CC SR 20221004 I - CalPERS Annual Valuation Report
CITY COUNCIL MEETING DATE: 10/04/2022
AGENDA REPORT AGENDA HEADING: Consent Calendar
AGENDA TITLE:
Consideration and possible action to receive the California Public Employees’ Retirement
System (CalPERS) Annual Valuation Reports (AVR).
RECOMMENDED COUNCIL ACTION:
(1) Receive and file the CalPERS AVR for the City of Rancho Palos Verdes as of June
30, 2021.
FISCAL IMPACT: None
Amount Budgeted: N/A
Additional Appropriation: N/A
Account Number(s): N/A
ORIGINATED BY: Jason Loya, Senior Administrative Analyst
REVIEWED BY: Trang Nguyen, Director of Finance
APPROVED BY: Ara Mihranian, AICP, City Manager
ATTACHED SUPPORTING DOCUMENTS:
A. Annual Valuation Report – Tier 1 (page A-1)
B. Annual Valuation Report – Tier 2 (page B-1)
C. Annual Valuation Report – Tier 3 (page C-1)
BACKGROUND:
The City of Rancho Palos Verdes participates in CalPERS to deliver retirement and health
care benefits to members and their beneficiaries. To evaluate this effort, CalPERS
actuaries prepare the AVR to disclose the funded condition and the minimum required
contributions for all City pension plans. This report summarizes the results of the June
30, 2021 actuarial valuations for the Miscellaneous Classic Tier (Tier 1), Miscellaneous
Second Tier (Tier 2), and Public Employees’ Pension Reform Act (PEPRA) Miscellaneous
(Tier 3) plans of the City.
All full-time and eligible part-time City Staff participate in a defined benefit pension plan.
Funding for each pension plan comes from three sources. The largest contribution comes
from CalPERS' investments, followed by employer and employee contributions. Each
plan should accumulate adequate resources in a systematic and disciplined manner over
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RANCHO PALOS VERDES
the active service life of benefitting employees to maintain its financial stability. Successful
management of annual contributions is key to achieving more desirable outcomes.
In support of this objective, the Finance Advisory Committee (FAC) helped develop and
recommend funding guidelines to mitigate financial risks inherent to the pension system.
As a result, the City Council approved the Pension Plan Guidelines shortly thereafter in
February 2021 to effectively monitor the City’s pension plans and advise the City Council
on actions to manage the Unfunded Accrued Liability (UAL).
The purpose of this report is to provide a summary of the 2021 AVR, present an analysis
of the results with reference to the overarching objectives of the pension guidelines, and
to adhere to transparency and reporting requirements. Thus, on September 8, 2022, Staff
presented the information to the FAC, and this evening, the City Council will also receive
the 2021 AVR and analysis of the results, as discussed below.
DISCUSSION:
On August 12, 2022, CalPERS released the AVR as of June 30, 2021. Each report
presents results from the actuarial valuation and sets the required employer (City) and
employee contributions for Fiscal Year 2023-24. Results contain the financial status of
the plans as well as projections and risk measures to aid in future planning. A two-year
lag between the valuation date and contribution fiscal year is necessary to ensure the
financial data is properly and accurately reported.
Actuarial valuations are based on assumptions such as investment return and payroll
growth, eligibility for benefits, and longevity among retirees. The AVR captures
differences between actual and assumed experience and adjusts contribution rates as
needed. This AVR uses an investment return assumption of 6.8%, which was adopted by
CalPERS in November 2021. Plan results, changes in assumptions, and the financial
implications determined by CalPERS actuaries are discussed throughout this report.
Changes in Actuarial Methods and Assumptions
The predominant change compared to last year’s AVR is a decrease in the discount rate,
also known as the expected rate of return. At the end of FY 2020-21, CalPERS earned a
21.3% return on investments and exceeded the previous 7% discount rate by 14.3%.
Since actual investment returns exceeded the target rate by more than 2%, it triggered
the CalPERS Funding Risk Mitigation (FRM) policy and ultimately lowered the discount
rate to 6.8% in November 2021. Other noteworthy adjustments reflected in the 2021
valuation are pictured in Table 1 below.
Table 1. 2021 Changes in Actuarial Methods and Assumptions
Assumption June 30, 2020 June 30, 2021 Net Change
Discount Rate 7.00% 6.80% -0.20%
Inflation Rate 2.50% 2.30% -0.20%
Wage Growth 2.75% 2.80% 0.05%
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Required Contributions
The City’s total minimum required contribution is the sum of the Normal Cost Rate plus
the UAL payment (discussed below). Table 2 summarizes the minimum required
employer contribution rates for each plan (tiers) in FY 2023-24.
Table 2. Minimum Required City’s Contributions
Defined Plan Fiscal Year Normal Cost Rate Amortization of
Unfunded Accrued Liability
Tier 1 2023-24 14.06% $1,070,317
Tier 2 2023-24 10.10% $0
Tier 3 2023-24 7.68% $0
Normal Cost Rate and UAL
A plan’s normal cost represents the annual cost of service credit earned by active
employees and is allocated on a fiscal year basis. This rate is measured as a percentage
of payroll and paid as part of the payroll reporting process. The UAL is the required
payment needed to fund benefits already earned or accrued for members who are
currently receiving benefits, active members, and for members entitled to deferred
benefits as of the valuation date.
Table 3 below represents the estimated total contribution per Tier. The total tier estimated
normal cost of $684,854 and minimum UAL payment of $1,070,317 equate to an
estimated contribution of $1,755,171 in FY 2023-24. This is an increase of $11,473 or
0.7% compared to the total estimated contribution of $1,743,698 in FY 2022-23. Required
UAL payments can be paid monthly, or as a lumpsum payment at a discounted rate. The
City has traditionally selected the lumpsum payment option which constitutes a savings
of 3.2% or $34,634 in FY 2023-24.
Table 3. Estimated Total Contribution for Fiscal Year 2023-24
Defined Plan Estimated Normal
Cost
Minimum UAL
Payment
Estimated Total
Contribution
Tier 1 $277,024 $1,070,317 $1,347,341
Tier 2 $154,539 $0 $154,539
Tier 3 $253,291 $0 $253,291
Totals $684,854 $1,070,317 $1,755,171
CalPERS’ favorable investment return of 21.3% in FY 2020-21 lowered the City’s actual
UAL contribution for FY 2023-24 by $155,683 when compared to estimates in the June
2020 valuation. This instance serves as an example where the current valuation adjusts
previously estimated contribution rates to reflect differences between actual and assumed
experience. In general, actuarial assumptions are used to portray the best estimate of
future experience and are long-term in nature. This instance is shown in Table 4 below.
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Table 4. June 2020 Valuation Projection vs June 2021 Valuation Actual
Defined Plan Fiscal Year Projected UAL
Payment
Actual UAL
Payment
Net Inc /
(Dec)
Tier 1 2023-24 $1,187,000 $1,070,317 ($116,683)
Tier 2 2023-24 $22,000 $0 ($22,000)
Tier 3 2023-24 $17,000 $0 ($17,000)
Totals $1,226,000 $1,070,317 ($155,683)
Projected Future City Contributions
This 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. In particular, the investment return is assumed to be 6.8% per year and
is used to project future UAL payments from FY 2024-25 to FY 2028-29 as illustrated in
Table 5. Actual long-term costs will depend on the actual benefits and expenses paid, as
well as the actual investment experience of the fund. The impact of future investment
return scenarios on required contributions will be discussed in a later section.
Table 5. Projected UAL Payments (Assumes 6.8% Return)
Required Contribution Projected Future Employer Contributions
Fiscal Year 2023-24 2024-25 2025-26 2026-27 2027-28 2028-29
Tier 1 $1,070,317 $1,064,000 $1,027,000 $988,000 $931,000 $966,000
Tier 2 $0 $0 $0 $0 $0 $0
Tier 3 $0 $0 $0 $0 $0 $0
Additional Discretionary Payments
In addition to the UAL prepayment option, agencies also have the option to make
Additional Discretionary Payments (ADPs) at any point during the fiscal year and in any
amount. ADPs are optional and may reduce the UAL balance and future contributions.
From a strategic perspective, ADPs can be considered a pension cost management tool
and utilized to stabilize annual contributions or immediately reduce net pension liabilities.
Provided below are examples of ADP options prepared by the CalPERS actuary.
Table 6. Alternative FY 2023-24 Employer Contributions with ADP
Funding Target Minimum UAL Payment ADP Total UAL
Contribution
10 years $1,070,317 $197,389 $1,267,706
5 years $1,070,317 $1,109,740 $2,180,057
Both scenarios in Table 6 are calculated based on the projected UAL balance of
$9,287,260 as of June 30, 2023, and demonstrate an accelerated payment schedule
using optional ADPs. In either case, making a one-time ADP in FY 2023-24 together with
the required payment would increase the total UAL contribution to $1,267,706 or
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$2,180,057 based on the respective funding target. For each alternative option or funding
target above, CalPERS is also implying that a fixed annual payment of $1,267,706 or
$2,180,057 would theoretically fund the City’s total UAL balance within the indicated
number of years. However, a plan’s funded status is still dependent on actuarial
experience and the emergence of new unfunded liabilities.
Making a one-time ADP does not obligate the City to make an ADP in future years, nor
does it change the remaining amortization period of any portion of unfunded liability.
Additional information regarding changes to amortization periods and the effect on the
UAL amortization will be discussed in the upcoming sections.
Plan’s Funded Status as of June 30, 2021
The UAL and funded ratio enable employers to assess the need for future employer
contributions based on the actuarial cost method used to fund the pension plans. A plan’s
UAL is determined by finding the difference between each plan’s Accrued Liability (AL)
and the Market Value of Assets (MVA). If the AL is equal to or less than the MVA, then
the plan reaches a funded ratio of 100% or more. Conversely, if the AL is greater than the
MVA, the funded status is below 100% and creates an unfunded liability.
AL ≤ MVA = Superfunded (Tiers 2 and 3)
AL ≥ MVA = Unfunded (Tier 1)
As of June 30, 2021, the City’s total UAL balance for three tiers was $10,031,559. The
funding details reported below reflect actual experience included in the AVR and highlight
a funded ratio of 78.9% for Tier 1, 102.6% for Tier 2, an d 102.8% for Tier 3. Tiers 2 and
3 exceed a 100% funded status and are considered “superfunded” when above this
threshold. A breakdown of the funded status for each plan is illustrated in Table 7.
Table 7. Funded Status as of June 30, 2021 Tier 1 Tier 2 Tier 3
Accrued Liability $47,593,129 $3,048,741 $2,391,157
Market Value of Assets $37,561,570 $3,129,430 $2,458,040
Unfunded Accrued Liability [(AL) - (MVA)] $10,031,559 ($80,689) ($66,883)
Funded Ratio [(MVA) / (AL)] 78.9% 102.6% 102.8%
Funding History and Analysis
The following section evaluates similar details using the aggregate totals for all
miscellaneous pension plans over a short-term and long-term period. Historical data in
Table 8 below includes the actuarial accrued liability, market value of assets, unfunded
accrued liability, funded ratio, and annual covered payroll from June 2013 to June 2021.
An analysis of the data was performed in aggregate and by tier.
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Table 8. Funding History
Valuation
Date
Accrued
Liability (AL)
Market Value
of Assets
(MVA)
Unfunded
Accrued
Liability (UAL)
Funded
Ratio
Annual
Covered
Payroll
6/30/2013 $30,383,661 $23,153,182 $7,230,479 76.2% $5,348,252
6/30/2014 $32,969,098 $26,283,059 $6,686,039 79.7% $5,609,006
6/30/2015 $35,161,985 $26,970,215 $8,191,770 76.7% $5,673,471
6/30/2016 $36,986,435 $26,330,118 $10,656,317 71.2% $5,997,450
6/30/2017 $40,915,699 $30,299,314 $10,616,385 74.1% $6,283,821
6/30/2018 $45,330,477 $33,034,043 $12,296,434 72.9% $6,573,264
6/30/2019 $47,909,161 $34,931,168 $12,977,993 72.9% $6,310,553
6/30/2020 $50,237,999 $36,060,334 $14,177,665 71.8% $6,076,490
6/30/2021 $53,033,027 $43,149,040 $10,031,559 81.4% $6,257,934
Based on a year-over-year comparison of the data, the City’s overall Funded Ratio
increased from 71.8% in 2020 to 81.4% in 2021. Likewise, the total AL and MVA
increased by 5.6% and 19.7%, respectively. The City’s total UAL balance decreased b y
29.2% from $14,177,665 in 2020 to $10,031,559 in 2021.
Over the long term, the City’s AL and MVA have an average annual growth rate of 7.2%
and 8.1%, respectively. This indicates that assets have historically grown slightly faster
than liabilities despite various fluctuations and volatility year-over-year. Nevertheless, the
UAL balance has increased at an average annual growth rate of 4.2% and reveals that
plan assets have yet to surpass accrued liabilities. A s a result, the City’s funded status
has averaged 75.2% since June 2013.
Furthermore, the Annual Covered Payroll equals $6,257,934 ending June 2021 and
maintains an average annual growth rate of 2%. Chart 1 illustrates Tier 1 costs declining
at an average annual rate of 12% since June 2013 due to the natural progression of
classic plan members transitioning into retirement. Comparatively, Tier 2 and Tier 3 costs
have grown at an annual average rate of 28.2% and 48.5% over the same period. As of
the June 2021 AVR, these tiers account for 71% of annual covered payroll.
Chart 1. Annual Covered Payroll Trend – June 2013 to June 2021
6
VI $6.0
z
0 ::::; $5.0
-'
~ $4.0
$3.0
$2.0
$1.0
$0.0
JUN-13 JUN-14 JUN-15 JUN-16 JUN-17 JUN-18 JUN-19 JUN-20 JUN-21
-Tier 1 -Tier 2 -Tier 3 ·····➔Trend Line (Tier 1) ·····➔Trend Line (Tier 3)
Lastly, a breakdown of AL distributed across members as of June 2021 is shared in Table
9 below. With reference to the analysis above, Tier 1 accounts for 89.7% or $47.6 million
of AL while Tier 2 and Tier 3 combined for 10.3% or $5.4 million.
Table 9. Breakdown of Accrued Liability as of June 30, 2021
Tier 1 Tier 2 Tier 3 Total
Active Members $11,083,919 $1,442,453 $1,636,741 $14,163,113
Transferred Members $4,566,761 $430,577 $656,065 $5,653,403
Terminated Members $2,467,387 $87,886 $98,351 $2,653,624
Members & Beneficiaries Rec. Payments $29,475,062 $1,087,825 $0 $30,562,887
Total $47,593,129 $3,048,741 $2,391,157 $53,033,027
Schedule of Amortization Bases
CalPERS amortization methods are designed to eliminate the UAL in a way that maintains
benefit security and minimizes variations in the required contribution rates. The UAL
balance is rolled forward each year by subtracting the expected payment on the UAL and
adjusting for interest. As new unfunded liabilities are realized, a new base is established
and amortized in accordance with the CalPERS amortization policy. A summary of the
UAL balance and current amortization schedules from June 30, 2021 to June 30, 2023
are displayed in the following table.
Table 10. Summary of UAL Amortization Schedules
Employer
Plan
Balance
6/30/21
Expected
Payment
FY 2021-22
Balance
6/30/22
Expected
Payment
FY 2022-23
Balance
6/30/23
Minimum Required
Payment
FY 2023-24
Tier 1 10,031,559 943,821 9,738,322 1,077,244 9,287,260 1,070,317
Tier 2 (80,689) (4,256) (81,778) (2,104) (85,165) 0
Tier 3 (66,883) (32,597) (37,744) (31,925) (7,318) 0
Tier 1 carries a total UAL balance of $10,031,559 through June 30, 2021, as observed in
the table above. In this case, a two-year lag means that the Expected Payment for FY
2022-23 was determined by the 2020 valuation, and the Minimum Required Payment for
FY 2023-24 was determined by the 2021 valuation. The ending UAL balance for Tier 1 is
projected to decrease to a total of $9,287,260 by June 30, 2023. Additional information
regarding the plan’s bases is available on pages 12-13 of Attachment A.
Tier 2 and Tier 3 were uniquely impacted by the 21.3% investment return. The impact of
a substantial return and timely payments made by the City eliminated each plan’s existing
amortization bases. As of June 30, 2021, Tier 2 and Tier 3 amortization schedules reflect
a credit balance of ($80,689) and ($66,883), respectively. A negative amortization
payment, or credit, on a positive unfunded liability will result in a new Fresh Start base as
specified in the CalPERS amortization policy. Tier 2 and Tier 3 have credit balances of
($85,165) and ($7,318) ending June 30, 2023, with no payments required in FY 2023-24.
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Analysis of Amortization Schedule and Alternatives
Alternate amortization schedules are provided by CalPERS to help agencies analyze their
current schedules against accelerated schedules that could potentially result in interest
savings and expedite the UAL payment schedule. The ADP scenarios discussed earlier
in Table 6 are referenced again to help illustrate the potential benefit of ongoing increases
toward UAL payments. Once again, this analysis is specific to the Tier 1 UAL balance of
$9,287,260. Table 11 below summarizes the differences between the current and
alternate Fresh Start amortization schedules provided.
Table 11. Potential Savings of Accelerated UAL Payment
Current Amortization
Schedule (19 Year)
10 Year
Amortization
5 Year
Amortization
Total Paid 14,229,375 12,677,056 10,900,286
Interest Paid 4,942,115 3,389,796 1,613,026
Estimated Savings
1,552,319 3,329,089
The UAL balance is currently amortized over a 19-year period and is estimated to cost
$14,229,375, which includes $4.9 million in interest paid. If the City elects to increase
UAL payments using a fixed dollar amount, it will potentially accelerate the amortization
period down to 10 or 5 years and save an estimated $1.5 million to $3.3 million in interest
paid. The distinction between this and earlier ADP scenarios is it requires implementing
a Fresh Start and would permanently change the amortization period and increase the
annual payment to $1,267,706 or $2,180,057 based on the indicated number of years.
Despite the estimated results provided by CalPERS, it is important to note that new
unfunded liabilities can and will emerge in future years due to investment gain/loss,
assumption or method changes, and actuarial experience different than assumed.
Historical Contributions and Investment Returns
Table 12 provides a recent history of the required City contributions and UAL payments.
Table 12. Historical Normal Cost Rates and UAL Payments
Tier 1 Tier 2 Tier 3
Fiscal
Year
Normal
Cost
Unfunded
Liability
Payment ($)
Normal
Cost
Unfunded
Liability
Payment ($)
Normal
Cost
Unfunded
Liability
Payment ($)
2016 - 17 10.07% $413,568 7.16% $0 6.56% $90
2017 - 18 10.11% $495,784 7.20% $198 6.53% $214
2018 - 19 10.61% $613,118 7.63% $1,413 6.84% $1,011
2019 - 20 11.43% $739,621 8.08% $3,107 6.99% $2,239
2020 - 21 12.36% $835,213 8.79% $15,889 7.73% $12,837
2021 - 22 12.20% $971,580 8.65% $17,301 7.59% $13,868
2022 - 23 12.21% $1,105,780 8.63% $20,057 7.47% $15,841
2023 - 24 14.06% $1,070,317 10.10% $0 7.68% $0
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The City’s normal cost can be viewed as the long-term contribution rate and as the annual
cost of providing benefits to active employees each fiscal year . Liability projections are
based on demographic and economic factors, including future salary and payroll growth.
As illustrated previously, incremental payroll growth is expected over the long term.
From FY 2016-17 to FY 2023-24, aggregate UAL payments have grown at an average
annual rate of 14.5%, notwithstanding the decrease from FY 2022-23. Absent the 21.3%
return on investments for FY 2020-21 included in the AVR, the UAL average annual
growth rate was 18.4% through FY 2022-23. Given the CalPERS preliminary investment
return of -6.1% in FY 2021-22, an increase in both the UAL annual growth rate and
payment in next year’s actuarial valuation is reasonable to assume. Chart 2 further
illustrates the trend in annual UAL payments through FY 2023 -24.
Chart 2. Total UAL Payments – FY 2016-17 to FY 2023-24
Table 13 highlights that investment earnings at CalPERS have averaged 6.9% over 20
years ending June 30, 2021. It’s also worth noting that individual fiscal year returns have
ranged from -23.6% to +21.3%. However, the adopted 6.8% discount rate is best
evaluated over the long term considering investment volatility year-over-year.
Table 13. Net Investment Returns as of June 30, 2021
CalPERS Annualized Investment Returns
FY to Date 21.3%
3 Years 10.7%
5 Years 10.3%
10 Years 8.5%
20 Years 6.9%
9
Vl $1.20
2
0 ::i $1.00
...I
2 $0.80
$0.60
$0.40
$0.20
$0.00
FY16-17 FY17-18 FY18-19 FY19-20 FY20-21 FY21-22 FY22-23 FY23-24
~Annual UAL Payments
Future Investment Return Scenarios
As of June 30, 2022, CalPERS reported an investment return of -6.1% in the Public
Employees’ Retirement Fund (PERF). The 2021-22 investment return will impact
employer contribution rates in FY 2024-25. Preliminary estimates indicate a decrease in
the total PERF funded status from 81.2% in 2021 to 72% in 2022. The City’s funded status
is anticipated to regress in a similar fashion. A full understanding of future impacts to the
City’s pension obligations will be evaluated as more information becomes available .
ADDITIONAL INFORMATION:
The table below shows a summary of the plan’s member data upon which this valuation
is based:
Table 15. Employee Tier Distribution
Employee Status Tier 1 Tier 2 Tier 3 Total by Status
Active Members 23 11 57 91
Retirees 105 6 0 111
Total by Tier 128 17 57 202
Year over year, Tier 1 members have decreased as employees either retire or end
employment with the City. Table 16 provides a five-year overview of the cumulative
impact of this transition. Tier 1 membership decreases at a greater rate due to changes
implemented by the City that restructured pension benefits and established the Tier 2
plan. Subsequently, Tier 3 was enacted by the statewide Public Employees’ Pension
Reform Act (PEPRA) in 2013. The three-tiered system has worked to limit higher costs of
the classic pension plans as membership incrementally increases in Tier 3.
Table 16. Five-Year Employee Tier Distribution
Employer Plan 2017 2018 2019 2020 2021 Cumulative
Tier 1 41 32 28 24 23 -18 -44%
Tier 2 16 17 16 14 11 -5 -31%
Tier 3 33 54 52 57 57 24 73%
Pension Guidelines
In accordance with the 2020-21 City Council Goals under “Government Efficiency and
Transparency,” the Pension Plan Guidelines were created to address and manage the
City’s pension plans and accrued liabilities. The resulting framework guides pension
related decision-making in the annual budget process, promotes prudent financial
management strategies, and fosters the City Council’s goal of improving transparency.
In addition to outlining available funding methods for consideration, the two primary goals
of the pension guidelines are listed as follows:
1. To stabilize the annual UAL contribution; and
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2. To achieve and maintain a 90% funded status over the next seven to 10 years.
A broader goal within the guidelines is to transfer funds to the Employee Pension Service
Fund of at least 10%, but no more than 25%, of the annual General Fund surplus
(revenues minus expenditures, including transfers). Accumulating funds in the Employee
Pension Service Fund is intended to relieve the General Fund of payments toward the
City’s UAL when greater than $900,000.
The Employee Pension Service Fund ended FY 2021-22 with a projected fund balance
of $640,000. Most recently, the City Council took additional action by approving Staff’s
recommendation to transfer $400,000 or 12% of the General Fund surplus to the
Employee Pension Service Fund in FY 2022-23. The City Council later approved Staff’s
additional recommendation to relieve the General Fund of $242,000 in the employee
benefit category for payment on the UAL. These actions resulted in a projected ending
fund balance of $798,000 as of June 30, 2023, and are summarized in Table 17.
Table 17. Employee Pension Fund Balance ending FY 2022-23
Employee Pension Service Fund
Estimated Beginning Fund Balance - 7/1/2022 $ 640,000
Add: Revenues -
Add: Transfers-In from General Fund 400,000
Total Revenues 400,000
Less: Expenditures (242,000)
Less: Transfers-Out -
Total Expenditures (242,000)
Projected Ending Fund Balance - 6/30/2023 798,000
Restricted by City Council Policy -
Excess/(Deficit) Reserve - 06/30/2023 $ 798,000
Finance Advisory Committee
On September 8, 2022, Staff presented the FAC the results and analysis of the CalPERS
2021 AVR. The following is a summary of its feedback and recommendations:
• Perform an analysis to determine the costs and benefits of an ADP toward the
City’s UAL balance.
• Present findings from the analysis to FAC at a future meeting.
Staff will consider various scenarios using all available pension management tools to
conduct this analysis. To remain consistent with pension guidelines, the purpose of this
analysis will align with the primary goals of stabilizing contributions and increasing the
funded ratio over the next seven to 10 years. Staff will return to the City Council with any
recommendations from FAC as a result of this analysis.
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CONCLUSION:
CalPERS’ AVR provides the City with both a retrospective and forward-looking account
of the financial health of all retirement plans. As determined in the June 2021 AVR, the
estimated required contribution for all miscellaneous plans in FY 2023-24 totals
$1,755,171. Through June 30, 2021, the City maintained a total UAL balance of
$10,031,559, which is expected to decrease to $9,287,260 by June 30, 2023. Results
also determined the City’s overall Funded Ratio increased from 71.8% in 2020 to 81.4%
in 2021. A long-term analysis of the 2021 valuation further revealed total annual average
growth rates of 7.2% for AL, 8.1% for the MVA, and an average Funded Ratio of 75.2%.
In addition, wage growth has continued to steadily increase by 2% on average year over
year since June 2013.
Most notably, the aggregate annual UAL payment has grown at an average rate of 14.5%
and is anticipated to increase following CalPERS preliminary investment return of -6.1%
in FY 2021-22. Despite the positive results of the 2021 AVR, it’s critical to recall that new
unfunded liabilities may emerge in future years due to the differences between actual and
assumed experience. Overall, the City has continued to take a proactive approach by
establishing pension guidelines, setting aside funds, minimizing impacts on the General
Fund, and monitoring all pension obligations. Staff will continue to collaborate with the
FAC in exploring and analyzing options provided by CalPERS, such as ADPs and other
pension management strategies. Ultimately, the objective is to achieve the overarching
goals of the Pension Plan Guidelines. Any recommendations from the FAC will be
forwarded for the City Council’s consideration at a future meeting.
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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 2022
Miscellaneous Plan of the City of Rancho Palos Verdes (CalPERS ID: 3846845523)
Annual Valuation Report as of June 30 , 2021
Dear Employer,
Attached to this letter, you will find the June 30, 2021 actuarial valuation report for the rate plan noted above . Provided
in this report is the determination of the minimum required employer contributions for fiscal year (FY)
2023-24. In addition, the report contains important information regarding the current financial status of the plan as
well as projections and risk measu res 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, 2021.
Section 2 can be found on the CalPERS website (www.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, 2021 .
Your June 30, 2021 actuarial valuation report contains important actuarial information about your pension plan at
CalPERS. The plan actuary whose signature is in the Actuarial Certification is available to discuss.
Actuarial valuations are based on assumptions regarding future plan experience including investment return and payroll
growth, eligibility for the types of benefits provide d, and longevity among retirees. The CalPERS Board of Administration
(board) adopts these assumptions after considering the advice of CalPERS actuarial and investment teams and other
professionals. Each actuarial valuation reflects all prior differences be tween actual and assumed experience and adjusts
the contribution requirements as needed. This valuation is based on an investment return assumption of 6.8%, which
was adopted by the board in November 2021 . Other assumptions used in this report are those re commended in the
CalPERS Experience Study and Review of Actuarial Assumptions report from November 2021.
Required Contribution
The table below shows the minimum required employer contributions for FY 2023-24 along with estimates of the
required contributions for FY 2024-25. Employee contributions other than cost sharing (whether paid by the employer
or the employee) are in addition to the results shown below. The required employer contributions in this report
do not reflect any cost sharing arrangement between the agency and the employees.
Fiscal Year Employer Normal
Cost Rate
Employer Amortization of
Unfunded Accrued Liability
2023-24 14.06% $1,070,317
Projected Results
2024-25 14.1% $1,064,000
A-1
J~_CalPERS
Miscellaneous Plan of the City of Rancho Palos Verdes
(CalPERS ID: 3846845523)
Annual Valuation Report as o f June 30, 2021
Page 2
The actual investment return for FY 2021-22 was not known at the time this report was prepared. The projections
above assume the investment re turn for that year would be 6.8%. To the extent the actual investment return
for FY 2021-22 differs from 6.8%, the actual contribution requirements for FY 2024-25 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 FY 2028-29.
Changes from Previous Year’s Valuation
On July 12, 2021, CalPERS reported a preliminary 21.3% net return on investments for FY 2020-21. Since the return
exceeded the 7.00% discount rate sufficiently, the CalPERS Funding Risk Mitigation policy allows CalPERS to use a
portion of the investment ga in to offset the cost of reducing the expected volatility of future investment returns. Based
on the thresholds specified in the policy, the excess return of 14.3% prescribes a reduction in investment volatility that
corresponds to a reduction in the discount rate of 0.20%, from 7.00% to 6.80%.
On November 17, 2021, the board adopted new actuarial assumptions based on the recommendations in the November
202 1 CalPERS Experience Study and Review of Actuarial Assumptions . This study reviewed the retirement rates,
termination rates, mortality rates, rates of salary increases , and inflation assumption for public agencies. These new
assumptions are incorporated in this actuarial valuation and will impact the required contribution for FY 2023-24. In
addition, the board adopted a new strategic asset allocation as part of its Asset Liability Management process. The new
asset allocation along with the new capital market assumptions and economic assumptions support a discount rate of
6.80%. This includes a reduction in the price inflation assumption from 2.50% to 2.30%.
Besides the above noted changes, there may also be changes specific to the plan such as contract amendments and
funding changes.
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 the plan 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, 2021
for the
Miscellaneous Plan
of the
City of Rancho Palos Verdes
(CalPERS ID: 3846845523)
Required Contributions
for Fiscal Year
July 1, 2023 - June 30, 2024
A-3
A
CalPERS
Table of Contents
Section 1 – Plan Specific Information
Section 2 – Risk Pool Actuarial Valuation I nformation
A-4
Section 1
CALIFORNIA PUBLIC EMPLOYEES’ 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 Contribution s 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 1 1
Allocation of Plan’s Share of Pool’s Experience/Assumption C hange 1 1
Development of Plan’s Share of Pool’s Market Value of Assets 1 1
Sche dule of Plan’s Amortization Bases 1 2
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, 2021
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 1
Actuarial Certification
To the best of our knowledge, this report , comprising of Sections 1 and 2, is complete and accurate and contains
sufficient information to disclose, fully and fairly, the funded condition of the Miscellaneous Plan of the City of
Rancho Palos Verdes and satisfies the actuarial valuation requirements of Government Code section 7504 . This
valuation is based on the member and financial data as of June 30, 2021 provided by the various CalPERS
databases and the benefits under this plan with CalPERS as of the date this report was produced. Section 1 of
this report is based on the member and financial data for City of Rancho Palos Verdes , while Section 2 is based
on the corresponding information for all agencies participating in the Miscellaneous Risk Pool to which the plan
belongs.
As set forth in Section 2 of this report, the pool actuaries have certified that, in their opinion, the valuation of the
Miscellaneous Risk Pool 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 p ool as of the date of this valuation and as prescribed by the
CalPERS Board of Administration according to pro visions 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 inf ormation for the rate plan, it is my opinion as the plan actuary that the Unfunded Accrued Liability
amortization bases as of June 30, 2021 and employer contribution as of July 1, 2023 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 Contributions
• Additional Discretionary Employer Contributions
• Plan’s Funded Status
• Projected Employer Contributions
• Other Pooled Miscellaneous Risk Pool Rate Plans
• Cost
• Changes Since the Prior Y ear’s Valuation
• Subsequent Events
A-8
CALPERS ACTUARIAL VALUATION - June 30, 2021
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, 2021 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 contribution s for (FY) 2023 -24.
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 a ctuary in order to:
• Set forth the assets and accrued liabilities of this plan as of June 30, 2021 ;
• Determine the minimum required employer contribution for this plan for the FY July 1, 2023 through
June 30, 2024; and
• Provide actuarial information as of June 30, 2021 to the CalPERS Board of Administration (board) 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 (www.calpers.ca.gov).
The measurements shown in this actuarial valuation may not be applicable for other purposes. The agency
should contact the plan 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 th is 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;
changes in plan provisions or applica ble law; and differences between the required contributions determined by
the valuation and the actual contributions made by the agency .
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 5.8% and 7.8 %.
• 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 2021.
• Plan maturity measures indicating how sensitive a plan may be to the risks noted above.
A-9
CALPERS ACTUARIAL VALUATION - June 30, 2021
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 4
Required Contributions
Fiscal Year
Required Employer Contributions 2023-24
Employer Normal Cost Rate 14.06%
Plus
Required Payment on Amortization Bases1 $1,070,317
Paid either as
1) Monthly Payment $89,193.08
Or
2) Annual Prepayment Option * $1,035,683
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 b e prepaid (which must be received in full no
later than July 31).
Fiscal Year Fiscal Year
2022-23 2023-24
Development of Normal Cost as a Percentage of Payroll
Base Total Normal Cost for Formula 19.55% 21.30%
Surcharge for Class 1 Benefits2
a) FAC 1 0.62% 0.72%
Phase out of Normal Cost Difference 3 0.00% 0.00%
Plan’s Total Normal Cost 20.17% 22.02%
Formula's Expected Employee Contribution Rate 7.96% 7.96%
Employer Normal Cost Rate 12.21% 14.06%
1 The required payment on amortization bases does not take into account any additional discretionary payment made after
April 29, 2022.
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, 2021
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 2023-24 FY is $1,070,317 . CalPERS allows agencies 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. Agencies 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 FY 2023-24 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 perio ds, see the “Amortization
Schedule and Alternatives” section of the report.
Agencies considering making an ADP should contact CalPERS for additional information.
Minimum Required Employer Contribution for Fiscal Year 20 23-24
Estimated
Normal Cost
Minimum UAL
Payment
ADP Total UAL
Contribution
Estimated Total
Contribution
$277,024 $1,070,317 $0 $1,070,317 $1,347,341
Alternative Fiscal Year 2023-24 Employer Contributions for Greater UAL Reduction
Funding
Target
Estimated
Normal Cost
Minimum UAL
Payment
ADP1 Total UAL
Contribution
Estimated Total
Contribution
10 years $277,024 $1,070,317 $197,389 $1,267,706 $1,544,730
5 years $277,024 $1,070,317 $1,109,740 $2,180,057 $2,457,081
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, 2023 as
determined in the June 30, 2021 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 numb er 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, 2021
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, 2020 June 30, 2021
1. Present Value of Projected Benefits (PVB) $48,055,650 $49,885,862
2. Entry Age Accrued Liability (AL) 46,073,081 47,593,129
3. Plan’s Market Value of Assets (MVA) 32,343,280 37,561,570
4. Unfunded Accrued Liability (UAL) [(2) - (3)] 13,729,801 10,031,559
5. Funded Ratio [(3 ) / (2)] 70.2% 78.9%
The UAL and funded ratio are assessments of the need for future employer contributions based on the 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. The
funded ratio, on the other hand, is a relative measure of funded status that allows f or comparison between
plans of different sizes. For measures of funded status that are appropriate 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, b enefits, or funding will occur during the projection period. In particular, the
investment return beginning with FY 2021-22 is assumed to be 6.80% per year, net of invest ment and
administrative expenses. Actual contribution rates during this projection period could be significantly higher or
lower than the projection shown below. Future contribution requirements may differ significantly from those
shown below. The actual l ong-term cost of the plan will depend on the actual benefits and expenses paid and
the actual investment experience of the fund.
Required
Contribution
Projected Future Employer Contributions
(Assumes 6.80% Return for Fiscal Year 2021-22 and Beyond )
Fiscal Year 2023-24 2024-25 2025-26 2026-27 2027-28 2028-29
Rate Plan 1107 Results
Normal Cost % 14.06% 14.1% 14.1% 14.1% 14.1% 14.1%
UAL Payment $1,070,317 $1,064,000 $1,027,000 $988,000 $931,000 $966,000
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 inve stment return scenarios, please see the “Future Investment
Return Scenarios” in the “Risk Analysis” section .
Our online pension plan projection tool, Pension Outlook, is available in the Employers section of the CalPERS
website. Pension Outlook can help plan and budget pension costs under various scenarios.
A-12
CALPERS ACTUARIAL VALUATION - June 30, 2021
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Ris k 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 f or 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 2.80 % per year for three years.
Fiscal Year Fiscal Year
2022-23 2023-24
Estimated Combined Employer Contributions for all Pooled Miscellaneous Rate Plans
Projected Payroll for the Contribution Year $6,591,713 $6,798,456
Estimated Employer Normal Cost $602,020 $684,854
Required Payment on Amortization Bases $1,141,678 $1,070,317
Estimated Total Employer Contributions $1,743,698 $1,755,171
Estimated Total Employer Contribution Rate (illustrative only) 26.45% 25.82%
A-13
CALPERS ACTUARIAL VALUATION - June 30, 2021
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Ris k Pool Page 8
Cost
Actuarial Determination of Plan Cost
Contributions to fund the 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 perce ntage of total
active payroll. Starting with FY 2016-17, the Am ortization 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 expre ssed 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 ave raged 6.9 % over the 20 years ending June 30, 2021 , yet individual fiscal year returns have
ranged from -23.6 % to +21.3 %. In addition, CalPERS reviews all actuarial assumptions by conducting in -depth
experience stud ies every four years, with the most recent experience study completed in 2021.
A-14
CALPERS ACTUARIAL VALUATION - June 30, 2021
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Ris k 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 th is valuation.
Actuarial Methods and Assumptions
On November 17, 20 21, the board adopted new actuarial assumptions based on the recommendations in the
202 1 CalPERS Experience Study and Review of Actuarial As sumptions. This study reviewed the retirement rates,
termination rates, mortality rates, rates of salary increases, and inflation assumption for Public Agencies. These
new assumptions are incorporated in this actuarial valuation and will impact the require d contribution for FY
2023-24. In addition, the b oard adopted a new asset portfolio as part of its Asset Liability Management process.
The new asset mix supports a 6.80% discount rate, which reflects a change in the price inflation assumption to
2.30%.
Subsequent Events
The contribution requirements determined in this actuarial valuation report are based on demographic and
financial information as of June 30, 2021 . Changes subsequent to that date are not reflected. Investment returns
below the assumed rate of return may increase future required contributions while investment returns above
the assumed rate of return may decrease future required contributions.
The projected employer contributions on Page 6 are calculated under the assumption that the disco unt rate
remains at 6.8% going forward and that the realized rate of return on assets for FY 2021-22 is 6.8 %.
This actuarial valuation report reflects statutory changes, regulatory changes and board actions through January
2022. 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 H istory
• Funding History
A-16
CALPERS ACTUARIAL VALUATION - June 30, 2021
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 $11,083,919
Transferred Members 4,566,761
Terminated Members 2,467,387
Members and Beneficiaries Receiving Payments 29,475,062
Total $47,593,129
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 $47,593,129
2. Projected UAL balance at 6/30/2021 13,826,935
3. Pool’s Accrued Liability1 20,794,529,023
4. Sum of Pool’s Individual Plan UAL Balances at 6/30/2021 1 4,597,734,264
5. Pool’s 2020/21 Investment (Gain)/Loss1 (2,338,185,055)
6. Pool’s 2020/21 Non-Investment (Gain)/Loss 1 (84,077,623)
7. Plan’s Share of Pool’s Investment (Gain)/Loss : [(1) - (2)] ÷ [(3) - (4)] × (5) (4,874,521)
8. Plan’s Share of Pool’s Non-Investment (Gain)/Loss: (1) ÷ (3) × (6 ) (192,431)
9. Plan’s New (Gain)/Loss as of 6/30/2021: (7) + (8 ) (5,066,952)
10. Increase in Pool’s Accrued Liability due to Change in Assumptions 1 60,407,898
11. Plan’s Share of Pool’s Change in Assumptions: (1) ÷ (3) × (10) 138,258
12. Increase in Pool’s Accrued Liability due to Funding Risk Mitigation 1 495,172,731
13. Plan’s Share of Pool’s Change due to Funding Risk Mitigation: (1) ÷ (3) × (12) 1,133,318
14. Offset due to Funding Risk Mitigation (1,159,884)
15. Plan’s Net Investment (Gain): (7) – (14) (3,714,637)
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
16. Plan’s UAL: (2) + (9) + (11) + (13) $10,031,559
17. Plan’s Share of Pool’s MVA: (1) - (16) $37,561,570
A-17
CALPERS ACTUARIAL VALUATION - June 30, 2021
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, 2021 .
• The required employer contributions determined by the valuation are for the fiscal year beginning two years after the valuation date: FY 2023-24.
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 provide pub lic agencies with
their required employer contribution well in advance of the start of the fiscal year.
The Unfunded Accrued Liabil ity (UAL) is used to determine the employer contribution and therefore must be rolled forward two years from the valuation da te to the first
day of the fiscal year for which the contribution is being determined. The UAL is rolled forward each year by subtr acting 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 valu ation 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
2023-24
Ramp
Shape
Escala-
tion
Rate
Amort.
Period
Balance
6/30/21
Expected
Payment
2021-22
Balance
6/30/22
Expected
Payment
2022-23
Balance
6/30/23
Minimum
Required
Payment
2023-24
Investment (Gain)/Loss 6/30/13 100% Up/Down 2.80% 22 4,088,971 285,060 4,072,428 292,900 4,046,658 293,716
Non-Investment (Gain)/Loss 6/30/13 100% Up/Down 2.80% 22 (37,714) (2,629) (37,562) (2,702) (37,324) (2,709)
Share of Pre-2013 Pool UAL 6/30/13 No Ramp 2.80% 13 3,936,819 355,076 3,837,573 364,841 3,721,486 368,220
Assumption Change 6/30/14 100% Up/Down 2.80% 13 1,825,420 183,557 1,759,853 188,605 1,684,611 190,695
Investment (Gain)/Loss 6/30/14 100% Up/Down 2.80% 23 (2,996,835) (203,296) (2,990,525) (208,887) (2,978,008) (209,290)
Non-Investment (Gain)/Loss 6/30/14 100% Up/Down 2.80% 23 3,423 232 3,416 239 3,401 239
Investment (Gain)/Loss 6/30/15 100% Up/Down 2.80% 24 1,929,249 127,575 1,928,597 131,084 1,924,274 131,226
Non-Investment (Gain)/Loss 6/30/15 100% Up/Down 2.80% 24 (163,084) (10,784) (163,029) (11,081) (162,663) (11,093)
Assumption Change 6/30/16 100% Up/Down 2.80% 15 727,034 53,497 721,186 68,710 699,219 69,341
Investment (Gain)/Loss 6/30/16 100% Up/Down 2.80% 25 2,358,125 123,340 2,391,013 158,414 2,389,890 158,457
Non-Investment (Gain)/Loss 6/30/16 100% Up/Down 2.80% 25 (303,522) (15,875) (307,756) (20,390) (307,612) (20,396)
Assumption Change 6/30/17 100% Up/Down 2.80% 16 850,095 46,283 860,071 63,408 853,027 79,918
Investment (Gain)/Loss 6/30/17 100% Up/Down 2.80% 26 (1,249,609) (49,108) (1,283,832) (67,278) (1,301,605) (84,056)
Non-Investment (Gain)/Loss 6/30/17 100% Up/Down 2.80% 26 (66,535) (2,615) (68,357) (3,582) (69,303) (4,475)
Assumption Change 6/30/18 80% Up/Down 2.80% 17 1,379,227 50,294 1,421,039 77,516 1,437,561 104,095
Investment (Gain)/Loss 6/30/18 80% Up/Down 2.80% 27 (385,367) (10,244) (400,985) (15,788) (411,936) (21,018)
Method Change 6/30/18 80% Up/Down 2.80% 17 384,337 14,015 395,988 21,601 400,592 29,007
Non-Investment (Gain)/Loss 6/30/18 80% Up/Down 2.80% 27 197,232 5,243 205,225 8,080 210,830 10,757
Investment (Gain)/Loss 6/30/19 60% Up Only 0.00% 18 180,130 3,938 188,309 7,877 192,974 11,603
Non-Investment (Gain)/Loss 6/30/19 No Ramp 0.00% 18 197,482 18,021 192,287 18,021 186,739 17,705
A-18
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CALPERS ACTUARIAL VALUATION - June 30, 2021
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
2023-24
Ramp
Shape
Escala-
tion
Rate
Amort.
Period
Balance
6/30/21
Expected
Payment
2021-22
Balance
6/30/22
Expected
Payment
2022-23
Balance
6/30/23
Minimum
Required
Payment
2023-24
Investment (Gain)/Loss 6/30/20 40% Up Only 0.00% 19 817,820 0 873,432 19,132 913,054 37,533
Non-Investment (Gain)/Loss 6/30/20 No Ramp 0.00% 19 154,237 0 164,725 15,060 160,363 14,789
Assumption Change 6/30/21 No Ramp 0.00% 20 138,258 (13,770) 161,890 (14,155) 187,527 16,863
Net Investment (Gain) 6/30/21 20% Up Only 0.00% 20 (3,714,637) 0 (3,967,232) 0 (4,237,004) (91,073)
Non-Investment (Gain)/Loss 6/30/21 No Ramp 0.00% 20 (192,431) 0 (205,516) 0 (219,491) (19,737)
Risk Mitigation 6/30/21 No Ramp 0.00% 1 1,133,318 (13,989) 1,224,840 (14,381) 1,322,991 1,367,233
Risk Mitigation Offset 6/30/21 No Ramp 0.00% 1 (1,159,884) 0 (1,238,756) 0 (1,322,991) (1,367,233)
Total 10,031,559 943,821 9,738,322 1,077,244 9,287,260 1,070,317
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
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CALPERS ACTUARIAL VALUATION - June 30, 2021
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 (s) 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 amo rtization 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) alternat ive “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 contact the 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 , s uch 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 whe n 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 n appropriate period.
The Current Amortization Schedule on th e 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 b ases 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, 2021
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 10 Year Amortization 5 Year Amortization
Date Balance Payment Balance Payment Balance Payment
6/30/2023 9,287,260 1,070,317 9,287,260 1,267,706 9,287,260 2,180,057
6/30/2024 8,812,684 1,063,762 8,608,695 1,267,706 7,665,834 2,180,057
6/30/2025 8,312,613 1,027,367 7,883,987 1,267,706 5,934,151 2,180,057
6/30/2026 7,816,147 988,008 7,109,999 1,267,705 4,084,713 2,180,057
6/30/2027 7,326,598 930,800 6,283,381 1,267,706 2,109,514 2,180,058
6/30/2028 6,862,883 965,614 5,400,552 1,267,706
6/30/2029 6,331,657 1,001,406 4,457,690 1,267,705
6/30/2030 5,727,314 1,038,194 3,450,715 1,267,706
6/30/2031 5,043,859 1,076,015 2,375,264 1,267,705
6/30/2032 4,274,845 1,065,996 1,226,684 1,267,705
6/30/2033 3,463,891 1,054,329
6/30/2034 2,609,847 1,022,130
6/30/2035 1,731,008 964,804
6/30/2036 851,649 328,317
6/30/2037 570,263 253,338
6/30/2038 347,231 173,659
6/30/2039 191,377 110,644
6/30/2040 90,047 69,286
6/30/2041 24,567 25,389
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
6/30/2052
Total 14,229,375 12,677,056 10,900,286
Interest Paid 4,942,115 3,389,796 1,613,026
Estimated Savings 1,552,319 3,329,089
A-21
CALPERS ACTUARIAL VALUATION - June 30, 2021
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, 201 9 or after June 30, 2021 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 0
2021 - 22 12.20% 971,580
2022 - 23 12.21% 1,105,780
2023 - 24 14.06% 1,070,317
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
06/30/2012 $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
06/30/2021 47,593,129 37,561,570 10,031,559 78.9% 1,813,647
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, 2021
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Page 18
Future Investment Return Scenarios
Analysis using the investment return scenarios from the Asset Liability Management process completed in
2021 was performed to determine the effects of various future investment returns on required employer
contributions. The projections below reflect the impact of the CalPERS Funding Risk Mitigation policy. The
projections also assume that all other actuarial assumptions will be realized and t hat no further changes in
assumptions, contributions, benefits, or funding will occur.
The first table shows projected contribution requirements if the fund were to earn either 3.0% or 10.8%
annually. These alternate investment returns were chosen because 90% of long -term average returns are
expected to fall between them over the 20 -year period ending June 30, 2041.
Required contributions outside of this range are also possible. In particular, whereas it is unlikely that
investment returns will average less than 3.0% or greater than 10.8% over a 20 -year period, the likelihood
of a single investment return less than 3.0% or greater than 10.8% in any given year is much greater. The
following analysis illustrates the effect of an extreme, single year investment return.
The portfolio has an expected volatility (or standard deviation) of 12.0% per year. Accordingly, in a ny given
year there is a 16% probability that the annual return will be -5.2% or less and a 2.5% probability that the
annual return will be -17.2% or less. These returns represent one and two standard deviations below the
expected return of 6.8%.
The following table shows the effect of a one or two standard deviation investment loss in FY 2021-22 on the
FY 2024-25 contribution requirements. Note that a single -year investment gain or loss decreases or increases
the required UAL contribution amount incrementally for each of the next five years, not just one, due to the
5 -year ramp in the amortization policy. However, the contribution requirements beyond the first year are also
impacted by investment returns beyond the first year. Historically, significant downturns i n the market are
often followed by higher than average returns. Such investment gains would offset the impact of these single
year negative returns in years beyond FY 2024-25.
Assumed Annual Return for
Fiscal Year 2021-22
Required
Employer
Contributions
Projected
Employer
Contributions
2023-24 2024-25
(1 7.2)% (2 standard deviation loss)
Normal Cost Rate 14.06% 14.1%
UAL Contribution $1,070,317 $1,285,000
(5 .2)% (1 standard deviation loss)
Normal Cost Rate 14.06% 14.1%
UAL Contribution $1,070,317 $1,175,000
• Without investment gains (returns higher than 6.8%) in year FY 2022-23 or later, projected
contributions rates would continue to rise over the next four years due to the continued phase -in of
the impact of the illustrated investment loss in FY 2021-22.
• The Pension Outlook Tool can be used to model projected contributions for these scenarios beyond
FY 2024-25 as well as to model other investment return scenarios.
Assumed Annual Return
FY 2021-22
through 2040-41
Projected Employer Contributions
2024-25 2025-26 2026-27 2027-28 2028-29
3.0% (5 th percentile)
Normal Cost Rate 14.1% 14.1% 14.1% 14.1% 14.1%
UAL Contribution $1,099,000 $1,134,000 $1,202,000 $1,291,000 $1,511,000
10.8% (95th percentile)
Normal Cost Rate 14.4% 14.6% 14.9% 15.2% 15.5%
UAL Contribution $1,030,000 $928,000 $786,000 $279,000 $0
A-24
CalPERS Actuarial Valuation – June 30, 2021
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 4.5% and 2.3%, 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, 2021 assuming alternate discount rates by changing the two components
independently. Results are shown using the current discount rate of 6.8% as well as alternate disco unt rates of
5.8% and 7.8%. The rates of 5.8% and 7.8% were selected since they illustrate the impact of a 1.0% increase
or decrease to the 6.8% assumption.
Sensitivity to the Real Rate of Return Assumption
As of June 30, 2021 1% Lower
Real Return Rate
Current
Assumptions
1% Higher
Real Return Rate
Discount Rate 5.8% 6.8 % 7.8%
Inflation 2.3% 2.3% 2.3%
Real Rate of Return 3.5% 4.5% 5.5%
a) Total Normal Cost 27.78% 22.02% 17.65%
b) Accrued Liability $53,873,670 $47,593,129 $42,427,862
c) Market Value of Assets $37,561,570 $37,561,570 $37,561,570
d) Unfunded Liability /(Surplus) [(b) - (c)] $16,312,100 $10,031,559 $4,866,292
e) Funded Ratio 69.7% 78.9% 88.5%
Sensitivity to the Price Inflation Assumption
As of June 30, 2021 1% Lower
Inflation Rate
Current
Assumptions
1% Higher
Inflation Rate
Discount Rate 5.8% 6.8 % 7.8%
Inflation 1.3% 2.3 % 3.3%
Real Rate of Return 4.5% 4.5% 4.5%
a) Total Normal Cost 23.14% 22.02% 20.04%
b) Accrued Liability $49,303,122 $47,593,129 $43,707,939
c) Market Value of Assets $37,561,570 $37,561,570 $37,561,570
d) Unfunded Liability/(Surplus) [(b) - (c)] $11,741,552 $10,031,559 $6,146,369
e) Funded Ratio 76.2% 78.9% 85.9%
Mortality Rate Sensitivity
The following table looks at the change in the June 30, 2021 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 2021. This type of analysis highlights the impact on the plan of
improving or worseni ng mortality over the long-term.
As of June 30, 2021 10% Lower
Mortality Rates
Current
Assumptions
10% Higher
Mortality Rates
a) Total Normal Cost 22.38% 22.02% 21.69%
b) Accrued Liability $48,523,224 $47,593,129 $46,736,618
c) Market Value of Assets $37,561,570 $37,561,570 $37,561,570
d) Unfunded Liability/(Surplus) [(b) - (c)] $10,961,654 $10,031,559 $9,175,048
e) Funded Ratio 77.4% 78.9% 80.4%
A-25
CalPERS Actuarial Valuation – June 30, 2021
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 varia bles 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, 2020 June 30, 2021
1. Retired Accrued Liability $27,480,518 $29,475,062
2. Total Accrued Liability 46,073,081 47,593,129
3. Ratio of Retiree AL to Total AL [(1) / (2)] 0.60 0.62
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 declines. A mature plan will often have a ratio near or below
one.
To calculate the support ratio for the rate plan, retirees and beneficiaries receiving a continuance are each
counted as one, even though they may have only worked a portion of their caree rs as an active member of this
rate plan. For this reason, the support ratio, while intuitive, may be less informative than the ratio of retiree
liability to total accrued liability above. For comparison, the support ratio for all CalPERS public agency pla ns is
0.82 and is calculated consistently with how it is for the individual rate plan. Note that to calculate the support
ratio for all public agency plans, a retiree with service from more than one CalPERS agency is counted as a
retiree more than once.
Support Ratio June 30, 2020 June 30, 2021
1. Number of Actives 24 23
2. Number of Retirees 99 105
3. Support Ratio [(1) / (2)] 0.24 0.22
A-26
CalPERS Actuarial Valuation – June 30, 2021
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 a ctuarial 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, investment return) are exactly realized each year, there will be differences on a
year-to -year basis. The year-to -year differences between actual experience and the assumptions are called
actuarial gains and losses and serve to lower or raise required employer contribution s 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
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 the
plan matures.
Liability Volatility Ratio
Also shown in the table belo w 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 changes in liability. For exam ple, 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, since the AVR, described above, will tend to move closer to the LVR as the funded ratio approaches
100%.
Contribution Volatility June 30, 2020 June 30, 2021
1. Market Value of Assets $32,343,280 $37,561,570
2. Payroll 1,749,626 1,813,647
3. Asset Volatility Ratio (AVR) [(1) / (2)] 18.5 20.7
4. Accrued Liability $46,073,081 $47,593,129
5. Liability Volatility Ratio (LVR) [(4) / (2)] 26.3 26.2
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
0.53
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
06/30/2021
0.62
0.22
20.7
26.2
A-27
CalPERS Actuarial Valuation – June 30, 2021
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, 2021 . The plan liability on a termination basis is calculated differently
compared to the plan’s ong oing funding liability. For the hypothetical termination liability calculation , both
compensation and service are frozen as of the valuation date and no future pay i ncreases 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 board for the
Terminated Agency Pool. The Terminated Agency Pool has limited funding sources since no future empl oyer
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 P ool 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 o f 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 seven months after.
Market
Value of
Assets (MVA)
Hypothetical
Termination
Liability1,2
at 1.00%
Funded
Ratio
Unfunded
Termination
Liability
at 1.00 %
Hypothetical
Termination
Liability1,2
at 2.25%
Funded
Ratio
Unfunded
Termination
Liability
at 2.25%
$37,561,570 $110,912,060 33.9% $73,350,490 $91,783,730 40.9% $54,222,160
1 The hypothetical liabilities calculated above include a 5% contingency load. The contingency load and o ther actuarial
assumptions can be found in Appendix A.
2 The discount rate 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 2.00% on June 30, 2021, the valuation date.
In order to terminate the plan, first contact our Pension Contract Services unit to initiate a Resolution of Intent
to Terminate. The completed Resolution will allow the plan actuary to provide a preliminary termination valuation
with a more up -to -date estimate of the plan liabilities. Before beginning this process, please consult with the
plan actuary.
A-28
CalPERS Actuarial Valuation – June 30, 2021
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 the plan’s member data upon which this valuation is based :
June 30, 2020 June 30, 2021
Active Members
Counts 24 23
Average Attained Age 52.72 53.91
Average Entry Age to Rate Plan 34.54 34.44
Average Years of Credited Service 15.37 16.76
Average Annual Covered Pay $72,901 $78,854
Annual Covered Payroll $1,749,626 $1,813,647
Present Value of Future Payroll $10,378,645 $10,888,508
Transferred Members 38 33
Separated Members 98 96
Retired Members and Beneficiaries
Counts* 99 105
Average Annual Benefits* $21,256 $21,217
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.
* Value s 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, 2021
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 the 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, 2021
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 EMPLOYEES’ RETIREMENT SYSTEM
Risk Pool Actuarial Valuation Information
Section 2 may be found on the CalPERS website
(www.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 2022
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes (CalPERS ID: 3846845523)
Annual Valuation Report as of June 30 , 2021
Dear Employer,
Attached to this letter, you will find the June 30, 2021 actuarial valuation report for the rate plan noted above . Provided
in this report is the determination of the minimum required employer contributions for fiscal year (FY)
2023-24. In addition, the report contains important information regarding the current financial status of the plan as
well as projections and risk measu res 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, 2021.
Section 2 can be found on the CalPERS website (www.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, 2021 .
Your June 30, 2021 actuarial valuation report contains important actuarial information about your pension plan at
CalPERS. The plan actuary whose signature is in the Actuarial Certification is available to discuss.
Actuarial valuations are based on assumptions regarding future plan experience including investment return and payroll
growth, eligibility for the types of benefits provide d, and longevity among retirees. The CalPERS Board of Administration
(board) adopts these assumptions after considering the advice of CalPERS actuarial and investment teams and other
professionals. Each actuarial valuation reflects all prior differences be tween actual and assumed experience and adjusts
the contribution requirements as needed. This valuation is based on an investment return assumption of 6.8%, which
was adopted by the board in November 2021 . Other assumptions used in this report are those re commended in the
CalPERS Experience Study and Review of Actuarial Assumptions report from November 2021.
Required Contribution
The table below shows the minimum required employer contributions for FY 2023-24 along with estimates of the
required contributions for FY 2024-25. Employee contributions other than cost sharing (whether paid by the employer
or the employee) are in addition to the results shown below. The required employer contributions in this report
do not reflect any cost sharing arrangement between the agency and the employees.
Fiscal Year Employer Normal
Cost Rate
Employer Amortization of
Unfunded Accrued Liability
2023-24 10.10% $0
Projected Results
2024-25 10.1% $0
B-1
J~_CalPERS
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
(CalPERS ID: 3846845523)
Annual Valuation Report as o f June 30, 2021
Page 2
The actual investment return for FY 2021-22 was not known at the time this report was prepared. The projections
above assume the investment re turn for that year would be 6.8%. To the extent the actual investment return
for FY 2021-22 differs from 6.8%, the actual contribution requirements for FY 2024-25 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 FY 2028-29.
Changes from Previous Year’s Valuation
On July 12, 2021, CalPERS reported a preliminary 21.3% net return on investments for FY 2020-21. Since the return
exceeded the 7.00% discount rate sufficiently, the CalPERS Funding Risk Mitigation policy allows CalPERS to use a
portion of the investment ga in to offset the cost of reducing the expected volatility of future investment returns. Based
on the thresholds specified in the policy, the excess return of 14.3% prescribes a reduction in investment volatility that
corresponds to a reduction in the discount rate of 0.20%, from 7.00% to 6.80%.
On November 17, 2021, the board adopted new actuarial assumptions based on the recommendations in the November
202 1 CalPERS Experience Study and Review of Actuarial Assumptions . This study reviewed the retirement rates,
termination rates, mortality rates, rates of salary increases , and inflation assumption for public agencies. These new
assumptions are incorporated in this actuarial valuation and will impact the required contribution for FY 2023-24. In
addition, the board adopted a new strategic asset allocation as part of its Asset Liability Management process. The new
asset allocation along with the new capital market assumptions and economic assumptions support a discount rate of
6.80%. This includes a reduction in the price inflation assumption from 2.50% to 2.30%.
Besides the above noted changes, there may also be changes specific to the plan such as contract amendments and
funding changes.
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 the plan 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, 2021
for the
Miscellaneous Second Tier Plan
of the
City of Rancho Palos Verdes
(CalPERS ID: 3846845523)
Required Contributions
for Fiscal Year
July 1, 2023 - June 30, 2024
B-3
A
CalPERS
Table of Contents
Section 1 – Plan Specific Information
Section 2 – Risk Pool Actuarial Valuation I nformation
B-4
Section 1
CALIFORNIA PUBLIC EMPLOYEES’ 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 Contribution s 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 1 1
Allocation of Plan’s Share of Pool’s Experience/Assumption C hange 1 1
Development of Plan’s Share of Pool’s Market Value of Assets 1 1
Sche dule of Plan’s Amortization Bases 1 2
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, 2021
Miscellaneous Sec ond Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 1
Actuarial Certification
To the best of our knowledge, this report , comprising of Sections 1 and 2, is complete and accurate and contains
sufficient information to disclose, fully and fairly, the funded condition of the Miscellaneous Second Tier Plan of
the City of Rancho Palos Verdes and satisfies the actuarial valuation requirements of Government Code section
7504. This valuation is based on the member and financial data as of June 30, 2021 provided by the various
CalPERS databases and the benefits under this plan with CalPERS as of the date this report was produced. Section
1 of this report is based on the member and financial data for City of Rancho Palos Verdes , while Section 2 is
based on the corresponding information for all agencies participating in the Miscellaneous Risk Pool to which the
plan belongs.
As set forth in Section 2 of this report, the pool actuaries have certified that, in their opinion, the valuation of the
Miscellaneous Risk Pool 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 p ool as of the date of this valuation and as prescribed by the
CalPERS Board of Administration according to pro visions 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 inf ormation for the rate plan, it is my opinion as the plan actuary that the Unfunded Accrued Liability
amortization bases as of June 30, 2021 and employer contribution as of July 1, 2023 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 Contributions
• Additional Discretionary Employer Contributions
• Plan’s Funded Status
• Projected Employer Contributions
• Other Pooled Miscellaneous Risk Pool Rate Plans
• Cost
• Changes Since the Prior Y ear’s Valuation
• Subsequent Events
B-8
CALPERS ACTUARIAL VALUATION - June 30, 2021
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, 2021 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 contribution s for (FY) 2023-24.
Purpose of Section 1
This Section 1 report for the Miscellaneous Second Tier P lan of the City of Rancho Palos Verdes of CalPERS was
prepared by the plan a ctuary in order to:
• Set forth the assets and accrued liabilities of this plan as of June 30, 2021 ;
• Determine the minimum required employer contribution for this plan for the FY July 1, 2023 through
June 30, 2024; and
• Provide actuarial information as of June 30, 2021 to the CalPERS Board of Administration (board) 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 (www.calpers.ca.gov).
The measurements shown in this actuarial valuation may not be applicable for other purposes. The agency
should contact the plan 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 th is 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;
changes in plan provisions or applica ble law; and differences between the required contributions determined by
the valuation and the actual contributions made by the agency .
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 5.8% and 7.8 %.
• 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 2021.
• Plan maturity measures indicating how sensitive a plan may be to the risks noted above.
B-9
CALPERS ACTUARIAL VALUATION - June 30, 2021
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 Contributions
Fiscal Year
Required Employer Contributions 2023-24
Employer Normal Cost Rate 10.10%
Plus
Required Payment on Amortization Bases1 $0
Paid either as
1) Monthly Payment $0.00
Or
2) Annual Prepayment Option * $0
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 b e prepaid (which must be received in full no
later than July 31).
Fiscal Year Fiscal Year
2022-23 2023-24
Development of Normal Cost as a Percentage of Payroll
Base Total Normal Cost for Formula 15.56% 17.03%
Surcharge for Class 1 Benefits2
None 0.00% 0.00%
Phase out of Normal Cost Difference 3 0.00% 0.00%
Plan’s Total Normal Cost 15.56% 17.03%
Formula's Expected Employee Contribution Rate 6.93% 6.93%
Employer Normal Cost Rate 8.63% 10.10%
1 The required payment on amortization bases does not take into account any additional discretionary payment made after
April 29, 2022.
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, 2021
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 2023-24 FY is $0. CalPERS allows agencies 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. Agencies 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 FY 2023-24 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 perio ds, see the “Amortization
Schedule and Alternatives” section of the report.
Agencies considering making an ADP should contact CalPERS for additional information.
Minimum Required Employer Contribution for Fiscal Year 20 23-24
Estimated
Normal Cost
Minimum UAL
Payment
ADP Total UAL
Contribution
Estimated Total
Contribution
$154,539 $0 $0 $0 $154,539
Alternative Fiscal Year 2023-24 Employer Contributions for Greater UAL Reduction
Funding
Target
Estimated
Normal Cost
Minimum UAL
Payment
ADP1 Total UAL
Contribution
Estimated Total
Contribution
N/A N/A N/A N/A N/A N/A
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, 2023 as
determined in the June 30, 2021 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 numb er 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
I I I I I
I I I I I I
CALPERS ACTUARIAL VALUATION - June 30, 2021
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, 2020 June 30, 2021
1.Present Value of Projected Benefits (PVB)$5,195,179 $6,298,632
2.Entry Age Accrued Liability (AL)2,444,917 3,048,741
3.Plan’s Market Value of Assets (MVA)2,192,472 3,129,430
4.Unfunded Accrued Liability (UAL) [(2) - (3)]252,445 (80,689)
5. Funded Ratio [(3 ) / (2)]89.7% 102.6%
The UAL and funded ratio are assessments of the need for future employer contributions based on the 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. The
funded ratio, on the other hand, is a relative measure of funded status that allows f or comparison between
plans of different sizes. For measures of funded status that are appropriate 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, b enefits, or funding will occur during the projection period. In particular, the
investment return beginning with FY 2021-22 is assumed to be 6.80% per year, net of invest ment and
administrative expenses. Actual contribution rates during this projection period could be significantly higher or
lower than the projection shown below. Future contribution requirements may differ significantly from those
shown below. The actual l ong-term cost of the plan will depend on the actual benefits and expenses paid and
the actual investment experience of the fund.
Required
Contribution
Projected Future Employer Contributions
(Assumes 6.80% Return for Fiscal Year 2021-22 and Beyond )
Fiscal Year 2023-24 2024-25 2025-26 2026-27 2027-28 2028-29
Rate Plan 23274 Results
Normal Cost % 10.10% 10.1% 10.1% 10.1% 10.1% 10.1%
UAL Payment $0 $0 $0 $0 $0 $0
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 inve stment return scenarios, please see the “Future Investment
Return Scenarios” in the “Risk Analysis” section .
Our online pension plan projection tool, Pension Outlook, is available in the Employers section of the CalPERS
website. Pension Outlook can help plan and budget pension costs under various scenarios.
B-12
CALPERS ACTUARIAL VALUATION - June 30, 2021
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 f or 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 2.80 % per year for three years.
Fiscal Year Fiscal Year
2022-23 2023-24
Estimated Combined Employer Contributions for all Pooled Miscellaneous Rate Plans
Projected Payroll for the Contribution Year $6,591,713 $6,798,456
Estimated Employer Normal Cost $602,020 $684,854
Required Payment on Amortization Bases $1,141,678 $1,070,317
Estimated Total Employer Contributions $1,743,698 $1,755,171
Estimated Total Employer Contribution Rate (illustrative only) 26.45% 25.82%
B-13
CALPERS ACTUARIAL VALUATION - June 30, 2021
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 Plan Cost
Contributions to fund the 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 perce ntage of total
active payroll. Starting with FY 2016-17, the Am ortization 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 expre ssed 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 ave raged 6.9 % over the 20 years ending June 30, 2021 , yet individual fiscal year returns have
ranged from -23.6 % to +21.3 %. In addition, CalPERS reviews all actuarial assumptions by conducting in -depth
experience stud ies every four years, with the most recent experience study completed in 2021.
B-14
CALPERS ACTUARIAL VALUATION - June 30, 2021
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 th is valuation.
Actuarial Methods and Assumptions
On November 17, 20 21, the board adopted new actuarial assumptions based on the recommendations in the
202 1 CalPERS Experience Study and Review of Actuarial As sumptions. This study reviewed the retirement rates,
termination rates, mortality rates, rates of salary increases, and inflation assumption for Public Agencies. These
new assumptions are incorporated in this actuarial valuation and will impact the require d contribution for FY
2023-24. In addition, the b oard adopted a new asset portfolio as part of its Asset Liability Management process.
The new asset mix supports a 6.80% discount rate, which reflects a change in the price inflation assumption to
2.30%.
Subsequent Events
The contribution requirements determined in this actuarial valuation report are based on demographic and
financial information as of June 30, 2021 . Changes subsequent to that date are not reflected. Investment returns
below the assumed rate of return may increase future required contributions while investment returns above
the assumed rate of return may decrease future required contributions.
The projected employer contributions on Page 6 are calculated under the assumption that the disco unt rate
remains at 6.8% going forward and that the realized rate of return on assets for FY 2021-22 is 6.8 %.
This actuarial valuation report reflects statutory changes, regulatory changes and board actions through January
2022. 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 H istory
•Funding History
B-16
CALPERS ACTUARIAL VALUATION - June 30, 2021
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 $1,442,453
Transferred Members 430,577
Terminated Members 87,886
Members and Beneficiaries Receiving Payments 1,087,825
Total $3,048,741
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 $3,048,741
2. Projected UAL balance at 6/30/2021 253,680
3. Pool’s Accrued Liability1 20,794,529,023
4. Sum of Pool’s Individual Plan UAL Balances at 6/30/2021 1 4,597,734,264
5. Pool’s 2020/21 Investment (Gain)/Loss1 (2,338,185,055)
6. Pool’s 2020/21 Non-Investment (Gain)/Loss 1 (84,077,623)
7. Plan’s Share of Pool’s Investment (Gain)/Loss : [(1) - (2)] ÷ [(3) - (4)] × (5) (403,498)
8. Plan’s Share of Pool’s Non-Investment (Gain)/Loss: (1) ÷ (3) × (6 ) (12,327)
9. Plan’s New (Gain)/Loss as of 6/30/2021: (7) + (8 ) (415,825)
10. Increase in Pool’s Accrued Liability due to Change in Assumptions 1 60,407,898
11. Plan’s Share of Pool’s Change in Assumptions: (1) ÷ (3) × (10) 8,857
12. Increase in Pool’s Accrued Liability due to Funding Risk Mitigation 1 495,172,731
13. Plan’s Share of Pool’s Change due to Funding Risk Mitigation: (1) ÷ (3) × (12) 72,599
14. Offset due to Funding Risk Mitigation (93,229)
15. Plan’s Net Investment (Gain): (7) – (14) (310,269)
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
16. Plan’s UAL: (2) + (9) + (11) + (13) ($80,689)
17. Plan’s Share of Pool’s MVA: (1) - (16) $3,129,430
B-17
CALPERS ACTUARIAL VALUATION - June 30, 2021
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, 2021 .
• The required employer contributions determined by the valuation are for the fiscal year beginning two years after the valuation date: FY 2023-24.
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 provide pub lic agencies with
their required employer contribution well in advance of the start of the fiscal year.
The Unfunded Accrued Liabil ity (UAL) is used to determine the employer contribution and therefore must be rolled forward two years from the valuation da te to the first
day of the fiscal year for which the contribution is being determined. The UAL is rolled forward each year by subtr acting 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 valu ation 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
2023-24
Ramp
Shape
Escala-
tion
Rate
Amort.
Period
Balance
6/30/21
Expected
Payment
2021-22
Balance
6/30/22
Expected
Payment
2022-23
Balance
6/30/23
Minimum
Required
Payment
2023-24
Fresh Start 6/30/21 N/A (80,689) (4,256) (81,778) (2,104) (85,165) 0
Total (80,689) (4,256) (81,778) (2,104) (85,165) 0
The (gain)/loss bases are the plan’s allocated share of the risk pool’s (gain)/loss for the fiscal year as disclosed in “Allo cation 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.
B-18
------------------------------------------········································---------········································-------------------------
CALPERS ACTUARIAL VALUATION - June 30, 2021
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 (s) 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 amo rtization 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) alternat ive “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 contact the 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 , s uch 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 whe n 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 n appropriate period.
The Current Amortization Schedule on th e 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 b ases 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, 2021
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 N/A Year Amortization N/A Year Amortization
Date Balance Payment Balance Payment Balance Payment
6/30/2023 N/A N/A N/A N/A N/A N/A
6/30/2024
6/30/2025
6/30/2026
6/30/2027
6/30/2028
6/30/2029
6/30/2030
6/30/2031
6/30/2032
6/30/2033
6/30/2034
6/30/2035
6/30/2036
6/30/2037
6/30/2038
6/30/2039
6/30/2040
6/30/2041
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
6/30/2052
Total N/A N/A N/A
Interest Paid N/A N/A N/A
Estimated Savings N/A N/A
B-20
CALPERS ACTUARIAL VALUATION - June 30, 2021
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, 201 9 or after June 30, 2021 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 0
2021 - 22 8.65% 17,301
2022 - 23 8.63% 20,057
2023 - 24 10.10% 0
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
06/30/2021 3,048,741 3,129,430 (80,689) 102.6% 1,408,439
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, 2021
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Page 17
Future Investment Return Scenarios
Analysis using the investment return scenarios from the Asset Liability Management process completed in
2021 was performed to determine the effects of various future investment returns on required employer
contributions. The projections below reflect the impact of the CalPERS Funding Risk Mitigation policy. The
projections also assume that all other actuarial assumptions will be realized and t hat no further changes in
assumptions, contributions, benefits, or funding will occur.
The first table shows projected contribution requirements if the fund were to earn either 3.0% or 10.8%
annually. These alternate investment returns were chosen because 90% of long -term average returns are
expected to fall between them over the 20 -year period ending June 30, 2041.
Required contributions outside of this range are also possible. In particular, whereas it is unlikely that
investment returns will average less than 3.0% or greater than 10.8% over a 20 -year period, the likelihood
of a single investment return less than 3.0% or greater than 10.8% in any given year is much greater. The
following analysis illustrates the effect of an extreme, single year investment return.
The portfolio has an expected volatility (or standard deviation) of 12.0% per year. Accordingly, in a ny given
year there is a 16% probability that the annual return will be -5.2% or less and a 2.5% probability that the
annual return will be -17.2% or less. These returns represent one and two standard deviations below the
expected return of 6.8%.
The following table shows the effect of a one or two standard deviation investment loss in FY 2021-22 on the
FY 2024-25 contribution requirements. Note that a single -year investment gain or loss decreases or increases
the required UAL contribution amount incrementally for each of the next five years, not just one, due to the
5 -year ramp in the amortization policy. However, the contribution requirements beyond the first year are also
impacted by investment returns beyond the first year. Historically, significant downturns i n the market are
often followed by higher than average returns. Such investment gains would offset the impact of these single
year negative returns in years beyond FY 2024-25.
Assumed Annual Return for
Fiscal Year 2021-22
Required
Employer
Contributions
Projected
Employer
Contributions
2023-24 2024-25
(1 7.2)% (2 standard deviation loss)
Normal Cost Rate 10.10% 10.1%
UAL Contribution $0 $17,000
(5 .2)% (1 standard deviation loss)
Normal Cost Rate 10.10% 10.1%
UAL Contribution $0 $7,300
• Without investment gains (returns higher than 6.8%) in year FY 2022-23 or later, projected
contributions rates would continue to rise over the next four years due to the continued phase -in of
the impact of the illustrated investment loss in FY 2021-22.
• The Pension Outlook Tool can be used to model projected contributions for these scenarios beyond
FY 2024-25 as well as to model other investment return scenarios.
Assumed Annual Return
FY 2021-22
through 2040-41
Projected Employer Contributions
2024-25 2025-26 2026-27 2027-28 2028-29
3.0% (5 th percentile)
Normal Cost Rate 10.1% 10.1% 10.1% 10.1% 10.1%
UAL Contribution $970 $4,900 $12,000 $22,000 $36,000
10.8% (95th percentile)
Normal Cost Rate 10.3% 10.5% 10.7% 11.0% 11.2%
UAL Contribution $0 $0 $0 $0 $0
B-23
CalPERS Actuarial Valuation – June 30, 2021
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 4.5% and 2.3%, 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, 2021 assuming alternate discount rates by changing the two components
independently. Results are shown using the current discount rate of 6.8% as well as alternate disco unt rates of
5.8% and 7.8%. The rates of 5.8% and 7.8% were selected since they illustrate the impact of a 1.0% increase
or decrease to the 6.8% assumption.
Sensitivity to the Real Rate of Return Assumption
As of June 30, 2021 1% Lower
Real Return Rate
Current
Assumptions
1% Higher
Real Return Rate
Discount Rate 5.8% 6.8 % 7.8%
Inflation 2.3% 2.3% 2.3%
Real Rate of Return 3.5% 4.5% 5.5%
a) Total Normal Cost 21.31% 17.03% 13.75%
b) Accrued Liability $3,637,142 $3,048,741 $2,583,182
c) Market Value of Assets $3,129,430 $3,129,430 $3,129,430
d) Unfunded Liability /(Surplus) [(b) - (c)] $507,712 ($80,689) ($546,248)
e) Funded Ratio 86.0% 102.6% 121.1%
Sensitivity to the Price Inflation Assumption
As of June 30, 2021 1% Lower
Inflation Rate
Current
Assumptions
1% Higher
Inflation Rate
Discount Rate 5.8% 6.8 % 7.8%
Inflation 1.3% 2.3 % 3.3%
Real Rate of Return 4.5% 4.5% 4.5%
a) Total Normal Cost 17.90% 17.03% 15.49%
b) Accrued Liability $3,182,241 $3,048,741 $2,783,551
c) Market Value of Assets $3,129,430 $3,129,430 $3,129,430
d) Unfunded Liability/(Surplus) [(b) - (c)] $52,811 ($80,689) ($345,879)
e) Funded Ratio 98.3% 102.6% 112.4%
Mortality Rate Sensitivity
The following table looks at the change in the June 30, 2021 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 2021. This type of analysis highlights the impact on the plan of
improving or worseni ng mortality over the long-term.
As of June 30, 2021 10% Lower
Mortality Rates
Current
Assumptions
10% Higher
Mortality Rates
a) Total Normal Cost 17.35% 17.03% 16.73%
b) Accrued Liability $3,104,472 $3,048,741 $2,997,217
c) Market Value of Assets $3,129,430 $3,129,430 $3,129,430
d) Unfunded Liability/(Surplus) [(b) - (c)] ($24,958) ($80,689) ($132,213)
e) Funded Ratio 100.8% 102.6% 104.4%
B-24
CalPERS Actuarial Valuation – June 30, 2021
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 varia bles 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, 2020 June 30, 2021
1. Retired Accrued Liability $838,033 $1,087,825
2. Total Accrued Liability 2,444,917 3,048,741
3. Ratio of Retiree AL to Total AL [(1) / (2)] 0.34 0.36
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 declines. A mature plan will often have a ratio near or below
one.
To calculate the support ratio for the rate plan, retirees and beneficiaries receiving a continuance are each
counted as one, even though they may have only worked a portion of their caree rs as an active member of this
rate plan. For this reason, the support ratio, while intuitive, may be less informative than the ratio of retiree
liability to total accrued liability above. For comparison, the support ratio for all CalPERS public agency pla ns is
0.82 and is calculated consistently with how it is for the individual rate plan. Note that to calculate the support
ratio for all public agency plans, a retiree with service from more than one CalPERS agency is counted as a
retiree more than once.
Support Ratio June 30, 2020 June 30, 2021
1. Number of Actives 14 11
2. Number of Retirees 4 6
3. Support Ratio [(1) / (2)] 3.50 1.83
B-25
CalPERS Actuarial Valuation – June 30, 2021
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 a ctuarial 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, investment return) are exactly realized each year, there will be differences on a
year-to -year basis. The year-to -year differences between actual experience and the assumptions are called
actuarial gains and losses and serve to lower or raise required employer contribution s 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
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 the
plan matures.
Liability Volatility Ratio
Also shown in the table belo w 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 changes in liability. For exam ple, 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, since the AVR, described above, will tend to move closer to the LVR as the funded ratio approaches
100%.
Contribution Volatility June 30, 2020 June 30, 2021
1. Market Value of Assets $2,192,472 $3,129,430
2. Payroll 1,561,936 1,408,439
3. Asset Volatility Ratio (AVR) [(1) / (2)]1.4 2.2
4. Accrued Liability $2,444,917 $3,048,741
5.Liability Volatility Ratio (LVR) [(4) / (2)]1.6 2.2
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 0.18 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
06/30/2021 0.36 1.83 2.2 2.2
B-26
CalPERS Actuarial Valuation – June 30, 2021
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, 2021 . The plan liability on a termination basis is calculated differently
compared to the plan’s ong oing funding liability. For the hypothetical termination liability calculation , both
compensation and service are frozen as of the valuation date and no future pay i ncreases 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 board for the
Terminated Agency Pool. The Terminated Agency Pool has limited funding sources since no future empl oyer
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 P ool 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 o f 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 seven months after.
Market
Value of
Assets (MVA)
Hypothetical
Termination
Liability1,2
at 1.00%
Funded
Ratio
Unfunded
Termination
Liability
at 1.00 %
Hypothetical
Termination
Liability1,2
at 2.25%
Funded
Ratio
Unfunded
Termination
Liability
at 2.25%
$3,129,430 $7,707,751 40.6% $4,578,321 $5,853,753 53.5% $2,724,323
1 The hypothetical liabilities calculated above include a 5% contingency load. The contingency load and o ther actuarial
assumptions can be found in Appendix A.
2 The discount rate 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 2.00% on June 30, 2021, the valuation date.
In order to terminate the plan, first contact our Pension Contract Services unit to initiate a Resolution of Intent
to Terminate. The completed Resolution will allow the plan actuary to provide a preliminary termination valuation
with a more up -to -date estimate of the plan liabilities. Before beginning this process, please consult with the
plan actuary.
B-27
CalPERS Actuarial Valuation – June 30, 2021
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 the plan’s member data upon which this valuation is based :
June 30, 2020 June 30, 2021
Active Members
Counts 14 11
Average Attained Age 42.47 41.94
Average Entry Age to Rate Plan 38.70 37.32
Average Years of Credited Service 3.78 4.64
Average Annual Covered Pay $111,567 $128,040
Annual Covered Payroll $1,561,936 $1,408,439
Present Value of Future Payroll $16,761,550 $18,266,274
Transferred Members 7 8
Separated Members 3 3
Retired Members and Beneficiaries
Counts* 4 6
Average Annual Benefits* $15,323 $12,546
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.
* Value s 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, 2021
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 the 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, 2021
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 EMPLOYEES’ RETIREMENT SYSTEM
Risk Pool Actuarial Valuation Information
Section 2 may be found on the CalPERS website
(www.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 2022
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes (CalPERS ID: 3846845523)
Annual Valuation Report as of June 30 , 2021
Dear Employer,
Attached to this letter, you will find the June 30, 2021 actuarial valuation report for the rate plan noted above . Provided
in this report is the determination of the minimum required employer contributions for fiscal year (FY)
2023-24. In addition, the report contains important information regarding the current financial status of the plan as
well as projections and risk measu res 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, 2021.
Section 2 can be found on the CalPERS website (www.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, 2021 .
Your June 30, 2021 actuarial valuation report contains important actuarial information about your pension plan at
CalPERS. The plan actuary whose signature is in the Actuarial Certification is available to discuss.
Actuarial valuations are based on assumptions regarding future plan experience including investment return and payroll
growth, eligibility for the types of benefits provide d, and longevity among retirees. The CalPERS Board of Administration
(board) adopts these assumptions after considering the advice of CalPERS actuarial and investment teams and other
professionals. Each actuarial valuation reflects all prior differences be tween actual and assumed experience and adjusts
the contribution requirements as needed. This valuation is based on an investment return assumption of 6.8%, which
was adopted by the board in November 2021 . Other assumptions used in this report are those re commended in the
CalPERS Experience Study and Review of Actuarial Assumptions report from November 2021.
Required Contribution
The table below shows the minimum required employer contributions and the Employee PEPRA Rate for FY 2023-24
along with estimates of the required contributions for FY 2024-25. Employee contributions other than cost sharing
(whether paid by the employer or the employee) are in addition to the results shown below. The required employer
contributions in this report do not reflect any cost sharing arrangement between the agency and the
employees.
Fiscal Year Employer Normal
Cost Rate
Employer Amortization of
Unfunded Accrued Liability
PEPRA Member
Rate
2023-24 7.68% $0 7.75%
Projected Results
2024-25 7.7% $0 TBD
C-1
J~_CalPERS
PEPRA Miscellaneous Plan of the City of Ranc ho Palos Verdes
(CalPERS ID: 3846845523)
Annual Valuation Report as o f June 30, 2021
Page 2
The actual investment return for FY 2021-22 was not known at the time this report was prepared. The projections
above assume the investment re turn for that year would be 6.8%. To the extent the actual investment return
for FY 2021-22 differs from 6.8%, the actual contribution requirements for FY 2024-25 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 FY 2028-29.
Changes from Previous Year’s Valuation
On July 12, 2021, CalPERS reported a preliminary 21.3% net return on investments for FY 2020-21. Since the return
exceeded the 7.00% discount rate sufficiently, the CalPERS Funding Risk Mitigation policy allows CalPERS to use a
portion of the investment ga in to offset the cost of reducing the expected volatility of future investment returns. Based
on the thresholds specified in the policy, the excess return of 14.3% prescribes a reduction in investment volatility that
corresponds to a reduction in the discount rate of 0.20%, from 7.00% to 6.80%.
On November 17, 2021, the board adopted new actuarial assumptions based on the recommendations in the November
202 1 CalPERS Experience Study and Review of Actuarial Assumptions . This study reviewed the retirement rates,
termination rates, mortality rates, rates of salary increases , and inflation assumption for public agencies. These new
assumptions are incorporated in this actuarial valuation and will impact the required contribution for FY 2023-24. In
addition, the board adopted a new strategic asset allocation as part of its Asset Liability Management process. The new
asset allocation along with the new capital market assumptions and economic assumptions support a discount rate of
6.80%. This includes a reduction in the price inflation assumption from 2.50% to 2.30%.
Besides the above noted changes, there may also be changes specific to the plan such as contract amendments and
funding changes.
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 the plan 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, 2021
for the
PEPRA Miscellaneous Plan
of the
City of Rancho Palos Verdes
(CalPERS ID: 3846845523)
Required Contributions
for Fiscal Year
July 1, 2023 - June 30, 2024
C-3
A
CalPERS
Table of Contents
Section 1 – Plan Specific Information
Section 2 – Risk Pool Actuarial Valuation I nformation
C-4
Section 1
CALIFORNIA PUBLIC EMPLOYEES’ 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 Contribution s 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 1 1
Allocation of Plan’s Share of Pool’s Experience/Assumption C hange 1 1
Development of Plan’s Share of Pool’s Market Value of Assets 1 1
Sche dule of Plan’s Amortization Bases 1 2
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, 2021
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
To the best of our knowledge, this report , comprising of Sections 1 and 2, is complete and accurate and contains
sufficient information to disclose, fully and fairly, the funded condition of the PEPRA Miscellaneous Plan of the
City of Rancho Palos Verdes and satisfies the actuarial valuation requirements of Government Code section 7504.
This valuation is based on the member and financial data as of June 30, 2021 provided by the various CalPERS
databases and the benefits under this plan with CalPERS as of the date this report was produced. Section 1 of
this report is based on the member and financial data for City of Rancho Palos Verdes , while Section 2 is based
on the corresponding information for all agencies participating in the Miscellaneous Risk Pool to which the plan
belongs.
As set forth in Section 2 of this report, the pool actuaries have certified that, in their opinion, the valuation of the
Miscellaneous Risk Pool 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 p ool as of the date of this valuation and as prescribed by the
CalPERS Board of Administration according to pro visions 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 inf ormation for the rate plan, it is my opinion as the plan actuary that the Unfunded Accrued Liability
amortization bases as of June 30, 2021 and employer contribution as of July 1, 2023 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 Contributions
• Additional Discretionary Employer Contributions
• Plan’s Funded Status
• Projected Employer Contributions
• Other Pooled Miscellaneous Risk Pool Rate Plans
• Cost
• Changes Since the Prior Y ear’s Valuation
• Subsequent Events
C-8
CALPERS ACTUARIAL VALUATION - June 30, 2021
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, 2021 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 contribution s for (FY) 2023-24.
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 a ctuary in order to:
• Set forth the assets and accrued liabilities of this plan as of June 30, 2021 ;
• Determine the minimum required employer contribution for this plan for the FY July 1, 2023 through
June 30, 2024; and
• Provide actuarial information as of June 30, 2021 to the CalPERS Board of Administration (board) 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 (www.calpers.ca.gov).
The measurements shown in this actuarial valuation may not be applicable for other purposes. The agency
should contact the plan 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 th is 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;
changes in plan provisions or applica ble law; and differences between the required contributions determined by
the valuation and the actual contributions made by the agency .
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 5.8% and 7.8 %.
• 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 2021.
• Plan maturity measures indicating how sensitive a plan may be to the risks noted above.
C-9
CALPERS ACTUARIAL VALUATION - June 30, 2021
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 4
Required Contributions
Fiscal Year
Required Employer Contributions 2023-24
Employer Normal Cost Rate 7.68%
Plus
Required Payment on Amortization Bases1 $0
Paid either as
1) Monthly Payment $0.00
Or
2) Annual Prepayment Option * $0
Required PEPRA Member Contribution Rate 7.75%
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 b e prepaid (which must be received in full no
later than July 31).
For additional detail regarding the determination of the required PEPRA member contribution rate see s ection
on PEPRA Member Contribution Rates.
Fiscal Year Fiscal Year
2022-23 2023-24
Development of Normal Cost as a Percentage of Payroll
Base Total Normal Cost for Formula 14.22% 15.43%
Surcharge for Class 1 Benefits2
None 0.00% 0.00%
Phase out of Normal Cost Difference 3 0.00% 0.00%
Plan’s Total Normal Cost 14.22% 15.43%
Plan's Employee Contribution Rate 6.75% 7.75%
Employer Normal Cost Rate 7.47% 7.68%
1 The required payment on amortization bases does not take into account any additional discretionary payment made after
April 29, 2022.
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.
C-10
CALPERS ACTUARIAL VALUATION - June 30, 2021
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 2023-24 FY is $0. CalPERS allows agencies 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. Agencies 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 FY 2023-24 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 perio ds, see the “Amortization
Schedule and Alternatives” section of the report.
Agencies considering making an ADP should contact CalPERS for additional information.
Minimum Required Employer Contribution for Fiscal Year 20 23-24
Estimated
Normal Cost
Minimum UAL
Payment
ADP Total UAL
Contribution
Estimated Total
Contribution
$253,291 $0 $0 $0 $253,291
Alternative Fiscal Year 2023-24 Employer Contributions for Greater UAL Reduction
Funding
Target
Estimated
Normal Cost
Minimum UAL
Payment
ADP1 Total UAL
Contribution
Estimated Total
Contribution
N/A N/A N/A N/A N/A N/A
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, 2023 as
determined in the June 30, 2021 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 numb er 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
I I I I I
I I I I I I
CALPERS ACTUARIAL VALUATION - June 30, 2021
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, 2020 June 30, 2021
1. Present Value of Projected Benefits (PVB) $5,769,168 $7,303,767
2. Entry Age Accrued Liability (AL) 1,720,001 2,391,157
3. Plan’s Market Value of Assets (MVA) 1,524,582 2,458,040
4. Unfunded Accrued Liability (UAL) [(2) - (3)] 195,419 (66,883)
5. Funded Ratio [(3 ) / (2)] 88.6% 102.8%
The UAL and funded ratio are assessments of the need for future employer contributions based on the 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. The
funded ratio, on the other hand, is a relative measure of funded status that allows f or comparison between
plans of different sizes. For measures of funded status that are appropriate 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, b enefits, or funding will occur during the projection period. In particular, the
investment return beginning with FY 2021-22 is assumed to be 6.80% per year, net of invest ment and
administrative expenses. Actual contribution rates during this projection period could be significantly higher or
lower than the projection shown below. Future contribution requirements may differ significantly from those
shown below. The actual l ong-term cost of the plan will depend on the actual benefits and expenses paid and
the actual investment experience of the fund.
Required
Contribution
Projected Future Employer Contributions
(Assumes 6.80% Return for Fiscal Year 2021-22 and Beyond )
Fiscal Year 2023-24 2024-25 2025-26 2026-27 2027-28 2028-29
Rate Plan 26567 Results
Normal Cost % 7.68% 7.7% 7.7% 7.7% 7.7% 7.7%
UAL Payment $0 $0 $0 $0 $0 $0
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 inve stment return scenarios, please see the “Future Investment
Return Scenarios” in the “Risk Analysis” section .
Our online pension plan projection tool, Pension Outlook, is available in the Employers section of the CalPERS
website. Pension Outlook can help plan and budget pension costs under various scenarios.
C-12
CALPERS ACTUARIAL VALUATION - June 30, 2021
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 f or 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 2.80 % per year for three years.
Fiscal Year Fiscal Year
2022-23 2023-24
Estimated Combined Employer Contributions for all Pooled Miscellaneous Rate Plans
Projected Payroll for the Contribution Year $6,591,713 $6,798,456
Estimated Employer Normal Cost $602,020 $684,854
Required Payment on Amortization Bases $1,141,678 $1,070,317
Estimated Total Employer Contributions $1,743,698 $1,755,171
Estimated Total Employer Contribution Rate (illustrative only) 26.45% 25.82%
C-13
CALPERS ACTUARIAL VALUATION - June 30, 2021
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 Plan Cost
Contributions to fund the 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 perce ntage of total
active payroll. Starting with FY 2016-17, the Am ortization 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 expre ssed 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 ave raged 6.9 % over the 20 years ending June 30, 2021 , yet individual fiscal year returns have
ranged from -23.6 % to +21.3 %. In addition, CalPERS reviews all actuarial assumptions by conducting in -depth
experience stud ies every four years, with the most recent experience study completed in 2021.
C-14
CALPERS ACTUARIAL VALUATION - June 30, 2021
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 th is valuation.
Actuarial Methods and Assumptions
On November 17, 20 21, the board adopted new actuarial assumptions based on the recommendations in the
202 1 CalPERS Experience Study and Review of Actuarial As sumptions. This study reviewed the retirement rates,
termination rates, mortality rates, rates of salary increases, and inflation assumption for Public Agencies. These
new assumptions are incorporated in this actuarial valuation and will impact the require d contribution for FY
2023-24. In addition, the b oard adopted a new asset portfolio as part of its Asset Liability Management process.
The new asset mix supports a 6.80% discount rate, which reflects a change in the price inflation assumption to
2.30%.
Subsequent Events
The contribution requirements determined in this actuarial valuation report are based on demographic and
financial information as of June 30, 2021 . Changes subsequent to that date are not reflected. Investment returns
below the assumed rate of return may increase future required contributions while investment returns above
the assumed rate of return may decrease future required contributions.
The projected employer contributions on Page 6 are calculated under the assumption that the disco unt rate
remains at 6.8% going forward and that the realized rate of return on assets for FY 2021-22 is 6.8 %.
This actuarial valuation report reflects statutory changes, regulatory changes and board actions through January
2022. 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 H istory
• Funding History
C-16
CALPERS ACTUARIAL VALUATION - June 30, 2021
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 $1,636,741
Transferred Members 656,065
Terminated Members 98,351
Members and Beneficiaries Receiving Payments 0
Total $2,391,157
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 $2,391,157
2. Projected UAL balance at 6/30/2021 195,820
3. Pool’s Accrued Liability1 20,794,529,023
4. Sum of Pool’s Individual Plan UAL Balances at 6/30/2021 1 4,597,734,264
5. Pool’s 2020/21 Investment (Gain)/Loss1 (2,338,185,055)
6. Pool’s 2020/21 Non-Investment (Gain)/Loss 1 (84,077,623)
7. Plan’s Share of Pool’s Investment (Gain)/Loss : [(1) - (2)] ÷ [(3) - (4)] × (5) (316,921)
8. Plan’s Share of Pool’s Non-Investment (Gain)/Loss: (1) ÷ (3) × (6 ) (9,668)
9. Plan’s New (Gain)/Loss as of 6/30/2021: (7) + (8 ) (326,589)
10. Increase in Pool’s Accrued Liability due to Change in Assumptions 1 60,407,898
11. Plan’s Share of Pool’s Change in Assumptions: (1) ÷ (3) × (10) 6,946
12. Increase in Pool’s Accrued Liability due to Funding Risk Mitigation 1 495,172,731
13. Plan’s Share of Pool’s Change due to Funding Risk Mitigation: (1) ÷ (3) × (12) 56,940
14. Offset due to Funding Risk Mitigation (101,408)
15. Plan’s Net Investment (Gain): (7) – (14) (215,513)
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
16. Plan’s UAL: (2) + (9) + (11) + (13) ($66,883)
17. Plan’s Share of Pool’s MVA: (1) - (16) $2,458,040
C-17
CALPERS ACTUARIAL VALUATION - June 30, 2021
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, 2021 .
• The required employer contributions determined by the valuation are for the fiscal year beginning two years after the valuation date: FY 2023-24.
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 provide pub lic agencies with
their required employer contribution well in advance of the start of the fiscal year.
The Unfunded Accrued Liabil ity (UAL) is used to determine the employer contribution and therefore must be rolled forward two years from the valuation da te to the first
day of the fiscal year for which the contribution is being determined. The UAL is rolled forward each year by subtr acting 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 valu ation 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
2023-24
Ramp
Shape
Escala-
tion
Rate
Amort.
Period
Balance
6/30/21
Expected
Payment
2021-22
Balance
6/30/22
Expected
Payment
2022-23
Balance
6/30/23
Minimum
Required
Payment
2023-24
Fresh Start 6/30/21 N/A (66,883) (32,597) (37,744) (31,925) (7,318) 0
Total (66,883) (32,597) (37,744) (31,925) (7,318) 0
The (gain)/loss bases are the plan’s allocated share of the risk pool’s (gain)/loss for the fiscal year as disclosed in “Allo cation 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.
C-18
------------------------------------------········································---------········································-------------------------
CALPERS ACTUARIAL VALUATION - June 30, 2021
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 (s) 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 amo rtization 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) alternat ive “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 contact the 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 , s uch 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 whe n 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 n appropriate period.
The Current Amortization Schedule on th e 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 b ases 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, 2021
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 N/A Year Amortization N/A Year Amortization
Date Balance Payment Balance Payment Balance Payment
6/30/2023 N/A N/A N/A N/A N/A N/A
6/30/2024
6/30/2025
6/30/2026
6/30/2027
6/30/2028
6/30/2029
6/30/2030
6/30/2031
6/30/2032
6/30/2033
6/30/2034
6/30/2035
6/30/2036
6/30/2037
6/30/2038
6/30/2039
6/30/2040
6/30/2041
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
6/30/2052
Total N/A N/A N/A
Interest Paid N/A N/A N/A
Estimated Savings N/A N/A
C-20
CALPERS ACTUARIAL VALUATION - June 30, 2021
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, 201 9 or after June 30, 2021 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 0
2021 - 22 7.59% 13,868
2022 - 23 7.47% 15,841
2023 - 24 7.68% 0
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
06/30/2021 2,391,157 2,458,040 (66,883) 102.8% 3,035,848
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, 2021
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Page 17
Future Investment Return Scenarios
Analysis using the investment return scenarios from the Asset Liability Management process completed in
2021 was performed to determine the effects of various future investment returns on required employer
contributions. The projections below reflect the impact of the CalPERS Funding Risk Mitigation policy. The
projections also assume that all other actuarial assumptions will be realized and t hat no further changes in
assumptions, contributions, benefits, or funding will occur.
The first table shows projected contribution requirements if the fund were to earn either 3.0% or 10.8%
annually. These alternate investment returns were chosen because 90% of long -term average returns are
expected to fall between them over the 20 -year period ending June 30, 2041.
Required contributions outside of this range are also possible. In particular, whereas it is unlikely that
investment returns will average less than 3.0% or greater than 10.8% over a 20 -year period, the likelihood
of a single investment return less than 3.0% or greater than 10.8% in any given year is much greater. The
following analysis illustrates the effect of an extreme, single year investment return.
The portfolio has an expected volatility (or standard deviation) of 12.0% per year. Accordingly, in a ny given
year there is a 16% probability that the annual return will be -5.2% or less and a 2.5% probability that the
annual return will be -17.2% or less. These returns represent one and two standard deviations below the
expected return of 6.8%.
The following table shows the effect of a one or two standard deviation investment loss in FY 2021-22 on the
FY 2024-25 contribution requirements. Note that a single -year investment gain or loss decreases or increases
the required UAL contribution amount incrementally for each of the next five years, not just one, due to the
5 -year ramp in the amortization policy. However, the contribution requirements beyond the first year are also
impacted by investment returns beyond the first year. Historically, significant downturns i n the market are
often followed by higher than average returns. Such investment gains would offset the impact of these single
year negative returns in years beyond FY 2024-25.
Assumed Annual Return for
Fiscal Year 2021-22
Required
Employer
Contributions
Projected
Employer
Contributions
2023-24 2024-25
(1 7.2)% (2 standard deviation loss)
Normal Cost Rate 7.68% 7.7%
UAL Contribution $0 $14,000
(5 .2)% (1 standard deviation loss)
Normal Cost Rate 7.68% 7.7%
UAL Contribution $0 $7,100
• Without investment gains (returns higher than 6.8%) in year FY 2022-23 or later, projected
contributions rates would continue to rise over the next four years due to the continued phase -in of
the impact of the illustrated investment loss in FY 2021-22.
• The Pension Outlook Tool can be used to model projected contributions for these scenarios beyond
FY 2024-25 as well as to model other investment return scenarios.
Assumed Annual Return
FY 2021-22
through 2040-41
Projected Employer Contributions
2024-25 2025-26 2026-27 2027-28 2028-29
3.0% (5 th percentile)
Normal Cost Rate 7.7% 7.7% 7.7% 7.7% 7.7%
UAL Contribution $2,100 $6,600 $14,000 $23,000 $35,000
10.8% (95th percentile)
Normal Cost Rate 7.9% 8.1% 8.3% 8.5% 8.7%
UAL Contribution $0 $0 $0 $0 $0
C-23
CalPERS Actuarial Valuation – June 30, 2021
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 4.5% and 2.3%, 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, 2021 assuming alternate discount rates by changing the two components
independently. Results are shown using the current discount rate of 6.8% as well as alternate disco unt rates of
5.8% and 7.8%. The rates of 5.8% and 7.8% were selected since they illustrate the impact of a 1.0% increase
or decrease to the 6.8% assumption.
Sensitivity to the Real Rate of Return Assumption
As of June 30, 2021 1% Lower
Real Return Rate
Current
Assumptions
1% Higher
Real Return Rate
Discount Rate 5.8% 6.8 % 7.8%
Inflation 2.3% 2.3% 2.3%
Real Rate of Return 3.5% 4.5% 5.5%
a) Total Normal Cost 19.32% 15.43% 12.47%
b) Accrued Liability $2,939,412 $2,391,157 $1,970,401
c) Market Value of Assets $2,458,040 $2,458,040 $2,458,040
d) Unfunded Liability /(Surplus) [(b) - (c)] $481,372 ($66,883) ($487,639)
e) Funded Ratio 83.6% 102.8% 124.7%
Sensitivity to the Price Inflation Assumption
As of June 30, 2021 1% Lower
Inflation Rate
Current
Assumptions
1% Higher
Inflation Rate
Discount Rate 5.8% 6.8 % 7.8%
Inflation 1.3% 2.3 % 3.3%
Real Rate of Return 4.5% 4.5% 4.5%
a) Total Normal Cost 16.27% 15.43% 14.03%
b) Accrued Liability $2,512,410 $2,391,157 $2,176,725
c) Market Value of Assets $2,458,040 $2,458,040 $2,458,040
d) Unfunded Liability/(Surplus) [(b) - (c)] $54,370 ($66,883) ($281,315)
e) Funded Ratio 97.8% 102.8% 112.9%
Mortality Rate Sensitivity
The following table looks at the change in the June 30, 2021 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 2021. This type of analysis highlights the impact on the plan of
improving or worseni ng mortality over the long-term.
As of June 30, 2021 10% Lower
Mortality Rates
Current
Assumptions
10% Higher
Mortality Rates
a) Total Normal Cost 15.71% 15.43% 15.18%
b) Accrued Liability $2,437,861 $2,391,157 $2,348,090
c) Market Value of Assets $2,458,040 $2,458,040 $2,458,040
d) Unfunded Liability/(Surplus) [(b) - (c)] ($20,179) ($66,883) ($109,950)
e) Funded Ratio 100.8% 102.8% 104.7%
C-24
CalPERS Actuarial Valuation – June 30, 2021
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 varia bles 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, 2020 June 30, 2021
1. Retired Accrued Liability $0 $0
2. Total Accrued Liability 1,720,001 2,391,157
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 declines. A mature plan will often have a ratio near or below
one.
To calculate the support ratio for the rate plan, retirees and beneficiaries receiving a continuance are each
counted as one, even though they may have only worked a portion of their caree rs as an active member of this
rate plan. For this reason, the support ratio, while intuitive, may be less informative than the ratio of retiree
liability to total accrued liability above. For comparison, the support ratio for all CalPERS public agency pla ns is
0.82 and is calculated consistently with how it is for the individual rate plan. Note that to calculate the support
ratio for all public agency plans, a retiree with service from more than one CalPERS agency is counted as a
retiree more than once.
Support Ratio June 30, 2020 June 30, 2021
1. Number of Actives 57 57
2. Number of Retirees 0 0
3. Support Ratio [(1) / (2)] N/A N/A
C-25
CalPERS Actuarial Valuation – June 30, 2021
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 a ctuarial 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, investment return) are exactly realized each year, there will be differences on a
year-to -year basis. The year-to -year differences between actual experience and the assumptions are called
actuarial gains and losses and serve to lower or raise required employer contribution s 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
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 the
plan matures.
Liability Volatility Ratio
Also shown in the table belo w 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 changes in liability. For exam ple, 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, since the AVR, described above, will tend to move closer to the LVR as the funded ratio approaches
100%.
Contribution Volatility June 30, 2020 June 30, 2021
1. Market Value of Assets $1,524,582 $2,458,040
2. Payroll 2,764,928 3,035,848
3. Asset Volatility Ratio (AVR) [(1) / (2)] 0.6 0.8
4. Accrued Liability $1,720,001 $2,391,157
5. Liability Volatility Ratio (LVR) [(4) / (2)] 0.6 0.8
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
06/30/2021
0.00
N/A 0.8
0.8
C-26
CalPERS Actuarial Valuation – June 30, 2021
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, 2021 . The plan liability on a termination basis is calculated differently
compared to the plan’s ong oing funding liability. For the hypothetical termination liability calculation , both
compensation and service are frozen as of the valuation date and no future pay i ncreases 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 board for the
Terminated Agency Pool. The Terminated Agency Pool has limited funding sources since no future empl oyer
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 P ool 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 o f 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 seven months after.
Market
Value of
Assets (MVA)
Hypothetical
Termination
Liability1,2
at 1.00%
Funded
Ratio
Unfunded
Termination
Liability
at 1.00 %
Hypothetical
Termination
Liability1,2
at 2.25%
Funded
Ratio
Unfunded
Termination
Liability
at 2.25%
$2,458,040 $6,763,340 36.3% $4,305,300 $4,891,217 50.3% $2,433,177
1 The hypothetical liabilities calculated above include a 5% contingency load. The contingency load and o ther actuarial
assumptions can be found in Appendix A.
2 The discount rate 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 2.00% on June 30, 2021, the valuation date.
In order to terminate the plan, first contact our Pension Contract Services unit to initiate a Resolution of Intent
to Terminate. The completed Resolution will allow the plan actuary to provide a preliminary termination valuation
with a more up -to -date estimate of the plan liabilities. Before beginning this process, please consult with the
plan actuary.
C-27
CalPERS Actuarial Valuation – June 30, 2021
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 the plan’s member data upon which this valuation is based :
June 30, 2020 June 30, 2021
Active Members
Counts 57 57
Average Attained Age 40.08 40.56
Average Entry Age to Rate Plan 37.80 37.77
Average Years of Credited Service 1.95 2.37
Average Annual Covered Pay $48,508 $53,260
Annual Covered Payroll $2,764,928 $3,035,848
Present Value of Future Payroll $28,556,373 $32,552,770
Transferred Members 16 23
Separated Members 20 27
Retired Members and Beneficiaries
Counts* 0 0
Average Annual Benefits* $0 $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.
* Value s include community property settlements .
List of Class 1 Benefit Provisions
This plan has the additional Class 1 Benefit Provisions:
• None
C-28
CALPERS ACTUARIAL VALUATION - June 30, 2021
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 the 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%
C-29
CALPERS ACTUARIAL VALUATION - June 30, 2021
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, 2023, based on 50% of
the total normal cost rate as of the June 30, 2021 valuation.
Basis for Current Rate Rates Effective July 1, 2023
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% 15.43% 1.695% Yes 7.75%
C-30
CALPERS ACTUARIAL VALUATION - June 30, 2021
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 EMPLOYEES’ RETIREMENT SYSTEM
Risk Pool Actuarial Valuation Information
Section 2 may be found on the CalPERS website
(www.calpers.ca.gov) in the Forms and
Publications section
C-31