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

City of Monterey Pension Update April 25, 2018

• The City provides retirement benefits to City Background employees through the California Public Employees Retirement System (CalPERS).

• City controls • Who gets benefits • What benefits are promised • How much money has been set aside to pay Funding for benefits Targets/Contribution • CalPERS controls Rates • How money is invested • What assumptions are made regarding future experience • What funding methods are used to allocate costs to different years

• Different base formulas for Safety (police officers & fire fighters) versus Miscellaneous (all non-Safety) employees. • Classic formula for employees hired before Benefits 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% None Fire: 5%

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 0 Separated 25 4 0 Retirees and Beneficiaries 195 0 0

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%

• 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 Normal Cost 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%

• Employer Normal Cost • Total Normal Cost – Employee Contributions Total PLUS Employer Contribution • Unfunded Actuarial Liability (UAL) Amortization Payment

Total Employer Contribution - Safety

Total Employer Contribution - Miscellaneous

• Funding Target • The assets that would be in the fund today, IF • The Normal Costs had always been paid into the fund, Actuarial • Current plan benefits had never been not changed, Liability • Employee experience had always matched current assumptions, and • Investment experience had always matched assumptions.

Unfunded • Actuarial Liability – Assets Actuarial • The amount that the current assets are behind (or ahead of) the funding target. Liability (UAL)

UAL - Safety

UAL - Miscellaneous

Questions?