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City of Palo Alt (CA) CalPERS Annual Valuation Reports for the City’s Miscellaneous and Safety Pension Plans as of June 30, 2012

City of Palo Alt (CA) CalPERS Annual Valuation Reports for the City’s Miscellaneous and Safety Pension Plans as of June 30, 2012

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Published by wmartin46
This report which summarizes and transmits
the CalPERS Annual Valuation Reports for the City’s Miscellaneous and Safety Pension Plans as of June 30, 2012 for the City of Palo Alto, CA.
This report which summarizes and transmits
the CalPERS Annual Valuation Reports for the City’s Miscellaneous and Safety Pension Plans as of June 30, 2012 for the City of Palo Alto, CA.

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Published by: wmartin46 on Dec 16, 2013
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05/15/2014

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City of Palo Alto
(ID # 4310)
 
Finance Committee Staff Report
 
Report Type: Action Items Meeting Date: 12/3/2013
City of Palo Alto
 Page 1
Council Priority: City Finances
Summary Title: CalPERS Annual Valuation Reports for the City’s
Miscellaneous and Safety Pension Plans
Title: CalPERS Annual Valuation Reports for the Citys Miscellaneous and
Safety Pension Plans as of June 30, 2012 From: City Manager Lead Department: Administrative Services
Recommendation
Staff recommends that Finance Committee accept this report which summarizes and transmits
the CalPERS Annual Valuation Reports for the City’s Miscellaneous and Safety Pension Plans as
of June 30, 2012.
Background
After salary, pension cost is the largest cost factor in the salary and fringe expense category, with annual pension contribution rates
determined by the California Public Employees’
Retirement System (CalPERS). Staff is continuously in close contact with CalPERS actuarial staff
to stay up to date with all pending changes that may impact the City. Since the City’s last
annual valuations the CalPERS Board approved several actuarial policy and assumption changes, which this report discusses below. The City of Palo Alto provides a defined pension benefit to its employees through CalPERS, which manages and administers the program. Pursuant to CalPERS rules, City employees vest in the pension program after 5 years of service. During the last few years, the City has reduced the pension benefit level. Effective July 17, 2010, the City implemented the second tier pension
plans for Miscellaneous and Safety employees, and as of January 1, 2013 the Public Employees’
 
 
City of Palo Alto
 Page 2
Pension Reform Act (PEPRA) was implemented for new members in the miscellaneous (2%@62) and safety (2.7%@57) groups. Due to the nature of the CalPERS valuation process and the associated delay, the City will not realize PEPRA (Tier Three) savings in provided rates until the June 30, 2013 valuation, which is scheduled for release in fall 2014. The CalPERS program maintains two trust accounts: 1) for public safety employees (fire and police); and 2) for miscellaneous employees (all other non-safety personnel such as field personnel, administrative support, and management). The employee share of pension costs is 9% for public safety employees and 7% or 8%, depending on the specific employee
s pension formula, for miscellaneous employees. The following chart outlines the different pension benefits provided to City employees by pension calculation formula. Classic employees are employees who were members of CalPERS at another agency or members of another California Retirement System prior to joining the City of Palo Alto.
 
 
City of Palo Alto
 Page 3
TierFormulaEff. DateMiscellaneous Employees
Tier 12.7% @ 55Hired on or pre July 16, 2010Tier 22% @ 60Hired on or after July 17, 2010Classic EmployeesTier 32% @ 62Hired on or after Jan 1, 2013
Safety Employees
Tier 1, Fire3% @ 50Prior to June 8, 2012Tier 1, Police3% @ 50Prior to December 6, 2012Tier 2, Fire3% @ 55Hired on or after June 8, 2012Tier 2, Police3% @ 55On or after December 6, 2012Classic EmployeesTier 32.7% @ 57Hired on or after Jan 1, 2013
Current Pension Formulas
Discussion
CalPERS prepares annual actuarial analyses to determines
the City’s pension liability and annual
required contributions for the two trusts. The actuarial valuations are based on current
employees’ accrued benefit, former emp
loyees that are vested but have yet to retire, and retired employees as of June 30, 2012. Staff received the actuarial valuations as of June 30, 2012 in October in early November 2013. The CalPERS actuarial valuations by practice are completed two years in arrears. The chart and table below reflect the rates paid for 2007/2008 through 2013/2014, the new rate for 2014/15, and the projected rates for 2015/16 through 2019/20. Projected rates are from the CalPERS actuarial valuations (Attachment A and B) and will be incorporated in the Long Range Financial Forecast, which is scheduled for Finance Committee discussion on December 17, 2013. The table further details the annual percentage point increases for both plans. For the Miscellaneous Plan, from 2009/2010 to 2019/2020, the pension contribution rate is projected to nearly double from 17.10% to 33.40%. For the same period, the pension contribution rate for the Safety Plan is projected to more than double from 23.94% to 52.2%. It is important to note that these contribution rates do not take any third tier savings or any mortality rate assumption changes into account. As of October 28, 2013, the City currently has

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