given year is much greater.
Assumed Annual Return From
2020-21 through 2023-24
Projected Employer Contributions
2023-24 2024-25 2025-26 2026-27
1.0%
Normal Cost 8.6% 8.6% 8.6% 8.6%
UAL Contribution $25,000 $34,000 $46,000 $61,000
4.0%
Normal Cost 8.6% 8.6% 8.6% 8.6%
UAL Contribution $24,000 $29,000 $36,000 $45,000
7.0%
Normal Cost 8.6% 8.6% 8.6% 8.6%
UAL Contribution $22,000 $24,000 $26,000 $28,000
9.0%
Normal Cost 8.8% 9.0% 9.2% 9.4%
UAL Contribution $21,000 $22,000 $22,000 $20,000
12.0%
Normal Cost 8.8% 9.0% 9.2% 9.4%
UAL Contribution $20,000 $17,000 $0 $0
B-23
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 18
Discount Rate Sensitivity
The discount rate assumption is calculated as the sum of the assumed real rate of return and the assumed
annual price inflation, currently 4.50% and 2.50%, respectively. Changing either the price inflation assumption
or the real rate of return assumption will change the discount rate. The sensitivity of the valuation results to the
discount rate assumption depends on which component of the discount rate is changed. Shown below are
various valuation results as of June 30, 2020 assuming alternate discount rates by changing the two components
independently. Results are shown using the current discount rate of 7.0% as well as alternate discount rates of
6.0% and 8.0%. The rates of 6.0% and 8.0% were selected since they illustrate the impact of a 1.0% increase
or decrease to the 7.0% assumption.
Sensitivity to the Real Rate of Return Assumption
As of June 30, 2020 1% Lower
Real Return Rate
Current
Assumptions
1% Higher
Real Return Rate
Discount Rate 6.0% 7.0% 8.0%
Inflation 2.5% 2.5% 2.5%
Real Rate of Return 3.5% 4.5% 5.5%
a) Total Normal Cost 19.21% 15.56% 12.74%
b) Accrued Liability $2,877,904 $2,444,917 $2,098,020
c) Market Value of Assets $2,192,472 $2,192,472 $2,192,472
d) Unfunded Liability/(Surplus) [(b) - (c)] $685,432 $252,445 ($94,452)
e) Funded Status 76.2% 89.7% 104.5%
Sensitivity to the Price Inflation Assumption
As of June 30, 2020 1% Lower
Inflation Rate
Current
Assumptions
1% Higher
Inflation Rate
Discount Rate 6.0% 7.0% 8.0%
Inflation 1.5% 2.5% 3.5%
Real Rate of Return 4.5% 4.5% 4.5%
a) Total Normal Cost 16.65% 15.56% 14.26%
b) Accrued Liability $2,611,119 $2,444,917 $2,249,848
c) Market Value of Assets $2,192,472 $2,192,472 $2,192,472
d) Unfunded Liability/(Surplus) [(b) - (c)] $418,647 $252,445 $57,376
e) Funded Status 84.0% 89.7% 97.4%
Mortality Rate Sensitivity
The following table looks at the change in the June 30, 2020 plan costs and funded status under two different
longevity scenarios, namely assuming post-retirement rates of mortality are 10% lower or 10% higher than our
current mortality assumptions adopted in 2017. This type of analysis highlights the impact on the plan of
improving or worsening mortality over the long-term.
As of June 30, 2020 10% Lower
Mortality Rates
Current
Assumptions
10% Higher
Mortality Rates
a) Total Normal Cost 15.84% 15.56% 15.30%
b) Accrued Liability $2,489,372 $2,444,917 $2,403,751
c) Market Value of Assets $2,192,472 $2,192,472 $2,192,472
d) Unfunded Liability/(Surplus) [(b) - (c)] $296,900 $252,445 $211,279
e) Funded Status 88.1% 89.7% 91.2%
B-24
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 19
Maturity Measures
As pension plans mature they become more sensitive to risks. Understanding plan maturity and how it affects
the ability of a pension plan sponsor to tolerate risk is important in understanding how the pension plan is
impacted by investment return volatility, other economic variables and changes in longevity or other
demographic assumptions. Since it is the employer that bears the risk, it is appropriate to perform this analysis
on a pension plan level considering all rate plans. The following measures are for one rate plan only.
One way to look at the maturity level of CalPERS and its plans is to look at the ratio of a plan’s retiree liability
to its total liability. A pension plan in its infancy will have a very low ratio of retiree liability to total liability. As
the plan matures, the ratio starts increasing. A mature plan will often have a ratio above 60%-65%.
Ratio of Retiree Accrued Liability to
Total Accrued Liability June 30, 2019 June 30, 2020
1. Retired Accrued Liability 253,454 838,033
2. Total Accrued Liability 1,892,664 2,444,917
3. Ratio of Retiree AL to Total AL [(1) / (2)] 0.13 0.34
Another measure of maturity level of CalPERS and its plans is to look at the ratio of actives to retirees, also
called the Support Ratio. A pension plan in its infancy will have a very high ratio of active to retired members.
As the plan matures, and members retire, the ratio starts declining. A mature plan will often have a ratio near
or below one. The average support ratio for CalPERS public agency plans is 1.25.
Support Ratio June 30, 2019 June 30, 2020
1. Number of Actives 16 14
2. Number of Retirees 2 4
3. Support Ratio [(1) / (2)] 8.00 3.50
B-25
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 20
Maturity Measures (Continued)
The actuarial calculations supplied in this communication are based on various assumptions about long-term
demographic and economic behavior. Unless these assumptions (e.g., terminations, deaths, disabilities,
retirements, salary growth, and investment return) are exactly realized e ach year, there will be differences on
a year-to-year basis. The year-to-year differences between actual experience and the assumptions are called
actuarial gains and losses and serve to lower or raise required employer contributions from one year to the
next. Therefore, employer contributions will inevitably fluctuate, especially due to the ups and downs of
investment returns.
Asset Volatility Ratio (AVR)
Shown in the table below is the asset volatility ratio (AVR), which is the ratio of market value of assets to payroll.
Plans that have higher AVR experience more volatile employer contributions (as a percentage of payroll) due to
investment return. For example, a plan with an asset-to-payroll ratio of 8 may experience twice the contribution
volatility due to investment return volatility than a plan with an asset-to-payroll ratio of 4. It should be noted
that this ratio is a measure of the current situation. It increases over time but generally tends to stabilize as t he
plan matures.
Liability Volatility Ratio (LVR)
Also shown in the table below is the liability volatility ratio (LVR), which is the ratio of accrued liability to payroll.
Plans that have a higher LVR experience more volatile employer contributions (as a percentage of payroll) due
to investment return and changes in liability. For example, a plan with LVR ratio of 8 is expected to have twice
the contribution volatility of a plan with LVR of 4. It should be noted that this ratio indicates a longer-term
potential for contribution volatility. The AVR, described above, will tend to move closer to the LVR as a plan
matures.
Contribution Volatility June 30, 2019 June 30, 2020
1. Market Value of Assets $1,724,042 $2,192,472
2. Payroll 1,933,912 1,561,936
3. Asset Volatility Ratio (AVR) [(1) / (2)] 0.9 1.4
4. Accrued Liability $1,892,664 $2,444,917
5. Liability Volatility Ratio (LVR) [(4) / (2)] 1.0 1.6
Maturity Measures History
Valuation Date
Ratio of
Retiree Accrued Liability
to
Total Accrued Liability
Support
Ratio
Asset
Volatility
Ratio
Liability
Volatility
Ratio
06/30/2017 0.00 N/A 0.5 0.5
06/30/2018 0.17 8.50 0.7 0.7
06/30/2019 0.13 8.00 0.9 1.0
06/30/2020 0.34 3.50 1.4 1.6
B-26
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 21
Hypothetical Termination Liability
The hypothetical termination liability is an estimate of the financial position of the plan had the contract with
CalPERS been terminated as of June 30, 2020. The plan liability on a termination basis is calculated differently
compared to the plan’s ongoing funding liability. For the hypothetical termination liability calculation, both
compensation and service are frozen as of the valuation date and no future pay increases or service accruals
are assumed. This measure of funded status is not appropriate for assessing the need for future employer
contributions in the case of an ongoing plan, that is, for an employer that continues to provide CalPERS
retirement benefits to active employees.
A more conservative investment policy and asset allocation strategy was adopted by the CalPERS Board for the
Terminated Agency Pool. The Terminated Agency Pool has limited funding sources since no future employer
contributions will be made. Therefore, expected benefit payments are secured by risk-free assets and benefit
security for members is increased while limiting the funding risk. However, this asset allocation has a lower
expected rate of return than the PERF and consequently, a lower discount rate is assumed. The lower discount
rate for the Terminated Agency Pool results in higher liabilities for terminated plans.
The effective termination discount rate will depend on actual market rates of return for risk-free securities on
the date of termination. As market discount rates are variable, the table below shows a range for the hypothetical
termination liability based on the lowest and highest interest rates observed during an approximate 19 -month
period from 12 months before the valuation date to 7 months after.
Market
Value of
Assets (MVA)
Hypothetical
Termination
Liability1,2
at 0.75%
Funded
Status
Unfunded
Termination
Liability
at 0.75%
Hypothetical
Termination
Liability1,2
at 2.50%
Funded
Status
Unfunded
Termination
Liability
at 2.50%
$2,192,472 $6,352,038 34.5% $4,159,566 $4,332,288 50.6% $2,139,816
1 The hypothetical liabilities calculated above include a 5% mortality contingency load in accordance with Board policy. Other
actuarial assumptions can be found in Appendix A of the Section 2 report.
2 The current discount rate assumption used for termination valuations is a weighted average of the 10-year and 30-year U.S.
Treasury yields where the weights are based on matching asset and liability durations as of the termination date. The
discount rates used in the table are based on 20-year Treasury bonds, rounded to the nearest quarter percentage point,
which is a good proxy for most plans. The 20-year Treasury yield was 1.18% on June 30, 2020, and was 1.68% on January
31, 2021.
In order to terminate the plan, you must first contact our Retirement Services Contract Unit to initiate a
Resolution of Intent to Terminate. The completed Resolution will allow the plan actuary to give you a preliminary
termination valuation with a more up-to-date estimate of the plan liabilities. CalPERS advises you to consult with
the plan actuary before beginning this process.
B-27
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 22
Participant Data
The table below shows a summary of your plan’s member data upon which this valuation is based:
June 30, 2019 June 30, 2020
Active Members
Counts 16 14
Average Attained Age N/A 42.5
Average Entry Age to Rate Plan N/A 38.7
Average Years of Credited Service N/A 3.8
Average Annual Covered Pay $120,870 $111,567
Annual Covered Payroll $1,933,912 $1,561,936
Projected Annual Payroll for Contribution Year $2,097,888 $1,694,372
Present Value of Future Payroll $18,709,456 $16,761,550
Transferred Members 5 7
Separated Members 3 3
Retired Members and Beneficiaries
Counts* 2 4
Average Annual Benefits* N/A $15,323
Counts of members included in the valuation are counts of the recor ds 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 include community property settlements.
List of Class 1 Benefit Provisions
This plan has the additional Class 1 Benefit Provisions:
• None
B-28
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 23
Plan’s Major Benefit Options
Shown below is a summary of the major optional benefits for which your agency has contracted. A description of principal standard and optional plan provisions
is in Section 2.
Benefit Group
Member Category Misc
Demographics
Actives Yes
Transfers/Separated Yes
Receiving Yes
Benefit Group Key 110655
Benefit Provision
Benefit Formula 2% @ 60
Social Security Coverage No
Full/Modified Full
Employee Contribution Rate 7.00%
Final Average Compensation Period Three Year
Sick Leave Credit Yes
Non-Industrial Disability Standard
Industrial Disability No
Pre-Retirement Death Benefits
Optional Settlement 2 Yes
1959 Survivor Benefit Level Level 4
Special No
Alternate (firefighters) No
Post-Retirement Death Benefits
Lump Sum $500
Survivor Allowance (PRSA) No
COLA 2%
B-29
CALPERS ACTUARIAL VALUATION - June 30, 2020
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 24
Section 2
CALIFORNIA PUBLIC EM PLOYEES’ RETIREMENT SYSTEM
Risk Pool Actuarial Valuation Information
Section 2 may be found on the CalPERS website
(calpers.ca.gov) in the Forms and
Publications section
B-30
California Public Employees’ Retirement System
Actuarial Office
400 Q Street, Sacramento, CA 95811 | Phone: (916) 795-3000 | Fax: (916) 795-2744
888 CalPERS (or 888-225-7377) | TTY: (877) 249-7442 | www.calpers.ca.gov
July 2021
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
(CalPERS ID: 3846845523)
Annual Valuation Report as of June 30, 2020
Dear Employer,
Attached to this letter, you will find the June 30, 2020 actuarial valuation report of your CalPERS pension plan.
Provided in this report is the determination of the minimum required employer contributions for fiscal
year 2022-23. In addition, the report contains important information regarding the current financial status of the
plan as well as projections and risk measures to aid in planning for the future.
Because this plan is in a risk pool, the following valuation report has been separated into two sections:
• Section 1 contains specific information for the plan including the development of the current and projected
employer contributions, and
• Section 2 contains the Risk Pool Actuarial Valuation appropriate to the plan as of June 30, 2020.
Section 2 can be found on the CalPERS website (calpers.ca.gov). From the home page, go to “Forms & Publications”
and select “View All”. In the search box, enter “Risk Pool” and from the results list download the Miscellaneous Risk
Pool Actuarial Valuation Report for June 30, 2020.
Your June 30, 2020 actuarial valuation report contains important actuarial information about your pension plan at
CalPERS. Your assigned CalPERS staff actuary, whose signature appears in the Actuarial Certification section on page
1, is available to discuss the report with you.
Actuarial valuations are based on assumptions regarding future plan experience including investment return and payroll
growth, eligibility for the types of benefits provided, and longevity among retirees. The CalPERS Board of Administration
adopts these assumptions after considering the advice of CalPERS actuarial and investment teams and other
professionals. Each actuarial valuation reflects all prior differences between actual and assumed experience and adjusts
the contribution rates as needed. This valuation is based on an investment return assumption of 7.0% which was
adopted by the board in December 2016. Other assumptions used in this report are those recommended in the CalPERS
Experience Study and Review of Actuarial Assumptions report from December 2017.
Required Contribution
The exhibit below displays the minimum employer contributions and the Employee PEPRA Rate for fiscal year 2022-23
along with estimates of the required contributions for fiscal year 2023-24. Member contributions other than cost sharing
(whether paid by the employer or the employee) are in addition to the results shown below. The employer
contributions in this report do not reflect any cost sharing arrangements you may have with your
employees.
Fiscal Year Employer Normal
Cost Rate
Employer Amortization of
Unfunded Accrued Liability
PEPRA Employee
Rate
2022-23 7.47% $15,841 6.75%
Projected Results
2023-24 7.5% $17,000 TBD
C-1
J~_CalPERS
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
(CalPERS ID: 3846845523)
Annual Valuation Report as of June 30, 2020
Page 2
The actual investment return for fiscal year 2020-21 was not known at the time this report was prepared. The
projections above assume the investment return for that year would be 7.00%. To the extent the actual
investment return for fiscal year 2020-21 differs from 7.00%, the actual contribution requirements for
fiscal year 2023-24 will differ from those shown above. For additional details regarding the assumptions and
methods used for these projections please refer to the “Projected Employer Contributions” in the “Highlights and
Executive Summary” section. This section also contains projected required contributions through fiscal year 2027-28.
Changes from Previous Year’s Valuation
There are no significant changes in actuarial assumptions or policies in your 2020 actuarial valuation. Your annual
valuation report is an important tool for monitoring the health of your CalPERS pension plan. Your report contains
useful information about future required contributions and ways to control your plan’s funding progress. In addition to
your annual actuarial report my office has developed tools for employers to plan, project and protect the retirement
benefits of your employees. Pension Outlook is a tool to help plan and budget pension costs into the future with easy
to understand results and charts.
You will be able to view the projected funded status and required employer contributions for pension plans in
different potential scenarios for up to 30 years into the future — which will make budgeting more predictable. While
Pension Outlook can't predict the future, it can provide valuable planning information based on a variety of future
scenarios that you select.
Pension Outlook can help you answer specific questions about your plans, including:
• When is my plan’s funded status expected to increase?
• What happens to my required contributions in a down market?
• How does the discount rate assumption affect my contributions?
• What is the impact of making an additional discretionary payment to my plan?
To get started, visit our Pension Outlook page at www.calpers.ca.gov/page/employers/actuarial-resources/pension-
outlook-overview and take the steps to register online.
CalPERS will be completing an Asset Liability Management (ALM) review process in November 2021 that will review the
capital market assumptions and the strategic asset allocation and ascertain whether a change in the discount rate and
other economic assumptions is warranted. In addition, the Actuarial Office will be completing its Experience Study to
review the demographic experience within the pension system and make recommendations to modify future
assumptions where appropriate.
Furthermore, this valuation does not reflect any impacts from the COVID-19 pandemic on your pension plan. The
impact of COVID-19 on retirement plans is not yet known and CalPERS actuaries will continue to monitor the effects
and where necessary make future adjustments to actuarial assumptions.
Further descriptions of general changes are included in the “Highlights and Executive Summary” section and in Appendix
A of the Section 2 report, “Actuarial Methods and Assumptions.”
Questions
We understand that you might have questions about these results, and your assigned CalPERS actuary whose signature
is on the valuation report is available to discuss. If you have other questions, you may call the Customer Contact Center
at (888)-CalPERS or (888-225-7377).
Sincerely,
SCOTT TERANDO, ASA, EA, MAAA, FCA, CFA
Chief Actuary
C-2
Actuarial Valuation
as of June 30, 2020
for the
PEPRA Miscellaneous Plan
of the
City of Rancho Palos Verdes
(CalPERS ID: 3846845523)
Required Contributions
for Fiscal Year
July 1, 2022 - June 30, 2023
C-3
A
CalPERS
Table of Contents
Section 1 – Plan Specific Information
Section 2 – Risk Pool Actuarial Valuation Information
C-4
Section 1
CALIFORNIA PUBLIC EM PLOYEES’ RETIREMENT SYSTEM
Plan Specific Information
for the
PEPRA Miscellaneous Plan
of the
City of Rancho Palos Verdes
(CalPERS ID: 3846845523)
(Rate Plan ID: 26567)
C-5
Rate Plan belonging to the Miscellaneous Risk Pool
Table of Contents
Actuarial Certification 1
Highlights and Executive Summary
Introduction 3
Purpose of Section 1 3
Required Employer Contributions 4
Additional Discretionary Employer Contributions 5
Plan’s Funded Status 6
Projected Employer Contributions 6
Other Pooled Miscellaneous Risk Pool Rate Plans 7
Cost 8
Changes Since the Prior Year’s Valuation 9
Subsequent Events 9
Assets and Liabilities
Breakdown of Entry Age Accrued Liability 11
Allocation of Plan’s Share of Pool’s Experience/Assumption Change 11
Development of Plan’s Share of Pool’s Market Value of Assets 11
Schedule of Plan’s Amortization Bases 12
Amortization Schedule and Alternatives 13
Employer Contribution History 15
Funding History 15
Risk Analysis
Future Investment Return Scenarios 17
Discount Rate Sensitivity 18
Mortality Rate Sensitivity 18
Maturity Measures 19
Maturity Measures History 20
Hypothetical Termination Liability 21
Participant Data 22
List of Class 1 Benefit Provisions 22
Plan’s Major Benefit Options 23
PEPRA Member Contribution Rates 24
C-6
CALPERS ACTUARIAL VALUATION - June 30, 2020
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 1
Actuarial Certification
Section 1 of this report is based on the member and financial data contained in our records as of June 30, 2020
which was provided by your agency and the benefit provisions under your contract with CalPERS. Section 2 of
this report is based on the member and financial data as of June 30, 2020 provided by employers participating
in the Miscellaneous Risk Pool to which the plan belongs and benefit provisions under the CalPERS contracts for
those agencies.
As set forth in Section 2 of this report, the pool actuaries have certified that, in their opinion, the valuation of the
risk pool containing your PEPRA 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 of the date of this
valuation and as prescribed by the CalPERS Board of Administration according to provisions set forth in the
California Public Employees’ Retirement Law.
Having relied upon the information set forth in Section 2 of this report and based on the census and benefit
provision information for the plan, it is my opinion as the plan actuary that the Unfunded Accrued Liability
amortization bases as of June 30, 2020 and employer contribution as of July 1, 2022 have been properly and
accurately determined in accordance with the principles and standards stated above.
The undersigned is an actuary who satisfies the Qualification Standards for Actuaries Issuing Statements of
Actuarial Opinion in the United States with regard to pensions.
STUART BENNETT, ASA, MAAA
Senior Pension Actuary, CalPERS
C-7
Highlights and Executive Summary
• Introduction
• Purpose of Section 1
• Required Employer Contributions
• Additional Discretionary Employer Contributions
• Plan’s Funded Status
• Projected Employer Contributions
• Other Pooled Miscellaneous Risk Pool Rate Plans
• Cost
• Changes Since the Prior Year’s Valuation
• Subsequent Events
C-8
CALPERS ACTUARIAL VALUATION - June 30, 2020
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 3
Introduction
This report presents the results of the June 30, 2020 actuarial valuation of the PEPRA Miscellaneous Plan of the
City of Rancho Palos Verdes of the California Public Employees’ Retirement System (CalPERS). This actuarial
valuation sets the required employer contributions for fiscal year 2022-23.
Purpose of Section 1
This Section 1 report for the PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes of CalPERS was
prepared by the plan actuary in order to:
• Set forth the assets and accrued liabilities of this plan as of June 30, 2020;
• Determine the minimum required employer contribution for this plan for the fiscal year July 1, 2022
through June 30, 2023; and
• Provide actuarial information as of June 30, 2020 to the CalPERS Board of Administration and other
interested parties.
The pension funding information presented in this report should not be used in financial reports subject to
Governmental Accounting Standards Board (GASB) Statement No. 68 for a Cost Sharing Employer Defined
Benefit Pension Plan. A separate accounting valuation report for such purposes is available on the CalPERS
website.
The measurements shown in this actuarial valuation may not be applicable for other purposes. The employer
should contact their actuary before disseminating any portion of this report for any reason that is not explicitly
described above.
Future actuarial measurements may differ significantly from the current measurements presented in this report
due to such factors as the following: plan experience differing from that anticipated by the economic or
demographic assumptions; changes in economic or demographic assumptions; changes in actuarial policies; and
changes in plan provisions or applicable law.
Assessment and Disclosure of Risk
This report includes the following risk disclosures consistent with the recommendations of Actuarial Standards
of Practice No. 51 and recommended by the California Actuarial Advisory Panel (CAAP) in the Model Disclosure
Elements document:
• A “Scenario Test,” projecting future results under different investment income returns.
• A “Sensitivity Analysis,” showing the impact on current valuation results using alternative discount rates
of 6.0% and 8.0%.
• A “Sensitivity Analysis,” showing the impact on current valuation results assuming rates of mortality
are 10% lower or 10% higher than our current post- retirement mortality assumptions adopted in
2017.
• Pension Plan maturity measures quantifying the risks the employer bears.
C-9
CALPERS ACTUARIAL VALUATION - June 30, 2020
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 4
Required Employer Contributions
Fiscal Year
Required Employer Contributions 2022-23
Employer Normal Cost Rate 7.47%
Plus
Required Payment on Amortization Bases1 $15,841
Paid either as
1) Monthly Payment $1,320.08
Or
2) Annual Prepayment Option* $15,314
The total minimum required employer contribution is the sum of the Plan’s Employer Normal Cost Rate
(expressed as a percentage of payroll and paid as payroll is reported) plus the Employer Unfunded Accrued
Liability (UAL) Contribution Amount (billed monthly (1) or prepaid annually (2) in dollars).
* Only the UAL portion of the employer contribution can be prepaid (which must be received in full no
later than July 31).
Fiscal Year Fiscal Year
2021-22 2022-23
Development of Normal Cost as a Percentage of Payroll
Base Total Normal Cost for Formula 14.34% 14.22%
Surcharge for Class 1 Benefits2
None 0.00% 0.00%
Phase out of Normal Cost Difference3 0.00% 0.00%
Plan’s Total Normal Cost 14.34% 14.22%
Plan's Employee Contribution Rate4 6.75% 6.75%
Employer Normal Cost Rate 7.59% 7.47%
1 The required payment on amortization bases does not take into account any additional discretionary payment made after
April 30, 2021.
2 Section 2 of this report contains a list of Class 1 benefits and corresponding surcharges for each benefit.
3 The normal cost change is phased out over a five-year period in accordance with the CalPERS contribution allocation policy.
4 For detail regarding the determination of the required PEPRA employee contribution rate see Section on PEPRA Member
Contribution Rates.
C-10
CALPERS ACTUARIAL VALUATION - June 30, 2020
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 5
Additional Discretionary Employer Contributions
The minimum required employer contribution towards the Unfunded Accrued Liability (UAL) for this rate plan
for the 2022-23 fiscal year is $15,841. CalPERS allows employers to make additional discretionary payments
(ADPs) at any time and in any amount. These optional payments serve to reduce the UAL and future required
contributions and can result in significant long-term savings. Employers can also use ADPs to stabilize annual
contributions as a fixed dollar amount, percent of payroll or percent of revenue.
Provided below are select ADP options for consideration. Making such an ADP during fiscal year 2022-23 does
not require an ADP be made in any future year, nor does it change the remaining amortization period of any
portion of unfunded liability. For information on permanent changes to amortization periods, see the
“Amortization Schedule and Alternatives” section of the report.
If you are considering making an ADP, please contact your actuary for additional information.
Minimum Required Employer Contribution for Fiscal Year 2022-23
Estimated
Normal Cost
Minimum UAL
Payment
ADP Total UAL
Contribution
Estimated Total
Contribution
$224,053 $15,841 $0 $15,841 $239,894
Alternative Fiscal Year 2022-23 Employer Contributions for Greater UAL Reduction
Funding
Target
Estimated
Normal Cost
Minimum UAL
Payment
ADP1 Total UAL
Contribution
Estimated Total
Contribution
20 years $224,053 $15,841 $1,970 $17,811 $241,864
15 years $224,053 $15,841 $4,876 $20,717 $244,770
10 years $224,053 $15,841 $11,024 $26,865 $250,918
5 years $224,053 $15,841 $30,179 $46,020 $270,073
1 The ADP amounts are assumed to be made in the middle of the fiscal year. A payment made earlier or later in the fiscal
year would have to be less or more than the amount shown to have the same effect on the UAL amortization.
Note that the calculations above are based on the projected Unfunded Accrued Liability as of June 30, 2022 as
determined in the June 30, 2020 actuarial valuation. New unfunded liabilities can emerge in future years due to
assumption or method changes, changes in plan provisions and actuarial experience different than assumed.
Making an ADP illustrated above for the indicated number of years will not result in a plan that is exactly 100%
funded in the indicated number of years. Valuation results will vary from one year to the next and can diverge
significantly from projections over a period of several years.
C-11
CALPERS ACTUARIAL VALUATION - June 30, 2020
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 6
Plan’s Funded Status
June 30, 2019 June 30, 2020
1. Present Value of Projected Benefits (PVB) $4,875,582 $5,769,168
2. Entry Age Accrued Liability (AL) 1,320,076 1,720,001
3. Plan’s Market Value of Assets (MVA) 1,192,048 1,524,582
4. Unfunded Accrued Liability (UAL) [(2) - (3)] 128,028 195,419
5. Funded Ratio [(3) / (2)] 90.3% 88.6%
This measure of funded status is an assessment of the need for future employer contributions based on the
selected actuarial cost method used to fund the plan. The UAL is the present value of future employer
contributions for service that has already been earned and is in addition to future normal cost contributions for
active members. For a measure of funded status that is appr opriate for assessing the sufficiency of plan assets
to cover estimated termination liabilities, please see “Hypothetical Termination Liability” in the “Risk Analysis”
section.
Projected Employer Contributions
The table below shows the required and projected employer contributions (before cost sharing) for the next six
fiscal years. The projection assumes that all actuarial assumptions will be realized and that no further changes
to assumptions, contributions, benefits, or funding will occur during the projection period. Actual contribution
rates during this projection period could be significantly higher or lower than the projection shown below.
Required
Contribution
Projected Future Employer Contributions
(Assumes 7.00% Return for Fiscal Year 2020-21)
Fiscal Year 2022-23 2023-24 2024-25 2025-26 2026-27 2027-28
Rate Plan 26567 Results
Normal Cost % 7.47% 7.5% 7.5% 7.5% 7.5% 7.5%
UAL Payment $15,841 $17,000 $19,000 $20,000 $21,000 $22,000
For some sources of UAL, the change in UAL is amortized using a 5-year ramp up. For more information, please
see “Amortization of the Unfunded Actuarial Accrued Liability” under “Actuarial Methods” in Appendix A of the
Section 2 Report. This method phases in the impact of the change in UAL over a 5-year period in order to reduce
employer cost volatility from year to year. As a result of this methodology, dramatic changes in the required
employer contributions in any one year are less likely. However, required contributions can change gradually
and significantly over the next five years. In years when there is a large increase in UAL, the relatively small
amortization payments during the ramp up period could result in a funded ratio that is projected to decrease
initially while the contribution impact of the increase in the UAL is phased in.
For projected contributions under alternate investment return scenarios, please see the “Future Investment
Return Scenarios” in the “Risk Analysis” section.
Our online pension plan modeling and projection tool, Pension Outlook, is available in the Employers section of
the CalPERS website. Pension Outlook is a tool to help plan and budget pension costs into the future with results
and charts that are easy to understand.
C-12
CALPERS ACTUARIAL VALUATION - June 30, 2020
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 7
Other Pooled Miscellaneous Risk Pool Rate Plans
All of the results presented in this Section 1 report, except those shown below, correspond to rate plan 26567.
In many cases, employers have additional rate plans within the same risk pool. For cost analysis and budgeting
it is useful to consider contributions for these rate plans as a whole rather than individually. The estimated
contribution amounts and rates for all of the employer’s rate plans in the Miscellaneous Risk Pool are shown
below and assume that the payroll for each rate plan will grow according to the overall payroll growth assumption
of 2.75% per year for three years.
Fiscal Year Fiscal Year
2021-22 2022-23
Estimated Combined Employer Contributions for all Pooled Miscellaneous Rate Plans
Projected Payroll for the Contribution Year $6,845,623 $6,591,713
Estimated Employer Normal Cost $639,524 $602,020
Required Payment on Amortization Bases $1,002,749 $1,141,678
Estimated Total Employer Contributions $1,642,273 $1,743,698
Estimated Total Employer Contribution Rate (illustrative only) 23.99% 26.45%
C-13
CALPERS ACTUARIAL VALUATION - June 30, 2020
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 8
Cost
Actuarial Determination of Pension Plan Cost
Contributions to fund the pension plan are comprised of two components:
• Normal Cost, expressed as a percentage of total active payroll
• Amortization of the Unfunded Accrued Liability (UAL), expressed as a dollar amount
For fiscal years prior to 2016-17, the Amortization of UAL component was expressed as a percentage of total
active payroll. Starting with fiscal year 2016-17, the Amortization of UAL component was expressed as a dollar
amount and invoiced on a monthly basis. There continues to be an option to prepay this amount during July of
each fiscal year.
The Normal Cost component is expressed as a percentage of active payroll with employer and employee
contributions payable as part of the regular payroll reporting process.
The determination of both components requires complex actuarial calculations. The calculations are based on a
set of actuarial assumptions which can be divided into two categories:
• Demographic assumptions (e.g., mortality rates, retirement rates, employment termination rates,
disability rates)
• Economic assumptions (e.g., future investment earnings, inflation, salary growth rates)
These assumptions reflect CalPERS’ best estimate of future experience of the plan and are long term in nature.
We recognize that all assumptions will not be realized in any given year. For example, the investment earnings
at CalPERS have averaged 5.5% over the 20 years ending June 30, 2020, yet individual fiscal year returns have
ranged from -23.6% to +20.7%. In addition, CalPERS reviews all actuarial assumptions by conducting in-depth
experience studies every four years, with the most recent experience study completed in 2017.
C-14
CALPERS ACTUARIAL VALUATION - June 30, 2020
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 9
Changes Since the Prior Year’s Valuation
Benefits
The standard actuarial practice at CalPERS is to recognize mandated legislative benefit changes in the first
annual valuation following the effective date of the legislation. Voluntary benefit changes by plan amendment
are generally included in the first valuation that is prepared after the amendment becomes effective, even if the
valuation date is prior to the effective date of the amendment.
This valuation generally reflects plan changes by amendments effective before the date of the report. Please
refer to the “Plan’s Major Benefit Options” and Appendix B of the Section 2 Report for a summary of the plan
provisions used in this valuation.
Actuarial Methods and Assumptions
The are no significant changes to the actuarial methods or assumptions for the 2020 actuarial valuation.
Subsequent Events
The contribution requirements determined in this actuarial valuation report are based on demographic and
financial information as of June 30, 2020. Changes in the value of assets subsequent to that date are not
reflected. Investment returns below the assumed rate of return will increase future required contributions while
investment returns above the assumed rate of return will decrease future required contributions.
CalPERS will be completing an Asset Liability Management (ALM) process in November 2021 that will review the
capital market assumptions and the strategic asset allocation and ascertain whether a change in the discount
rate and other economic assumptions is warranted. As part of the ALM process the Actuarial Office will be
completing an Experience Study to review the demographic experience of the retirement system and make
recommendations to modify future assumptions where appropriate.
Furthermore, this valuation does not reflect any impacts from the COVID-19 pandemic on your pension plan.
The impact of COVID-19 on retirement plans is not yet known and CalPERS actuaries will continue to monitor
the effects and where necessary make future adjustments to actuarial assumptions.
The projected employer contributions on Page 6 are calculated under the assumption that the discount rate
remains at 7.0% going forward and that the realized rate of return on assets for fiscal year 2020-21 is 7.0%.
This actuarial valuation report reflects statutory changes, regulatory changes and CalPERS Board actions through
January 2021. Any subsequent changes or actions are not reflected.
C-15
Assets and Liabilities
• Breakdown of Entry Age Accrued Liability
• Allocation of Plan’s Share of Pool’s Experience/Assumption Change
• Development of Plan’s Share of Pool’s Market Value of Assets
• Schedule of Plan’s Amortization Bases
• Amortization Schedule and Alternatives
• Employer Contribution History
• Funding History
C-16
CALPERS ACTUARIAL VALUATION - June 30, 2020
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 11
Breakdown of Entry Age Accrued Liability
Active Members $1,253,608
Transferred Members 426,798
Terminated Members 39,595
Members and Beneficiaries Receiving Payments 0
Total $1,720,001
Allocation of Plan’s Share of Pool’s
Experience/Assumption Change
It is the policy of CalPERS to ensure equity within the risk pools by allocating the pool’s experience
gains/losses and assumption changes in a manner that treats each employer equitably and maintains benefit
security for the members of the System while minimizing substantial variations in employer contributions.
The Pool’s experience gains/losses and impact of assumption/method changes is allocated to the plan as
follows:
1. Plan’s Accrued Liability $1,720,001
2. Projected UAL balance at 6/30/2020 154,043
3. Pool’s Accrued Liability1 19,314,480,060
4. Sum of Pool’s Individual Plan UAL Balances at 6/30/20201 4,306,566,797
5. Pool’s 2019/20 Investment (Gain)/Loss1 344,968,792
6. Pool’s 2019/20 Non-Investment (Gain)/Loss1 60,428,629
7. Plan’s Share of Pool’s Investment (Gain)/Loss: [(1) - (2)] ÷ [(3) - (4)] × (5) 35,995
8. Plan’s Share of Pool’s Non-Investment (Gain)/Loss: (1) ÷ (3) × (6) 5,381
9. Plan’s New (Gain)/Loss as of 6/30/2020: (7) + (8) 41,376
1 Does not include plans that transferred to Pool on the valuation date.
Development of the Plan’s Share of Pool’s Market
Value of Assets
10. Plan’s UAL: (2) + (9) $195,419
11. Plan’s Share of Pool’s MVA: (1) - (10) $1,524,582
C-17
CALPERS ACTUARIAL VALUATION - June 30, 2020
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 12
Schedule of Plan’s Amortization Bases
Note that there is a two-year lag between the valuation date and the start of the contribution fiscal year.
• The assets, liabilities, and funded status of the plan are measured as of the valuation date: June 30, 2020.
• The required employer contributions determined by the valuation are for the fiscal year beginning two years after the valuation date: fiscal year 2022-23.
This two-year lag is necessary due to the amount of time needed to extract and test the membership and financial data, and the need to provi de public agencies with
their required employer contribution well in advance of the start of the fiscal year.
The Unfunded Accrued Liability (UAL) is used to determine the employer contribution and therefore must be rolled forward two years from the valuat ion date to the first
day of the fiscal year for which the contribution is being determined. The UAL is rolled forward each year by subtracting the expected payment on the UAL for the fiscal
year and adjusting for interest. The expected payment for the first fiscal year is determined by the actuarial valuation two years ago and the contribution for the second
year is from the actuarial valuation one year ago. Additional discretionary payments are reflected in the Expected Payments column in the fiscal year they were made by
the agency.
Reason for Base
Date
Est.
Ramp
Level
2022-23
Ramp
Shape
Escala-
tion
Rate
Amort.
Period
Balance
6/30/20
Expected
Payment
2020-21
Balance
6/30/21
Expected
Payment
2021-22
Balance
6/30/22
Minimum
Required
Payment
2022-23
Fresh Start 6/30/18 No Ramp 2.75% 13 142,330 12,837 139,014 13,190 135,101 13,553
Non-Investment (Gain)/Loss 6/30/19 No Ramp 0.00% 19 5,451 0 5,833 532 5,691 532
Investment (Gain)/Loss 6/30/19 40% Up Only 0.00% 19 6,262 0 6,700 146 7,018 293
Non-Investment (Gain)/Loss 6/30/20 No Ramp 0.00% 20 5,381 0 5,758 0 6,161 562
Investment (Gain)/Loss 6/30/20 20% Up Only 0.00% 20 35,995 0 38,515 0 41,211 901
Total 195,419 12,837 195,820 13,868 195,182 15,841
The (gain)/loss bases are the plan’s allocated share of the risk pool’s (gain)/loss for the fiscal year as disclosed in “Allocation of Plan’s Share of Pool’s Experience/Assumption
Change” earlier in this section. These (gain)/loss bases will be amortized in accordance with the CalPERS amortization polic y in effect at the time the base was established.
C-18
CALPERS ACTUARIAL VALUATION - June 30, 2020
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool
Page 13
Amortization Schedule and Alternatives
The amortization schedule on the previous page shows the minimum contributions required according to the CalPERS
amortization policy. Many agencies have expressed a desire for a more stable pattern of payments or have indicated interest
in paying off the unfunded accrued liabilities more quickly than required. As such, we have provided alternative amortization
schedules to help analyze the current amortization schedule and illustrate the potential savings of accelerating unfunded
liability payments.
Shown on the following page are future year amortization payments based on 1) the current amortization schedule reflecting
the individual bases and remaining periods shown on the previous page, and 2) alternative “fresh start” amortization schedules
using two sample periods that would both result in interest savings relative to the current amortization schedule. To initiate
a Fresh Start, please consult with your plan actuary.
The Current Amortization Schedule typically contains both positive and negative bases. Positive bases result from plan
changes, assumption changes, method changes or plan experience that increase unfunded liability. Negative bases result
from plan changes, assumption changes, method changes, or plan experience that decrease unfunded liability. The
combination of positive and negative bases within an amortization schedule can result in unusual or problematic circumstances
in future years, such as:
• When a negative payment would be required on a positive unfunded actuarial liability; or
• When the payment would completely amortize the total unfunded liability in a very short time period, and results in
a large change in the employer contribution requirement.
In any year when one of the above scenarios occurs, the actuary will consider corrective action such as replacing the existing
unfunded liability bases with a single “fresh start” base and amortizing it over a reasonable period.
The Current Amortization Schedule on the following page may appear to show that, based on the current amortization bases,
one of the above scenarios will occur at some point in the future. It is impossible to know today whether such a scenario will
in fact arise since there will be additional bases added to the amortization schedule in each future year. Should such a scenario
arise in any future year, the actuary will take appropriate action based on guidelines in the CalPERS amortization policy.
C-19
CALPERS ACTUARIAL VALUATION - June 30, 2020
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool
Page 14
Amortization Schedule and Alternatives (continued)
Alternate Schedules
Current Amortization
Schedule 15 Year Amortization 10 Year Amortization
Date Balance Payment Balance Payment Balance Payment
6/30/2022 195,182 15,841 195,182 20,717 195,182 26,865
6/30/2023 192,459 17,261 187,415 20,717 181,055 26,865
6/30/2024 188,075 18,692 179,104 20,717 165,939 26,865
6/30/2025 181,905 20,133 170,211 20,717 149,765 26,865
6/30/2026 173,813 21,438 160,696 20,717 132,459 26,865
6/30/2027 163,805 21,854 150,515 20,717 113,942 26,865
6/30/2028 152,665 22,282 139,621 20,717 94,129 26,865
6/30/2029 140,303 22,718 127,965 20,717 72,929 26,865
6/30/2030 126,624 23,171 115,493 20,717 50,245 26,866
6/30/2031 111,520 23,634 102,148 20,717 25,972 26,866
6/30/2032 94,878 24,108 87,869 20,718
6/30/2033 76,582 24,598 72,589 20,717
6/30/2034 56,498 25,100 56,240 20,717
6/30/2035 34,489 6,333 38,747 20,718
6/30/2036 30,352 6,332 20,028 20,717
6/30/2037 25,927 6,333
6/30/2038 21,191 6,333
6/30/2039 16,124 6,335
6/30/2040 10,700 6,331
6/30/2041 4,900 5,069
6/30/2042
6/30/2043
6/30/2044
6/30/2045
6/30/2046
6/30/2047
6/30/2048
6/30/2049
6/30/2050
6/30/2051
Total 323,896 310,757 268,652
Interest Paid 128,714 115,575 73,470
Estimated Savings 13,139 55,244
C-20
CALPERS ACTUARIAL VALUATION - June 30, 2020
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 15
Employer Contribution History
The table below provides a recent history of the required employer contributions for the plan. The amounts are
based on the actuarial valuation from two years prior and does not account for prepayments or benefit changes
made during a fiscal year. Additional discretionary payments before July 1, 2019 or after June 30, 2020 are not
included.
[
Fiscal
Year
Employer
Normal Cost
Unfunded Liability
Payment ($)
Additional Discretionary
Payments
2016 - 17 6.555% $90 N/A
2017 - 18 6.533% 214 N/A
2018 - 19 6.842% 1,011 N/A
2019 - 20 6.985% 2,239 0
2020 - 21 7.732% 12,837
2021 - 22 7.59% 13,868
2022 - 23 7.47% 15,841
Funding History
The table below shows the recent history of the actuarial accrued liability, share of the pool’s market value of
assets, unfunded accrued liability, funded ratio, and annual covered payroll.
Valuation
Date
Accrued
Liability
(AL)
Share of Pool’s
Market Value of
Assets (MVA)
Unfunded
Accrued
Liability (UAL)
Funded
Ratio
Annual
Covered
Payroll
06/30/2013 $3,810 $5,112 ($1,302) 134.2% $128,274
06/30/2014 34,829 37,902 (3,073) 108.8% 469,813
06/30/2015 153,966 147,363 6,603 95.7% 859,764
06/30/2016 339,576 305,445 34,131 89.9% 1,351,084
06/30/2017 616,259 584,158 32,101 94.8% 1,628,257
06/30/2018 987,801 907,088 80,713 91.8% 2,422,034
06/30/2019 1,320,076 1,192,048 128,028 90.3% 2,422,912
06/30/2020 1,720,001 1,524,582 195,419 88.6% 2,764,928
C-21
Risk Analysis
• Future Investment Return Scenarios
• Discount Rate Sensitivity
• Mortality Rate Sensitivity
• Maturity Measures
• Maturity Measures History
• Hypothetical Termination Liability
C-22
CALPERS ACTUARIAL VALUATION - June 30, 2020
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 17
Future Investment Return Scenarios
Analysis was performed to determine the effects of various future investment returns on required employer
contributions. The projections below provide a range of results based on five investment return scenarios
assumed to occur during the next four fiscal years (2020-21, 2021-22, 2022-23 and 2023-24). The projections
also assume that all other actuarial assumptions will be realized and that no further changes to assumptions,
contributions, benefits, or funding will occur.
For fiscal years 2020-21, 2021-22, 2022-23, and 2023-24, each scenario assumes an alternate fixed annual
return. The fixed return assumptions for the five scenarios are 1.0%, 4.0%, 7.0%, 9.0% and 12.0%.
These alternate investment returns were chosen based on stochastic analysis of possible future investment
returns over the four-year period ending June 30, 2024. Using the expected returns and volatility of the asset
classes in which the funds are invested, we produced five thousand stochastic outcomes for this period based
on the most recently completed Asset Liability Management process. We then selected annual returns that
approximate the 5th, 25th, 50th, 75th, and 95th percentiles for these outcomes. For example, of all the 4-year
outcomes generated in the stochastic analysis, approximately 25% had an average annual return of 4.0% or
less.
Required contributions outside of this range are also possible. In particular, whereas it is unlikely that investment
returns will average less than 1.0% or greater than 12.0% over this four-year period, the likelihood of a single
investment return less than 1.0% or greater than 12.0% in any given year is much greater.
Assumed Annual Return From
2020-21 through 2023-24
Projected Employer Contributions
2023-24 2024-25 2025-26 2026-27
1.0%
Normal Cost 7.5% 7.5% 7.5% 7.5%
UAL Contribution $20,000 $26,000 $34,000 $44,000
4.0%
Normal Cost 7.5% 7.5% 7.5% 7.5%
UAL Contribution $18,000 $22,000 $27,000 $33,000
7.0%
Normal Cost 7.5% 7.5% 7.5% 7.5%
UAL Contribution $17,000 $19,000 $20,000 $21,000
9.0%
Normal Cost 7.6% 7.8% 8.0% 7.4%
UAL Contribution $17,000 $17,000 $17,000 $16,000
12.0%
Normal Cost 7.6% 7.8% 8.0% 7.4%
UAL Contribution $16,000 $14,000 $0 $0
C-23
CALPERS ACTUARIAL VALUATION - June 30, 2020
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 18
Discount Rate Sensitivity
The discount rate assumption is calculated as the sum of the assumed real rate of return and the assumed
annual price inflation, currently 4.50% and 2.50%, respectively. Changing either the price inflation assumption
or the real rate of return assumption will change the discount rate. The sensitivity of the valuation results to the
discount rate assumption depends on which component of the discount rate is changed. Shown below are
various valuation results as of June 30, 2020 assuming alternate discount rates by changing the two components
independently. Results are shown using the current discount rate of 7.0% as well as alternate discount rates of
6.0% and 8.0%. The rates of 6.0% and 8.0% were selected since they illustrate the impact of a 1.0% increase
or decrease to the 7.0% assumption.
Sensitivity to the Real Rate of Return Assumption
As of June 30, 2020 1% Lower
Real Return Rate
Current
Assumptions
1% Higher
Real Return Rate
Discount Rate 6.0% 7.0% 8.0%
Inflation 2.5% 2.5% 2.5%
Real Rate of Return 3.5% 4.5% 5.5%
a) Total Normal Cost 17.65% 14.22% 11.59%
b) Accrued Liability $2,106,499 $1,720,001 $1,420,928
c) Market Value of Assets $1,524,582 $1,524,582 $1,524,582
d) Unfunded Liability/(Surplus) [(b) - (c)] $581,917 $195,419 ($103,654)
e) Funded Status 72.4% 88.6% 107.3%
Sensitivity to the Price Inflation Assumption
As of June 30, 2020 1% Lower
Inflation Rate
Current
Assumptions
1% Higher
Inflation Rate
Discount Rate 6.0% 7.0% 8.0%
Inflation 1.5% 2.5% 3.5%
Real Rate of Return 4.5% 4.5% 4.5%
a) Total Normal Cost 15.20% 14.22% 13.05%
b) Accrued Liability $1,838,220 $1,720,001 $1,576,736
c) Market Value of Assets $1,524,582 $1,524,582 $1,524,582
d) Unfunded Liability/(Surplus) [(b) - (c)] $313,638 $195,419 $52,154
e) Funded Status 82.9% 88.6% 96.7%
Mortality Rate Sensitivity
The following table looks at the change in the June 30, 2020 plan costs and funded status under two different
longevity scenarios, namely assuming post-retirement rates of mortality are 10% lower or 10% higher than our
current mortality assumptions adopted in 2017. This type of analysis highlights the impact on the plan of
improving or worsening mortality over the long-term.
As of June 30, 2020 10% Lower
Mortality Rates
Current
Assumptions
10% Higher
Mortality Rates
a) Total Normal Cost 14.49% 14.22% 13.97%
b) Accrued Liability $1,756,541 $1,720,001 $1,686,326
c) Market Value of Assets $1,524,582 $1,524,582 $1,524,582
d) Unfunded Liability/(Surplus) [(b) - (c)] $231,959 $195,419 $161,744
e) Funded Status 86.8% 88.6% 90.4%
C-24
CALPERS ACTUARIAL VALUATION - June 30, 2020
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 19
Maturity Measures
As pension plans mature they become more sensitive to risks. Understanding plan maturity and how it affects
the ability of a pension plan sponsor to tolerate risk is important in understanding how the pension plan is
impacted by investment return volatility, other economic variables and changes in longevity or other
demographic assumptions. Since it is the employer that bears the risk, it is appropriate to perform this analysis
on a pension plan level considering all rate plans. The following measures are for one rate plan only.
One way to look at the maturity level of CalPERS and its plans is to look at the ratio of a plan’s retiree liability
to its total liability. A pension plan in its infancy will have a very low ratio of retiree liability to total liability. As
the plan matures, the ratio starts increasing. A mature plan will often have a ratio above 60%-65%.
Ratio of Retiree Accrued Liability to
Total Accrued Liability June 30, 2019 June 30, 2020
1. Retired Accrued Liability 0 0
2. Total Accrued Liability 1,320,076 1,720,001
3. Ratio of Retiree AL to Total AL [(1) / (2)] 0.00 0.00
Another measure of maturity level of CalPERS and its plans is to look at the ratio of actives to retirees, also
called the Support Ratio. A pension plan in its infancy will have a very high ratio of active to retired members.
As the plan matures, and members retire, the ratio starts declining. A mature plan will often have a ratio near
or below one. The average support ratio for CalPERS public agency plans is 1.25.
Support Ratio June 30, 2019 June 30, 2020
1. Number of Actives 52 57
2. Number of Retirees 0 0
3. Support Ratio [(1) / (2)] N/A N/A
C-25
CALPERS ACTUARIAL VALUATION - June 30, 2020
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 20
Maturity Measures (Continued)
The actuarial calculations supplied in this communication are based on various assumptions about long-term
demographic and economic behavior. Unless these assumptions (e.g., terminations, deaths, disabilities,
retirements, salary growth, and investment return) are exactly realized e ach year, there will be differences on
a year-to-year basis. The year-to-year differences between actual experience and the assumptions are called
actuarial gains and losses and serve to lower or raise required employer contributions from one year to the
next. Therefore, employer contributions will inevitably fluctuate, especially due to the ups and downs of
investment returns.
Asset Volatility Ratio (AVR)
Shown in the table below is the asset volatility ratio (AVR), which is the ratio of market value of assets to payroll.
Plans that have higher AVR experience more volatile employer contributions (as a percentage of payroll) due to
investment return. For example, a plan with an asset-to-payroll ratio of 8 may experience twice the contribution
volatility due to investment return volatility than a plan with an asset-to-payroll ratio of 4. It should be noted
that this ratio is a measure of the current situation. It increases over time but generally tends to stabilize as t he
plan matures.
Liability Volatility Ratio (LVR)
Also shown in the table below is the liability volatility ratio (LVR), which is the ratio of accrued liability to payroll.
Plans that have a higher LVR experience more volatile employer contributions (as a percentage of payroll) due
to investment return and changes in liability. For example, a plan with LVR ratio of 8 is expected to have twice
the contribution volatility of a plan with LVR of 4. It should be noted that this ratio indicates a longer-term
potential for contribution volatility. The AVR, described above, will tend to move closer to the LVR as a plan
matures.
Contribution Volatility June 30, 2019 June 30, 2020
1. Market Value of Assets $1,192,048 $1,524,582
2. Payroll 2,422,912 2,764,928
3. Asset Volatility Ratio (AVR) [(1) / (2)] 0.5 0.6
4. Accrued Liability $1,320,076 $1,720,001
5. Liability Volatility Ratio (LVR) [(4) / (2)] 0.5 0.6
Maturity Measures History
Valuation Date
Ratio of
Retiree Accrued Liability
to
Total Accrued Liability
Support
Ratio
Asset
Volatility
Ratio
Liability
Volatility
Ratio
06/30/2017 0.00 N/A 0.4 0.4
06/30/2018 0.00 N/A 0.4 0.4
06/30/2019 0.00 N/A 0.5 0.5
06/30/2020 0.00 N/A 0.6 0.6
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CALPERS ACTUARIAL VALUATION - June 30, 2020
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 21
Hypothetical Termination Liability
The hypothetical termination liability is an estimate of the financial position of the plan had the contract with
CalPERS been terminated as of June 30, 2020. The plan liability on a termination basis is calculated differently
compared to the plan’s ongoing funding liability. For the hypothetical termination liability calculation, both
compensation and service are frozen as of the valuation date and no future pay increases or service accruals
are assumed. This measure of funded status is not appropriate for assessing the need for future employer
contributions in the case of an ongoing plan, that is, for an employer that continues to provide CalPERS
retirement benefits to active employees.
A more conservative investment policy and asset allocation strategy was adopted by the CalPERS Board for the
Terminated Agency Pool. The Terminated Agency Pool has limited funding sources since no future employer
contributions will be made. Therefore, expected benefit payments are secured by risk-free assets and benefit
security for members is increased while limiting the funding risk. However, this asset allocation has a lower
expected rate of return than the PERF and consequently, a lower discount rate is assumed. The lower discount
rate for the Terminated Agency Pool results in higher liabilities for terminated plans.
The effective termination discount rate will depend on actual market rates of return for risk-free securities on
the date of termination. As market discount rates are variable, the table below shows a range for the hypothetical
termination liability based on the lowest and highest interest rates observed during an approximate 19 -month
period from 12 months before the valuation date to 7 months after.
Market
Value of
Assets (MVA)
Hypothetical
Termination
Liability1,2
at 0.75%
Funded
Status
Unfunded
Termination
Liability
at 0.75%
Hypothetical
Termination
Liability1,2
at 2.50%
Funded
Status
Unfunded
Termination
Liability
at 2.50%
$1,524,582 $4,963,998 30.7% $3,439,416 $3,150,051 48.4% $1,625,469
1 The hypothetical liabilities calculated above include a 5% mortality contingency load in accordance with Board policy. Other
actuarial assumptions can be found in Appendix A of the Section 2 report.
2 The current discount rate assumption used for termination valuations is a weighted average of the 10-year and 30-year U.S.
Treasury yields where the weights are based on matching asset and liability durations as of the termination date. The
discount rates used in the table are based on 20-year Treasury bonds, rounded to the nearest quarter percentage point,
which is a good proxy for most plans. The 20-year Treasury yield was 1.18% on June 30, 2020, and was 1.68% on January
31, 2021.
In order to terminate the plan, you must first contact our Retirement Services Contract Unit to initiate a
Resolution of Intent to Terminate. The completed Resolution will allow the plan actuary to give you a preliminary
termination valuation with a more up-to-date estimate of the plan liabilities. CalPERS advises you to consult with
the plan actuary before beginning this process.
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CALPERS ACTUARIAL VALUATION - June 30, 2020
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 22
Participant Data
The table below shows a summary of your plan’s member data upon which this valuation is based:
June 30, 2019 June 30, 2020
Active Members
Counts 52 57
Average Attained Age N/A 40.1
Average Entry Age to Rate Plan N/A 37.8
Average Years of Credited Service N/A 2.0
Average Annual Covered Pay $46,594 $48,508
Annual Covered Payroll $2,422,912 $2,764,928
Projected Annual Payroll for Contribution Year $2,628,350 $2,999,365
Present Value of Future Payroll $24,449,923 $28,556,373
Transferred Members 8 16
Separated Members 13 20
Retired Members and Beneficiaries
Counts* 0 0
Average Annual Benefits* N/A $0
Counts of members included in the valuation are counts of the recor ds 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 include community property settlements.
List of Class 1 Benefit Provisions
This plan has the additional Class 1 Benefit Provisions:
• None
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CALPERS ACTUARIAL VALUATION - June 30, 2020
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 23
Plan’s Major Benefit Options
Shown below is a summary of the major optional benefits for which your agency has contracted. A description of principal standard and optional plan provisions
is in Section 2.
Benefit Group
Member Category Misc
Demographics
Actives Yes
Transfers/Separated Yes
Receiving No
Benefit Group Key 110656
Benefit Provision
Benefit Formula 2% @ 62
Social Security Coverage No
Full/Modified Full
Employee Contribution Rate 6.75%
Final Average Compensation Period Three Year
Sick Leave Credit Yes
Non-Industrial Disability Standard
Industrial Disability No
Pre-Retirement Death Benefits
Optional Settlement 2 Yes
1959 Survivor Benefit Level Level 4
Special No
Alternate (firefighters) No
Post-Retirement Death Benefits
Lump Sum $500
Survivor Allowance (PRSA) No
COLA 2%
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CALPERS ACTUARIAL VALUATION - June 30, 2020
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 24
PEPRA Member Contribution Rates
The California Public Employees’ Pension Reform Act of 2013 (PEPRA) established new benefit formulas, final compensation
period, and contribution requirements for “new” employees (generally those first hired into a CalPERS -covered position on or
after January 1, 2013). In accordance with Government Code Section 7522.30(b), “new members … shall have an initial
contribution rate of at least 50% of the normal cost rate.” The normal cost rate is dependent on the plan of retirement
benefits, actuarial assumptions and demographics of the risk pool, particularly members’ entry age. Should the total normal
cost rate change by more than 1% from the base total normal cost rate, the new member rate shall be 50% of the new
normal cost rate rounded to the nearest quarter percent.
The table below shows the determination of the PEPRA member contribution rates effective July 1, 2022, based on 50% of
the total normal cost rate as of the June 30, 2020 valuation.
Basis for Current Rate Rates Effective July 1, 2022
Rate Plan
Identifier Benefit Group Name
Total
Normal
Cost
Member
Rate
Total
Normal
Cost
Change Change
Needed
Member
Rate
26567 Miscellaneous PEPRA Level 13.735% 6.75% 14.22% 0.485% No 6.75%
C-30
CALPERS ACTUARIAL VALUATION - June 30, 2020
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 25
Section 2
CALIFORNIA PUBLIC EM PLOYEES’ RETIREMENT SYSTEM
Risk Pool Actuarial Valuation Information
Section 2 may be found on the CalPERS website
(calpers.ca.gov) in the Forms and
Publications section
C-31
City of Rancho Palos Verdes CalPERS Pension Plan Guidelines
Overview
The Rancho Palos Verdes CalPERS Pension Plan Guidelines provide a framework to
enable the City to develop sound funding policies and provide Staff a direction to
adequately and appropriately monitor the City’s pension plan s and obligations.
Purpose and Objectives
In accordance with the 2020-21 City Council Goals under “Government Efficiency and
Transparency,” the goal of these Pension Guidelines is to address and manage the
liability related to the City’s pension and accrued liability.
The Pension Plan Guidelines document the methods the City can use to determine its
annual pension contributions. The City’s annual pension contributions fund the long-
term cost of benefits to the plan’s participants and annuitants. Nothing in this guideline
shall constitute an obligation upon the City, nor an implied contract. The City Council,
with recommendations from the City’s Finance Advisory Committee, may revoke or
amend the guidelines at any time when in the best interest of the City.
The objectives of the Pension Plan Guidelines are as follows:
• Provide guidance in making annual budget decisions;
• Demonstrate prudent financial management practices; and
• Demonstrate transparency to the public and employees on how pensions will be
funded.
Definitions
Defined Benefit – benefit plan where retirement benefits are based on a formula.
The City currently has three benefit levels offered to eligible employees:
• Tier 1 – Employees hired prior to local pension reform action by City Council
on September 20, 2011; earn 2.5% of salary for each year employed with the
City (single highest year) at the age of 55. The employee contribution rate
for Tier 1 is 8.000% of their annual salary;
• Tier 2 – Employees hired after local pension reform on September 20, 2011,
who previously worked for another governmental agency with a reciprocating
pension plan; earn 2% of salary for each year employed with the City (based
on a three-year average) at the age of 60. The employee contribution rate
for Tier 2 is 7.000% of their annual salary; and
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• Tier 3 – Employees hired after state-wide pension reform effective January 1,
2013; who have not previously worked for another governmental agency with
a reciprocating pension plan or have not worked for such an agency within six
months of being hired by the City. These employees earn 2% of salary for
each year employed with the City (based on a three -year average) at the age
of 62. The employee contribution rate for Tier 3 is 6.250% of their annual
salary.
Full-time Employee – a competitive service employee that is regularly scheduled to
work at least 40 hours a week.
Part-time Employee – an employee that is scheduled to work on an irregular basis not
more than an average of 32 hours a week and worked at least 1,000 hours in a fiscal
year (July 1 – June 30).
Actuarial Valuation Report (AVR) – an annual valuation performed by the CalPERS
actuary which determines the amount the City needs to contribute for the next fiscal
year.
Normal Costs – the annual cost of service accrual for the upcoming fiscal year for
active employees. The normal cost should be viewed as the long -term contribution rate.
Unfunded Accrued Liabilities (UAL) – when a plan's Market Value of Assets is less
than its Accrued Liability, the difference is the plan's Unfunded Accrued Liability (or
unfunded liability). If the unfunded liability is positive, the plan will have to pay
contributions exceeding the Normal Cost.
Market Value of Assets (MVA) – the value of a plan's assets in the open marketplace
on a specific date.
Accrued Liability (AL) – the total dollars needed as of the valuation date to fund all
benefits earned in the past for current members.
Amortization of UAL – a separate payment schedule for different portions of the
Unfunded Liability. Payment periods are determined by Board policy and vary based on
the cause of the change.
Internal Service Funds –an accounting device used to accumulate and/or allocate costs
internally among the City’s various functions.
Employee Pension Plan Service Fund – a new fund in the Internal Service Funds. It is
a restricted fund through a City Council action for pension related costs. Likewise, any
accumulated funds can be released through a City Council action, if deemed necessary
by the City Council.
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Section 115 Trust –an Internal Revenue Code Section 115 Trust that may be established
by the City Council to set aside funds for future pension costs and liabilities. Funds
accumulated in this trust are restricted to pension costs.
Background
The City of Rancho Palos Verdes provides its employees a defined benefit retirement
plan through the California Public Employees’ Retirement System (CalPERS) per a City
Council-approved contract dated December 1, 1974. CalPERS is a multiple-employer
public employee defined benefit pension plan.
All full-time and part-time employees, if they worked more than 1,000 hours per fiscal
year, are eligible to participate in CalPERS. CalPERS provides retirement, disability, and
death benefits and annual cost of living adjustments to plan members and their
beneficiaries. CalPERS acts as a common investment and administrative agent for
participating public entities with the State of California. Benefit provisions and all other
requirements are established by state statute.
The financial objective of a defined benefit pension plan is to fund the lo ng-term cost of
benefits provided to the plan members. To assure that the plan is financially sustainable,
the plan should accumulate adequate resources in a systematic and disciplined manner
over the active service life of benefitting employees. This funding guideline outlines the
method the City will utilize to determine its Actuarially Determined Contributions to fund
the long-term cost of benefits to the plan members and annuitants.
Pension Funding: A Guide for Elected Officials, issued by eleven national groups
including the U.S. Conference of Mayors, the International Agency/County Management
Association, and the Government Finance Officers Association, established the following
five general policy objectives for a pension funding policy:
• Actuarially Determined Contributions - a pension funding plan should be based
upon an actuarially determined contribution (ADC) that incorporates both the cost
of benefits in the current year and the amortization of the plan’s unfunded actuari al
accrued liability.
• Fund Discipline - a commitment to make timely, actuarially determined
contributions to the retirement system is needed to ensure that sufficient assets
are available for all current and future retirees.
• Intergenerational equity - annual contributions should be reasonably related to the
expected and actual cost of each year of service so that the cost of employee
benefits is paid by the generation of taxpayers who receives from those
employees.
• Contributions as a stable percentage of payroll - contributions should be managed
so that employer costs remain consistent as a percentage of payroll over time.
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• Accountability and transparency - clear reporting of pension funding should include
an assessment of whether, how, and when the plan sponsor will ensure sufficient
assets are available for all current and future retirees.
Guidelines
A. Goals
1. To stabilize the annual unfunded accrued liability contribution (required normal
cost). The City’s required contribution is determined by CalPERS, as reported
in the annual Actuarial Valuation Report.
2. To achieve and maintain a 90% funding level of the City’s UAL over the next
seven to ten years. The City’s UAL amount is determined by CalPERS, as
reported in the annual AVR.
B. Actuarially Determined Contribution (ADC)
• CalPERS actuaries will determine the City’s ADC to CalPERS based on
annual actuarial valuations. The ADC will include the normal cost for the
current service and amortization of any under-funded amount. The normal
cost will be calculated using the entry age normal cost method using
economic and non-economic assumptions approved by the CalPERS
Board of Administration.
• The City will review the CalPERS annual actuarial valuations to validate the
completeness and accuracy of the member census data and the
reasonableness of the actuarial assumptions.
• The City will contribute the ADC as required by CalPERS.
C. Employee Pension Plan Service Fund
Employee Pension Plan Service Fund is an Internal Service Fund that is a
restricted fund through a City Council action for pension related costs. Likewise,
any accumulated funds can be released through a City Council action, if deemed
necessary by the City Council.
To address the increasing annual payment of the UAL, the City may set aside
funding in the Employee’s Pension Plan Service Fund to relieve the General Fund
of payment in excess of $900,000.
1. Employee Pension Plan Service Fund Contribution Options:
• Initial contribution - the City may consider an initial contribution equivalent
to at least two years but no more than three years of the incremental
D-4
increases to the annual UAL payment from the General Fund Unrestricted
Excess Reserve to the Employee Pension Plan Service Fund.
• Annual contributions - the City may consider, on an annual basis, to
contribute at least 10% but no more than 25% of the annual General Fund
surplus (revenues minus expenditures, including transfers) to the Employee
Pension Plan Service Fund.
o The surplus is to be calculated after closing the fiscal year and will
be included in the staff report to the City Council during the budget
meetings.
2. Employee Pension Plan Service Fund Usage Options:
• The City may use the accumulated funds in the fund to stabilize
contributions to CalPERS when the annual UAL lump-sum payment
exceeds $900,000 rather than utilizing the General Fund.
D. Section 115 Pension Trust Contribution
An Internal Revenue Code Section 115 Trust may be established by the City
Council to set aside funds for future pension costs and liabilities.
To address the City’s rising UAL, the City Council may consider establishing a
Section 115 Trust to pre-fund pension obligations. The objective of the Section 115
Pension Trust is to achieve and maintain the 90% funded level of the City’s UAL
over the next seven to ten years.
115 Trust Contribution Options:
• Initial contribution - the City may consider an initial contribution of at least
$500,000 but no more than 25% of the General Fund Unrestricted Excess
Reserve to the 115 Pension Trust.
• Annual contributions - the City may consider, on an annual basis,
contributing equivalent to the savings from making a lump-sum payment of
the UAL or the annual positive variances between the projected year-end
revenues and the actual revenues in the General Fund, whichever is more,
to the 115 Pension Trust.
o The variance is to be calculated after closing of the fiscal year and
will be included in the staff report to the City Council.
115 Trust Usage Options:
D-5
The City shall maintain the balance in the Section 115 Trust to achieve the 90%
funded level, unless:
• The Employee Pension Plan Service Fund does not have sufficient funding
to cover the excess of $900,000 in the annual lump-sum payment. The City
may use the accumulated funds from the Section 115 Trust to stabilize the
annual UAL contributions to CalPERS.
• The General Fund experience a loss in revenue of 10% or more. The City
may use accumulated funds from the Section 115 Trust to make ADC
contributions.
E. Transparency and Reporting
The City’s pension plans should be transparent to vested parties , including plan
members, annuitants, the City Council, and the Rancho Palos Verdes residents.
In order to achieve this transparency, the following information shall be available:
• An annual actuarial valuation will be presented to the City Council within 60
days but no later than 90 days after its release by CalPERS.
• The City’s Comprehensive Annual Financial Report (CAFR) shall be
published on the website. This report includes information on the City’s
annual contributions to the pension systems, the 115 Pension Trust, and
the funded status.
• The City’s annual operating budget shall include the City’s contributions to
CalPERS.
• The City’s annual contribution, usage, and balance of the Employee
Pension Plan Service Fund and the 115 Pension Trust shall be included in
the City’s year-end financial report to the City Council.
• The City’s Pension Plan Guidelines and actuarial valuation report shall be
published on the City website.
F. Review of Funding Guidelines
Funding a defined benefit pension plan requires a long-term horizon. As such, the
City will review the guidelines every three years or as needed to determine if
changes to the guidelines are warranted to ensure adequate resources are being
accumulated.
D-6