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CONTRACT AMENDMENT COST ANALYSIS - VALUATION BASIS: NNE 30, 1999 SAFETY PLAN FOR CITY OF SANTA ANA EMPLOYER NUMBER 137 Benefit Description: 21362.2,3% @ 50 Full Formula year. For example, a plan amendment could cause a plan to move all the way from being super -funded to being in an unfunded position. The changes in your plan's accrued liability, unfunded accrued liability, and the funded ratio as of June 30, 1999 due to the plan amendment are shown in the table below. While the tables above give the changes in the "cost" and funded status of the plan due to the amendment, there remains the question of what will happen to the employer contribution rate because of the change in plan provisions. CaIPERS policy is to implement rate changes due to plan amendments immediately on the effective date of the change in plan benefits. In general, the policy also provides that the change in unfunded liability due to the plan amendment will be separately amortized over a period of 20 years from the effective date of the amendment and all other components of the plan's unfunded liability/excess assets will continue to be amortized separately. However, special rules have to be applied to plans with a current employer contribution rate of zero. The pre -amendment excess assets in these plans were sufficient to cover the employer's normal cost for one or more years into the future. A plan amendment will use up some or all of the pre -amendment excess assets. If there is still excess assets (i.e. if the plan is still ahead of schedule) after the plan amendment, the remaining excess assets were spread over the greater of 5 years or the number of years for which the excess assets would keep the employer rate equal to zero. If the amendment uses up all excess assets and creates an unfunded liability (i.e. from being ahead of schedule to behind schedule), the post -amendment unfunded liability was amortized over 20 years. The table below shows the immediate short-term change in your plan's employer contribution rate due to the plan amendment. Rate Component Pre -Amendment Change Due to Post -Amendment Pre -Amendment Plan Amendment Post Method Change Normal Cost 13.067% & Method Change 17.762% Accrued Liability $ 366,269,832 $ 42,645,475 $ 408,915,307 Assets 472,514,555 0 472,514,555 Unfunded Liability Funded Ratio $ 42,645,475 $ (106,244,723) 129.0% $ (63,599,248) 115.6% While the tables above give the changes in the "cost" and funded status of the plan due to the amendment, there remains the question of what will happen to the employer contribution rate because of the change in plan provisions. CaIPERS policy is to implement rate changes due to plan amendments immediately on the effective date of the change in plan benefits. In general, the policy also provides that the change in unfunded liability due to the plan amendment will be separately amortized over a period of 20 years from the effective date of the amendment and all other components of the plan's unfunded liability/excess assets will continue to be amortized separately. However, special rules have to be applied to plans with a current employer contribution rate of zero. The pre -amendment excess assets in these plans were sufficient to cover the employer's normal cost for one or more years into the future. A plan amendment will use up some or all of the pre -amendment excess assets. If there is still excess assets (i.e. if the plan is still ahead of schedule) after the plan amendment, the remaining excess assets were spread over the greater of 5 years or the number of years for which the excess assets would keep the employer rate equal to zero. If the amendment uses up all excess assets and creates an unfunded liability (i.e. from being ahead of schedule to behind schedule), the post -amendment unfunded liability was amortized over 20 years. The table below shows the immediate short-term change in your plan's employer contribution rate due to the plan amendment. Rate Component Pre -Amendment Change Due to Plan Amendment & Method Change Post -Amendment Post Method Change Normal Cost 13.067% 4.695% 17.762% Unfunded/Excess Asset Cost 1959 Survivor (13.067)% 0.000% (4.695)% 0.000% (17.762)% 0.000% Total Employer Rate 0.000% (0.000)% 0.000% Amortization Period 36 Years 8 Years December 8, 2000 Page 2 of 3 1:19 PM