CalPERS Actuarial Issues – 6/30/14 Valuation Preliminary ... · PDF fileCITY OF CHICO...

CITY OF CHICO MISCELLANEOUS AND SAFETY PLANS

CalPERS Actuarial Issues – 6/30/14 Valuation

Preliminary Results

Presented by John E. Bartel, President Prepared by Bianca Lin, Assistant Vice President Matthew Childs, Actuarial Analyst

Bartel Associates, LLC

March 15 2016

Agenda

o:\clients\city of chico\projects\calpers\6-30-14\ba chicoci 16-03-15 calpers misc safety 14.docx

Topic Page

Definitions 1

CalPERS Changes 3

Miscellaneous Plan: Demographic Information 5 Plan Funded Status 7 Contribution Rates & Projections 13

Safety Plan: Demographic Information 19 Plan Funded Status 21 Contribution Rates & Projections 27

City Comparison to Other Agencies 33

PEPRA Cost Sharing 37

Impact of Enhanced Formulas 39

March

PVB - P Di

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15 2016

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March 15 2016 3

CALPERS CHANGES

Contribution policy changes:

No asset smoothing

5-year ramp up

Included in 6/30/13 valuation (first impact 15/16 rates; full impact 19/20)

Assumption changes:

Anticipate future mortality improvement

Other, less significant, changes

Included in 6/30/14 valuation (first impact 16/17 rates; full impact 20/21)

Risk Mitigation Strategy

Move to more conservative investments over time Only when investment return is better than expected Lower discount rate in concert

Essentially use ≈50% of investment gains to pay for cost increases

Likely get to 6.5% over ≈ 20 years

March 15 2016

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March 15 2016 5

SUMMARY OF DEMOGRAPHIC INFORMATION - MISCELLANEOUS

1994 2004 2013 2014 Actives Counts 220 240 217 177 Average

Age 44 47 48 48 City Service 10 10 12 13 PERSable Wages $34,200 $54,300 $66,200 $65,400

Total PERSable Wages (millions) 6.8 14.3 15.7 12.7 Receiving Payments Counts

Service 165 240 266 Disablity 19 9 9 Beneficiaries 35 26 27 Total 138 219 275 302

Average Annual City Provided Benefit1 Service $11,400 $28,200 $28,400 Disability 5,100 6,800 6,900 Service Retirements in last 5 years 15,800 34,100 32,900

1 Average City provided pensions are based on City service & City benefit formula, and are not

representative of benefits for long service employees.

March 15 2016

MEMBEERS INCLUUDED IN V

6

VALUATIOON - MISCCELLANEEOUS

March 15 2016

P

June 3

5$

8

152

100

(5

PLAN FUN

30, 2013

5,400,000

8,400,000

8,600,000

2,400,000

0,600,000

1,800,000)

NDED STA

Ac

Ret

Ina

To

Market

) (Unfun

7

ATUS - MI

ctive AAL

tiree AAL

active AAL

otal AAL

Value of A

nded Liabi

ISCELLAN

J

$

L

L

Assets

ility)

NEOUS

June 30, 20

50,800

102,400

10,600

163,800

114,400

(49,400

014

0,000

0,000

0,000

0,000

0,000

0,000)

March 15 2016 8

PLAN FUNDED STATUS - MISCELLANEOUS

What happened between 6/30/13 and 6/30/14?

Unfunded Liability (Increase)/Decrease ≈ $2.4 million

Reasons for Unfunded Liability increase

Asset gain/(loss): ≈ $9.9 million

Assumption Change gain/(loss): ≈ $(7.6) million

Actuarial gain/(loss): ≈ $2.6 million Average Salary $66,200 $65,400 Number of Actives 217 177 Number of Inactives 121 136 Number of Retirees 275 302

Other gain/(loss): ≈ $(2.5) million Contributions Other (expected)

March 15 2016 9

INVESTMENT RETURN - MISCELLANEOUS

Above assumes contributions, payments, etc. received evenly throughout year. Estimated June 30, 2016 based on CalPERS actual return through 12/31/15 and

assumed 7.5% annual return for the remaining 6 months.

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Est.

2016

MVA 2.0% 16.3%15.3%20.1%19.5%12.5%10.5%-7.2%-6.0% 3.7% 16.6%12.3%11.9%18.8%-5.1% -24.0 13.3%21.7% 0.1% 13.2%18.4% 2.4% 0.6%

-30.00%

-22.50%

-15.00%

-7.50%

0.00%

7.50%

15.00%

22.50%

30.00%MVA

March 15 2016

FUNNDED STA

6/30

ATUS (MIL

0/15 & 6/30/1

10

LLIONS) -

16 funded stat

- MISCELL

tus estimated

LANEOUSS

March 15 2016 11

CONTRIBUTION RATES - MISCELLANEOUS

97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17

ER Normal Cost 9.2% 9.3% 8.0% 8.1% 8.3% 8.4% 12.5% 12.6% 12.3% 12.4% 12.2% 12.3% 12.5% 12.5% 12.0% 11.8% 12.1% 11.8% 12.4% 13.2%

Total ER Cont Rate 10.2% 8.8% 1.7% 0.0% 0.0% 0.0% 11.4% 20.0% 21.2% 19.7% 20.3% 20.9% 20.8% 21.2% 23.3% 23.8% 26.3% 28.1% 31.2% 38.9%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

March 15 2016 12

CONTRIBUTION RATES - MISCELLANEOUS

6/30/13 6/30/14 2015/2016 2016/2017

Total Normal Cost 20.4% 21.2%

Employee Normal Cost 8.0% 8.0%

Employer Normal Cost 12.4% 13.2%

Amortization Bases 18.8% 25.8%

Total Employer Contribution Rate 31.2% 38.9%

Amortization Period Multiple Multiple

What Happened from 6/30/13 to 6/30/14:

2015/16 Rate 31.2%

Asset Method Change (2nd Year) 1.5%

Assumption Change (1st Year) 1.4%

Payroll Increased Less Than Expected 5.2%

(Gains)/Losses (0.4)%

2016/17 Rate 38.9%

March 15 2016 13

CONTRIBUTION PROJECTIONS - MISCELLANEOUS

Market Value Investment Return: June 30, 2013 13.2%2 June 30, 2014 18.4%2

June 30, 2015 2.4%2

Future returns3 based on stochastic analysis using 1,000 trials Single Year Returns at 25th Percentile 50th Percentile 75th Percentile

7.5% Investment Mix 0.6% 7.5% 15.3% 6.5% Investment Mix 1.3% 6.5% 11.9%

No Other: Gains/Losses, Method/Assumption Changes, Benefit Improvements Excludes Employer Paid Member Contributions (EPMC) New hire assumptions:

Assumes 50% of 2013 new hires will be Classic Members (3%@60) and 50% will be New Members with PEPRA benefits.

Assumes Classic Members will decrease from 50% to 0% of new hires over 20 years.

2 Based on CalPERS CAFR. 3 June 30, 2016 return based on CalPERS return of (3.0%) through 12/31/15 and assumed future returns for 6 months.

March 15 2016 14


6.25%

6.50%

6.75%

7.00%

7.25%

7.50%

7.75%Discount Rate used as of Actuarial Valuation Date

95th percentile 75th percentile 50th percentile 25th percentile 5th Percentile

March 15 2016 15


0%

10%

20%

30%

40%

50%

60%

70%

75th Percentile 50th Percentile 50th Percentile - No Risk Mitigation 25th Percentile

March 15 2016 16


0%

10%

20%

30%

40%

50%

60%

70%


March 15 2016 17


0%

25%

50%

75%

100%

125%

150%

175%Funded Status With Risk Mitigation

75th Percentile 50th Percentile 25th Percentile

March 15 2016 18


25%

50%

75%

100%

125%

150%

175%Funded Status Without Risk Mitigation


March 15 2016 19

SUMMARY OF DEMOGRAPHIC INFORMATION – SAFETY

1994 2004 2013 2014 Actives Counts 111 149 149 150 Average

Age 39 40 43 41 City Service 13 11 13 11 PERSable Wages $40,400 $73,400 $98,900 $91,200

Total PERSable Wages (millions) 4.9 12.0 16.1 14.9 Receiving Payments Counts

Service 61 99 111 Disablity 52 68 71 Beneficiaries 16 27 30 Total 92 129 194 212

Average Annual City Provided Benefit4 Service $15,900 $41,700 $47,700 Disability 18,800 31,200 32,300 Service Retirements in last 5 years 15,700 73,000 75,900

4 Average City provided pensions are based on City service & City benefit formula, and are not

representative of benefits for long service employees.

March 15 2016

MEEMBERS IINCLUDED

20

D IN VALUUATION – – SAFETY

March 15 2016

June 3

68$

91

4

164

116

(47

PLAN

30, 2013

8,800,000

1,600,000

4,200,000

4,600,000

6,800,000

7,800,000

N FUNDED

Ac

Re

Ina

T

Market

) (Unfun

21

D STATUS

ctive AAL

etiree AA

active AA

Total AAL

t Value of

nded Liab

S – SAFETY

J

L $

AL

AL

L

f Assets

bility)

Y

June 30, 2

61,800$

114,900

4,800

181,500

135,400

(46,100

2014

0,000

0,000

0,000

0,000

0,000

0,000)

March 15 2016 22

PLAN FUNDED STATUS – SAFETY

What happened between 6/30/13 and 6/30/14?

Unfunded Liability (Increase)/Decrease ≈ $1.7 million

Reasons for Unfunded Liability increase

Asset gain/(loss): ≈ $11.7 million

Assumption Change gain/(loss): ≈ $(7.5) million

Actuarial gain/(loss): ≈ $(0.2) million Average Salary $98,900 $91,200 Number of Actives 149 150 Number of Inactives 37 38 Number of Retirees 194 212

Other gain/(loss): ≈ $(2.3) million Contributions Other (expected)

March 15 2016 23

INVESTMENT RETURN – SAFETY

Above assumes contributions, payments, etc. received evenly throughout year. Estimated June 30, 2016 based on CalPERS actual return through 12/31/15 and

assumed 7.5% annual return for the remaining 6 months.

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Est.

2016

MVA 2.0% 16.3%15.3%20.1%19.5%12.5%10.5%-7.2%-6.0% 3.7% 16.6%12.3%11.9%18.8%-5.1% -24.0 13.3%21.7% 0.1% 13.2%18.4% 2.4% 0.6%

-30.00%

-22.50%

-15.00%

-7.50%

0.00%

7.50%

15.00%

22.50%

30.00%MVA

March 15 2016

FUNDED

6/30

D STATUS

0/15 & 6/30/1

24

(MILLIO

16 funded stat

ONS) – SAF

tus estimated

FETY

March 15 2016 25

CONTRIBUTION RATES – SAFETY

97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17

ER Normal Cost 14.9% 15.3% 12.8% 14.2% 19.0% 19.6% 19.5% 19.7% 18.4% 18.3% 18.2% 18.4% 18.6% 18.3% 19.4% 19.6% 20.1% 20.2% 20.2% 20.7%

Total ER Cont Rate 11.1% 11.7% 4.0% 7.8% 16.6% 21.0% 21.4% 30.1% 28.2% 25.3% 25.9% 26.9% 26.4% 27.5% 30.7% 31.0% 31.3% 32.9% 35.2% 39.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

March 15 2016 26

CONTRIBUTION RATES – SAFETY

6/30/13 6/30/14 2015/2016 2016/2017


Employee Normal Cost 9.0% 9.1%


Amortization Bases 15.0% 18.3%

Total Employer Contribution Rate 35.2% 39.0%

Amortization Period Multiple Multiple

What Happened from 6/30/13 to 6/30/14:

2015/16 Rate 35.2%

Asset Method Change (2nd year) 1.5%

Assumption Change (1st year) 1.1%

Payroll Increased Less Than Expected 1.6%

(Gain)/Losses (0.4)%

2016/17 Rate 39.0%

March 15 2016 27

CONTRIBUTION PROJECTIONS – SAFETY

Market Value Investment Return: June 30, 2013 13.2%5 June 30, 2014 18.4%5

June 30, 2015 2.4%5

Future returns6 based on stochastic analysis using 1,000 trials Single Year Returns at 25th Percentile 50th Percentile 75th Percentile

7.5% Investment Mix 0.6% 7.5% 15.3% 6.5% Investment Mix 1.3% 6.5% 11.9%

No Other: Gains/Losses, Method/Assumption Changes, Benefit Improvements Excludes Employer Paid Member Contributions (EPMC) New hire assumptions:

Assumes 50% of 2013 new hires will be Classic Members (3%@50) and 50% will be New Members with PEPRA benefits.

Assumes Classic Members will decrease from 50% to 0% of new hires over 10 years

5 Based on CalPERS CAFR. 6 June 30, 2016 return based on CalPERS return of (3.0%) through 12/31/15 and assumed future returns for 6 months.

March 15 2016 28


6.25%

6.50%

6.75%

7.00%

7.25%

7.50%

7.75%Discount Rate used as of Actuarial Valuation Date

95th percentile 75th percentile 50th percentile 25th percentile 5th Percentile

March 15 2016 29


0%

10%

20%

30%

40%

50%

60%

70%


March 15 2016 30


0%

10%

20%

30%

40%

50%

60%

70%

80%


March 15 2016 31


25%

50%

75%

100%

125%

150%

175%Funded Status With Risk Mitigation


March 15 2016 32


25%

50%

75%

100%

125%

150%

175%Funded Status Without Risk Mitigation


March 15 2016 33

RATIO OF AAL TO PENSION WAGES - MISCELLANEOUS

0

2

4

6

8

10

12

14

16

County of B

utte

City of C

itrus Heights

City of C

hico

City of Fairfield

City of M

erced

City of O

roville

City of R

edding

City of San L

eandro

City of T

racy

City of V

acaville

City of Y

uba

6/30/14 Ratio of Actuarial Accrued Liability to Payroll - Miscellaneous

*All results taken from most recently available CalPERS 6/30/14 valuation reports.

March 15 2016 34

RATIO OF AAL TO PENSION WAGES - SAFETY

0

4

8

12

16

20

24

28C

ounty of Butte

City of C

itrus Heights

City of C

hico

City of Fairfield

City of M

erced

City of O

roville

City of R

edding

City of San L

eandro

City of T

racy

City of V

acaville

City of Y

uba

6/30/14 Ratio of Actuarial Accrued Liability to Payroll - Safety


March 15 2016 35

RATIO OF MVA TO PENSION WAGES - MISCELLANEOUS

0

2

4

6

8

10

12

County of B

utte

City of C

itrus Heights

City of C

hico

City of Fairfield

City of M

erced

City of O

roville

City of R

edding

City of San L

eandro

City of T

racy

City of V

acaville

City of Y

uba

6/30/14 Ratio of Market Value of Assets to Payroll - Miscellaneous


March 15 2016 36

RATIO OF MVA TO PENSION WAGES - SAFETY

0

4

8

12

16

20

24C

ounty of Butte

City of C

itrus Heights

City of C

hico

City of Fairfield

City of M

erced

City of O

roville

City of R

edding

City of San L

eandro

City of T

racy

City of V

acaville

City of Y

uba

6/30/14 Ratio of Actuarial Accrued Liability to Payroll - Safety


March 15 2016 37

RATIO OF UAL TO PENSION WAGES - MISCELLANEOUS

0%

100%

200%

300%

400%

500%

County of B

utte

City of C

itrus Heights

City of C

hico

City of Fairfield

City of M

erced

City of O

roville

City of R

edding

City of San L

eandro

City of T

racy

City of V

acaville

City of Y

uba

6/30/14 Unfunded Actuarial Accrued Liability as a Percentage of Payroll - Miscellaneous


March 15 2016 38

RATIO OF UAL TO PENSION WAGES - SAFETY

0%

100%

200%

300%

400%

500%

600%

County of B

utte

City of C

itrus Heights

City of C

hico

City of Fairfield

City of M

erced

City of O

roville

City of R

edding

City of San L

eandro

City of T

racy

City of V

acaville

City of Y

uba

6/30/14 Unfunded Actuarial Accrued Liability as a Percentage of Payroll - Safety


March 15 2016 39

NORMAL COST RATE - MISCELLANEOUS

0%

2%

4%

6%

8%

10%

12%

14%

16%

County of B

utte

City of C

itrus Heights

City of C

hico

City of Fairfield

City of M

erced

City of O

roville

City of R

edding

City of San L

eandro

City of T

racy

City of V

acaville

City of Y

uba

Normal Cost Rate - Miscellaneous


March 15 2016 40

NORMAL COST RATE - SAFETY

0%

5%

10%

15%

20%

25%C

ounty of Butte

City of C

itrus Heights

City of C

hico

City of Fairfield

City of M

erced

City of O

roville

City of R

edding

City of San L

eandro

City of T

racy

City of V

acaville

City of Y

uba

Normal Cost Rate - Safety

*All results taken from most recently available CalPERS 6/30/14 valuation reports

March 15 2016 41

PEPRA COST SHARING

Target of 50% of total normal cost for everyone

New members must pay greater of 50% of total normal cost or bargained amount if higher

Employer cannot pay any part of new member required employee contributions

Employer may impose current employees pay 50% of total normal cost (limited to certain amounts) if not agreed through collective bargaining by 1/1/18

Miscellaneous Plan

Current Members New Members

Tier 1 3%@60

Tier 2 2%@62


Member Normal Cost 8.0% 6.75%


50% Target 10.7% 6.53%

March 15 2016 42

PEPRA COST SHARING

Safety Plan

Current Members New Members

Tier 1 3%@50

Tier 2 2.7%@57


Member Normal Cost 9.0% 12.00%


50% Target 14.95% 12.09%

March 15 2016 43

IMPACT OF ENHANCED BENEFIT FORMULAS

Miscellaneous

2.5% @ 55 → 3% @ 60

Contract Amendment Cost Analysis Normal Cost Increase 3.7% Increase in UAL 7.2% Estimated impact of lower discount rate 5.0%

and other issues on benefit improvement

Safety

2% @ 50 → 3% @ 50

Contract Amendment Cost Analysis Normal Cost Increase 4.8% Increase in UAL 8.0% Estimated impact of lower discount rate 3.0%

and other issues on benefit improvement

≈15.8%

≈15.9%

March 15 2016

IMMPACT OF

Th

F ENHANC

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