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CONTRACT AMENDMENT COST ANALYSIS - VALUATION BASIS: NNE 30,1999
<br />SAFETY PLAN FOR CITY OF SANTA ANA
<br />EMPLOYER NUMBER 137
<br />Benefit Description: 21362.2,3% @ 50 Full Formula
<br />The table below shows the change in the total present value of benefits for the proposed plan amendment.
<br />The present value of benefits represents the total dollars needed today to fund all future benefits for
<br />current members of the plan, i.e. without regard to future employees. The difference between this amount
<br />and current plan assets must be paid by future employee and employer contributions. As such, the change
<br />in the present value of benefits due to the plan amendment represents the "cost" of the plan amendment.
<br />However, for plans with excess assets some or all of this "cost" may already be covered by current excess
<br />assets.
<br />The Ca1PERS Board adopted a resolution providing a one-time increase in the actuarial value of assets to
<br />95% of market value for the calculation of the employer rate when a rate plan adopts a contract
<br />amendment that increases the present value of benefits. This resolution applies only to plans that (1) file
<br />a resolution of intention to amend their plan with CalPERS before June 30, 2001 and that (2) amend their
<br />contract with an effective date on or before June 30, 2002. If a plan amends more than once during the
<br />window period, only the first qualifying amendment will result in the asset increase to 95% of market
<br />value. Therefore, if your plan previously adopted an amendment which increased the actuarial value of
<br />assets to 95% of market value, no increase in assets will be shown in the tables below. If your plan's
<br />actuarial value of assets was not previously increased to 95% of market value, the tables below show the
<br />effect on its assets due to this one-time change in actuarial method (i.e., the 95% market value of assets).
<br />It is not required, nor necessarily desirable, to have accumulated assets sufficient to cover the total present
<br />value of benefits until every member has left employment. Instead, the actuarial funding process
<br />calculates a regular contribution schedule of employee contributions and employer contributions (called
<br />normal costs) which are designed to accumulate with interest to equal the total present value of benefits
<br />by the time every member has left employment. As of each June 30, the actuary calculates the
<br />"desirable" level of plan assets as of that point in time by subtracting the present value of scheduled future
<br />employee contributions and future employer normal costs from the total present value of benefits. The
<br />resulting "desirable" level of assets is called the accrued liability.
<br />A plan with assets exactly equal to the plan's accrued liability is simply "on schedule" in funding that
<br />plan, and only future employee contributions and future employer normal costs are needed. A plan with
<br />assets below the accrued liability is "behind schedule", or is said to have an unfunded liability, and must
<br />temporarily increase contributions to get back on schedule. A plan with assets in excess of the plan's
<br />accrued liability is "ahead of schedule", or is said to have excess assets, and can temporarily reduce future
<br />contributions. A plan with assets in excess of the total present value of benefits is called super -funded,
<br />and neither future employer nor employee contributions are required. Of course, events such as plan
<br />amendments and investment or demographic gains or losses can change a plan's condition from year to
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<br />Change Due to
<br />Post -Amendment
<br />Pre -Amendment
<br />Plan Amendment
<br />Post Method
<br />& Method Change
<br />Change
<br />Total Present Value of Benefits
<br />$ 449,965,380
<br />$ 46,014,620
<br />$ 495,980,000
<br />Actuarial Value of Plan Assets
<br />472,514,555
<br />0
<br />472,514,555
<br />Present Value of Future Employer
<br />and Employee Contributions
<br />$ (22,549,175)
<br />$ 46,014,620
<br />$ 23,465,445
<br />It is not required, nor necessarily desirable, to have accumulated assets sufficient to cover the total present
<br />value of benefits until every member has left employment. Instead, the actuarial funding process
<br />calculates a regular contribution schedule of employee contributions and employer contributions (called
<br />normal costs) which are designed to accumulate with interest to equal the total present value of benefits
<br />by the time every member has left employment. As of each June 30, the actuary calculates the
<br />"desirable" level of plan assets as of that point in time by subtracting the present value of scheduled future
<br />employee contributions and future employer normal costs from the total present value of benefits. The
<br />resulting "desirable" level of assets is called the accrued liability.
<br />A plan with assets exactly equal to the plan's accrued liability is simply "on schedule" in funding that
<br />plan, and only future employee contributions and future employer normal costs are needed. A plan with
<br />assets below the accrued liability is "behind schedule", or is said to have an unfunded liability, and must
<br />temporarily increase contributions to get back on schedule. A plan with assets in excess of the plan's
<br />accrued liability is "ahead of schedule", or is said to have excess assets, and can temporarily reduce future
<br />contributions. A plan with assets in excess of the total present value of benefits is called super -funded,
<br />and neither future employer nor employee contributions are required. Of course, events such as plan
<br />amendments and investment or demographic gains or losses can change a plan's condition from year to
<br />December 8, 2000 Page 1 of 3
<br />1:19 PM
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