Revised Pension Rate Stabilization
Program (PRSP) and Other Post-
Employment Benefits (OPEB) Policy
1 City of Alameda – November 1, 2022
May 11, 2021
1. Update on Unfunded Pension Liability as of June 30, 2021
2. Update on OPEB as of June 30, 2022
3. Proposed revisions to the PRSP and OPEB Funding Policy 2 Tonight’s Agenda
Update of CalPERS Pension Obigations as of June 30, 2021 Net Pension Liability Formula:
3 Accrued Liability Plan Assets Net Pension Liability
Liability Asset
NPL
Update of CalPERS Pension Obigations as of June 30, 2021, Continued Accrued Liability
4 Liability
Accrued liability is the present
value of projected benefits for:
-
100,000,000
200,000,000
300,000,000
400,000,000
500,000,000
600,000,000
700,000,000
800,000,000
900,000,000
1,000,000,000
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Combined CalPERS Accrued Liabilities
Accrued Liability
1) Active Members
2) Transferred Members
3) Terminated Members
4) Members and
Beneficiaries Receiving
Benefits
Update of CalPERS Pension Obigations as of June 30, 2021, Continued Plan Assets
5 Plan assets are the current market
value of all assets. Items which affect
this category include:
1) Investment Return
2) Employee Contributions
3) Employer Contributions
(both required and
voluntary)
$-
$100,000,000
$200,000,000
$300,000,000
$400,000,000
$500,000,000
$600,000,000
$700,000,000
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Plan Assets
Combined CalPERS Plan Assets
Assets
Update of CalPERS Pension Obigations as of June 30, 2021, Continued Net Pension Liability
6 Net Pension Liability is the difference
between accrued liability and the plan
assets.
NPL
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
$-
$100,000,000
$200,000,000
$300,000,000
$400,000,000
$500,000,000
$600,000,000
$700,000,000
$800,000,000
$900,000,000
$1,000,000,000
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Combined CalPERS Net Pension Liability
Plan Assets Unfunded Liability Funded Ratio
Funded Ratio expresses the pension
fund’s current financial position, the
ratio between plan assets and
liabilities.
Update of CalPERS Pension Obigations as of June 30, 2021, Continued Payments towards Pension and OPEB costs since the Pension Rate Stabilization Program (PRSP) and OPEB Funding Policy was adopted in 2017 7 $-
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
$16,000,000
$18,000,000
2017 2018 2019 2020 2021 2022
PRSP and OPEB Funding Policy Contributions
CalPERS Advance Payments Pension Trust Contributions PARS Section 115 Trust Total
CalPERS
Advance
Payments
Pension Trust
Contributions
PARS Section
115 Trust Total
2017 250,000 250,000
2018 10,695,052 3,565,017 3,000,000 17,260,069
2019 6,142,000 2,047,172 500,000 8,689,172
2020 250,000 250,000
2021 5,000,000 4,000,000 250,000 9,250,000
2022 5,755,000 1,919,000 250,000 7,924,000
Total 27,592,052 11,531,189 4,500,000 43,623,241
Update of CalPERS Pension Obigations as of June 30, 2021, Continued FY 21 Highlights:
● Accrued liability increased 5.9% since year prior
○ Average annual increase over past 11 years is 5.2% per year ● Plan assets increased roughly 21% since June 30, 2020 ○ A mixture of required and voluntary contributions in addition to a solid investment performance
● Unfunded Accrued Liability is the lowest since 2015
● Funded Ratio is the highest over last 11 years
○ Increased from 63.9% in prior year to 73.1% in current year ● City has additional $12 million in a PARS trust fund for future pension obligations 8
Update of CalPERS Pension Obigations as of June 30, 2021, Continued What’s ahead?
● The discount rate – the assumed rate of return CalPERS expects its investments to earn each fiscal year – changed from 7% to 6.8% in July 2021
● CalPERS reported a preliminary net investment loss of 6.1% in FY 22. ● Economic uncertainty
9 Net OPEB Liability Formula:
10 Total Liability Plan Assets Net OPEB Liability
Liability Asset Net
OPEB
OPEB Update as of June 30, 2022
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
-
20,000,000
40,000,000
60,000,000
80,000,000
100,000,000
120,000,000
140,000,000
160,000,000
2018 2019 2020 2021 2022
OPEB Actuarial Valuation
Plan Assets Net OPEB Funded Ratio
Total Total Liability Plan Assets Net OPEB Funded Ratio 2018 114,742,012 11,785,405 102,956,607 10.3%
2019 115,789,739 13,977,904 101,811,835 12.1%
2020 132,265,281 15,322,693 116,942,588 11.6%
2021 135,200,409 20,684,723 114,515,686 15.3%
2022 105,765,757 18,946,785 86,818,972 17.9%
Propsed revisions to the PRSP and OPEB Funding Policy
The following text under “Annual Contributions” has been removed:
a. One-half of each fiscal year’s General Fund surplus over the 25% available fund balance shall be put into a Trust Fund or directly into paying off the CalPERS unfunded liability for either pensions or post- employment benefits.
11 Propsed revisions to the PRSP and OPEB Funding Policy Two material changes have been added:
1) Definition:
a. General Fund Surplus - General Fund Surplus, as defined by this policy, is the difference between the current year and prior year General Fund “Residual fund balance in excess of policy or fund balance deficits,” found under the Net Position and Fund Balances footnote of the Annual Comprehensive Financial Report (ACFR). The amount is considered Surplus only if the current year is greater than the prior year. This amount comprises unassigned residual fund balance after meeting all annual auditing and financial reporting requirements.
12 Propsed revisions to the PRSP and OPEB Funding Policy 2) Clarifying Paragraph under “Annual Contribution”:
After fiscal year close and the annual audit has been completed, the Finance Department shall determine if a General Fund Surplus exists. If a General Fund Surplus exists, the Finance Department will calculate the amount of General Fund Surplus. City staff will then propose half (50%) of the General Fund Surplus be used in the following manner: 75% shall be used to reduce CalPERS unfunded liability and 25% shall be contributed into the City’s Public Agency Retirement Services (PARS) Section 115 Irrevocable Trust.
13