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Consider Pension Debt Refinancing and Policy
<br />February 2, 2021
<br />Page 3
<br />Each year, CalPERS provides the City with an updated actuarial valuation report for its
<br />plans, including the updated calculation of the unfunded liability and the required
<br />contributions for the following year. The City typically receives the annual reports 12-15
<br />months after the fiscal year end. For example, the City received the report for the year
<br />ended June 30, 2019 in July 2020, which includes the required contributions for FY21-
<br />22. A snapshot of relevant data follows, and the total unfunded liability at June 30, 2019,
<br />for the Miscellaneous and Safety plans combined was $706,905,205.
<br />Miscellaneous
<br />Safety
<br />June 30, 2019:
<br />A: Market Value of
<br />Assets
<br />$645,902,345
<br />$787,086,636
<br />B: Accrued Liability
<br />$948,084,339
<br />$1,191,809,847
<br />Unfunded Liability, A-B
<br />$302,181,994
<br />$404,723,211
<br />Funded Ratio, A/B
<br />68.1 %
<br />66.0%
<br />FY20-21
<br />Normal Cost paid by
<br />City
<br />12.072% of pensionable
<br />wages
<br />23.581 % of pensionable
<br />wages
<br />Normal Cost paid by
<br />Employees
<br />8.0% Classic
<br />6.5% PEPRA
<br />12.0% Classic
<br />13.0% PEPRA
<br />Unfunded Liability
<br />Payment
<br />$23,390,827
<br />$26,223,726
<br />Discount for
<br />Prepayment
<br />$778,061
<br />$872,293
<br />Unfunded Liability
<br />Funding Source
<br />72% General Fund
<br />18% Restricted Funds
<br />100% General Fund
<br />FY21-22
<br />Normal Cost paid by
<br />City
<br />11.9% of pensionable wages
<br />22.93% of pensionable
<br />wages
<br />Normal Cost paid by
<br />Employees
<br />8.0% Classic
<br />7.0% PEPRA
<br />12.0% Classic
<br />13.0% PEPRA
<br />Unfunded Liability
<br />Payment
<br />$26,113,041
<br />$30,102,971
<br />Discount for
<br />Prepayment
<br />$868,611
<br />$1,001,331
<br />CalPERS announced its investment return for the year ended June 30, 2020 was 4.7%,
<br />which is less than the CalPERS 7% assumption. Therefore, we expect the unfunded
<br />liability to grow, and the required contribution to increase for FY22-23.
<br />The following chart summarizes CalPERS assumed rate of return, and actual investment
<br />returns over the last 20 years. The average investment return over 20 years has been
<br />5.8%, which is less than the current assumption of 7%. When actual CalPERS investment
<br />returns are less than assumed, the required contributions increase.
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