City of Culver City, California
City Council Agenda Item Report
RECOMMENDATION:
Staff recommends the City Council adopt an Urgency Ordinance amending the
contract between the Public Employees’ Retirement System (PERS) and the City of
Culver City (City).
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 and
the adopted MOUs.
Implementation of the contract amendment was delayed due to protracted
negotiations with CCEA and CCMG, and subsequent administrative procedures that
are necessary for such implementation. In accordance with PERS requirements,
adoption of this urgency ordinance is necessary to comply with the CCEA and
CCMG contractual commitments, and for the preservation of the public health, safety
or welfare.
Meeting Date: 01/08/07 Item Number: A-6
AGENDA ITEM: Adoption of an Urgency Ordinance Amending the Contract
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 (01/03/07)
Department Approval:
Serena Wright (12/18/06)
City Manager Approval:
Jerry B. Fulwood (01/03/07)
City Controller Approval:
Marlee Chang (12/28/06)
City Attorney Approval
Heather Iker (01/03/07)City of Culver City, California
City Council Agenda Item Report
On December 18, 2006, the City Council adopted Resolution No. 2006-R091, which
declared the Council’s intent to amend the PERS contract for the Miscellaneous
Group. Pursuant to Government Code Section 20471, a minimum of twenty (20)
days has passed between the adoption of the resolution on December 18, 2006 and
potential adoption of the urgency ordinance this evening. The effective date of the
contract amendment will be January 22, 2007, which is the first day of the pay period
immediately following adoption of the ordinance in compliance with PERS
requirements.
FISCAL ANALYSIS:
The following fiscal analysis was included in the December 18, 2006 staff report:
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:City of Culver City, California
City Council Agenda Item Report
1) Urgency Ordinance with Exhibit Amendment to Contract
2) Resolution No. 2006-R091
3) Actuarial Valuation in accordance with Government Code Section 7507
MOTION:
That the City Council:
Adopt the Urgency Ordinance amending the contract between PERS and the City of
Culver City.
MEETING DATE: 01/08/07
AGENDA ITEM: Consideration of Adoption of an Urgency Ordinance Amending
the Contract 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
ATTACHMENTS
Pages
1. Urgency Ordinance with Exhibit Amendment to Contract
1-7
2. Resolution No.R-091
8-14
3. Actuarial Valuation in accordance with Government Code Section 15-19
7507ORDINANCE NO. 2007-
AN URGENCY ORDINANCE OF THE CITY OF CULVER CITY,
CALIFORNIA, AUTHORIZING AMENDMENT TO THE
CONTRACT BETWEEN THE CITY OF CULVER CITY AND THE
BOARD OF ADMINISTRATION OF THE CALIFORNIA PUBLIC
EMPLOYEES' RETIREMENT SYSTEM (Local Miscellaneous
Members)
WHEREAS, implementation of the contract amendment was delayed due to
protracted negotiations of the Memorandums of Understanding with the Culver City
Employees' Association ("CCEA") and the Culver City Management Group ("CCMG") and
subsequent administrative procedures that were necessary for such implementation; and
WHEREAS, adoption of an urgency ordinance is necessary to comply with
the requirements of the recently adopted Memorandums of Understanding with the CCEA
and CCMG; and, for the preservation of the public health, safety or welfare.
NOW, THEREFORE, the City Council of the City of Culver City, California,
DOES HEREBY ORDAIN as follows:
SECTION 1. That an amendment to the contract between the City Council of
the City of Culver City and the Board of Administration of the California Public Employees'
Retirement System is hereby authorized, effective January 22, 2007, a copy of said
amendment being attached hereto, marked Exhibit "A", and by such reference made a part
hereof as though herein set forth in full.
SECTION 2. The City Council of the City of Culver City is hereby authorized,
empowered, and directed to execute said amendment on behalf of the City of Culver City.
SECTION 3. Pursuant to Section 614 of the City Charter, and the reasons
set forth above, this Ordinance shall take effect January 9, 2007. Pursuant to Sections
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28616 and 621 of the City Charter, prior to the expiration of fifteen (15) days after its
adoption, the City Clerk shall cause this Ordinance, or a summary thereof, to be published
in the Culver City News and shall post this Ordinance or a summary thereof in at least
three places within the City.
APPROVED and ADOPTED this 8th day of January, 2007.
GARY SILBIGER, Mayor
City of Culver City, California
ATTEST: APPROVED AS TO FORM:
CHRISTOPHER ARMENTA,
CAROL A. SCHWAB,
City Clerk
City Attorney
A06-00732
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CalPERS
EXHIBIT
California
Public Employees' Retirement System
411111=
AMENDMENT TO CONTRACT
Between the
Board of Administration
California Public Employees' Retirement System
and the
City Council
City of Culver City
44100.
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 ONLY"
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 (2.5% 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).
g.
Section 21548 (Pre-Retirement Optional Settlement 2 Death
Benefit).LEASE DO NOT SIGN "EXHIBIT ONLY"
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.Witness Date
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 required o any employee may be made by direct
payments between the emplo nd the Board.
B. This amendment shall be effq \n the day of BOARD OF ADMINISTRATI CITY COUNCIL
PUBLIC EMPLOYEES' tjkEMENT SYSTEM CITY OF CULVER CITY
\\C:C‘
(S 3
BY c.:Ce BY LORI MCGARTEAND, CHIEF PRESIDING OFFICER
EMPLOYER SERVICES DIVISION
PUBLIC EMPLOYEES' RETIREMENT SYSTEM
Clerk
AMENDMENT ER# 88
PERS-CON-702A (Rev. 10\05)1
RESOLUTION NO. 2006-R091|1010|A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF|1010| CULVER CITY, CALIFORNIA, INTENDING TO APPROVE AN
4 ADMINISTRATION CALIFORNIA PUBLIC EMPLOYEES'
AMENDMENT TO CONTRACT BETWEEN THE BOARD OF
RETIREMENT SYSTEM AND THE CITY COUNCIL OF THE|1010|CITY OF CULVER CITY (Local Miscellaneous Members)|101010| WHEREAS, the Public Employees' Retirement Law permits the participation|1010|of public agencies and their employees in the Public Employees' Retirement System by the|10 10|execution of a contract, and sets forth the procedure by which said public agencies may
10
elect to subject themselves and their employees to amendments to said Law; and
11
WHEREAS, one of the steps in the procedures to amend this contract is the
12
13 adoption by the governing body of the public agency of a resolution giving notice of its
14 intention to approve an amendment to said contract, which resolution shall contain a
15
summary of the change proposed in said contract; and
16
WHEREAS, the following is a statement of the proposed change:
17
To provide Section 20042 (One-Year Final Compensation)
18
for local miscellaneous members.
19
NOW, THEREFORE, the City Council of the City of Culver City, California,
20
21 DOES HEREBY RESOLVE as follows:
22
1. That the City Council of the City of Culver City does hereby give notice
23 of intention to approve an amendment to the contract between said public agency and the
24 Board of Administration of the Public Employees' Retirement System, a copy of said
25
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amendment being attached hereto, as Exhibit "A", and by this reference made a part
hereof.
APPROVED and ADOPTED this
18th day of
December
2006.
ATTEST: APPROVED AS TO FORM:
I HEREBY CERTIFY THIS DOCUMENT
TO BE ,
TRUEJ DCpRRECTCOPY
OF ORI
-----
CLERK'S OFFICE
Y OF CULVER CITY, CALIF.
IGER, MAYO
Cit of C ver City, Calif la
A06-007
CHRVOPHER ARMENTA, City ClerkAk
CalPEK
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
44110-
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.
/0PLEASE 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.
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).
ItPLEASE DO NOT SIGN "EXHIBIT ONLY"
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 (2.5% 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).
g.
Section 21548 (Pre-Retirement Optional Settlement 2 Death
Benefit).
/2-PLEASE DO NOT SIGN "EXHIBIT ONLY"
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.
/315. 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 required ctany employee may be made by direct
payments between the emplo pnd the Board.
B. This amendment shall be effe \n the day of BOARD OF ADMINISTRAT ,1004 CITY COUNCIL
PUBLIC EMPLOYEES' E#I6t'EMENT SYSTEM CITY OF CULVER CITY
\C3
BY `c
cy
LORI MCGOOLAND, CHIEF
EMPLOYER-SERVICES DIVISION
PUBLIC EMPLOYEES' RETIREMENT SYSTEM
BY
PRESIDING OFFICER
- ICS0{0Witness Date
Clerk
AMENDMENT ER# 88
PERS-CON-702A (Rev. 10\05)CONTRACT 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
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 CalPERS will
earn for each year into the future until the last dollar is paid to current members of your plan. 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
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 schedule", 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 June 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.
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November 20, 2006 Page 3CONTRACT 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
Disclosure
If your agency is requesting cost information for two or more benefit changes, the cost of adopting more than one of
these changes may not be obtained by adding the individual costs. Instead, a separate valuation must be done to
provide a cost analysis for the combination of benefit changes. If the proposed plan amendment applies to only
some of the employees in the plan, the rate change due to the plan amendment still applies to the entire plan, and is
still based on the total plan payroll.
Any mandated benefit improvements not included in the June 30, 2005 annual valuation have not been incorporated
into this cost analysis.
Please note that the cost analysis provided in this document may not be relied upon after August 1, 2007. If you
have not taken action to amend your contract, by this date, you must contact our office for an updated cost analysis,
based on the new annual valuation.
Descriptions of the actuarial methodologies, actuarial assumptions, and plan benefit provisions may be found in the
appendices of the June 30, 2005 annual report. Please note that the results shown here are subject to change if any
of the data or plan provisions change from what was used in this study.
Certification
This actuarial valuation for the proposed plan amendment is based on the participant, benefits, and asset data used
in the June 30, 2005 annual valuation, with the benefits modified if necessary to reflect what is currently provided
under your contract with CalPERS, and further modified to reflect the proposed plan amendment. The valuation has
been performed in accordance with standards of practice prescribed by the Actuarial Standards Board, and the
assumptions and methods are internally consistent and reasonable for this plan, as prescribed by the CalPERS Board
of Administration according to provisions set forth in the California Public Employees' Retirement Law.
41A/
Kung-pei Hwang, A.S.A., M.A.A.A.
Senior Pension Actuary, CalPERS
Fin Process Ids: Annual-273985 Base-281867 Proposal-281868
November 20, 2006 Page 5CONTRACT 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
COVERAGE GROUP 70002
Pre-Amendment
• The final compensation is calculated as the monthly average of the member's highest 36 consecutive
months' full-time equivalent monthly pay (no matter which CalPERS employer paid this compensation).
Post-Amendment
• The final compensation is calculated as the monthly average of the member's highest 12 consecutive
months' full-time equivalent monthly pay (no matter which CalPERS employer paid this compensation).
November 20, 2006 Page 7CONTRACT 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
COVERAGE GROUP 70004
Pre-Amendment
• The final compensation is calculated as the monthly average of the member's highest 36 consecutive
months' full-time equivalent monthly pay (no matter which CalPERS employer paid this compensation).
Post-Amendment
• The final compensation is calculated as the monthly average of the member's highest 12 consecutive
months' full-time equivalent monthly pay (no matter which CalPERS employer paid this compensation).
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November 20, 2006 Page 9