CITY OF CULVER CITY
MISCELLANEOUS AND SAFETY PLANS
CalPERS Actuarial Issues – 6/30/11 Valuation
Preliminary Results
Presented by John E. Bartel
Prepared by Bianca Lin
Tina Haugbro
Bartel Associates, LLC
May 13, 2013
Agenda
o:\clients\city of culver city\projects\calpers\6-30-11\ba culverci 13-05-13 calpers misc safety
11.wol.docx
Topic Page
Definitions 1
Miscellaneous Plan:
Demographic Information 3
Plan Funded Status 5
Plan Assets & Actuarial Obligations 9
Contribution Rates & Projections 13
Safety Plan:
Demographic Information 23
Plan Funded Status 27
Plan Assets & Actuarial Obligations 31
Contribution Rates & Projections 35
PEPRA Cost Sharing 45 ?
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another Summary of Demographic Information – Miscellaneous
May 13, 2013 3
1994 2003 2010 2011
Actives
? Counts 432 505 482 461
? Average
? Age 43 44 45 45
? City Service 10 9 10 10
? PERSable Wages $40,000 $47,400 $63,800 $65,200
? Total PERSable Wages (millions) 18.9 26.4 33.8 32.8
Receiving Payments
? Counts
? Service 251 362 375
? Disablity 69 73 76
? Beneficiaries 65 79 81
? Total 263 385 514 532
? Average Annual City Provided Benefit|1010|
? Service $14,000 $20,200 $21,000
? Disability 7,100 7,400 7,600
? Service Retirements in last 5 years 15,600 23,300 25,200
|1010| Average City provided pensions are based on City service & City benefit formula, and are not
representative of benefits for long service employees.
Members Included in Valuation
Miscellaneous
May 13, 2013 4
Plan Funded Status
Miscellaneous
May 13, 2013 5
June 30, 2010 June 30, 2011
192,800,000 $ Actuarial Liability 205,800,000 $
157,000,000 Actuarial Asset Value 165,000,000
(35,800,000) (Unfunded Liability) (40,800,000)
June 30, 2010 June 30, 2011
192,800,000 $ Actuarial Liability 205,800,000 $
122,900,000 Market Asset Value 146,700,000
(69,900,000) (Unfunded Liability) (59,100,000)
Plan Funded Status
Miscellaneous
May 13, 2013 6
? What happened between 6/30/10 and 6/30/11?
? Market Value Asset Gain/(Loss) ˜ 19.1 million
? Unfunded Liability (Increase)/Decrease ˜ (5.0) million
? Reasons for Unfunded Liability increase
? Actuarial Asset gain/(loss): ˜ (1.3) million
? $18 million remaining unrecognized asset losses
? Assumption Change ˜ (3.6) million
? Gold Handshake ˜ (0.2) million
? Actuarial gain/(loss): ˜ 0.7 million
? Average Salary $63,800 ? $65,200
? Number of Actives 482 ? 461
? Number of Inactives 498 ? 293
? Number of Retirees 514 ? 532
? Other gain/(loss): ˜ (0.6) million
? Contributions
? Other (expected) Actuarial Investment Return
Miscellaneous
May 13, 2013 7
Above assumes contributions, payments, etc. received evenly throughout year.
2013 estimate based on 12/13 return of 10.2% through February 28, 2013
Actuarial Investment Return
Miscellaneous
May 13, 2013 8
Market Actuarial
? June 30, 2008
? Return (5.1%) 8.5%
? Gain/(Loss) (12.9%) 0.7%
? June 30, 2009
? Return (24.0)% 6.3%
? Gain/(Loss) (31.8)% (1.5)%
? June 30, 2010
? Return 13.3% 6.1%
? Gain/(Loss) 5.5% (1.7)%
? June 30, 2011
? Return 21.7% 6.9%
? Gain/(Loss) 13.9% (0.9)%
? June 30, 2012
? Return 1.0% 6.3%
? Gain/(Loss) (6.5)% (1.2)%
? Accumulated Market Value Gains/(Losses) through June 30, 2012 ˜ (31.8)%
[(12.9)% + (31.8)% + 5.5% + 13.9% + (6.5%)] Asset Values (Millions)
Miscellaneous
May 13, 2013 9
6/30/12 & 6/30/13 asset values estimated.
Funded Status
Miscellaneous
May 13, 2013 10
6/30/12 & 6/30/13 funded status estimated Funded Status (Millions)
Miscellaneous
May 13, 2013 11
6/30/12 & 6/30/13 funded status estimated
Funded Status (Millions)
Miscellaneous
May 13, 2013 12
6/30/12 & 6/30/13 funded status estimated Contribution Rates
Miscellaneous
May 13, 2013 13
Contribution Rates
Miscellaneous
May 13, 2013 14
6/30/10 6/30/11
2012/2013 2013/2014
? Total Normal Cost 15.7% 16.1%
? Employee Normal Cost 7.8% 7.8%
? Employer Normal Cost 7.9% 8.3%
? Amortization Bases: 8.0% 8.8%
? Total Employer Contribution Rate 15.9% 17.1%
? Amortization Period Multiple
˜ 22 years
Multiple
˜ 24 years
? What Happened from 6/30/10 to 6/30/11:
? 2012/13 Rate 15.9%
? (Gains)/Losses 0.5
? Plan Change (Golden Handshake) 0.1
? Assumption Change 0.6
? 2013/14 Rate 17.1% CalPERS Upcoming Issues
May 13, 2013 15
? CalPERS actuarial staff recommended & CalPERS Board adopted changes to
contribution policy. Four reasons why:
? Asset corridor generates volatility when extreme events happen
? Slow progress towards increased funded status
? Current method needs improved transparency
? GASB 68 encourages faster funding by requiring a lower discount rate for
slower funding
? Changes - Direct rate smoothing based on:
? 5 year ramp up
? No asset smoothing
? Future Gains/losses 25 year amortization period
? with 5 year ramp up means paid over 30 years
? Method & Assumption changes 15 year amortization period
? with 5 year ramp up means paid over 20 years
? No cap on rate increases each year
CalPERS Upcoming Issues
May 13, 2013 16
? CalPERS starting an assumption study and Chief Actuary will likely
recommend generational mortality improvement
? CalPERS starting an asset allocation study and Chief Actuary will:
? Likely recommend a .25% margin
? Possibly (but does not know until asset allocation study is done)
recommend .25% reduction in real rate of return.
? Timing:
? All the above will probably be included in 6/30/13 valuation (first impact
15/16 rates)
? Will be estimated as part of 6/30/12 valuation when they project
contribution rates.
Contribution Projections
Miscellaneous
May 13, 2013 17
? Market Value Investment Return:
? June 30, 2011 21.7%
? June 30, 2012 1.0%|1010|
? June 30, 2013 12.9%|1010|
? June 30, 2014 - 2017 Poor Investment Return: ˜ 0.2% - 3.4%
Expected Investment Ret: ˜ 7.50%
Good Investment Return: ˜ 11.6% - 15.1%
? No Other: Gains/Losses, Method/Assumption Changes, Benefit Improvements
? Excludes Employer Paid Member Contributions (EPMC)
? Impact of assumption changes (excluding Normal Cost impact)
With Phase In W/O Phase In Net Rate Impact
Initial 2013/14 Rate Impact 0.336% 1.008% 0.672%
Rate Impact 2014/15+ 1.062% 1.008% (0.054)%
? Contribution projections assume 2 year phase in.
? 2
nd
tier 2%@60 FAE3 effective 7/1/11
? New hire assumptions:
? Assumes 50% of 2013 new hires will be Classic Members and 50% will be New
Members with PEPRA benefits.
? Assumes Classic Members will decrease from 50% to 0% of new hires over 20 years.
2
Based on CalPERS press release.
3
Based on CalPERS actual return (10.2%) through February 28, 2013 and 7.5% thereafter.
Contribution Projections
Miscellaneous
May 13, 2013 18 Contribution Projections
Miscellaneous
May 13, 2013 19
? In addition to above assumptions:
? New Amortization Periods and Smoothing Methods
? 4/17/13 Board Agenda Item 8b
? 5 Year Direct Rate Smoothing
? 25 Year (Fixed) Amortization Period of Gains and Losses, paid over
30 years
? Changes will take place June 30, 2013 affecting 2015/16 contribution rates
? CalPERS will amortize the smoothing method change using 25 Year (Fixed)
Amortization Period paid over 30 years.
.
Contribution Projections
Miscellaneous
May 13, 2013 20
Contribution Projections
Miscellaneous
May 13, 2013 21
? In addition to above assumptions:
? New Amortization Periods and Smoothing Methods
? 4/17/13 Board Agenda Item 8b
? 5 Year Direct Rate Smoothing
? 25 Years (Fixed) Amortization Period of Gains and Losses, paid over
30 years
? Anticipated discount rate change from 7.50% to 7.25%
? Anticipated mortality assumption changes
? Above changes assumed to take place June 30, 2013 affecting 2015/16
contribution rates
? We expect CalPERS will amortize the above changes as follows:
? The smoothing method change will be paid over 30 years.
? The discount rate and mortality changes will be paid over 20 years.
Contribution Projections
Miscellaneous
May 13, 2013 22
Summary of Demographic Information – Safety
May 13, 2013 23
1994 2003 2010 2011
Actives
? Counts 179 183 163 162
? Average
? Age 39 4242 42
? City Service 14 15 15 15
? PERSable Wages $63,900 $85,800 $105,800 $107,500
? Total PERSable Wages (millions) 12.5 17.3 19. 19.0
Receiving Payments
? Counts
? Service 69 102 103
? Disablity 90 104 107
? Beneficiaries 26 39 38
? Total 141 185 245 248
? Average Annual City Provided Benefit|1010|
? Service $38,900 $64,000 $64,400
? Disability 28,800 42,400 45,400
? Service Retirements in last 5 years 57,100 78,800 76,700
|1010| Average City provided pensions are based on City service & City benefit formula and are not
representative of benefits for long service employees.
Members Included in Valuation
Safety
May 13, 2013 24
Plan Funded Status
Safety
May 13, 2013 25
Plan Funded Status
Safety
May 13, 2013 26
? What happened between 6/30/10 and 6/30/11?
? Market Value Asset Gain/(Loss) ˜ 24.7 million
? Unfunded Liability increase ˜ (5.4) million
? Reasons for Unfunded Liability increase
? Actuarial Asset gain/(loss): ˜ (1.7) million
? $24 million remaining unrecognized asset losses
? Assumption change ˜ (4.5) million
? Actuarial gain/(loss): ˜ 2.3 million
? Average Salary $105,800 ? $107,500
? Number of Actives 163 ? 162
? Number of Inactives 50 ? 50
? Number of Retirees 245 ? 248
? Other gain/(loss): ˜ (1.5) million
? Contributions
? Other (expected) Actuarial Investment Return
Safety
May 13, 2013 27
Above assumes contributions, payments, etc. received evenly throughout year.
2013 estimate based on 12/13 return of 10.2% through February 28, 2013
Actuarial Investment Return
Safety
May 13, 2013 28
Market Actuarial
? June 30, 2008
? Return (5.1%) 8.1%
? Gain/(Loss) (12.9%) 0.3%
? June 30, 2009
? Return (24.0)% 5.9%
? Gain/(Loss) (31.8)% (1.9)%
? June 30, 2010
? Return 13.3% 6.2%
? Gain/(Loss) 5.5% (1.6)%
? June 30, 2011
? Return 21.7% 6.9%
? Gain/(Loss) 13.9% (0.9)%
? June 30, 2012
? Return 1.0% 6.3%
? Gain/(Loss) (6.5)% (1.2)%
? Accumulated Market Value Gains/(Losses) through June 30, 2012 ˜ (31.8)%
[(12.9)% + (31.8)% + 5.5% + 13.9% + (6.5%)] Asset Values (Millions)
Safety
May 13, 2013 29
6/30/12 & 6/30/13 asset values estimated.
Funded Status
Safety
May 13, 2013 30
6/30/12 & 6/30/13 funded status estimated Funded Status (Millions)
Safety
May 13, 2013 31
6/30/12 & 6/30/13 funded status estimated
Funded Status (Millions)
Safety
May 13, 2013 32
6/30/12 & 6/30/13 funded status estimated Contribution Rates
Safety
May 13, 2013 33
Contribution Rates
Safety
May 13, 2013 34
6/30/10 6/30/11
2012/2013 2013/2014
? Total Normal Cost 26.1% 28.6%
? Employee Normal Cost 9.0% 9.0%
? Employer Normal Cost 17.1% 17.6%
? Amortization Bases 16.1% 16.7%
? Total Employer Contribution Rate 33.2% 34.3%
? Amortization Period Multiple
˜ 28 years
Multiple
˜ 31 years
? What Happened from 6/30/10 to 6/30/11:
? 2012/13 Rate 33.2%
? (Gains)/Losses (0.0)
? Assumption Change 1.1
? 2013/14 Rate 34.3% Contribution Projections
Safety
May 13, 2013 35
? Market Value Investment Return:
? June 30, 2011 21.7%
? June 30, 2012 1.0%|1010|
? June 30, 2013 12.9%|1010|
? June 30, 2014 - 2017 Poor Investment Return: ˜ 0.2% - 3.4%
Expected Investment Ret: ˜ 7.50%
Good Investment Return: ˜ 11.6% - 15.1%
? No Other: Gains/Losses, Method/Assumption Changes, Benefit Improvements
? Excludes Employer Paid Member Contributions (EPMC)
? Impact of assumption changes (excluding Normal Cost impact)
With Phase In W/O Phase In Net Rate Impact
Initial 2013/14 Rate Impact 0.714% 2.142% 1.428%
Rate Impact 2014/15+ 2.253% 2.142% (0.111)%
? Contribution projections assume 2 year phase in and 4% EE cost sharing for all
? 2
nd
Tier 3%@55 FAE3 effective 7/1/11
? New hire Assumptions:
? Assumes 50% of 2013 new hires will be Classic Members with current benefits and
50% will be New Members with PEPRA benefits.
? Assumes Classic Member will decrease from 50% to 0% of new hires over 10 years.
5
Based on CalPERS press release.
6
Based on CalPERS actual return (10.2%) through February 28, 2013 and 7.5% thereafter.
Contribution Projections
Safety
May 13, 2013 36
Contribution Projections
Safety
May 13, 2013 37
? In addition to above assumptions:
? New Amortization Periods and Smoothing Methods
? 4/17/13 Board Agenda Item 8b
? 5 Year Direct Rate Smoothing
? 25 Year (Fixed) Amortization Period of Gains and Losses, paid over
30 years
? Changes will take place June 30, 2013 affecting 2015/16 contribution rates
? CalPERS will amortize the smoothing method change using 25 Year (Fixed)
Amortization Period paid over 30 years.
Contribution Projections
Safety
May 13, 2013 38 Contribution Projections
Safety
May 13, 2013 39
? In addition to above assumptions:
? New Amortization Periods and Smoothing Methods
? 4/17/13 Board Agenda Item 8b
? 5 Year Direct Rate Smoothing
? 25 Years (Fixed) Amortization Period of Gains and Losses, paid over
30 years
? Anticipated discount rate change from 7.50% to 7.25%
? Anticipated mortality assumption changes
? Above changes assumed to take place June 30, 2013 affecting 2015/16
contribution rates
? We expect CalPERS will amortize the above changes as follows:
? The smoothing method change is will be paid over 30 years.
? The discount rate and mortality changes will be paid over 20 years.
Contribution Projections
Safety
May 13, 2013 40
PEPRA Cost Sharing
May 13, 2013 41
? Target of 50% of total normal cost for everyone
? New members must pay greater of 50% of total normal cost or bargained
amount if higher
? Employer cannot pay any part of new member required employee contributions
? Employer may impose current employees pay 50% of total normal cost (limited
to certain amounts) if not agreed through collective bargaining by 1/1/18
? Miscellaneous Plan:
Tier 1 Tier 2
Current Members New Members
? Employer Normal Cost 8.3% 6.6% 6.25%
? Member Normal Cost 7.8% 7.0% 6.25%
? Total Normal Cost 16.1% 13.6% 12.5%
? 50% Target 8.05% 6.8% 6.25%
PEPRA Cost Sharing
May 13, 2013 42
? Safety Plan
Tier 1 Tier 2
Current Members New Members
? Employer Normal Cost 17.6% 16.5% 12.25%
? Member Normal Cost 9.0% 9.0% 12.25%
? Total Normal Cost 26.6% 25.5% 24.50%
? 50% Target 13.3% 12.75% 12.25%