HomeMy WebLinkAboutItem 4e - CalPERS Actuarial Analysis Presentation - Advance DistributionCity of San Luis Obispo, Council Memorandum
City of San Luis Obispo
Council Agenda Correspondence
DATE: May 5, 2023
TO: Mayor and Council
FROM: Emily Jackson, Finance Director
VIA: Derek Johnson, City Manager
SUBJECT: ITEM 4E – PRESENTATION OF CALPERS ACTUARIAL
ANALYSIS RELATED TO ADDITIONAL DISCRETIONARY PAYMENTS
As noted in the 2023-25 Strategic Budget Direction presentation on April 18, 2023, staff
engaged with Foster & Foster, an independent national actuarial consulting firm to
perform a review of the City’s progress in paying down unfunded pension liabilities. This
memo provides a background and summary of actions taken by the City since 2017 to
pay down the unfunded pension liabilities and transmits the actuarial analysis prepared
by Foster & Foster.
The presentation on May 16, 2023, will be made by Foster & Foster staff and will provide
an opportunity for the Council to ask questions of the consultant.
Background
In 2017, CalPERS made some significant policy changes to address unfunded liabilities
systemwide. These policy changes significantly increased required pension contributions
for member agencies. As a result, the City had to reduce ongoing expenditures by $8.9
million (across all funds) in order to address and increase its pension contributions in line
with new CalPERS requirements. To provide a framework to respond to the long-term
fiscal impacts of the significant increases in required pension contributions to the
CalPERS retirement system, the City Council adopted a Fiscal Health Response Plan
(FHRP), containing three key components, which began implementation with adoption of
the FY 2018-19 Financial Plan Supplement and continued through FY 2020-21. The
three components of the FHRP included:
1.New Revenues. In November 2018, voters approved a Cannabis tax, allowing the
industry to legally operate within the boundaries of the City. This afford ed the City
a new income source through a special business tax on all Cannabis related
businesses. In addition to a Cannabis tax on sales of the product, the City also
ensured compliance with existing City regulations and taxes and pursu ed
enforcement as applicable including the then-emerging industry of homestay
businesses. The following highlights new revenues under the FHRP:
a.Code Enforcement
b.Transient Occupancy Compliance of Homestay businesses
c. Business license and tax compliance
d.Cannabis license and business tax
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ITEM 4E – CalPERS Actuarial Analysis Related to Additional Discretionary Payments Page 2
2.Operating Reductions and New Ways of Doing Business. All City funds
(general and enterprise) participated in this component to varying degrees. The
plan contained a list of operating reduction options to be pursued along with new
ways of doing business. These new ways of doing business focused on energy
efficiency and included thoughtful reorganizations to enable the City to deliver
services differently while minimizing impacts to residents and other customers.
Thoughtful reorganizations were facilitated by the City’s Organization of the Future
with Phase One focused on the community services group, beginning with the
2019-21 Financial Plan.
The concepts were generally as follows:
3.Employee Concessions – All City Employees and All Funds. Over the three
years of the FHRP, the City negotiated in good faith with its represented and
unrepresented bargaining groups to achieve approximately $1.9M of ongoing
employee concessions. The employee concessions aimed at a recipe of increasing
the employee contribution to CalPERS (“retirement cost-sharing”) by three (3%)
percent of pay and offsetting that employee burden by providing a 4% cost-of-living
adjustment over a two-year period and continuing the annual City health insurance
cost-sharing contribution. Ultimately, the City was able to successfully negotiate
retirement cost-sharing with all groups except the San Luis Obispo City Employees
Association.
In addressing unfunded pension liability as it related to employee concessions, the
Council adopted policies such as the Fiscal Sustainability Policy, Compensation
Philosophy, and Labor Relations Objectives to provide guidance and address and
implement the concept of “shared responsibility.” This concept acknowledges the
responsibility of the City, and its employees, to share the burden of pension and
health costs, including addressing unfunded liabilities, while recognizing that
increasing the employee share of this cost may impact the City’s ability to attract
and retain well-qualified employees that ultimately deliver programs and services
to the community. With that in mind, employee concessions were proposed as a
significant component of the FHRP.
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ITEM 4E – CalPERS Actuarial Analysis Related to Additional Discretionary Payments Page 3
To date, implementation of the concessions has resulted in employees from all
bargaining groups, except members of the San Luis Obispo City Employees’
Association, paying an additional three (3%) percent of retirement cost sharing
ongoing. The table below highlights the percentage of retirement cost sharing each
represented and unrepresented bargaining groups has agreed to:
Table 1: Retirement Cost Sharing Percentage by Bargaining Group
1 City Bargaining Group
Total
Retirement
Cost Sharing
Percentage
2 Fire Union, Local 3523 3%
3 Police Officers’ Association 6%
4 Police Staff Officers’ Association 3%
5 San Luis Obispo City Employees’ Association 0%
6 Unrepresented Confidentials 3%
7 Unrepresented Management 3%
In addition, the implementation of tiered pension plans has reduced the City’s
contributions to CalPERS compared to what they would have been. The City has
three established retirement tiers:
Classic 1: Employees hired with the City before December 2012, and
provides the most generous defined benefit plan.
Classic 2: Employees hired with the City with prior CalPERS experience on
or after December 6, 2012, for miscellaneous and police safety or on or after
August 30, 2012, for fire safety. Employees in this plan have a lesser
defined benefit when compared to Classic 1 employees, but greater than
PEPRA employees.
PEPRA: The California Public Employees’ Pension Reform Act (PEPRA)
was approved and took effect on January 1, 2013, which provides uniformity
in pension benefits for all member agencies. PEPRA limits the retirement
benefits offered to new CalPERS members hired after January 2013 and
requires that employees pay 50% of the total normal cost of retirement.
Over the last decade, most Classic 1 employees have retired from the City and the
majority of employees hired since are in the PEPRA tier. Table 2 outlines the count
and percentage of employees in each retirement tier and benefits formula
(miscellaneous “misc.”, police safety, and fire safety). Only a quarter of employees
makeup the Classic 1 tier, and 64% of the workforce are in the PEPRA tier. This
demographic shift has helped the City contain pension costs.
Page 15 of 1165
ITEM 4E – CalPERS Actuarial Analysis Related to Additional Discretionary Payments Page 4
Table 2: Count and Percentage of City Employees at Each CalPERS
Retirement Tier and Benefit Formula
1 Employee Retirement Tier & Benefit Formula Total Count Percentage
2 Classic 1 Total 117 26%
3 Retirement Fire Safety Classic 1 (3% @ 50) 17 4%
4 Retirement Misc. Classic 1 (2.7% @ 55) 80 18%
5 Retirement Police Safety Classic 1 (3% @ 50) 20 4%
6 Classic 2 Total 44 10%
7 Retirement Fire Safety Classic 2 (3% @ 55) 11 2%
8 Retirement Misc. Classic 2 (2% @ 60) 25 6%
9 Retirement Police Safety Classic 2 (2% @ 50) 8 2%
10 PEPRA Total 292 64%
11 Retirement Fire Safety PEPRA (2.7% @ 57) 21 5%
12 Retirement Misc. PEPRA (2% @ 62) 247 55%
13 Retirement Police Safety PEPRA (2.7% @ 57) 24 5%
14 Grand Total 453 100%
Implementation of the components noted above have contributed to the City’s ability to
address increased CalPERS contributions and make a total of $16.6 million in additional
discretionary payments in order to paydown its pension liability.
Current Status
Based on the Foster & Foster actuarial report (Attachment A), the City’s commitment to
paying down its pension debt by making additional discretionary payments (ADPs) has
helped to make progress on improving the plan’s overall funded status. Unfortuna tely,
the 2022 investment losses experienced by CalPERS have significantly impacted the
City’s funded status (as well as that of other PERS agencies throughout California). Table
3 shows the funded status of the City’s pension plans each year back to 2015 and
compares it to what had been projected in 2017, and what it would look like without the
additional discretionary payments.
Page 16 of 1165
ITEM 4E – CalPERS Actuarial Analysis Related to Additional Discretionary Payments Page 5
As shown in Table 3, the ADPs that the City has made have helped to make progress in
paying down the unfunded pension liabilities. As of 2021, the funded status of the City’s
pension had reached 70.1%, a significant improvement compared to 64.4% in 2015.
Absent the ADPs, the funded status in 2021 would have been 68.5%.
Unfortunately, the CalPERS -7.5% investment return in FY 2021-22 significantly impacted
the City’s funded status (as well as that of other PERS agencies). Based on these losses,
the estimated funded status for 2022 is 64.3%. Absent the ADPs, the -7.5% return would
have decreased the City’s funded status to 60.4%.
Despite the ADPs and factoring in the -7.5% CalPERS investment return, the City’s
current UFL is approximately $180 million. This UFL is addressed through ongoing
regular payments to CalPERS and paydown is expedited by the City’s ability t o make
ADPs.
Actuarial Analysis
Feedback provided by the City’s independent Actuary is that the City is taking appropriate
action to make progress in paying down the unfunded pension liabilities, but that market
conditions impacting CalPERS investments hinder progress. The impact of the -7.5%
investment return in FY 2021-22 provides a good reminder that the City’s ability to
address unfunded liabilities is heavily impacted by factors outside of the City’s control.
64.4%60.6%62.6%61.5%62.2%61.7%
70.1%
64.3%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
2015 2016 2017 2018 2019 2020 2021 2022
(ESTIMATED)
Table 3: Historical Funded Status -City of San Luis Obispo CalPERS Pension
Plans
Projected Funded Status From 2017 Study based on 6/30/15 Actuarial Valuation
From Current study based on 6/30/21 Actuarial Valuation
From Current study based on 6/30/21 Actuarial Valuation - WITHOUT ADPs (Extra Payments to CalPERS)
Page 17 of 1165
ITEM 4E – CalPERS Actuarial Analysis Related to Additional Discretionary Payments Page 6
The full actuarial analysis provided by Foster & Foster is included as Attachment A to this
report and contains a lot of information. The key pieces of the report relate to the City’s
funded level, the amount of unfunded liabilities, and expected future contributions. The
following slides include information related to these items:
Slides 18 and 48 show the unfunded liability for the miscellaneous plan (slide 18)
and safety plan (slide 48) and show the impact that the -7.5% CalPERS investment
return on the amount of unfunded liability.
Slides 22 and 51 compare the historical actuarial accrued liability (AAL) fo r the
miscellaneous plan (slide 22) and safety plan (slide 51) versus the market asset
value.
Slides 28 and 58 show the impact of the -7.5% investment return on future
contributions for the miscellaneous plan (slide 28) and safety plan (slide 58).
Slides 42 and 72 show contribution projections for the miscellaneous plan (slide
42) and safety plan (slide 72).
Slides 43 and 73 show the projected funded status for the miscellaneous plan
(slide 43) and safety plan (slide 73) assuming continuation of employee cost
sharing and payment of future ADPs.
Slide 75 shows the total projected CalPERS contribution highlight ing the
committed future ADPs.
Slide 91 summarizes the savings that would be realized if the City were to make
the $1,584,187 ADP in April 2024.
Pension Costs in the Long-Term Forecast
Given the results of the actuarial analysis, the long-term forecast will need to be revised
in order to factor in the expected increased pension costs in the out years. Staff is not
recommending a change to the forecast at this time, as the amounts forecasted for the
2023-25 Financial Plan period align closely enough to the projections provided by Foster
& Foster.
The City will have some budgetary issues to work through in the coming years, but the
general economic uncertainty related to timing of reimbursement for storm-related costs,
CalPERS decision-making inflationary factors and concerns about a recession makes it
difficult to pin down the long-term forecast at this time. Fortunately, the increased cost
will incrementally impact the forecast in a meaningful way in FY 2025-26, which provides
an onramp for determining how to best address these increased costs in the long-term.
ATTACHMENT
A – Foster & Foster CalPERS Review- 6/30/21 Valuation Preliminary Results
Page 18 of 1165
CITY OF SAN LUIS OBISPO
CALPERS MISCELLANEOUS & SAFETY PLANS
CalPERS Review – 6/30/21 Valuation
Mary Elizabeth Redding, FSA, EA, MAAA
Bianca Lin, FSA, EA, MAAA
Matthew Childs
Foster & Foster, Inc.
May 4, 2023
Contents
l:\sanluisobispocity\calpers\6-30-21\f&f_sanluisobispocity_23-05-04_calpers_misc_safety_21.docx
Topic Page
Background 1
Miscellaneous Plan:
Historical Information 15
Projections 25
Safety Plan:
Historical Information 45
Projections 55
Combined Miscellaneous and Safety 75
Leaving CalPERS 77
PEPRA Cost Sharing 79
Paying Down the Unfunded Liability 82
Additional Discretionary Payment Analysis 91
Actuarial Certification 99
Page 19 of 1165
May 4, 2023 1
DEFINITIONS
PVB - Present Value of all Projected
Benefits:
The value now of amounts due to be
paid in the future
Discounted value (at valuation date -
6/30/21), of all future expected benefit
payments based on various (actuarial)
assumptions
Current Normal Cost (NC):
Portion of PVB allocated to (or “earned” during) current year
Value of employee and employer current service benefit
Actuarial Liability (AAL):
Discounted value (at valuation date) of benefits earned through valuation date
[value of past service benefit]
Portion of PVB “earned” at measurement
May 4, 2023 2
DEFINITIONS
Target- Have money in the bank to cover Actuarial Liability (past service)
Unfunded Liability (UAAL or UAL) - Money short of target at valuation date
If all actuarial assumptions were always exactly met, then the plan assets would
always equal AAL
Any difference is the unfunded (or overfunded) AAL
Every year, the actuary calculates the difference between the expected UAAL and
Actual UAAL. This is a new layer or amortization base
Each new layer gets amortized (paid off) over a period of time as part of the
contribution [rate]
Page 20 of 1165
May 4, 2023 3
HOW WE GOT HERE
Investment Losses
CalPERS Contribution Policy
Enhanced Benefits
Demographics
May 4, 2023 4
HOW WE GOT HERE – INVESTMENT RETURN
Returns (after 2001) shown are gross returns, unreduced for administrative expenses, from CalPERS valuation
reports, when available. The discount rate is based on expected returns net of administrative expenses.
20-Year and 30-Year
average return rates on
6/30/22 are 6.8% and
7.6%, respectively
Page 21 of 1165
May 4, 2023 5
HOW WE GOT HERE – OLD CONTRIBUTION POLICY
Effective with 2003 valuations:
Slow (15 year) recognition of investment losses into funded status
Rolling 30 year amortization of all (primarily investment) losses
Designed to:
First smooth rates and
Second pay off UAL
Mitigated contribution volatility
May 4, 2023 6
HOW WE GOT HERE – ENHANCED BENEFITS
At CalPERS, Enhanced Benefits implemented using all (future & prior) service
Typically not negotiated with cost sharing
City of San Luis Obispo
Tier 1 Tier 2 PEPRA
Miscellaneous 2.7%@55 FAE1 2%@60 FAE3 2%@62 FAE3
Police Safety 3%@50 FAE1 2%@50 FAE3 2.7%@57 FAE3
Fire Safety 3%@50 FAE1 3%@55 FAE3 2.7%@57 FAE3
Note:
FAE1 is highest one year (typically final) average earnings
FAE3 is highest three years (typically final three) average earnings
PEPRA tier implemented for new employees hired after 1/1/13
Employee pays half of total normal cost
2023 Compensation limit
Social Security participants: $146,042
Non-Social Security participants: $175,250
Page 22 of 1165
May 4, 2023 7
HOW WE GOT HERE – ENHANCED BENEFITS
Available CalPERS Benefit formulas. City’s formulas shown in blue (Tier 1),
green (Tier 2) and red (PEPRA).
For any retirement age, chart shows benefit multiplier (% FAE per year of service)
Retirement Age Benefit Multiplier
May 4, 2023 8
HOW WE GOT HERE – ENHANCED BENEFITS Benefit Multiplier Retirement Age
Page 23 of 1165
May 4, 2023 9
HOW WE GOT HERE – DEMOGRAPHIC
Around the State
Large retiree liability compared to actives
State-wide public agency average percentage of liability belonging to
retirees: 59% for Miscellaneous, 67% for Safety
Declining active population and increasing number of retirees
Higher percentage of retiree liability increases contribution volatility
City of San Luis Obispo percentage of liability belonging to retirees:
Miscellaneous 69%
Safety 74%
May 4, 2023 10
CALPERS CHANGES
April 2013: CalPERS adopted new contribution policy
No asset smoothing or rolling amortization
February 2018: New amortization policy for 2021/22 contributions
Fixed dollar (level) 20-year amortization rather than % pay (escalating)
5-year ramp up (not down) for investment gains and losses
CalPERS Board changed the discount rate to 7%, still phasing in to rates:
Rate Initial Impact Full Impact
6/30/16 valuation 7.375% 18/19 22/23
6/30/17 valuation 7.25% 19/20 23/24
6/30/18 valuation 7.00% 20/21 24/25
In the November 2021 meeting, CalPERS Board adopted new
Discount rate and investment allocation
Discount rate: 6.8% for 6/30/2021. UAL impact matches investment
gain amortization (5-year ramp-up). Initial impact in 23/24 and full
impact in 27/28.
Asset allocation has higher investment risk than current portfolio
Experience study (Demographic assumptions)
Page 24 of 1165
May 4, 2023 11
CALPERS CHANGES
Risk Mitigation Strategy
Move to more conservative investments over time to reduce volatility
Only when investment return is better than expected
Lower discount rate in concert
Essentially use ≈50% of investment gains to pay for cost increases
Likely get to 6.0% discount rate over 20+ years
Risk mitigation suspended from 6/30/16 to 6/30/18 valuation
Did not trigger for 6/30/19 or 6/30/20 valuations
First triggered for 6/30/21 valuation – 6.8% discount rate
May 4, 2023 12
CALPERS CHANGES
Page 25 of 1165
May 4, 2023 13
CALPERS CHANGES
Capital Market Assumptions
Asset Class Asset Segment
Near-Term
Return
(5-year)
Long-Term
Return
(20-year)
Volatility
(20-year)
Growth
Global Equity – Cap Weighted 6.8% 6.8% 17.0%
Global Equity – Non-Cap Weighted 5.1% 6.1% 13.5%
Private Equity 8.9% 9.6% 30.1%
Income
Long U.S. Treasuries 0.1% 2.6% 12.4%
Mortgage-Backed Securities 1.2% 2.8% 3.1%
Investment Grade Corporates 0.1% 3.9% 8.5%
Spread Product – High Yield 2.2% 4.7% 9.2%
Spread Product – Sovereigns 3.2% 4.5% 10.4%
High Yield Segment 2.2% 4.6% 9.0%
Real Assets Real Estate 5.3% 5.5% 12.2%
Liquidity Liquidity 0.3% 1.7% 0.8%
Other
Private Debt 6.8% 5.9% 9.9%
Emerging Market Debt 2.7% 4.8% 10.3%
May 4, 2023 14
CALPERS CHANGES
Portfolio Target Allocations
Prior
Portfolio
11/17/21
Portfolio
Asset Classification
Liquidity 1% -
Real Assets 13% 15%
Private Debt - 5%
EM Sov Bonds 1% 5%
High Yield 4% 5%
Investment Grade Corp. 6% 10%
Mtge-backed Securities 7% 5%
Treasury 10% 5%
Private Equity 8% 13%
Global Equity1 50% 42%
Leverage - (5)%
Total 100% 100%
Standard Deviation 11.2% 12.0%
1 Cap and non-cap weighted combined for this table; actual portfolios have specific allocations for each classification.
Page 26 of 1165
May 4, 2023 15
SUMMARY OF DEMOGRAPHIC INFORMATION - MISCELLANEOUS
2001 2011 2020 2021
Actives
Counts 265 291 319 324
Average
Age 45 46 42 41
City Service 11 10 8 8
PERSable Wages $ 49,000 $ 68,500 $ 72,600 $ 73,800
Total PERSable Wages 13,000,000 19,900,000 23,200,000 23,900,000
Inactive Members
Counts
Transferred 62 110 150 148
Separated 86 146 248 263
Retired
Service 103 231 391 409
Disability 19 21 22 22
Beneficiaries 15 20 29 31
Total 137 272 442 462
Average Annual City Provided
Benefit for Service Retirees2 11,500 26,200 31,300 32,000
2 Average City-provided pensions are based on City service & City benefit formula, and are not representative of
benefits for long-service employees.
May 4, 2023 16
SUMMARY OF DEMOGRAPHIC INFORMATION - MISCELLANEOUS
Page 27 of 1165
May 4, 2023 17
PLAN FUNDED STATUS - MISCELLANEOUS
June 30, 2020 June 30, 2021
Actuarial Accrued Liability
Active $ 60,800,000 $ 62,500,000
Retiree 165,100,000 176,500,000
Inactive 15,000,000 16,700,000
Total 240,900,000 255,700,000
Assets 147,800,000 177,800,000
Unfunded Liability 93,100,000 77,900,000
Funded Ratio 61.4% 69.5%
Average funded ratio for
CalPERS Public Agency
Miscellaneous Plans
72.3%
83.7%
May 4, 2023 18
PLAN FUNDED STATUS - MISCELLANEOUS
City CalPERS Assets and Actuarial Liability ($Millions)3
3 Projected 2022 assets reflects -7.5% CalPERS investment return for 2021/22.
Page 28 of 1165
May 4, 2023 19
PLAN FUNDED STATUS - MISCELLANEOUS
Discount Rate Sensitivity
June 30, 2021
Discount Rate
6.80% 6.30%4 5.80%
AAL $ 255,700,000 $ 272,200,000 $ 288,600,000
Assets 177,800,000 177,800,000 177,800,000
Unfunded Liability 77,900,000 94,400,000 110,800,000
Funded Ratio 69.5% 65.3% 61.6%
4 Estimated by Foster & Foster.
May 4, 2023 20
PLAN FUNDED STATUS - MISCELLANEOUS
Unfunded Accrued Liability Changes
Unfunded Accrued Liability on 6/30/20 $ 93,100,000
Expected 6/30/21 Unfunded Accrued Liability 93,400,000
Changes
Assumption Change (demographics) 1,200,000
Discount Rate 7% to 6.8% 5,700,000
Asset Loss (Gain) (21.3% return for FY 2021) (23,000,000)
Contribution & Experience Loss (Gain) 600,000
Total (15,500,000)
Unfunded Accrued Liability on 6/30/21 77,900,000
Projected Unfunded Accrued Liability on 6/30/225 94,600,000
5 Projected 2022 assets reflects -7.5% CalPERS investment return for 2021/22.
Page 29 of 1165
May 4, 2023 21
FUNDED RATIO - MISCELLANEOUS
6/30/22 funded status estimated
May 4, 2023 22
FUNDED STATUS (MILLIONS) - MISCELLANEOUS
6/30/22 funded status estimated
Page 30 of 1165
May 4, 2023 23
CONTRIBUTION RATES - MISCELLANEOUS
Benefit
Improvement
2%@55
Lower discount
rates
PEPRA impact
Benefit
Improvement
2.7%@55
May 4, 2023 24
CONTRIBUTION RATES - MISCELLANEOUS
6/30/20 6/30/21
2022/2023 2023/2024
Total Normal Cost 17.1% 18.2%
Employee Normal Cost 7.5% 7.7%
Employer Normal Cost 9.6% 10.5%
Amortization Payments 29.2% 26.7%6
Total Employer Contribution Rate 38.8% 37.2%
2022/23 Employer Contribution Rate 38.8%
Payroll greater than expected (0.2%)
6/30/17 Discount rate & inflation (5th Year) 0.3%
6/30/18 Discount rate change (4th Year) 0.7%
6/30/21 Demog. Assumption change (1st Year, no ramp) 1.7%
6/30/21 Risk mitigation (6.8%) (Normal Cost change) 0.8%
4/1/22 ADP $7,533,0217 (2.1%)
Other (gains)/losses mainly net investment gain (2.7%)
2023/24 Employer Contribution Rate 37.2%
6 Equivalent to 10.4% of UAL. One year, 6.8% interest on the UAL is 17.4% of payroll. 2023/24 amortization
payment exceeds interest on the UAL, so there is no “negative amortization.”
7 Does not include impact of $1,914,274ADP to be paid April 2023.
Page 31 of 1165
May 4, 2023 25
CONTRIBUTION PROJECTIONS - MISCELLANEOUS
Investment returns:
June 30, 2022 (7.5%)8
Future returns based on stochastic analysis using 1,000 trials
Single year returns9 with current investment mix, no risk mitigation:
Percentile
25th 50th 75th
First 10 years -1.8% 6.0% 14.7%
After 10 years -0.7% 7.5% 16.4%
Assumes investment returns will generally be lower over the next 10 years
and higher beyond that.
Discount Rate decreases due to Risk Mitigation policy – Ultimate rate 6.0%
No Other: Gains/Losses, Method/Assumption Changes, Benefit Improvements
Different from CalPERS projection
Impact of Risk Mitigation Policy:
Net impact of investment gain and discount rate change amortized over 20 years
with 5 year ramp up
Same amortization method for all future years
8 Gross return based on June 30, 2022 CalPERS Annual Financial Comprehensive Report issued in November 2022.
9 Nth percentile means N percentage of our trials result in returns lower than the indicated rates.
May 4, 2023 26
CONTRIBUTION PROJECTIONS - MISCELLANEOUS
New hire assumptions:
All new hires assumed PEPRA members and none are Classic members
6/30/21 employee distribution:
Benefit Tier Count
% of
Total 20/21 Payroll
% of
Total
2.7%@55 FAE1 (Classic) 103 31.8% $ 9,731,400 40.7%
2%@60 FAE3 (Classic Tier 2) 22 6.8% 1,773,500 7.4%
2%@62 FAE3 (PEPRA) 199 61.4% 12,400,500 51.9%
Total 324 100% 23,905,400 100%
Projections include 2022/23 through 2028/29 ADP’s of $1,914,274 each year:
Assume City will make the payment on 4/1 paying down 2013, 2015, and
2016 loss bases
First impact 2023/24 contribution rates
Page 32 of 1165
May 4, 2023 27
CONTRIBUTION PROJECTIONS - MISCELLANEOUS
EE Cost-Sharing:
Miscellaneous Employee Group
Employee
Cost
Sharing
Group As a % of
Total Miscellaneous
Payroll
SLOCEA 0% 51%
Management 3% 38%
Confidential 3% 2%
Fire Union 3% 1%
Police Union Classic 6% 4%
Police Union PEPRA 3% 3%
Police Management 3% 1%
May 4, 2023 28
CONTRIBUTION PROJECTIONS - MISCELLANEOUS
Impact of 21/22 Investment Return
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FUNDED STATUS - MISCELLANEOUS
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FUNDED STATUS - MISCELLANEOUS
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SUMMARY OF DEMOGRAPHIC INFORMATION - SAFETY
2001 2011 2020 2021
Actives
Counts 106 97 106 95
Average Age 42 n/a 40 41
Average Service 14 n/a 10 11
Average PERSable Wages $ 66,300 $ 112,700 $ 109,100 $ 115,000
Total PERSable Wages 7,000,000 10,900,000 11,600,000 10,900,000
Inactive Members
Counts
Transferred 29 14 15 20
Separated 10 8 12 13
Receiving Payments 90 175 208 211
May 4, 2023 46
SUMMARY OF DEMOGRAPHIC INFORMATION - SAFETY
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PLAN FUNDED STATUS - SAFETY
June 30, 2020 June 30, 2021
Actuarial Accrued Liability
Active $ 50,100,000 $ 53,700,000
Retiree 163,000,000 169,500,000
Inactive 2,700,000 5,500,000
Total 215,800,000 228,700,000
Assets 133,800,000 161,600,000
Unfunded Liability 82,000,000 67,100,000
Funded Ratio 62.0% 70.7%
Average funded ratio for
CalPERS Public Agency
Safety Plans
69.2%
80.9%
May 4, 2023 48
PLAN FUNDED STATUS - SAFETY
City CalPERS Assets and Actuarial Liability ($Millions)10
10 Projected 2022 assets reflects -7.5% CalPERS investment return for 2021/22.
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PLAN FUNDED STATUS - SAFETY
Discount Rate Sensitivity
June 30, 2021
Discount Rate
6.80% 6.30%11 5.80%
AAL $ 228,700,000 $ 243,900,000 $ 259,000,000
Assets 161,600,000 161,600,000 161,600,000
Unfunded Liability 67,100,000 82,300,000 97,400,000
Funded Ratio 70.7% 66.3% 62.4%
11 Estimated by Foster & Foster.
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FUNDED RATIO - SAFETY
6/30/22 funded status estimated
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FUNDED STATUS (MILLIONS) - SAFETY
6/30/22 funded status estimated
May 4, 2023 52
CONTRIBUTION RATES - SAFETY
Benefit
Improvement
3%@50
Lower discount
rates
PEPRA impact
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May 4, 2023 53
CONTRIBUTION RATES - SAFETY
6/30/21 Valuation
2023/2024 Contribution Rates
Total12 Tier 1 Tier 2 PEPRA
3%@50
3%@55 &
2%@50 2.7%@57
Base Total Normal Cost 32.1% 34.6% 30.8% 27.3%
Class 1 Benefits
Final One Year Compensation 0.8% 1.5% - -
Post-Retirement Survivor Allowance 1.9% 2.0% 1.9% 1.7%
Total Normal Cost 34.8% 38.1% 32.7% 29.0%
Expected Employee Contr. Rate 10.3% 9.0% 9.0% 14.5%
Employer Normal Cost 24.4% 29.1% 23.7% 14.5%
Amortization Payment 39.1% 70.3% - -
Amortization of Side Fund 14.5% 26.1% - -
Total Employer (ER) Contribution 78.0% 125.4% 23.7% 14.5%
Employee counts 95 47 19 29
Employee payroll (in 000’s) $ 11,870 $ 6,600 $ 2,348 $ 2,922
Total ER Contribution $ (in 000’s) $ 9,260 $ 8,279 $ 557 $ 424
12 Weighting of total contribution based on projected classic and PEPRA payrolls
May 4, 2023 54
CONTRIBUTION RATES - SAFETY
6/30/20 6/30/21
2022/2023 2023/2024
Total Normal Cost 32.1% 34.8%
Employee Normal Cost 10.1% 10.3%
Employer Normal Cost 22.0% 24.4%
Amortization Payments 54.1% 53.6%13
Total Employer Contribution Rate 76.1% 78.0%
2022/23 Employer Contribution Rate 76.1%
Payroll lower than expected 4.3%
6/30/17 Discount rate & inflation (5th Year) 0.7%
6/30/18 Discount rate change (4th Year) 1.1%
6/30/21 Demog. assumption change (1st Year, no ramp) 2.3%
6/30/21 Risk Mitigation (Normal Cost change) 1.2%
4/1/22 ADP $4,896,00014 (2.5%)
Other (gains)/losses mainly net investment gain (5.2%)
2023/24 Employer contribution rate 78.0%
13 Equivalent to 11.0% of UAL. One year, 6.8% interest on the UAL is 33.3% of payroll. 2023/24 amortization
payment exceeds interest on the UAL, so there is no “negative amortization.”
14 Does not include impact of $522,937ADP to be paid April 2023.
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CONTRIBUTION PROJECTION - SAFETY
Investment returns:
June 30, 2022 (7.5%)15
Future returns based on stochastic analysis using 1,000 trials
Single year returns16 with current investment mix, no risk mitigation:
Percentile
25th 50th 75th
First 10 years -1.8% 6.0% 14.7%
After 10 years -0.7% 7.5% 16.4%
Assumes investment returns will generally be lower over the next 10 years
and higher beyond that.
Discount Rate decreases due to Risk Mitigation policy – Ultimate rate 6.0%
No Other: Gains/Losses, Method/Assumption Changes, Benefit Improvements
Different from CalPERS projection
Impact of Risk Mitigation Policy:
Net impact of investment gain and discount rate change amortized over 20 years
with 5 year ramp up
Same amortization method for all future years
15 Gross return based on June 30, 2022 CalPERS Annual Financial Comprehensive Report issued in November 2022.
16 Nth percentile means N percentage of our trials result in returns lower than the indicated rates.
May 4, 2023 56
CONTRIBUTION PROJECTION - SAFETY
New hire assumptions:
All new hires assumed PEPRA members and none are Classic members
6/30/21 employee distribution:
Benefit Tier Count
% of
Total 20/21 Payroll
% of
Total
3%@50 FAE1 Fire & Police 47 49.5% $6,075,600 55.6%
3%@55 FAE3 Fire 12 12.6% 1,395,900 12.8%
2%@50 FAE3 Police 7 7.4% 765,900 7.0%
2.7%@57 FAE3 (PEPRA) Fire 6 6.3% 485,800 4.4%
2.7%@57 FAE3 (PEPRA) Police 23 24.2% 2,203,500 20.2%
Total 95 100.0% 10,926,700 100.0%
Projections Include 2022/23 through 2028/29 ADP’s of $522,937 each year:
Assume City will make the payment on 4/1 paying down the 2016
investment loss base
First impact 2023/24 contribution rates
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May 4, 2023 57
CONTRIBUTION PROJECTION - SAFETY
EE Cost-Sharing:
Safety Employee Group
Employee
Cost
Sharing
Group As a % of
Total Safety
Payroll
Fire 3% 42%
Police
Police Management 3% 21%
Police Union Classic 6% 17%
Police Union PEPRA 3% 20%
Total 100%
May 4, 2023 58
CONTRIBUTION PROJECTION - SAFETY
Impact of 21/22 Investment Return
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CONTRIBUTION PROJECTION - SAFETY
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CONTRIBUTION PROJECTION - SAFETY
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CONTRIBUTION PROJECTION - SAFETY
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CONTRIBUTION PROJECTION - SAFETY
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CONTRIBUTION PROJECTION - SAFETY
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CONTRIBUTION PROJECTION - SAFETY
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CONTRIBUTION PROJECTION - SAFETY
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CONTRIBUTION PROJECTION - SAFETY
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CONTRIBUTION PROJECTION - SAFETY
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CONTRIBUTION PROJECTION - SAFETY
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CONTRIBUTION PROJECTION - SAFETY
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CONTRIBUTION PROJECTION - SAFETY
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CONTRIBUTION PROJECTION - SAFETY
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CONTRIBUTION PROJECTION - SAFETY
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FUNDED STATUS - SAFETY
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FUNDED STATUS - SAFETY
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COMBINED MISCELLANEOUS AND SAFETY
May 4, 2023 76
COMBINED MISCELLANEOUS AND SAFETY
Funded Status Summary on June 30, 2021
(Amounts in $Millions)
Miscellaneous Safety Total
Actuarial Accrued Liability (AAL) $ 255.7 $ 228.7 $ 484.4
Assets 177.8 161.6 339.4
Unfunded AAL 77.9 67.1 145.0
Funded Ratio 69.5% 70.7% 70.1%
Projected Funded Status Summary on June 30, 202217
(Amounts in $Millions)
Miscellaneous Safety Total
Actuarial Accrued Liability (AAL) $ 263.2 $ 235.2 $ 498.4
Assets 168.6 151.1 319.7
Unfunded AAL 94.6 84.1 178.7
Funded Ratio 64.1% 64.2% 64.1%
17 Projected 2022 assets reflects -7.5% CalPERS investment return for 2021/22.
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May 4, 2023 77
LEAVING CALPERS
Participation in CalPERS is governed by State law and CalPERS rules
The following are considered “withdrawing” from CalPERS:
Exclude new hires from CalPERS & giving them a different pension
Stop accruing benefits for current employees
“Withdrawal” from CalPERS:
Treated as plan termination
Liability increased for conservative investments
Liability increased for future demographic fluctuations
Liability must be funded immediately by withdrawing agency
Otherwise, retiree benefits are cut
May 4, 2023 78
LEAVING CALPERS
CalPERS Termination Estimates on June 30, 2021 (Amounts in Millions)
Ongoing Plan Termination Basis
Discount Rate 6.80% 1.00% 2.25%
Miscellaneous
Actuarial Accrued Liability $ 255.7 $ 552.2 $ 459.2
Assets 177.8 177.8 177.8
Unfunded AAL (UAAL) 77.9 374.4 281.4
Safety
Actuarial Accrued Liability $ 228.7 $ 530.1 $ 436.4
Assets 161.6 161.6 161.6
Unfunded AAL (UAAL) 67.1 368.5 274.8
Total
Unfunded AAL (UAAL) $145.0 $742.9 $556.2
Funded Ratio 70.1% 31.4% 37.9%
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May 4, 2023 79
PEPRA COST SHARING
Target of 50% of total normal cost paid by all employees
PEPRA members must pay greater of 50% of total normal cost or bargained
amount if higher
Employer cannot pay any part of PEPRA member required employee
contributions
Employer may impose current employees pay 50% of total normal cost (limited
to 8% of pay for Miscellaneous and 12% for Safety) if not agreed through
collective bargaining
Miscellaneous Plan 2023/24 before negotiated cost sharing:
Classic Members New Members
Tier 1
2.7%@55 FAE1
Tier 2
2%@60 FAE3
PEPRA
2%@62 FAE3
Employer Normal Cost 14.3% 12.3% 7.36%
Member Normal Cost 8.0% 7.0% 7.50%
Total Normal Cost 22.3% 19.3% 14.86%
50% Target 11.2% 9.7% 7.43%
May 4, 2023 80
PEPRA COST SHARING
Fire Safety Plan 2023/24 before negotiated cost sharing:
Classic Members New Members
Tier 1
3%@50 FAE1
Tier 2
3%@55 FAE3
PEPRA
2.7%@57 FAE3
Employer Normal Cost 29.1% 24.8% 14.50%
Member Normal Cost 9.0% 9.0% 14.50%
Total Normal Cost 38.1% 33.8% 29.00%
50% Target 19.1% 16.9% 14.50%
Police Safety Plan 2023/24 before negotiated cost sharing:
Classic Members New Members
Tier 1
3%@50 FAE1
Tier 2
2%@50 FAE3
PEPRA
2.7%@57 FAE3
Employer Normal Cost 29.1% 21.8% 14.50%
Member Normal Cost 9.0% 9.0% 14.50%
Total Normal Cost 38.1% 30.7% 29.00%
50% Target 19.1% 15.4% 14.50%
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PEPRA COST SHARING
PEPRA Member Contributions:
2022/23 2023/24
Group
Total
NC
(Basis)
Member
Rate
Total
Normal
Cost
Change
Member
Rate
Method
Miscellaneous 13.76% 7.00% 14.86% 1.11% 7.50% PEPRA
Members
Fire Safety 27.63% 13.75% 29.00% 1.37% 14.50% PEPRA
Members
Police Safety 27.63% 13.75% 29.00% 1.37% 14.50% PEPRA
Members
May 4, 2023 82
PAYING DOWN THE UAL & RATE STABILIZATION
Where do you get the money from?
How do you use the money?
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WHERE DO YOU GET THE MONEY FROM?
POB:
Usually thought of as interest arbitrage between expected earnings and rate
paid on POB
No guaranteed savings
PEPRA prevents contributions from dropping below normal cost
Savings offset when investment return is good
GFOA Advisory
Borrow from General Fund similar to State
One time payments
Governing body resolution to use a portion of one time money, e.g.
1/3 to one time projects
1/3 to replenish reserves and
1/3 to pay down unfunded liability
May 4, 2023 84
ADDITIONAL PAYMENTS TO CALPERS
Internal Service Fund
Typically used for rate stabilization
Restricted investments:
Likely low (0.5%-1.0%) investment returns
Short term/high quality, designed for preservation of principal
Assets can be used by governing body for other purposes
Does not reduce Unfunded Liability
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ADDITIONAL PAYMENTS TO CALPERS
Make payments directly to CalPERS:
Likely best long-term investment return
Must be considered an irrevocable decision
Extra payments cannot be used as future “credit”
PEPRA prevents contributions from dropping below normal cost
Option #1: Request shorter amortization period (Fresh Start):
Higher short term payments
Less interest and lower long term payments
Likely cannot revert to old amortization schedule
Savings offset when investment return is good (PEPRA)
May 4, 2023 86
ADDITIONAL PAYMENTS TO CALPERS
Make payments directly to CalPERS (continued):
Option #2: Target specific amortization bases with an Additional
Discretionary Payment “ADP” :
Extra contribution’s impact muted by reduced future contributions
CalPERS can’t track the “would have been” contribution
No guaranteed savings
Larger asset pool means larger loss (or gain) opportunity
Paying off shorter amortization bases: larger contribution savings over
shorter period:
e.g. 10 year base reduces contribution 13.7¢ for $1
Less interest savings vs paying off longer amortization bases
Paying off longer amortization bases: smaller contribution savings
over longer period:
e.g. 25 year base reduces contribution 8.2¢ for $1
More interest savings vs paying off shorter amortization bases
Maintaining the current payment schedule – not letting payments
reduce due to extra payment – gives the greatest long-term savings
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May 4, 2023 87
IRREVOCABLE SUPPLEMENTAL (§115) PENSION TRUST
Can only be used to:
Reimburse City for CalPERS contributions
Make payments directly to CalPERS
Investments significantly less restricted than City investment funds
Fiduciary rules govern Trust investments
Usually, designed for long term returns
Assets don’t count for GASB accounting
Are considered Employer assets
Over 100 trusts established, mostly since 2015
Trust providers: PARS, PFM, Keenan
California Employers’ Pension Prefunding Trust (CEPPT)
effective July 2019
Strategy 1: 48% stocks / 52% bonds
Strategy 2: 22% stocks / 78% bonds
May 4, 2023 88
IRREVOCABLE SUPPLEMENTAL (§115) PENSION TRUST
More flexibility than paying CalPERS directly
City decides if and when and how much money to put into Trust
City decides if and when and how much to withdraw to pay CalPERS or
reimburse Agency
Funding strategies typically focus on:
Reducing the unfunded liability
Fund enough to make total CalPERS UAL = 0
Make PEPRA required payments from Trust when overfunded
Stabilizing contribution rates
Mitigate expected contribution rates to better manage budget
Combination
Use funds for rate stabilization/budget predictability
Target increasing fund balance to pay off UAL sooner
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IRREVOCABLE SUPPLEMENTAL (§115) PENSION TRUST
Consider:
How much can you put into Trust?
Initial seed money?
Additional amounts in future years?
When do you take money out?
Target budget rate?
Year target budget rate kicks in?
Before or after CalPERS rate exceeds budgeted rate?
May 4, 2023 90
COMPARISON OF OPTIONS
Supplemental Trust CalPERS
Flexible Locked In
Likely lower long-term return Likely higher long-term return
Investment strategy choice No investment choice
Does not reduce net pension
liability for GASB reporting
Reduces net pension liability for
GASB reporting
More visible More restricted
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ADDITIONAL DISCRETIONARY PAYMENT ANALYSIS
Direct Payment to CalPERS (ADP)
Following illustrates additional $1,584,187 ($823,777 to Miscellaneous &
$760,410 to Safety) contribution (ADP) to CalPERS on April 1, 2024:
Miscellaneous amortization base paid down
Longest outstanding amortization base: 2015 Gain/Loss (23 years left)
Safety amortization base paid down
Longest outstanding amortization base: 2016 Investment Gain/Loss (24
years left)
Estimated Savings
Pay Off Longest Bases Miscellaneous Safety
$823,777 $760,410
$ Savings (reduction in future required
contributions minus amount of ADP) $698,000 $577,000
Present value of savings @ 3% 305,000 260,000
May 4, 2023 92
ADDITIONAL DISCRETIONARY PAYMENT ANALYSIS
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ADDITIONAL DISCRETIONARY PAYMENT ANALYSIS
Direct Payment (ADP) of $823,777 to CalPERS
Miscellaneous
May 4, 2023 94
ADDITIONAL DISCRETIONARY PAYMENT ANALYSIS
Direct Payment (ADP) of $823,777 to CalPERS
Miscellaneous
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ADDITIONAL DISCRETIONARY PAYMENT ANALYSIS
Direct Payment (ADP) of $760,410 to CalPERS
Safety
May 4, 2023 96
ADDITIONAL DISCRETIONARY PAYMENT ANALYSIS
Direct Payment (ADP) of $760,410 to CalPERS
Safety
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ADDITIONAL DISCRETIONARY PAYMENT ANALYSIS
Direct Payment (ADP) of $823,777 to CalPERS
Miscellaneous
May 4, 2023 98
ADDITIONAL DISCRETIONARY PAYMENT ANALYSIS
Direct Payment (ADP) of $760,410 to CalPERS
Safety
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ACTUARIAL CERTIFICATION
This report presents analysis of the City of San Luis Obispo’s CalPERS pension plans. The purpose of this report is to
provide the City:
Historical perspective on the plan investment returns, assets, funded status and contributions.
Projections of likely future contributions and the impact of investment volatility
The calculations and projections in this report are based on information contained in the City’s June 30, 2021 and earlier
CalPERS actuarial valuation reports. We reviewed this information for reasonableness, but do not make any
representation on the accuracy of the CalPERS reports.
Future investment returns and volatility are based on Foster & Foster’s Capital Market model which results in long term
returns summarized on pages 25 and 55.
Future results may differ from our projections due to differences in actual experience as well as changes in plan
provisions, CalPERS actuarial assumptions or methodology. Other than variations in investment return, this study does not
analyze these.
To the best of our knowledge, this report is complete and accurate and has been conducted using generally accepted
actuarial principles and practices. As members of the American Academy of Actuaries meeting the Academy
Qualification Standards, we certify the actuarial results and opinions herein.
Respectfully submitted,
Mary Elizabeth Redding, FSA, EA, MAAA Foster & Foster, Inc. May 4, 2023
Bianca Lin, FSA, EA, MAAA Foster & Foster, Inc. May 4, 2023
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CITY OF SAN LUIS OBISPO CALPERS MISCELLANEOUS & SAFETY PLANS CalPERS Review Based on the 6/30/21 Valuation Mary Elizabeth Redding, FSA, EA, MAAA Bianca Lin, FSA, EA, MAAA Matthew Childs Foster & Foster, Inc. May 16, 2023
May 16, 2023 2 ABOUT CALPERS Largest US pension fund, $456B assets at 5/12/23 Administered by an appointed/elected Board in accordance with State laws CalPERS: Calculates & pays retiree benefits Invests funds Following Board policies, calculates required employer contributions The City has always paid the required contributions, plus Extra contributions called Additional Discretionary Payments (ADP) Defined benefit pension plan Annuity calculated by a formula based on a percent, service, and final pay Benefits increase for limited Cost-of-living after retirement Employees are required to pay a share of the cost Employers pay all of the remainder of the cost of benefits Target: CalPERS assets equal value of benefits earned to date
May 16, 2023 3 HISTORICAL FUNDED STATUS AND ADPS
May 16, 2023 4 FUNDED RATIO - MISCELLANEOUS Miscellaneous CalPERS Assets and Actuarial Liability ($Millions)1 1 Projected 2022 assets reflects -7.5% CalPERS investment return for 2021/22.
May 16, 2023 5 FUNDED STATUS (MILLIONS) - MISCELLANEOUS 6/30/22 funded status estimated Historical Actuarial Accrued Liability and Assets
May 16, 2023 6 CONTRIBUTION PROJECTIONS - MISCELLANEOUS Impact of 21/22 Investment Return
May 16, 2023 7 CONTRIBUTION PROJECTIONS - MISCELLANEOUS
May 16, 2023 8 FUNDED STATUS - MISCELLANEOUS
May 16, 2023 9 PLAN FUNDED STATUS - SAFETY Safety CalPERS Assets and Actuarial Liability ($Millions)2 2 Projected 2022 assets reflects -7.5% CalPERS investment return for 2021/22.
May 16, 2023 10 FUNDED STATUS (MILLIONS) - SAFETY 6/30/22 funded status estimated Historical Actuarial Accrued Liability and Assets
May 16, 2023 11 CONTRIBUTION PROJECTION - SAFETY Impact of 21/22 Investment Return
May 16, 2023 12 CONTRIBUTION PROJECTION - SAFETY
May 16, 2023 13 FUNDED STATUS - SAFETY
May 16, 2023 14 COMBINED MISCELLANEOUS AND SAFETY
May 16, 2023 15 QUESTIONS ?
May 16, 2023 16 COMBINED MISCELLANEOUS AND SAFETY Funded Status Summary on June 30, 2021 (Amounts in $Millions) Miscellaneous Safety Total Actuarial Accrued Liability (AAL) $ 255.7 $ 228.7 $ 484.4 Assets 177.8 161.6 339.4 Unfunded AAL 77.9 67.1 145.0 Funded Ratio 69.5% 70.7% 70.1% Projected Funded Status Summary on June 30, 20223 (Amounts in $Millions) Miscellaneous Safety Total Actuarial Accrued Liability (AAL) $ 263.2 $ 235.2 $ 498.4 Assets 168.6 151.1 319.7 Unfunded AAL 94.6 84.1 178.7 Funded Ratio 64.1% 64.2% 64.1% 3 Projected 2022 assets reflects -7.5% CalPERS investment return for 2021/22.
May 16, 2023 17 VALUE OF ADDITIONAL ADP Direct Payment to CalPERS (ADP) Following illustrates additional $1,584,187 ($823,777 to Miscellaneous & $760,410 to Safety) contribution (ADP) to CalPERS on April 1, 2024: Miscellaneous amortization base paid down Longest outstanding amortization base: 2015 Gain/Loss (23 years left) Safety amortization base paid down Longest outstanding amortization base: 2016 Investment Gain/Loss (24 years left) Estimated Savings Pay Off Longest Bases Miscellaneous Safety $823,777 $760,410 $ Savings (reduction in future required contributions minus amount of ADP) $698,000 $577,000 Present value of savings @ 3% 305,000 260,000
May 16, 2023 18 HISTORICAL CALPERS INVESTMENT RETURN Returns (after 2001) shown are gross returns, unreduced for administrative expenses, from CalPERS valuation reports, when available. The discount rate is based on expected returns net of administrative expenses.