City of Culver City, California
City Council Agenda Item Report
RECOMMENDATION:
Staff recommends that the City Council adopt the Resolution of Intention to approve
the Public Employees’ Retirement System (PERS) Contract Amendment.
BACKGROUND:
The City Council recently adopted two (2) new Memoranda of Understanding
(MOU’s):
October 9, 2006: Culver City Employees’ Association (CCEA); and
October 23, 2006: Culver City Management Group (CCMG).
Both MOU’s provide for implementation of the PERS Section 20042, One-Year Final
Compensation contract amendment, to become effective January 1, 2007, or as
soon as possible in compliance with PERS requirements. PERS regulations do not
allow for a distinction between the CCMG and CCEA bargaining groups, and instead
categorizes both groups as “Miscellaneous.” As such, the single highest year
formula will apply to both bargaining units in accordance with PERS regulations.
To accomplish implementation of this labor agreement, PERS requires a contract
amendment with specific procedures and timelines. Before you tonight is the
Resolution of Intention declaring City Council’s intent to amend the contract with
PERS for Miscellaneous employees to implement the One-Year Final Compensation
contract amendment. Upon adoption of the Resolution of Intention, pursuant to
Government Code Section 20471, the City must wait at least twenty (20) days to
adopt the final Ordinance. There are no exceptions to that law. The effective date of
Meeting Date: 12/18/06 Item Number: A-4
AGENDA ITEM:
Adoption of a Resolution of Intention to Approve a Contract Amendment between
PERS and the City of Culver City to Implement One-Year Final Compensation for
Culver City Management Group (CCMG) and Culver City Employees’ Association
(CCEA) Unit Employees.
Contact Person/Dept.: Serena Wright Phone Number: 310-253-5642
Fiscal Impact: Yes [X] No [] General Fund: Yes [X] No []
Public Hearing: [] Action Item: [X] Attachments: [X]
Public Notification: Culver City Management Group, Culver City Employees’
Association and Master Notification List (12/14/06)
Department Approval:
Serena Wright (12/06/2006)
City Manager Approval:
Jerry B. Fulwood (12/14/06)
City Controller Approval:
Marlee Chang (12/14/06)City of Culver City, California
City Council Agenda Item Report
the ordinance is usually thirty (30) days after adoption, unless an urgency ordinance
is adopted establishing an earlier effective date.
Assuming the Resolution of Intention is adopted this evening, consideration of
adoption of the urgency ordinance will be placed on the January 8, 2007 City
Council agenda. Should City Council adopt the urgency ordinance, it would become
effective January 8, 2007, and the contract amendment would become effective
January 22, 2007, which is the first day of the pay period immediately following
adoption of the ordinance, and in compliance with PERS requirements.
FISCAL ANALYSIS:
Both CCMG and CCEA employees agreed to share the cost of this contract
amendment wherein subject unit employees will pay an additional one percent (1%)
of the PERS employee contribution as follows:
Current Effective January 2007:
PERS employee rate: 8% PERS employee rate: 8%
City current pays: 7% City to pay: 6%
Employees currently pay: 1% Employees will pay: 2%
Beginning FY 06/07, the total estimated annualized cost to the City is: |1010|nd
Year
7/06–6/07|1010|rd
Year
7/07–6/08|1010|th
Year
7/08–6/09|1010|th
Year
7/09–6/10 Total
Total Estimated
PERS Cost $391,880 $407,600 $423,900 $440,900 $1,664,280
Less 1%
Employee
Contribution
($290,300) ($301,900) ($314,000) ($326,600) ($1,232,800)
Net Increased
Cost to City $101,580 $105,700 $109,900 $114,300 $431,480
The City Controller has reviewed the fiscal analysis.
ATTACHMENTS:
1) Resolution of Intention including Exhibit Amendment to Contract
2) Actuarial Valuation in accordance with Government Code Section 7507City of Culver City, California
City Council Agenda Item Report
MOTION:
That the City Council:
Adopt the Resolution of Intention to approve the PERS Contract Amendment.
MEETING DATE: 12/18/06
AGENDA ITEM: Consideration of Adoption of a Resolution of Intention to
Approve a Contract Amendment between PERS and the City of Culver City to
Implement One-Year Final Compensation for Culver City Management Group
(CCMG) and Culver City Employees' Association (CCEA) Unit Employees
ATTACHMENT
1. Resolution of Intention including Exhibit Amendment to Contract
2. Actuarial Valuation in accordance with Government Code Section
7507
Pages
1-7
8-16RESOLUTION NO. 2006-R
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CULVER CITY, CALIFORNIA, INTENTION TO APPROVE AN
AMENDMENT TO CONTRACT BETWEEN THE BOARD OF
ADMINISTRATION CALIFORNIA PUBLIC EMPLOYEES'
RETIREMENT SYSTEM (MISCELLANEOUS MEMBERS).
WHEREAS, the Public Employees' Retirement Law permits the participation
of public agencies and their employees in the Public Employees' Retirement System by the
execution of a contract, and sets forth the procedure by which said public agencies may
elect to subject themselves and their employees to amendments to said Law; and
WHEREAS, one of the steps in the procedures to amend this contract is the
adoption by the governing body of the public agency of a resolution giving notice of its
intention to approve an amendment to said contract, which resolution shall contain a
summary of the change proposed in said contract; and
WHEREAS, the following is a statement of the proposed change:
To provide Section 20042 (One-Year Final Compensation)
for local miscellaneous members.
NOW, THEREFORE, the City Council of the City of Culver City, California,
DOES HEREBY RESOLVE as follows:
1. That the City Council of the City of Culver City does hereby give notice
of intention to approve an amendment to the contract between said public agency and the
Board of Administration of the Public Employees' Retirement System, a copy of said
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28amendment being attached hereto, as Exhibit "A", and by this reference made a part
hereof.
APPROVED and ADOPTED this day of 2006.
GARY SILBIGER, MAYOR
City of Culver City, California
ATTEST: APPROVED AS TO FORM:
CHRISTOPHER ARMENTA, City Clerk
CAROL A. SCHWAB, City Attorney
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-2-
.2__CalPErv
EXHIBIT
California
Public Employees' Retirement System
AMENDMENT TO CONTRACT
Between the
Board of Administration
California Public Employees' Retirement System
and the
City Council
City of Culver City
The Board of Administration, California Public Employees' Retirement System,
hereinafter referred to as Board, and the governing body of the above public agency,
hereinafter referred to as Public Agency, having entered into a contract effective August
1, 1945, and witnessed August 9, 1945, and as amended effective October 1, 1947,
November 1, 1951, June 1, 1954, January 1, 1960, July 1, 1960, June 1, 1963,
December 4, 1967, January 1, 1972, January 1, 1973, August 1, 1973, September 28,
1973, July 4, 1977, October 20, 1980, June 29, 1981, October 14, 1992, July 14, 1994,
August 12, 1997, July 6, 1998, November 5, 1999, November 20, 2000, June 17, 2002,
July 1, 2002 and June 28, 2004 which provides for participation of Public Agency in said
System, Board and Public Agency hereby agree as follows:
A. Paragraphs 1 through 15 are hereby stricken from said contract as executed
effective June 28, 2004, and hereby replaced by the following paragraphs
numbered 1 through 15 inclusive:
1. All words and terms used herein which are defined in the Public
Employees' Retirement Law shall have the meaning as defined therein
unless otherwise specifically provided. "Normal retirement age" shall
mean age 55 for local miscellaneous members, age 55 for local fire
members, and age 50 for local police members.PLEASE DO NOT SIGN "EXHIBIT ONLY"
2. Public Agency shall participate in the Public Employees' Retirement
System from and after August 1, 1945 making its employees as
hereinafter provided, members of said System subject to all provisions of
the Public Employees' Retirement Law except such as apply only on
election of a contracting agency and are not provided for herein and to all
amendments to said Law hereafter enacted except those, which by
express provisions thereof, apply only on the election of a contracting
agency.
3. Employees of Public Agency in the following classes shall become
members of said Retirement System except such in each such class as
are excluded by law or this agreement:
a. Local Fire Fighters (herein referred to as local safety members);
b. Local Police Officers (herein referred to as local safety members);
c. Employees other than local safety members (herein referred to as
local miscellaneous members).
4. In addition to the classes of employees excluded from membership by
said Retirement Law, the following classes of employees shall not become
members of said Retirement System:
a. AUDITORIUM HELPERS; CROSSING GUARDS; RECREATION
LEADERS; LIFEGUARDS; LOCKER ROOM ATTENDANTS; AND
CASHIERS HIRED ON OR AFTER AUGUST 2, 1973.
5. Prior to January 1, 1975, those members who were hired by Public
Agency on a temporary and/or seasonal basis not to exceed 6 months
were excluded from PERS membership by contract. Government Code
Section 20336 superseded this contract provision by providing that any
such temporary and/or seasonal employees are excluded from PERS
membership subsequent to January 1, 1975. Legislation repealed and
replaced said Section with Government Code Section 20305 effective July
1, 1994.
6. The percentage of final compensation to be provided for each year of
credited prior and current service for local miscellaneous members in
employment before and not on or after July 1, 2002 shall be determined in
accordance with Section 21354 of said Retirement Law, subject to the
reduction provided therein for service on and after January 1, 1956, the
effective date of Social Security coverage, for members whose service
has been included in Federal Social Security (2% at age 55 Full and
Modified).PLEASE DO NOT SIGN "EXHIBIT
7. The percentage of final compensation to be provided for each year of
credited prior and current service for local miscellaneous members in
employment on or after July 1, 2002 shall be determined in accordance
with Section 21354.4 of said Retirement Law, subject to the reduction
provided therein for service on and after January 1, 1956, the effective
date of Social Security coverage, for members whose service has been
included in Federal Social Security (25% at age 55 Full and Modified).
8. The percentage of final compensation to be provided for each year of
credited prior and current service as a local police member shall be
determined in accordance with Section 21362.2 of said Retirement Law
(3% at age 50 Full).
9. The percentage of final compensation to be provided for each year of
credited prior and current service as a local fire member shall be
determined in accordance with Section 21363.1 of said Retirement Law
(3% at age 55 Full).
10.
Public Agency elected and elects to be subject to the following optional
provisions:
a. Section 21571 (Basic Level of 1959 Survivor Benefits) for local
miscellaneous members only.
b. Section 20425 ("Local Police Officer" shall include employees of a
police department who were employed to perform identification or
communication duties on August 4, 1972 and who elected to be
local safety members).
c. Sections 21624 and 21626 (Post-Retirement Survivor Allowance)
for local safety members only.
d. Section 21317 (One-Time 15% Increase for Certain Local Safety
Members Who Retired for Service Retirement). Legislation
repealed said Section effective January 1, 2002.
e. Section 21319 (One-Time 15% Increase for Local Miscellaneous
Members Who Retired or Died Prior to July 1, 1971). Legislation
repealed said Section effective January 1, 2002.
f. Section 20903 (Two Years Additional Service Credit).
9.
Section 21548 (Pre-Retirement Optional Settlement 2 Death
Benefit).h. Section 21574 (Fourth Level of 1959 Survivor Benefits) for local
safety members only.
Section 20042 (One-Year Final Compensation).
j. Section 21024 (Military Service Credit as Public Service).
11. Public Agency, in accordance with Government Code Section 20790,
ceased to be an "employer" for purposes of Section 20834 effective on
October 20, 1980. Accumulated contributions of Public Agency shall be
fixed and determined as provided in Government Code Section 20834,
and accumulated contributions thereafter shall be held by the Board as
provided in Government Code Section 20834.
12. Public Agency shall contribute to said Retirement System the contributions
determined by actuarial valuations of prior and future service liability with
respect to local miscellaneous members and local safety members of said
Retirement System.
13. Public Agency shall also contribute to said Retirement System as follows:
a. Contributions required per covered member on account of the 1959
Survivor Benefits provided under Section 21574 of said Retirement
Law. (Subject to annual change.) In addition, all assets and
liabilities of Public Agency and its employees shall be pooled in a
single account, based on term insurance rates, for survivors of all
local safety members.
b. A reasonable amount, as fixed by the Board, payable in one
installment within 60 days of date of contract to cover the costs of
administering said System as it affects the employees of Public
Agency, not including the costs of special valuations or of the
periodic investigation and valuations required by law.
c. A reasonable amount, as fixed by the Board, payable in one
installment as the occasions arise, to cover the costs of special
valuations on account of employees of Public Agency, and costs of
the periodic investigation and valuations required by law.
14. Contributions required of Public Agency and its employees shall be
subject to adjustment by Board on account of amendments to the Public
Employees' Retirement Law, and on account of the experience under the
Retirement System as determined by the periodic investigation and
valuation required by said Retirement Law.11 03 Witne P tp_ e 15. Contributions required of Public Agency and its employees shall be paid
by Public Agency to the Retirement System within fifteen days after the
end of the period to which said contributions refer or as may be prescribed
by Board regulation. If more or less than the correct amount of
contributions is paid for any period, proper adjustment shall be made in
connection with subsequent remittances. Adjustments on account of
errors in contributions requir9d of any employee may be made by direct
payments between the ern . Iyee and the Board.
-eB. This amendment shall beijtive on the day of
Ns%
BOARD OF ADMIN1ST
PUBLIC EMPLOYEE
kNa \CSS"
BY LORI leARTLAND, CHIEF
E c ER SERVICES DIVISION
PU LIC EMPLOYEES' RETIREMENT SYSTEM
BY PRESIDING OFFICER
Clerk
CITY COUNCIL
IREMENT SYSTEM CITY OF CULVER CITY
AMENDMENT ER# 83
PERS-CON-702A (Rev. 10105)
7:77,777,?7,7,77,
CONTRACT AMENDMENT COST ANALYSIS VALUATION BASIS: June 30, 2005
MISCELLANEOUS PLAN FOR CITY OF CULVER CITY
Employer Number: BB
Benefit Description: Section 20042, One-Year Final Compensation
Actuarial Cost Estimates in General
What will this amendment cost? Unfortunately, there is no simple answer. There are two major reasons for the
complexity of the answer:
• First, all actuarial calculations, including the ones in this cost estimate are based on a lot of assumptions
about the future — demographic assumptions about the percentage of your employees that will terminate,
die, become disabled, and retire in each future year, and economic assumptions about what salary
increases each employee receives and the most important assumption: what the assets at C.aIPERS will
earn for each year into the future until the last dollar is paid to current members of your plait While
CalPERS has set these assumptions as our best estimate of the real future of your plan, it must be
understood that these assumptions are very long term predictors and will surely not be realized each year
as we go forward. For example, the asset earnings for the past 15 years at CalPERS have ranged from
-7.2% to 20.1%, yet the 15 year compound return has been 9.7%, well above our assumption.
Second, the very nature of actuarial funding produces the answer to the question of amendment cost as
the sum of two separate pieces:
1. The increase in Normal Cost (i.e., the increase in future annual premiums in the absence of
surplus or unfunded liability) expressed as a percentage of total active payroll, and
2. The increase in Past Service Cost (i.e., Accrued Liability — representing the current value of the
increased benefit for all past service of current members) which is expressed as a lump sum dollar
amount.
The cost is the sum of a percent of future pay and a lump sum dollar amount (the sum of an apple and an
orange if you will). To communicate the total cost, either the increase in Normal Cost (i.e., future percent
of payroll) must be converted to a lump sum dollar amount (in which case the result is called the increase
in the present value of benefits), or the Past Service Cost (i.e., the lump sum) must be converted to a
percent of payroll (in which case the result is the increase in the employer's rate). Converting the Past
Service Cost lump sum to a percent of payroll requires a specific amortization period. So, the new
employer rate can be computed in many different ways depending on how long one will take to pay for it.
And don't forget the first bullet point above; all of these results depends on all of the assumptions being
exactly realized.
Rate Volatility
As is stated above, the cost estimates supplied in this communication are based on a number of assumptions about
very long term demographic and economic behavior. Even if these assumptions are exactly realized (terminations,
deaths, disabilities, retirements, salary growth, and investment return) there will be differences on a year to year
basis. This year to year difference between actual experience and the assumptions is called gains and losses and
serve to raise or lower the employer's rates from year to year. So, the rates will bounce around, especially due to the
ups and downs of investment returns.
The volatility in annual employer rates may be affected by this amendment. The reason is that higher benefits and
earlier retirement ages require the accumulation of more assets per member earlier in their career. Rate volatility
can be measured by the ratio of plan assets to active member payroll. Higher asset to payroll ratios produce more
volatile employer rates. To see this, consider two plans, one with assets that are 4 times active member payroll, and
the other with assets that are 8 times active member payroll. In a given year, see what happens when assets rise or
fall 10% above or below the actuarial assumption. For the plan with a ratio of 4, this 10 percent gain or loss in
assets is the same in dollars as 40% of payroll; and for the plan with a ratio of 8, this is equivalent to 80% of payroll.
If this gain or loss is spread over 20 years (and we oversimplify by ignoring interest on the gain or loss), then the
first plan's rate changes by 2% of pay while the second plan's rate changes by 4% of pay.
November 20, 2006
Page 1CONTRACT AMENDMENT COST ANALYSIS - VALUATION BASIS: June 30, 2005
MISCELLANEOUS PLAN FOR CITY OF CULVER CITY"
Employer Number: 88
Benefit Description: Section 20042, One-Year Final Compensation
When a plan is amended, liability changes but assets do not. In addition, the desired state is to be 100% funded
(i.e., to bring assets to equal accrued liability). Therefore, we disclose the ratio of accrued liability to payroll rather
than assets to payroll as a measure of the plan's potential future rate volatility. The higher the ratio, the more
volatile the future rate may be. The table below contains these measures of potential future rate volatility.
As of June 30, 2005 Current Plan Post-Amendment
Accrued Liability 126,596,923 $ 128,838,155
Payroll 24,913,611 24,913,611
Volatility Index 5.08 5.17
It should also be noted that these ratios tend to stabilize as the plan matures. That is, all plans with no past service
start their lives with zero assets and zero accrued liability — and so asset to payroll ratio and liability to payroll ratio of
zero. However, as time goes by these ratios begin to rise and then tend to stabilize at some constant amount as the
plan matures. Higher benefit levels and earlier expected retirements produce higher constant future ratios. For
example, our miscellaneous plan pools have ratios that range from 2.75 for the "2% at 60" pool to a ratio of 4.71 for
the "3% at 60" pool. For safety pools, the ratios range from 3.02 for the "2% at 55" pool to a rata of 9.36 for the
"3% at 50" pool.
Present Value of Projected Benefits
The table below shows the change in the total present value of benefits for the proposed plan amendment. The
present value of benefits represents the total dollars needed today to fund all future benefits for current members of
the plan (i.e., without regard to future employees). The difference between this amount and current plan assets
must be paid by future employee and employer contributions. As such, the change in the present value of benefits
due to the plan amendment represents the "cost" of the plan amendment.
However, for plans with excess assets some or all of this "cost" may already be covered by current excess assets.
As of June 30, 2005 Current Plan Post-Amendment
Total Assets at Market Value (MVA) 118,785,804 118,785,804
Actuarial Value of Assets (AVA) 115,367,080 • 115,367,080
AVA/ MVA 97.1% 97.1%
Present Value of Projected Benefits (PVB) 160,267,139 163,686,398
Actuarial Value of Assets (AVA) 115,367,080 115 367 080
Present Value of Future Employer and
Employee Contributions (PVB — AVA)
44,900,059 48,319,318
Change to PVB
3,419,259
Accrued Liability
It is not required, nor necessarily desirable, to have accumulated assets sufficient to cover the total present value of
benefits until every member has left employment. Instead, the actuarial funding process calculates a regular
contribution schedule of employee contributions and employer contributions (called normal costs) which are designed
to accumulate with interest to equal the total present value of benefits by the time every member has left
employment. As of each June 30, the actuary calculates the "desirable" level of plan assets as of that point in time
by subtracting the present value of scheduled future employee contributions and future employer normal costs from
the total present value of benefits. The resulting "desirable" level of assets is called the accrued liability
November 20, 2006
Page 27777,7
CONTRACT AMENDMENT COST ANALYSIS - VALUATION BASIS: June 30, 2005
MISCELLANEOUS PLAN FOR cn-y OF CULVER CTI'Y
Employer Number: 88
Benefit Description: Section 20042, One-Year Final Compensation
A plan with assets exactly equal to the plan's accrued liability is simply "on schedule" in funding that plan, and only
future employee contributions and future employer normal costs are needed. A plan with assets below the accrued
liability is "behind schedule", or is said to have an unfunded liability, and must temporarily increase contributions to
get back on schedule. A plan with assets in excess of the plan's accrued liability is "ahead of scheduie", or is said to
have excess assets, and can temporarily reduce future contributions. A plan with assets (AVA) in excess of the total
present value of benefits is called super-funded, and neither future employer nor employee contributions are
required. Of course, events such as plan amendments and investment or demographic gains or losses can change a
plan's condition from year to year. For example, a plan amendment could cause a plan to move all the way from
being super-funded to being in an unfunded position.
The changes in your plan's accrued liability, unfunded accrued liability, and the funded ratio as of June 30, 2005 due
to the plan amendment are shown in the table below.
As of 3une 30, 2005 Current Plan Post-Amendment
Entry Age Normal Accrued Liability (AL) 126,596,923 $ 128,838,155
Actuarial Value of Assets (AVA) 115,367,080 115,367,080
Unfunded Liability/ (Excess Assets) (UAL = AL —
$ 11,229,843 13,471,075
AVA)
Funded Ratio (AVA / AL) 91.1% 89.5%
Change to AL
2,241,232
Total Employer Contribution Rate
While the table above gives the changes in the accrued liability and funded status of the plan due to the amendment,
there remains the question of what will happen to the employer contribution rate because of the change in plan
provisions.
CalPERS policy is to implement rate changes due to plan amendments immediately on the effective date of the
change in plan benefits. This change is displayed as the "Change to Total Employer Rate" on the following page. If
the contract amendment effective date is on or before June 30, 2007, the change in the employer contribution rate
should be added to the employer's current rate. In general, the policy also provides that the change in unfunded
liability due to the plan amendment will be separately amortized over a period of 20 years from the effective date of
the amendment and all other components of the plan's unfunded liability/excess assets will continue to be amortized
separately.
However, your actuary may choose to apply different rules to plans with a current employer contribution rate of zero.
The pre-amendment excess assets in these plans were sufficient to cover the employer's normal cost for one or more
years into the future. A plan amendment will use up some or all of the pre-amendment excess assets. In order to
maintain our goal of providing rates that are relatively stable, while taking into account known or expected future
events, your actuary may decide to spread any remaining excess assets over a single number of years. This is
known as a "fresh start" and will, in no case, be less than 5 years. You may call your actuary to discuss further
alternative financing options. If the amendment uses up all excess assets and creates an unfunded liability (i.e.,
from being ahead of schedule to behind schedule), the total post-amendment unfunded liability may be amortized
over 20 years.
In no case may the annual contribution with regard to a positive unfunded liability be less than the amount which
would be required to amortize that unfunded liability, as a level percent of pay, over 30 years. The table on the
following page shows the change in your plan's employer contribution rate due to the plan amendment for fiscal year
2007-2008.
10
Page 3
November 20, 2006CONTRACT AMENDMENT COST ANALYSIS - VALUATION BASIS: June 30, 2005
MISCELLANEOUS PLAN FOR CITY OF CULVER CITY
Employer Number: BB
Benefit Description: Section 20042, One-Year Final Compensation
As of June 30, 2005
Current Plan Post-Amendment
2007-2008 Employer Rate
Payment for Normal Cost
Payment on Amortization Bases
Total Employer Rate
7.762%
8.312%
2.829%
3.631%
10391%
11.943%
Change to Normal Cost
0.550%
Change to Total Employer Rate 1.352%
Current Amortization Bases 1 Multiple Bases
Amendment Amortization Base
- Fresh Start 2
- Multiple Base 3
20-year
2007-2008 Employee Rate
Total Employee Rate
Change to Total Employee Rate
7.755%
7.755%
0.000%
2008-2009
Estimated Employer Rate (recognizing
1104 investment return for 2005-2006) 10.4%
Projection Amortization Base Multiple Base
11.8%
Multiple Base
1 — Details of the current amortization base are shown on page 13 of June 30, 2005 annual valuation report. If you have adopted any other
subsequent amendments, the current amortization base is the schedule after these adopted amendments.
2 - If a fixed number of years Is shown, it means that the current unfunded actuarial liability is projected and amortized over this fixed number of
years. This amortization replaces the amortization schedule shown in your June 30, 2005 annual valuation and any other subsequent amendments
you have adopted.
3 - If 20-year is shown, it means that the change In liability due to plan amendments is amortized separately over a 20-year period. This amortization
schedule is in addition to the amortization schedule shown In the June 30, 2005 annual valuation and any other subsequent amendments you have
adopted.
In the above table, the information shown represents the actual initial contribution rate that will apply during fiscal
year 2007-2008 if you adopt the amendment. However, these figures do not incorporate the projected 11%
investment return in 2005-2006. The estimated employer rates shown for 2008-2009, which incorporate this return,
will give you a good estimate of what to expect in 2008-2009.
Note that the change in normal cost in the table above may be much more indicative of the long term change in the
employer contribution rate due to the plan amendment. The plan's payment on amortization bases shown in the
table above is a temporary adjustment to the employer contribution to "get the plan back on schedule". This
temporary adjustment to the employer rate varies in duration from plan to plan. For example, a plan with initial
excess assets being amortized over a short period of time will typically experience a large rate increase when excess
assets are fully amortized. While a plan amendment for such a plan may produce little or no increase in the
employer contribution rate now, the change in normal cost due to the plan amendment will become fully reflected in
the employer contribution rate as soon as initial excess assets are fully amortized.
November 20, 2006
Page 4