Pension Update April 25, 2018 The City provides retirement benefits - - PowerPoint PPT Presentation

Pension Update

City of Monterey April 25, 2018

Background

• The City provides retirement benefits to City

employees through the California Public Employees Retirement System (CalPERS).

Funding Targets/Contribution Rates

• City controls
• Who gets benefits
• What benefits are promised
• How much money has been set aside to pay

for benefits

• CalPERS controls
• How money is invested
• What assumptions are made regarding

future experience

• What funding methods are used to allocate

costs to different years

Benefits

• Different base formulas for Safety (police
• fficers & fire fighters) versus Miscellaneous (all

non-Safety) employees.

• Classic formula for employees hired before

2013

• Public Employees Pension Reform Act

(PEPRA) formula for employees hired after 2012.

Benefits and Contributions - Safety

PLAN CLASSIC PEPRA Formula 3% at 50 2.7% at 57 Final Average Pay 1 year 3 years Cost of Living Adjustments 2% per year 2% per year Employee Contribution 9% of pay 11.5% of pay Additional Employee Contribution Police: 3% Fire: 5% None

Benefits and Contributions - Miscellaneous

PLAN CLASSIC PEPRA Formula 2.7% at 55 2% at 62 Final Average Pay 1 year 3 years Cost of Living Adjustments 2% per year 2% per year Employee Contribution 8% of pay 6.25% of pay Additional Employee Contribution 3% None

Plan Membership - Safety

PLAN CLASSIC Police – PEPRA Fire - PEPRA Active Employees 104 6 8 Transferred 46 1 Separated 25 4 Retirees and Beneficiaries 195

Plan Membership - Miscellaneous

Members Count Active Employees 326 Transferred 90 Separated 151 Retirees and Beneficiaries 408

Key Assumptions

June 30 Valuation Discount Rate Salary Growth 2015 7.5% 3.0% 2016 7.375% 3.0% 2017 7.25% 2.875% 2018 and thereafter 7.0% 2.75%

Normal Cost

• The percentage of payroll that would be

sufficient to fully fund promised benefits for current active employees, IF

• This percentage were paid from the time

the employee is hired until the employee leaves,

• Current plan benefits are not changed,
• Employee experience matches assumptions,

and

• Investment experience matches

assumptions.

Normal Cost - Safety

Normal Cost – Safety

CLASSIC PEPRA Total Normal Cost 30.4% 24.1% Employee Contribution Rate 13.2% 12.0% Employer Normal Cost Rate 17.2% 12.1%

Normal Cost - Miscellaneous

Normal Cost – Miscellaneous

CLASSIC PEPRA Total Normal Cost 20.7% 13.6% Employee Contribution Rate 11.0% 6.75% Employer Normal Cost Rate 9.7% 6.8%

Total Employer Contribution

• Employer Normal Cost
• Total Normal Cost – Employee Contributions

PLUS

• Unfunded Actuarial Liability (UAL) Amortization

Payment

Total Employer Contribution - Safety

Total Employer Contribution - Miscellaneous

Actuarial Liability

• Funding Target
• The assets that would be in the fund today, IF
• The Normal Costs had always been paid into

the fund,

• Current plan benefits had never been not

changed,

• Employee experience had always matched

current assumptions, and

• Investment experience had always matched

assumptions.

Unfunded Actuarial Liability (UAL)

• Actuarial Liability – Assets
• The amount that the current assets are behind

(or ahead of) the funding target.

UAL - Safety

UAL - Miscellaneous

Questions?