CC SR 20241217 H - CalPERS 2023 Valuation Reports
CITY COUNCIL MEETING DATE: 12/03/2024
AGENDA REPORT AGENDA HEADING: Consent Calendar
AGENDA TITLE:
Consideration and possible action to receive the annual valuations for City pension plans
from the California Public Employees Retirement System (CalPERS).
RECOMMENDED COUNCIL ACTION:
1) Receive and file the actuarial valuations for City pension plans from the CalPERS
as of June 30, 2023.
FISCAL IMPACT: N/A.
Amount Budgeted: N/A
Additional Appropriation: N/A
Account Number(s): N/A
ORIGINATED BY: Robert Moya, Deputy Director of Finance RM
REVIEWED BY: Vina Ramos, Director of Finance VR
APPROVED BY: Ara Mihranian, AICP, City Manager
ATTACHED SUPPORTING DOCUMENTS:
A. Actuarial Valuation as of June 30, 2023 – Tier 1 (page A-1)
B. Actuarial Valuation as of June 30, 2023 – Tier 2 (page B-1)
C. Actuarial Valuation as of June 30, 2023 – Tier 3 (page C-1)
BACKGROUND
Each year, CalPERS prepares Actuarial Valuation Reports (AVR) to determine the funded
status and employer contribution requirements for City pension plans. The City’s three
plans, administered by CalPERS, include the Miscellaneous Plan (Tier 1), Miscellaneous
Second Tier Plan (Tier 2), and Public Employees’ Pension Reform Act (PEPRA)
Miscellaneous Plan (Tier 3). Results from the latest valuations as of June 30, 2023 are
presented below in accordance with the City’s Pension Plan Guidelines and for review by
the Finance Advisory Committee (FAC) as an item in the FY 2024-25 Work Plan.
The City typically receives the valuation reports in August of each year, approximately
one year after the reportable period. This timeline allows CalPERS actuaries to certify
that the reports are complete, accurate, and contain sufficient information to fully disclose
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the financial condition of each plan. As such, the purpose of this report is to highlight
actual results and analysis from the 2023 AVR with respect to the City Council’s goal of
efficiency and transparency.
DISCUSSION:
The latest valuations determine the funded status for each pension plan as of June 30,
2023, and provide the minimum required employer contributions for FY 2025-26. This
two-year gap between the valuation date and contribution fiscal year is necessary to
ensure that the financial data is accurately reported and gives agencies sufficient time to
budget accordingly. CalPERS also includes projected employer contributions within each
report to aid in future planning, along with historical data to provide additional context.
Nevertheless, the information contained in this report is from the 2023 AVR and all
projections are subject to change based on actual investment experience in future years.
Changes in Actuarial Methods and Assumptions
There are no significant changes to the actuarial methods or assumptions for the 2023
AVR. In general, actuarial valuations are based on assumptions regarding future
experience including investment return and payroll growth, eligibility for benefits, and
longevity among retirees. Each AVR captures differences between actual and assumed
experience and adjusts the contribution requirements as needed. The latest iterations are
based on an investment return assumption of 6.8%, which was adopted by the CalPERS
Board of Administration in November 2021. CalPERS’ next review of actuarial
assumptions will be examined in the November 2025 experience study.
Required Contributions
As noted, the 2023 valuations set the minimum required contributions for FY 2025 -26.
Contributions to fund the pension plans are comprised of two components:
• Normal Cost, expressed as a percentage of total active payroll; and
• Amortization of the Unfunded Accrued Liability (UAL), expressed as a dollar
amount.
More specifically, a plan’s Normal Cost Rate represents the total expected cost of
projected benefits allocated annually based on years of service for active members. The
UAL is determined by calculating the difference between a plan’s Accrued Liability (AL)
and Market Value of Assets (MVA) at the end of each valuation period. If a plan’s AL is
greater than its MVA, then an unfunded liability is measurable, and the amount must be
repaid in accordance with the CalPERS amortization policy. Table 1 highlights the details
of each cost component by type and tier.
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Table 1. Minimum Required Employer Contributions FY 2025-26
Benefit
Plan
Normal Cost
Rate
Estimated
Normal Cost
Minimum UAL
Payment
Total Estimated
Contribution
Tier 1 14.18% $193,270 $1,448,658 $1,641,928
Tier 2 10.19% $173,541 $30,952 $204,493
Tier 3 7.96% $357,249 $31,007 $388,256
Total $724,060 $1,510,617 $2,234,677
In total, the estimated normal cost of $0.7 million and minimum UAL payment of $1.5
million add up to a required contribution of approximately $2.2 million in FY 2025-26. This
reflects an increase of $0.2 million, or 12.2%, over the previous year. The rising cost is
mostly attributed to a growing UAL balance resulting from CalPERS’ 2022 and 2023
investment returns falling short of the 6.8% discount rate . CalPERS’ investment returns
for these two periods were -7.5% and 6.1% respectively.
The City traditionally chooses to prepay the UAL portion of the employer contribution in
full to help minimize costs. Exercising this option would yield approximately $49,000, or
3.2%, in savings. To visualize the trend in required contributions, Chart 1 below illustrates
the year-over-year changes since FY 2019-20.
Chart 1. Minimum Required Employer Contributions Since FY 2019-20
Change in CalPERS Valuation Projections: 2022 vs 2023
As stated, the valuations reflect prior differences between actual and assumed
experience. Adjusted for this change, the UAL payment in FY 2025 -26 rose by just over
$0.1 million, or 7%, above the anticipated amount in the 2022 AVR. This type of analysis
emphasizes the year-over-year impact on pension plans due to differences in the
CalPERS assumption rate of 6.8% and actual investment return. In this case, the actual
costs were higher than projected based on the actual net return of 6.1%. Table 2 lays out
the variances between the projected and actual AVR results by tier.
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Table 2. 2022 AVR Projected vs 2023 AVR Actual UAL Payment
Benefit Plan
FY 2025-26
(Projected)
FY 2025-26
(Actual) Net Change
Tier 1 $1,362,000 $1,448,658 $86,658
Tier 2 $24,000 $30,952 $6,952
Tier 3 $24,000 $31,007 $7,007
Total $1,410,000 $1,510,617 $100,617
Projected Future City Contributions
The projections below are determined by CalPERS and assume a 6.8% investment return
in future years. It’s also assumed that no further changes to assumptions, contributions,
benefits, or funding will occur during the projection period. To the extent the investment
return for FY 2023-24 differs from 6.8%, the actual contribution requirements for FY 2026-
27 and beyond will differ from those shown in Table 3.
Table 3. Projected UAL Payments (Assumes 6.8% Return)
Benefit
Plan
FY 2025-26
Required
FY 2026-27
Projected
FY 2027-28
Projected
FY 2028-29
Projected
FY 2029-30
Projected
FY 2030-31
Projected
Tier 1 $1,448,658 $1,546,000 $1,626,000 $1,797,000 $1,839,000 $1,876,000
Tier 2 $30,952 $41,000 $51,000 $61,000 $62,000 $62,000
Tier 3 $31,007 $41,000 $52,000 $62,000 $63,000 $63,000
Total $1,510,617 $1,628,000 $1,729,000 $1,920,000 $1,964,000 $2,001,000
Inc. % 7.8% 6.2% 11% 2.3% 1.9%
Based on CalPERS assumptions, the 2023 valuations project total UAL payments to
increase by an average annual rate of 5.8% through FY 2030-31. This amounts to an
increase of about $0.5 million from the beginning to end of this period. Regardless, and
as the data has shown, actual long -term costs depend on the actual benefits and
expenses paid and the future investment experience of the fund.
Funded Status as of June 30, 2022
A plan’s funded status is based on the MVA relative to the value of projected benefits for
active members, otherwise known as the AL. The AL is considered a plan’s funding target
as of the valuation date. A funded ratio of 100% (UAL of $0) implies that the funding of
the plan is on target and that future contributions equal to the normal cost of the active
plan members. A funded ratio of less than 100% (positive UAL) implies that in addition to
normal costs, payments toward the UAL will be required. Table 4 breaks down each plan’s
funded status following the investment loss and as reported in the 2022 AVR.
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Table 4. Funded Status as of June 30, 2022
in millions Tier 1 Tier 2 Tier 3 Totals
Accrued Liability (AL) $49.8 $3.5 $3.0 $56.3
Market Value of Assets (MVA) $34.0 $3.0 $2.6 $39.7
Unfunded Accrued Liability [(AL) - (MVA)] $15.8 $0.4 $0.4 $16.7
Funded Ratio [(MVA) / (AL)] 68.3% 87.3% 86.3% 70.4%
Through June 30, 2022, the City’s total AL of $56.3 million and total MVA of $39.7 million
resulted in a total UAL of $16.7 million. All plans considered, the City’s overall funded
ratio fell to 70.4%, down 11% from the 2021 AVR. Most notably, the UAL now present in
Tier 2 and Tier 3 adds to the anticipated UAL reported and project ed in Staff’s analysis.
In brief, City Staff anticipated a $15.1 million UAL as of June 30, 2022. This projection
was for Tier 1 only given that Tiers 2 and 3 did not have an existing UAL at that time. The
variance between Staff’s projection and actual UAL for Tier 1 was approxim ately $0.7
million, or 4%. According to CalPERS, the $0.7 million is non -investment related and
associated with retroactive cost-of-living-adjustments for retirees to account for inflation.
Funding History and Analysis
Funding History and Analysis
Chart 2 below illustrates the City’s actuarial AL, MVA, UAL, and funded ratio using 10
years of historical data provided by CalPERS. This data is presented in aggregate to
demonstrate the overall values and trends for City pension plans.
Chart 2. Funding History – Valuation Ending 6/30/2014 to 6/30/2023
Over a 10-year period, the City’s AL and MVA have grown by an average annual rate of
7% and 6%, respectively. This analysis indicates that plan liabilities have continued to
exceed and outpace plan assets over the long run. The year-over-year volatility in
investment returns can affect these outcomes, however, the long-term trends suggest
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that the gap between AL and MVA is widening . Consequently, the combined funded
status of 69.8% fell below 70% for the first time in the plan’s history.
Maintaining a long-term perspective is critical to the evaluation of City pension plans. That
said, the most significant indicator of the widening gap and change in funding status is
the rising UAL balance. The City’s total UAL has notably increased by an average annual
rate of 9.5% over 10 years. Additionally, the City’s average funded status fell slightly to
74.3% from an average of 74.7% reported in last year’s AVR. Favorable investment
returns in future years can help offset these trends, but additional steps may be necessary
to mitigate long-term costs associated with the UAL.
Breakdown of Accrued Liability
For additional insight, Table 5 on the following page provides a breakdown of the City’s
AL distributed across members as reported in the 2023 AVR. In summary, Tier 1
members account for $51.4 million, or 87%, of the total AL. Tier 2 and Tier 3 members
represent a combined total of $7.8 million, or 13%, of the remaining portion of City’s AL.
Table 5 also calls attention to Tier 1 member/beneficiary payments of $3 2.5 million which
is 55% of total AL. This amount rose by $1.1 million, or 3%, from the 2022 AVR and
indicates that the cost of payments to retirees has increased.
Table 5. Breakdown of Accrued Liability as of June 30, 2023
in millions Tier 1 Tier 2 Tier 3 Totals
Active Members $11.4 $1.9 $2.4 $15.7
Transferred Members $4.9 $0.7 $1.1 $6.7
Terminated Members $2.6 $0.2 $0.2 $3.0
Member / Beneficiary Payments $32.5 $1.1 $0.1 $33.7
Total $51.4 $3.9 $3.9 $59.2
UAL Amortization Analysis
This section focuses on the long-term implications of a growing UAL. As stated, the City’s
total UAL balance is $17.9 million and has increased by an average annual rate of 9.5 %
since June 2014. Chart 3 below depicts this growing trend in parallel to CalPERS
annualized investment returns. Despite year-over-year investment volatility, the long-term
growth of the City’s UAL is most apparent in review of the historic data.
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Chart 3. Annual UAL and Investment Return History
Schedule of Amortization Bases
The UAL is made up of several gain and loss bases that collectively determine the total
balance at the end of each valuation period. Individual bases represent the City’s
allocated share of the risk pool’s experience and assumption change for each period and
are added to each plan’s amortization schedule. For example, an investment gain occurs
when CalPERS experiences an investment return above the 6.8% discount rate. An
investment return below the discount rate, like in the 2023 AVR, results in a loss.
Differences in non-investment experience also result in either a gain or loss base. This
occurs when demographic assumptions, such as retirement or mortality rates, differ from
actuarial assumptions. For example, the cost of benefits increases for retirees living
longer than assumed, and in turn, raises contribution requirements. This scenario is
viewed as a non-investment loss. Ultimately, each gain or loss base is added and
amortized accordingly regardless of the plan specific reason.
Table 6 summarizes the ending UAL balances and expected payments based on the
schedule of amortization bases in the 2023 AVR. The ending UAL balance is rolled
forward each year by subtracting the expected payment and adjusting for interest.
Table 6. Summary of UAL Amortization Schedules
BENEFIT
PLAN
BALANCE
6/30/2023
EXPECTED
PAYMENT
2023-24
BALANCE
6/30/24
EXPECTED
PAYMENT
2024-25
BALANCE
6/30/25
REQUIRED
PAYMENT
2025-26
TIER 1 $16,773,436 $1,070,317 $16,807,920 $1,266,876 $16,641,619 $1,448,658
TIER 2 $553,760 $0 $591,416 $14,644 $616,498 $30,952
TIER 3 $561,002 $0 $599,150 $14,336 $625,076 $31,007
TOTAL $17,888,198 $1,070,317 $17,998,486 $1,295,856 $17,883,193 $1,510,617
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The total UAL balance of $17.9 million as of June 30, 2023 is referenced earlier in this
report. However, because the 2023 AVR determines the required employer contributions
for FY 2025-26, the amortization schedules are forward-looking and begin with the $17.9
million UAL as of June 30, 2025. All future payments reflect CalPERS’ investment return
assumption of 6.8%, and thus, are subject to change based on actual experience.
Analysis of UAL Amortization Schedules
The projected UAL balances as of June 30, 2025 are listed in Table 7 below. The default
amortization schedules provided in the 202 3 AVR use a 20-year funding horizon.
Repaying the UAL under the default schedules and assumptions is projected to cost the
City $17.9 million in total principal and $11.7 million in total interest, for a total estimated
cost of $29.6 million. This exceeds last year's projected total by $1.2 million, or 4%, and
is projected to reach a 90% funded status in FY 2033 -34, three years beyond the goal of
FY 2030-31 stated in the pension guidelines.
Table 7. 2023 Default Amortization Schedules
in millions Tier 1 Tier 2 Tier 3 Totals
Principal Paid $16.6 $0.6 $0.6 $17.9
Interest Paid $10.7 $0.5 $0.5 $11.7
Total Paid $27.3 $1.1 $1.1 $29.6
Furthermore, the 2023 default schedules are based on the City making the minimum
contributions required in accordance with CalPERS amortization policy. Alternatively,
there are other methods available to help proactively manage the UAL and align with the
City’s Pension Plan Guidelines. The primary benefits of these alternatives include
stabilizing future contributions and reducing interest costs. CalPERS includes alternative
schedules in the AVR to help illustrate the potential savings from these methods.
CalPERS Alternative Amortization Schedules
The first alternative method provided by CalPERS is to employ a Fresh Start. A Fresh
Start is an adjustment to the amortization schedule that permanently reduces the funding
horizon and increases annual payments at a fixed amount. This method uses a level
dollar amortization strategy that enables agencies to budget consistently for a specified
number of years. Accordingly, the totals and estimated savings from alternate examples
provided in the 2023 valuations are aggregated and shown in Table 8 below.
Table 8. Alternate Amortization Schedules (Fresh Start)
in millions 2023 Default Alternative 1 Alternative 2
Total Paid $29.6 $28.4 $24.7
Interest Paid $11.7 $10.5 $6.8
Estimated Savings $0 $1.1 $4.9
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Initiating a Fresh Start as prepared by CalPERS would require UAL contributions to
increase to an average of roughly $1.7 million for Alternative 1 or $2.2 million for
Alternative 2. Due to the higher average payments, Alternatives 1 and 2 are designed to
shorten the funding horizon to 15 or 10 years to achieve an estimated savings of $1.1
million or $4.9 million, respectively. However, any new unfunded liabilities that to emerge
in future years would be amortized as a separate gain/loss base and must be factored
into consideration if implementing a Fresh Start alternative.
A second alternative prepared by CalPERS considers ADPs, which is a method added
as a revision to the City’s Pension Plan Guidelines in August 2023. Similarly, these
optional payments serve to reduce the UAL and future required contributions and can
result in significant long-term savings. ADPs can also be utilized to mirror a Fresh Start
without permanently altering the current schedules. Table 9 aggregates data for all plans
to compare total contributions for the select ADP options provided in the 202 3 AVR.
Table 9. Alternative Fiscal Year 2025-26 Employer Contributions (in millions)
Funding
Horizon
Estimated
Normal Cost
Minimum UAL
Payment
ADP
Amount
Total UAL
Contribution
Estimated Total
Contribution
Default $0.7 $1.5 $0 $1.5 $2.2
20 years $0.7 $1.5 $0.1 $1.6 $2.3
15 years $0.7 $1.5 $0.4 $1.9 $2.6
10 years $0.7 $1.5 $0.9 $2.4 $3.2
CalPERS does not provide the estimated savings for the ADP options in Table 9, though
results from the 15- and 10-year options can be assumed using the Fresh Start example.
This information was also included to indicate that it may benefit the City to consider ADPs
under current circumstances. This is because the minimum required contributions on the
default schedules for Tiers 2 and 3 are less than the interest on the UAL.
Using the given assumptions, Tier 2 and Tier 3 contributions are not expected to exceed
interest until FY 2027-28. This is referred to as negative amortization and occurs because
investment gains and losses are amortized using 5 -year ramp methodology. CalPERS
uses this method to incrementally phase-in the impacts associated with significant
changes in the UAL. Projected payments and interest for both tiers are shown in Table
10. For additional reference, the Tier 1 payment in FY 2025 -26 exceeds interest, but
nearly 75% of it will cover interest rather than the principal balance.
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Table 10. Negative Amortization
Tier 2 Tier 3
Fiscal
Year Payment Interest ($)
Interest/
Payment
Ratio
Payment Interest ($)
Interest/
Payment
Ratio
2025-26 $30,952 $40,886 132% $31,007 $41,468 134%
2026-27 $41,135 $41,222 100% $41,483 $41,830 101%
2027-28 $51,316 $40,886 80% $51,958 $41,502 80%
Contribution History and Analysis
To provide additional perspective, Chart 4 uses historic AVR data to illustrate required
UAL contributions from FY 2016-17 to FY 2025-26. Collectively, the City’s total UAL
payments during this period have increased at an average annual rate of 15.5%. This
exceeds the previous year’s average growth rate of 15.3%. Chart 4 also includes a linear
projection using the 10 years of data. This upward trend aligns with the projected UAL
payments reported by CalPERS in Table 3 of this report, further validating the expected
trajectory of future payments through FY 2030-31.
Chart 4. UAL Contribution History and Trend Analysis
UAL payments are expected to continue until FY 2044-45 based on the 2023 AVR
schedules. Nonetheless, all projections and future payments reported are subject to
change based on actual experience in the years to come.
CalPERS FY 2023-24 Preliminary Investment Return
The preliminary investment return for the fiscal year ending June 30, 2024, was
announced on July 15, 2024, as 9.3% (9.2% net of the 0.1% administrative fee). This
represents a 2.4% experience gain over the CalPERS discount rate assumption of 6.8%.
In most cases, an investment experience gain will provide some relief to the peak years
of the UAL payment schedule (FY 2028-29 through FY 2035-36) but may not significantly
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change the trajectory of the UAL payment schedule leading up to FY 2028 -29. Most
amortization schedules will still be impacted by the steep ascent associated with the 2022
investment loss of -7.5% (i.e., a 14.4% experience loss). The “Non-Investment” Gain/loss
for 2024 is currently unknown, but largely depends on the extent of COLAs and/or other
payroll factors that exceed CalPERS’ assumed payroll growth assumption of 2.8%.
When using the preliminary net return of 9.3%, the overall estimated funded status of the
Public Employees’ Retirement Fund (PERF) stands at 75%. To that end, the updated
preliminary total fund annualized returns are as follows:
Table 11. CalPERS Investment Returns through June 30, 2024 1 Year 5 Year 10 Year 20 Year 30 Year
Annualized Returns 9.3% 6.6% 6.2% 6.7% 7.7%
ADDITIONAL INFORMATION:
Table 12 summarizes the plan’s member data upon which this valuation is based.
Compared to the prior year, Tier 1 active members decreased from 20 to 19, while retirees
have increased from 109 to 110. Tier 2 active members decreased by one while total
retirees remain unchanged. Active members in Tier 3 increased was also unchanged.
Table 12. Employee Tier Distribution Tier 1 Tier 2 Tier 3 Total by Status
Active Members 19 12 59 90
Retirees 110 6 2 118
Total by Tier 129 18 61 208
Pension Plan Guidelines
In accordance with the 2020-21 City Council Goals under “Government Efficiency and
Transparency,” the purpose of the pension guidelines is to proactively manage ongoing
contributions to the City’s pension plans and UAL.
The two primary goals established by the pension guidelines are:
1. To stabilize annual contributions and mitigate long -term impacts from the City’s
UAL.
2. To achieve and maintain a 90% funding level for City pension plans over the next
seven to ten years ending in FY 2030-31.
The guidelines also established the Employee Pension Plan Service Fund (EPSF). To
address the rising UAL, the City may set aside funds in the EPSF to help relieve the
General Fund of contributions exceeding $900,000. The City may consider contributing
at least 10%, but no more than 25%, of the prior year’s unallocated General Fund balance
following the year-end close. To date, the EPSF has an estimated fund balance
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approximately $1.1 million, net of the proposed transfer of $0.4 million in FY 2024-25 and
required UAL payment.
Finance Advisory Committee
The 2023 valuations were presented to the FAC at the meeting on November 14, 2024.
Based on the results, discussions focused on strategies for addressing the City’s UAL.
Consideration was given to accelerating repayment, aligning supplemental payments with
existing policies, and evaluating long-term financial impacts. While no use of reserves is
planned at this time, further analysis will continue through the FAC ad hoc subcommittee,
with recommendations expected to be revisited during the FY 2025-26 budget process
and brought to the City Council for consideration.
CONCLUSION:
The 2023 AVR determines the funded status for each pension plan as of June 30, 2023,
and provide the minimum required employer contributions for FY 2025 -26. As a result of
CalPERS 6.1% investment return, the City’s total estimated required contribution in FY
2025-26 is $2.2 million, an increase of $0.2 million, or 12.2%, from the previous year.
Additional data indicates that the City’s total AL of $59.2 million and total MVA of $41.3
million resulted in a total UAL of $17.9 million. Overall, the City’s funded ratio has fallen
to 69.8%, down 1% from the prior year.
Since 2014, the City’s UAL has increased by an average rate of 9.5% per year. By making
the minimum required payments, the UAL is currently projected to cost $1 7.9 million in
total principal and $11.7 million in total interest, for a total estimated cost of $2 9.6 million
by FY 2044-45. Based on current assumptions, City pension plans are expected to reach
a 90% funded status in FY 2033-34, three years beyond the stated goal. Nevertheless,
valuation results are reported annually to maintain transparency and provide an
opportunity to formulate solutions for the City Council’s future consideration. This task is
currently being undertaken by the FAC ad hoc subcommittee formed since August 2024
and will continue its work until the next budget cycle of FY 2025-26.
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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 2023
Miscellaneous Plan of the City of Rancho Palos Verdes (CalPERS ID: 3846845523)
Annual Valuation Report as of June 30, 2022
Dear Employer,
Attached to this letter is the June 30, 2022 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) 2024-25. In
addition, the report contains important information regarding the current financial status of the plan as well as
projections and risk measures to aid in planning for the future.
Because this plan is in a risk pool, the following valuation report has been separated into two sections:
• Section 1 contains specific information for the plan including the development of the current and projected
employer contributions, and
• Section 2 contains the Risk Pool Actuarial Valuation appropriate to the plan as of June 30, 2022.
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, 2022.
Actuarial valuations are based on assumptions regarding future plan experience including investment return and payroll
growth, eligibility for the types of benefits provided, and longevity among retirees. The CalPERS Board of Administration
(board) adopts these assumptions after considering the advice of CalPERS actuarial and investment teams and other
professionals. Each actuarial valuation reflects all prior differences between actual and assumed experie nce 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 recommended in
the CalPERS Experie nce Study and Review of Actuarial Assumptions report from November 2021.
Required Contributions
The table below shows the minimum required employer contributions for FY 2024-25 along with estimates of the
required contributions for FY 2025-26. Employe e 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 emp loyees.
Fiscal Year Employer Normal
Cost Rate
Employer Amortization of
Unfunded Accrued Liability
2024-25 14.13% $1,266,876
Projected Results
2025-26 14.1% $1,362,000
A-1
Miscellaneous Plan of the City of Rancho Palos Verdes
(CalPERS ID: 3846845523)
Annual Valuation Report as of June 30, 2022
Page 2
The actual investment return for FY 2022-23 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 2022-
23 differs from 6.8%, the actual contribution requirements for FY 2025-26 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 2029-30.
Changes from Previous Year’s Valuations
There are no significant changes in actuarial assumptions or policies in the 2022 actuarial valuation. T here may be
changes specific to the plan such as contract amendments and funding changes.
Further descriptions of general changes are included in “Highlights and Executive Summ ary” and in Appendix A of the
Section 2 report in “Actuarial Methods and Assumptions .” The effects of any changes on the required contributions are
included in “Reconciliation of Required Employer Contributions ,” also in the Section 2 report.
Questions
A CalPERS actuary is available to answer questions about this report. Other questions may be directed to the Customer
Contact Center at (888)-CalPERS or (888-225-7377).
Sincerely,
SCOTT TERANDO, ASA, EA, MAAA, FCA, CFA
Chief Actuary, CalPERS
RANDALL DZIUBEK, ASA, MAAA
Deputy Chief Actuary, Valuation Services , CalPERS
A-2
Actuarial Valuation
as of June 30, 2022
for the
Miscellaneous Plan
of the
City of Rancho Palos Verdes
(CalPERS ID : 3846845523)
Required Contributions
for Fiscal Year
July 1, 2024 - June 30, 2025
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Table of Contents
Section 1 – Plan Specific Information
Section 2 – Risk Pool Actuarial Valuation I nformation
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Section 1
CALIFORNIA PUBLIC EM PLOYEES’ RETIREMENT SYSTEM
Plan Specific Information
for the
Miscellaneous Plan
of the
City of Rancho Palos Verdes
(CalPERS ID : 3846845523)
(Rate Plan ID: 1107)
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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
Funded Status – Funding Policy Basis 6
Projected Employer Contributions 7
Other Pooled Miscellaneous Risk Pool Rate Plans 8
Cost 9
Changes Since the Prior Year’s Valuation 10
Subsequent Events 10
Assets and Liabilities
Breakdown of Entry Age Accrued Liability 12
Allocation of Plan’s Share of Pool’s Experience/Assumption Change 12
Development of Plan’s Share of Pool’s Market Value of Assets 12
Schedule of Amortization Bases 13
Amortization Schedule and Alternatives 15
Employer Contribution History 17
Funding History 17
Risk Analysis
Future Investment Return Scenarios 19
Discount Rate Sensitivity 20
Mortality Rate Sensitivity 20
Maturity Measures 21
Maturity Measures History 22
Funded Status – Termination Basis 23
Participant Data 24
List of Class 1 Benefit Provisions 24
Plan’s Major Benefit Options 25
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CALPERS ACTUARIAL VALUATION - June 30, 2022
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, compris ed 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, 2022 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 s et forth in Section 2 of this report, the pool ac tuaries have certified that, in their opinion, the valuation of the
Miscellaneous Risk Pool has been performed in accordance with generally accepted actuarial princip les , in
accordance with standards of practice prescribed by the Actuarial Standards Board, and that the assumptions
and methods are internally consistent and reasonable for the risk pool as of the date of this valuation and as
prescribed by the CalPERS Boa rd of Administration according to provisions set forth in the California Public
Employees’ Retirement Law.
Having relied upon the information set forth in Section 2 of this report and based on the census and benefit
provision information for the rate plan, it is my opinion as the plan actuary that the Unfunded Accrued Liability
amortization bases as of June 30, 2022 and employer contribution as of July 1, 2024 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.
IAN OSUGI, ASA , MAAA
Senior Actuary, CalPERS
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Highlights and Executive Summary
• Introduction
• Purpose of Section 1
• Required Contributions
• Additional Discretionary Employer Contributions
• Funded S tatus – Funding Policy Basis
• Projected Employer Contributions
• Other Pooled Miscellaneous Risk Pool Rate Plans
• Cost
• Changes Since the Prior Year’s Valuation
• Subsequent Events
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CALPERS ACTUARIAL VALUATION - June 30, 2022
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, 2022 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 minimum required contributions for fiscal year (FY) 2024-25.
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 Actuarial Office using data as of June 30, 2022. The purpose of the valuation is to:
• Set forth the assets and accrued liabilities of this rate plan as of June 30, 2022;
• Determine the minimum required employer contribution s for this rate plan for FY July 1, 2024 through
June 30, 2025;
• Determine the required member contribution rate for FY July 1, 2024 through June 30, 2025 for
employees subject to the California Public Employees' Pension Reform Act of 2013 (PEPRA); and
• Provide actuarial information as of June 30, 2022 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 valu ation 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 portio n of this report for any reason that is not explicitly
described above.
Future actuarial measurements may differ significantly from the current measurements presented in this report
due to such factors as the following: plan experience differing from that anticipated by the economic or
demographic assumptions; changes in economic or demographic assumptions; changes in actuarial policies;
changes in plan provisions or applicable 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 guidance of Actuarial Standard of Practice
No. 51 and recommended by the California Actuarial Ad visory 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 20 21.
• Plan maturity measures indicating how sensitive a plan may be to the risks noted above.
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CALPERS ACTUARIAL VALUATION - June 30, 2022
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 2024-25
Employer Normal Cost Rate 14.13%
Plus
Required Payment on Amortization Bases 1 $1,266,876
Paid either as
1) Monthly Payment $105,573.00
Or
2) Annual Prepayment Option* $1,225,881
The total minimum required employer contribution is the sum of the Plan’s Employer Normal Cost Rate
(expressed as a percentage of payroll and paid as payroll is reported) plus the Employer Unfunded Accrued
Liability (UAL) Contribution Amount (billed monthly (1) or prepaid annually (2) in dollars).
* Only the UAL portion of the employer contribution can be prepaid (which must be received in full no later
than July 31).
Fiscal Year Fiscal Year
2023-24 2024-25
Development of Normal Cost as a Percentage of Payroll
Base Total Normal Cost for Formula 21.30% 21.37%
Surcharge for Class 1 Benefits 2
a) FAC 1 0.72% 0.72%
Phase out of Normal Cost Difference 3 0.00% 0.00%
Plan’s Total Normal Cost 22.02% 22.09%
Offset Due to Employee Contributions 7.96% 7.96%
Employer Normal Cost Rate 14.06% 14.13%
1 The required payment on amortization bases does not take into account any additional discretionary payment made after
April 28, 2023.
2 Section 2 of this report contains a list of Class 1 benefits and corresponding surcharges.
3 When a rate plan joins the pool, the difference in normal cost between the pool and the rate plan is phased out over a five-
year period in accordance with the CalPERS contribution allocation policy.
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CALPERS ACTUARIAL VALUATION - June 30, 2022
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
FY 2024-25 is $1,266,876 . 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 2024-25 does not
require an ADP be made in any future year, nor does it change the remaining amortization period of any portion
of unfunded liability. For information on permanent changes to amortization periods, see the “Amortization
Schedule and Alternatives” section of the report.
Agencies considering making an ADP should contact CalPERS for additional information.
Minimum Required Employer Contribution for Fiscal Year 20 24-25
Estimated
Normal Cost
Minimum UAL
Payment
ADP Total UAL
Contribution
Estimated Total
Contribution
$203,933 $1,266,876 $0 $1,266,876 $1,470,809
Alternative Fiscal Year 2024-25 Employer Contributions for Greater UAL Reduction
Funding
Horizon
Estimated
Normal Cost
Minimum UAL
Payment
ADP 1 Total UAL
Contribution
Estimated Total
Contribution
20 years $203,933 $1,266,876 $146,679 $1,413,555 $1,617,488
15 years $203,933 $1,266,876 $382,15 9 $1,649,035 $1,852,968
10 years $203,933 $1,266,876 $878,829 $2,145,705 $2,349,638
5 years $203,933 $1,266,876 $2,423,065 $3,689,941 $3,893,874
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 UAL as of June 30, 2024 as determined in the June
30, 2022 actuarial valuation. New unfunded liabilities can emerge in future years due to assumption or method
changes, changes in plan provisions , and actuarial experience different than assumed. Making an ADP
illustrated above for the indicated number of years will not result in a plan that is exactly 100 % funded in the
indicated number of years. Valuation results will vary from one year to the next and can diverge significantly
from projections over a period of several years .
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CALPERS ACTUARIAL VALUATION - June 30, 2022
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 6
Funded Status – Funding Policy Basis
The table below provides information on th e current funded status of the plan under the funding policy. The
funded status for this purpose is based on the market value of assets relative to the funding target produced by
the entry age actuarial cost method and actuarial assumptions adopted by the board. The actuarial cost method
allocates the total expected cost of a member’s projected benefit (Present Value of Benefits ) to individual years
of service (the Normal Cost). The value of the projected benefit that is not allocated to future service is r eferred
to as the Accrued Liability and is the plan’s funding target on the valuation date. The Unfunded Accrued
Liability (UAL) equals the funding target minus the assets. The UAL is an absolute measure of funded status
and can be viewed as employer debt. The funded ratio equals the assets divided by the funding target. The
funded ratio is a relative measure of the funded status and allows for comparisons between plans of different
sizes.
A funded ratio of 100% (UAL of $0) implies that the funding of the plan is on target and that future contributions
equal to the normal cost of the active plan members will be sufficient to fully fund all retirement benefits if future
experience matches the actuarial assumptions. A funded ratio of less than 100% (positive UAL) implies that in
addition to normal costs, payments toward the UAL will be required. Plans with a funded ratio greater than 100%
have a negative UAL (or surplus) but are requ ired under current law to continue contributing the normal cost in
most cases, preserving the surplus for future contingencies.
Calculations for the funding target reflect the expected long -term investment return of 6.8%. If it were known on
the valuation date that future investment returns will average something greater/less than the expected return,
calculated normal costs and accrued liabilities provided in this report would be less/greater than the results
shown. Therefore, for example, if actual avera ge future returns are less than the expected return, calculated
normal costs and UAL contributions will not be sufficient to fully fund all retirement benefits. Under this scenario,
required future normal cost contributions will need to increase from those provided in this report, and the plan
will develop unfunded liabilities that will also add to required future contributions. For illustrative purposes, funded
statuses based on a 1% lower and higher average future investment return (discount rate) are as follows:
The “Risk Analysis” section of the report provides additional information regarding the sensitivity of valuation
results to the expected investment return and other factors. Also provided in that section are measures of funded
status that are appropriate for assessing the sufficiency of plan assets to cover estimated termination liabilities.
June 30, 2021 June 30, 2022
1. Present Value of Benefits $49,885,862 $52,074,421
2. Entry Age Accrued Liability 47,593,129 49,824,152
3. Market Value of Assets (MVA) 37,561,570 34,030,518
4. Unfunded Accrued Liability (UAL) [(2) – (3)] $10,031,559 $15,793,634
5. Funded Ratio [(3) / (2)] 78.9% 68.3%
1% Lower
Average Return
Current
Assumption
1% Higher
Average Return
Discount Rate 5.8% 6.8% 7.8%
1. Entry Age Accrued Liability $56,279,103 $49,824,152 $44,507,417
2. Market Value of Assets (MVA) 34,030,518 34,030,518 34,030,518
3. Unfunded Accrued Liability (UAL) [(1) – (2)] $22,248,585 $15,793,634 $10,476,899
4. Funded Ratio [(2) / (1)] 60.5% 68.3% 76.5%
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CALPERS ACTUARIAL VALUATION - June 30, 2022
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 7
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 2022-23 is assumed to be 6.80% per year, net of invest ment and
administrative expenses. Future contribution requirements may differ significantly from those shown below. The
actual long -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 2022-23 and Beyond)
Fiscal Year 2024-25 2025-26 2026-27 2027-28 2028-29 2029-30
Rate Plan 1107 Results
Normal Cost % 14.13% 14.1% 14.1% 14.1% 14.1% 14.1%
UAL Payment $1,266,876 $1,362,000 $1,454,000 $1,528,000 $1,694,000 $1,730,000
For ongoing plans, investment gains and losses are 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 i nvestment loss, the relatively
small amortization payments during the ramp up period could result in contributions that are less than interest
on the UAL (i.e. negative amortization) while the contribution impact of the increase in the UAL is phased in.
For projected contributions under alternate investment return scenarios, please see the “Future Investment
Return Scenarios” in the “Risk Analysis” section . Our online pension plan 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 .
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CALPERS ACTUARIAL VALUATION - June 30, 2022
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 8
Other Pooled Miscellaneous Risk Pool Rate Plans
All of the results presented in this Section 1 report, except those shown on this page , correspond to rate plan
1107. In many cases, employers have additional rate plans within the same risk pool. For cost analysis and
budgeting it is useful to consider contributions for these rate plans as a whole rather than individually. The
estimated contribution amounts and rates for a ll of the employer’s rate plans in the Miscellaneous Risk Pool are
shown below and assume that the total employer payroll within the Miscellaneous Risk Pool will grow according
to the overall payroll growth assumption of 2.80% per year for three years. In a refinement since the prior year’s
report, Classic members who are projected to terminate employment are assumed to be replaced by PEPRA
members.
Fiscal Year Fiscal Year
2023-24 2024-25
Estimated Combined Employer Contributions for all Pooled Miscellaneous Rate Plans
Projected Payroll for the Contribution Year $6,798,456 $7,246,562
Estimated Employer Normal Cost $684,854 $695,745
Required Payment on Amortization Bases $1,070,317 $1,295,856
Estimated Total Employer Contributions $1,755,171 $1,991,601
Estimated Total Employer Contribution Rate (illustrative only) 25.82% 27.48%
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CALPERS ACTUARIAL VALUATION - June 30, 2022
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 9
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 2015-16, the Amortization of UAL component was expressed as a percentage of total
active payroll. Starting with FY 2015-16, the Amortization of UAL component was expressed as a dollar amount
and invoiced on a monthly basis. There is an option to prepay this amount during July of each fiscal year.
The Normal Cost component is expressed as a percentage of active payroll with e mployer 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 CalPE RS’ best estimate of future experience of the plan and are long term in nature.
We recognize that all assumptions will not be realized in any given year. For example, the investment earnings
at CalPERS have averaged 6.9% over the 20 years ending June 30, 2022 , 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 studies every four years, with the most recent exp erience study completed in 2021.
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CALPERS ACTUARIAL VALUATION - June 30, 2022
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 10
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 amendments effective before the date of the report. Please refer to the
“Plan’s Major Benefit Options” in this report and Appendix B of the Section 2 Report for a summary of the plan
provisions used in this valuation.
In 2022, SB 1168 increased the standard retiree lump sum death benefit from $500 to $2,000 for any death
occurring on or after July 1, 2023. For pooled plans this is a Class 3 benefit and there is no normal cost surcharge.
The impact on the unfunded liability i s included in the pool’s (gain)/loss.
Actuarial Methods and Assumptions
There are no significant changes to the actuarial methods or assumptions for the June 30, 2022 actuarial
valuation.
Subsequent Events
This actuarial valuation report reflects fund investment return through June 30, 2022 and statutory/regulatory
changes and board actions through January 2023.
During the time period between the valuation date and the publication of this report, inflation has been
significantly higher than the expected inflation of 2.3% per annum. Since inflation influences cost -of-living
increases for retirees and beneficiaries and active member pay increases, higher inflation is likely to put at least
some upward pressure on contribution requirements and downward pressure on the funded status in the June
30, 2023 valuation. The actual impact of higher inflation on future valuation results will depend on, among other
factors , how long higher inflation persists. At this tim e, we continue to believe the long -term inflation assumption
of 2.3% is appropriate.
To the best of our knowledge, there have been no other subsequent events that could materially affect current
or future certifications rendered in this report.
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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 Amortization Bases
• Amortization Schedule and Alternatives
• Employer Contribution History
• Funding History
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CALPERS ACTUARIAL VALUATION - June 30, 2022
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 12
Breakdown of Entry Age Accrued Liability
Active Members $11,123,085
Transferred Members 4,648,001
Separated Members 2,677,069
Members and Beneficiaries Receiving Payments 31,375,997
Total $49,824,152
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 mi nimizing 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 $49,824,152
2. Projected UAL Balance at 6/30/2022 9,738,322
3. Other UAL Adjustments (Golden Handshake, Prior Service Purchase, etc.) 0
4. Adjusted UAL Balance at 6/30/2022 for Asset Share 9,738,322
5. Pool’s Accrued Liability1 22,021,735,002
6. Sum of Pool’s Individual Plan UAL Balances at 6/30/20221 2,453,954,297
7. Pool’s 2021-22 Investment (Gain)/Loss1 2,614,071,182
8. Pool’s 2021-22 Non-Investment (Gain)/Loss1 309,490,972
9. Plan’s Share of Pool’s Investment (Gain)/Loss: [(1) - (4)] ÷ [(5) - (6)] × (7) 5,355,089
10. Plan’s Share of Pool’s Non -Investment (Gain)/Loss: (1) ÷ (5) × (8) 700,223
11. Plan’s New (Gain)/Loss as of 6/30/2022: (9) + (10) 6,055,31 2
12. Increase in Pool’s Accrued Liability due to Change in Assumptions1 0
13. Plan’s Share of Pool’s Change in Assumptions: (1) ÷ (5) × (12) 0
14. Increase in Pool’s Accrued Liabi lity due to Funding Risk Mitigation 1 0
15. Plan’s Share of Pool’s Change due to Funding Risk Mitigation: (1) ÷ (5) × (14) 0
16. Offset due to Funding Risk Mitigation 0
17. Plan’s Investment (Gain)/Loss: (9) – (16) 5,355,089
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
18. Plan’s UAL: (2) + (3) + (11) + (13) + (15) $15,793,634
19. Plan’s Share of Pool’s MVA: (1) - (18) $34,030,518
A-18
CALPERS ACTUARIAL VALUATION - June 30, 2022
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 13
Schedule of Amortization Bases
Below is the schedule of the plan’s amortization bases. Note that there is a two -year lag between the valuation date and the start of the contribution year.
• The assets, liabilities, and funded status of the plan are measured as of the valuation date: June 30, 2022 .
• The required employer contributions determined by the valuation are for the fiscal year beginning two years after the valuati on date: FY 2024-25.
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 public agencies with their
required employer contribution well in advance of the start of the fiscal year.
The Unfunded Accrued Liability (UAL) is used to determine the employer contribution and therefore must be rolled forward two years from the valuation date to the first day
of the fiscal year for which the contribution is being de termined. The UAL is rolled forward each year by subtracting the expected payment on the UAL for the fiscal year and
adjusting for interest. The expected payment for the first fiscal year is determined by the actuarial valuation two years ago and the contribution for the second year is from
the actuarial valuation one year ago. Additional discretionary payments are reflected in the Expected Payments column in the fiscal year they were made by the agency.
Reason for Base
Date
Est.
Ramp
Level
2024-25
Ramp
Shape
Escala-
tion
Rate
Amort.
Period
Balance
6/30/22
Expected
Payment
2022-23
Balance
6/30/23
Expected
Payment
2023-24
Balance
6/30/24
Minimum
Required
Payment
2024-25
Investment (Gain)/Loss 6/30/13 100% Up/Down 2.80% 21 4,072,428 292,900 4,046,658 293,716 4,018,293 301,940
Non-Investment (Gain)/Loss 6/30/13 100% Up/Down 2.80% 21 (37,562) (2,702) (37,324) (2,709) (37,062) (2,785)
Share of Pre-2013 Pool UAL 6/30/13 No Ramp 2.80% 12 3,837,573 364,841 3,721,486 368,220 3,594,013 378,530
Assumption Change 6/30/14 100% Up/Down 2.80% 12 1,759,853 188,605 1,684,611 190,695 1,602,093 196,034
Investment (Gain)/Loss 6/30/14 100% Up/Down 2.80% 22 (2,990,525) (208,887) (2,978,008) (209,290) (2,964,224) (215,150)
Non-Investment (Gain)/Loss 6/30/14 100% Up/Down 2.80% 22 3,416 239 3,401 239 3,385 246
Investment (Gain)/Loss 6/30/15 100% Up/Down 2.80% 23 1,928,597 131,084 1,924,274 131,226 1,919,510 134,900
Non-Investment (Gain)/Loss 6/30/15 100% Up/Down 2.80% 23 (163,029) (11,081) (162,663) (11,093) (162,260) (11,403)
Assumption Change 6/30/16 100% Up/Down 2.80% 14 721,186 68,710 699,219 69,341 675,106 71,283
Investment (Gain)/Loss 6/30/16 100% Up/Down 2.80% 24 2,391,013 158,414 2,389,890 158,457 2,388,647 162,894
Non-Investment (Gain)/Loss 6/30/16 100% Up/Down 2.80% 24 (307,756) (20,390) (307,612) (20,396) (307,452) (20,967)
Assumption Change 6/30/17 100% Up/Down 2.80% 15 860,071 63,408 853,027 79,918 828,442 82,156
Investment (Gain)/Loss 6/30/17 100% Up/Down 2.80% 25 (1,283,832) (67,278) (1,301,605) (84,056) (1,303,247) (86,409)
Non-Investment (Gain)/Loss 6/30/17 100% Up/Down 2.80% 25 (68,357) (3,582) (69,303) (4,475) (69,391) (4,601)
Assumption Change 6/30/18 100% Up/Down 2.80% 16 1,421,039 77,516 1,437,561 104,095 1,427,739 133,762
Investment (Gain)/Loss 6/30/18 100% Up/Down 2.80% 26 (400,985) (15,788) (411,936) (21,018) (418,227) (27,009)
Method Change 6/30/18 100% Up/Down 2.80% 16 395,988 21,601 400,592 29,007 397,855 37,274
Non-Investment (Gain)/Loss 6/30/18 100% Up/Down 2.80% 26 205,225 8,080 210,830 10,757 214,050 13,823
Investment (Gain)/Loss 6/30/19 80% Up Only 0.00% 17 188,309 7,877 192,974 11,603 194,105 15,470
Non-Investment (Gain)/Loss 6/30/19 No Ramp 0.00% 17 192,287 18,021 186,739 17,705 181,140 17,705
A-19
CALPERS ACTUARIAL VALUATION - June 30, 2022
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 14
Schedule of Amortization Bases (continued)
Reason for Base
Date
Est.
Ramp
Level
2024-25
Ramp
Shape
Escala-
tion
Rate
Amort.
Period
Balance
6/30/22
Expected
Payment
2022-23
Balance
6/30/23
Expected
Payment
2023-24
Balance
6/30/24
Minimum
Required
Payment
2024-25
Investment (Gain)/Loss 6/30/20 60% Up Only 0.00% 18 873,432 19,132 913,054 37,533 936,354 56,300
Non-Investment (Gain)/Loss 6/30/20 No Ramp 0.00% 18 164,725 15,060 160,363 14,789 155,984 14,789
Assumption Change 6/30/21 No Ramp 0.00% 19 161,890 (14,155) 187,527 16,863 182,852 16,863
Net Investment (Gain) 6/30/21 40% Up Only 0.00% 19 (3,967,232) 0 (4,237,004) (91,073) (4,431,002) (182,146)
Non-Investment (Gain)/Loss 6/30/21 No Ramp 0.00% 19 (205,516) 0 (219,491) (19,737) (214,019) (19,737)
Risk Mitigation 6/30/21 No Ramp 0.00% 0 1,224,840 (14,381) 1,322,991 1,367,233 0 0
Risk Mitigation Offset 6/30/21 No Ramp 0.00% 0 (1,238,756) 0 (1,322,991) (1,367,233) 0 0
Investment (Gain)/Loss 6/30/22 20% Up Only 0.00% 20 5,355,089 0 5,719,235 0 6,108,143 131,293
Non-Investment (Gain)/Loss 6/30/22 No Ramp 0.00% 20 700,223 0 747,838 0 798,691 71,821
Total 15,793,634 1,077,244 15,754,333 1,070,317 15,719,518 1,266,876
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-20
CALPERS ACTUARIAL VALUATION - June 30, 2022
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
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 amortization schedule and illustrate the potential savings of accelerating unfunded
liability payments.
Shown on the following page are future year amortization payments based on 1) the current amortization schedule reflecting
the individual bases and remaining periods shown on the previous page, and 2) alternative “fresh start” amortization schedule s
using two sample periods that would both result in interest savings relative to the current amortization schedule. To initiate a
fresh s tart, 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 liabili ty. The
combination of positive and negative bases within an amortization schedule can result in unusual or problematic circumstances
in future years, such as:
• When a negative payment would be required on a positive unfunded actuarial liability; or
• When the payment would completely amortize the total unfunded liability in a very short time period, and results in a
large change in the employer contribution requirement.
In any year when one of the above scenarios occurs, the actuary will consider corrective action such as replacing the existing
unfunded liability bases with a single “fresh start” base and amortizing it over a n appropriate period.
The Current Amortization Schedule on the following page may appear to show that, based on the current amortizat ion bases,
one of the above scenarios will occur at some point in the future. It is impossible to know today whether such a scenario wil l
in fact arise since there will be additional bases added to the amortization schedule in each future year. Should such a scenario
arise in any future year, the actuary will take appropriate action based on guidelines in the CalPERS amortization policy.
A-21
CALPERS ACTUARIAL VALUATION - June 30, 2022
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 16
Amortization Schedule and Alternatives (continued)
Alternate Schedules
Current Amortization
Schedule 15 Year Amortization 10 Year Amortization
Date Balance Payment Balance Payment Balance Payment
6/30/2024 15,719,518 1,266,876 15,719,518 1,649,035 15,719,518 2,145,705
6/30/2025 15,479,205 1,361,773 15,084,265 1,649,035 14,570,986 2,145,705
6/30/2026 15,124,478 1,453,707 14,405,815 1,649,035 13,344,354 2,145,705
6/30/2027 14,650,623 1,527,792 13,681,230 1,649,035 12,034,311 2,145,705
6/30/2028 14,067,986 1,693,898 12,907,374 1,649,035 10,635,185 2,145,705
6/30/2029 13,274,068 1,729,690 12,080,895 1,649,035 9,140,918 2,145,705
6/30/2030 12,389,171 1,766,478 11,198,216 1,649,035 7,545,041 2,145,705
6/30/2031 11,406,083 1,804,299 10,255,515 1,649,035 5,840,645 2,145,705
6/30/2032 10,317,062 1,794,280 9,248,710 1,649,035 4,020,350 2,145,706
6/30/2033 9,164,340 1,782,613 8,173,442 1,649,035 2,076,274 2,145,706
6/30/2034 7,945,288 1,750,414 7,025,056 1,649,036
6/30/2035 6,676,620 1,693,088 5,798,579 1,649,036
6/30/2036 5,380,924 1,056,602 4,488,701 1,649,035
6/30/2037 4,654,889 981,622 3,089,753 1,649,036
6/30/2038 3,956,974 901,944 1,595,675 1,649,036
6/30/2039 3,293,943 838,929
6/30/2040 2,650,948 797,570
6/30/2041 2,006,971 675,541
6/30/2042 1,445,315 547,537
6/30/2043 977,749 943,326
6/30/2044 69,364 71,684
6/30/2045
6/30/2046
6/30/2047
6/30/2048
6/30/2049
Total 26,439,663 24,735,529 21,457,052
Interest Paid 10,720,145 9,016,011 5,737,534
Estimated Savings 1,704,134 4,982,611
A-22
CALPERS ACTUARIAL VALUATION - June 30, 2022
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 17
Employer Contribution History
The table below provides a recent history of the required and discretionary employer contributions for the plan.
The required amounts are based on the actuarial valuation from two years prior without subsequent adjustments,
if any. Additional discretionary payments before July 1, 2019 or after April 2 8, 2023 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 0
2022 - 23 12.21% 1,105,780 0
2023 - 24 14.06% 1,070,317
2024 - 25 14.13% 1,266,876
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 $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
06/30/2022 49,824,152 34,030,518 15,793,634 68.3% 1,820,115
A-23
Risk Analysis
• Future Investment Return Scenarios
• Discount Rate Sensitivity
• Mortality Rate Sensitivity
• Maturity Measures
• Maturity Measures History
• Funded Status – Termination Basis
A-24
CalPERS Actuarial Valuation – June 30, 2022
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool
Page 19
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 i mpact of the CalPERS Funding Risk Mitigation policy. The
projections also assume that all other actuarial assumptions will be realized and that 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, 2042.
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 any 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 2022-23 on the
FY 2025-26 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 in 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 2025-26.
Assumed Annual Return for
Fiscal Year 2022-23
Required
Employer
Contributions
Projected
Employer
Contributions
2024-25 2025-26
(17.2)% (2 standard deviation loss)
Normal Cost Rate 14.13% 14.1%
UAL Contribution $1,266,876 $1,561,000
(5.2)% (1 standard deviation loss)
Normal Cost Rate 14.13% 14.1%
UAL Contribution $1,266,876 $1,461,000
• Without investment gains (returns higher than 6.8%) in FY 2023-24 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 2022-23.
• The Pension Outlook Tool can be used to model projected contributions for these scenarios beyond
FY 2025-26 as well as to model other investment return scenarios .
Assumed Annual Return
FY 2022-23
through 2041-42
Projected Employer Contributions
2025-26 2026-27 2027-28 2028-29 2029-30
3.0% (5 th percentile)
Normal Cost Rate 14.1% 14.1% 14.1% 14.1% 14.1%
UAL Contribution $1,393,000 $1,549,000 $1,720,000 $2,017,000 $2,218,000
10.8% (95 th percentile)
Normal Cost Rate 14.4% 14.7% 15.0% 15.3% 15.6%
UAL Contribution $1,331,000 $1,363,000 $1,345,000 $1,381,000 $1,247,000
A-25
CalPERS Actuarial Valuation – June 30, 2022
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool
Page 20
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 wil l 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, 2022 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 discount rates of
5.8% and 7.8%. The rates of 5.8% and 7.8% were selected since they illustrate t he 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, 2022 1% Lower
Real Return Rate
Current
Assumptions
1% Higher
Real Return Rate
Discount Rate 5.8% 6.8% 7.8%
Price Inflation 2.3% 2.3% 2.3%
Real Rate of Return 3.5% 4.5% 5.5%
a) Total Normal Cost 27.88% 22.09% 17.70%
b) Accrued Liability $56,279,103 $49,824,152 $44,507,417
c) Market Value of Asse ts $34,030,518 $34,030,518 $34,030,518
d) Unfunded Liability/(Surplus) [(b) - (c)] $22,248,585 $15,793,634 $10,476,899
e) Funded Ratio 60.5% 68.3% 76.5%
Sensitivity to the Price Inflation Assumption
As of June 30, 2022 1% Lower
Price Inflation
Current
Assumptions
1% Higher
Price Inflation
Discount Rate 5.8% 6.8% 7.8%
Price Inflation 1.3% 2.3% 3.3%
Real Rate of Return 4.5% 4.5% 4.5%
a) Total Normal Cost 23.21% 22.09% 20.10%
b) Accrued Liability $51,590,864 $49,824,152 $45,860,659
c) Market Value of Assets $34,030,518 $34,030,518 $34,030,518
d) Unfunded Liability/(Surplus) [(b) - (c)] $17,560,346 $15,793,634 $11,830,141
e) Funded Ratio 66.0% 68.3% 74.2%
Mortality Rate Sensitivity
The following table looks at the change in the June 30, 2022 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 a
change in the mortality assumption .
As of June 30, 2022 10% Lower
Mortality Rates
Current
Assumptions
10% Higher
Mortality Rates
a) Total Normal Cost 22.45% 22.09% 21.76%
b) Accrued Liability $50,811,274 $49,824,152 $48,915,871
c) Market Value of Assets $34,030,518 $34,030,518 $34,030,518
d) Unfunded Liability/(Surplus) [(b) - (c)] $16,780,756 $15,793,634 $14,885,353
e) Funded Ratio 67.0% 68.3% 69.6%
A-26
CalPERS Actuarial Valuation – June 30, 2022
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool
Page 21
Maturity Measures
As pension plans mature they become more sensitive to risks . Understanding plan maturity and how it affects
the ability of a pension plan sponsor to tolerate risk is important in understanding how the pension plan is
impacted by investment return volatility, other economic variables , and changes in longevity or other
demographic assumptions.
Since it is the employer that bears the risk, it is appropriate to perform this analysis on a pension plan level
considering all rate plans. The following measures are for one rate pla n 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 pl an 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, 2021 June 30, 2022
1. Retired Accrued Liability $29,475,062 $31,375,997
2. Total Accrued Liability 47,593,129 49,824,152
3. Ratio of Retiree AL to Total AL [(1) / (2)] 0.62 0.63
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 b elow 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 careers 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 plans as of June 30, 2021, was 0.78 and was
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, 2021 June 30, 2022
1. Number of Actives 23 20
2. Number of Retirees 105 109
3. Support Ratio [(1) / (2)] 0.22 0.18
A-27
CalPERS Actuarial Valuation – June 30, 2022
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool
Page 22
Maturity Measures (continued)
The actuarial calculations supplied in this communication are based on various assumptions about long -term
demographic and economic behavior. Unless these assumptions (e.g., terminations, deaths, disabilities,
retirements, salary growth, 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 contributions from one year to the next.
Therefore, employer contributions will inevitably fluctuate, especially due to the ups and downs of investment
returns.
Asset Volatility Ratio
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 AVR of 8 may experience twice the contribution volatility due to
investment return volatility than a plan with AVR 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 a plan matures.
Liability Volatility Ratio
Also shown in the table below is the liability volatility ratio (LVR), which is the ratio of accrued liability to payroll.
Plans that have a higher LVR experience more volatile employer contributi ons (as a percentage of payroll) due
to changes in liability. For example, a plan with LVR 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 contribu tion volatility,
since the AVR, described above, will tend to move closer to the LVR as the funded ratio approaches 100%.
Contribution Volatility June 30, 2021 June 30, 2022
1. Market Value of Assets $37,561,570 $34,030,518
2. Payroll 1,813,647 1,820,115
3. Asset Volatility Ratio (AVR) [(1) / (2)] 20.7 18.7
4. Accrued Liability $47,593,129 $49,824,152
5. Liability Volatility Ratio (LVR) [(4) / (2)] 26.2 27.4
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
06/30/2022
0.63
0.18
18.7
27.4
A-28
CalPERS Actuarial Valuation – June 30, 2022
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool
Page 23
Funded Status – Termination Basis
The funded status measured on a termination basis is an estimate of the financial position of the plan had the
contract with CalPERS been terminated as of June 30, 2022. The accrued liability on a termination basis
(termination liability) is calculated differently compared to the plan’s ongoing funding liability. For the termination
liability calculation, both compensation and service are frozen as of the valu ation date and no future pay
increases or service accruals are assumed. This measure of funded status is not appropriate for assessing the
need for future employer contributions in the case of an ongoing plan, that is, for an employer that continues to
provide CalPERS retirement benefits to active employees. Unlike the actuarial cost method used for ongoing
plans, the termination liability is the present value of the benefits earned through the valuation date.
A more conservative investment policy and asse t allocation strategy was adopted by the board for the
Terminated Agency Pool. The Terminated Agency Pool has limited funding sources since no future employer
contributions will be made. Therefore, expected benefit payments are secured by risk -free assets and benefit
security for members is increased while limiting the funding risk. However, this asset allocation has a lower
expected rate of return than the PERF and consequently, a lower discount rate is assumed. The lower discount
rate for the Terminated Agency Pool results in higher liabilities for terminated plans.
The effective termination discount rate will depend on actual market rates of return for risk -free securities on the
date of termination. As market discount rates are variable , the table below shows a range for the hypothetical
termination liability based on the lowest and highest interest rates observed during an approximate 19 -month
period from 12 months before the valuation date to seven months after.
Discount Rate: 1.75%
Price Inflation: 2.50%
Discount Rate: 4.50%
Price Inflation: 2.75%
Market
Value of
Assets (MVA)
Termination
Liability1,2
Funded
Ratio
Unfunded
Termination
Liability
Termination
Liability1,2
Funded
Ratio
Unfunded
Termination
Liability
$34,030,518 $103,781,080 32.8% $69,750,562 $67,620,680 50.3% $33,590,162
1 The termination liabilities calculated above include a 5% contingency load. The contingency load and other actuarial
assumptions can be found in Appendix A of the Section 2 report.
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 3.38% on June 30, 2022, the valuation date.
In order to te rminate 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 p lan liabilities. Before beginning this process, please consult with the plan
actuary.
A-29
CalPERS Actuarial Valuation – June 30, 2022
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool
Page 24
Participant Data
The table below shows a summary of the plan’s member data upon which this valuation is based:
June 30, 2021 June 30, 2022
Active Members
Counts 23 20
Average Attained Age 53.9 53.8
Average Entry Age to Rate Plan 34.4 34.7
Average Years of Credited Service 16.8 16.9
Average Annual Covered Pay $78,854 $91,006
Annual Covered Payroll $1,813,647 $1,820,115
Present Value of Future Payroll $10,888,508 $10,876,505
Transferred Members 33 31
Separated Members 96 94
Retired Members and Beneficiaries *
Counts 105 109
Average Annual Benefits $21,217 $22,190
Total Annual Benefits $2,227,798 $2,418,722
Counts of members included in the valuation are counts of the records processed by the valuation. Multiple
records may exist for those who have service in more than one valuation group. This does not result in double
counting of liabilities.
* Values 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-30
CALPERS ACTUARIAL VALUATION - June 30, 2022
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 25
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 $2000 $2000 $2000
Survivor Allowance (PRSA) No No No
COLA 2% 2% 2%
A-31
CALPERS ACTUARIAL VALUATION - June 30, 2022
Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 26
Section 2
CALIFORNIA PUBLIC EMPLOYEES’ RETIREMEN T 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-32
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 2023
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes (CalPERS ID: 3846845523)
Annual Valuation Report as of June 30, 2022
Dear Employer,
Attached to this letter is the June 30, 2022 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) 2024-25. In
addition, the report contains important information regarding the current financial status of the plan as well as
projections and risk measures to aid in planning for the future.
Because this plan is in a risk pool, the following valuation report has been separated into two sections:
• Section 1 contains specific information for the plan including the development of the current and projected
employer contributions, and
• Section 2 contains the Risk Pool Actuarial Valuation appropriate to the plan as of June 30, 2022.
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, 2022.
Actuarial valuations are based on assumptions regarding future plan experience including investment return and payroll
growth, eligibility for the types of benefits provided, and longevity among retirees. The CalPERS Board of Administration
(board) adopts these assumptions after considering the advice of CalPERS actuarial and investment teams and other
professionals. Each actuarial valuation reflects all prior differences between actual and assumed experie nce 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 recommended in
the CalPERS Experie nce Study and Review of Actuarial Assumptions report from November 2021.
Required Contributions
The table below shows the minimum required employer contributions for FY 2024-25 along with estimates of the
required contributions for FY 2025-26. Employe e 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 emp loyees.
Fiscal Year Employer Normal
Cost Rate
Employer Amortization of
Unfunded Accrued Liability
2024-25 10.15% $14,644
Projected Results
2025-26 10.2% $24,000
B-1
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
(CalPERS ID: 3846845523)
Annual Valuation Report as of June 30, 2022
Page 2
The actual investment return for FY 2022-23 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 2022-
23 differs from 6.8%, the actual contribution requirements for FY 2025-26 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 2029-30.
Changes from Previous Year’s Valuations
There are no significant changes in actuarial assumptions or policies in the 2022 actuarial valuation. T here may be
changes specific to the plan such as contract amendments and funding changes.
Further descriptions of general changes are included in “Highlights and Executive Summ ary” and in Appendix A of the
Section 2 report in “Actuarial Methods and Assumptions .” The effects of any changes on the required contributions are
included in “Reconciliation of Required Employer Contributions ,” also in the Section 2 report.
Questions
A CalPERS actuary is available to answer questions about this report. Other questions may be directed to the Customer
Contact Center at (888)-CalPERS or (888-225-7377).
Sincerely,
SCOTT TERANDO, ASA, EA, MAAA, FCA, CFA
Chief Actuary, CalPERS
RANDALL DZIUBEK, ASA, MAAA
Deputy Chief Actuary, Valuation Services , CalPERS
B-2
Actuarial Valuation
as of June 30, 2022
for the
Miscellaneous Second Tier Plan
of the
City of Rancho Palos Verdes
(CalPERS ID : 3846845523)
Required Contributions
for Fiscal Year
July 1, 2024 - June 30, 2025
B-3
Table of Contents
Section 1 – Plan Specific Information
Section 2 – Risk Pool Actuarial Valuation I nformation
B-4
Section 1
CALIFORNIA PUBLIC EM PLOYEES’ RETIREMENT SYSTEM
Plan Specific Information
for the
Miscellaneous Second Tier Plan
of the
City of Rancho Palos Verdes
(CalPERS ID : 3846845523)
(Rate Plan ID: 23274)
B-5
Rate Plan belonging to the Miscellaneous Risk Pool
Table of Contents
Actuarial Certification 1
Highlights and Executive Summary
Introduction 3
Purpose of Section 1 3
Required Contribution s 4
Additional Discretionary Employer Contributions 5
Funded Status – Funding Policy Basis 6
Projected Employer Contributions 7
Other Pooled Miscellaneous Risk Pool Rate Plans 8
Cost 9
Changes Since the Prior Year’s Valuation 10
Subsequent Events 10
Assets and Liabilities
Breakdown of Entry Age Accrued Liability 12
Allocation of Plan’s Share of Pool’s Experience/Assumption Change 12
Development of Plan’s Share of Pool’s Market Value of Assets 12
Schedule of Amortization Bases 13
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
Funded Status – Termination Basis 22
Participant Data 23
List of Class 1 Benefit Provisions 23
Plan’s Major Benefit Options 24
B-6
CALPERS ACTUARIAL VALUATION - June 30, 2022
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 1
Actuarial Certification
To the best of our knowledge, this report, compris ed 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, 2022 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 s et forth in Section 2 of this report, the pool ac tuaries have certified that, in their opinion, the valuation of the
Miscellaneous Risk Pool has been performed in accordance with generally accepted actuarial princip les , in
accordance with standards of practice prescribed by the Actuarial Standards Board, and that the assumptions
and methods are internally consistent and reasonable for the risk pool as of the date of this valuation and as
prescribed by the CalPERS Boa rd of Administration according to provisions set forth in the California Public
Employees’ Retirement Law.
Having relied upon the information set forth in Section 2 of this report and based on the census and benefit
provision information for the rate plan, it is my opinion as the plan actuary that the Unfunded Accrued Liability
amortization bases as of June 30, 2022 and employer contribution as of July 1, 2024 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.
IAN OSUGI, ASA , MAAA
Senior Actuary, CalPERS
B-7
Highlights and Executive Summary
• Introduction
• Purpose of Section 1
• Required Contributions
• Additional Discretionary Employer Contributions
• Funded S tatus – Funding Policy Basis
• Projected Employer Contributions
• Other Pooled Miscellaneous Risk Pool Rate Plans
• Cost
• Changes Since the Prior Year’s Valuation
• Subsequent Events
B-8
CALPERS ACTUARIAL VALUATION - June 30, 2022
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, 2022 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 minimum required contributions for fiscal year (FY) 2024-25.
Purpose of Section 1
This Section 1 report for the Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes of CalPERS
was prepared by the Actuarial Office using data as of June 30, 2022. The purpose of the valuation is to:
• Set forth the assets and accrued liabilities of this rate plan as of June 30, 2022;
• Determine the minimum required employer contribution s for this rate plan for FY July 1, 2024 through
June 30, 2025;
• Determine the required member contribution rate for FY July 1, 2024 through June 30, 2025 for
employees subject to the California Public Employees' Pension Reform Act of 2013 (PEPRA); and
• Provide actuarial information as of June 30, 2022 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 valu ation 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 portio n of this report for any reason that is not explicitly
described above.
Future actuarial measurements may differ significantly from the current measurements presented in this report
due to such factors as the following: plan experience differing from that anticipated by the economic or
demographic assumptions; changes in economic or demographic assumptions; changes in actuarial policies;
changes in plan provisions or applicable 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 guidance of Actuarial Standard of Practice
No. 51 and recommended by the California Actuarial Ad visory 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 20 21.
• Plan maturity measures indicating how sensitive a plan may be to the risks noted above.
B-9
CALPERS ACTUARIAL VALUATION - June 30, 2022
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 2024-25
Employer Normal Cost Rate 10.15%
Plus
Required Payment on Amortization Bases 1 $14,644
Paid either as
1) Monthly Payment $1,220.33
Or
2) Annual Prepayment Option* $14,170
The total minimum required employer contribution is the sum of the Plan’s Employer Normal Cost Rate
(expressed as a percentage of payroll and paid as payroll is reported) plus the Employer Unfunded Accrued
Liability (UAL) Contribution Amount (billed monthly (1) or prepaid annually (2) in dollars).
* Only the UAL portion of the employer contribution can be prepaid (which must be received in full no later
than July 31).
Fiscal Year Fiscal Year
2023-24 2024-25
Development of Normal Cost as a Percentage of Payroll
Base Total Normal Cost for Formula 17.03% 17.08%
Surcharge for Class 1 Benefits 2
None 0.00% 0.00%
Phase out of Normal Cost Difference 3 0.00% 0.00%
Plan’s Total Normal Cost 17.03% 17.08%
Offset Due to Employee Contributions 6.93% 6.93%
Employer Normal Cost Rate 10.10% 10.15%
1 The required payment on amortization bases does not take into account any additional discretionary payment made after
April 28, 2023.
2 Section 2 of this report contains a list of Class 1 benefits and corresponding surcharges.
3 When a rate plan joins the pool, the difference in normal cost between the pool and the rate plan is phased out over a five-
year period in accordance with the CalPERS contribution allocation policy.
B-10
CALPERS ACTUARIAL VALUATION - June 30, 2022
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
FY 2024-25 is $14,644. 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 2024-25 does not
require an ADP be made in any future year, nor does it change the remaining amortization period of any portion
of unfunded liability. For information on permanent changes to amortization periods, see the “Amortization
Schedule and Alternatives” section of the report.
Agencies considering making an ADP should contact CalPERS for additional information.
Minimum Required Employer Contribution for Fiscal Year 20 24-25
Estimated
Normal Cost
Minimum UAL
Payment
ADP Total UAL
Contribution
Estimated Total
Contribution
$156,223 $14,644 $0 $14,644 $170,867
The minimum required contribution above is less than interest on the UAL. With no AD P the UAL is projected to
increase over the following year. If the minimum UAL payment were split between interest and principal, the
principal portion would be negative. This situation is referred to as negative amortization. If only the minimum
required contribution is made, contributions are not expected to exceed interest on the UAL until FY 2027-28,
as shown in the “Amortization Schedule and Alternatives” s ection of the report (s ee columns labeled “Current
Amortization Schedule”).
Fiscal Year 2024-25 Employer Contribution Necessary to Avoid Negative Amortization
Estimated
Normal Cost
Minimum UAL
Payment
ADP 1 Total UAL
Contribution
Estimated Total
Contribution
$156,223 $14,644 $18,558 $33,202 $189,425
Alternative Fiscal Year 2024-25 Employer Contributions for Greater UAL Reduction
Funding
Horizon
Estimated
Normal Cost
Minimum UAL
Payment
ADP 1 Total UAL
Contribution
Estimated Total
Contribution
20 years $156,223 $14,644 $30,731 $45,375 $201,598
15 years $156,223 $14,644 $38,290 $52,934 $209,157
10 years $156,223 $14,644 $54,233 $68,877 $225,100
5 years $156,223 $14,644 $103,803 $118,447 $274,670
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 UAL as of June 30, 2024 as determined in the June
30, 2022 actuarial valuation. New unfunded liabilities can emerge in future years due to assumption or method
changes, changes in plan provisions , and actuarial experience different than assumed. Making an ADP
illustrated above for the indicated number of years will not result in a plan that is exactly 100 % funded in the
indicated number of years. Valuation results will vary from one year to the next and can diverge significantly
from projections over a period of several years .
B-11
CALPERS ACTUARIAL VALUATION - June 30, 2022
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 6
Funded Status – Funding Policy Basis
The table below provides information on th e current funded status of the plan under the funding policy. The
funded status for this purpose is based on the market value of assets relative to the funding target produced by
the entry age actuarial cost method and actuarial assumptions adopted by the board. The actuarial cost method
allocates the total expected cost of a member’s projected benefit (Present Value of Benefits ) to individual years
of service (the Normal Cost). The value of the projected benefit that is not allocated to future service is r eferred
to as the Accrued Liability and is the plan’s funding target on the valuation date. The Unfunded Accrued
Liability (UAL) equals the funding target minus the assets. The UAL is an absolute measure of funded status
and can be viewed as employer debt. The funded ratio equals the assets divided by the funding target. The
funded ratio is a relative measure of the funded status and allows for comparisons between plans of different
sizes.
A funded ratio of 100% (UAL of $0) implies that the funding of the plan is on target and that future contributions
equal to the normal cost of the active plan members will be sufficient to fully fund all retirement benefits if future
experience matches the actuarial assumptions. A funded ratio of less than 100% (positive UAL) implies that in
addition to normal costs, payments toward the UAL will be required. Plans with a funded ratio greater than 100%
have a negative UAL (or surplus) but are requ ired under current law to continue contributing the normal cost in
most cases, preserving the surplus for future contingencies.
Calculations for the funding target reflect the expected long -term investment return of 6.8%. If it were known on
the valuation date that future investment returns will average something greater/less than the expected return,
calculated normal costs and accrued liabilities provided in this report would be less/greater than the results
shown. Therefore, for example, if actual avera ge future returns are less than the expected return, calculated
normal costs and UAL contributions will not be sufficient to fully fund all retirement benefits. Under this scenario,
required future normal cost contributions will need to increase from those provided in this report, and the plan
will develop unfunded liabilities that will also add to required future contributions. For illustrative purposes, funded
statuses based on a 1% lower and higher average future investment return (discount rate) are as follows:
The “Risk Analysis” section of the report provides additional information regarding the sensitivity of valuation
results to the expected investment return and other factors. Also provided in that section are measures of funded
status that are appropriate for assessing the sufficiency of plan assets to cover estimated termination liabilities.
June 30, 2021 June 30, 2022
1. Present Value of Benefits $6,298,632 $6,735,342
2. Entry Age Accrued Liability 3,048,741 3,462,411
3. Market Value of Assets (MVA) 3,129,430 3,022,059
4. Unfunded Accrued Liability (UAL) [(2) – (3)] ($80,689) $440,352
5. Funded Ratio [(3) / (2)] 102.6% 87.3%
1% Lower
Average Return
Current
Assumption
1% Higher
Average Return
Discount Rate 5.8% 6.8% 7.8%
1. Entry Age Accrued Liability $4,124,977 $3,462,411 $2,936,415
2. Market Value of Assets (MVA) 3,022,059 3,022,059 3,022,059
3. Unfunded Accrued Liability (UAL) [(1) – (2)] $1,102,918 $440,352 ($85,644)
4. Funded Ratio [(2) / (1)] 73.3% 87.3% 102.9%
B-12
CALPERS ACTUARIAL VALUATION - June 30, 2022
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 7
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 2022-23 is assumed to be 6.80% per year, net of invest ment and
administrative expenses. Future contribution requirements may differ significantly from those shown below. The
actual long -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 2022-23 and Beyond)
Fiscal Year 2024-25 2025-26 2026-27 2027-28 2028-29 2029-30
Rate Plan 23274 Results
Normal Cost % 10.15% 10.2% 10.2% 10.2% 10.2% 10.2%
UAL Payment $14,644 $24,000 $34,000 $44,000 $53,000 $53,000
For ongoing plans, investment gains and losses are 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 i nvestment loss, the relatively
small amortization payments during the ramp up period could result in contributions that are less than interest
on the UAL (i.e. negative amortization) while the contribution impact of the increase in the UAL is phased in.
The required contribution for FY 2024 -25 is less than interest on the UAL, a situation referred to as negative
amortization, as explained in the “Additional Discretionary Employer Contributions” section earlier in this report.
If only the minimum required contribution is made, contributions are not expected to exceed interest on the UAL
until FY 2027-28, as shown in the “Amortization Schedule and Alternatives” section of the report (see columns
labelled “Current Amortization Schedule ”).
For projected contributions under alternate investment 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-13
CALPERS ACTUARIAL VALUATION - June 30, 2022
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 8
Other Pooled Miscellaneous Risk Pool Rate Plans
All of the results presented in this Section 1 report, except those shown on this page , correspond to rate plan
23274. In many cases, employers have additional rate plans within the same risk pool. For cost analysis and
budgeting it is useful to consider contributions for these rate plans as a whole rather than individually. The
estimated contribution amounts and rates for a ll of the employer’s rate plans in the Miscellaneous Risk Pool are
shown below and assume that the total employer payroll within the Miscellaneous Risk Pool will grow according
to the overall payroll growth assumption of 2.80% per year for three years. In a refinement since the prior year’s
report, Classic members who are projected to terminate employment are assumed to be replaced by PEPRA
members.
Fiscal Year Fiscal Year
2023-24 2024-25
Estimated Combined Employer Contributions for all Pooled Miscellaneous Rate Plans
Projected Payroll for the Contribution Year $6,798,456 $7,246,562
Estimated Employer Normal Cost $684,854 $695,745
Required Payment on Amortization Bases $1,070,317 $1,295,856
Estimated Total Employer Contributions $1,755,171 $1,991,601
Estimated Total Employer Contribution Rate (illustrative only) 25.82% 27.48%
B-14
CALPERS ACTUARIAL VALUATION - June 30, 2022
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 9
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 2015-16, the Amortization of UAL component was expressed as a percentage of total
active payroll. Starting with FY 2015-16, the Amortization of UAL component was expressed as a dollar amount
and invoiced on a monthly basis. There is an option to prepay this amount during July of each fiscal year.
The Normal Cost component is expressed as a percentage of active payroll with e mployer 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 CalPE RS’ best estimate of future experience of the plan and are long term in nature.
We recognize that all assumptions will not be realized in any given year. For example, the investment earnings
at CalPERS have averaged 6.9% over the 20 years ending June 30, 2022 , 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 studies every four years, with the most recent exp erience study completed in 2021.
B-15
CALPERS ACTUARIAL VALUATION - June 30, 2022
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 10
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 amendments effective before the date of the report. Please refer to the
“Plan’s Major Benefit Options” in this report and Appendix B of the Section 2 Report for a summary of the plan
provisions used in this valuation.
In 2022, SB 1168 increased the standard retiree lump sum death benefit from $500 to $2,000 for any death
occurring on or after July 1, 2023. For pooled plans this is a Class 3 benefit and there is no normal cost surcharge.
The impact on the unfunded liability i s included in the pool’s (gain)/loss.
Actuarial Methods and Assumptions
There are no significant changes to the actuarial methods or assumptions for the June 30, 2022 actuarial
valuation.
Subsequent Events
This actuarial valuation report reflects fund investment return through June 30, 2022 and statutory/regulatory
changes and board actions through January 2023.
During the time period between the valuation date and the publication of this report, inflation has been
significantly higher than the expected inflation of 2.3% per annum. Since inflation influences cost -of-living
increases for retirees and beneficiaries and active member pay increases, higher inflation is likely to put at least
some upward pressure on contribution requirements and downward pressure on the funded status in the June
30, 2023 valuation. The actual impact of higher inflation on future valuation results will depend on, among other
factors , how long higher inflation persists. At this tim e, we continue to believe the long -term inflation assumption
of 2.3% is appropriate.
To the best of our knowledge, there have been no other subsequent events that could materially affect current
or future certifications rendered in this report.
B-16
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 Amortization Bases
• Amortization Schedule and Alternatives
• Employer Contribution History
• Funding History
B-17
CALPERS ACTUARIAL VALUATION - June 30, 2022
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 12
Breakdown of Entry Age Accrued Liability
Active Members $1,783,646
Transferred Members 465,328
Separated Members 117,460
Members and Beneficiaries Receiving Payments 1,095,977
Total $3,462,411
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 mi nimizing 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 $3,462,411
2. Projected UAL Balance at 6/30/2022 (81,778)
3. Other UAL Adjustments (Golden Handshake, Prior Service Purchase, etc.) 0
4. Adjusted UAL Balance at 6/30/2022 for Asset Share (81,778)
5. Pool’s Accrued Liability1 22,021,735,002
6. Sum of Pool’s Individual Plan UAL Balances at 6/30/20221 2,453,954,297
7. Pool’s 2021-22 Investment (Gain)/Loss1 2,614,071,182
8. Pool’s 2021-22 Non-Investment (Gain)/Loss1 309,490,972
9. Plan’s Share of Pool’s Investment (Gain)/Loss: [(1) - (4)] ÷ [(5) - (6)] × (7) 473,470
10. Plan’s Share of Pool’s Non -Investment (Gain)/Loss: (1) ÷ (5) × (8) 48,660
11. Plan’s New (Gain)/Loss as of 6/30/2022: (9) + (10) 522,130
12. Increase in Pool’s Accrued Liability due to Change in Assumptions1 0
13. Plan’s Share of Pool’s Change in Assumptions: (1) ÷ (5) × (12) 0
14. Increase in Pool’s Accrued Liabi lity due to Funding Risk Mitigation 1 0
15. Plan’s Share of Pool’s Change due to Funding Risk Mitigation: (1) ÷ (5) × (14) 0
16. Offset due to Funding Risk Mitigation 0
17. Plan’s Investment (Gain)/Loss: (9) – (16) 473,470
18. Partial Fresh Start Base: (2) + (1 7) 391,692
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
19. Plan’s UAL: (2) + (3) + (11) + (13) + (15) $440,352
20. Plan’s Share of Pool’s MVA: (1) - (19) $3,022,059
B-18
CALPERS ACTUARIAL VALUATION - June 30, 2022
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 13
Schedule of Amortization Bases
Below is the schedule of the plan’s amortization bases. Note that there is a two -year lag between the valuation date and the start of the contribution year.
• The assets, liabilities, and funded status of the plan are measured as of the valuation date: June 30, 2022 .
• The required employer contributions determined by the valuation are for the fiscal year beginning two years after the valuati on date: FY 2024-25.
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 public agencies with their
required employer contribution well in advance of the start of the fiscal year.
The Unfunded Accrued Liability (UAL) is used to determine the employer contribution and therefore must be rolled forward two years from the valuation date to the first day
of the fiscal year for which the contribution is being de termined. The UAL is rolled forward each year by subtracting the expected payment on the UAL for the fiscal year and
adjusting for interest. The expected payment for the first fiscal year is determined by the actuarial valuation two years ago and the contribution for the second year is from
the actuarial valuation one year ago. Additional discretionary payments are reflected in the Expected Payments column in the fiscal year they were made by the agency.
Reason for Base
Date
Est.
Ramp
Level
2024-25
Ramp
Shape
Escala-
tion
Rate
Amort.
Period
Balance
6/30/22
Expected
Payment
2022-23
Balance
6/30/23
Expected
Payment
2023-24
Balance
6/30/24
Minimum
Required
Payment
2024-25
Non-Investment (Gain)/Loss 6/30/22 No Ramp 0.00% 20 48,660 0 51,969 0 55,503 4,991
Partial Fresh Start 6/30/22 20% Up Only 0.00% 20 391,692 (2,104) 420,501 0 449,095 9,653
Total 440,352 (2,104) 472,470 0 504,598 14,644
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.
The partial fresh start base established June 30, 2022 is the sum of the UAL balance from the June 30, 2021 valuati on (projected to June 30, 2022) and the June 30,
2022 investment loss, as shown on the previous page.
B-19
CALPERS ACTUARIAL VALUATION - June 30, 2022
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
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 amortization schedule and illustrate the potential savings of accelerating unfunded
liability payments.
Shown on the following page are future year amortization payments based on 1) the current amortization schedule reflecting
the individual bases and remaining periods shown on the previous page, and 2) alternative “fresh start” amortization schedule s
using two sample periods that would both result in interest savings relative to the current amortization schedule. To initiate a
fresh s tart, 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 liabili ty. The
combination of positive and negative bases within an amortization schedule can result in unusual or problematic circumstances
in future years, such as:
• When a negative payment would be required on a positive unfunded actuarial liability; or
• When the payment would completely amortize the total unfunded liability in a very short time period, and results in a
large change in the employer contribution requirement.
In any year when one of the above scenarios occurs, the actuary will consider corrective action such as replacing the existing
unfunded liability bases with a single “fresh start” base and amortizing it over a n appropriate period.
The Current Amortization Schedule on the following page may appear to show that, based on the current amortizat ion bases,
one of the above scenarios will occur at some point in the future. It is impossible to know today whether such a scenario wil l
in fact arise since there will be additional bases added to the amortization schedule in each future year. Should such a scenario
arise in any future year, the actuary will take appropriate action based on guidelines in the CalPERS amortization policy.
B-20
CALPERS ACTUARIAL VALUATION - June 30, 2022
Miscellaneous Second Tier 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 20 Year Amortization 15 Year Amortization
Date Balance Payment Balance Payment Balance Payment
6/30/2024 504,598 14,644 504,598 45,375 504,598 52,934
6/30/2025 523,777 24,297 492,018 45,375 484,207 52,934
6/30/2026 534,284 33,951 478,583 45,375 462,429 52,934
6/30/2027 535,529 43,604 464,234 45,375 439,170 52,934
6/30/2028 526,882 53,257 448,910 45,375 414,329 52,934
6/30/2029 507,672 53,257 432,544 45,375 387,799 52,934
6/30/2030 487,155 53,257 415,065 45,376 359,465 52,934
6/30/2031 465,244 53,257 396,396 45,375 329,204 52,934
6/30/2032 441,843 53,256 376,459 45,376 296,886 52,934
6/30/2033 416,852 53,257 355,165 45,376 262,370 52,935
6/30/2034 390,160 53,257 332,423 45,376 225,506 52,934
6/30/2035 361,653 53,256 308,134 45,375 186,136 52,935
6/30/2036 331,209 53,257 282,195 45,376 144,088 52,934
6/30/2037 298,693 53,256 254,491 45,375 99,182 52,935
6/30/2038 263,968 53,257 224,904 45,376 51,221 52,934
6/30/2039 226,879 53,256 193,304 45,375
6/30/2040 187,270 53,257 159,556 45,376
6/30/2041 144,967 53,258 123,512 45,375
6/30/2042 99,786 53,257 85,018 45,375
6/30/2043 51,533 53,256 43,907 45,375
6/30/2044
6/30/2045
6/30/2046
6/30/2047
6/30/2048
6/30/2049
Total 968,604 907,507 794,013
Interest Paid 464,006 402,909 289,415
Estimated Savings 61,097 174,591
B-21
CALPERS ACTUARIAL VALUATION - June 30, 2022
Miscellaneous Second Tier 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 and discretionary employer contributions for the plan.
The required amounts are based on the actuarial valuation from two years prior without subsequent adjustments,
if any. Additional discretionary payments before July 1, 2019 or after April 2 8, 2023 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 0
2022 - 23 8.63% 20,057 0
2023 - 24 10.10% 0
2024 - 25 10.15% 14,644
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
06/30/2022 3,462,411 3,022,059 440,352 87.3% 1,450,515
B-22
Risk Analysis
• Future Investment Return Scenarios
• Discount Rate Sensitivity
• Mortality Rate Sensitivity
• Maturity Measures
• Maturity Measures History
• Funded Status – Termination Basis
B-23
CalPERS Actuarial Valuation – June 30, 2022
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool
Page 18
Future Investment Return Scenarios
Analysis 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 i mpact of the CalPERS Funding Risk Mitigation policy. The
projections also assume that all other actuarial assumptions will be realized and that 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, 2042.
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 any 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 2022-23 on the
FY 2025-26 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 in 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 2025-26.
Assumed Annual Return for
Fiscal Year 2022-23
Required
Employer
Contributions
Projected
Employer
Contributions
2024-25 2025-26
(17.2)% (2 standard deviation loss)
Normal Cost Rate 10.15% 10.2%
UAL Contribution $14,644 $42,000
(5.2)% (1 standard deviation loss)
Normal Cost Rate 10.15% 10.2%
UAL Contribution $14,644 $33,000
• Without investment gains (returns higher than 6.8%) in FY 2023-24 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 2022-23.
• The Pension Outlook Tool can be used to model projected contributions for these scenarios beyond
FY 2025-26 as well as to model other investment return scenarios .
Assumed Annual Return
FY 2022-23
through 2041-42
Projected Employer Contributions
2025-26 2026-27 2027-28 2028-29 2029-30
3.0% (5 th percentile)
Normal Cost Rate 10.2% 10.2% 10.2% 10.2% 10.2%
UAL Contribution $27,000 $42,000 $61,000 $82,000 $97,000
10.8% (95 th percentile)
Normal Cost Rate 10.4% 10.6% 10.8% 11.0% 11.2%
UAL Contribution $22,000 $27,000 $28,000 $0 $0
B-24
CalPERS Actuarial Valuation – June 30, 2022
Miscellaneous Second Tier 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 wil l 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, 2022 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 discount rates of
5.8% and 7.8%. The rates of 5.8% and 7.8% were selected since they illustrate t he 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, 2022 1% Lower
Real Return Rate
Current
Assumptions
1% Higher
Real Return Rate
Discount Rate 5.8% 6.8% 7.8%
Price Inflation 2.3% 2.3% 2.3%
Real Rate of Return 3.5% 4.5% 5.5%
a) Total Normal Cost 21.36% 17.08% 13.80%
b) Accrued Liability $4,124,977 $3,462,411 $2,936,415
c) Market Value of Asse ts $3,022,05 9 $3,022,059 $3,022,059
d) Unfunded Liability/(Surplus) [(b) - (c)] $1,102,918 $440,352 ($85,644)
e) Funded Ratio 73.3% 87.3% 102.9%
Sensitivity to the Price Inflation Assumption
As of June 30, 2022 1% Lower
Price Inflation
Current
Assumptions
1% Higher
Price Inflation
Discount Rate 5.8% 6.8% 7.8%
Price Inflation 1.3% 2.3% 3.3%
Real Rate of Return 4.5% 4.5% 4.5%
a) Total Normal Cost 17.96% 17.08% 15.54%
b) Accrued Liability $3,617,340 $3,462,411 $3,163,990
c) Market Value of Assets $3,022,059 $3,022,059 $3,022,059
d) Unfunded Liability/(Surplus) [(b) - (c)] $595,281 $440,352 $141,931
e) Funded Ratio 83.5% 87.3% 95.5%
Mortality Rate Sensitivity
The following table looks at the change in the June 30, 2022 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 a
change in the mortality assumption .
As of June 30, 2022 10% Lower
Mortality Rates
Current
Assumptions
10% Higher
Mortality Rates
a) Total Normal Cost 17.40% 17.08% 16.78%
b) Accrued Liability $3,526,080 $3,462,411 $3,403,589
c) Market Value of Assets $3,022,059 $3,022,059 $3,022,059
d) Unfunded Liability/(Surplus) [(b) - (c)] $504,021 $440,352 $381,530
e) Funded Ratio 85.7% 87.3% 88.8%
B-25
CalPERS Actuarial Valuation – June 30, 2022
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
As pension plans mature they become more sensitive to risks . Understanding plan maturity and how it affects
the ability of a pension plan sponsor to tolerate risk is important in understanding how the pension plan is
impacted by investment return volatility, other economic variables , and changes in longevity or other
demographic assumptions.
Since it is the employer that bears the risk, it is appropriate to perform this analysis on a pension plan level
considering all rate plans. The following measures are for one rate pla n 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 pl an 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, 2021 June 30, 2022
1. Retired Accrued Liability $1,087,825 $1,095,977
2. Total Accrued Liability 3,048,741 3,462,411
3. Ratio of Retiree AL to Total AL [(1) / (2)] 0.36 0.32
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 b elow 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 careers 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 plans as of June 30, 2021, was 0.78 and was
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, 2021 June 30, 2022
1. Number of Actives 11 11
2. Number of Retirees 6 6
3. Support Ratio [(1) / (2)] 1.83 1.83
B-26
CalPERS Actuarial Valuation – June 30, 2022
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool
Page 21
Maturity Measures (continued)
The actuarial calculations supplied in this communication are based on various assumptions about long -term
demographic and economic behavior. Unless these assumptions (e.g., terminations, deaths, disabilities,
retirements, salary growth, 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 contributions from one year to the next.
Therefore, employer contributions will inevitably fluctuate, especially due to the ups and downs of investment
returns.
Asset Volatility Ratio
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 AVR of 8 may experience twice the contribution volatility due to
investment return volatility than a plan with AVR 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 a plan matures.
Liability Volatility Ratio
Also shown in the table below is the liability volatility ratio (LVR), which is the ratio of accrued liability to payroll.
Plans that have a higher LVR experience more volatile employer contributi ons (as a percentage of payroll) due
to changes in liability. For example, a plan with LVR 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 contribu tion volatility,
since the AVR, described above, will tend to move closer to the LVR as the funded ratio approaches 100%.
Contribution Volatility June 30, 2021 June 30, 2022
1. Market Value of Assets $3,129,430 $3,022,059
2. Payroll 1,408,439 1,450,515
3. Asset Volatility Ratio (AVR) [(1) / (2)] 2.2 2.1
4. Accrued Liability $3,048,741 $3,462,411
5. Liability Volatility Ratio (LVR) [(4) / (2)] 2.2 2.4
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
06/30/2022
0.32
1.83
2.1
2.4
B-27
CalPERS Actuarial Valuation – June 30, 2022
Miscellaneous Second Tier Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool
Page 22
Funded Status – Termination Basis
The funded status measured on a termination basis is an estimate of the financial position of the plan had the
contract with CalPERS been terminated as of June 30, 2022. The accrued liability on a termination basis
(termination liability) is calculated differently compared to the plan’s ongoing funding liability. For the termination
liability calculation, both compensation and service are frozen as of the valu ation date and no future pay
increases or service accruals are assumed. This measure of funded status is not appropriate for assessing the
need for future employer contributions in the case of an ongoing plan, that is, for an employer that continues to
provide CalPERS retirement benefits to active employees. Unlike the actuarial cost method used for ongoing
plans, the termination liability is the present value of the benefits earned through the valuation date.
A more conservative investment policy and asse t allocation strategy was adopted by the board for the
Terminated Agency Pool. The Terminated Agency Pool has limited funding sources since no future employer
contributions will be made. Therefore, expected benefit payments are secured by risk -free assets and benefit
security for members is increased while limiting the funding risk. However, this asset allocation has a lower
expected rate of return than the PERF and consequently, a lower discount rate is assumed. The lower discount
rate for the Terminated Agency Pool results in higher liabilities for terminated plans.
The effective termination discount rate will depend on actual market rates of return for risk -free securities on the
date of termination. As market discount rates are variable , the table below shows a range for the hypothetical
termination liability based on the lowest and highest interest rates observed during an approximate 19 -month
period from 12 months before the valuation date to seven months after.
Discount Rate: 1.75%
Price Inflation: 2.50%
Discount Rate: 4.50%
Price Inflation: 2.75%
Market
Value of
Assets (MVA)
Termination
Liability1,2
Funded
Ratio
Unfunded
Termination
Liability
Termination
Liability1,2
Funded
Ratio
Unfunded
Termination
Liability
$3,022,059 $7,600,950 39.8% $4,578,891 $4,117,886 73.4% $1,095,827
1 The termination liabilities calculated above include a 5% contingency load. The contingency load and other actuarial
assumptions can be found in Appendix A of the Section 2 report.
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 3.38% on June 30, 2022, the valuation date.
In order to te rminate 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 p lan liabilities. Before beginning this process, please consult with the plan
actuary.
B-28
CalPERS Actuarial Valuation – June 30, 2022
Miscellaneous Second Tier 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, 2021 June 30, 2022
Active Members
Counts 11 11
Average Attained Age 41.9 43.3
Average Entry Age to Rate Plan 37.3 37.9
Average Years of Credited Service 4.6 5.4
Average Annual Covered Pay $128,040 $131,865
Annual Covered Payroll $1,408,439 $1,450,515
Present Value of Future Payroll $18,266,274 $18,003,003
Transferred Members 8 9
Separated Members 3 3
Retired Members and Beneficiaries *
Counts 6 6
Average Annual Benefits $12,546 $12,829
Total Annual Benefits $75,276 $76,972
Counts of members included in the valuation are counts of the records processed by the valuation. Multiple
records may exist for those who have service in more than one valuation group. This does not result in double
counting of liabilities.
* Values include community property settlements.
List of Class 1 Benefit Provisions
This plan has the additional Class 1 Benefit Provisions:
• None
B-29
CALPERS ACTUARIAL VALUATION - June 30, 2022
Miscellaneous Second Tier 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
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 $2000
Survivor Allowance (PRSA) No
COLA 2%
B-30
CALPERS ACTUARIAL VALUATION - June 30, 2022
Miscellaneous Second Tier 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’ RETIREMEN T 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-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 2023
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes (CalPERS ID: 3846845523)
Annual Valuation Report as of June 30, 2022
Dear Employer,
Attached to this letter is the June 30, 2022 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) 2024-25. In
addition, the report contains important information regarding the current financial status of the plan as well as
projections and risk measures to aid in planning for the future.
Because this plan is in a risk pool, the following valuation report has been separated into two sections:
• Section 1 contains specific information for the plan including the development of the current and projected
employer contributions, and
• Section 2 contains the Risk Pool Actuarial Valuation appropriate to the plan as of June 30, 2022.
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, 2022.
Actuarial valuations are based on assumptions regarding future plan experience including investment return and payroll
growth, eligibility for the types of benefits provided, and longevity among retirees. The CalPERS Board of Administration
(board) adopts these assumptions after considering the advice of CalPERS actuarial and investment teams and other
professionals. Each actuarial valuation reflects all prior differences between actual and assumed experie nce 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 recommended in
the CalPERS Experie nce Study and Review of Actuarial Assumptions report from November 2021.
Required Contributions
The table below shows the minimum required employer contributions and the PEPRA member contribution rate for FY
2024-25 along with estimates of the required contributions for FY 2025-26. 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
Contribution Rate
2024-25 7.87% $14,336 7.75%
Projected Results
2025-26 7.9% $24,000 TBD
C-1
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
(CalPERS ID: 3846845523)
Annual Valuation Report as of June 30, 2022
Page 2
The actual investment return for FY 2022-23 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 2022-
23 differs from 6.8%, the actual contribution requirements for FY 2025-26 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 2029-30.
Changes from Previous Year’s Valuations
There are no significant changes in actuarial assumptions or policies in the 2022 actuarial valuation. T here may be
changes specific to the plan such as contract amendments and funding changes.
Further descriptions of general changes are included in “Highlights and Executive Summ ary” and in Appendix A of the
Section 2 report in “Actuarial Methods and Assumptions .” The effects of any changes on the required contributions are
included in “Reconciliation of Required Employer Contributions ,” also in the Section 2 report.
Questions
A CalPERS actuary is available to answer questions about this report. Other questions may be directed to the Customer
Contact Center at (888)-CalPERS or (888-225-7377).
Sincerely,
SCOTT TERANDO, ASA, EA, MAAA, FCA, CFA
Chief Actuary, CalPERS
RANDALL DZIUBEK, ASA, MAAA
Deputy Chief Actuary, Valuation Services , CalPERS
C-2
Actuarial Valuation
as of June 30, 2022
for the
PEPRA Miscellaneous Plan
of the
City of Rancho Palos Verdes
(CalPERS ID : 3846845523)
Required Contributions
for Fiscal Year
July 1, 2024 - June 30, 2025
C-3
Table of Contents
Section 1 – Plan Specific Information
Section 2 – Risk Pool Actuarial Valuation I nformation
C-4
Section 1
CALIFORNIA PUBLIC EM PLOYEES’ RETIREMENT SYSTEM
Plan Specific Information
for the
PEPRA Miscellaneous Plan
of the
City of Rancho Palos Verdes
(CalPERS ID : 3846845523)
(Rate Plan ID: 26567)
C-5
Rate Plan belonging to the Miscellaneous Risk Pool
Table of Contents
Actuarial Certification 1
Highlights and Executive Summary
Introduction 3
Purpose of Section 1 3
Required Contribution s 4
Additional Discretionary Employer Contributions 5
Funded Status – Funding Policy Basis 6
Projected Employer Contributions 7
Other Pooled Miscellaneous Risk Pool Rate Plans 8
Cost 9
Changes Since the Prior Year’s Valuation 10
Subsequent Events 10
Assets and Liabilities
Breakdown of Entry Age Accrued Liability 12
Allocation of Plan’s Share of Pool’s Experience/Assumption Change 12
Development of Plan’s Share of Pool’s Market Value of Assets 12
Schedule of Amortization Bases 13
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
Funded Status – Termination Basis 22
Participant Data 23
List of Class 1 Benefit Provisions 23
Plan’s Major Benefit Options 24
PEPRA Member Contribution Rates 25
C-6
CALPERS ACTUARIAL VALUATION - June 30, 2022
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, compris ed 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, 2022 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 s et forth in Section 2 of this report, the pool ac tuaries have certified that, in their opinion, the valuation of the
Miscellaneous Risk Pool has been performed in accordance with generally accepted actuarial princip les , in
accordance with standards of practice prescribed by the Actuarial Standards Board, and that the assumptions
and methods are internally consistent and reasonable for the risk pool as of the date of this valuation and as
prescribed by the CalPERS Boa rd of Administration according to provisions set forth in the California Public
Employees’ Retirement Law.
Having relied upon the information set forth in Section 2 of this report and based on the census and benefit
provision information for the rate plan, it is my opinion as the plan actuary that the Unfunded Accrued Liability
amortization bases as of June 30, 2022 and employer contribution as of July 1, 2024 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.
IAN OSUGI, ASA , MAAA
Senior Actuary, CalPERS
C-7
Highlights and Executive Summary
• Introduction
• Purpose of Section 1
• Required Contributions
• Additional Discretionary Employer Contributions
• Funded S tatus – Funding Policy Basis
• Projected Employer Contributions
• Other Pooled Miscellaneous Risk Pool Rate Plans
• Cost
• Changes Since the Prior Year’s Valuation
• Subsequent Events
C-8
CALPERS ACTUARIAL VALUATION - June 30, 2022
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, 2022 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 minimum required contributions for fiscal year (FY) 2024-25.
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 Actuarial Office using data as of June 30, 2022. The purpose of the valuation is to:
• Set forth the assets and accrued liabilities of this rate plan as of June 30, 2022;
• Determine the minimum required employer contribution s for this rate plan for FY July 1, 2024 through
June 30, 2025;
• Determine the required member contribution rate for FY July 1, 2024 through June 30, 2025 for
employees subject to the California Public Employees' Pension Reform Act of 2013 (PEPRA); and
• Provide actuarial information as of June 30, 2022 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 valu ation 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 portio n of this report for any reason that is not explicitly
described above.
Future actuarial measurements may differ significantly from the current measurements presented in this report
due to such factors as the following: plan experience differing from that anticipated by the economic or
demographic assumptions; changes in economic or demographic assumptions; changes in actuarial policies;
changes in plan provisions or applicable 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 guidance of Actuarial Standard of Practice
No. 51 and recommended by the California Actuarial Ad visory 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 20 21.
• Plan maturity measures indicating how sensitive a plan may be to the risks noted above.
C-9
CALPERS ACTUARIAL VALUATION - June 30, 2022
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 2024-25
Employer Normal Cost Rate 7.87%
Plus
Required Payment on Amortization Bases 1 $14,336
Paid either as
1) Monthly Payment $1,194.67
Or
2) Annual Prepayment Option* $13,872
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 be prepaid (which must be received in full no later
than July 31).
For additional detail regarding the determination of the required contribution rate for PEPRA members, see
“PEPRA Member Contribution Rates” section.
Fiscal Year Fiscal Year
2023-24 2024-25
Development of Normal Cost as a Percentage of Payroll
Base Total Normal Cost for Formula 15.43% 15.62%
Surcharge for Class 1 Benefits 2
None 0.00% 0.00%
Phase out of Normal Cost Difference 3 0.00% 0.00%
Plan’s Total Normal Cost 15.43% 15.62%
Offset Due to Employee Contributions 7.75% 7.75%
Employer Normal Cost Rate 7.68% 7.87%
1 The required payment on amortization bases does not take into account any additional discretionary payment made after
April 28, 2023.
2 Section 2 of this report contains a list of Class 1 benefits and corresponding surcharges.
3 When a rate plan joins the pool, the difference in normal cost between the pool and the rate plan is phased out over a five-
year period in accordance with the CalPERS contribution allocation policy.
C-10
CALPERS ACTUARIAL VALUATION - June 30, 2022
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
FY 2024-25 is $14,336. 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 2024-25 does not
require an ADP be made in any future year, nor does it change the remaining amortization period of any portion
of unfunded liability. For information on permanent changes to amortization periods, see the “Amortization
Schedule and Alternatives” section of the report.
Agencies considering making an ADP should contact CalPERS for additional information.
Minimum Required Employer Contribution for Fiscal Year 20 24-25
Estimated
Normal Cost
Minimum UAL
Payment
ADP Total UAL
Contribution
Estimated Total
Contribution
$335,589 $14,336 $0 $14,336 $349,925
The minimum required contribution above is less than interest on the UAL. With no AD P the UAL is projected to
increase over the following year. If the minimum UAL payment were split between interest and principal, the
principal portion would be negative. This situation is referred to as negative amortization. If only the minimum
required contribution is made, contributions are not expected to exceed interest on the UAL until FY 2027-28,
as shown in the “Amortization Schedule and Alternatives” s ection of the report (s ee columns labeled “Current
Amortization Schedule”).
Fiscal Year 2024-25 Employer Contribution Necessary to Avoid Negative Amortization
Estimated
Normal Cost
Minimum UAL
Payment
ADP 1 Total UAL
Contribution
Estimated Total
Contribution
$335,589 $14,336 $19,312 $33,648 $369,237
Alternative Fiscal Year 2024-25 Employer Contributions for Greater UAL Reduction
Funding
Horizon
Estimated
Normal Cost
Minimum UAL
Payment
ADP 1 Total UAL
Contribution
Estimated Total
Contribution
20 years $335,589 $14,336 $31,648 $45,984 $381,573
15 years $335,589 $14,336 $39,308 $53,644 $389,233
10 years $335,589 $14,336 $55,466 $69,802 $405,391
5 years $335,589 $14,336 $105,701 $120,037 $455,626
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 UAL as of June 30, 2024 as determined in the June
30, 2022 actuarial valuation. New unfunded liabilities can emerge in future years due to assumption or method
changes, changes in plan provisions , and actuarial experience different than assumed. Making an ADP
illustrated above for the indicated number of years will not result in a plan that is exactly 100 % funded in the
indicated number of years. Valuation results will vary from one year to the next and can diverge significantly
from projections over a period of several years .
C-11
CALPERS ACTUARIAL VALUATION - June 30, 2022
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 6
Funded Status – Funding Policy Basis
The table below provides information on th e current funded status of the plan under the funding policy. The
funded status for this purpose is based on the market value of assets relative to the funding target produced by
the entry age actuarial cost method and actuarial assumptions adopted by the board. The actuarial cost method
allocates the total expected cost of a member’s projected benefit (Present Value of Benefits ) to individual years
of service (the Normal Cost). The value of the projected benefit that is not allocated to future service is r eferred
to as the Accrued Liability and is the plan’s funding target on the valuation date. The Unfunded Accrued
Liability (UAL) equals the funding target minus the assets. The UAL is an absolute measure of funded status
and can be viewed as employer debt. The funded ratio equals the assets divided by the funding target. The
funded ratio is a relative measure of the funded status and allows for comparisons between plans of different
sizes.
A funded ratio of 100% (UAL of $0) implies that the funding of the plan is on target and that future contributions
equal to the normal cost of the active plan members will be sufficient to fully fund all retirement benefits if future
experience matches the actuarial assumptions. A funded ratio of less than 100% (positive UAL) implies that in
addition to normal costs, payments toward the UAL will be required. Plans with a funded ratio greater than 100%
have a negative UAL (or surplus) but are requ ired under current law to continue contributing the normal cost in
most cases, preserving the surplus for future contingencies.
Calculations for the funding target reflect the expected long -term investment return of 6.8%. If it were known on
the valuation date that future investment returns will average something greater/less than the expected return,
calculated normal costs and accrued liabilities provided in this report would be less/greater than the results
shown. Therefore, for example, if actual avera ge future returns are less than the expected return, calculated
normal costs and UAL contributions will not be sufficient to fully fund all retirement benefits. Under this scenario,
required future normal cost contributions will need to increase from those provided in this report, and the plan
will develop unfunded liabilities that will also add to required future contributions. For illustrative purposes, funded
statuses based on a 1% lower and higher average future investment return (discount rate) are as follows:
The “Risk Analysis” section of the report provides additional information regarding the sensitivity of valuation
results to the expected investment return and other factors. Also provided in that section are measures of funded
status that are appropriate for assessing the sufficiency of plan assets to cover estimated termination liabilities.
June 30, 2021 June 30, 2022
1. Present Value of Benefits $7,303,767 $8,700,192
2. Entry Age Accrued Liability 2,391,157 3,048,772
3. Market Value of Assets (MVA) 2,458,040 2,631,340
4. Unfunded Accrued Liability (UAL) [(2) – (3)] ($66,883) $417,432
5. Funded Ratio [(3) / (2)] 102.8% 86.3%
1% Lower
Average Return
Current
Assumption
1% Higher
Average Return
Discount Rate 5.8% 6.8% 7.8%
1. Entry Age Accrued Liability $3,750,132 $3,048,772 $2,511,546
2. Market Value of Assets (MVA) 2,631,340 2,631,340 2,631,340
3. Unfunded Accrued Liability (UAL) [(1) – (2)] $1,118,792 $417,432 ($119,794)
4. Funded Ratio [(2) / (1)] 70.2% 86.3% 104.8%
C-12
CALPERS ACTUARIAL VALUATION - June 30, 2022
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 7
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 2022-23 is assumed to be 6.80% per year, net of invest ment and
administrative expenses. Future contribution requirements may differ significantly from those shown below. The
actual long -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 2022-23 and Beyond)
Fiscal Year 2024-25 2025-26 2026-27 2027-28 2028-29 2029-30
Rate Plan 26567 Results
Normal Cost % 7.87% 7.9% 7.9% 7.9% 7.9% 7.9%
UAL Payment $14,336 $24,000 $34,000 $44,000 $54,000 $54,000
For ongoing plans, investment gains and losses are 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 i nvestment loss, the relatively
small amortization payments during the ramp up period could result in contributions that are less than interest
on the UAL (i.e. negative amortization) while the contribution impact of the increase in the UAL is phased in.
The required contribution for FY 2024 -25 is less than interest on the UAL, a situation referred to as negative
amortization, as explained in the “Additional Discretionary Employer Contributions” section earlier in this report.
If only the minimum required contribution is made, contributions are not expected to exceed interest on the UAL
until FY 2027-28, as shown in the “Amortization Schedule and Alternatives” section of the report (see columns
labelled “Current Amortization Schedule ”).
For projected contributions under alternate investment 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-13
CALPERS ACTUARIAL VALUATION - June 30, 2022
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 8
Other Pooled Miscellaneous Risk Pool Rate Plans
All of the results presented in this Section 1 report, except those shown on this page , correspond to rate plan
26567. In many cases, employers have additional rate plans within the same risk pool. For cost analysis and
budgeting it is useful to consider contributions for these rate plans as a whole rather than individually. The
estimated contribution amounts and rates for a ll of the employer’s rate plans in the Miscellaneous Risk Pool are
shown below and assume that the total employer payroll within the Miscellaneous Risk Pool will grow according
to the overall payroll growth assumption of 2.80% per year for three years. In a refinement since the prior year’s
report, Classic members who are projected to terminate employment are assumed to be replaced by PEPRA
members.
Fiscal Year Fiscal Year
2023-24 2024-25
Estimated Combined Employer Contributions for all Pooled Miscellaneous Rate Plans
Projected Payroll for the Contribution Year $6,798,456 $7,246,562
Estimated Employer Normal Cost $684,854 $695,745
Required Payment on Amortization Bases $1,070,317 $1,295,856
Estimated Total Employer Contributions $1,755,171 $1,991,601
Estimated Total Employer Contribution Rate (illustrative only) 25.82% 27.48%
C-14
CALPERS ACTUARIAL VALUATION - June 30, 2022
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 9
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 2015-16, the Amortization of UAL component was expressed as a percentage of total
active payroll. Starting with FY 2015-16, the Amortization of UAL component was expressed as a dollar amount
and invoiced on a monthly basis. There is an option to prepay this amount during July of each fiscal year.
The Normal Cost component is expressed as a percentage of active payroll with e mployer 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 CalPE RS’ best estimate of future experience of the plan and are long term in nature.
We recognize that all assumptions will not be realized in any given year. For example, the investment earnings
at CalPERS have averaged 6.9% over the 20 years ending June 30, 2022 , 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 studies every four years, with the most recent exp erience study completed in 2021.
C-15
CALPERS ACTUARIAL VALUATION - June 30, 2022
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 10
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 amendments effective before the date of the report. Please refer to the
“Plan’s Major Benefit Options” in this report and Appendix B of the Section 2 Report for a summary of the plan
provisions used in this valuation.
In 2022, SB 1168 increased the standard retiree lump sum death benefit from $500 to $2,000 for any death
occurring on or after July 1, 2023. For pooled plans this is a Class 3 benefit and there is no normal cost surcharge.
The impact on the unfunded liability i s included in the pool’s (gain)/loss.
Actuarial Methods and Assumptions
There are no significant changes to the actuarial methods or assumptions for the June 30, 2022 actuarial
valuation.
Subsequent Events
This actuarial valuation report reflects fund investment return through June 30, 2022 and statutory/regulatory
changes and board actions through January 2023.
During the time period between the valuation date and the publication of this report, inflation has been
significantly higher than the expected inflation of 2.3% per annum. Since inflation influences cost -of-living
increases for retirees and beneficiaries and active member pay increases, higher inflation is likely to put at least
some upward pressure on contribution requirements and downward pressure on the funded status in the June
30, 2023 valuation. The actual impact of higher inflation on future valuation results will depend on, among other
factors , how long higher inflation persists. At this tim e, we continue to believe the long -term inflation assumption
of 2.3% is appropriate.
To the best of our knowledge, there have been no other subsequent events that could materially affect current
or future certifications rendered in this report.
C-16
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 Amortization Bases
• Amortization Schedule and Alternatives
• Employer Contribution History
• Funding History
C-17
CALPERS ACTUARIAL VALUATION - June 30, 2022
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 12
Breakdown of Entry Age Accrued Liability
Active Members $1,955,583
Transferred Members 957,005
Separated Members 136,184
Members and Beneficiaries Receiving Payments 0
Total $3,048,772
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 mi nimizing 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 $3,048,772
2. Projected UAL Balance at 6/30/2022 (37,744)
3. Other UAL Adjustments (Golden Handshake, Prior Service Purchase, etc.) 0
4. Adjusted UAL Balance at 6/30/2022 for Asset Share (37,744)
5. Pool’s Accrued Liability1 22,021,735,002
6. Sum of Pool’s Individual Plan UAL Balances at 6/30/20221 2,453,954,297
7. Pool’s 2021-22 Investment (Gain)/Loss1 2,614,071,182
8. Pool’s 2021-22 Non-Investment (Gain)/Loss1 309,490,972
9. Plan’s Share of Pool’s Investment (Gain)/Loss: [(1) - (4)] ÷ [(5) - (6)] × (7) 412,329
10. Plan’s Share of Pool’s Non -Investment (Gain)/Loss: (1) ÷ (5) × (8) 42,847
11. Plan’s New (Gain)/Loss as of 6/30/2022: (9) + (10) 455,176
12. Increase in Pool’s Accrued Liability due to Change in Assumptions1 0
13. Plan’s Share of Pool’s Change in Assumptions: (1) ÷ (5) × (12) 0
14. Increase in Pool’s Accrued Liabi lity due to Funding Risk Mitigation 1 0
15. Plan’s Share of Pool’s Change due to Funding Risk Mitigation: (1) ÷ (5) × (14) 0
16. Offset due to Funding Risk Mitigation 0
17. Plan’s Investment (Gain)/Loss: (9) – (16) 412,329
18. Partial Fresh Start Base: (2) + (1 7) 374,585
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
19. Plan’s UAL: (2) + (3) + (11) + (13) + (15) $417,432
20. Plan’s Share of Pool’s MVA: (1) - (19) $2,631,340
C-18
CALPERS ACTUARIAL VALUATION - June 30, 2022
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 13
Schedule of Amortization Bases
Below is the schedule of the plan’s amortization bases. Note that there is a two -year lag between the valuation date and the start of the contribution year.
• The assets, liabilities, and funded status of the plan are measured as of the valuation date: June 30, 2022 .
• The required employer contributions determined by the valuation are for the fiscal year beginning two years after the valuati on date: FY 2024-25.
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 public agencies with their
required employer contribution well in advance of the start of the fiscal year.
The Unfunded Accrued Liability (UAL) is used to determine the employer contribution and therefore must be rolled forward two years from the valuation date to the first day
of the fiscal year for which the contribution is being de termined. The UAL is rolled forward each year by subtracting the expected payment on the UAL for the fiscal year and
adjusting for interest. The expected payment for the first fiscal year is determined by the actuarial valuation two years ago and the contribution for the second year is from
the actuarial valuation one year ago. Additional discretionary payments are reflected in the Expected Payments column in the fiscal year they were made by the agency.
Reason for Base
Date
Est.
Ramp
Level
2024-25
Ramp
Shape
Escala-
tion
Rate
Amort.
Period
Balance
6/30/22
Expected
Payment
2022-23
Balance
6/30/23
Expected
Payment
2023-24
Balance
6/30/24
Minimum
Required
Payment
2024-25
Non-Investment (Gain)/Loss 6/30/22 No Ramp 0.00% 20 42,847 0 45,761 0 48,873 4,395
Partial Fresh Start 6/30/22 20% Up Only 0.00% 20 374,585 (31,925) 433,049 0 462,496 9,941
Total 417,432 (31,925) 478,810 0 511,369 14,336
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.
The partial fresh start base established June 30, 2022 is the sum of the UAL balance from the June 30, 2021 valuati on (projected to June 30, 2022) and the June 30,
2022 investment loss, as shown on the previous page.
C-19
CALPERS ACTUARIAL VALUATION - June 30, 2022
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
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 amortization schedule and illustrate the potential savings of accelerating unfunded
liability payments.
Shown on the following page are future year amortization payments based on 1) the current amortization schedule reflecting
the individual bases and remaining periods shown on the previous page, and 2) alternative “fresh start” amortization schedule s
using two sample periods that would both result in interest savings relative to the current amortization schedule. To initiate a
fresh s tart, 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 liabili ty. The
combination of positive and negative bases within an amortization schedule can result in unusual or problematic circumstances
in future years, such as:
• When a negative payment would be required on a positive unfunded actuarial liability; or
• When the payment would completely amortize the total unfunded liability in a very short time period, and results in a
large change in the employer contribution requirement.
In any year when one of the above scenarios occurs, the actuary will consider corrective action such as replacing the existing
unfunded liability bases with a single “fresh start” base and amortizing it over a n appropriate period.
The Current Amortization Schedule on the following page may appear to show that, based on the current amortizat ion bases,
one of the above scenarios will occur at some point in the future. It is impossible to know today whether such a scenario wil l
in fact arise since there will be additional bases added to the amortization schedule in each future year. Should such a scenario
arise in any future year, the actuary will take appropriate action based on guidelines in the CalPERS amortization policy.
C-20
CALPERS ACTUARIAL VALUATION - June 30, 2022
PEPRA 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 20 Year Amortization 15 Year Amortization
Date Balance Payment Balance Payment Balance Payment
6/30/2024 511,369 14,336 511,369 45,984 511,369 53,644
6/30/2025 531,326 24,277 498,620 45,984 490,704 53,645
6/30/2026 542,367 34,219 485,004 45,984 468,633 53,644
6/30/2027 543,885 44,160 470,463 45,984 445,062 53,645
6/30/2028 535,232 54,101 454,933 45,984 419,887 53,644
6/30/2029 515,717 54,101 438,347 45,984 393,001 53,644
6/30/2030 494,876 54,101 420,633 45,984 364,287 53,644
6/30/2031 472,617 54,100 401,714 45,984 333,621 53,645
6/30/2032 448,846 54,101 381,509 45,984 300,868 53,644
6/30/2033 423,457 54,100 359,930 45,984 265,889 53,645
6/30/2034 396,343 54,100 336,883 45,984 228,531 53,645
6/30/2035 367,385 54,100 312,269 45,984 188,632 53,644
6/30/2036 336,458 54,101 285,982 45,984 146,021 53,644
6/30/2037 303,426 54,100 257,907 45,985 100,513 53,645
6/30/2038 268,150 54,100 227,922 45,984 51,909 53,645
6/30/2039 230,475 54,100 195,899 45,985
6/30/2040 190,238 54,101 161,697 45,984
6/30/2041 147,264 54,102 125,171 45,985
6/30/2042 101,366 54,100 86,160 45,985
6/30/2043 52,350 54,100 44,496 45,984
6/30/2044
6/30/2045
6/30/2046
6/30/2047
6/30/2048
6/30/2049
Total 982,600 919,684 804,667
Interest Paid 471,231 408,315 293,298
Estimated Savings 62,916 177,933
C-21
CALPERS ACTUARIAL VALUATION - June 30, 2022
PEPRA 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 and discretionary employer contributions for the plan.
The required amounts are based on the actuarial valuation from two years prior without subsequent adjustments,
if any. Additional discretionary payments before July 1, 2019 or after April 2 8, 2023 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 0
2022 - 23 7.47% 15,841 0
2023 - 24 7.68% 0
2024 - 25 7.87% 14,336
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
06/30/2022 3,048,772 2,631,340 417,432 86.3% 3,399,782
C-22
Risk Analysis
• Future Investment Return Scenarios
• Discount Rate Sensitivity
• Mortality Rate Sensitivity
• Maturity Measures
• Maturity Measures History
• Funded Status – Termination Basis
C-23
CalPERS Actuarial Valuation – June 30, 2022
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool
Page 18
Future Investment Return Scenarios
Analysis 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 i mpact of the CalPERS Funding Risk Mitigation policy. The
projections also assume that all other actuarial assumptions will be realized and that 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, 2042.
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 any 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 2022-23 on the
FY 2025-26 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 in 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 2025-26.
Assumed Annual Return for
Fiscal Year 2022-23
Required
Employer
Contributions
Projected
Employer
Contributions
2024-25 2025-26
(17.2)% (2 standard deviation loss)
Normal Cost Rate 7.87% 7.9%
UAL Contribution $14,336 $40,000
(5.2)% (1 standard deviation loss)
Normal Cost Rate 7.87% 7.9%
UAL Contribution $14,3 36 $32,000
• Without investment gains (returns higher than 6.8%) in FY 2023-24 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 2022-23.
• The Pension Outlook Tool can be used to model projected contributions for these scenarios beyond
FY 2025-26 as well as to model other investment return scenarios .
Assumed Annual Return
FY 2022-23
through 2041-42
Projected Employer Contributions
2025-26 2026-27 2027-28 2028-29 2029-30
3.0% (5 th percentile)
Normal Cost Rate 7.9% 7.9% 7.9% 7.9% 7.9%
UAL Contribution $27,000 $42,000 $59,000 $79,000 $92,000
10.8% (95 th percentile)
Normal Cost Rate 8.1% 8.3% 8.5% 8.7% 8.4%
UAL Contribution $22,000 $28,000 $31,000 $31,000 $0
C-24
CalPERS Actuarial Valuation – June 30, 2022
PEPRA 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 wil l 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, 2022 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 discount rates of
5.8% and 7.8%. The rates of 5.8% and 7.8% were selected since they illustrate t he 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, 2022 1% Lower
Real Return Rate
Current
Assumptions
1% Higher
Real Return Rate
Discount Rate 5.8% 6.8% 7.8%
Price Inflation 2.3% 2.3% 2.3%
Real Rate of Return 3.5% 4.5% 5.5%
a) Total Normal Cost 19.53% 15.62% 12.65%
b) Accrued Liability $3,750,132 $3,048,772 $2,511,546
c) Market Value of Asse ts $2,631,340 $2,631,340 $2,631,340
d) Unfunded Liability/(Surplus) [(b) - (c)] $1,118,792 $417,432 ($119,794)
e) Funded Ratio 70.2% 86.3% 104.8%
Sensitivity to the Price Inflation Assumption
As of June 30, 2022 1% Lower
Price Inflation
Current
Assumptions
1% Higher
Price Inflation
Discount Rate 5.8% 6.8% 7.8%
Price Inflation 1.3% 2.3% 3.3%
Real Rate of Return 4.5% 4.5% 4.5%
a) Total Normal Cost 16.48% 15.62% 14.20%
b) Accrued Liability $3,210,542 $3,048,772 $2,769,190
c) Market Value of Assets $2,631,340 $2,631,340 $2,631,340
d) Unfunded Liability/(Surplus) [(b) - (c)] $579,202 $417,432 $137,850
e) Funded Ratio 82.0% 86.3% 95.0%
Mortality Rate Sensitivity
The following table looks at the change in the June 30, 2022 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 a
change in the mortality assumption .
As of June 30, 2022 10% Lower
Mortality Rates
Current
Assumptions
10% Higher
Mortality Rates
a) Total Normal Cost 15.89% 15.62% 15.37%
b) Accrued Liability $3,108,971 $3,048,772 $2,993,340
c) Market Value of Assets $2,631,340 $2,631,340 $2,631,340
d) Unfunded Liability/(Surplus) [(b) - (c)] $477,631 $417,432 $362,000
e) Funded Ratio 84.6% 86.3% 87.9%
C-25
CalPERS Actuarial Valuation – June 30, 2022
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
As pension plans mature they become more sensitive to risks . Understanding plan maturity and how it affects
the ability of a pension plan sponsor to tolerate risk is important in understanding how the pension plan is
impacted by investment return volatility, other economic variables , and changes in longevity or other
demographic assumptions.
Since it is the employer that bears the risk, it is appropriate to perform this analysis on a pension plan level
considering all rate plans. The following measures are for one rate pla n 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 pl an 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, 2021 June 30, 2022
1. Retired Accrued Liability $0 $0
2. Total Accrued Liability 2,391,157 3,048,772
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 b elow 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 careers 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 plans as of June 30, 2021, was 0.78 and was
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, 2021 June 30, 2022
1. Number of Actives 57 59
2. Number of Retirees 0 0
3. Support Ratio [(1) / (2)] N/A N/A
C-26
CalPERS Actuarial Valuation – June 30, 2022
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool
Page 21
Maturity Measures (continued)
The actuarial calculations supplied in this communication are based on various assumptions about long -term
demographic and economic behavior. Unless these assumptions (e.g., terminations, deaths, disabilities,
retirements, salary growth, 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 contributions from one year to the next.
Therefore, employer contributions will inevitably fluctuate, especially due to the ups and downs of investment
returns.
Asset Volatility Ratio
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 AVR of 8 may experience twice the contribution volatility due to
investment return volatility than a plan with AVR 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 a plan matures.
Liability Volatility Ratio
Also shown in the table below is the liability volatility ratio (LVR), which is the ratio of accrued liability to payroll.
Plans that have a higher LVR experience more volatile employer contributi ons (as a percentage of payroll) due
to changes in liability. For example, a plan with LVR 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 contribu tion volatility,
since the AVR, described above, will tend to move closer to the LVR as the funded ratio approaches 100%.
Contribution Volatility June 30, 2021 June 30, 2022
1. Market Value of Assets $2,458,040 $2,631,340
2. Payroll 3,035,848 3,399,7 82
3. Asset Volatility Ratio (AVR) [(1) / (2)] 0.8 0.8
4. Accrued Liability $2,391,157 $3,048,772
5. Liability Volatility Ratio (LVR) [(4) / (2)] 0.8 0.9
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
06/30/2022
0.00
N/A 0.8
0.9
C-27
CalPERS Actuarial Valuation – June 30, 2022
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool
Page 22
Funded Status – Termination Basis
The funded status measured on a termination basis is an estimate of the financial position of the plan had the
contract with CalPERS been terminated as of June 30, 2022. The accrued liability on a termination basis
(termination liability) is calculated differently compared to the plan’s ongoing funding liability. For the termination
liability calculation, both compensation and service are frozen as of the valu ation date and no future pay
increases or service accruals are assumed. This measure of funded status is not appropriate for assessing the
need for future employer contributions in the case of an ongoing plan, that is, for an employer that continues to
provide CalPERS retirement benefits to active employees. Unlike the actuarial cost method used for ongoing
plans, the termination liability is the present value of the benefits earned through the valuation date.
A more conservative investment policy and asse t allocation strategy was adopted by the board for the
Terminated Agency Pool. The Terminated Agency Pool has limited funding sources since no future employer
contributions will be made. Therefore, expected benefit payments are secured by risk -free assets and benefit
security for members is increased while limiting the funding risk. However, this asset allocation has a lower
expected rate of return than the PERF and consequently, a lower discount rate is assumed. The lower discount
rate for the Terminated Agency Pool results in higher liabilities for terminated plans.
The effective termination discount rate will depend on actual market rates of return for risk -free securities on the
date of termination. As market discount rates are variable , the table below shows a range for the hypothetical
termination liability based on the lowest and highest interest rates observed during an approximate 19 -month
period from 12 months before the valuation date to seven months after.
Discount Rate: 1.75%
Price Inflation: 2.50%
Discount Rate: 4.50%
Price Inflation: 2.75%
Market
Value of
Assets (MVA)
Termination
Liability1,2
Funded
Ratio
Unfunded
Termination
Liability
Termination
Liability1,2
Funded
Ratio
Unfunded
Termination
Liability
$2,631,340 $7,308,040 36.0% $4,676,700 $3,666,472 71.8% $1,035,132
1 The termination liabilities calculated above include a 5% contingency load. The contingency load and other actuarial
assumptions can be found in Appendix A of the Section 2 report.
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 3.38% on June 30, 2022, the valuation date.
In order to te rminate 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 p lan liabilities. Before beginning this process, please consult with the plan
actuary.
C-28
CalPERS Actuarial Valuation – June 30, 2022
PEPRA 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, 2021 June 30, 2022
Active Members
Counts 57 59
Average Attained Age 40.6 41.2
Average Entry Age to Rate Plan 37.8 38.3
Average Years of Credited Service 2.4 2.5
Average Annual Covered Pay $53,260 $57,623
Annual Covered Payroll $3,035,848 $3,399,782
Present Value of Future Payroll $32,552,770 $36,677,825
Transferred Members 23 30
Separated Members 27 34
Retired Members and Beneficiaries *
Counts 0 0
Average Annual Benefits $0 $0
Total Annual Benefits $0 $0
Counts of members included in the valuation are counts of the records processed by the valuation. Multiple
records may exist for those who have service in more than one valuation group. This does not result in double
counting of liabilities.
* Values include community property settlements.
List of Class 1 Benefit Provisions
This plan has the additional Class 1 Benefit Provisions:
• None
C-29
CALPERS ACTUARIAL VALUATION - June 30, 2022
PEPRA 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
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 7.75%
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 $2000
Survivor Allowance (PRSA) No
COLA 2%
C-30
CALPERS ACTUARIAL VALUATION - June 30, 2022
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 25
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 for the plan is dependent on the benefit levels,
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 p ercent.
The table below shows the determination of the PEPRA member contribution rates effective July 1, 2024, based on 50% of the
total normal cost rate as of the June 30, 2022 valuation.
Basis for Current Rate Rates Effective July 1, 2024
Rate Plan
Identifier Benefit Group Name
Total
Normal
Cost
Member
Rate
Total
Normal
Cost
Change Change
Needed
Member
Rate
26567 Miscellaneous PEPRA Level 15.43% 7.75% 15.62% 0.19% No 7.75%
C-31
CALPERS ACTUARIAL VALUATION - June 30, 2022
PEPRA Miscellaneous Plan of the City of Rancho Palos Verdes
CalPERS ID: 3846845523
Rate Plan belonging to the Miscellaneous Risk Pool Page 26
Section 2
CALIFORNIA PUBLIC EMPLOYEES’ RETIREMEN T 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
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