CALPERS ACTUARIAL VALUATION - June 30, 2021
PEPRA Miscellaneous Plan of the City of Buellton
CalPERS ID: 7472860304
Rate Plan belonging to the Miscellaneous Risk Pool Page 9 Changes Since the Prior Year’s Valuation
Benefits
The standard actuarial practice at CalPERS is to recognize mandated legislative benefit changes in the first annual valuation following the effective date of the legislation. Voluntary benefit changes by plan amendment are generally included in the first valuation that is prepared after the amendment becomes effective, even if the valuation date is prior to the effective date of the amendment.
This valuation generally reflects plan changes by amendments effective before the date of the report. Please refer to the “Plan’s Major Benefit Options” and Appendix B of the Section 2 Report for a summary of the plan provisions used in this valuation.
Actuarial Methods and Assumptions
On November 17, 2021, the board adopted new actuarial assumptions based on the recommendations in the 2021 CalPERS Experience Study and Review of Actuarial As sumptions. This study reviewed the retirement rates, termination rates, mortality rates, rates of salary increases, and inflation assumption for Public Agencies. These new assumptions are incorporated in this actuarial valuation and will impact the require d contribution for FY 2023-24. In addition, the board adopted a new asset portfolio as part of its Asset Liability Management process.
The new asset mix supports a 6.80% discount rate, which reflects a change in the price inflation assumption to
2.30%.
Subsequent Events
The contribution requirements determined in this actuarial valuation report are based on demographic and financial information as of June 30, 2021. Changes subsequent to that date are not reflected. Investment returns below the assumed rate of return may increase future required contributions while investment returns above the assumed rate of return may decrease future required contributions.
The projected employer contributions on Page 6 are calculated under the assumption that the discount rate remains at 6.8% going forward and that the realized rate of return on assets for FY 2021-22 is 6.8%.
This actuarial valuation report reflects statutory changes, regulatory changes and board actions through January 2022. Any subsequent changes or actions are not reflected.
Assets and Liabilities
• Breakdown of Entry Age Accrued Liability
• Allocation of Plan’s Share of Pool’s Experience/Assumption Change • Development of Plan’s Share of Pool’s Market Value of Assets • Schedule of Plan’s Amortization Bases
• Amortization Schedule and Alternatives
• Employer Contribution History
• Funding History
CALPERS ACTUARIAL VALUATION - June 30, 2021
PEPRA Miscellaneous Plan of the City of Buellton
CalPERS ID: 7472860304
Rate Plan belonging to the Miscellaneous Risk Pool Page 11 Breakdown of Entry Age Accrued Liability
Active Members $711,133
Transferred Members 4,331
Terminated Members 3,107
Members and Beneficiaries Receiving Payments 0
Total $718,571
Allocation of Plan’s Share of Pool’s
Experience/Assumption Change
It is the policy of CalPERS to ensure equity within the risk pools by allocating the pool’s experience gains/losses and assumption changes in a manner that treats each employer equitably and maintains benefit security for the members of the System while minimizing substantial variations in employer contributions.
The Pool’s experience gains/losses and impact of assumption/method changes is allocated to the plan as follows:
1. Plan’s Accrued Liability $718,571
2. Projected UAL balance at 6/30/2021 33,215
3. Pool’s Accrued Liability1 20,794,529,023
4. Sum of Pool’s Individual Plan UAL Balances at 6/30/20211 4,597,734,264
5. Pool’s 2020/21 Investment (Gain)/Loss1(2,338,185,055)
6. Pool’s 2020/21 Non-Investment (Gain)/Loss1(84,077,623)
7. Plan’s Share of Pool’s Investment (Gain)/Loss: [(1) - (2)] ÷ [(3) - (4)] × (5) (98,939)
8. Plan’s Share of Pool’s Non-Investment (Gain)/Loss: (1) ÷ (3) × (6) (2,905)
9. Plan’s New (Gain)/Loss as of 6/30/2021: (7) + (8) (101,844)
10. Increase in Pool’s Accrued Liability due to Change in Assumptions1 60,407,898
11. Plan’s Share of Pool’s Change in Assumptions: (1) ÷ (3) × (10) 2,087
12. Increase in Pool’s Accrued Liability due to Funding Risk Mitigation1 495,172,731
13. Plan’s Share of Pool’s Change due to Funding Risk Mitigation: (1) ÷ (3) × (12) 17,111
14. Offset due to Funding Risk Mitigation (28,976)
15. Plan’s Net Investment (Gain): (7) – (14) (69,963)
1 Does not include plans that transferred to Pool on the valuation date.
Development of the Plan’s Share of Pool’s Market
Value of Assets
16. Plan’s UAL: (2) + (9) + (11) + (13) ($49,431)
17. Plan’s Share of Pool’s MVA: (1) - (16) $768,002
CALPERS ACTUARIAL VALUATION - June 30, 2021
PEPRA Miscellaneous Plan of the City of Buellton
CalPERS ID: 7472860304
Rate Plan belonging to the Miscellaneous Risk Pool Page 12 Schedule of Plan’s Amortization Bases
Note that there is a two-year lag between the valuation date and the start of the contribution fiscal year. • The assets, liabilities, and funded status of the plan are measured as of the valuation date: June 30, 2021. • The required employer contributions determined by the valuation are for the fiscal year beginning two years after the valuation date: FY 2023-24.
This two-year lag is necessary due to the amount of time needed to extract and test the membership and financial data, and the need to provide pub lic agencies with their required employer contribution well in advance of the start of the fiscal year.
The Unfunded Accrued Liability (UAL) is used to determine the employer contribution and therefore must be rolled forward two years from the valuation da te to the first day of the fiscal year for which the contribution is being determined. The UAL is rolled forward each year by subtracting the expected payment on the UAL for the fiscal year and adjusting for interest. The expected payment for the first fiscal year is determined by the actuarial valuation two years ago and the contribution for the second year is from the actuarial valuation one year ago. Additional discretionary payments are reflected in the Expected Payments column in the fiscal year they were made by the agency.
Reason for Base
Date
Est.
Ramp
Level
2023-24
Ramp
Shape
Escalation
Rate
Amort.
Period
Balance
6/30/21
Expected
Payment
2021-22
Balance
6/30/22
Expected
Payment
2022-23
Balance
6/30/23
Minimum
Required
Payment
2023-24
Fresh Start 6/30/21 N/A (49,431) (11,078) (41,344) (10,673) (33,125) 0 Total (49,431) (11,078) (41,344) (10,673) (33,125) 0
The (gain)/loss bases are the plan’s allocated share of the risk pool’s (gain)/loss for the fiscal year as disclosed in “Allo cation of Plan’s Share of Pool’s Experience/Assumption Change” earlier in this section. These (gain)/loss bases will be amortized in accordance with the CalPERS amortization policy in effect at the time the base was established.
CALPERS ACTUARIAL VALUATION - June 30, 2021
PEPRA Miscellaneous Plan of the City of Buellton
CalPERS ID: 7472860304
Rate Plan belonging to the Miscellaneous Risk Pool
Amortization Schedule and Alternatives
The amortization schedule on the previous page(s) shows the minimum contributions required according to the CalPERS amortization policy. Many agencies have expressed a desire for a more stable pattern of payments or have indicated interest in paying off the unfunded accrued liabilities more quickly than required. As such, we have provided alternative amortization schedules to help analyze the current amortization schedule and illustrate the potential savings of accelerating unfunded liability payments.
Shown on the following page are future year amortization payments based on 1) the current amortization schedule reflecting the individual bases and remaining periods shown on the previous page, and 2) alternative “fresh start” amortization schedules using two sample periods that would both result in interest savings relative to the current amortization schedule. To initiate a Fresh Start, please contact the plan actuary.
The Current Amortization Schedule typically contains both positive and negative bases. Positive bases result from plan changes, assumption changes, method changes or plan experience that increase unfunded liability. Negative bases result from plan changes, assumption changes, method changes, or plan experience that decrease unfunded liability. The combination of positive and negative bases within an amortization schedule can result in unusual or problematic circumstances in future years, such as:
• When a negative payment would be required on a positive unfunded actuarial liability; or • When the payment would completely amortize the total unfunded liability in a very short time period, and results in a large change in the employer contribution requirement.
In any year when one of the above scenarios occurs, the actuary will consider corrective action such as replacing the existing unfunded liability bases with a single “fresh start” base and amortizing it over a n appropriate period.
The Current Amortization Schedule on the following page may appear to show that, based on the current amortization bases, one of the above scenarios will occur at some point in the future. It is impossible to know today whether such a scenario will in fact arise since there will be additional bases added to the amortization schedule in each future year. Should such a scenario arise in any future year, the actuary will take appropriate action based on guidelines in the CalPERS amortization policy.
CALPERS ACTUARIAL VALUATION - June 30, 2021
PEPRA Miscellaneous Plan of the City of Buellton
CalPERS ID: 7472860304
Rate Plan belonging to the Miscellaneous Risk Pool
Amortization Schedule and Alternatives (continued)
Alternate Schedules
Current Amortization
Schedule N/A Year Amortization N/A Year Amortization
Date Balance Payment Balance Payment Balance Payment
6/30/2023 N/A N/A N/A N/A N/A N/A
6/30/2024
6/30/2025
6/30/2026
6/30/2027
6/30/2028
6/30/2029
6/30/2030
6/30/2031
6/30/2032
6/30/2033
6/30/2034
6/30/2035
6/30/2036
6/30/2037
6/30/2038
6/30/2039
6/30/2040
6/30/2041
6/30/2042
6/30/2043
6/30/2044
6/30/2045
6/30/2046
6/30/2047
6/30/2048
6/30/2049
6/30/2050
6/30/2051
6/30/2052
Total N/A N/A N/A
Interest Paid N/A N/A N/A
Estimated Savings N/A N/A
CALPERS ACTUARIAL VALUATION - June 30, 2021
PEPRA Miscellaneous Plan of the City of Buellton
CalPERS ID: 7472860304
Rate Plan belonging to the Miscellaneous Risk Pool Page 15
Employer Contribution History
The table below provides a recent history of the required employer contributions for the plan. The amounts are based on the actuarial valuation from two years prior and does not account for prepayments or benefit changes made during a fiscal year. Additional discretionary payments before July 1, 2019 or after June 30, 2021 are not included.
[
Fiscal
Year
Employer
Normal Cost
Unfunded Liability
Payment ($)
Additional Discretionary
Payments
2016 - 17 6.930% $88 N/A
2017 - 18 6.908% 235 N/A
2018 - 19 7.266% 330 N/A
2019 - 20 7.072% 2,189 75
2020 - 21 7.874% 803 0
2021 - 22 7.73% 1,276
2022 - 23 7.76% 2,072
2023 - 24 8.00% 0
Funding History
The table below shows the recent history of the actuarial accrued liability, share of the pool’s market value of assets, unfunded accrued liability, funded ratio, and annual covered payroll.
Valuation
Date
Accrued
Liability
(AL)
Share of Pool’s
Market Value of
Assets (MVA)
Unfunded
Accrued
Liability (UAL)
Funded
Ratio
Annual
Covered
Payroll
06/30/2014 $353 $369 ($16) 104.5% $38,232
06/30/2015 9,490 8,861 629 93.4% 85,708
06/30/2016 31,102 27,975 3,127 89.9% 275,816
06/30/2017 97,121 94,343 2,778 97.1% 354,090
06/30/2018 199,129 186,841 12,288 93.8% 489,703
06/30/2019 330,191 313,752 16,439 95.0% 526,741
06/30/2020 501,537 469,718 31,819 93.7% 759,692
06/30/2021 718,571 768,002 (49,431) 106.9% 810,031
Risk Analysis
• Future Investment Return Scenarios
• Discount Rate Sensitivity
• Mortality Rate Sensitivity
• Maturity Measures
• Maturity Measures History
• Hypothetical Termination Liability
CalPERS Actuarial Valuation – June 30, 2021
PEPRA Miscellaneous Plan of the City of Buellton
CalPERS ID: 7472860304
Future Investment Return Scenarios
Analysis using the investment return scenarios from the Asset Liability Management process completed in 2021 was performed to determine the effects of various future investment returns on required employer contributions. The projections below reflect the impact of the CalPERS Funding Risk Mitigation policy. The projections also assume that all other actuarial assumptions will be realized and that no further changes in assumptions, contributions, benefits, or funding will occur.
The first table shows projected contribution requirements if the fund were to earn either 3.0% or 10.8% annually. These alternate investment returns were chosen because 90% of long-term average returns are expected to fall between them over the 20-year period ending June 30, 2041.
Required contributions outside of this range are also possible. In particular, whereas it is unlikely that investment returns will average less than 3.0% or greater than 10.8% over a 20 -year period, the likelihood of a single investment return less than 3.0% or greater than 10.8% in any given year is much greater. The following analysis illustrates the effect of an extreme, single year investment return.
The portfolio has an expected volatility (or standard deviation) of 12.0% per year. Accordingly, in any given year there is a 16% probability that the annual return will be -5.2% or less and a 2.5% probability that the annual return will be -17.2% or less. These returns represent one and two standard deviations below the expected return of 6.8%.
The following table shows the effect of a one or two standard deviation investment loss in FY 2021-22 on the FY 2024-25 contribution requirements. Note that a single-year investment gain or loss decreases or increases the required UAL contribution amount incrementally for each of the next five years, not just one, due to the 5-year ramp in the amortization policy. However, the contribution requirements beyond the first year are also impacted by investment returns beyond the first year. Historically, significant downturns in the market are often followed by higher than average returns. Such investment gains would offset the impact of these single year negative returns in years beyond FY 2024-25.
Assumed Annual Return for
Fiscal Year 2021-22
Required
Employer
Contributions
Projected
Employer
Contributions
2023-24 2024-25
(17.2)% (2 standard deviation loss)
Normal Cost Rate 8.00% 8.0%
UAL Contribution $0 $3,800
(5.2)% (1 standard deviation loss)
Normal Cost Rate 8.00% 8.0%
UAL Contribution $0 $1,500
• Without investment gains (returns higher than 6.8%) in year FY 2022-23 or later, projected contributions rates would continue to rise over the next four years due to the continued phase-in of the impact of the illustrated investment loss in FY 2021-22. • The Pension Outlook Tool can be used to model projected contributions for these scenarios beyond FY 2024-25 as well as to model other investment return scenarios.
Assumed Annual Return
FY 2021-22
through 2040-41
Projected Employer Contributions
2024-25 2025-26 2026-27 2027-28 2028-29
3.0% (5th percentile)
Normal Cost Rate 8.0% 8.0% 8.0% 8.0% 8.0%
UAL Contribution $0 $690 $2,100 $4,400 $7,400
10.8% (95th percentile)
Normal Cost Rate 8.2% 8.4% 8.6% 8.8% 8.5%
UAL Contribution $0 $0 $0 $0 $0
CalPERS Actuarial Valuation – June 30, 2021
PEPRA Miscellaneous Plan of the City of Buellton
CalPERS ID: 7472860304
Rate Plan belonging to the Miscellaneous Risk Pool Page 18 Discount Rate Sensitivity
The discount rate assumption is calculated as the sum of the assumed real rate of return and the assumed annual price inflation, currently 4.5% and 2.3%, respectively. Changing either the price inflation assumption or the real rate of return assumption will change the discount rate. The sensitivity of the valuation results to the discount rate assumption depends on which component of the discount rate is changed. Shown below are various valuation results as of June 30, 2021 assuming alternate discount rates by changing the two components independently. Results are shown using the current discount rate of 6.8% as well as alternate disco unt rates of
5.8% and 7.8%. The rates of 5.8% and 7.8% were selected since they illustrate the impact of a 1.0% increase or decrease to the 6.8% assumption.
Sensitivity to the Real Rate of Return Assumption
As of June 30, 2021 1% Lower
Real Return Rate
Current
Assumptions
1% Higher
Real Return Rate
Discount Rate 5.8% 6.8% 7.8%
Inflation 2.3% 2.3% 2.3%
Real Rate of Return 3.5% 4.5% 5.5%
a) Total Normal Cost 20.35% 16.25% 13.13%
b) Accrued Liability $884,305 $718,571 $590,414
c) Market Value of Assets $768,002 $768,002 $768,002
d) Unfunded Liability/(Surplus) [(b) - (c)] $116,303 ($49,431) ($177,588) e) Funded Ratio 86.8% 106.9% 130.1%
Sensitivity to the Price Inflation Assumption
As of June 30, 2021 1% Lower
Inflation Rate
Current
Assumptions
1% Higher
Inflation Rate
Discount Rate 5.8% 6.8% 7.8%
Inflation 1.3% 2.3% 3.3%
Real Rate of Return 4.5% 4.5% 4.5%
a) Total Normal Cost 17.13% 16.25% 14.77%
b) Accrued Liability $755,402 $718,571 $650,692
c) Market Value of Assets $768,002 $768,002 $768,002
d) Unfunded Liability/(Surplus) [(b) - (c)] ($12,600) ($49,431) ($117,310) e) Funded Ratio 101.7% 106.9% 118.0%
Mortality Rate Sensitivity
The following table looks at the change in the June 30, 2021 plan costs and funded status under two different longevity scenarios, namely assuming post-retirement rates of mortality are 10% lower or 10% higher than our current mortality assumptions adopted in 2021. This type of analysis highlights the impact on the plan of improving or worsening mortality over the long-term.
As of June 30, 2021 10% Lower
Mortality Rates
Current
Assumptions
10% Higher
Mortality Rates
a) Total Normal Cost 16.54% 16.25% 15.98%
b) Accrued Liability $732,916 $718,571 $705,375
c) Market Value of Assets $768,002 $768,002 $768,002
d) Unfunded Liability/(Surplus) [(b) - (c)] ($35,086) ($49,431) ($62,627) e) Funded Ratio 104.8% 106.9% 108.9%
CalPERS Actuarial Valuation – June 30, 2021
PEPRA Miscellaneous Plan of the City of Buellton
CalPERS ID: 7472860304
Rate Plan belonging to the Miscellaneous Risk Pool Page 19 Maturity Measures
As pension plans mature they become more sensitive to risks. Understanding plan maturity and how it affects the ability of a pension plan sponsor to tolerate risk is important in understanding how the pension plan is impacted by investment return volatility, other economic varia bles and changes in longevity or other demographic assumptions. Since it is the employer that bears the risk, it is appropriate to perform this analysis on a pension plan level considering all rate plans. The following measures are for one rate plan only.
One way to look at the maturity level of CalPERS and its plans is to look at the ratio of a plan’s retiree liability to its total liability. A pension plan in its infancy will have a very low ratio of retiree liability to total liability. As the plan matures, the ratio starts increasing. A mature plan will often have a ratio above 60%-65%.
Ratio of Retiree Accrued Liability to
Total Accrued Liability June 30, 2020 June 30, 2021
1. Retired Accrued Liability $0 $0
2. Total Accrued Liability 501,537 718,571
3. Ratio of Retiree AL to Total AL [(1) / (2)] 0.00 0.00 Another measure of maturity level of CalPERS and its plans is to look at the ratio of actives to retirees, also called the support ratio. A pension plan in its infancy will have a very high ratio of active to retired members. As the plan matures and members retire, the ratio declines. A mature plan will often have a ratio near or below one.
To calculate the support ratio for the rate plan, retirees and beneficiaries receiving a continuance are each counted as one, even though they may have only worked a portion of their caree rs as an active member of this rate plan. For this reason, the support ratio, while intuitive, may be less informative than the ratio of retiree liability to total accrued liability above. For comparison, the support ratio for all CalPERS public agency plans is
0.82 and is calculated consistently with how it is for the individual rate plan. Note that to calculate the support ratio for all public agency plans, a retiree with service from more than one CalPERS agency is counted as a retiree more than once.
Support Ratio June 30, 2020 June 30, 2021
1. Number of Actives 11 10
2. Number of Retirees 0 0
3. Support Ratio [(1) / (2)] N/A N/A
CalPERS Actuarial Valuation – June 30, 2021
PEPRA Miscellaneous Plan of the City of Buellton
CalPERS ID: 7472860304
Rate Plan belonging to the Miscellaneous Risk Pool Page 20 Maturity Measures (Continued)
The actuarial calculations supplied in this communication are based on various assumptions about long-term demographic and economic behavior. Unless these assumptions (e.g., terminations, deaths, disabilities, retirements, salary growth, investment return) are exactly realized each year, there will be differences on a year-to-year basis. The year-to-year differences between actual experience and the assumptions are called actuarial gains and losses and serve to lower or raise required employer contributions from one year to the next. Therefore, employer contributions will inevitably fluctuate, especially due to the ups and downs of investment returns.
Asset Volatility Ratio
Shown in the table below is the asset volatility ratio (AVR), which is the ratio of market value of assets to payroll.
Plans that have higher AVR experience more volatile employer contributions (as a percentage of payroll) due to investment return. For example, a plan with an asset-to-payroll ratio of 8 may experience twice the contribution volatility due to investment return volatility than a plan with an asset-to-payroll ratio of 4. It should be noted that this ratio is a measure of the current situation. It increases over time but generally tends to stabilize as the plan matures.
Liability Volatility Ratio
Also shown in the table below is the liability volatility ratio (LVR), which is the ratio of accrued liability to payroll.
Plans that have a higher LVR experience more volatile employer contributions (as a percentage of payroll) due to changes in liability. For example, a plan with LVRratio of 8 is expected to have twice the contribution volatility of a plan with LVR of 4. It should be noted that this ratio indicates a longer-term potential for contribution volatility, since the AVR, described above, will tend to move closer to the LVR as the funded ratio approaches 100%.
Contribution Volatility June 30, 2020 June 30, 2021
1. Market Value of Assets $469,718 $768,002
2. Payroll 759,692 810,031
3. Asset Volatility Ratio (AVR) [(1) / (2)] 0.6 0.9
4. Accrued Liability $501,537 $718,571
5. Liability Volatility Ratio (LVR) [(4) / (2)] 0.7 0.9 Maturity Measures History
Valuation Date
Ratio of
Retiree Accrued Liability
to
Total Accrued Liability
Support
Ratio
Asset
Volatility
Ratio
Liability
Volatility
Ratio
06/30/2017 0.00 N/A 0.3 0.3
06/30/2018 0.00 N/A 0.4 0.4
06/30/2019 0.00 N/A 0.6 0.6
06/30/2020 0.00 N/A 0.6 0.7
06/30/2021 0.00 N/A 0.9 0.9
CalPERS Actuarial Valuation – June 30, 2021
PEPRA Miscellaneous Plan of the City of Buellton
CalPERS ID: 7472860304
Rate Plan belonging to the Miscellaneous Risk Pool Page 21 Hypothetical Termination Liability
The hypothetical termination liability is an estimate of the financial position of the plan had the contract with CalPERS been terminated as of June 30, 2021. The plan liability on a termination basis is calculated differently compared to the plan’s ongoing funding liability. For the hypothetical termination liability calculation, both compensation and service are frozen as of the valuation date and no future pay increases or service accruals are assumed. This measure of funded status is not appropriate for assessing the need for future employer contributions in the case of an ongoing plan, that is, for an employer that continues to provide CalPERS retirement benefits to active employees.
A more conservative investment policy and asset allocation strategy was adopted by the board for the Terminated Agency Pool. The Terminated Agency Pool has limited funding sources since no future employer contributions will be made. Therefore, expected benefit payments are secured by risk-free assets and benefit security for members is increased while limiting the funding risk. However, this asset allocation has a lower expected rate of return than the PERF and consequently, a lower discount rate is assumed. The lower discount rate for the Terminated Agency Pool results in higher liabilities for terminated plans.
The effective termination discount rate will depend on actual market rates of return for risk-free securities on the date of termination. As market discount rates are variable, the table below shows a range for the hypothetical termination liability based on the lowest and highest interest rates observed during an approximate 19 -month period from 12 months before the valuation date to seven months after.
Market
Value of
Assets (MVA)
Hypothetical
Termination
Liability1,2
at 1.00%
Funded
Ratio
Unfunded
Termination
Liability
at 1.00%
Hypothetical
Termination
Liability1,2
at 2.25%
Funded
Ratio
Unfunded
Termination
Liability
at 2.25%
$768,002 $1,884,659 40.8% $1,116,657 $1,369,994 56.1% $601,992 1 The hypothetical liabilities calculated above include a 5% contingency load. The contingency load and other actuarial assumptions can be found in Appendix A.
2 The discount rate used for termination valuations is a weighted average of the 10-year and 30-year U.S. Treasury yields where the weights are based on matching asset and liability durations as of the termination date. The discount rates used in the table are based on 20-year Treasury bonds, rounded to the nearest quarter percentage point, which is a good proxy for most plans. The 20-year Treasury yield was 2.00% on June 30, 2021, the valuation date.
In order to terminate the plan, first contact our Pension Contract Services unit to initiate a Resolution of Intent to Terminate. The completed Resolution will allow the plan actuary to provide a preliminary termination valuation with a more up-to-date estimate of the plan liabilities. Before beginning this process, please consult with the plan actuary.
CalPERS Actuarial Valuation – June 30, 2021
PEPRA Miscellaneous Plan of the City of Buellton
CalPERS ID: 7472860304
Rate Plan belonging to the Miscellaneous Risk Pool Page 22 Participant Data
The table below shows a summary of the plan’s member data upon which this valuation is based:
June 30, 2020 June 30, 2021
Active Members
Counts 11 10
Average Attained Age 47.33 46.86
Average Entry Age to Rate Plan 44.02 42.52
Average Years of Credited Service 3.37 4.41
Average Annual Covered Pay $69,063 $81,003
Annual Covered Payroll $759,692 $810,031
Present Value of Future Payroll $7,572,621 $7,951,242
Transferred Members 1 1
Separated Members 2 3
Retired Members and Beneficiaries
Counts* 0 0
Average Annual Benefits* $0 $0
Counts of members included in the valuation are counts of the records processed by the valuation. Multiple records may exist for those who have service in more than one valuation group. This does not result in double counting of liabilities.
* Values include community property settlements.
List of Class 1 Benefit Provisions
This plan has the additional Class 1 Benefit Provisions:
• Post-Retirement Survivor Allowance (PRSA)
CALPERS ACTUARIAL VALUATION - June 30, 2021
PEPRA Miscellaneous Plan of the City of Buellton
CalPERS ID: 7472860304
Rate Plan belonging to the Miscellaneous Risk Pool Page 23 Plan’s Major Benefit Options
Shown below is a summary of the major optional benefits for which the agency has contracted. A description of principal standard and optional plan provisions is in Section 2.
Benefit Group
Member Category Misc
Demographics
Actives Yes
Transfers/Separated Yes
Receiving No
Benefit Group Key 112802
Benefit Provision
Benefit Formula 2% @ 62
Social Security Coverage No
Full/Modified Full
Employee Contribution Rate 7.25%
Final Average Compensation Period Three Year
Sick Leave Credit Yes
Non-Industrial Disability Improved
Industrial Disability No
Pre-Retirement Death Benefits
Optional Settlement 2 Yes
1959 Survivor Benefit Level No
Special No
Alternate (firefighters) No
Post-Retirement Death Benefits
Lump Sum $500
Survivor Allowance (PRSA) Yes
COLA 2%
CALPERS ACTUARIAL VALUATION - June 30, 2021
PEPRA Miscellaneous Plan of the City of Buellton
CalPERS ID: 7472860304
Rate Plan belonging to the Miscellaneous Risk Pool Page 24 PEPRA Member Contribution Rates
The California Public Employees’ Pension Reform Act of 2013 (PEPRA) established new benefit formulas, final compensation period, and contribution requirements for “new” employees (generally those first hired into a CalPERS -covered position on or after January 1, 2013). In accordance with Government Code Section 7522.30(b), “new members … shall have an initial contribution rate of at least 50% of the normal cost rate.” The normal cost rate is dependent on the plan of retirement benefits, actuarial assumptions, and demographics of the risk pool, particularly members’ entry age. Should the total normal cost rate change by more than 1% from the base total normal cost rate, the new member rate shall be 50% of the new normal cost rate rounded to the nearest quarter percent.
The table below shows the determination of the PEPRA member contribution rates effective July 1, 2023, based on 50% of the total normal cost rate as of the June 30, 2021 valuation.
Basis for Current Rate Rates Effective July 1, 2023
Rate Plan
Identifier Benefit Group Name
Total
Normal
Cost
Member
Rate
Total
Normal
Cost
Change Change
Needed
Member
Rate
26369 Miscellaneous PEPRA Level 14.322% 7.25% 16.25% 1.928% Yes 8.25%
CALPERS ACTUARIAL VALUATION - June 30, 2021
PEPRA Miscellaneous Plan of the City of Buellton
CalPERS ID: 7472860304
Rate Plan belonging to the Miscellaneous Risk Pool Page 25 Section 2
C A L I F O R N I A P U B L I C E M P L O Y E E S ’ R E T I R E M E N T S Y S T E M Risk Pool Actuarial Valuation Information
Section 2 may be found on the CalPERS website
(www.calpers.ca.gov) in the Forms and
Publications section
11/2/2022
1 Proprietary and Confidential © 2022
GovInvest Inc.
Pension Funding
Update
Buellton, CA
1 What has Changed Since Last Year?
11/2/2022
2 ASSUMPTION CHANGES
Reduced Discount Rate Assumption from 7% to 6.8%
Reduced Inflation Rate Assumption from 2.5% to 2.3%
Increased Wage Growth Assumption from 2.75% to 2.8%
Other Demographic Assumptions Changes
ACTUAL EXPERIENCE
Investment Return: 21.3%
2021 CalPERS Board Decisions & Experience
3 CalPERS Investment Return:
June 30, 2021
21.3% Investment Return
Experience Gain
7% (Assumed) vs 21.3% (Actual) = +14.3%
https://www.calpers.ca.gov/docs/funding-risk-mitigation-policy.pdf
11/2/2022
3 Funding Risk Mitigation Policy
https://www.calpers.ca.gov/docs/funding-risk-mitigation-policy.pdf CalPERS Investment Return:
June 30, 2022
-6.1% Investment Return
Experience Loss 6.8% (Assumed) vs -6.1% (Actual) = - 12.9% https://www.calpers.ca.gov/docs/funding-risk-mitigation-policy.pdf
11/2/2022
4 2021 Experience Gain Vs 2022 Experience Loss
Invest Gain/(Loss)
Invest 10,000
2021 Experience Gain 14.3%
6/30/2021 Balance 11,430 1,430
2022 Experience Loss -12.9%
6/30/2022 Balance 9,956 (1,474)
(44)
How Has Your Agency Been Impacted?
11/2/2022
5 Comparison to Other Public Agencies
9 Source:
Buellton 74.8% 84.6% 74.3%
UAL Comparison
10
11/2/2022
6 Funded Status
11 Funded Status
12
11/2/2022
7 Projected Classic vs PEPRA Payroll
13 47.8%
64.0%
78.9%
90.1%
96.9% 99.1%
0%
20%
40%
60%
80%
100%
120%
$-
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
Classic PEPRA % PEPRA Normal Cost Impact – Nominal Dollars 14
11/2/2022
8 Normal Cost Impact – Percent of Payroll
15 Impact on Annual Amortization Payment
16
11/2/2022
9 Total Employer Required Contributions
17 Source:
Expect Volatility
11/2/2022
10 Strategy
Options
Just Make Minimum
UAL Payment
1 Pay Off Current UAL -
~$1.6 Million via
• Additional Discretionary
Payment (ADP)
2 Pay Off Current UAL -
~1.6 Million via ADP after
6-month investment
3
11/2/2022
11 Unfunded Liability With Or Without $1.6M
ADP
21 $2.97M
$2.96M $2.98M
$1.6M
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000 6/30/2021 6/30/2022 6/30/2023 6/30/2024 6/30/2025 6/30/2026 6/30/2027 6/30/2028 6/30/2029 6/30/2030 6/30/2031 6/30/2032 6/30/2033 6/30/2034 6/30/2035 6/30/2036 6/30/2037 6/30/2038 6/30/2039 6/30/2040 6/30/2041 6/30/2042 6/30/2043 6/30/2044 6/30/2044 UAL Balance No ADP UAL Balance With ADP
Funded Ratio Comparison
22 75.4%
84.6%
74.3%
88.6%
0%
20%
40%
60%
80%
100%
120% 6/30/2021 6/30/2022 6/30/2023 6/30/2024 6/30/2025 6/30/2026 6/30/2027 6/30/2028 6/30/2029 6/30/2030 6/30/2031 6/30/2032 6/30/2033 6/30/2034 6/30/2035 6/30/2036 6/30/2037 6/30/2038 6/30/2039 6/30/2040 6/30/2041 6/30/2042 6/30/2043 Funded Ratio Without ADP Funded Ratio With ADP
11/2/2022
12 Unfunded Liability (UAL) Payment Comparison
23 $0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
$1,600,000
$1,800,000
$2,000,000 2022-23 2023-24 2024-25 2025-26 2026-27 2027-28 2028-29 2029-30 2030-31 2031-32 2032-33 2033-34 2034-35 2035-36 2036-37 2037-38 2038-39 2039-40 2040-41 2041-42 2042-43 2043-44 UAL Payment - No ADP UAL Payment - With ADP
UAL Payment Savings with FY 22-23 ADP
Fiscal Yr. UAL Balance Option 1 Option 2 Option 3 1,711,683 22-23 1,622,345 198,158 1,569,849 1,622,345 23-24 1,527,879 194,447 24-25 1,430,827 184,171 25-26 1,337,793 173,178 26-27 1,249,797 158,028 27-28 1,171,472 164,533 28-29 1,081,098 171,220 29-30 977,667 178,092 30-31 860,103 185,159 31-32 727,238 181,479 32-33 589,142 177,386 33-34 445,884 168,562 34-35 302,005 153,964 35-36 163,429 127,761 36-37 42,511 42,365 37-38 1,622 1,676 38-39 - - Sum 2,460,179 1,569,849 1,622,345 Less Investment Earnings Offset (36,000) 1,586,345 Savings Relative to Option 1 $ 890,330 $ 873,834
11/2/2022
13 Reference
Treasury Yield Curve – Fixed Income Proxy
0.05% 0.06% 0.08% 0.22%
0.40%
0.78%
1.04%
1.37%
1.55% 1.63%
3.73%
4.00%
4.22%
4.57% 4.66%
4.51% 4.45%
4.27% 4.18% 4.10%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%
5.00%
1 Mo 2 Mo 3 Mo 6 Mo 1 Yr 2 Yr 3 Yr 5 Yr 7 Yr 10 Yr
1/3/2022 3/31/2022 6/30/2022 9/30/2022 10/31/2022
11/2/2022
14 PEPRA Member Deduction Increases