Carlsbad City Council
August 22, 2024

To the members of the:

CITY COUNCIL
Da t e~cA ✓ ccV
CM _iLACr!.ii ~ M (3)V
Council Memorandum
August 22, 2024
To:

From:

Via:

Re:

Honorable Mayor Blackburn and Members of the City Council Laura Rocha, Deputy City Manager, Administrative Services Zach Korach, Finance Director
Geoff Patnoe, Assistant City Manager @_
Cal PERS Update (Districts - All)
{city of
Carlsbad
Memo ID# 2024063
This memorandum provides information related to t he city's pension plan with California Public Employment Retirement System (CalPERS) and their updated actuarial valuation reports as of June 2023 (issued in August 2024). Compared to the previous year, there was a slight decrease in the funded ratio which was primarily driven by CalPERS' fiscal year 2022-23 investment return of

5.8%, below their 6.8% target.

Background
The city provides a defined benefit pension to its employees through Cal PERS. Each year, around the August timeframe, Cal PERS issues actuarial valuat ion reports to participating agencies. These comprehensive reports include the most current information related to Cal PERS' investment performance, actuarial assumptions as well as the city's required contributions for the upcoming year. Due to the length of time it takes Cal PERS to compile the information and ultimately publish the reports, they are issued over one year in arrears. For example, reports received in August 2024 are measured as of June 30, 2023. This means any investment performance, changes in actuarial assumptions and changes to the composition of the pension plan subsequent t o June 30, 2023, are not factored into the reports.

These reports are particularly critical to the city's budget process. Depending on CalPERS' investmen t performance from the previous fiscal year and any potential changes to the actuarial assumptions they use, the amount required to be cont ributed by the city in the following fiscal year may be subject to increased volatility. It is impor tant to note that these reports are issued as of a point- in-time and can change significant ly from one year to t he next. While one year's repor ts may indicate the city's required contributions are set to be higher or lower compared t o previous fiscal years, the following year's report may include significantly differen t projections.

As of Cal PERS' most recent actuarial reports for the year ending June 30, 2023, the city's miscellaneous pension plan had assets of $383.8 milli on, liabilities of $502.5 million and a funded ratio of 76.4%. The city's safety pension plan has assets of $294.2 million, liabilities of $416.9 million and a funded ratio of 70.6%. The unfunded liability is the difference between assets and liabilities, while the funded ratio is the ratio of assets to liabilities. In total, the city's funded ratio Administrative Services Branch
Finance Department
1635 Faraday Avenue I Carlsbad, CA 92008 I 442-339-2127 t Council Memo - Cal PERS Update (Districts - All)
August 22, 2024

was 73.7%, representing a shortfall of approximately $57.5 million from the city's 80% policy target.

As of June 30, 2024, the city's Section 115 Pension Trust had $10.8 million, which included a $10.0 million initial contribution and $0.8 million of net investment earnings. These funds are legally restricted for pension-related costs and are available to mitigate pension cost volatility and its impacts on the city's budget. Additionally, in accordance with City Council Policy No. 86, these funds are considered when calculating the city's funded status. Based on Cal PERS' most current actuarial valuations and the Section 115 Pension Trust's assets as of June 30, 2024, the city's funded status is 74.9%. CalPERS recently released their preliminary investment performance for fiscal year 2023-24 which yielded a return of 9.3%, or 2.5 percentage points above their 6.8% target. With this in mind, the city is still on track to achieve an 80% funded status in fiscal year 2027-28 and within the 5-year timeframe that was proposed when the trust was established in September 2023.

Discussion
CalPERS
The city provides a defined benefit pension to its employees through Cal PERS. Retirement benefits are calculated using a formula based on an employee's age, earnings, and years of service. The retirement benefits are funded by:
• Investment earnings (60%)
• Employer contributions (29%)
• Employee contributions (11%)
Each year, CalPERS determines an employer's contributions based on actual investment returns and actuarial assumptions including:
• Expected investment returns (discount rates)
• Inflation rates
• Salaries
• Retirement ages
• Life expectancies
Contributions to fund the pension plan are comprised of two components:
• The normal cost (the cost of the benefits earned in a respective year) • The amortization of the unfunded accrued liability (UAL) CalPERS Discount Rate
Defined benefit plans are highly sensitive to the discount rate assumption. The discount rate is the expected rate of return of the plan's assets over the long term. The discount rate will depend on the plan's size, asset allocation, time horizon and other considerations.

Council Memo - Cal PERS Update (District s - All)
August 22, 2024

From the city's perspective, the discount rate is important as it is used to determine the city's annual contributions to the plan, the plan's unfunded liability, and the plan's funded status. In other words, the discount rate is used to determine whether a plan has enough assets to meet its future obligations . The discount rate must be realistic to allow the city to foresee funding issues that may impact future operating budgets and future generations of retirees and plan members.

If the discount rate assumption is too high and investments earn less than expected, a funding shortfall may result, requiring the city or Cal PERS members to make greater contributions than • expected.

CalPERS Investment Earnings
Since investment earnings fund nearly 60% of retirement benefits, the city's pension plan is sensitive to the investment returns of Cal PERS. Investment returns affect how much of the retirement benefits can be funded by investment earnings rather than contributions. If investment returns are lower than the discount rate, contributions must increase to make up the difference. As a result, pension plans need accurate rate of return assumptions to ensure fiscal sustainability.

Currently CalPERS assumes it will earn investment returns of 6.8% each year. As illustrated in the following chart, over the last 20 years, CalPERS has earned investment returns below the discount rate assumption nearly half of the time. Individual fiscal year investment returns have ranged between -24.0% and +21.7%. Notably, CalPERS earned negative investment returns in 2008 and 2009 due to the Great Recession.

CalPERS Historical Investmen t Returns
ttl I 1-. I
For fiscal year 2022-23, Cal PERS reported an investment return of 5.8%, 1.0 percentage point lower than the 6.8% discount rate. The average investment return is 6.5% for a 5-year period,

7.3% for a 10-year period, and 7.6% for a 20-year period. As returns in a given year are volatile, it can be more instructive to look at returns over longer time horizons.

Funding Risk Mitigation Policy
Under CalPERS' Funding Risk Mitigation Policy, the 21.3% return in fiscal year 2020-21 triggered a reduction in the discount rate from 7% to 6.8%. The Funding Risk Mitigation Policy, approved by Council Memo - Cal PERS Update (Districts -All)
August 22, 2024

the Cal PERS Board in 2005, lowers the discount rate in years of good investment returns to reduce risk in the portfolio. The Risk Mitigation Policy and the resulting impacts from fiscal year 2020-21 began affecting contributions in fiscal year 2023-24.

Asset Liability Management Process
In November 2021, CalPERS completed its quadrennial Asset Liability Management (ALM) process, which reviewed investment strategies and actuarial assumptions. At the November 15-17, 2021, meetings, the CalPERS Board approved a 6.8% discount rate, selected a new asset allocation for the fund's investment portfolio, and adopted new actuarial assumptions.

Previous Current
Asset Class Allocation Allocation
Global Equity 50% 42%
Fixed Income 28% 30%
Real Assets 13% 15%
Private Equity 8% 13%
Private Debt 0% 5%
Liquidity 1% 0%
Total 100% 105%
*Includes a 5% allocation to leverage.

CalPERS Plan Status
As of the most recent actuarial valuation on June 30, 2023, the city's miscellaneous pension plan had assets of $383.8 million, liabilities of $502.5 million and a funded ratio of 76.4%. The city's safety pension plan has assets of $294.2 million, liabilities of $416.9 million and a funded ratio of

70.6%. The unfunded liability is the difference between assets and liabilities, while the funded ratio is the ratio of assets to liabilities.

City Council's Pension Funding Policy (No. 86) strives to maintain an 80% funded ratio. As of CalPERS' June 30, 2023, actuarial valuation, the city's combined funded status was 73.7%. Slightly lower than the previous year's funded status of 74.6% and driven by lower-than-desired investment performance in fiscal year 2022-23, this represents a shortfall below the city's 80% target of approximately $57.5 million.

CalPERS Miscellaneous Plan Status
June 30, 2022 June 30, 2023
Present Value of Projected Benefits $ 559,893,293 $ 587,760,912 Entry Age Normal Accrued Liability $ 481,393,865 $ 502,489,876 Market Value of Assets $ 369,436,837 $ 383,790,810
Unfunded Accrued Liability $ 111,957,028 $ 118,699,066
Funded Ratio 76.7% 76.4%
CalPERS Safety Plan Status
June 30, 2022 June 30, 2023
Present Value of Projected Benefits $ 485,436,500 $ 517,025,611 Entry Age Normal Accrued Liability $ 393,017,010 $ 416,941,852 Market Value of Assets $ 282,537,994 $ 294,206,830
Unfunded Accrued Liability $ 110,479,016 $ 122,735,022
Funded Ratio 71.9% 70.6%
CalPERS M iscellaneous & Safety Plan Status
June 30, 2022 June 30, 2023
Present Value of Projected Benefits $ 1,045,329,793 $ 1,104,786,523 Entry Age Normal Accrued Liability $ 874,410,875 $ 919,431,728 Market Value of Assets $ 651,974,831 $ 677,997,640
Unfunded Accrued Liability $ 222,436,044 $ 241,434,088
Funded Ratio 74.6% 73.7%
Council Memo - CalPERS Update (Districts - All)
August 22, 2024

Below is a 10-year history of the city's unfunded liability and funded ratio:

CalPERS - Unfund ed Liability and Funded Ratio
$300,000,000
$250,000,000
$200,000,000
$150,000,000
$100 ,000,000
$50,000,000
$ - I I
2014 2015 2016 2017 2018 20 19 2020 2021 2022
- Unfunded Liability Funded Status
2023
100 %
90 %
80 %
70%
60%
50 %
40%
30 %
20%
10%
0%
Over this ten-year period, the city's unfunded liability has ranged between $102 million and $241 million and the funded ratio has ranged from 68% to 86%. These ranges represent a high level of volatility which were driven primarily by Cal PERS' investment performance as well as changes in their actuarial assumptions. Since fiscal year 2016-17, and in an effort to stabilize the city's required contributions, $56.4 million in additional discretionary payments to CalPERS have been made .

Impact of CalPERS Investments Returns
CalPERS assumes it will earn investment returns of 6.8% each year. If investment returns are higher than 6.8%, the city's contributions decrease. Conversely, if investment returns are lower than 6.8%, the city's contributions increase.

In fiscal year 2021-22, CalPERS experienced an investment loss of -6.1% and as a result, the city's required pension contributions increased substantially in fiscal year 2024-25. In fiscal year 2022-23, Cal PERS experienced an investment return of 5.8%, slightly below thei r target of 6.8% and as a result, the city's required pension contributions will increase in fiscal year 2025-26.

Impact of CalPERS Discount Rate Changes
Since the early 2000's, CalPERS has reduced their discount rate from 8.25% to 6.8%. While this makes it easier for Cal PERS to meet their target, it also represents a significant increase in costs for the city.

During CalPERS' Asset Management Liability Process in 2021, CalPERS considered discount rates between 6.25% and 7%. Ultimately, Cal PERS approved a discount rate of 6.8%, a decrease from the previous discount rate of 7%.

Council Memo - Cal PERS Update (Districts - All)
August 22, 2024

The discount rate has a significant effect on the city's Cal PERS contributions. If the discount rate is reduced, the city's required contributions will increase. For example, if Cal PERS reduced their discount rate from 6.8% to 5.8%, the city's unfunded liability would increase by $124.5 million or 52%.

City Strategies
In recent years, unfunded liabilities, or pension debt, have caused cities in California to cut back on public services. Three cities have even declared bankruptcy. Pension debt is the difference between how much money is available to pay for the pensions city employees receive when they retire, and the money needed to pay for the actual benefits . Pension debt is an estimate because it is not possible to know exactly how well the pension fund investments will perform nor how many employees will retire, at what age they will retire and how long they will live.

The City of Carlsbad has long recognized the financial uncertainty caused by the state's pension system. That's why Carlsbad was one of the first cities in the region to enact pension reform, pre­ dating state reforms in 2013. This and other strategies have reduced the city's pension debt considerably compared to most other cities in the state . 600
~00
400
JOO
200
100
0 Number of Employees by Benefit Tier
Tier 1 -Tier 2
■ 201 4 2023
-Tier
In 2019, the City Council adopted a Pension Funding Policy (City Council Policy Statement No. 86).

This policy states that the city will strive to maintain an 80% funded status. Said another way, the goal of this policy is to keep Carlsbad's pension debt at no more than 20%.

Since fiscal year 2016-17, the city has contributed $56.4 million to CalPERS to reduce the city's unfunded liability and thereby achieve interest savings. These contributions were in addition to the annual required contributions set by CalPERS.

On September 12, 2023, the City Council approved the establishment of a Section 115 Pension Trust and a Pension Investment Policy to govern the management of assets within the trust. This trust allows the city to stabilize pension cost volatility, maintain local control over the city's assets, and earn a potentially higher rate of return than if the assets were kept within the General Fund. On September 26, 2023, the City Council approved an initial contribution of Council Memo - Cal PERS Updat e (Districts - All)
August 22, 2024

$10 million. The trust has earned approximately $0.8 million since its establishment.

City Council Policy No. 86 states that "in the event the city is unable to meet the minimum combined pension funded ratio of 80% with current resources (i.e., without borrowing or using reserves), the Finance Director or Deputy City Manager of Administrative Services will identify a reasonable period to return to a minimum 80% funded ratio status." Rather than making a significant one-time payment to Cal PERS, the city will contribute the difference between the 74.6% funded status as of June 30, 2022, and the 80% target to the Section 115 Trust over a five-year period . The city made an initial contribution of $10.0 million and is expected to make four additional annual contributions of $7.S million with General Fund dollars. Over the five -year period and beyond, assets in the trust would be invested, in accordance with City Council Policy No. 98 - Pension Trust Investment Policy, with a "balanced" investment strategy. Staff project that at the end of fiscal year 2027-28, assets in the trust will meet the 80% funded status target, assuming CalPERS meets their annual target rate of return.

Any deposits or withdrawals from the trust require approval from the City Council.

The city's funded status changes every year based on CalPERS' investment performance. In the event the city's combined funded status meets or exceeds the 80% target level, it is important the Section 115 Trust continues to serve the city as a pension rate stabilization tool. The asset balance in the trust is evaluated to ensure it is on track to accumulate sufficient funds to cover the additional costs associated with a potential future reduction in CalPERS' discount rate.

While the trust helps ensure an 80% combined funded ratio is maintained, the ultimate funding goal is for the city to have sufficient assets in the trust to be prepared for further discount rate reductions by CalPERS.

With the initial contribution of $10 million, followed by four annual contributions of $7.5 million, and assuming an annual rate of return of 6.25%, not only would the city's funded status reach 80% over a five-year period, but over a 20-year period there would be sufficient assets in the trust to fund a potential reduction in Cal PERS' discount rate from the current 6.8% to 6.25%.

When the Section 115 Pension Trust was established in 2023, the potential reduction in CalPERS' discount rate represented an additional $118 million in unfunded pension costs for the City of Carlsbad.

Council Memo - Cal PERS Update (Districts - All)
August 22, 2024

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Even though Cal PERS is continuing to take prudent measures to manage the pension liability for its participants, the annual costs paid by participating members will continue to increase. And, while CalPERS has outperformed its assumed rate of return on investments over the last 10-years, future economic uncertainty is likely to have a profound impact on its investment performance, which will impact the city's annual required contributions.

Next Steps
Information included in Cal PERS' most recent actuarial reports will not affect the city's contributions until fiscal year 2025-26. The appropriate data will be incorporated in the fiscal year 2025-26 budget process and presented to the City Council in May 2025.

Staff will return to the City Council on September 24, 2024, for the annual adoption of the Pension Trust Investment Policy. Also, and as part of the fiscal year 2023-24 Carryforward Report, a status update on the city's pension will be presented and the 2nd annual contribution of $7.5 million to the Section 115 Pension Trust will be recommended for consideration.

Attachment: A. CalPERS Miscellaneous Actuarial Valuation Report (Due to the size of Attachment A, a hard copy is on file in the Office of the City Council, as reference)
B. CalPERS Safety Actuarial Valuation Report
(Due to the size of Attachment B, a hardcopy is on file in the Office of the City Council, as reference)
Council Memo - CalPERS Update (Districts - All}
August 22, 2024

cc: Scott Chadwick, City Manager
Cindie McMahon, City Attorney
Gary Barberio, Deputy City Manager, Community Services
Paz Gomez, Deputy City Manager, Public Works
Christie Calderwood, Police Chief
Michael Calderwood, Fire Chief
Sheila Cobian, Legislative & Constituent Affairs Director Roxanne Muhlmeister, Assistant Finance Director
Brigid Drury, Budget Manager
California Public Employees’ Retirement System
Actuarial Office
400 Q Street, Sacramento, CA 95811 | Phone: (916) 795-3000 | Fax: (916) 795-2744 888 CalPERS (or 888-225-7377) | TTY: (877) 249-7442 | www.calpers.ca.gov July 2024
Miscellaneous Plan of the City of Carlsbad (CalPERS ID: 3747905882 ) Annual Valuation Report as of June 30, 2023
Dear Employer,
Attached to this letter is the June 30, 2023 , actuarial valuation report for the rate plan noted above. Provided in this report is the determination of the minimum required employer contributions for fiscal year (FY) 2025-26. In addition, the report contains important information regarding the current financial status of the plan as well as projections and risk measures to aid in planning for the future.

Required Contributions
The table below shows the minimum required employer contributions and the PEPRA member contribution rates for FY 2025-26 along with an estimate of the employer contribution requirements for FY 2026-27. Employee contributions other than cost sharing (whether paid by the employer or the employe e) are in addition to the results shown below. The required employer and member contributions in this report do not reflect any cost sharing arrangement between the agency and the employees.

Fiscal Year Employer Normal
Cost Rate
Employer Amortization of
Unfunded Accrued Liability
PEPRA Member
Contribution Rate
2025-26 11.59% $9,296,961 8.50%
Projected Results
2026-27 11.3% $10,278,000 TBD
The actual investment return for FY 2023-24 was not known at the time this report was prepared. The projections above assume the investment return for that year would be 6.8%. To the extent the actual investment return for FY 2023-24 differs from 6.8%, the actual contribution requirements for FY 2026-27 will differ from those shown above. For additional detail s regarding the assumptions and methods used for these projections, please refer to Projected Employer Contributions . This section also contains projected required contributions through FY 2030-31.

Report Enhancements
A number of enhancements were made to the report this year to ease navigation and allow the reader to find specific information more quickly. The tables of contents are now “clickable.” This is true for the main table of contents that follows the title page and the intermediate tables of contents at the beginning of sections. The Adobe navigation pane on the left can al so be used to skip to specific exhibits.

Attachment A
CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Carlsbad
CalPERS ID: 3747905882

There are a number of links throughout the document in blue text. Links that are internal to the document are not underlined, while underlined links will take you to the CalPERS website. Examples are shown below.

Internal Bookmarks CalPERS Website Links
Required Employer Contributions Required Employer Contribution Search Tool Member Contribution Rates Public Agency PEPRA Member Contribution Rates Summary of Key Valuation Results Pension Outlook Overview Funded Status – Funding Policy Basis Interactive Summary of Public Agency Valuation Results Projected Employer Contributions Public Agency Actuarial Valuation Reports

Further descriptions of general changes are included in the Highlights and Executive Summary section and in Appendix A - Actuarial Methods and Assumptions . The effects of any changes on the required contributions are included in the Reconciliation of Required Employer Contributions section.

Questions

A CalPERS actuary is available to answer questions about th is report. Other questions may be directed to the Customer Contact Center at 888 CalPERS (or 888-225-7377).

Sincerely,

Nina Ramsey , ASA, MAAA
Senior Actuary, CalPERS

Randall Dziubek, ASA, MAAA
Deputy Chief Actuary, Valuation Services , CalPERS

Scott Terando , ASA, EA, MAAA, FCA, CFA
Chief Actuary, CalPERS

California Public Employees’ Retirement System

Actuarial Valuation for the
Miscellaneous Plan
of the City of Carlsbad
as of June 30, 2023

(CalPERS ID: 3747905882 )
(Rate Plan ID: 316)

Required Contributions for Fiscal Year

July 1, 2025 — June 30, 2026

CY Fin Job Instance ID: 437819 PY Fin Job Instance ID: 415584 Report ID: 439355

Table of Contents

Actuarial Certification.......................................................................................................................................................................................1 Highlights and Executive Summary .............................................................................................................................................................2 Introduction .......................................................................................................................................................................................................3 Purpose .............................................................................................................................................................................................................3 Summary of Key Valuation Results ..............................................................................................................................................................4 Changes Since the Prior Year’s Valuation ..................................................................................................................................................5 Subsequent Events .........................................................................................................................................................................................5 Assets ...................................................................................................................................................................................................................6 Reconciliation of the Market Value of Assets..............................................................................................................................................7 Asset Allocation................................................................................................................................................................................................8 CalPERS History of Investment Returns .....................................................................................................................................................9 Liabilities and Contributions ....................................................................................................................................................................... 10 Determination of Required Contributions.................................................................................................................................................. 11 Development of Accrued and Unfunded Liabilities ................................................................................................................................. 12 Required Employer Contributions .............................................................................................................................................................. 13 Member Contribution Rates ........................................................................................................................................................................ 14 Funded Status – Funding Policy Basis ..................................................................................................................................................... 15 Additional Employer Contributions............................................................................................................................................................. 16 Projected Employer Contributions ............................................................................................................................................................. 17 (Gain)/Loss Analysis 6/30/22 – 6/30/23 .................................................................................................................................................... 18 Schedule of Amortization Bases ................................................................................................................................................................ 19 Amortization Schedule and Alternatives ................................................................................................................................................... 21 Reconciliation of Required Employer Contributions................................................................................................................................ 23 Employer Contribution History .................................................................................................................................................................... 24 Funding History ............................................................................................................................................................................................. 24 Normal Cost by Benefit Group.................................................................................................................................................................... 25 Risk Analysis ................................................................................................................................................................................................... 26 Future Investment Return Scenarios......................................................................................................................................................... 27 Discount Rate Sensitivity............................................................................................................................................................................. 28 Mortality Rate Sensitivity ............................................................................................................................................................................. 28 Maturity Measures ........................................................................................................................................................................................ 29 Maturity Measures History........................................................................................................................................................................... 30 Funded Status – Termination Basis .......................................................................................................................................................... 31 Funded Status – Low-Default-Risk Basis ................................................................................................................................................. 32 Plan’s Major Benefit Options ....................................................................................................................................................................... 33 Appendix A - Actuarial Methods and Assumptions .............................................................................................................................. 38 Appendix B - Principal Plan Provisions.................................................................................................................................................... 63 Appendix C - Participant Data ..................................................................................................................................................................... 74 Appendix D - Glossary .................................................................................................................................................................................. 80

CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Carlsbad
CalPERS ID: 3747905882

Actuarial Certification

It is our opinion that the valuation has been performed in accordance with generally accepted actuarial principles as well as the applicable Standards of Practice promulgated by the Actuarial Standards Board. While this report is intended to be complete, our office is available to answer questions as needed. All of the undersigned are actuaries who satisfy the Qualification Standards for Actuaries Issuing Statements of Actuarial Opinion in the United States of the American Academy of Actuaries with regard to pension s.

Actuarial Methods and Assumptions

It is our opinion that the assumptions and methods, as recommended by the Chief Actuary and adopted by the CalPERS Board of Administration, are internally consistent and reasonable for this plan.

Randall Dziubek, ASA, MAAA
Deputy Chief Actuary, Valuation Services , CalPERS

Scott Terando , ASA, EA, MAAA, FCA, CFA
Chief Actuary, CalPERS

Actuarial Data and Rate Plan Results

To the best of my knowledge and having relied upon the attestation above that the actuarial methods and assumptions are reasonable , this report is complete and accurate and contains sufficient information to disclose, fully and fairly, the funded condition of the Miscellaneous Plan of the City of Carlsbad and satisfies the actuarial valuation requirements of Government Code section 7504. This valuation and related validation work was performed by the CalPERS Actuarial Office. The valuation was based on the member and financial data as of June 30, 2023, provided by the various CalPERS databases and the benefits under this plan with CalPERS as of the date this report was produced.

Nina Ramsey , ASA, MAAA
Senior Actuary, CalPERS

Highlights and Executive Summary

• Introduction 3
• Purpose 3
• Summary of Key Valuation Results 4
• Changes Since the Prior Year’s Valuation 5
• Subsequent Events 5

CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Carlsbad
CalPERS ID: 3747905882

Introduction

This report presents the results of the June 30, 2023, actuarial valuation of the Miscellaneous Plan of the City of Carlsbad of the California Public Employees’ Retirement System (CalPERS). This actuarial valuation sets the minimum required contributions for fiscal year (FY) 2025-26.

Purpose

This report documents the results of the actuarial valuation prepared by the CalPERS Actuarial Office using data as of June 30, 2023. The purpose of the valuation is to:

• Set forth the assets and accrued liabilities of this rate plan as of June 30, 2023; • Determine the minimum required employer co ntributions for this rate plan for FY July 1, 2025, through June 30, 2026; • Determine the required member contribution rate for FY July 1, 2025, through June 30, 2026, for employees subject to the California Public Employees' Pension Reform Act of 2013 (PEPRA); and • Provide actuarial information as of June 30, 2023, to the CalPERS Board of Administration (board) and other interested parties.

The pension funding information presented in this report should not be used in financial reports subject to Governmental Accounting Standards Board (GASB) Statement No. 68 for an Agent Employer Defined Benefit Pension Plan. A separate accounting valuation report for such purposes is available from CalPERS and details for ordering are available on the CalPERS website (www.calpers.ca.gov).

The measurements shown in this actuarial valuation may not be applicable for other purposes. The agency should contact a CalPERS actuary before disseminating any portion of this report for any reason that is not explicitly described above.

Future actuarial measurements may differ significantly from the current measurements presented in this report due to such factors as the following: plan experience differing from that anticipated by the economic or demographic assumptions; changes in economic or demographic assumptions; changes in actuarial policies; changes in plan provisions or applicable law; and differences between the required contributions determined by the valuation and the actual contributions made by the agency.

Assessment and Disclosure of Risk

This report includes the following risk disclosures consistent with the guidance of Actuarial Standards of Practice No. 51 and recommended by the California Actuarial Advisory Panel (CAAP) in the Model Disclosure Elements document:

• A “Scenario Test,” projecting future results under different investment income returns. • A “Sensitivity Analysis,” showing the impact on current valuation results using alternative discount rates of 5.8% and

7.8%.
• A “Sensitivity Analysis,” showing the impact on current valuation results assuming rates of mortality are 10% lower or 10% higher than our current post-retirement mortality assumptions adopted in 2021. • Plan maturity measures indicating how sensitive a plan may be to the risks noted above.

CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Carlsbad
CalPERS ID: 3747905882

Summary of Key Valuation Results

Below is a brief summary of key valuation results alo ng with page references where more detailed information can be found.

Required Employer Contributions — page 13

Fiscal Year
2024-25
Fiscal Year
2025-26
Employer Normal Cost Rate 12.13% 11.59%
Unfunded Accrued Liability (UAL) Contribution Amount $8,103,356 $9,296,961 Paid either as
Option 1) 12 Monthly Payments of $675,280 $774,747
Option 2) Annual Prepayment in July $7,841,142 $8,996,123

Member Contribution Rates — page 14

Fiscal Year
2024-25
Fiscal Year
2025-26
Classic Member Contribution Rate 7.00%/8.00% 7.00%/8.00% PEPRA Member Contribution Rate 8.50% 8.50%

Projected Employer Contributions — page 17

Fiscal Year Normal Cost
(% of payroll)
Annual
UAL Payment
2026-27 11.3% $10,278,000
2027-28 11.1% $10,994,000
2028-29 10.9% $12,714,000
2029-30 10.7% $13,008,000
2030-31 10.5% $13,242,000

Funded Status — Funding Policy Basis — page 15

June 30, 2022 June 30, 2023
Entry Age Accrued Liability (AL) $481,393,865 $502,489,876 Market Value of Assets (MVA) 369,436,837 383,790,810 Unfunded Accrued Liability (UAL) [AL – MVA] $111,957,028 $118,699,066 Funded Ratio [MVA ÷ AL] 76.7% 76.4%

Summary of Valuation Data — Page 75

June 30, 2022 June 30, 2023
Active Member Count 548 581
Annual Covered Payroll $46,150,095 $50,552,759
Transferred Member Count 249 259
Separated Member Count 309 332
Retired Members and Beneficiaries Count 678 703

CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Carlsbad
CalPERS ID: 3747905882

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. For rate plans that are not in a risk pool (non-pooled), benefit changes by contract amendment are generally included in the first valuation that is prepared after the amendment becomes effective, even if the effective date of the amendment is after the valuation date.

Please refer to the Plan’s Major Benefit Options and Appendix B - Principal Plan Provisions for a summary of the plan provisions used in this valuation. The effect of any mandated benefit changes or plan amendments on the unfunded liability is shown in the (Gain)/Loss Analysis 6/30/22 – 6/30/23 and the effect on the employer contribution is shown in the Reconcil iation of Required Employer Contributions . It should be noted that no change in liability or contribution is shown for any plan changes which were already included in the prior year’s valuation.

Actuarial Methods and Assumptions

There are no significant changes to the actuarial methods or assumptions for the June 30, 2023, actuarial valuation.

New Disclosure Items

In December 2021, the Actuarial Standards Board issued a revision of Actuarial Standard of Practice No. 4 (ASOP 4) requiring actuaries to disclose a low -default-risk obligation measure (LDROM) of the benefits earned. This information is shown in a new exhibit, Funded Status – Low-Default-Risk Basis.

Subsequent Events

This actuarial valuation report reflects fund investment return through June 30, 2023, as well as statutory changes, regulatory changes and board actions through January 2024.

During the time period between the valuation date and the publication of this report, inflation has been higher than the expected inflation of 2.3% per annum. Since inflation influences cost -of-living increases for retirees and beneficiaries and active member pay increases, higher inflation is likely to put at least some upward pressure on contribution requirements and downward pressure on the funded status in the June 30, 2024, valuation. The actual impact of higher inflation on future valuation results will depend on, among other factors, how long higher inflation persists.

The 2023 annual benefit limit under Internal Revenue Code (IRS) section 415(b) and annual compensation limits under IRS section 401(a)(17) and Government Code section 7522.10 were use d for this valuation and are assumed to increase 2.3% per year based on the price inflation assumption. The actual 2024 limits , determined in October 2023, are not reflected.

On April 16, 2024, the board took action to modify the Funding Risk Mitigation Policy to remove the automatic change to the discount rate when the investment return exceeds various thresholds. Rather than an automatic change to the discount rate, a board discussion would be placed on the calendar. The 95 th percentile return in the Future Investment Return Scenarios exhibit in this report has not been modified and still reflects the projected contribution requirements associated with a reduction i n the discount rate.

To the best of our knowledge, there have been no other subsequent events that could materially affect current or future certifications rendered in this report.

Assets

• Reconciliation of the Market Value of Assets 7
• Asset Allocation 8
• CalPERS History of Investment Returns 9

CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Carlsbad
CalPERS ID: 3747905882

Reconciliation of the Market Value of Assets

1. Market Value of Assets as of 6/30/22 including Receivables $369,436,837

2. Change in Receivables for Service Buybacks (45,072)

3. Employer Contributions 12,670,687

4. Employee Contributions 3,794,652

5. Benefit Payments to Retirees and Beneficiaries (24,277,902)

6. Refunds (176,739)

7. Transfers 677

8. Service Credit Purchase (SCP) Payments and Interest 90,198

9. Administrative Expenses (219,188)

10. Miscellaneous Adjustments 0

11. Investment Return (Net of Investment Expenses) 22,516,658

12. Market Value of Assets as of 6/30/23 including Receivables $383,790,810

CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Carlsbad
CalPERS ID: 3747905882

Asset Allocation

CalPERS adheres to an Asset Allocation Strategy which establishes asset class allocation policy targets and ranges and manages those asset class allocations within their policy ranges . CalPERS recognizes that over 90% of the variation in investment returns of a large, well -diversified pool of assets can typically be attributed to asset allocation decisions .

The asset allocation shown below reflect s the allocation of the Public Employees’ Retirement Fund (PERF) in its entirety. The assets for City of Carlsbad Miscellaneous Plan are a subset of the PERF and are invested accordingly.

On November 17, 2021, the board adopted changes to the strategic asset allocation . The new allocation was effective July 1, 2022. The asset allocation as of June 30, 2023 , is shown below, along with the long-term strategic asset allocations.

For more information s ee the Trust Level Review as of June 30, 2023, which is available on the CalPERS website.

33.1%

12.0%

5.1%

5.1%

6.6%

4.5%

5.1%

12.9%

15.2%

2.2%
(1.8%)
30%
12%
5%
5%
10%
5%
5%
13%
15%
5%
(5%)
(10%) 0% 10% 20% 30% 40%
Public Equities - Cap Weighted
Public Equities - Factor Weighted
Treasury
Mortgage-Backed Securities
Investment Grade Corporates
High Yield
Emerging Market Sovereign Bonds
Private Equity
Real Assets
Private Debt
Strategic Financing
Current Allocation Long-Term Strategic Asset Allocation CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Carlsbad
CalPERS ID: 3747905882

CalPERS History of Investment Returns

The following is a chart with the 20-year historical annual return s of the PERF for each fiscal year ending on June 30 as reported by the Investment Office. Investment returns reported are net of investment expenses but without reduction for administrative expenses. The assumed rate of return, however, is net of both investment and administrative expenses. Also, the Investment Office uses a three-month lag on private equity and real assets for investment performance reporting purposes. This can lead to a timing difference in the returns below and those used for financial reporting purposes. The investment gain or loss calculation in this report relies on final assets that have been audited and are appropriate for financial reporting. Because of these differences, the effective investment return for funding purposes in a single year can be higher or lower than the return reported by the Investment Office shown here.

* As reported by the Investment Office w ith a 3-month lag on private equity and real assets and w ithout any reduction for administrative expenses.

The table below shows annualized investment returns of the PERF for various time periods ending on June 30, 2023. Figures reported are net of investment expenses but without reduction for administrative expenses. These returns are the annual rates that if compounded over the indicated number of years would equate to the actual time -weighted investment performance of the PERF. It should be recognized that in any given year the rate of return is volatile. The po rtfolio has an expected volatility of

12.0% per year based on the most recent Asset Liability Management study. The realized volatility is a measure of the risk of the portfolio expressed as the standard deviation of the fund’s total monthly return distrib ution, expressed as an annual percentage. Due to their volatile nature, when looking at investment returns, it is more instructive to look at returns over longer time horizons.

History of CalPERS Compound Annual Rates of Return and Volatilities 1 year 5 year 10 year 20 year 30 year
Compound Annual Return 5.8% 6.1% 7.1% 7.0% 7.5%
Realized Volatility – 9.5% 7.8% 8.4% 8.8%

Liabilities and Contributions

• Determination of Required Contributions 11
• Development of Accrued and Unfunded Liabilities 12
• Required Employer Contributions 13
• Member Contribution Rates 14
• Funded Status – Funding Policy Basis 15
• Additional Employer Contributions 16
• Projected Employer Contributions 17
• (Gain)/Loss Analysis 6/30/22 – 6/30/23 18
• Schedule of Amortization Bases 19
• Amortization Schedule and Alternatives 21
• Reconciliation of Required Employer Contributions 23
• Employer Contribution History 24
• Funding History 24
• Normal Cost by Benefit Group 25

CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Carlsbad
CalPERS ID: 3747905882

Determination of Required Contributions

Contributions to fund the plan are determined by an actuarial valuation performed each year. The valuation employs complex calculations based on a set of actuarial assumptions and methods. See Appendix A for information on the assumptions and methods used in this valuation. The valuation incorporates all plan experience through the valuation date and sets required contributions for the fiscal year that begins two years after the valuation date.

Contribution Components

Two components comprise required contributions:

• Normal Cost — expressed as a percentage of pensionable payroll • Unfunded Accrued Liability (UAL) Contribution — expressed as a dollar amount

Normal Cost represents the value of benefits allocated to the upcoming year for active employees. If all plan experience exactly matched the actuarial assumptions, normal cost would be sufficient to fully fund all benefits. The employer and employees each pay a share of the normal cost with contributions payable as part of the regular payroll reporting process. The contribution rate for Classic members is set by statute based on benefit formula whereas for PEPRA members it is based on 50% of the total normal cost.

When plan experience differs from the actuarial assumptions, unfunded accrued liability (UAL) emerges. The new UAL may be positive or negative. If the total UAL is positive (i.e., accrued liability exceeds assets), the employer is required to make contributions to pay off the UAL over time. This is called the Unfunded Accrued Liability Contribution component . There is an option to prepay this amount during July of each fiscal year, otherwise it is paid monthly.

In measuring the UAL each year, plan experience is split by source. Common sources of UAL include investment experience different than expected, non-investment experience different than expected, assumption changes, and benefit changes. Each source of UAL (positive or negative) forms a base that is amortized, or paid off, over a specified period of time in accordan ce with the CalPERS Actuarial Amortization Policy. The Unfunded Accrued Liability Contribution is the sum of the payments on all bases. See the Schedul e of Amortization Bases section of this report for an inventory of existing bases and Appendix A for more information on the amortization policy.

CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Carlsbad
CalPERS ID: 3747905882

Development of Accrued and Unfunded Liabilities

June 30, 2022 June 30, 2023

1. Present Value of Projected Benefits
a) Active Members $223,007,6 05 $236,539,905
b) Transferred Members 28,585,995 28,083,261
c) Separated Members 11,859,539 12,272,619
d) Members and Beneficiaries Receiving Payments 296,440,154 310,865,127 e) Total $559,893,293 $587,760,912

2. Present Value of Future Employer Normal Costs $44,511,346 $47,069,044

3. Present Value of Future Employee Contributions $33,988,082 $38,201,992

4. Entry Age Accrued Liability
a) Active Members [(1a) - (2) - (3)] $144,508,177 $151,268,869 b) Transferred Members (1b) 28,585,995 28,083,261
c) Separated Members (1c) 11,859,539 12,272,619
d) Members and Beneficiaries Receiving Payments (1d) 296,440,154 310,865,127 e) Total $481,393,865 $502,489,876

5. Market Value of Assets (MVA) $369,436,837 $383,790,810

6. Unfunded Accrued Liability (UAL) [(4e) - (5)] $111,957,028 $118,699,066

7. Funded Ratio [(5) ÷ (4e)] 76.7% 76.4%

CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Carlsbad
CalPERS ID: 3747905882

Required Employer Contributions

The required employer contributions in this report do not reflect any cost sharing arrangement between the agency and the employees.

Fiscal Year
Required Employer Contributions 2025-26
Employer Normal Cost Rate 11.59%
Plus
Unfunded Accrued Liability (UAL) Contribution Amount $9,296,961 Paid either as
1) Monthly Payment $774,747
Or
2) Annual Prepayment Option* $8,996,123
The total minimum required employer contribution is the sum of the Plan’s Employer Normal Cost Rate (expressed as a percentage of payroll and paid as payroll is reported) and the Unfunded Accrued Liability (UAL) Contribution Amount (billed monthly (1) or prepaid annually (2) in dollars). * Only the UAL portion of the employer contribution can be prepaid (which must be received in full no later than July 31).

For Member Contribution Rates see the following page.

Fiscal Year Fiscal Year
2024-25 2025-26
Normal Cost Contribution as a Percentage of Payroll
Total Normal Cost 1 20.23% 19.74%
Offset due to Employee Contribution s2 8.10% 8.15%
Employer Normal Cost 12.13% 11.59%

Projected Annual Payroll for Contribution Year $50,136,262 $54,919,200

Estimated Employer Contributions Based on Projected Payroll Total Normal Cost $10,142,566 $10,841,050
Expected Employee Contribution s 4,061,037 4,475,915 Employer Normal Cost 6,081,529 6,365,135
Unfunded Liability Contribution

8,103,356 9,296,961
% of Projected Payroll (illustrative only) 16.16% 16.93% Estimated Total Employer Contribution

$14,184,885 $15,662,096
% of Projected Payroll (illustrative only) 28.29% 28.52%

1 The Total Normal Cost is a blended rate for all benefit groups in the plan. For a breakout of normal cost by benefit group, see Normal Cost by Benefit Group.
2 This is the expected employee contributions, taking into account individual benefit formula and any offset from the use of a modified formula, divided by projected annual payroll. For member contribution rates above the breakpoint for each benefit formula, see Member Contribution Rates.

CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Carlsbad
CalPERS ID: 3747905882

Member Contribution Rates

The required member contributions in this report do not reflect any cost sharing arrangement between the agency and the employees.

Classic Members

Each member contributes toward their retirement based upon the retirement formula. The standard Classic member contribution rate above the breakpoint, if any, is as described below.

Benefit Formula
Percent Contributed
above the Breakpoint
Miscellaneous, 1.5% at age 65 2%
Miscellaneous, 2% at age 60 7%
Miscellaneous, 2% at age 55 7%
Miscellaneous, 2.5% at age 55 8%
Miscellaneous, 2.7% at age 55 8%
Miscellaneous, 3% at age 60 8%
Auxiliary organizations of the CSU system may elect reduced contribution rates for Miscellaneous members , in which case the contribution rate above the breakpoint is 6% if members are not covered by Social Security and 5% if they are.

PEPRA Members

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 for the plan is dependent on the benefit levels, actuarial assumptions, and demographics of the plan, particularly members’ entry age into the plan. Should the total normal c ost rate of the plan change by more than 1% from the base total normal cost rate established for the plan, 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, 2025, based on 50% of the total normal cost rate for each respective plan as of the June 30, 2023, valuation.

Basis for Current Rate Rates Effective July 1, 2025 Plan
Identifier Benefit Group Name
Total
Normal
Cost
Member
Rate
Total
Normal
Cost Change
Change
Needed
Member
Rate
26260 Miscellaneous PEPRA
Level 16.980% 8.50% 16.87% (0.110%) No 8.50%

For a description of the methodology used to determine the Total Normal Cost for this purpose, see PEPRA Normal Cost Rate Methodology in Appendix A.

CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Carlsbad
CalPERS ID: 3747905882

Funded Status – Funding Policy Basis

The table below provides information on the current funded status of the plan under the funding policy. The funded status for this purpose is based on the market value of assets relative to the funding target produced by the entry age actuarial cost method and actuarial assumptions adopted by the board. The actuarial cost method allocates the total expected cost of a member’s projected benefit (Present Value of Benefits) to individual years of service (the Normal Cost). The value of the projected benefit that is not allocated to future service is referred to as the Accrued Liability and is the plan’s funding target on the valuation date. The Unfunded Accrued Liability (UAL) equals the funding target minus the assets. The UAL is an absolute measure of funded status and can be viewed as employer debt. The funded ratio equals the assets divided by the funding target. The funded ratio is a relative measure of the funded status and allows for comparisons between plans of different siz es.

June 30, 2022 June 30, 2023

1. Present Value of Benefits $559,893,293 $587,760,912

2. Entry Age Accrued Liability 481,393,865 502,489,876

3. Market Value of Assets (MVA) 369,436,837 383,790,810

4. Unfunded Accrued Liability (UAL) [(2) – (3)] $111,957,028 $118,699,066

5. Funded Ratio [(3) ÷ (2)] 76.7% 76.4%

A funded ratio of 100% (UAL of $0) implies that the funding of the plan is on target and that future contributions equal to the normal cost of the active plan members will be sufficient to fully fund all retirement benefits if future experience matches the actuarial assumptions. A funded ratio of less than 100% (positive UAL) implies that in addition to normal costs, payments tow ard the UAL will be required. Plans with a funded ratio greater than 100% have a negative UAL (or surplus) but are requ ired under current law to continue contributing the normal cost in most cases, preserving the surplus for future contingencies.

Calculations for the funding target reflect the expected long -term investment return of 6.8%. If it were known on the valuation date that future investment returns will average something greater/less than the expected return, calculated normal costs and accrued liabilities provided in this report would be less/greater than the results shown. Therefore, for example, if actual a verage future returns are less than the expected return, calculated normal costs and UAL contributions will not be sufficient to fully fund all retirement benefits. Under this scenario, required future normal cost contributions will need to increase from those provided in this report, and the plan will develop unfunded liabilities that will also add to required future contributions. For illustra tive purposes, funded status es based on a 1% lower and higher average future investment return (discount rate) are as follows:

1% Lower
Average Return
Current
Assumption
1% Higher
Average Return
Discount Rate 5.8% 6.8% 7.8%

1. Present Value of Benefits $684,722,081 $587,760,912 $511,789,941

2. Entry Age Accrued Liability 567,866,401 502,489,876 448,424,538

3. Market Value of Assets (MVA) 383,790,810 383,790,810 383,790,810

4. Unfunded Accrued Liability (UAL) [(2) – (3)] $184,075,591 $118,699,066 $64,633,728

5. Funded Ratio [(3) ÷ (2)] 67.6% 76.4% 85.6%

The Risk Analysis section of the report provides additional information regarding the sensitivity of valuation results to the expected investment return and other factors. Also provided in that section are measures of funded status that are appropriate for assessing the sufficiency of plan assets to cover estimated termination liabilities.

CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Carlsbad
CalPERS ID: 3747905882

Additional Employer Contributions

The minimum required employer contribution towards the Unfunded Accrued Liability (UAL) for this rate plan for FY 2025-26 is $9,296,961 . CalPERS allows agencies to make additional discretionary payments (ADPs) at any time and in any amount. These optional payments serve to reduce the UAL and future required contributions and can result in significant long -term savings.

Agencies can also use ADPs to stabilize annual contributions as a fixed dollar amount, percent of payroll or percent of revenue.

Provided below are select ADP options for consideration. Making such an ADP during FY 2025-26 does not require an ADP be made in any future year, nor does it change the remaining amortization period of any portion of unfunded liability. For information on permanent changes to amortization periods, see Amortization Schedule and Alternatives. Agencies considering making an ADP should contact CalPERS for additional information.

Fiscal Year 2025-26 Employer Contributions — Illustrative Scenarios

Funding Approach Estimated
Normal Cost
Minimum UAL
Contribution ADP1 Total UAL
Contribution
Estimated Total
Contribution
Minimum required only $6,365,135 $9,296,961 0 $9,296,961 $15,662,096 20 year funding horizon $6,365,135 $9,296,961 $1,494,059 $10,791,020 $17,156,155 15 year funding horizon $6,365,135 $9,296,961 $3,291,705 $12,588,666 $18,953,801 10 year funding horizon $6,365,135 $9,296,961 $7,083,263 $16,380,224 $22,745,359 5 year funding horizon $6,365,135 $9,296,961 $18,871,900 $28,168,861 $34,533,996

1 The ADP amounts are assumed to be made in the middle of the fiscal year. A payment made earlier or later in the fiscal year would have to be less or more than the amount show n to have the same effect on the UAL amortization.

The calculations above are based on the projected UAL as of June 30, 2025, as determined in the June 30, 2023, actuarial valuation. New unfunded liabilities can em erge in future years due to assumption or method changes, changes in plan provisions, and actuarial experience different than assumed. Making an ADP illustrated above for the indicated number of years will not result in a plan that is exactly 100% funded in the indicated number of years. Valuation results will vary from one year to the next and can diverge significantly from projections over a period of several years.

Additional Discretionary Payment History

The following table provides a recent history of actual ADPs made to the plan.

Fiscal
Year ADP Fiscal
Year ADP
2018-19 $5,779,350 2021-22 $3,200,000
2019-20 $0 2022-23 $0
2020-21 $5,403,140 2023-24 $0

CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Carlsbad
CalPERS ID: 3747905882

Projected Employer Contributions

The table below shows the required and projected employer contributions (before cost sharing) for the next six fiscal years. The projection assumes that all actuarial assumptions will be realized and that no further changes to assumptions, contributions, benefits, or funding will occur during the projection period. In particular, the investment return beginning with FY 2023-24 is assumed to be 6.80% per year, net of investment and administrative expenses. The projected normal cost percentages below reflect that the normal cost is expected to continue to decline over time as new employees are hired into lower cost benefit tiers.

Future contribution requirements may differ signifi cantly from those shown below. The actual long-term cost of the plan will depend on the actual benefits and expenses paid and the actual investment experience of the fund.

Required
Contribution
Projected Future Employer Contributions
(Assumes 6.80% Return for Fiscal Year 2023-24 and Beyond) Fiscal Year 2025-26 2026-27 2027-28 2028-29 2029-30 2030-31 Normal Cost % 11.59% 11.3% 11.1% 10.9% 10.7% 10.5%
UAL Payment $9,296,961 $10,278,000 $10,994,000 $12,714,000 $13,008,000 $13,242,000

Total as a % of Payroll* 28.52% 29.5% 30.0% 32.2% 31.9% 31.5% Projected Payroll $54,919,200 $56,456,938 $58,037,732 $59,662,788 $61,333,347 $63,050,680

*Illustrative only and based on the projected payroll shown.

For ongoing plans, investment gains and losses are amortized using a 5 -year ramp up. For more information, please see Amortization of Unfunded Actuarial Accrued Liability in Appendix A. This method phases in the impact of the change in UAL over a 5-year period in order to reduce employer cost volatility from year to year. As a result of this methodology, dramatic changes in the required employer contributions in any one year are less likely. However, required con tributions can change gradually and significantly over the next five years. In years when there is a large investment loss, the relatively small amortization payments during the ramp up period could result in contributions that are less than interest on the UAL (i.e. negative amortization) while the contribution impact of the increase in the UAL is phased in.

For projected contributions under alternate investment return scenarios, please see the Future Investment Return Scenarios exhibit. Our online pension plan projection tool, Pension Outlook , is available in the Employers section of the CalPERS website.

Pension Outlook can help plan and budget pension costs under various scenarios.

CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Carlsbad
CalPERS ID: 3747905882

(Gain)/Loss Analysis 6/30/ 22 – 6/30/23

To calculate the cost requirements of the plan, assumptions are made about future events that affect the amount and timing of benefits to be paid and assets to be accumulated. Each year, actual experience is compared to the expected experience based on the actuarial assumptions. This results in actuarial gains or losses, as shown below.

1. Total (Gain)/Loss for the Year
a) Unfunded Accrued Liability (UAL) as of 6/30/22 $111,957,028 b) Expected payment on the UAL during 2022-23 6,312,155 c) Interest through 6/30/23 [.068 x (1a) - ((1.068)½ - 1) x (1b)] 7,401,992 d) Expected UAL before all other changes [(1a) - (1b) + (1c)] 113,046,865 e) Change due to plan changes 0
f) Change due to AL Significant Increase 0
g) Change due to assumption change s 0
h) Change due to method change s 0
i) Change due to discount rate change with Funding Risk Mitigation 0 j) Expected UAL after all other changes [(1d) + (1e) + (1f) + (1g) + (1h) + (1i)] 113,046,865 k) Actual UAL as of 6/30/23 118,699,066
l) Total (Gain)/Loss for 2022-23 [(1k) - (1j)] $5,652,201

2. Investment (Gain)/Loss for the Year
a) Market Value of Assets as of 6/30/22 $369,436,837
b) Prior fiscal year receivables (461,603)
c) Current fiscal year receivables 416,532
d) Contributions received 16,465,339
e) Benefits and refunds paid (24,454,641)
f) Transfers, SCP payments and interest, and miscellaneous adjustments 90,876 g) Expected return at 6.8% per year 25,062,074
h) Expected assets as of 6/30/23 [(2a) + (2b) + (2c) + (2d) + (2e) + (2f) + (2g)] 386,555,413 i) Actual Market Value of Assets as of 6/30/23 383,790,810 j) Investment (Gain)/Loss [(2h) - (2i)] $2,764,603

3. Non-Investment (Gain)/Loss for the Year
a) Total (Gain)/Loss ( 1l) $5,652,201
b) Investment (Gain)/Loss ( 2j) 2,764,603
c) Non-Investment (Gain)/Loss [(3a) - (3b)] $2,887,598

CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Carlsbad
CalPERS ID: 3747905882

Schedule of Amortization Bases

Below is the schedule of the plan’s amortization bases. Note that there is a two-year lag between the valuation date and the start of the contribution year.

• The assets, liabilities, and funded status of the plan are measured as of the valuation date: June 30, 2023. • The required employer contributions determined by the valuation are for the fiscal year beginning two years after the valuation date: FY 2025-26.

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 public 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 date 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 on the UAL for FY 2023-24 is based on the actuarial valuation two years ago, adjusted for additional discretionary payments, if necessary , and the expected payment for FY 2024-25 is based on the actuarial valuation one year ago.

Reason for Base
Date
Est.

Ramp
Level
2025-26
Ramp
Shape
Escala-
tion
Rate
Amort.

Period
Balance
6/30/23
Expected
Payment
2023-24
Balance
6/30/24
Expected
Payment
2024-25
Balance
6/30/25
Minimum
Required
Payment
2025-26
Method Change 6/30/04 No Ramp 2.80% 1 (201,633) (72,126) (140,806) (74,146) (73,755) (76,221) Special (Gain)/Loss 6/30/09 No Ramp 2.80% 16 2,130,381 165,921 2,103,777 170,567 2,070,563 175,342 Special (Gain)/Loss 6/30/10 No Ramp 2.80% 17 481,321 36,118 476,725 37,129 470,772 38,168 Special (Gain)/Loss 6/30/11 No Ramp 2.80% 18 (1,212,751) (87,912) (1,204,366) (90,374) (1,192,867) (92,904) (Gain)/Loss 6/30/12 No Ramp 2.80% 19 10,019,695 703,335 9,974,179 723,028 9,905,216 743,273 Payment (Gain)/Loss 6/30/12 No Ramp 2.80% 19 422,463 29,655 420,544 30,485 417,637 31,339 (Gain)/Loss 6/30/13 100% Up/Dn 2.80% 20 34,835,293 2,528,426 34,591,114 2,599,222 34,257,168 2,672,001 (Gain)/Loss 6/30/14 100% Up/Dn 2.80% 21 (25,659,006) (1,803,278) (25,540,237) (1,853,770) (25,361,211) (1,905,675) Assumption Change 6/30/14 100% Up/Dn 2.80% 11 18,109,068 2,049,912 17,222,022 2,107,310 16,215,339 2,166,314 (Gain)/Loss 6/30/15 100% Up/Dn 2.80% 22 13,230,281 902,240 13,197,528 927,503 13,136,440 953,473 (Gain)/Loss 6/30/16 100% Up/Dn 2.80% 23 16,152,876 1,070,986 16,144,471 1,100,974 16,104,504 1,131,801 Assumption Change 6/30/16 100% Up/Dn 2.80% 13 6,779,322 672,300 6,545,534 691,124 6,276,395 710,476 (Gain)/Loss 6/30/17 100% Up/Dn 2.80% 24 (14,648,086) (945,953) (14,666,569) (972,440) (14,658,936) (999,668) Assumption Change 6/30/17 100% Up/Dn 2.80% 14 5,411,864 507,026 5,255,889 521,222 5,074,637 535,817 (Gain)/Loss 6/30/18 100% Up/Dn 2.80% 25 (4,190,949) (213,835) (4,254,948) (274,779) (4,260,317) (282,472) Assumption Change 6/30/18 100% Up/Dn 2.80% 15 13,937,221 1,009,204 13,841,999 1,296,827 13,443,061 1,333,138 Method Change 6/30/18 100% Up/Dn 2.80% 15 2,655,590 192,293 2,637,447 247,097 2,561,433 254,015 Non-Investment (Gain)/Loss 6/30/19 No Ramp 0.00% 16 204,557 19,394 198,424 19,394 191,874 19,394 Investment (Gain)/Loss 6/30/20 80% Up Only 0.00% 17 9,506,167 390,772 9,748,747 586,158 9,805,902 781,544 Non-Investment (Gain)/Loss 6/30/20 No Ramp 0.00% 17 3,202,544 295,347 3,115,093 295,347 3,021,696 295,347

CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Carlsbad
CalPERS ID: 3747905882

Schedule of Amortization Bases (continued)
Reason for Base
Date
Est.

Ramp
Level
2025-26
Ramp
Shape
Escala-
tion
Rate
Amort.

Period
Balance
6/30/23
Expected
Payment
2023-24
Balance
6/30/24
Expected
Payment
2024-25
Balance
6/30/25
Minimum
Required
Payment
2025-26
Assumption Change 6/30/21 No Ramp 0.00% 18 1,726,402 155,244 1,683,362 155,244 1,637,395 155,244 Net Investment (Gain) 6/30/21 60% Up Only 0.00% 18 (46,427,660) (997,948) (48,553,421) (1,995,897) (49,792,412) (2,993,845) Non-Investment (Gain)/Loss 6/30/21 No Ramp 0.00% 18 (2,745,386) (246,875) (2,676,942) (246,875) (2,603,843) (246,875) Risk Mitigation 6/30/21 No Ramp 0.00% 0 12,857,699 13,287,671 0 0 0 0 Risk Mitigation Offset 6/30/21 No Ramp 0.00% 0 (12,857,699) (13,287,671) 0 0 0 0 Benefit Change 6/30/22 No Ramp 0.00% 19 531,888 (4,879) 573,099 51,535 558,811 51,535 Investment (Gain)/Loss 6/30/22 40% Up Only 0.00% 19 62,334,430 0 66,573,171 1,430,970 69,621,324 2,861,940 Non-Investment (Gain)/Loss 6/30/22 No Ramp 0.00% 19 6,460,973 0 6,900,319 620,501 6,728,290 620,501 Investment (Gain)/Loss 6/30/23 20% Up Only 0.00% 20 2,764,603 0 2,952,596 0 3,153,373 67,781 Non-Investment (Gain)/Loss 6/30/23 No Ramp 0.00% 20 2,887,598 0 3,083,955 0 3,293,664 296,178 Total 118,699,066 6,355,367 120,202,706 8,103,356 120,002,153 9,296,961

CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Carlsbad
CalPERS ID: 3747905882

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 i n 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 lia bility payments.

Shown on the follow ing 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 a CalPERS 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 combinatio n 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 re placing the existing unfunded liability bases with a single “fresh start” base and amortizing it over an 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 fa ct arise since there will be additional bases added to the amortization schedule in each future year. Should such a scenario ari se in any future year, the actuary will take appropriate action based on guidelines in the CalPERS Actuarial Amortization Policy.

CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Carlsbad
CalPERS ID: 3747905882

Amortization Schedule and Alternatives (continued)

Alternative Schedules
Current Amortization
Schedule 15 Year Amortization 10 Year Amortization
Date Balance Payment Balance Payment Balance Payment
6/30/2025 120,002,153 9,296,961 120,002,153 12,588,666 120,002,153 16,380,224 6/30/2026 118,554,442 10,278,375 115,152,658 12,588,666 111,234,307 16,380,224 6/30/2027 115,994,052 10,994,034 109,973,397 12,588,666 101,870,247 16,380,224 6/30/2028 112,519,964 12,713,658 104,441,946 12,588,666 91,869,431 16,380,225 6/30/2029 107,032,508 13,008,494 98,534,357 12,588,666 81,188,559 16,380,225 6/30/2030 100,867,208 13,241,910 92,225,052 12,588,666 69,781,387 16,380,224 6/30/2031 94,041,447 13,481,859 85,486,714 12,588,666 57,598,529 16,380,225 6/30/2032 86,503,562 13,202,872 78,290,169 12,588,666 44,587,235 16,380,224 6/30/2033 78,741,418 12,901,353 70,604,259 12,588,666 30,691,174 16,380,224 6/30/2034 70,763,051 12,394,072 62,395,707 12,588,666 15,850,181 16,380,225 6/30/2035 62,766,396 11,710,687 53,628,973 12,588,667 6/30/2036 54,932,209 10,552,875 44,266,100 12,588,666 6/30/2037 47,761,826 9,928,196 34,266,553 12,588,666 6/30/2038 40,749,427 9,263,921 23,587,037 12,588,667 6/30/2039 33,946,673 8,767,494 12,181,313 12,588,667 6/30/2040 27,194,362 8,401,824
6/30/2041 20,360,792 7,382,801
6/30/2042 14,115,636 5,880,836
6/30/2043 8,998,004 9,298,905
6/30/2044
6/30/2045
6/30/2046
6/30/2047
6/30/2048
6/30/2049

Total 202,701,127 188,829,993 163,802,244
Interest Paid 82,698,974 68,827,840 43,800,091
Estimated Savings 13,871,134 38,898,883
CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Carlsbad
CalPERS ID: 3747905882

Reconciliation of Required Employer Contributions

Normal Cost (% of Payroll)

1. For Period 7/1/24 – 6/30/25
a) Employer Normal Cost 12.13%
b) Employee contribution 8.10%
c) Total Normal Cost 20.23%

2. Changes since the prior year annual valuation
a) Effect of demographic experience (0.49%)
b) Effect of plan changes 0.00%
c) Effect of discount rate change due to Funding Risk Mitigation 0.00% d) Effect of assumption changes 0.00%
e) Effect of method changes 0.00%
f) Net effect of the changes above [sum of (a) through (e)] (0.49%)

3. For Period 7/1/25 – 6/30/26
a) Employer Normal Cost 11.59%
b) Employee contribution 8.15%
c) Total Normal Cost 19.74%
Employer Normal Cost Change [(3a) – (1a)] (0.54%)
Employee Contribution Change [(3b) – (1b)] 0.05%

Unfunded Liability Contribution ($)

1. For Period 7/1/24 – 6/30/25 8,103,356

2. Changes since the prior year annual valuation
a) Effect of adjustments to prior year’s amortization schedule 0 b) Effect of elimination of amortization bases 0
c) Effect of progression of amortization bases 1 829,646 d) Effect of investment (gain) /loss during prior year2 67,781 e) Effect of non-investment (gain)/loss during prior year 296,178 f) Effect of re-amortizing existing bases due to Funding Risk Mitigation 0 g) Effect of Golden Handshake 0
h) Effect of plan changes 0
i) Effect of AL Significant Increase (Government Code section 20791) 0 j) Effect of assumption changes 0
k) Effect of adjustments to the amortization schedule (e.g., Fresh Start) 0 l) Effect of method change 0
m
)
Net effect of the changes above [sum of (a) through (l)] 1,193,605

3. For Period 7/1/25 – 6/30/26 [(1) + (2m)] 9,296,961

The amounts shown for the period 7/1/24 – 6/30/25 may be different if a prepayment of unfunded actuarial liability is made or a plan change became effective after the prior year’s actuarial valuation was performed.

1 Includes scheduled escalation in individual amortization base payments due to the 5-year ramp and payroll grow th assumption used in the pre-2019 amortization policy.
2 The unfunded liability contribution for the investment (gain)/loss during the year prior to the valuation date is 20% of the “full” annual requirement due to the 5-year ramp. Increases to this amount that occur during the ramp period w ill be included in line c) for each of the next four years.

CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Carlsbad
CalPERS ID: 3747905882

Employer Contribution History

The table below provides a 10-year history of the employer contribution requirements for the plan, as determined by the annual actuarial valuation. Changes due to prepayments or plan amendments after the valuation report was finalized are not reflected.

Valuation
Date
Contribution
Year
Employer
Normal Cost
Rate
Unfunded
Liability Rate
Unfunded
Liability Payment
06/30/2014 2016 - 17 12.598% 16.259% N/A
06/30/2015 2017 - 18 12.255% N/A 6,649,209
06/30/2016 2018 - 19 12.343% N/A 7,126,004
06/30/2017 2019 - 20 12.410% N/A 5,596,719
06/30/2018 2020 - 21 12.787% N/A 5,675,255
06/30/2019 2021 - 22 12.15% N/A 6,577,258
06/30/2020 2022 - 23 11.72% N/A 7,227,710
06/30/2021 2023 - 24 12.51% N/A 6,360,246
06/30/2022 2024 - 25 12.13% N/A 8,103,356
06/30/2023 2025 - 26 11.59% N/A 9,296,961

Funding History

The table below shows the recent history of the actuarial accrued liability, market value of assets, unfunded accrued liability, funded ratio and annual covered payroll.

Valuation
Date

Accrued
Liability
(AL)
Market Value of
Assets (MVA)
Unfunded
Accrued
Liability (UAL)

Funded
Ratio

Annual
Covered
Payroll
6/30/2014 $311,318,547 $238,912,202 $72,406,345 76.7% $32,748,320 6/30/2015 325,919,906 242,072,220 83,847,686 74.3% 34,274,855 6/30/2016 344,920,666 241,133,786 103,786,880 69.9% 36,249,206 6/30/2017 363,173,103 269,810,408 93,362,695 74.3% 36,940,152 6/30/2018 392,462,997 300,350,224 92,112,773 76.5% 36,242,013 6/30/2019 410,200,348 322,146,603 88,053,745 78.5% 39,277,286 6/30/2020 430,502,885 330,903,112 99,599,773 76.9% 42,888,826 6/30/2021 456,814,169 404,515,911 52,298,258 88.6% 43,167,428 6/30/2022 481,393,865 369,436,837 111,957,028 76.7% 46,150,095 6/30/2023 502,489,876 383,790,810 118,699,066 76.4% 50,552,759 CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Carlsbad
CalPERS ID: 3747905882

Normal Cost by Benefit Group

The table below displays the Total Normal Cost broken out by benefit group for FY 2025-26. The Total Normal Cost is the annual cost of service accrual for the fiscal year for active employees and can be viewed as the long -term contribution rate for the benefits contracted. Generally, the normal cost for a benefit group subject to more generous benefit provisions will exce ed the normal cost for a group with less generous benefits. However, based on the characteristics of the members (particularly when the number of actives is small), this may not be the case. Future measurements of the Total Normal Cost for each group may differ significantly from the current values due to such factors as: changes in the demographics of the group, changes in economic and demographic assumptions, changes in plan benefits or applicable law.

Plan
Identifier Benefit Group Name
Total
Normal Cost
FY 2025-26
Number of
Actives
Payroll on
6/30/2023
316 Miscellaneous First Level 24.21% 171 $16,586,879
26260 Miscellaneous PEPRA Level 16.87% 358 $27,767,449 30365 Miscellaneous Second Level 21.02% 52 $6,198,431 Plan Total 19.74% 581 $50,552,759

Note that if a Benefit Group above has multiple bargaining units, each of which has separately contracted for different benef its such as Employer Paid Member Contributions, then the Normal Cost shown for the respective benefit level does not reflect those differences. Additionally, if a Second Level Benefit Group amended to the same benefit formula as a First Level Benefit Group, their Normal Costs may be dissimilar due to demographic or other population differences. For questions in these situations, pleas e contact a CalPERS actuary.

Risk Analysis

• Future Investment Return Scenarios 27
• Discount Rate Sensitivity 28
• Mortality Rate Sensitivity 28
• Maturity Measures 29
• Maturity Measures History 30
• Funded Status – Termination Basis 31
• Funded Status – Low-Default-Risk Basis 32
CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Carlsbad
CalPERS ID: 3747905882

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 refle ct the impact of the CalPERS Funding Risk Mitigation Policy. The projected normal cost rates reflect that the rates are anticipated to decline over time as new employees are hired into lower -cost benefit tiers. The projections also assume that all other actuarial assumptions will be realiz ed 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 alter nate 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, 2043.

Assumed Annual Return
FY 2023-24
through FY 2042-43
Projected Employer Contributions
2026-27 2027-28 2028-29 2029-30 2030-31

3.0% (5th percentile)
Discoun t Rate 6.80% 6.80% 6.80% 6.80% 6.80%
Normal Cost Rate 11.3% 11.1% 10.9% 10.7% 10.5%
UAL Contribution $10,632,000 $12,059,000 $14,851,000 $16,587,000 $18,637,000

10.8% (95th percentile)
Discoun t Rate 6.75% 6.70% 6.65% 6.60% 6.55%
Normal Cost Rate 11.6% 11.6% 11.6% 11.7% 11.7%
UAL Contribution $9,949,000 $10,014,000 $10,716,000 $9,614,000 $8,019,000

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 illustrat es 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 one and two standard deviation investment loss es in FY 2023-24 on the FY 2026-27 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 impac ted 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 2026-27.

Assumed Annual Return for
Fiscal Year 2023-24
Required
Employer
Contributions
Projected
Employer
Contributions
2025-26 2026-27
(17.2% ) (2 standard deviation loss)
Discoun t Rate 6.80% 6.80%
Normal Cost Rate 11.59% 11.3%
UAL Contribution $9,296,961 $12,510,000
(5.2% ) (1 standard deviation loss)
Discoun t Rate 6.80% 6.80%
Normal Cost Rate 11.59% 11.3%
UAL Contribution $9,296,961 $11,395,000

• Without investment gains (returns higher than 6.8%) in FY 2024-25 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 2023-24.
• The Pension Outlook Tool can be used to model projected contributions for these scenarios beyond FY 2026-27 as well as to model other investment return scenarios .

CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Carlsbad
CalPERS ID: 3747905882

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, 2023, 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 discount 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, 2023
1% Lower
Real Return Rate
Current
Assumptions
1% Higher
Real Return Rate
Discount Rate 5.8% 6.8% 7.8%
Price Inflation 2.3% 2.3% 2.3%
Real Rate of Return 3.5% 4.5% 5.5%
a) Total Normal Cost 24.93% 19.74% 15.81%
b) Accrued Liability $567,866,401 $502,489,876 $448,424,538 c) Market Value of Assets $383,790,810 $383,790,810 $383,790,810 d) Unfunded Liability/(Surplus) [(b) - (c)] $184,075,591 $118,699,066 $64,633,728 e) Funded Ratio 67.6% 76.4% 85.6%

Sensitivity to the Price Inflation Assumption

As of June 30, 2023
1% Lower
Price Inflation
Current
Assumptions
1% Higher
Price Inflation
Discount Rate 5.8% 6.8% 7.8%
Price Inflation 1.3% 2.3% 3.3%
Real Rate of Return 4.5% 4.5% 4.5%
a) Total Normal Cost 20.81% 19.74% 17.89%
b) Accrued Liability $519,258,836 $502,489,876 $466,238,025 c) Market Value of Assets $383,790,810 $383,790,810 $383,790,810 d) Unfunded Liability/(Surplus) [(b) - (c)] $135,468 ,026 $118,699,066 $82,447,215 e) Funded Ratio 73.9% 76.4% 82.3%

Mortality Rate Sensitivity

The following table looks at the change in the June 30, 2023, plan costs and funded status under two different longevity scenarios, namely assuming rates of post-retirement 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 a change in the mortality assumption .

As of June 30, 2023
10% Lower
Mortality Rates
Current
Assumptions
10% Higher
Mortality Rates
a) Total Normal Cost 20.04% 19.74% 19.45%
b) Accrued Liability $512,822,010 $502,489,876 $492,991,752 c) Market Value of Assets $383,790,810 $383,790,810 $383,790,810 d) Unfunded Liability/(Surplus) [(b) - (c)] $129,031,200 $118,699,066 $109,200,942 e) Funded Ratio 74.8% 76.4% 77.8%

CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Carlsbad
CalPERS ID: 3747905882

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 variables and changes in longevity or other demographic assumptions.

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 increases.

A mature plan will often have a ratio above 60%-65%.

Ratio of Retiree Accrued Liability to
Total Accrued Liability June 30, 2022 June 30, 2023

1. Retiree Accrued Liability $296,440,154 $310,865,127

2. Total Accrued Liability $481,393,865 $502,489,876

3. Ratio of Retiree AL to Total AL [(1) ÷ (2)] 62% 62%

Another measure of the maturity level of CalPERS and its plans is 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 retir e, 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 careers 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 as of June 30, 2022, was 0.77 and was calculated consistently with how it is for the individual rate plan. Note that to calculate the support ratio for all public agency plan s, a retiree with service from more than one CalPERS agency is counted as a retiree more than once.

Support Ratio June 30, 2022 June 30, 2023

1. Number of Actives 548 581

2. Number of Retirees 678 703

3. Support Ratio [(1) ÷ (2)] 0.81 0.83

CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Carlsbad
CalPERS ID: 3747905882

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 increases , 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 a higher AVR experience more volatile employer contributions (as a percentage of payroll) due to investment return. For example, a plan with an AVR of 8 may experience twice the contribution volatility due to investment return volatility than a plan with an AVR 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 a 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 an LVR of 8 is expected to have twice the contribution volatility of a plan with an LVR of 4 when there is a change in accrued liability, such as when there is a change in actuarial assumptions . 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 10 0%.

Contribution Volatility June 30, 2022 June 30, 2023

1. Market Value of Assets without Receivables $368,975,233 $383,374,278

2. Payroll 46,150,095 50,552,759

3. Asset Volatility Ratio (AVR) [(1) ÷ (2)] 8.0 7.6

4. Accrued Liability $481,393,865 $502,489,876

5. Liability Volatility Ratio (LVR) [(4) ÷ (2)] 10.4 9.9

Maturity Measures History

Valuation Date
Ratio of
Retiree Accrued Liability
to
Total Accrued Liability Support Ratio
Asset
Volatility
Ratio
Liability
Volatility
Ratio

6/30/2017

56%

0.98 7.3

9.8 6/30/2018

58%

0.88 8.3

10.8 6/30/2019

59%

0.89 8.2

10.4 6/30/2020

59%

0.89 7.7

10.0 6/30/2021

60%

0.82 9.4

10.6 6/30/2022

62%

0.81 8.0

10.4 6/30/2023

62%

0.83 7.6

9.9 CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Carlsbad
CalPERS ID: 3747905882

Funded Status – Termination Basis

The funded status measured on a termination basis is an estimate of the financial position of the plan had the contract with CalPERS been terminated as of June 30, 2023. The accrued liability on a termination basis (termination liability) is calculated differently from the plan’s ongoing funding liability. For the 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. Unlike the actuarial cost method used for ongoing plans, the termination liability is the present value of the benefits earned through the valuation date.

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 remainder of the PERF and consequently, a lower discoun t rate assumption. The lower discount rate for the Terminated Agency Pool results in higher liabilities for terminated plans.

The discount rate used for actual termination valuations is a weighted average of the 10-year and 30-year Treasury yields where the weights are based on matching asset and liability durations as of the termination date. The discount rates used in the following analysis is based on 20-year Treasury bonds, which is a good proxy for most plans. The discount rate upon contract terminat ion will depend on actual Treasury rates on the date of termination , which varies over time, as shown below.

Valuation 20-Year Valuation 20-Year
Date Treasury Rate Date Treasury Rate
06/30/2014 3.08% 06/30/2019 2.31%
06/30/2015 2.83% 06/30/2020 1.18%
06/30/2016 1.86% 06/30/2021 2.00%
06/30/2017 2.61% 06/30/2022 3.38%
06/30/2018 2.91% 06/30/2023 4.06%

As Treasury rates are variable, the table below shows a range for the termination liability using discount rates 1% below and above the 20-year Treasury rate on the valuation date. The price inflation assumption is the 20 -year Treasury breakeven inflation rate, that is, the difference between the 20-year inflation indexed bond and the 20-year fixed-rate bond.

The Market Value of Assets (MVA) also varies with interest rates and will fluctuate depending on other market conditions on the date of termination . Since it is not possible to approximate how the MVA will change in different interest rate environments, the results below use the MVA as of the valuation date.

Discount Rate: 3.06%
Price Inflation: 2.50%
Discount Rate: 5.06%
Price Inflation: 2.50%

1. Termination Liability 1 $809,146,781 $609,219,182

2. Market Value of Assets (MVA) 383,790,810 383,790,810

3. Unfunded Termination Liability [(1) – (2)] $425,355,971 $225,428,372

4. Funded Ratio [(2) ÷ (1)] 47.4% 63.0%

1 The termination liabilities calculated above include a 5% contingency load. The contingency load and other actuarial assumptions can be found in Appendix A.

In order to terminate the plan, first contact our Pension Contract Services unit to initiate a Resolution of Intent to Termin ate. The completed Resolution will allow a CalPERS actuary to provide a preliminary termination valuation with a more up-to-date estimate of the plan’s assets and liabilities. Before beginning this process, please consult with a CalPERS actuary.

CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Carlsbad
CalPERS ID: 3747905882

Funded Status – Low-Default-Risk Basis

Actuarial Standard of Practice (ASOP) No. 4, Measuring Pension Obligations and Determining Pension Plan Costs or Contributions , requires the disclosure of a low-default-risk obligation measure (LDROM) of benefit costs accrued as of the valuation date using a discount rate based on the yields of high quality fixed income securities with cash flows that replicate expected benefit payments. Conceptually, this measure represents the level at which financial markets would value the accrued plan costs, and would be approximately equal to the cost of a portfolio of low-default-risk bonds with similar financial characteristics to accrued plan costs.

As permitted in ASOP No. 4, the Actuarial Office uses the Entry Age Actuarial Cost Method to calculate the LDROM. This methodology is in line with the measure of “benefit entitlements” calculated by the Bureau of Economic Analysis and used by the Federal Reserve to report the indebtedness due to pensions of plan sponsors and, conversely, the household wealth due to pensions of plan members.

As shown below, the discount rate used for the LDROM is 4.82%, which is the Standard FTSE Pension Liability Index1 discount rate as of June 30, 2023 , net of assumed administrative expenses.

Selected Measures on a Low-Default-Risk Basis June 30, 2023 Discount Rate 4.82%

1. Accrued Liability 2 – Low-Default-Risk Basis (LDROM) a) Active Members $210,369,696
b) Transferred Members 41,176,616
c) Separated Members 16,868,997
d) Members and Beneficiaries Receiving Payments 377,458,184 e) Total $645,873,493

2. Market Value of Assets (MVA) 383,790,810

3. Unfunded Accrued Liability – Low-Default-Risk Basis [(1e) – (2)] $262,082,683

4. Unfunded Accrued Liability – Funding Policy Basis 118,699,066

5. Present Value of Unearned Investment Risk Premium [(3) – (4)] $143,383,617

The difference between the unfunded liabilities on a low -default-risk basis and on the funding policy basis represents the present value of the investment risk premium that must be earned in future years to keep future contributions for currently accrued plan costs at the levels anticipated by the funding policy.

Benefit security for members of the plan relies on a combination of the assets in the plan, the investment income generated f rom those assets, and the ability of the plan sponso r to make necessary future contributions. If future returns fall short of 6.8%, benefit security could be at risk without higher than currently anticipated future contributions.

The funded status on a low-default-risk basis is not appropriate for assessing the sufficiency of plan assets to cover the cost of settling the plan’s benefit obligations (see Funded Status – Termination Basis ), nor is it appropriate for assessing the need for future contributions (see Funded Status – Funding Policy Basis ).

1 This index is based on a yield curve of hypothetical AA-rated zero coupon corporate bonds whose maturities range from 6 months to 30 years. The index represents the single discount rate that w ould produce the same present value as discounting a standardized set of liability cash flow s for a fully open pension plan using the yield curve. The liability cash flows are reasonably consistent with the pattern of benefits expected to be paid from the entire Public Employees’ Retirement Fund for current and former plan members. A different index, hence a different discount rate, may be needed to measure the LDROM for a subset of the fund, such as a single rate plan or a group of retirees.

2 If plan assets w ere invested entirely in the AA fixed income securities used to determine the discount rate of 4.82%, the CalPERS discount rate could, at various times, be below 4.5% or 5.25%, and some automatic annual retiree COLAs could be suspended (Gov. Code sections 21329 and 21335). Since there is currently no proposal to adopt an asset allocation entirely comprised of fixed income securities, the automatic COLAs have been fully valued in the measures above based on the assumptions used for plan funding. Removing future COLAs from the measurement w ould understate the statutory obligation.

Plan’s Major Benefit Options
CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Carlsbad
CalPERS ID: 3747905882

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 Appendix B.

Benefit Group
Member Category Misc Misc Misc Misc Misc Misc Misc
Demographics
Actives No No No Yes Yes Yes No
Transfers/Separated Yes Yes No Yes Yes Yes Yes
Receiving Yes Yes Yes Yes Yes Yes Yes
Benefit Group Key 103026 103027 103029 103030 108500 110624 110625 Benefit Provision

Benefit Formula 2% @ 55 2% @ 55 3% @ 60 2% @ 60 2% @ 62 2% @ 55 Social Security Coverage Yes No No No No No
Full/Modified Modified Full Full Full Full Full

Employee Contribution Rate 8.00% 7.00% 8.50%

Final Average Compensation Period One Year One Year One Year Three Year Three Year One Year

Sick Leave Credit Yes Yes Yes Yes Yes No

Non-Industrial Disability Improved Improved Improved Improved Improved Standard

Industrial Disability No No No No No No

Pre-Retirement Death Benefits
Optional Settlement 2 No No No No No No
1959 Survivor Benefit Level No Level 3 Level 3 Level 3 Level 3 Level 3 Special No No No No No No
Alternate (firefighters) No No No No No No

Post-Retirement Death Benefits
Lump Sum $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 Survivor Allowance (PRSA) Yes Yes Yes Yes Yes Yes No

COLA 2% 2% 2% 2% 2% 2% 2%
CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Carlsbad
CalPERS ID: 3747905882

Plan's Major Benefit Options (Continued)
Shown below is a summary of the major optional benefits for which the agency has contracted. A description of principal stand ard and optional plan provisions is in Appendix B.

Benefit Group
Member Category Misc Misc Misc Misc Misc Misc Misc
Demographics
Actives No No No No No No No
Transfers/Separated No No No No No No No
Receiving Yes Yes Yes Yes Yes Yes Yes
112323 202156 202157 202162 202163 202164 202165
Benefit Provision

Benefit Formula
Social Security Coverage
Full/Modified

Employee Contribution Rate

Final Average Compensation Period

Sick Leave Credit

Non-Industrial Disability

Industrial Disability

Pre-Retirement Death Benefits
Optional Settlement 2
1959 Survivor Benefit Level
Special
Alternate (firefighters)

Post-Retirement Death Benefits
Lump Sum $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 Survivor Allowance (PRSA) No No No Yes Yes Yes Yes

COLA 2% 2% 2% 2% 2% 2% 2%
CalPERS Actuarial Valuation - June 30, 2023
Miscellaneous Plan of the City of Carlsbad
CalPERS ID: 3747905882

Plan's Major Benefit Options (Continued)
Shown below is a summary of the major optional benefits for which the agency has contracted. A description of principal stand ard and optional plan provisions is in Appendix B.

Benefit Group
Member Category Misc Misc Misc
Demographics
Actives No No No
Transfers/Separated No No No
Receiving Yes Yes Yes
202166 202167 202169
Benefit Provision

Benefit Formula
Social Security Coverage
Full/Modified

Employee Contribution Rate

Final Average Compensation Period

Sick Leave Credit

Non-Industrial Disability

Industrial Disability

Pre-Retirement Death Benefits
Optional Settlement 2
1959 Survivor Benefit Level
Special
Alternate (firefighters)

Post-Retirement Death Benefits
Lump Sum $2,000 $2,000 $2,000
Survivor Allowance (PRSA) Yes Yes Yes

COLA 2% 2% 2%

Appendices

• Appendix A – Actuarial Methods and Assumptions
• Appendix B – Principal Plan Provisions
• Appendix C – Participant Data
• Appendix D – Glossary

Appendix A - Actuarial Methods and Assumptions

• Actuarial Data 39
• Actuarial Methods 39
• Actuarial Assumptions 42
• Miscellaneous 62

CalPERS Actuarial Valuation – June 30, 2023 Appendix A Actuarial Methods and Assumptions

Actuarial Data

As stated in the Actuarial Certification, the data which serves as the basis of this valuation has been obtained from the various CalPERS databases. We have reviewed the valuation data and believe that it is reasonable and appropriate in aggregate. We are unaware of any potential data issues that would have a material effect on the results of this valuation, except that data does not always contain the latest salary information for form er members now in reciprocal systems and does not recognize the potential for unusually large salary deviation in certain cases such as elected officials. Therefore, salary information in these cases may not be accurate. These situations are relatively infrequent, however, and generally do not have a material impact on the required employer contributions.

Actuarial Methods

Actuarial Cost Method

With one exception, the actuarial cost method use d in this valuation is the Entry Age Actuarial Cost Method. This method is used to calculate the required employer contributions and the PEPRA member contribution rate. Under this method, the cost of the projected benefits is allocated on an individual basis as a level percent of earnings for the individual between entry age and retirement age. The portion allocated to the year following the valuation date is the normal cost. This method yields a total normal cost rate, expressed as a percentage of payroll, which is designed to rema in level throughout the member’s career.

The actuarial accrued liability for active members is then calculated as the present value of benefits minus the present value of future normal cost , or the portion of the total present value of benefits allocated to prior years. The actuarial accrued liability for members currently receiving benefits and for members entitled to deferred benefits is equal to the present value of the benef its expected to be paid. No normal costs are applicable for these pa rticipants.

To calculate the accrued liability on termination basis, this valuation use d the Traditional Unit Credit Actuarial Cost Method. This method differs from the entry age method only for active members where the accrued liability is the present value of benefits assuming no future pay increases or service accruals.

Amortization of Unfunded Actuarial Accrued Liability

The excess of the total actuarial accrued liability over the market value of plan assets is called the unfunded actuarial acc rued liability (UAL). Funding requirements are determined by adding the normal cost and a payment toward the UAL. The UAL payment is equal to the sum of individual amortization payments, each representing a different source of UAL for a given measurement period.

Amortization payments are determined according to the CalPERS Actuarial Amortization Policy. The board adopted a new policy effective for the June 30, 2019 , actuarial valuation. The new policy applies prospectively only; amortization bases (sources of UAL) established prior to the June 30, 2019 , valuation will continue to be amortized according to the prior policy.

CalPERS Actuarial Valuation – June 30, 2023 Appendix A Actuarial Methods and Assumptions

Prior Policy (Bases Established prior to June 30, 2019)

Amortization payments are determined as a level percentage of payroll whereby the payment increases each year at an escalation rate. Gains or losses are amortized over a fixed 30-year period with a 5-year ramp up at the beginning and a 5-year ramp down at the end of the amortization period. All changes in liability due to plan amendments (other than golden handshakes) are amortized over a 20-year period with no ramp. Changes in actuarial assumptions or changes in actuarial methodology are am ortized over a 20-year period with a 5-year ramp up at the beginning and a 5-year ramp down at the end of the amortization period. Changes in unfunded accrued liability due to a Golden Handshake will be amortized over a period of five years. Bases establis hed prior to June 30, 2013, may be amortized differently. A summary is provided in the following table:

Driver
Source
(Gain)/Loss
Assumption/Method
Change
Benefit
Change
Golden
Handshake Investment
Non-
investment
Amortization
Period 30 Years 30 Years 20 Years
20 Years 5 Years
Escalation Rate
- Active Plans
- Inactive Plans

2.80%
0%

2.80%
0%

2.80%
0%

2.80%
0%

2.80%
0%
Ramp Up 5 5 5 0 0
Ramp Down 5 5 5 0 0

The 5-year ramp up means that the payments in the first four years of the amortization period are 20%, 40%, 60% and 80% of the “full” payment which begins in year five. The 5-year ramp down means that the reverse is true in the final four years of the amortization period.

Current Policy (Bases Established on or after June 30, 2019)

Amortization payments are determined as a level dollar amount. Investment gains or losses are amortized over a fixed 20 -year period with a 5-year ramp up at the beginning of the amortization period. Non-investment gains or losses are amortized over a fixed 20-year period with no ramps. All changes in liability due to plan amendments (other than golden handshakes) are amortized over a 20-year period with no ramps. Changes in actuarial assumptions or changes in actuarial methodology are amortized over a 20-year period with no ramps. Changes in unfunded accrued liability due to a Golden Handshake are amortized over a period of five years. A summary is provided in the table below:

Driver
Source
(Gain)/Loss
Assumption/
Method
Change
Benefit
Change
Golden
Handshake Investment
Non-
investment
Amortization
Period 20 Years 20 Years 20 Years 20 Years 5 Years
Escalation Rate 0% 0% 0% 0% 0%
Ramp Up 5 0 0 0 0
Ramp Down 0 0 0 0 0

Exceptions for Inconsistencies

An exception to the amortization rules above is used whenever their application results in inconsistencies. In these cases, a “fresh start” approach is used. This means that the current unfunded actuarial liability is projected and amortized over a se t number of years. For example, a fresh start is needed in the following situations:

• When a negative payment would be required on a positive unfunded actuarial liability; or CalPERS Actuarial Valuation – June 30, 2023 Appendix A Actuarial Methods and Assumptions

• 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 .

It should be noted that the actuary may determine that a fresh start is necessary under other circumstances. In all cases of a fresh start, the period is set by the actuary at what is deemed appropriate; how ever, the period will not be greater than 20 years.

Exceptions for Plans in Surplus

If a surplus exists (i.e. , the Market Value of Assets exceeds the plan’s accrued liability) any prior amortization layers shall be considered fully amortized, and the sur plus shall not be amortized.

In the event of any subsequent unfunded liability, a Fresh Start shall be used with an amortization period of 20 years or les s.

Exceptions for Small Amounts

Where small unfunded liabilities are identified in annual valuation s which result in small payment amounts, the actuary may shorten the remaining period for these bases.

• When the balance of a single amortization base has an absolute value less than $250, the amortization period is reduced to one year.
• When the entire unfunded liability is a small amount , the actuary may perform a Fresh Start and use an appropriate amortization period.

Exceptions for Inactive Plans

The following exceptions apply to plans classified as Inactive. These plans have no active members and no e xpectation to have active members in the future.

• Amortization of the unfunded liability is on a “level dollar” basis rather than a “level percent of pay” basis. For amortization layers, which utilize a ramp up and ramp down, the “ultimate” payment is constant. • Actuarial judgment will be used to shorten amortization periods for Inactive plans with existing periods that are deemed too long given the duration of the liability. The specific demographics of the plan will be used to determine if shorter periods may be more appropriate.

Exceptions for Inactive Agencies

For a public agency with no active members in any CalPERS rate plan, the unfunded liability shall be amortized over a closed amortization period of no more than 15 years.

Asset Valuation Method

The Actuarial Value of Assets is set equal to the market value of assets. Asset values include accounts receivable.

PEPRA Normal Cost Rate Methodology

Per Government Code section 7522.30(b), the “normal cost rate” shall mean the annual actuarially determined normal cost for the plan of retirement benefits provided to the new member and shall be established based on actuarial assumptions used to determine the liabilities and costs as part of the annual actuarial valuation. The plan of retirement benefi ts shall include any elements that would impact the actuarial determination of the normal cost, including, but not limited to, the retirement form ula, eligibility and vesting criteria, ancillary benefit provisions, and any automatic cost -of-living adjustme nts as determined by the public retirement system.

For purposes of setting member rates, it is preferable to determine total normal cost using a large active population so that the rate remains relatively stable. While each CalPERS non-pooled plan has a sufficiently large active population for this purpose, the PEPRA active population by itself may not be sufficiently large enough yet. The total PEPRA normal cost for each PEPRA benefit tier will be determined based on the entire active plan population (both PEPRA and Classic) only until the number of members covered under the PEPRA formula meets either:

1. 50% of the active population, or

2. 25% of the active population and 100 or more PEPRA members

Once one of these conditions is met , the total PEPRA normal cost for each PEPRA benefit tier will be determined using the entire active PEPRA population.

CalPERS Actuarial Valuation – June 30, 2023 Appendix A Actuarial Methods and Assumptions

Actuarial Assumptions

In 2021, CalPERS completed its most recent asset liability management stud y incorporating actuarial assumptions and strategic asset allocation. In November 2021, the board adopted changes to the asset allocation that increased the expected volatility of returns. The adopted asset allocation was expected to have a long-term blended return that continued to support a discount rate assumption of 6.80%. The board also approved several changes to the demographic assumptions that more closely aligned with actual experience.

For more details and additional rationale for the selection of the actuarial assumptions, please refer to the 2021 CalPERS Experience Study and Review of Actuarial Assumptions that can be found on the CalPERS website under: Forms and Publications. Click on “View All” and search for Experience Study.

All actuarial assumptions (except the discount rates and price inflation assumption used for the accrued liability on a termination basis ) represent an estimate of future experience rather than observations of the estimates inherent in market data.

Economic Assumptions

Discount Rate
The prescribed discount rate assumption, adopted by the board on November 17, 2021, is 6.80% compounded annually (net of investment and administrative expenses) as of June 30, 2023. The discount rate is based on the long-term expected rate of return on assets using a building -block method in which expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. The current assumption, originally based on capital market assum ptions developed by the Investment Office in 2021, has been reviewed for this valuation based on capital market assumptions developed by the Investment Office in 2023.

Termination Liability Discount Rate
The current discount rate assumption used for termi nation 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 accrued liabilities on a termination basis in this report use disc ount rates that are based on the 20-year Treasury rate on the valuation date.

To illustrate the impact of the variability of interest rates, the accrued liabilities on a termination basis in this report use discount rates 1% below and 1% above the 20-year Treasury rate on the valuation date. The 20-year Treasury rate was 4.06% on June 30, 2023.

CalPERS Actuarial Valuation – June 30, 2023 Appendix A Actuarial Methods and Assumptions

Salary Increases
Annual increases vary by category, entry age, and duration of service. A sample of assumed increases due to seniority, merit and promotion are shown below. Assumed wage inflation is combined with these factors to develop the total expected salary increases .

Public Agency Miscellaneous
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40) 0 0.0764 0.0621 0.0521
1 0.0663 0.0528 0.0424
2 0.0576 0.0449 0.0346
3 0.0501 0.0381 0.0282
4 0.0435 0.0324 0.0229
5 0.0378 0.0276 0.0187
10 0.0201 0.0126 0.0108
15 0.0155 0.0102 0.0071
20 0.0119 0.0083 0.0047
25 0.0091 0.0067 0.0031
30 0.0070 0.0054 0.0020

Public Agency Fire
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40) 0 0.1517 0.1549 0.0631
1 0.1191 0.1138 0.0517
2 0.0936 0.0835 0.0423
3 0.0735 0.0613 0.0346
4 0.0577 0.0451 0.0284
5 0.0453 0.0331 0.0232
10 0.0188 0.0143 0.0077
15 0.0165 0.0124 0.0088
20 0.0145 0.0108 0.0101
25 0.0127 0.0094 0.0115
30 0.0112 0.0082 0.0132

Public Agency Police
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40) 0 0.1181 0.1051 0.0653
1 0.0934 0.0812 0.0532
2 0.0738 0.0628 0.0434
3 0.0584 0.0485 0.0353
4 0.0462 0.0375 0.0288
5 0.0365 0.0290 0.0235
10 0.0185 0.0155 0.0118
15 0.0183 0.0150 0.0131
20 0.0181 0.0145 0.0145
25 0.0179 0.0141 0.0161
30 0.0178 0.0136 0.0179

CalPERS Actuarial Valuation – June 30, 2023 Appendix A Actuarial Methods and Assumptions

Salary Increases (continued)
Public Agency County Peace Officers
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40) 0 0.1238 0.1053 0.0890
1 0.0941 0.0805 0.0674
2 0.0715 0.0616 0.0510
3 0.0544 0.0471 0.0387
4 0.0413 0.0360 0.0293
5 0.0314 0.0276 0.0222
10 0.0184 0.0142 0.0072
15 0.0174 0.0124 0.0073
20 0.0164 0.0108 0.0074
25 0.0155 0.0094 0.0075
30 0.0147 0.0083 0.0077

Schools
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40) 0 0.0275 0.0275 0.0200
1 0.0422 0.0373 0.0298
2 0.0422 0.0373 0.0298
3 0.0422 0.0373 0.0298
4 0.0388 0.0314 0.0245
5 0.0308 0.0239 0.0179
10 0.0236 0.0160 0.0121
15 0.0182 0.0135 0.0103
20 0.0145 0.0109 0.0085
25 0.0124 0.0102 0.0058
30 0.0075 0.0053 0.0019

• The Miscellaneous salary scale is used for Local Prosecutors. • The Police salary scale is used for Other Safety, Local Sheriff, and School Police.

Price Inflation

2.30% compounded annually.

Termination Liability Price Inflation
The breakeven inflation rate for 20 -year Treasur ies on the valuation date, 2.50%.

Wage Inflation

2.80% compounded annually . This is used in projecting individual salary increases.

Payroll Growth

2.80% compounded annually . This is used as the escalation rate of the amortization payments on level percent of payroll amortization bases , that is, on any amortization bases established prior to 2019 for plans that currently have active members.

Non-valued Potential Additional Liabilities
The potential liability loss for a cost-of-living increase exceeding the 2.30% price inflation assumption and any potential liability loss from future member service purchases that are not reflected in the valuation.

Miscellaneous Loading Factors

Credit for Unused Sick Leave
Total years of service is increased by 1% for those plans that have adopted the provision of providing Credit for Unused Sick Leave.

CalPERS Actuarial Valuation – June 30, 2023 Appendix A Actuarial Methods and Assumptions

Conversion of Employer Paid Member Contributions (EPMC) Total years of service is increased by the Employee Contribution Rate for those plans with the provision providing for the Conversion of Employer Paid Member Contributions (EPMC) during the final compensation period.

Norris Decision (Best Factors)
Employees hired prior to July 1, 1982 have projected benefit amounts increased in order to reflect the use of “Best Factors” in the calculation of optional benefit forms. This is due to a 1983 Supreme Court decision, known as the Norris decision, which required males and females to be treated equally in the determination of benefit amounts. Consequently, anyone already employed at that time is given the best possible conversion factor when optional benefits are determined. No loading is necessary for employees hired after July 1, 1982.

Termination Liabili ty
The termination liabilities include a 5% contingency load. This load is for unforeseen improvements in mortality.

Demographic Assumptions

Pre-Retirement Mortality
The mortality assumptions are based on mortality rates resulting from the most recent Ca lPERS Experience Study adopted by the CalPERS Board in November 2021. For purposes of the mortality rates, the rates incorporate generational mortality to capture ongoing mor tality improvement. Generational mortality explicitly assumes that members born mo re recently will live longer than the members born before them thereby capturing the mortality improvement seen in the past and expected continued improvement. For more details, please refer to the 2021 CalPERS Experience Study and Review of Actuarial Assumptions report that can be found on the CalPERS website.

Rates vary by age and gender. This table only contains a sample of the 2017 base table rates for illustrative purposes. The n on- industrial death rates are used for all plans. The industrial death rates are used for Safety plans (except for local Safety mem bers described in Government Code section 20423.6 where the agency has not specifically contracted for industrial death benefits.)

Miscellaneous Safety
Non-Industrial Death Non-Industrial Death Industrial Death (Not Job-Related) (Not Job-Related) (Job-Related)
Age Male Female Male Female Male Female
20 0.00039 0.00014 0.00038 0.00014 0.00004 0.00002
25 0.00033 0.00013 0.00034 0.00018 0.00004 0.00002
30 0.00044 0.00019 0.00042 0.00025 0.00005 0.00003
35 0.00058 0.00029 0.00048 0.00034 0.00005 0.00004
40 0.00075 0.00039 0.00055 0.00042 0.00006 0.00005
45 0.00093 0.00054 0.00066 0.00053 0.00007 0.00006
50 0.00134 0.00081 0.00092 0.00073 0.00010 0.00008
55 0.00198 0.00123 0.00138 0.00106 0.00015 0.00012
60 0.00287 0.00179 0.00221 0.00151 0.00025 0.00017
65 0.00403 0.00250 0.00346 0.00194 0.00038 0.00022
70 0.00594 0.00404 0.00606 0.00358 0.00067 0.00040
75 0.00933 0.00688 0.01099 0.00699 0.00122 0.00078
80 0.01515 0.01149 0.02027 0.01410 0.00225 0.00157

• The pre-retirement mortality rates above are for 2017 and are projected generationally for future years using 80% of the Society of Actuaries’ Scale MP-2020.
• Miscellaneous plans usually have industrial death rates set to zero unless the agency has specifically contracted for industria l death benefits. If so, each non-industrial death rate shown above will be split into two components : 99% will become the non-industrial death rate and 1% will become the industrial death rate.

CalPERS Actuarial Valuation – June 30, 2023 Appendix A Actuarial Methods and Assumptions

Post-Retirement Mortality
Rates vary by age, type of retirement, and gender. See sample rates in table below. These rates are used for all plans.

Service Retirement
Non-Industrial Disability Industrial Disability
(Not Job-Related) (Job-Related)
Age Male Female Male Female Male Female
50 0.00267 0.00199 0.01701 0.01439 0.00430 0.00311
55 0.00390 0.00325 0.02210 0.01734 0.00621 0.00550
60 0.00578 0.00455 0.02708 0.01962 0.00944 0.00868
65 0.00857 0.00612 0.03334 0.02276 0.01394 0.01190
70 0.01333 0.00996 0.04001 0.02910 0.02163 0.01858
75 0.02391 0.01783 0.05376 0.04160 0.03446 0.03134
80 0.04371 0.03403 0.07936 0.06112 0.05853 0.05183
85 0.08274 0.06166 0.11561 0.09385 0.10137 0.08045
90 0.14539 0.11086 0.16608 0.14396 0.16584 0.12434
95 0.24665 0.20364 0.24665 0.20364 0.24665 0.20364
100 0.36198 0.31582 0.36198 0.31582 0.36198 0.31582
105 0.52229 0.44679 0.52229 0.44679 0.52229 0.44679
110 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000

• The post-retirement mortality rates above are for 2017 and are projected generationally for future years using 80% of the Society of Actuaries’ Scale MP-2020.

Marital Status
For active members, a percentage who are married upon retirement is assumed according to the member category as shown in the following table.

Member Category Percent Married
Miscellaneous Member 70%
Local Police 85%
Local Fire 85%
Other Local Safety 70%
School Police 85%
Local County Peace Officers 75%

Age of Spouse
It is assumed that female spouses are 3 years younger than male spouses. This assumption is used for all plans.

Separated Members
It is assumed that separ ated members refund immediately if non-vested. Separated members who are vested are assumed to retire at age 59 for Miscellaneous members and age 54 for Safety members.

CalPERS Actuarial Valuation – June 30, 2023 Appendix A Actuarial Methods and Assumptions

Termination with Refund
Rates vary by entry age and service for Miscellaneous plans. Rates vary by service for Safety plans. See sample rates in tabl es below.

Public Agency Miscellaneous
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45 Male Female Male Female Male Female Male Female Male Female Male Female 0 0.1851 0.1944 0.1769 0.1899 0.1631 0.1824 0.1493 0.1749 0.1490 0.1731 0.1487 0.1713 1 0.1531 0.1673 0.1432 0.1602 0.1266 0.1484 0.1101 0.1366 0.1069 0.1323 0.1037 0.1280 2 0.1218 0.1381 0.1125 0.1307 0.0970 0.1183 0.0815 0.1058 0.0771 0.0998 0.0726 0.0938 3 0.0927 0.1085 0.0852 0.1020 0.0727 0.0912 0.0601 0.0804 0.0556 0.0737 0.0511 0.0669 4 0.0672 0.0801 0.0616 0.0752 0.0524 0.0670 0.0431 0.0587 0.0392 0.0523 0.0352 0.0459 5 0.0463 0.0551 0.0423 0.0517 0.0358 0.0461 0.0292 0.0404 0.0261 0.0350 0.0230 0.0296 10 0.0112 0.0140 0.0101 0.0129 0.0083 0.0112 0.0064 0.0094 0.0048 0.0071 0.0033 0.0049 15 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 20 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 25 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 30 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 35 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

Public Agency Safety
Duration of
Service Fire Police County Peace Officer
Male Female Male Female Male Female
0 0.1022 0.1317 0.1298 0.1389 0.1086 0.1284
1 0.0686 0.1007 0.0789 0.0904 0.0777 0.0998
2 0.0441 0.0743 0.0464 0.0566 0.0549 0.0759
3 0.0272 0.0524 0.0274 0.0343 0.0385 0.0562
4 0.0161 0.0349 0.0170 0.0206 0.0268 0.0402
5 0.0092 0.0214 0.0113 0.0128 0.0186 0.0276
10 0.0015 0.0000 0.0032 0.0047 0.0046 0.0038
15 0.0000 0.0000 0.0000 0.0000 0.0023 0.0036
20 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
25 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
30 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
35 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

• The police termination and refund rates are also used for Public Agency Local Prosecutors, Other Safety, Local Sheriff, and School Police.

CalPERS Actuarial Valuation – June 30, 2023 Appendix A Actuarial Methods and Assumptions

Termination with Refund (continued)

Schools
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45 Male Female Male Female Male Female Male Female Male Female Male Female 0 0.2054 0.2120 0.1933 0.1952 0.1730 0.1672 0.1527 0.1392 0.1423 0.1212 0.1318 0.1032 1 0.1922 0.2069 0.1778 0.1883 0.1539 0.1573 0.1300 0.1264 0.1191 0.1087 0.1083 0.0910 2 0.1678 0.1859 0.1536 0.1681 0.1298 0.1383 0.1060 0.1086 0.0957 0.0934 0.0853 0.0782 3 0.1384 0.1575 0.1256 0.1417 0.1042 0.1155 0.0829 0.0893 0.0736 0.0774 0.0643 0.0656 4 0.1085 0.1274 0.0978 0.1143 0.0800 0.0925 0.0622 0.0707 0.0542 0.0620 0.0462 0.0533 5 0.0816 0.0991 0.0732 0.0887 0.0590 0.0713 0.0449 0.0539 0.0383 0.0476 0.0317 0.0413 10 0.0222 0.0248 0.0200 0.0221 0.0163 0.0174 0.0125 0.0128 0.0094 0.0100 0.0063 0.0072 15 0.0106 0.0132 0.0095 0.0113 0.0077 0.0083 0.0058 0.0052 0.0040 0.0039 0.0021 0.0026 20 0.0059 0.0065 0.0050 0.0054 0.0035 0.0036 0.0021 0.0019 0.0010 0.0009 0.0000 0.0000 25 0.0029 0.0034 0.0025 0.0029 0.0018 0.0020 0.0010 0.0012 0.0005 0.0006 0.0000 0.0000 30 0.0012 0.0015 0.0011 0.0013 0.0011 0.0011 0.0010 0.0009 0.0005 0.0005 0.0000 0.0000 35 0.0006 0.0007 0.0006 0.0007 0.0005 0.0006 0.0005 0.0005 0.0003 0.0002 0.0000 0.0000

CalPERS Actuarial Valuation – June 30, 2023 Appendix A Actuarial Methods and Assumptions

Termination with Vested Benefits
Rates vary by entry age and service for Miscellaneous plans. Rates vary by service for Safety plans. See sample rates in tables below.

Public Agency Miscellaneous
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Male Female Male Female Male Female Male Female Male Female 5 0.0381 0.0524 0.0381 0.0524 0.0358 0.0464 0.0334 0.0405 0.0301 0.0380 10 0.0265 0.0362 0.0265 0.0362 0.0254 0.0334 0.0244 0.0307 0.0197 0.0236 15 0.0180 0.0252 0.0180 0.0252 0.0166 0.0213 0.0152 0.0174 0.0119 0.0132 20 0.0141 0.0175 0.0141 0.0175 0.0110 0.0131 0.0079 0.0087 0.0000 0.0000 25 0.0084 0.0108 0.0084 0.0108 0.0064 0.0076 0.0000 0.0000 0.0000 0.0000 30 0.0047 0.0056 0.0047 0.0056 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 35 0.0038 0.0041 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

Public Agency Safety
Duration of
Service Fire Police County Peace Officer
Male Female Male Female Male Female
5 0.0089 0.0224 0.0156 0.0272 0.0177 0.0266
10 0.0066 0.0164 0.0113 0.0198 0.0126 0.0189
15 0.0048 0.0120 0.0083 0.0144 0.0089 0.0134
20 0.0035 0.0088 0.0060 0.0105 0.0063 0.0095
25 0.0024 0.0061 0.0042 0.0073 0.0042 0.0063
30 0.0012 0.0031 0.0021 0.0037 0.0021 0.0031
35 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

• After termination with vested benefits, a Miscellaneous member is assumed to retire at age 59 and a Safety member at age 54.
• The Police termination with vested benefits rates are also used for Public Agency Local Prosecutors, Other Safety, Local Sheriff, and School Police.

Schools
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Male Female Male Female Male Female Male Female Male Female 5 0.0359 0.0501 0.0359 0.0501 0.0332 0.0402 0.0305 0.0304 0.0266 0.0272 10 0.0311 0.0417 0.0311 0.0417 0.0269 0.0341 0.0228 0.0265 0.0193 0.0233 15 0.0193 0.0264 0.0193 0.0264 0.0172 0.0220 0.0151 0.0175 0.0123 0.0142 20 0.0145 0.0185 0.0145 0.0185 0.0113 0.0141 0.0080 0.0097 0.0000 0.0000 25 0.0089 0.0123 0.0089 0.0123 0.0074 0.0093 0.0000 0.0000 0.0000 0.0000 30 0.0057 0.0064 0.0057 0.0064 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 35 0.0040 0.0049 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

CalPERS Actuarial Valuation – June 30, 2023 Appendix A Actuarial Methods and Assumptions

Non-Industrial (Not Job-Related) Disability
Rates vary by age and gender for Miscellaneous plans. Rates vary by age and category for Safety plans.

Miscellaneous Fire Police County Peace Officer Schools
Age Male Female All All All Male Female
20 0.0001 0.0000 0.0001 0.0001 0.0001 0.0000 0.0002
25 0.0001 0.0001 0.0001 0.0001 0.0001 0.0000 0.0002
30 0.0002 0.0003 0.0001 0.0001 0.0001 0.0002 0.0002
35 0.0004 0.0007 0.0001 0.0002 0.0003 0.0005 0.0004
40 0.0009 0.0012 0.0001 0.0002 0.0006 0.0010 0.0008
45 0.0015 0.0019 0.0002 0.0003 0.0011 0.0019 0.0015
50 0.0015 0.0019 0.0004 0.0005 0.0016 0.0027 0.0021
55 0.0014 0.0013 0.0006 0.0007 0.0009 0.0024 0.0017
60 0.0012 0.0009 0.0006 0.0011 0.0005 0.0020 0.0010

• The Miscellaneous non -industrial disability rates are used for Local Prosecutors. • The police non-industrial disability rates are also used for Other Safety, Local Sheriff, and School Police.

Industrial (Job -Related) Disability
Rates vary by age and category.

Age Fire Police County Peace Officer
20 0.0001 0.0000 0.0004
25 0.0002 0.0017 0.0013
30 0.0006 0.0048 0.0025
35 0.0012 0.0079 0.0037
40 0.0023 0.0110 0.0051
45 0.0040 0.0141 0.0067
50 0.0208 0.0185 0.0092
55 0.0307 0.0479 0.0151
60 0.0438 0.0602 0.0174

• The police industrial disability rates are also used for Local Sheriff and Other Safety. • 50% of the police industrial disability rates are used for School Police. • 1% of the police industrial disability rates are used for Local Prosecutors. • Normally, rates are zero for Miscellaneous plans unless the agency has specifically contracted for industrial disability benefits. If so, each Miscellaneous non -industrial disability rate will be split into two components: 50% will become the non-industrial disability rate and 50% will become the industrial disability rate.

CalPERS Actuarial Valuation – June 30, 2023 Appendix A Actuarial Methods and Assumptions

Service Retirement
Retirement rates vary by age, service, and formula, except for the Safety Half Pay at 55 and 2% at 55 formulas, where retirement rates vary by age only.

Public Agency Miscellaneous 1.5% at age 65
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.008 0.011 0.013 0.015 0.017 0.019
51 0.007 0.010 0.012 0.013 0.015 0.017
52 0.010 0.014 0.017 0.019 0.021 0.024
53 0.008 0.012 0.015 0.017 0.019 0.022
54 0.012 0.016 0.019 0.022 0.025 0.028
55 0.018 0.025 0.031 0.035 0.038 0.043
56 0.015 0.021 0.025 0.029 0.032 0.036
57 0.020 0.028 0.033 0.038 0.043 0.048
58 0.024 0.033 0.040 0.046 0.052 0.058
59 0.028 0.039 0.048 0.054 0.060 0.067
60 0.049 0.069 0.083 0.094 0.105 0.118
61 0.062 0.087 0.106 0.120 0.133 0.150
62 0.104 0.146 0.177 0.200 0.223 0.251
63 0.099 0.139 0.169 0.191 0.213 0.239
64 0.097 0.136 0.165 0.186 0.209 0.233
65 0.140 0.197 0.240 0.271 0.302 0.339
66 0.092 0.130 0.157 0.177 0.198 0.222
67 0.129 0.181 0.220 0.249 0.277 0.311
68 0.092 0.129 0.156 0.177 0.197 0.221
69 0.092 0.130 0.158 0.178 0.199 0.224
70 0.103 0.144 0.175 0.198 0.221 0.248

Public Agency Miscellaneous 2% at age 60
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.010 0.011 0.014 0.014 0.017 0.017
51 0.017 0.013 0.014 0.010 0.010 0.010
52 0.014 0.014 0.018 0.015 0.016 0.016
53 0.015 0.012 0.013 0.010 0.011 0.011
54 0.006 0.010 0.017 0.016 0.018 0.018
55 0.012 0.016 0.024 0.032 0.036 0.036
56 0.010 0.014 0.023 0.030 0.034 0.034
57 0.006 0.018 0.030 0.040 0.044 0.044
58 0.022 0.023 0.033 0.042 0.046 0.046
59 0.039 0.033 0.040 0.047 0.050 0.050
60 0.063 0.069 0.074 0.090 0.137 0.116
61 0.044 0.058 0.066 0.083 0.131 0.113
62 0.084 0.107 0.121 0.153 0.238 0.205
63 0.173 0.166 0.165 0.191 0.283 0.235
64 0.120 0.145 0.164 0.147 0.160 0.172
65 0.138 0.160 0.214 0.216 0.237 0.283
66 0.198 0.228 0.249 0.216 0.228 0.239
67 0.207 0.242 0.230 0.233 0.233 0.233
68 0.201 0.234 0.225 0.231 0.231 0.231
69 0.152 0.173 0.164 0.166 0.166 0.166
70 0.200 0.200 0.200 0.200 0.200 0.200
CalPERS Actuarial Valuation – June 30, 2023 Appendix A Actuarial Methods and Assumptions

Service Retirement (continued)

Public Agency Miscellaneous 2% at age 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.014 0.014 0.017 0.021 0.023 0.024
51 0.013 0.017 0.017 0.018 0.018 0.019
52 0.013 0.018 0.018 0.020 0.020 0.021
53 0.013 0.019 0.021 0.024 0.025 0.026
54 0.017 0.025 0.028 0.032 0.033 0.035
55 0.045 0.042 0.053 0.086 0.098 0.123
56 0.018 0.036 0.056 0.086 0.102 0.119
57 0.041 0.046 0.056 0.076 0.094 0.120
58 0.052 0.044 0.048 0.074 0.106 0.123
59 0.043 0.058 0.073 0.092 0.105 0.126
60 0.059 0.064 0.083 0.115 0.154 0.170
61 0.087 0.074 0.087 0.107 0.147 0.168
62 0.115 0.123 0.151 0.180 0.227 0.237
63 0.116 0.127 0.164 0.202 0.252 0.261
64 0.084 0.138 0.153 0.190 0.227 0.228
65 0.167 0.187 0.210 0.262 0.288 0.291
66 0.187 0.258 0.280 0.308 0.318 0.319
67 0.195 0.235 0.244 0.277 0.269 0.280
68 0.228 0.248 0.250 0.241 0.245 0.245
69 0.188 0.201 0.209 0.219 0.231 0.231
70 0.229 0.229 0.229 0.229 0.229 0.229

Public Agency Miscellaneous 2.5% at age 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.014 0.017 0.027 0.035 0.046 0.050
51 0.019 0.021 0.025 0.030 0.038 0.040
52 0.018 0.020 0.026 0.034 0.038 0.037
53 0.013 0.021 0.031 0.045 0.052 0.053
54 0.025 0.025 0.030 0.046 0.057 0.068
55 0.029 0.042 0.064 0.109 0.150 0.225
56 0.036 0.047 0.068 0.106 0.134 0.194
57 0.051 0.047 0.060 0.092 0.116 0.166
58 0.035 0.046 0.062 0.093 0.119 0.170
59 0.029 0.053 0.072 0.112 0.139 0.165
60 0.039 0.069 0.094 0.157 0.177 0.221
61 0.080 0.077 0.086 0.140 0.167 0.205
62 0.086 0.131 0.149 0.220 0.244 0.284
63 0.135 0.135 0.147 0.214 0.222 0.262
64 0.114 0.128 0.158 0.177 0.233 0.229
65 0.112 0.174 0.222 0.209 0.268 0.273
66 0.235 0.254 0.297 0.289 0.321 0.337
67 0.237 0.240 0.267 0.249 0.267 0.277
68 0.258 0.271 0.275 0.207 0.210 0.212
69 0.117 0.208 0.266 0.219 0.250 0.270
70 0.229 0.229 0.229 0.229 0.229 0.229

CalPERS Actuarial Valuation – June 30, 2023 Appendix A Actuarial Methods and Assumptions

Service Retirement (continued)

Public Agency Miscellaneous 2.7% at age 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.011 0.016 0.022 0.033 0.034 0.038
51 0.018 0.019 0.023 0.032 0.031 0.031
52 0.019 0.020 0.026 0.035 0.034 0.037
53 0.020 0.020 0.025 0.043 0.048 0.053
54 0.018 0.030 0.040 0.052 0.053 0.070
55 0.045 0.058 0.082 0.138 0.208 0.278
56 0.057 0.062 0.080 0.121 0.178 0.222
57 0.045 0.052 0.071 0.106 0.147 0.182
58 0.074 0.060 0.074 0.118 0.163 0.182
59 0.058 0.067 0.086 0.123 0.158 0.187
60 0.087 0.084 0.096 0.142 0.165 0.198
61 0.073 0.084 0.101 0.138 0.173 0.218
62 0.130 0.133 0.146 0.187 0.214 0.249
63 0.122 0.140 0.160 0.204 0.209 0.243
64 0.104 0.124 0.154 0.202 0.214 0.230
65 0.182 0.201 0.242 0.264 0.293 0.293
66 0.272 0.249 0.273 0.285 0.312 0.312
67 0.182 0.217 0.254 0.249 0.264 0.264
68 0.223 0.197 0.218 0.242 0.273 0.273
69 0.217 0.217 0.217 0.217 0.217 0.217
70 0.227 0.227 0.227 0.227 0.227 0.227

Public Agency Miscellaneous 3% at age 60
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.015 0.020 0.025 0.039 0.040 0.044
51 0.041 0.034 0.032 0.041 0.036 0.037
52 0.024 0.020 0.022 0.039 0.040 0.041
53 0.018 0.024 0.032 0.047 0.048 0.057
54 0.033 0.033 0.035 0.051 0.049 0.052
55 0.137 0.043 0.051 0.065 0.076 0.108
56 0.173 0.038 0.054 0.075 0.085 0.117
57 0.019 0.035 0.059 0.088 0.111 0.134
58 0.011 0.040 0.070 0.105 0.133 0.162
59 0.194 0.056 0.064 0.081 0.113 0.163
60 0.081 0.085 0.133 0.215 0.280 0.333
61 0.080 0.090 0.134 0.170 0.223 0.292
62 0.137 0.153 0.201 0.250 0.278 0.288
63 0.128 0.140 0.183 0.227 0.251 0.260
64 0.174 0.147 0.173 0.224 0.239 0.264
65 0.152 0.201 0.262 0.299 0.323 0.323
66 0.272 0.273 0.317 0.355 0.380 0.380
67 0.218 0.237 0.268 0.274 0.284 0.284
68 0.200 0.228 0.269 0.285 0.299 0.299
69 0.250 0.250 0.250 0.250 0.250 0.250
70 0.245 0.245 0.245 0.245 0.245 0.245

CalPERS Actuarial Valuation – June 30, 2023 Appendix A Actuarial Methods and Assumptions

Service Retirement (continued)

Public Agency Miscellaneous 2% at age 62
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.000 0.000 0.000 0.000 0.000 0.000
51 0.000 0.000 0.000 0.000 0.000 0.000
52 0.005 0.008 0.012 0.015 0.019 0.031
53 0.007 0.011 0.014 0.018 0.021 0.032
54 0.007 0.011 0.015 0.019 0.023 0.034
55 0.010 0.019 0.028 0.036 0.061 0.096
56 0.014 0.026 0.038 0.050 0.075 0.108
57 0.018 0.029 0.039 0.050 0.074 0.107
58 0.023 0.035 0.048 0.060 0.073 0.099
59 0.025 0.038 0.051 0.065 0.092 0.128
60 0.031 0.051 0.071 0.091 0.111 0.138
61 0.038 0.058 0.079 0.100 0.121 0.167
62 0.044 0.074 0.104 0.134 0.164 0.214
63 0.077 0.105 0.134 0.163 0.192 0.237
64 0.072 0.101 0.129 0.158 0.187 0.242
65 0.108 0.141 0.173 0.206 0.239 0.300
66 0.132 0.172 0.212 0.252 0.292 0.366
67 0.132 0.172 0.212 0.252 0.292 0.366
68 0.120 0.156 0.193 0.229 0.265 0.333
69 0.120 0.156 0.193 0.229 0.265 0.333
70 0.120 0.156 0.193 0.229 0.265 0.333

Public Agency Fire Half Pay at age 55 and 2% at age 55
Age Rate

Age Rate
50 0.016 56 0.111
51 0.000 57 0.000
52 0.034 58 0.095
53 0.020 59 0.044
54 0.041 60 1.000
55 0.075

Public Agency Police Half Pay at age 55 and 2% at age 55 Age Rate

Age Rate
50 0.026 56 0.069
51 0.000 57 0.051
52 0.016 58 0.072
53 0.027 59 0.070
54 0.010 60 0.300
55 0.167

CalPERS Actuarial Valuation – June 30, 2023 Appendix A Actuarial Methods and Assumptions

Service Retirement (continued)

Public Agency Police 2% at age 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.018 0.077 0.056 0.046 0.043 0.046
51 0.022 0.087 0.060 0.048 0.044 0.047
52 0.020 0.102 0.081 0.071 0.069 0.075
53 0.016 0.072 0.053 0.045 0.042 0.046
54 0.006 0.071 0.071 0.069 0.072 0.080
55 0.009 0.040 0.099 0.157 0.186 0.186
56 0.020 0.051 0.108 0.165 0.194 0.194
57 0.036 0.072 0.106 0.139 0.156 0.156
58 0.001 0.046 0.089 0.130 0.152 0.152
59 0.066 0.094 0.119 0.143 0.155 0.155
60 0.177 0.177 0.177 0.177 0.177 0.177
61 0.134 0.134 0.134 0.134 0.134 0.134
62 0.184 0.184 0.184 0.184 0.184 0.184
63 0.250 0.250 0.250 0.250 0.250 0.250
64 0.177 0.177 0.177 0.177 0.177 0.177
65 1.000 1.000 1.000 1.000 1.000 1.000

• These rates also apply to County Peace officers, Local Prosecutors, Local Sheriff, School Police, and Other Safety.

Public Agency Fire 2% at age 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.054 0.054 0.056 0.080 0.064 0.066
51 0.020 0.020 0.021 0.030 0.024 0.024
52 0.037 0.037 0.038 0.054 0.043 0.045
53 0.051 0.051 0.053 0.076 0.061 0.063
54 0.082 0.082 0.085 0.121 0.097 0.100
55 0.139 0.139 0.139 0.139 0.139 0.139
56 0.129 0.129 0.129 0.129 0.129 0.129
57 0.085 0.085 0.085 0.085 0.085 0.085
58 0.119 0.119 0.119 0.119 0.119 0.119
59 0.167 0.167 0.167 0.167 0.167 0.167
60 0.152 0.152 0.152 0.152 0.152 0.152
61 0.179 0.179 0.179 0.179 0.179 0.179
62 0.179 0.179 0.179 0.179 0.179 0.179
63 0.179 0.179 0.179 0.179 0.179 0.179
64 0.179 0.179 0.179 0.179 0.179 0.179
65 1.000 1.000 1.000 1.000 1.000 1.000

CalPERS Actuarial Valuation – June 30, 2023 Appendix A Actuarial Methods and Assumptions

Service Retirement (continued)

Public Agency Police 3% at age 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.019 0.053 0.045 0.054 0.057 0.061
51 0.002 0.017 0.028 0.044 0.053 0.060
52 0.002 0.031 0.037 0.051 0.059 0.066
53 0.026 0.049 0.049 0.080 0.099 0.114
54 0.019 0.034 0.047 0.091 0.121 0.142
55 0.006 0.115 0.141 0.199 0.231 0.259
56 0.017 0.188 0.121 0.173 0.199 0.199
57 0.008 0.137 0.093 0.136 0.157 0.157
58 0.017 0.126 0.105 0.164 0.194 0.194
59 0.026 0.146 0.110 0.167 0.195 0.195
60 0.155 0.155 0.155 0.155 0.155 0.155
61 0.210 0.210 0.210 0.210 0.210 0.210
62 0.262 0.262 0.262 0.262 0.262 0.262
63 0.172 0.172 0.172 0.172 0.172 0.172
64 0.227 0.227 0.227 0.227 0.227 0.227
65 1.000 1.000 1.000 1.000 1.000 1.000

• These rates also apply to County Peace officers, Local Prosecutors, Local Sheriff, School Police, and Other Safety.

Public Agency Fire 3% at age 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.003 0.006 0.013 0.019 0.025 0.028
51 0.004 0.008 0.017 0.026 0.034 0.038
52 0.005 0.011 0.022 0.033 0.044 0.049
53 0.005 0.034 0.024 0.038 0.069 0.138
54 0.007 0.047 0.032 0.051 0.094 0.187
55 0.010 0.067 0.046 0.073 0.134 0.266
56 0.010 0.063 0.044 0.069 0.127 0.253
57 0.135 0.100 0.148 0.196 0.220 0.220
58 0.083 0.062 0.091 0.120 0.135 0.135
59 0.137 0.053 0.084 0.146 0.177 0.177
60 0.162 0.063 0.099 0.172 0.208 0.208
61 0.598 0.231 0.231 0.231 0.231 0.231
62 0.621 0.240 0.240 0.240 0.240 0.240
63 0.236 0.236 0.236 0.236 0.236 0.236
64 0.236 0.236 0.236 0.236 0.236 0.236
65 1.000 1.000 1.000 1.000 1.000 1.000

CalPERS Actuarial Valuation – June 30, 2023 Appendix A Actuarial Methods and Assumptions

Service Retirement (continued)

Public Agency Police 3% at age 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.124 0.103 0.113 0.143 0.244 0.376
51 0.060 0.081 0.087 0.125 0.207 0.294
52 0.016 0.055 0.111 0.148 0.192 0.235
53 0.072 0.074 0.098 0.142 0.189 0.237
54 0.018 0.049 0.105 0.123 0.187 0.271
55 0.069 0.074 0.081 0.113 0.209 0.305
56 0.064 0.108 0.113 0.125 0.190 0.288
57 0.056 0.109 0.160 0.182 0.210 0.210
58 0.108 0.129 0.173 0.189 0.214 0.214
59 0.093 0.144 0.204 0.229 0.262 0.262
60 0.343 0.180 0.159 0.188 0.247 0.247
61 0.221 0.221 0.221 0.221 0.221 0.221
62 0.213 0.213 0.213 0.213 0.213 0.213
63 0.233 0.233 0.233 0.233 0.233 0.233
64 0.234 0.234 0.234 0.234 0.234 0.234
65 1.000 1.000 1.000 1.000 1.000 1.000

• These rates also apply to County Peace officers, Local Prosecutors, Local Sheriff, School Police, and Other Safety.

Public Agency Fire 3% at age 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.095 0.048 0.053 0.093 0.134 0.175
51 0.016 0.032 0.053 0.085 0.117 0.149
52 0.013 0.032 0.054 0.087 0.120 0.154
53 0.085 0.044 0.049 0.089 0.129 0.170
54 0.038 0.065 0.074 0.105 0.136 0.167
55 0.042 0.043 0.049 0.085 0.132 0.215
56 0.133 0.103 0.075 0.113 0.151 0.209
57 0.062 0.048 0.060 0.124 0.172 0.213
58 0.124 0.097 0.092 0.153 0.194 0.227
59 0.092 0.071 0.078 0.144 0.192 0.233
60 0.056 0.044 0.061 0.131 0.186 0.233
61 0.282 0.219 0.158 0.198 0.233 0.260
62 0.292 0.227 0.164 0.205 0.241 0.269
63 0.196 0.196 0.196 0.196 0.196 0.196
64 0.197 0.197 0.197 0.197 0.197 0.197
65 1.000 1.000 1.000 1.000 1.000 1.000

CalPERS Actuarial Valuation – June 30, 2023 Appendix A Actuarial Methods and Assumptions

Service Retirement (continued)

Public Agency Police 2% at age 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.040 0.040 0.040 0.040 0.040 0.080
51 0.028 0.028 0.028 0.028 0.040 0.066
52 0.028 0.028 0.028 0.028 0.043 0.061
53 0.028 0.028 0.028 0.028 0.057 0.086
54 0.028 0.028 0.028 0.032 0.069 0.110
55 0.050 0.050 0.050 0.067 0.099 0.179
56 0.046 0.046 0.046 0.062 0.090 0.160
57 0.054 0.054 0.054 0.072 0.106 0.191
58 0.060 0.060 0.060 0.066 0.103 0.171
59 0.060 0.060 0.060 0.069 0.105 0.171
60 0.113 0.113 0.113 0.113 0.113 0.171
61 0.108 0.108 0.108 0.108 0.108 0.128
62 0.113 0.113 0.113 0.113 0.113 0.159
63 0.113 0.113 0.113 0.113 0.113 0.159
64 0.113 0.113 0.113 0.113 0.113 0.239
65 1.000 1.000 1.000 1.000 1.000 1.000

• These rates also apply to County Peace officers, Local Prosecutors, Local Sheriff, School Police, and Other Safety.

Public Agency Fire 2% at age 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.005 0.005 0.005 0.005 0.008 0.012
51 0.006 0.006 0.006 0.006 0.009 0.013
52 0.012 0.012 0.012 0.012 0.019 0.028
53 0.033 0.033 0.033 0.033 0.050 0.075
54 0.045 0.045 0.045 0.045 0.069 0.103
55 0.061 0.061 0.061 0.061 0.094 0.140
56 0.055 0.055 0.055 0.055 0.084 0.126
57 0.081 0.081 0.081 0.081 0.125 0.187
58 0.059 0.059 0.059 0.059 0.091 0.137
59 0.055 0.055 0.055 0.055 0.084 0.126
60 0.085 0.085 0.085 0.085 0.131 0.196
61 0.085 0.085 0.085 0.085 0.131 0.196
62 0.085 0.085 0.085 0.085 0.131 0.196
63 0.085 0.085 0.085 0.085 0.131 0.196
64 0.085 0.085 0.085 0.085 0.131 0.196
65 1.000 1.000 1.000 1.000 1.000 1.000

CalPERS Actuarial Valuation – June 30, 2023 Appendix A Actuarial Methods and Assumptions

Service Retirement (continued)

Public Agency Police 2.5% at age 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.050 0.050 0.050 0.050 0.050 0.100
51 0.038 0.038 0.038 0.038 0.055 0.089
52 0.038 0.038 0.038 0.038 0.058 0.082
53 0.036 0.036 0.036 0.036 0.073 0.111
54 0.036 0.036 0.036 0.041 0.088 0.142
55 0.061 0.061 0.061 0.082 0.120 0.217
56 0.056 0.056 0.056 0.075 0.110 0.194
57 0.060 0.060 0.060 0.080 0.118 0.213
58 0.072 0.072 0.072 0.079 0.124 0.205
59 0.072 0.072 0.072 0.083 0.126 0.205
60 0.135 0.135 0.135 0.135 0.135 0.205
61 0.130 0.130 0.130 0.130 0.130 0.153
62 0.135 0.135 0.135 0.135 0.135 0.191
63 0.135 0.135 0.135 0.135 0.135 0.191
64 0.135 0.135 0.135 0.135 0.135 0.287
65 1.000 1.000 1.000 1.000 1.000 1.000

• These rates also apply to County Peace officers, Local Prosecutors, Local Sheriff, School Police, and Other Safety.

Public Agency Fire 2.5% at age 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.007 0.007 0.007 0.007 0.010 0.015
51 0.008 0.008 0.008 0.008 0.012 0.018
52 0.016 0.016 0.016 0.016 0.025 0.038
53 0.042 0.042 0.042 0.042 0.064 0.096
54 0.057 0.057 0.057 0.057 0.088 0.132
55 0.074 0.074 0.074 0.074 0.114 0.170
56 0.066 0.066 0.066 0.066 0.102 0.153
57 0.090 0.090 0.090 0.090 0.139 0.208
58 0.071 0.071 0.071 0.071 0.110 0.164
59 0.066 0.066 0.066 0.066 0.101 0.151
60 0.102 0.102 0.102 0.102 0.157 0.235
61 0.102 0.102 0.102 0.102 0.157 0.236
62 0.102 0.102 0.102 0.102 0.157 0.236
63 0.102 0.102 0.102 0.102 0.157 0.236
64 0.102 0.102 0.102 0.102 0.157 0.236
65 1.000 1.000 1.000 1.000 1.000 1.000

CalPERS Actuarial Valuation – June 30, 2023 Appendix A Actuarial Methods and Assumptions

Service Retirement (continued)

Public Agency Police 2.7% at age 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.050 0.050 0.050 0.050 0.050 0.100
51 0.040 0.040 0.040 0.040 0.058 0.094
52 0.038 0.038 0.038 0.038 0.058 0.083
53 0.038 0.038 0.038 0.038 0.077 0.117
54 0.038 0.038 0.038 0.044 0.093 0.150
55 0.068 0.068 0.068 0.091 0.134 0.242
56 0.063 0.063 0.063 0.084 0.123 0.217
57 0.060 0.060 0.060 0.080 0.118 0.213
58 0.080 0.080 0.080 0.088 0.138 0.228
59 0.080 0.080 0.080 0.092 0.140 0.228
60 0.150 0.150 0.150 0.150 0.150 0.228
61 0.144 0.144 0.144 0.144 0.144 0.170
62 0.150 0.150 0.150 0.150 0.150 0.213
63 0.150 0.150 0.150 0.150 0.150 0.213
64 0.150 0.150 0.150 0.150 0.150 0.319
65 1.000 1.000 1.000 1.000 1.000 1.000

• These rates also apply to County Peace officers, Local Prosecutors, Local Sheriff, School Police, and Other Safety.

Public Agency Fire 2.7% at age 57
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.007 0.007 0.007 0.007 0.010 0.015
51 0.008 0.008 0.008 0.008 0.013 0.019
52 0.016 0.016 0.016 0.016 0.025 0.038
53 0.044 0.044 0.044 0.044 0.068 0.102
54 0.061 0.061 0.061 0.061 0.093 0.140
55 0.083 0.083 0.083 0.083 0.127 0.190
56 0.074 0.074 0.074 0.074 0.114 0.171
57 0.090 0.090 0.090 0.090 0.139 0.208
58 0.079 0.079 0.079 0.079 0.122 0.182
59 0.073 0.073 0.073 0.073 0.112 0.168
60 0.114 0.114 0.114 0.114 0.175 0.262
61 0.114 0.114 0.114 0.114 0.175 0.262
62 0.114 0.114 0.114 0.114 0.175 0.262
63 0.114 0.114 0.114 0.114 0.175 0.262
64 0.114 0.114 0.114 0.114 0.175 0.262
65 1.000 1.000 1.000 1.000 1.000 1.000

CalPERS Actuarial Valuation – June 30, 2023 Appendix A Actuarial Methods and Assumptions

Service Retirement (continued)

Schools 2% at age 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.003 0.004 0.006 0.007 0.010 0.010
51 0.004 0.005 0.007 0.008 0.011 0.011
52 0.005 0.007 0.008 0.009 0.012 0.012
53 0.007 0.008 0.010 0.012 0.015 0.015
54 0.006 0.009 0.012 0.015 0.020 0.021
55 0.011 0.023 0.034 0.057 0.070 0.090
56 0.012 0.027 0.036 0.056 0.073 0.095
57 0.016 0.027 0.036 0.055 0.068 0.087
58 0.019 0.030 0.040 0.062 0.078 0.103
59 0.023 0.034 0.046 0.070 0.085 0.109
60 0.022 0.043 0.062 0.095 0.113 0.141
61 0.030 0.051 0.071 0.103 0.124 0.154
62 0.065 0.098 0.128 0.188 0.216 0.248
63 0.075 0.112 0.144 0.197 0.222 0.268
64 0.091 0.116 0.138 0.180 0.196 0.231
65 0.163 0.164 0.197 0.232 0.250 0.271
66 0.208 0.204 0.243 0.282 0.301 0.315
67 0.189 0.185 0.221 0.257 0.274 0.287
68 0.127 0.158 0.200 0.227 0.241 0.244
69 0.168 0.162 0.189 0.217 0.229 0.238
70 0.191 0.190 0.237 0.250 0.246 0.254

Schools 2% at age 62
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.000 0.000 0.000 0.000 0.000 0.000
51 0.000 0.000 0.000 0.000 0.000 0.000
52 0.004 0.007 0.010 0.011 0.013 0.015
53 0.004 0.008 0.010 0.013 0.014 0.016
54 0.005 0.011 0.015 0.018 0.020 0.022
55 0.014 0.027 0.038 0.045 0.050 0.056
56 0.013 0.026 0.037 0.043 0.048 0.055
57 0.013 0.027 0.038 0.045 0.050 0.055
58 0.017 0.034 0.047 0.056 0.062 0.069
59 0.019 0.037 0.052 0.062 0.068 0.076
60 0.026 0.053 0.074 0.087 0.097 0.108
61 0.030 0.058 0.081 0.095 0.106 0.119
62 0.053 0.105 0.147 0.174 0.194 0.217
63 0.054 0.107 0.151 0.178 0.198 0.222
64 0.053 0.105 0.147 0.174 0.194 0.216
65 0.072 0.142 0.199 0.235 0.262 0.293
66 0.077 0.152 0.213 0.252 0.281 0.314
67 0.070 0.139 0.194 0.229 0.255 0.286
68 0.063 0.124 0.173 0.205 0.228 0.255
69 0.066 0.130 0.183 0.216 0.241 0.270
70 0.071 0.140 0.196 0.231 0.258 0.289

CalPERS Actuarial Valuation – June 30, 2023 Appendix A Actuarial Methods and Assumptions

Miscellaneous

Models

The valuation results are based on proprietary actuarial valuation models. The models are centralized and maintained by a specialized team to achieve a high degree of accuracy and consistency. The Actuarial Office is responsible for confirming the appropriaten ess of the inputs (such as participant data, actuarial methods and assumptions, and plan provisions) as well as performing tests and validating the reasonableness of the output. The results of our models are independently confirmed by parallel valuations p erformed by outside actuaries on a periodic basis using their models. In our professional judgment, our actuarial valuation models produce comprehensive pension funding information consistent with the purposes of the valuation and have no material limitati ons or known weaknesses.

Internal Revenue Code Section 415(b)

The limitations on benefits imposed by Internal Revenue Code section 415(b) are taken into account in this valuation. Each year the impact of any changes in this limitation other than assumed since the prior valuation is included and amortized as part of the non-investment gain or loss base. This results in lower contributions for those employers contributing to the Replacement Benefit Fund and protects CalPERS from prefunding expected benefits in excess of limits imposed by federal tax law. The Section 415(b) dollar limit for the 2023 calendar year is $265,000.

Internal Revenue Code Section 401(a)(17)

The limitations on compensation imposed by Internal Revenue Code section 401(a)(17) are taken into account in this valuation.

Each year, the impact of any changes in the compensation limitation other than assumed since the prior valuation is included and amortized as part of the non-investment gain or loss base. The compensation limit for classic members for the 2023 calendar year is $330,000.

PEPRA Compensation Limits

The limitations on compensation for PEPRA members imposed by Government Code section 7522.10 are taken into account in this valuation. Each year, the impact of any changes in the compensation limitation other than assumed since the prior valuation is included and amortized as part of the non-investment gain or loss base. The PEPRA compensati on limit for 2023 is $146,042 for members who participate in Social Security and $175,250 for those who do not. The limits are adjusted annually based on changes to the CPI for all urban consumers.

Appendix B - Principal Plan Provisions

• Service Retirement 64
• Vested Deferred Retirement 66
• Non-Industrial Disability Retirement 66
• Industrial Disability Retirement 67
• Post-Retirement Death Benefit 68
• Form of Payment for Retirement Allowance 68
• Pre-Retirement Death Benefits 69
• Cost-of-Living Adjustments (COLA) 71
• Purchasing Power Protection Allowance (PPPA) 71
• Employee Contributions 72
• Refund of Employee Contributions 72
• 1959 Survivor Benefit 73

CalPERS Actuarial Valuation – June 30, 2023 Appendix B Miscellaneous Plan of the City of Carlsbad
Principal Plan Provisions

The following is a description of the principal plan provisions used in calculating costs and liabilities. We have indicated whether a plan provision is standard or optional. Standard benefits are applicable to all members while optional benefits vary among employers. Optional benefits that apply to a single period of time, such as Golden Handshakes, have not been included. Many of the statements in this summary are general in nature, and are intended to provide an easily understood summary of the Public Employees’ Retire ment Law and the California Public Employees’ Pension Reform Act of 2013. The law itself governs in all situations.

Service Retirement

Eligibility

A classic CalPERS member or PEPRA Safety member becomes eligible for Service Retirement upon attainment of age 50 with at least 5 years of credited service (total service across all CalPERS employers, and with certain other retirement systems with which CalPERS has reciprocity agreements). For employees hired into a plan with the 1.5% at age 65 formula, eligibility for service retirement is age 55 with at least 5 years of service. PEPRA Miscellaneous members become eligible for service retirement upon attainment of age 52 with at least 5 years of service.

Benefit

The service retirement benefit is a monthly allowance equal to the product of the benefit factor, years of service, and final compensation. The benefit factor depends on the benefit formula specified in the agency’s contract. The table below shows the factors for each of the available formulas. Factors vary by the member’s age at retirement. Listed are the factors for retire ment at whole year ages:

Miscellaneo us Plan Formulas

Retirement
Age

1.5% at
age 65
2% at
age 60
2% at
age 55

2.5% at
age 55

2.7% at
age 55
3% at
age 60
PEPRA
2% at
age 62
50 0.5000% 1.092% 1.426% 2.000% 2.000% 2.000% N/A
51 0.5667% 1.156% 1.522% 2.100% 2.140% 2.100% N/A
52 0.6334% 1.224% 1.628% 2.200% 2.280% 2.200% 1.000%
53 0.7000% 1.296% 1.742% 2.300% 2.420% 2.300% 1.100%
54 0.7667% 1.376% 1.866% 2.400% 2.560% 2.400% 1.200%
55 0.8334% 1.460% 2.000% 2.500% 2.700% 2.500% 1.300%
56 0.9000% 1.552% 2.052% 2.500% 2.700% 2.600% 1.400%
57 0.9667% 1.650% 2.104% 2.500% 2.700% 2.700% 1.500%
58 1.0334% 1.758% 2.156% 2.500% 2.700% 2.800% 1.600%
59 1.1000% 1.874% 2.210% 2.500% 2.700% 2.900% 1.700%
60 1.1667% 2.000% 2.262% 2.500% 2.700% 3.000% 1.800%
61 1.2334% 2.134% 2.314% 2.500% 2.700% 3.000% 1.900%
62 1.3000% 2.272% 2.366% 2.500% 2.700% 3.000% 2.000%
63 1.3667% 2.418% 2.418% 2.500% 2.700% 3.000% 2.100%
64 1.4334% 2.418% 2.418% 2.500% 2.700% 3.000% 2.200%
65 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.300%
66 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.400%
67 & up 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.500%

CalPERS Actuarial Valuation – June 30, 2023 Appendix B Miscellaneous Plan of the City of Carlsbad
Principal Plan Provisions

Classic Safety Plan Formulas

Retirement Age Half Pay at
age 55* 2% at age 55 2% at age 50 3% at age 55 3% at age 50 50 1.783% 1.426% 2.000% 2.400% 3.000%
51 1.903% 1.522% 2.140% 2.520% 3.000%
52 2.035% 1.628% 2.280% 2.640% 3.000%
53 2.178% 1.742% 2.420% 2.760% 3.000%
54 2.333% 1.866% 2.560% 2.880% 3.000%
55 & Up 2.500% 2.000% 2.700% 3.000% 3.000%

* For this formula, the benefit factor also varies by entry age. The factors shown are for members with an entry age of 35 or greater. If entry age is less than 35, then the age 55 benefit factor is 50% divided by the difference between age 55 and entry age. The benefit factor for ages prior to age 55 is the same proportion of the age 55 benefit factor as in the above table.

PEPRA Safety Plan Formulas

Retirement Age 2% at age 57 2.5% at age 57 2.7% at age 57 50 1.426% 2.000% 2.000%
51 1.508% 2.071% 2.100%
52 1.590% 2.143% 2.200%
53 1.672% 2.214% 2.300%
54 1.754% 2.286% 2.400%
55 1.836% 2.357% 2.500%
56 1.918% 2.429% 2.600%
57 & Up 2.000% 2.500% 2.700%

• The years of service is the amount credited by CalPERS to a member while he or she is employed in this group (or for other periods that are recognized under the employer’s contract with CalPERS). For a member who has earned service with multiple CalPERS employers, the benefit from each employer is calculated separately according to each employer’s contract, and then added together for the total allowance. An agency may contract for an optional benefit where any unused sick leave accumulated at the time of retirement will be converted to credited service at a rate of 0.004 years of service for each day of sick leave.

• The final compensation is the monthly average of the member’s highest 36 or 12 consecutive months’ full-time equivalent monthly pay (no matter which CalPERS emplo yer paid this compensation). The standard benefit is 36 months. Employers had the option of providing a final compensation equal to the highest 12 consecutive months for classic plans only. Final compensation must be defined by the highest 36 consecutive m onths’ pay under the 1.5% at age 65 formula. PEPRA members have a limit on the annual compensation that can be used to calculate final compensation. The limits are adjusted annually based on changes to the CPI for all urban consumers.

• PEPRA benefit formulas have no Social Security offsets and Social Security coverage is optional. For Classic benefit formulas, e mployees must be covered by Social Security with the 1.5% at age 65 formula. Social Security is optional for all other Classic benefit formulas. For employees covered by Social Security, the modified formula is the standard benefit.

Under this type of formula, the final compensation is offset by $133.33 (or by one third if the final compensation is less th an $400). Employers may contract for the full benefit with Social Security that will eliminate the offset applicable to the final compensation. For employees not covered by Social Security, the full benefit is paid with no offsets. Auxiliary organizations of the CSUC system may elect reduced contribut ion rates, in which case the offset is $317 if members are not covered by Social Security or $513 if members are covered by Social Security.

• The Miscellaneous and PEPRA Safety service retirement benefit is not capped. The Classic Safety service retirement benefit is capped at 90% of final compensation.

CalPERS Actuarial Valuation – June 30, 2023 Appendix B Miscellaneous Plan of the City of Carlsbad
Principal Plan Provisions

Vested Deferred Retirement

Eligibility for Deferred Status

CalPERS member s becomes eligible for a deferred vested retirement benefit when they leave employment, keep their contribution account balance on deposit with CalPERS, and have earned at least 5 years of credited service (total service across all CalPERS employers, and with certain other retirement systems with which CalPERS has reciproci ty agreements).

Eligibility to Start Receiving Benefits

The CalPERS classic members and PEPRA Safety members become eligible to receive the deferred retirement benefit upon satisfying the eligibility requirements for deferred status and upon attainment o f age 50 (55 for employees hired into a 1.5% at age 65 plan). PEPRA Miscellaneous members become eligible to receive the deferred retirement benefit upon satisfying the eligibility requirements for deferred status and upon attainment of age 52.

Benefit

The vested deferred retirement benefit is the same as the service retirement benefit, where the benefit factor is based on the member’s age at allowance commencement. For members who have earned service with multiple CalPERS employers, the benefit from each employer is calculated separately according to each employer’s contract, and then added together for the total allowance.

Non-Industrial Disability Retirement

Eligibility

A CalPERS member is eligible for Non-Industrial (non-job related) Disability Retirement if he or she becomes disabled and has at least 5 years of credited service (total service across all CalPERS employers, and with certain other retirement systems w ith which CalPERS has reciprocity agreements). There is no special age requirement. Disabled means the member is unable to perform their job because of an illness or injury, which is expected to be permanent or to last indefinitely. The illness or injury does not have to be job related. A CalPERS member must be actively employed by any CalPERS employer at the time of disability in order to be eligible for this benefit.

Standard Benefit

The standard Non -Industrial Disability Retirement benefit is a monthly allowance equal to 1.8% of final compensation, multiplied by service, which is determined as follows:

• Service is CalPERS credited service, for members with less than 10 years of service or greater than 18.518 years of service; or

• Service is CalPERS credited service plus the additional number of years that the member would have worked until age 60, for members with at least 10 years but not more than 18.518 years of service. The maximum benefit in this case is 33⅓% of final compensation.

CalPERS Actuarial Valuation – June 30, 2023 Appendix B Miscellaneous Plan of the City of Carlsbad
Principal Plan Provisions

Improved Benefit

Employers have the option of providing the improved Non -Industrial Disability Retirement benefit. This benefit provides a monthly allowance equal to 30% of final compensation for the first 5 years of service, plus 1% for each additional year of s ervice to a maximum of 50% of final compensation.

Members who are eligible for a larger service retirement benefit may choose to receive that benefit in lieu of a disability b enefit.

Members eligible to retire, and who have attained the normal retirement age determined by their service retirement benefit formula, will receive the same dollar amount for disability retirement as that payable for service retirement. For members wh o have earned service with multiple CalPERS employers, the benefit attributed to each employer is the total disability allowance multiplied by the ratio of service with a particular employer to the total CalPERS service.

Industrial Disability Retirement

This is a standard benefit for Safety members except those described in Section 20423.6. For excluded Safety members and all Miscellaneous members, employers have the option of providing this benefit. An employer may choose to provide the increased benefit option or the improved benefit option.

Eligibility

An employee is eligible for Industrial (job related) Disability Retirement if he or she becomes disabled while working, where disabled means the member is unable to perform the duties of the job because of a work-related illness or injury, which is expected to be permanent or to last indefinitely. A CalPERS member who has left active employment within this group is not eligible for this benefit, except to the extent described below.

Standard Benefit

The standard Industrial Disabil ity Retirement benefit is a monthly allowance equal to 50% of final compensation.

Increased Benefit (75% of Final Compensation)

The increased Industrial Disability Retirement benefit is a monthly allowance equal to 75% of final compensation for total dis ability.

Improved Benefit (50% to 90% of Final Compensation)

The improved Industrial Disability Retirement benefit is a monthly allowance equal to the Workman’s Compensation Appeals Board permanent disability rate percentage (if 50% or greater, with a maximum of 90%) times the final compensation.

For a CalPERS member not actively employed in this group who became disabled while employed by some other CalPERS employer, the benefit is a return of accumulated member contributions with respect to employment in this group. With the standard or increased benefit, a member may also choose to receive the annuitization of the accumulated member contributions.

If a member is eligible for service retirement and if the service retirement benefit is more than the industrial disability retirement benefit, the member may choose to receive the larger benefit.

CalPERS Actuarial Valuation – June 30, 2023 Appendix B Miscellaneous Plan of the City of Carlsbad
Principal Plan Provisions

Post-Retirement Death Benefit

Standard Lump Sum Payment

Upon the death of a retiree, a one -time lum p sum payment of $500 will be made to the retiree’s designated survivor(s), or to the retiree’s estate. The lump sum payment amount increases to $2,000 for any death occurring on or after July 1, 2023 due to SB 1168.

Optional Lump Sum Payment

In lieu of the standard lump sum death benefit, employers have the option of providing a lump sum death benefit of $600, $3,000, $4,000 or $5,000.

Form of Payment for Retirement Allowance

Standard Form of Payment

Generally, the retirement allowance is paid to the retiree in the form of an annuity for as long as he or she is alive. The retiree may choose to provide for a portion of their allowance to be paid to any designated beneficiary after the retiree’s death.

CalPERS provides for a variety of such benefit options, which the retiree pays for by taking a reduction in their retirement allowance. Such reduction takes into account the amount to be provided to the beneficiary and the probable duration of payments (based on the ages of the member and beneficiary) made subsequent to the member’s death.

Improved Form of Payment (Post-Retirement Survivor Allowance)

Employers have the option to contract for the post-retirement survivor allowance.

For retirement allowances with respect to service subject to a modified Classic formula, 25% of the retirement allowance will automatically be continued to certain statutory beneficiaries upon the death of the retiree, without a reduction in the retir ee’s allowance. For retirement allowances with respect to service subject to a PEPRA formula or a full or supplemental Classic formula, 50% of the retirement allowance will automatically be continued to certain statutory beneficiaries upon the death of the retiree, without a reduction in the retiree’s allowance. This additional benefit is referred to as post-retirement survivor allowance (PRSA) or simply as survivor continuance.

In other words, 25% or 50% of the allowance, the continuance portion, is paid to the retiree for as long as he or she is alive, and that same amount is continued to the retiree’s spouse (or if no eligible spouse, to unmarried child(ren) until they attain ag e 18; or, if no eligible child(ren), to a qualifying dependent parent) for the rest of their lifetime. This benefit will not be discontinued in the event the spouse remarries.

The remaining 75% or 50% of the retirement allowance, which may be referred to as the option portion of the benefit, is paid to the retiree as an annuity for as long as he or she is alive. Or, the retiree may choose to provide for some of this option portion to be paid to any designated beneficiary after the retiree’s death. Benefit options applicable to the option portion are the sam e as those offered with the standard form. The reduction is calculated in the same manner but is applied only to the option portion.

CalPERS Actuarial Valuation – June 30, 2023 Appendix B Miscellaneous Plan of the City of Carlsbad
Principal Plan Provisions

Pre-Retirement Death Benefits

Basic Death Benefit

This is a standard benefit.

Eligibility

An employee’s beneficiary (or estate) may receive the basic death benefit if the member dies while actively employed. A CalPERS member must be actively employed with the CalPERS employer providing this benefit to be eligible for this benefit. A member’s survi vor who is eligible for any other pre-retirement death benefit may choose to receive that death benefit instead of this basic death benefit.

Benefit

The basic death benefit is a lump sum in the amount of the member’s accumulated contributions, where inte rest is credited annually at the greater of 6% or the prevailing discount rate through the date of death, plus a lump sum in the amount of one month's salary for each completed year of current service, up to a maximum of six months' salary. For purposes of this benefit, one month's salary is defined as the member's average monthly full -time rate of compensation during the 12 months preceding death.

1957 Survivor Benefit

This is a standard benefit.

Eligibility

An employee’s eligible survivor(s) may receive the 1957 Survivor benefit if the member dies while actively employed, has attained at least age 50 for classic and PEPRA Safety members and age 52 for PEPRA Miscellaneous members, and has at least 5 years of credited service (total service across all Ca lPERS employers and with certain other retirement systems with which CalPERS has reciprocity agreements). A CalPERS member must be actively employed with the CalPERS employer providing this benefit to be eligible for this benefit. An eligible survivor mean s the surviving spouse to whom the member was married at least one year before death or, if there is no eligible spouse, to the member's unmarried child(ren) under age 18. A member’s survivor who is eligible for any other pre-retirement death benefit may choose to receive that death benefit instead of this 1957 Survivor benefit.

Benefit

The 1957 Survivor benefit is a monthly allowance equal to one-half of the unmodified service retirement benefit that the member would have been entitled to receive if the member had retired on the date of their death. If the benefit is payable to the spouse, the benefit is discontinued upon the death of the spouse. If the benefit is payable to dependent child(ren), the benefit will be discontinued upon death or attainment o f age 18, unless the child(ren) is disabled. The total amount paid will be at least equal to the basic death benefit.

CalPERS Actuarial Valuation – June 30, 2023 Appendix B Miscellaneous Plan of the City of Carlsbad
Principal Plan Provisions

Optional Settlement 2 Death Benefit

This is an optional benefit.

Eligibility

An employee’s eligible survivor may receive the Optional Settlement 2 Death benefit if the member dies while actively employed, has attained at least age 50 for classic and PEPRA Safety members and age 52 for PEPRA Miscellaneous members, and has at least 5 years of credited service (total service across all CalPERS employers and with certain other retirement systems with which CalPERS has reciprocity agreements). A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An eligible su rvivor means the surviving spouse to whom the member was married at least one year before death. A member’s survivor who is eligible for any other pre-retirement death benefit may choose to receive that death benefit instead of this Optional Settlement 2 Death benefit.

Benefit

The Optional Settlement 2 Death benefit is a monthly allowance equal to the service retirement benefit that the member would have received had the member retired on the date of their death and elected 100% to continue to the eligible survivor after the member’s death. The allowance is payable to the surviving spouse until death, at which time it is continued to any unmarried child(ren), if applicable. The total amount paid will be at least equal to the basic death benefit.

Special Death Benefit

This is a standard benefit for Safety members except those described in Section 20423.6. For excluded Safety members and all Miscellaneous members, employers have the option of providing this benefit.

Eligibility

An employee’s eligible survivor(s) may receive the special death benefit if the member dies while actively employed and the death is job-related. A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married prior to the onset of the injury or illness that resulted in death. If there is no eligible spouse, an eligible survivor means the member's unmarried ch ild(ren) under age 22. An eligible survivor who chooses to receive this benefit will not receive any other death benefit.

Benefit

The special death benefit is a monthly allowance equal to 50% of final compensation and will be increased whenever the compensation paid to active employees is increased but ceasing to increase when the member would have attained age 50. The allowance is payable to the surviving spouse until death , at which time the allowance is continued to any unmarried child(ren) under age 22. There is a guarantee that the total amount paid will at least equal the basic death benefit.

If the member’s death is the result of an accident or injury caused by external violence or physical force incurred in the performance of the member’s duty, and there are eligible surviving child(ren) (eligible means unmarried child(ren) under age 22) in addition to an eligible spouse, then an additional monthly allowance is paid equal to the following:

• if 1 eligible child: 12.5% of final compensation
• if 2 eligible children: 20.0% of final compensation
• if 3 or more eligible children: 25.0% of final compensation CalPERS Actuarial Valuation – June 30, 2023 Appendix B Miscellaneous Plan of the City of Carlsbad
Principal Plan Provisions

Alternate Death Benefit for Local Fire Members

This is an optional benefit available only to local fire members.

Eligibility

An employee’s eligible survivor(s) may receive the alternate death benefit in lieu of the basic death benefit or the 1957 Survivor benefit if the member dies while actively employed and has at least 20 years of total CalPERS service. A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married prior to the onset of the injury or illness that resulted in death. If there is no eligible spouse, an eligible survivor means the member's unmarried child(ren) under age 18.

Benefit

The Alternate Death benefit is a monthly allowance equal to the service retirement benefit that the member would have receive d had the member retired on the date of their death and elected Optional Settlement 2. (A retiree who elects Optional Settlement 2 receives an allowance that has been reduced so that it will continue to be paid after their death to a surviving beneficiary.) If the member has not yet attained age 50, the benefit is equal to that which would be payable if the member had retired at age 50, based on service credited at the time of death. The allowance is payable to the surviving spouse until death, at which time it is continued to any unmarrie d child(ren), if applicable. The total amount paid will be at least equal to the basic death benefit.

Cost-of-Living Adjustments (COLA)

Standard Benefit

Retirement and survivor allowances are adjusted each year in May for cost of living, beginning the second calendar year after the year of retirement. The standard cost -of-living adjustment (COLA) is 2%. Annual adjustments are calculated by first determining the lesser of 1) 2% compounded from the end of the year of retirement or 2) actual rate of price inflation. The resulting increase is divided by the total increase provided in prior years. For any given year, the COLA adjustment may be less than 2% (when the rate of price inflation is low), may be greater than the rate of price inflation (when the rate of price inflation is low after several years of high price inflation) or may even be greater than 2% (when price inflation is high after several years of low price inflation).

Improved Benefit

Employers have the option of providing a COLA of 3%, 4%, or 5%, determined in the same manner as described above for the standard 2% COLA. An improved COLA is not available with the 1.5% at age 65 formula.

Purchasing Power Protection Allowance (PPPA)

Retirement and survivor allowances are protected against price inflation by PPPA. PPPA benefits are cost-of-living adjustments that are intended to maintain an individual’s allowance at 80 % of the initial allowance at retirement adjusted for price inflation since retirement. The PPPA benefit will be coordinated with other cost-of-living adjustments provided under the plan.

CalPERS Actuarial Valuation – June 30, 2023 Appendix B Miscellaneous Plan of the City of Carlsbad
Principal Plan Provisions

Employee Contributions

Each employee contributes toward their retirement based upon the retirement formula. The standard employee contribution is as described below.

• The percent contributed below the monthly compensation breakpoint is 0 %.

• The monthly compensation breakpoint is $0 for all PEPRA members and Classic members covered by a full or supplemental formula and $133.33 for Classic members covered by a modified formula.

• The percent contributed above the monthly compensation breakpoint depends upon the benefit formula, as shown in the table below.

Benefit Formula Percent Contributed
above the Breakpoint
Miscellaneous, 1.5% at age 65 2%
Miscellaneous, 2% at age 60 7%
Miscellaneous, 2% at age 55 7%
Miscellaneous, 2.5% at age 55 8%
Miscellaneous, 2.7% at age 55 8%
Miscellaneous, 3% at age 60 8%
Miscellaneous, 2% at age 62 50% of the Total Normal Cost Miscellaneous, 1.5% at age 65 50% of the Total Normal Cost Safety, Half Pay at age 55 Varies by entry age
Safety, 2% at age 55 7%
Safety, 2% at age 50 9%
Safety, 3% at age 55 9%
Safety, 3% at age 50 9%
Safety, 2% at age 57 50% of the Total Normal Cost
Safety, 2.5% at age 57 50% of the Total Normal Cost
Safety, 2.7% at age 57 50% of the Total Normal Cost

The employer may choose to “pick-up” these contributions for classic members (Employer Paid Member Contributions or EPMC). EPMC is prohibited for new PEPRA members.

An employer may also include Employee Cost Sharing in the contract, where employees agree to share the cost of the employer contribution. These contributions are paid in addition to the member contribution.

Auxiliary organizations of the CSU system may elect reduced contribution rates, in which case the offset is $317 and the contribution rate is 6% if members are not covered by Social Security. If members are covered by Social Security, the offset is $513 and the contribution rate is 5%.

Refund of Employee Contributions

If the member’s service with the emplo yer ends, and if the member does not satisfy the eligibility conditions for any of the retirement benefits above, the member may elect to receive a refund of their employee contributions, which are credited with 6% interest compounded annually.

CalPERS Actuarial Valuation – June 30, 2023 Appendix B Miscellaneous Plan of the City of Carlsbad
Principal Plan Provisions

1959 Survivor Benefit

This is a pre-retirement death benefit available only to members not covered by Social Security. Any agency joining CalPERS subsequent to 1993 is required to provide this benefit if the members are not covered by Social Security. The benefit is optional for agencies joining CalPERS prior to 1994. Levels 1, 2, and 3 are now closed. Any new agency or any agency wishing to add this benefit or increase the current level may only choos e the 4th or Indexed Level.

This benefit is not included in the results presented in this valuation. More information on this benefit is available on the CalPERS website.

Appendix C - Participant Data

• Summary of Valuation Data 75
• Active Members 76
• Transferred and Separated Members 77
• Retired Members and Beneficiaries 78

CalPERS Actuarial Valuation – June 30, 2023 Appendix C Miscellaneous Plan of the City of Carlsbad
Participant Data

Summary of Valuation Data

June 30, 2022 June 30, 2023

1. Active Members
a) Counts 548 581
b) Average Attained Age

45.41 44.71
c) Average Entry Age to Rate Plan 36.32 36.08
d) Average Years of Credited Service 8.72 8.30
e) Average Annual Covered Pay $84,216 $87,010
f) Annual Covered Payroll 46,150,095 50,552,759
g) Projected Annual Payroll for Contribution Year 50,136,262 54,919,200 h) Present Value of Future Payroll 417,971,990 466,393,279

2. Transferred Members
a) Counts 249 259
b) Average Attained Age 46.88 46.00
c) Average Years of Credited Service 3.48 3.26
d) Average Annual Covered Pay $112,291 $115,098

3. Separated Members
a) Counts 309 332
b) Average Attained Age 47.34 47.02
c) Average Years of Credited Service 2.66 2.64
d) Average Annual Covered Pay $59,745 $61,798

4. Retired Members and Beneficiaries
a) Counts 678 703
b) Average Attained Age 69.44 69.52
c) Average Annual Benefits $34,655 $35,273
d) Total Annual Benefits $23,495,978 $24,796,766

5. Active to Retired Ratio [(1a) ÷ (4a)] 0.81 0.83

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.

Average Annual Benefits represents benefit amounts payable by this plan only. Some members may have service with another agency and would therefore have a larger total benefit than would be included as part of the average shown here.

CalPERS Actuarial Valuation – June 30, 2023 Appendix C Miscellaneous Plan of the City of Carlsbad
Participant Data

Active Members

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.

Distribution of Active Members by Age and Service

Years of Service at Valuation Date
Attained
Age 0-4 5-9 10-14 15-19 20-24 25+ Total
15-24 20 0 0 0 0 0 20
25-29 63 5 0 0 0 0 68
30-34 37 15 0 1 0 0 53
35-39 43 24 4 6 0 0 77
40-44 44 17 6 12 5 0 84
45-49 31 11 9 14 5 1 71
50-54 25 15 1 14 16 10 81
55-59 14 13 8 9 7 12 63
60-64 9 14 2 4 6 8 43
65 and Over 4 3 3 4 4 3 21
All Ages 290 117 33 64 43 34 581

Distribution of Average Annual Salaries by Age and Service

Years of Service at Valuation Date
Attained
Age 0-4 5-9 10-14 15-19 20-24 25+
Average
Salary
15-24 $56,086 $0 $0 $0 $0 $0 $56,086
25-29 60,539 71,176 0 0 0 0 61,321
30-34 71,750 80,138 0 118,423 0 0 75,004
35-39 85,104 88,172 95,731 87,263 0 0 86,781
40-44 93,087 85,322 89,515 92,404 91,152 0 91,048
45-49 92,962 81,869 87,101 89,130 85,711 116,174 89,561 50-54 108,428 102,848 177,879 95,567 103,055 97,918 103,670 55-59 101,305 107,661 104,065 98,743 96,526 112,287 104,162 60-64 84,355 97,543 67,850 124,377 71,354 117,928 96,036 65 and Over 120,363 49,831 39,704 60,245 80,524 64,961 71,810 Average $81,369 $89,594 $89,974 $93,184 $92,072 $105,326 $87,010

CalPERS Actuarial Valuation – June 30, 2023 Appendix C Miscellaneous Plan of the City of Carlsbad
Participant Data

Transferred and Separated Members

Distribution of Transfers to Other CalPERS Plans by Age, Service, and average Salary

Years of Service at Valuation Date
Attained
Age 0-4 5-9 10-14 15-19 20-24 25+ Total
Average
Salary
15-24 5 0 0 0 0 0 5 $78,508
25-29 18 0 0 0 0 0 18 74,679
30-34 22 1 0 0 0 0 23 93,264
35-39 28 9 1 0 0 0 38 98,017
40-44 38 5 2 0 0 0 45 116,228
45-49 30 4 1 1 1 0 37 138,222
50-54 18 7 0 2 1 0 28 137,133
55-59 20 10 0 1 0 0 31 126,228
60-64 14 4 4 2 0 0 24 117,315
65 and Over 8 1 1 0 0 0 10 129,100
All Ages 201 41 9 6 2 0 259 $115,098

Distribution of Separated Participants with Funds on Deposit by Age, Service, and average Salary

Years of Service at Valuation Date
Attained Age 0-4 5-9 10-14 15-19 20-24 25+ Total
Average
Salary
15-24 1 0 0 0 0 0 1 $62,400
25-29 21 0 0 0 0 0 21 46,588
30-34 28 2 0 0 0 0 30 53,659
35-39 40 2 1 0 0 0 43 66,033
40-44 41 11 3 0 0 0 55 64,913
45-49 45 7 2 2 0 0 56 64,700
50-54 28 7 2 0 1 0 38 69,620
55-59 25 13 0 0 0 0 38 61,594
60-64 29 1 0 0 0 1 31 58,701
65 and Over 17 1 1 0 0 0 19 54,091
All Ages 275 44 9 2 1 1 332 $61,798

CalPERS Actuarial Valuation – June 30, 2023 Appendix C Miscellaneous Plan of the City of Carlsbad
Participant Data

Retired Members and Beneficiaries

Distribution of Retirees and Beneficiaries by Age and Retirement Type*

Attained Age
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death After
Retirement Total
Under 30 0 0 0 0 0 0 0
30-34 0 0 0 0 0 0 0
35-39 0 0 0 0 0 0 0
40-44 0 2 1 0 0 0 3
45-49 0 0 8 0 0 0 8
50-54 13 5 3 0 0 1 22
55-59 67 0 3 0 0 2 72
60-64 112 7 1 1 0 4 125
65-69 121 3 0 1 0 5 130
70-74 140 4 1 0 0 14 159
75-79 84 1 1 0 0 6 92
80-84 36 0 0 0 0 16 52
85 and Over 25 2 0 0 0 13 40
All Ages 598 24 18 2 0 61 703

Distribution of Average Annual Disbursements to Retirees and Beneficiaries by Age and Retirement Type*

Attained
Age
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death After
Retirement Average
Under 30 $0 $0 $0 $0 $0 $0 $0
30-34 0 0 0 0 0 0 0
35-39 0 0 0 0 0 0 0
40-44 0 26,000 304 0 0 0 17,434
45-49 0 0 935 0 0 0 935
50-54 16,351 17,650 1,407 0 0 10,920 14,361
55-59 17,811 0 1,211 0 0 7,267 16,826
60-64 44,697 14,196 140 33,023 0 22,954 41,844
65-69 42,781 22,700 0 17,391 0 33,026 41,747
70-74 41,669 17,338 190 0 0 25,673 39,387
75-79 41,946 307 19,471 0 0 24,791 40,130
80-84 27,758 0 0 0 0 35,145 30,031
85 and Over 28,741 15,228 0 0 0 22,062 25,895
All Ages $37,899 $16,993 $1,969 $25,207 $0 $26,880 $35,273

CalPERS Actuarial Valuation – June 30, 2023 Appendix C Miscellaneous Plan of the City of Carlsbad
Participant Data

Retired Members and Beneficiaries (continued)

Distribution of Retirees and Beneficiaries by Years Retired and Retirement Type*

Years
Retired
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death After
Retirement Total
Under 5 Yrs 177 0 7 1 0 24 209
5-9 157 7 4 0 0 10 178
10-14 94 3 3 0 0 11 111
15-19 96 3 3 1 0 10 113
20-24 46 2 0 0 0 5 53
25-29 22 5 0 0 0 1 28
30 and Over 6 4 1 0 0 0 11
All Years 598 24 18 2 0 61 703

Distribution of Average Annual Disbursements to Retirees and Beneficiaries by Years Retired and Retirement Type*

Years
Retired
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death After
Retirement Average
Under 5 Yrs $34,896 $0 $977 $33,023 $0 $24,658 $32,575 5-9 42,297 19,886 1,472 0 0 45,762 40,693
10-14 43,872 17,176 920 0 0 26,369 40,255
15-19 43,569 19,390 6,587 17,391 0 14,019 39,098
20-24 22,260 16,366 0 0 0 30,699 22,834
25-29 19,491 16,049 0 0 0 6,530 18,413
30 and Over 14,491 11,491 190 0 0 0 12,100
All Years $37,899 $16,993 $1,969 $25,207 $0 $26,880 $35,273

* Counts of members do not include alternate payees receiving benefits while the member is still working. Therefore, the total counts may not match information on C-1 of the report. Multiple records may exist for those who have service in more than one coverage group. This does not result in double counting of liabilities .

Appendix D - Glossary

CalPERS Actuarial Valuation – June 30, 2023 Appendix D Miscellane ous Plan of the City of Carlsbad
Glossary

Glossary

Accrued Liability (Actuarial Accrued Liability)
The portion of the Present Value of Benefits allocated to prior years. It can also be expressed as the Present Value of Benefits minus the present value of future Normal Cost . Different actuarial cost methods and different assumptions will lead to different measures of Accrued Liability.

Actuarial Assumptions
Assumptions made about certain events that will affect pension costs. Assumptions generally can be broken down into two categories: demographic and economic. Demographic assumptions include such things as mortality, dis ability, and retirement rates. Economic assumptions include discount rate, wage inflation , and price inflation.

Actuarial Methods
Procedures employed by actuaries to achieve certain funding goals of a pension plan. Actuarial methods include an actuarial cost method, an amortization policy, and an asset valuation method.

Actuarial Valuation
The determination as of a valuation date of the Normal Cost, Accrued Liability, and related actuarial present values for a pension plan. These valuations are performed annually or when an employer is contemplating a change in plan provisions.

Actuary
A business professional proficient in mathematics and statistics who measures and manages risk. A public retirement system actuary in California perform s actuarial valuations necessary to properly fund a pension plan and disclose its liabilities and must satisfy the qualification standards for actuaries issuing statements of actuarial opinion in the United States with regard to pensions.

Amortization Bases
Separate payment schedules for different portions of the Unfunded Accrued Liability (UAL). The total UAL of a rate plan can be segregated by cause. The impact of such individual causes on the UAL are quantified at the time of their occurrence, resulting in new amortization bases. Each base is separately amortized and paid for over a specific period of time.

Generally, in an actuarial valuation, the separate bases consist of changes in UAL due to contract amendments, actuarial assumption changes, method changes, and/or experience gains and losses.

Amortization Period
The number of years required to pay off an Amortization Base.

Classic Member (under PEPRA)
A member who joined a public retirement system prior to January 1, 2013 , and who is not defined as a new member under PEPRA. (See definition of New Member below.)

Discount Rate
The rate used to discount the expected future benefit payments to the valuation date to determine the Projected Value of Benefits. Different discount rates will produce different measures of the Projected Value of Benefits. The discount rate for funding purposes is based on the assumed long -term rate of return on plan assets, net of investment and administrative expenses. This rate is called the “actuarial interest rate” in Section 20014 of the California Public Employees’ Retirement Law.

Entry Age
The earliest age at which a plan member begins to accrue benefits under a defined benefit pension plan. In most cases, this is the age of the member on their date of hire.

Entry Age Actuarial Cost Method
An actuarial cost method that allocates the cost of the projected benefits on an individual basis as a level percent of earnings for the individual between entry age and retirement age. This method yields a total normal cost rate, expressed as a percentage of payroll, which is designed to remain level throughout the member’s career.

Fresh Start
A Fresh Start is when multiple amortization bases are combined into a single base and amortized over a new Amortization Period.

CalPERS Actuarial Valuation – June 30, 2023 Appendix D Miscellane ous Plan of the City of Carlsbad
Glossary

Glossary (continued)

Funded Ratio
Defined as the Market Value of Assets divided by the Accrued Liability. Different actuarial cost methods and different assumptions will lead to different measures of Funded Ratio. The Funded Ratio with the Accrued Liability equal to the funding target is a measure of how well funded a rate plan is. A ratio greater than 100% means the rate plan has more assets than the funding target and the employer need only contribute the Normal Cost . A ratio less than 100% means assets are less than the funding target and contributions in addition to Normal Cost are required.

Funded Status
Any comparison of a particular measure of plan assets to a particular measure of pension obligations. The methods and assumptions used to calculate a funded status should be consistent with the purpose of the measurement.

Funding Target
The Accrued Liability measure upon which the funding requirements are based. The funding target is the Accrued Liability under the Entry Age Actuarial Cost Method using the assumptions adopted by the board.

GASB 68
Statement No. 68 of the Governmental Accounting Standards Board. The accounting standard governing a state or local governmental employer’s accounting and financial reporting for pensions.

New Member (under PEPRA)
A new member includes an individual who becomes a member of a public retirement system for the first time on or after January 1, 2013, and who was not a member of another public retirement system prior to that date, and who is not subject to reciprocity with another public retirement system.

Normal Cost
The portion of the Present Value of Benefits allocated to the upcoming fiscal year for active employees. Different actuarial cost methods and different assumptions will lead to d ifferent measures of Normal Cost. The Normal Cost under the Entry Age Actuarial Cost Method, using the assumptions adopted by the board , plus the required amortization of the UAL, if any, make up the required contributions.

PEPRA
The California Public Employees’ Pension Reform Act of 2013.

Present Value of Benefits (PVB)
The total dollars needed as of the valuation date to fund all benefits earned in the past or expected to be earned in the future for current members.

Traditional Unit Credit Actuarial Cost Method
An actuarial cost method that sets the Accrued Liability equal to the Present Value of Benefits assuming no future pay increases or service accruals. The Traditional Unit Credit Cost Method is used to measure the accrued liability on a termina tion basis.

Unfunded Accrued Liability (UAL)
The Accrued Liability minus the Market Value of Assets. If the UAL for a rate plan is positive, the employer is required to make contributions in excess of the Normal Cost.

California Public Employees’ Retirement System
Actuarial Office
400 Q Street, Sacramento, CA 95811 | Phone: (916) 795-3000 | Fax: (916) 795-2744 888 CalPERS (or 888-225-7377) | TTY: (877) 249-7442 | www.calpers.ca.gov July 2024
Safety Plan of the City of Carlsbad (CalPERS ID: 3747905882 ) Annual Valuation Report as of June 30, 2023
Dear Employer,
Attached to this letter is the June 30, 2023 , actuarial valuation report for the rate plan noted above. Provided in this report is the determination of the minimum required employer contributions for fiscal year (FY) 2025-26. In addition, the report contains important information regarding the current financial status of the plan as well as projections and risk measures to aid in planning for the future.

Required Contributions
The table below shows the minimum required employer contributions and the PEPRA member contribution rates for FY 2025-26 along with an estimate of the employer contribution requirements for FY 2026-27. Employee contributions other than cost sharing (whether paid by the employer or the employe e) are in addition to the results shown below. The required employer and member contributions in this report do not reflect any cost sharing arrangement between the agency and the employees.

Fiscal Year Employer Normal
Cost Rate
Employer Amortization of
Unfunded Accrued Liability
PEPRA Member
Contribution Rate
2025-26 19.77% $9,387,155 14.00%
Projected Results
2026-27 19.5% $10,187,000 TBD
The actual investment return for FY 2023-24 was not known at the time this report was prepared. The projections above assume the investment return for that year would be 6.8%. To the extent the actual investment return for FY 2023-24 differs from 6.8%, the actual contribution requirements for FY 2026-27 will differ from those shown above. For additional detail s regarding the assumptions and methods used for these projections, please refer to Projected Employer Contributions . This section also contains projected required contributions through FY 2030-31.

Report Enhancements
A number of enhancements were made to the report this year to ease navigation and allow the reader to find specific information more quickly. The tables of contents are now “clickable.” This is true for the main table of contents that follows the title page and the intermediate tables of contents at the beginning of sections. The Adobe navigation pane on the left can al so be used to skip to specific exhibits.

Attachment B
CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Carlsbad
CalPERS ID: 3747905882

There are a number of links throughout the document in blue text. Links that are internal to the document are not underlined, while underlined links will take you to the CalPERS website. Examples are shown below.

Internal Bookmarks CalPERS Website Links
Required Employer Contributions Required Employer Contribution Search Tool Member Contribution Rates Public Agency PEPRA Member Contribution Rates Summary of Key Valuation Results Pension Outlook Overview Funded Status – Funding Policy Basis Interactive Summary of Public Agency Valuation Results Projected Employer Contributions Public Agency Actuarial Valuation Reports

Further descriptions of general changes are included in the Highlights and Executive Summary section and in Appendix A - Actuarial Methods and Assumptions . The effects of any changes on the required contributions are included in the Reconciliation of Required Employer Contributions section.

Questions

A CalPERS actuary is available to answer questions about th is report. Other questions may be directed to the Customer Contact Center at 888 CalPERS (or 888-225-7377).

Sincerely,

Nina Ramsey , ASA, MAAA
Senior Actuary, CalPERS

Randall Dziubek, ASA, MAAA
Deputy Chief Actuary, Valuation Services , CalPERS

Scott Terando , ASA, EA, MAAA, FCA, CFA
Chief Actuary, CalPERS

California Public Employees’ Retirement System

Actuarial Valuation for the
Safety Plan
of the City of Carlsbad
as of June 30, 2023

(CalPERS ID: 3747905882 )
(Rate Plan ID: 317)

Required Contributions for Fiscal Year

July 1, 2025 — June 30, 2026

CY Fin Job Instance ID: 438721 PY Fin Job Instance ID: 421635 Report ID: 439356

Table of Contents

Actuarial Certification.......................................................................................................................................................................................1 Highlights and Executive Summary .............................................................................................................................................................2 Introduction .......................................................................................................................................................................................................3 Purpose .............................................................................................................................................................................................................3 Summary of Key Valuation Results ..............................................................................................................................................................4 Changes Since the Prior Year’s Valuation ..................................................................................................................................................5 Subsequent Events .........................................................................................................................................................................................5 Assets ...................................................................................................................................................................................................................6 Reconciliation of the Market Value of Assets..............................................................................................................................................7 Asset Allocation................................................................................................................................................................................................8 CalPERS History of Investment Returns .....................................................................................................................................................9 Liabilities and Contributions ....................................................................................................................................................................... 10 Determination of Required Contributions.................................................................................................................................................. 11 Development of Accrued and Unfunded Liabilities ................................................................................................................................. 12 Required Employer Contributions .............................................................................................................................................................. 13 Member Contribution Rates ........................................................................................................................................................................ 14 Funded Status – Funding Policy Basis ..................................................................................................................................................... 15 Additional Employer Contributions............................................................................................................................................................. 16 Projected Employer Contributions ............................................................................................................................................................. 17 (Gain)/Loss Analysis 6/30/22 – 6/30/23 .................................................................................................................................................... 18 Schedule of Amortization Bases ................................................................................................................................................................ 19 Amortization Schedule and Alternatives ................................................................................................................................................... 21 Reconciliation of Required Employer Contributions................................................................................................................................ 23 Employer Contribution History .................................................................................................................................................................... 24 Funding History ............................................................................................................................................................................................. 24 Normal Cost by Benefit Group.................................................................................................................................................................... 25 Risk Analysis ................................................................................................................................................................................................... 26 Future Investment Return Scenarios......................................................................................................................................................... 27 Discount Rate Sensitivity............................................................................................................................................................................. 28 Mortality Rate Sensitivity ............................................................................................................................................................................. 28 Maturity Measures ........................................................................................................................................................................................ 29 Maturity Measures History........................................................................................................................................................................... 30 Funded Status – Termination Basis .......................................................................................................................................................... 31 Funded Status – Low-Default-Risk Basis ................................................................................................................................................. 32 Plan’s Major Benefit Options ....................................................................................................................................................................... 33 Appendix A - Actuarial Methods and Assumptions .............................................................................................................................. 37 Appendix B - Principal Plan Provisions.................................................................................................................................................... 62 Appendix C - Participant Data ..................................................................................................................................................................... 73 Appendix D - Glossary .................................................................................................................................................................................. 79

CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Carlsbad
CalPERS ID: 374790 5882

Actuarial Certification

It is our opinion that the valuation has been performed in accordance with generally accepted actuarial principles as well as the applicable Standards of Practice promulgated by the Actuarial Standards Board. While this report is intended to be complete, our office is available to answer questions as needed. All of the undersigned are actuaries who satisfy the Qualification Standards for Actuaries Issuing Statements of Actuarial Opinion in the United States of the American Academy of Actuaries with regard to pension s.

Actuarial Methods and Assumptions

It is our opinion that the assumptions and methods, as recommended by the Chief Actuary and adopted by the CalPERS Board of Administration, are internally consistent and reasonable for this plan.

Randall Dziubek, ASA, MAAA
Deputy Chief Actuary, Valuation Services , CalPERS

Scott Terando , ASA, EA, MAAA, FCA, CFA
Chief Actuary, CalPERS

Actuarial Data and Rate Plan Results

To the best of my knowledge and having relied upon the attestation above that the actuarial methods and assumptions are reasonable , this report is complete and accurate and contains sufficient information to disclose, fully and fairly, the funded condition of the Safety Plan of the City of Carlsbad and satisfies the actuarial valuation requirements of Government Code section 7504. This valuation and related validation work was performed by the CalPERS Actuarial Office. The valuation was based on the member and financial data as of June 30, 2023, provided by the various CalPERS databases and the benefits under this plan with CalPERS as of the date this report was produced.

Nina Ramsey , ASA, MAAA
Senior Actuary, CalPERS

Highlights and Executive Summary

• Introduction 3
• Purpose 3
• Summary of Key Valuation Results 4
• Changes Since the Prior Year’s Valuation 5
• Subsequent Events 5

CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Carlsbad
CalPERS ID: 3747905882

Introduction

This report presents the results of the June 30, 2023 , actuarial valuation of the Safety Plan of the City of Carlsbad of the California Public Employees’ Retirement System (CalPERS). This actuarial valuation sets the minimum required contributions for fiscal year (FY) 2025-26.

Purpose

This report documents the results of the actuarial valuation prepared by the CalPERS Actuarial Office using data as of June 30, 2023. The purpose of the valuation is to:

• Set forth the assets and accrued liabilities of this rate plan as of June 30, 2023; • Determine the minimum required employer co ntributions for this rate plan for FY July 1, 2025, through June 30, 2026; • Determine the required member contribution rate for FY July 1, 2025, through June 30, 2026, for employees subject to the California Public Employees' Pension Reform Act of 2013 (PEPRA); and • Provide actuarial information as of June 30, 2023, to the CalPERS Board of Administration (board) and other interested parties.

The pension funding information presented in this report should not be used in financial reports subject to Governmental Accounting Standards Board (GASB) Statement No. 68 for an Agent Employer Defined Benefit Pension Plan. A separate accounting valuation report for such purposes is available from CalPERS and details for ordering are available on the CalPERS website (www.calpers.ca.gov).

The measurements shown in this actuarial valuation may not be applicable for other purposes. The agency should contact a CalPERS actuary before disseminating any portion of this report for any reason that is not explicitly described above.

Future actuarial measurements may differ significantly from the current measurements presented in this report due to such factors as the following: plan experience differing from that anticipated by the economic or demographic assumptions; changes in economic or demographic assumptions; changes in actuarial policies; changes in plan provisions or applicable law; and differences between the required contributions determined by the valuation and the actual contributions made by the agency.

Assessment and Disclosure of Risk

This report includes the following risk disclosures consistent with the guidance of Actuarial Standards of Practice No. 51 and recommended by the California Actuarial Advisory Panel (CAAP) in the Model Disclosure Elements document:

• A “Scenario Test,” projecting future results under different investment income returns. • A “Sensitivity Analysis,” showing the impact on current valuation results using alternative discount rates of 5.8% and

7.8%.
• A “Sensitivity Analysis,” showing the impact on current valuation results assuming rates of mortality are 10% lower or 10% higher than our current post-retirement mortality assumptions adopted in 2021. • Plan maturity measures indicating how sensitive a plan may be to the risks noted above.

CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Carlsbad
CalPERS ID: 3747905882

Summary of Key Valuation Results

Below is a brief summary of key valuation results alo ng with page references where more detailed information can be found.

Required Employer Contributions — page 13

Fiscal Year
2024-25
Fiscal Year
2025-26
Employer Normal Cost Rate 20.49% 19.77%
Unfunded Accrued Liability (UAL) Contribution Amount $7,360,036 $9,387,155 Paid either as
Option 1) 12 Monthly Payments of $613,336 $782,263
Option 2) Annual Prepayment in July $7,121,874 $9,083,398

Member Contribution Rates — page 14

Fiscal Year
2024-25
Fiscal Year
2025-26
Classic Member Contribution Rate 9.00% 9.00%
PEPRA Member Contribution Rate 14.00% 14.00%

Projected Employer Contributions — page 17

Fiscal Year Normal Cost
(% of payroll)
Annual
UAL Payment
2026-27 19.5% $10,187,000
2027-28 19.3% $10,779,000
2028-29 19.0% $12,101,000
2029-30 18.7% $12,334,000
2030-31 18.4% $12,524,000

Funded Status — Funding Policy Basis — page 15

June 30, 2022 June 30, 2023
Entry Age Accrued Liability (AL) $393,017,010 $416,941,852 Market Value of Assets (MVA) 282,537,994 294,206,830 Unfunded Accrued Liability (UAL) [AL – MVA] $110,479,016 $122,735,022 Funded Ratio [MVA ÷ AL] 71.9% 70.6%

Summary of Valuation Data — Page 74

June 30, 2022 June 30, 2023
Active Member Count 220 225
Annual Covered Payroll $27,595,346 $29,565,417
Transferred Member Count 61 63
Separated Member Count 51 51
Retired Members and Beneficiaries Count 285 295

CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Carlsbad
CalPERS ID: 3747905882

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. For rate plans that are not in a risk pool (non-pooled), benefit changes by contract amendment are generally included in the first valuation that is prepared after the amendment becomes effective, even if the effective date of the amendment is after the valuation date.

Please refer to the Plan’s Major Benefit Options and Appendix B - Principal Plan Provisions for a summary of the plan provisions used in this valuation. The effect of any mandated benefit changes or plan amendments on the unfunded liability is shown in the (Gain)/Loss Analysis 6/30/22 – 6/30/23 and the effect on the employer contribution is shown in the Reconcil iation of Required Employer Contributions . It should be noted that no change in liability or contribution is shown for any plan changes which were already included in the prior year’s valuation.

Actuarial Methods and Assumptions

There are no significant changes to the actuarial methods or assumptions for the June 30, 2023, actuarial valuation.

New Disclosure Items

In December 2021, the Actuarial Standards Board issued a revision of Actuarial Standard of Practice No. 4 (ASOP 4) requiring actuaries to disclose a low -default-risk obligation measure (LDROM) of the benefits earned. This information is shown in a new exhibit, Funded Status – Low-Default-Risk Basis.

Subsequent Events

This actuarial valuation report reflects fund investment return through June 30, 2023, as well as statutory changes, regulatory changes and board actions through January 2024.

During the time period between the valuation date and the publication of this report, inflation has been higher than the expected inflation of 2.3% per annum. Since inflation influences cost -of-living increases for retirees and beneficiaries and active member pay increases, higher inflation is likely to put at least some upward pressure on contribution requirements and downward pressure on the funded status in the June 30, 2024, valuation. The actual impact of higher inflation on future valuation results will depend on, among other factors, how long higher inflation persists.

The 2023 annual benefit limit under Internal Revenue Code (IRS) section 415(b) and annual compensation limits under IRS section 401(a)(17) and Government Code section 7522.10 were use d for this valuation and are assumed to increase 2.3% per year based on the price inflation assumption. The actual 2024 limits , determined in October 2023, are not reflected.

On April 16, 2024, the board took action to modify the Funding Risk Mitigation Policy to remove the automatic change to the discount rate when the investment return exceeds various thresholds. Rather than an automatic change to the discount rate, a board discussion would be placed on the calendar. The 95 th percentile return in the Future Investment Return Scenarios exhibit in this report has not been modified and still reflects the projected contribution requirements associated with a reduction i n the discount rate.

To the best of our knowledge, there have been no other subsequent events that could materially affect current or future certifications rendered in this report.

Assets

• Reconciliation of the Market Value of Assets 7
• Asset Allocation 8
• CalPERS History of Investment Returns 9

CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Carlsbad
CalPERS ID: 3747905882

Reconciliation of the Market Value of Assets

1. Market Value of Assets as of 6/30/22 including Receivables $282,537,994

2. Change in Receivables for Service Buybacks (52,600)

3. Employer Contributions 11,378,178

4. Employee Contributions 3,303,488

5. Benefit Payments to Retirees and Beneficiaries (19,753,653)

6. Refunds (491,284)

7. Transfers (677)

8. Service Credit Purchase (SCP) Payments and Interest 77,822

9. Administrative Expenses (167,820)

10. Miscellaneous Adjustments 0

11. Investment Return (Net of Investment Expenses) 17,375,383

12. Market Value of Assets as of 6/30/23 including Receivables $294,206,830

CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Carlsbad
CalPERS ID: 3747905882

Asset Allocation

CalPERS adheres to an Asset Allocation Strategy which establishes asset class allocation policy targets and ranges and manages those asset class allocations within their policy ranges . CalPERS recognizes that over 90% of the variation in investment returns of a large, well -diversified pool of assets can typically be attributed to asset allocation decisions .

The asset allocation shown below reflect s the allocation of the Public Employees’ Retirement Fund (PERF) in its entirety. The assets for City of Carlsbad Safety Plan are a subset of the PERF and are invested accordingly.

On November 17, 2021, the board adopted changes to the strategic asset allocation . The new allocation was effective July 1, 2022. The asset allocation as of June 30, 2023 , is shown below, along with the long-term strategic asset allocations.

For more information s ee the Trust Level Review as of June 30, 2023, which is available on the CalPERS website.

33.1%

12.0%

5.1%

5.1%

6.6%

4.5%

5.1%

12.9%

15.2%

2.2%
(1.8%)
30%
12%
5%
5%
10%
5%
5%
13%
15%
5%
(5%)
(10%) 0% 10% 20% 30% 40%
Public Equities - Cap Weighted
Public Equities - Factor Weighted
Treasury
Mortgage-Backed Securities
Investment Grade Corporates
High Yield
Emerging Market Sovereign Bonds
Private Equity
Real Assets
Private Debt
Strategic Financing
Current Allocation Long-Term Strategic Asset Allocation CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Carlsbad
CalPERS ID: 3747905882

CalPERS History of Investment Returns

The following is a chart with the 20-year historical annual return s of the PERF for each fiscal year ending on June 30 as reported by the Investment Office. Investment returns reported are net of investment expenses but without reduction for administrative expenses. The assumed rate of return, however, is net of both investment and administrative expenses. Also, the Investment Office uses a three-month lag on private equity and real assets for investment performance reporting purposes. This can lead to a timing difference in the returns below and those used for financial reporting purposes. The investment gain or loss calculation in this report relies on final assets that have been audited and are appropriate for financial reporting. Because of these differences, the effective investment return for funding purposes in a single year can be higher or lower than the return reported by the Investment Office shown here.

* As reported by the Investment Office w ith a 3-month lag on private equity and real assets and w ithout any reduction for administrative expenses.

The table below shows annualized investment returns of the PERF for various time periods ending on June 30, 2023. Figures reported are net of investment expenses but without reduction for administrative expenses. These returns are the annual rates that if compounded over the indicated number of years would equate to the actual time -weighted investment performance of the PERF. It should be recognized that in any given year the rate of return is volatile. The po rtfolio has an expected volatility of

12.0% per year based on the most recent Asset Liability Management study. The realized volatility is a measure of the risk of the portfolio expressed as the standard deviation of the fund’s total monthly return distrib ution, expressed as an annual percentage. Due to their volatile nature, when looking at investment returns, it is more instructive to look at returns over longer time horizons.

History of CalPERS Compound Annual Rates of Return and Volatilities 1 year 5 year 10 year 20 year 30 year
Compound Annual Return 5.8% 6.1% 7.1% 7.0% 7.5%
Realized Volatility – 9.5% 7.8% 8.4% 8.8%

Liabilities and Contributions

• Determination of Required Contributions 11
• Development of Accrued and Unfunded Liabilities 12
• Required Employer Contributions 13
• Member Contribution Rates 14
• Funded Status – Funding Policy Basis 15
• Additional Employer Contributions 16
• Projected Employer Contributions 17
• (Gain)/Loss Analysis 6/30/22 – 6/30/23 18
• Schedule of Amortization Bases 19
• Amortization Schedule and Alternatives 21
• Reconciliation of Required Employer Contributions 23
• Employer Contribution History 24
• Funding History 24
• Normal Cost by Benefit Group 25

CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Carlsbad
CalPERS ID: 3747905882

Determination of Required Contributions

Contributions to fund the plan are determined by an actuarial valuation performed each year. The valuation employs complex calculations based on a set of actuarial assumptions and methods. See Appendix A for information on the assumptions and methods used in this valuation. The valuation incorporates all plan experience through the valuation date and sets required contributions for the fiscal year that begins two years after the valuation date.

Contribution Components

Two components comprise required contributions:

• Normal Cost — expressed as a percentage of pensionable payroll • Unfunded Accrued Liability (UAL) Contribution — expressed as a dollar amount

Normal Cost represents the value of benefits allocated to the upcoming year for active employees. If all plan experience exactly matched the actuarial assumptions, normal cost would be sufficient to fully fund all benefits. The employer and employees each pay a share of the normal cost with contributions payable as part of the regular payroll reporting process. The contribution rate for Classic members is set by statute based on benefit formula whereas for PEPRA members it is based on 50% of the total normal cost.

When plan experience differs from the actuarial assumptions, unfunded accrued liability (UAL) emerges. The new UAL may be positive or negative. If the total UAL is positive (i.e., accrued liability exceeds assets), the employer is required to make contributions to pay off the UAL over time. This is called the Unfunded Accrued Liability Contribution component . There is an option to prepay this amount during July of each fiscal year, otherwise it is paid monthly.

In measuring the UAL each year, plan experience is split by source. Common sources of UAL include investment experience different than expected, non-investment experience different than expected, assumption changes, and benefit changes. Each source of UAL (positive or negative) forms a base that is amortized, or paid off, over a specified period of time in accordan ce with the CalPERS Actuarial Amortization Policy. The Unfunded Accrued Liability Contribution is the sum of the payments on all bases. See the Schedul e of Amortization Bases section of this report for an inventory of existing bases and Appendix A for more information on the amortization policy.

CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Carlsbad
CalPERS ID: 3747905882

Development of Accrued and Unfunded Liabilities

June 30, 2022 June 30, 2023

1. Present Value of Projected Benefits
a) Active Members $200,906,986 $212,113,050
b) Transferred Members 9,160,796 9,319,452
c) Separated Members 2,899,064 3,046,849
d) Members and Beneficiaries Receiving Payments 272,472,654 292,546,260 e) Total $485,439,500 $517,025,611

2. Present Value of Future Employer Normal Costs $56,284,562 $58,763,668

3. Present Value of Future Employee Contributions $36,137,928 $41,320,091

4. Entry Age Accrued Liability
a) Active Members [(1a) - (2) - (3)] $108,484,496 $112,029,291 b) Transferred Members (1b) 9,160,796 9,319,452
c) Separated Members (1c) 2,899,064 3,046,849
d) Members and Beneficiaries Receiving Payments (1d) 272,472,654 292,546,260 e) Total $393,017,010 $416,941,852

5. Market Value of Assets (MVA) $282,537,994 $294,206,830

6. Unfunded Accrued Liability (UAL) [(4e) - (5)] $110,479,016 $122,735,022

7. Funded Ratio [(5) ÷ (4e)] 71.9% 70.6%

CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Carlsbad
CalPERS ID: 3747905882

Required Employer Contributions

The required employer contributions in this report do not reflect any cost sharing arrangement between the agency and the employees.

Fiscal Year
Required Employer Contributions 2025-26
Employer Normal Cost Rate 19.77%
Plus
Unfunded Accrued Liability (UAL) Contribution Amount $9,387,155 Paid either as
1) Monthly Payment $782,263
Or
2) Annual Prepayment Option* $9,083,398
The total minimum required employer contribution is the sum of the Plan’s Employer Normal Cost Rate (expressed as a percentage of payroll and paid as payroll is reported) and the Unfunded Accrued Liability (UAL) Contribution Amount (billed monthly (1) or prepaid annually (2) in dollars). * Only the UAL portion of the employer contribution can be prepaid (which must be received in full no later than July 31).

For Member Contribution Rates see the following page.

Fiscal Year Fiscal Year
2024-25 2025-26
Normal Cost Contribution as a Percentage of Payroll
Total Normal Cost 1 31.77% 31.30%
Offset due to Employee Contribution s2 11.28% 11.53%
Employer Normal Cost 20.49% 19.77%

Projected Annual Payroll for Contribution Year $29,978,865 $32,119,099

Estimated Employer Contributions Based on Projected Payroll Total Normal Cost $9,524,285 $10,053,278
Expected Employee Contribution s 3,381,616 3,703,332 Employer Normal Cost 6,142,669 6,349,946
Unfunded Liability Contribution

7,360,036 9,387,155
% of Projected Payroll (illustrative only) 24.55% 29.23% Estimated Total Employer Contribution

$13,502,705 $15,737,101
% of Projected Payroll (illustrative only) 45.04% 49.00%

1 The Total Normal Cost is a blended rate for all benefit groups in the plan. For a breakout of normal cost by benefit group, see Normal Cost by Benefit Group.
2 This is the expected employee contributions, taking into account individual benefit formula and any offset from the use of a modified formula, divided by projected annual payroll. For member contribution rates above the breakpoint for each benefit formula, see Member Contribution Rates.

CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Carlsbad
CalPERS ID: 3747905882

Member Contribution Rates

The required member contributions in this report do not reflect any cost sharing arrangement between the agency and the employees.

Classic Members

Each member contributes toward their retirement based upon the retirement formula. The standard Classic member contribution rate above the breakpoint, if any, is as described below.

Benefit Formula
Percent Contributed
above the Breakpoint
Safety, 2% at age 55 7%
Safety, 2% at age 50 9%
Safety, 3% at age 55 9%
Safety, 3% at age 50 9%

PEPRA Members

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 for the plan is dependent on the benefit levels, actuarial assumptions, and demographics of the plan, particularly members’ entry age into the plan. Should the total normal c ost rate of the plan change by more than 1% from the base total normal cost rate established for the plan, 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, 2025, based on 50% of the total normal cost rate for each respective plan as of the June 30, 2023, valuation.

Basis for Current Rate Rates Effective July 1, 2025 Plan
Identifier Benefit Group Name
Total
Normal
Cost
Member
Rate
Total
Normal
Cost Change
Change
Needed
Member
Rate
25275 Safety Fire PEPRA
Level 28.040% 14.00% 28.22% 0.180% No 14.00%
25276 Safety Police PEPRA
Level 28.040% 14.00% 28.22% 0.180% No 14.00%

For a description of the methodology used to determine the Total Normal Cost for this purpose, see PEPRA Normal Cost Rate Methodology in Appendix A.

CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Carlsbad
CalPERS ID: 3747905882

Funded Status – Funding Policy Basis

The table below provides information on the current funded status of the plan under the funding policy. The funded status for this purpose is based on the market value of assets relative to the funding target produced by the entry age actuarial cost method and actuarial assumptions adopted by the board. The actuarial cost method allocates the total expected cost of a member’s projected benefit (Present Value of Benefits) to individual years of service (the Normal Cost). The value of the projected benefit that is not allocated to future service is referred to as the Accrued Liability and is the plan’s funding target on the valuation date. The Unfunded Accrued Liability (UAL) equals the funding target minus the assets. The UAL is an absolute measure of funded status and can be viewed as employer debt. The funded ratio equals the assets divided by the funding target. The funded ratio is a relative measure of the funded status and allows for comparisons between plans of different siz es.

June 30, 2022 June 30, 2023

1. Present Value of Benefits $485,439,500 $517,025,611

2. Entry Age Accrued Liability 393,017,010 416,941,852

3. Market Value of Assets (MVA) 282,537,994 294,206,830

4. Unfunded Accrued Liability (UAL) [(2) – (3)] $110,479,01 6 $122,735,022

5. Funded Ratio [(3) ÷ (2)] 71.9% 70.6%

A funded ratio of 100% (UAL of $0) implies that the funding of the plan is on target and that future contributions equal to the normal cost of the active plan members will be sufficient to fully fund all retirement benefits if future experience matches the actuarial assumptions. A funded ratio of less than 100% (positive UAL) implies that in addition to normal costs, payments tow ard the UAL will be required. Plans with a funded ratio greater than 100% have a negative UAL (or surplus) but are requ ired under current law to continue contributing the normal cost in most cases, preserving the surplus for future contingencies.

Calculations for the funding target reflect the expected long -term investment return of 6.8%. If it were known on the valuation date that future investment returns will average something greater/less than the expected return, calculated normal costs and accrued liabilities provided in this report would be less/greater than the results shown. Therefore, for example, if actual a verage future returns are less than the expected return, calculated normal costs and UAL contributions will not be sufficient to fully fund all retirement benefits. Under this scenario, required future normal cost contributions will need to increase from those provided in this report, and the plan will develop unfunded liabilities that will also add to required future contributions. For illustra tive purposes, funded status es based on a 1% lower and higher average future investment return (discount rate) are as follows:

1% Lower
Average Return
Current
Assumption
1% Higher
Average Return
Discount Rate 5.8% 6.8% 7.8%

1. Present Value of Benefits $614,439,372 $517,025,611 $442,434,984

2. Entry Age Accrued Liability 476,102,587 416,941,852 368,799,206

3. Market Value of Assets (MVA) 294,206,830 294,206,830 294,206,830

4. Unfunded Accrued Liability (UAL) [(2) – (3)] $181,895,757 $122,735,022 $74,592,376

5. Funded Ratio [(3) ÷ (2)] 61.8% 70.6% 79.8%

The Risk Analysis section of the report provides additional information regarding the sensitivity of valuation results to the expected investment return and other factors. Also provided in that section are measures of funded status that are appropriate for assessing the sufficiency of plan assets to cover estimated termination liabilities.

CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Carlsbad
CalPERS ID: 3747905882

Additional Employer Contributions

The minimum required employer contribution towards the Unfunded Accrued Liability (UAL) for this rate plan for FY 2025-26 is $9,387,15 5. CalPERS allows agencies to make additional discretionary payments (ADPs) at any time and in any amount. These optional payments serve to reduce the UAL and future required contributions and can result in significant long -term savings.

Agencies can also use ADPs to stabilize annual contributions as a fixed dollar amount, percent of payroll or percent of revenue.

Provided below are select ADP options for consideration. Making such an ADP during FY 2025-26 does not require an ADP be made in any future year, nor does it change the remaining amortization period of any portion of unfunded liability. For information on permanent changes to amortization periods, see Amortization Schedule and Alternatives. Agencies considering making an ADP should contact CalPERS for additional information.

Fiscal Year 2025-26 Employer Contributions — Illustrative Scenarios

Funding Approach Estimated
Normal Cost
Minimum UAL
Contribution ADP1 Total UAL
Contribution
Estimated Total
Contribution
Minimum required only $6,349,946 $9,387,155 0 $9,387,155 $15,737,101 20 year funding horizon $6,349,946 $9,387,155 $1,928,550 $11,315,705 $17,665,651 15 year funding horizon $6,349,946 $9,387,155 $3,813,602 $13,200,757 $19,550,703 10 year funding horizon $6,349,946 $9,387,155 $7,789,515 $17,176,670 $23,526,616 5 year funding horizon $6,349,946 $9,387,155 $20,151,343 $29,538,498 $35,888,444

1 The ADP amounts are assumed to be made in the middle of the fiscal year. A payment made earlier or later in the fiscal year would have to be less or more than the amount show n to have the same effect on the UAL amortization.

The calculations above are based on the projected UAL as of June 30, 2025, as determined in the June 30, 2023, actuarial valuation. New unfunded liabilities can em erge in future years due to assumption or method changes, changes in plan provisions, and actuarial experience different than assumed. Making an ADP illustrated above for the indicated number of years will not result in a plan that is exactly 100% funded in the indicated number of years. Valuation results will vary from one year to the next and can diverge significantly from projections over a period of several years.

Additional Discretionary Payment History

The following table provides a recent history of actual ADPs made to the plan.

Fiscal
Year ADP Fiscal
Year ADP
2018-19 $14,220,650 2021-22 $3,200,000
2019-20 $0 2022-23 $0
2020-21 $4,596,860 2023-24 $0

CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Carlsbad
CalPERS ID: 3747905882

Projected Employer Contributions

The table below shows the required and projected employer contributions (before cost sharing) for the next six fiscal years. The projection assumes that all actuarial assumptions will be realized and that no further changes to assumptions, contributions, benefits, or funding will occur during the projection period. In particular, the investment return beginning with FY 2023-24 is assumed to be 6.80% per year, net of investment and administrative expenses. The projected normal cost percentages below reflect that the normal cost is expected to continue to decline over time as new employees are hired into lower cost benefit tiers.

Future contribution requirements may differ signifi cantly from those shown below. The actual long-term cost of the plan will depend on the actual benefits and expenses paid and the actual investment experience of the fund.

Required
Contribution
Projected Future Employer Contributions
(Assumes 6.80% Return for Fiscal Year 2023-24 and Beyond) Fiscal Year 2025-26 2026-27 2027-28 2028-29 2029-30 2030-31 Normal Cost % 19.77% 19.5% 19.3% 19.0% 18.7% 18.4%
UAL Payment $9,387,155 $10,187,000 $10,779,000 $12,101,000 $12,334,000 $12,524,000

Total as a % of Payroll* 49.00% 50.4% 51.0% 53.7% 53.1% 52.4% Projected Payroll $32,119,099 $33,018,434 $33,942,950 $34,893,353 $35,870,367 $36,874,737

*Illustrative only and based on the projected payroll shown.

For ongoing plans, investment gains and losses are amortized using a 5 -year ramp up. For more information, please see Amortization of Unfunded Actuarial Accrued Liability in Appendix A. This method phases in the impact of the change in UAL over a 5-year period in order to reduce employer cost volatility from year to year. As a result of this methodology, dramatic changes in the required employer contributions in any one year are less likely. However, required con tributions can change gradually and significantly over the next five years. In years when there is a large investment loss, the relatively small amortization payments during the ramp up period could result in contributions that are less than interest on the UAL (i.e. negative amortization) while the contribution impact of the increase in the UAL is phased in.

For projected contributions under alternate investment return scenarios, please see the Future Investment Return Scenarios exhibit. Our online pension plan projection tool, Pension Outlook , is available in the Employers section of the CalPERS website.

Pension Outlook can help plan and budget pension costs under various scenarios.

CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Carlsbad
CalPERS ID: 3747905882

(Gain)/Loss Analysis 6/30/ 22 – 6/30/23

To calculate the cost requirements of the plan, assumptions are made about future events that affect the amount and timing of benefits to be paid and assets to be accumulated. Each year, actual experience is compared to the expected experience based on the actuarial assumptions. This results in actuarial gains or losses, as shown below.

1. Total (Gain)/Loss for the Year
a) Unfunded Accrued Liability (UAL) as of 6/30/22 $110,479,016 b) Expected payment on the UAL during 2022-23 5,050,298 c) Interest through 6/30/23 [.068 x (1a) - ((1.068)½ - 1) x (1b)] 7,343,683 d) Expected UAL before all other changes [(1a) - (1b) + (1c)] 112,772,401 e) Change due to plan changes 0
f) Change due to AL Significant Increase 0
g) Change due to assumption change s 0
h) Change due to method change s 0
i) Change due to discount rate change with Funding Risk Mitigation 0 j) Expected UAL after all other changes [(1d) + (1e) + (1f) + (1g) + (1h) + (1i)] 112,772,401 k) Actual UAL as of 6/30/23 122,735,022
l) Total (Gain)/Loss for 2022-23 [(1k) - (1j)] $9,962,621

2. Investment (Gain)/Loss for the Year
a) Market Value of Assets as of 6/30/22 $282,537,994
b) Prior fiscal year receivables (418,802)
c) Current fiscal year receivables 366,201
d) Contributions received 14,681,667
e) Benefits and refunds paid (20,244,938)
f) Transfers, SCP payments and interest, and miscellaneous adjustments 77,144 g) Expected return at 6.8% per year 19,191,259
h) Expected assets as of 6/30/23 [(2a) + (2b) + (2c) + (2d) + (2e) + (2f) + (2g)] 296,190,526 i) Actual Market Value of Assets as of 6/30/23 294,206,830 j) Investment (Gain)/Loss [(2h) - (2i)] $1,983,696

3. Non-Investment (Gain)/Loss for the Year
a) Total (Gain)/Loss ( 1l) $9,962,621
b) Investment (Gain)/Loss ( 2j) 1,983,696
c) Non-Investment (Gain)/Loss [(3a) - (3b)] $7,978,925

CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Carlsbad
CalPERS ID: 3747905882

Schedule of Amortization Bases

Below is the schedule of the plan’s amortization bases. Note that there is a two-year lag between the valuation date and the start of the contribution year.

• The assets, liabilities, and funded status of the plan are measured as of the valuation date: June 30, 2023. • The required employer contributions determined by the valuation are for the fiscal year beginning two years after the valuation date: FY 2025-26.

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 public 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 date 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 on the UAL for FY 2023-24 is based on the actuarial valuation two years ago, adjusted for additional discretionary payments, if necessary , and the expected payment for FY 2024-25 is based on the actuarial valuation one year ago.

Reason for Base
Date
Est.

Ramp
Level
2025-26
Ramp
Shape
Escala-
tion
Rate
Amort.

Period
Balance
6/30/23
Expected
Payment
2023-24
Balance
6/30/24
Expected
Payment
2024-25
Balance
6/30/25
Minimum
Required
Payment
2025-26
Assets Change 6/30/03 No Ramp 2.80% 0 (10,317) (5,433) (5,404) (5,585) 0 0 Assumption Change 6/30/03 No Ramp 2.80% 0 (876,784) (461,698) (459,268) (474,626) 0 0 Method Change 6/30/04 No Ramp 2.80% 1 (171,176) (61,231) (119,537) (62,946) (62,615) (64,709) Special (Gain)/Loss 6/30/09 No Ramp 2.80% 16 4,322,427 336,644 4,268,450 346,071 4,201,061 355,760 Special (Gain)/Loss 6/30/10 No Ramp 2.80% 17 4,098,981 307,581 4,059,845 316,194 4,009,147 325,047 Special (Gain)/Loss 6/30/11 No Ramp 2.80% 18 (3,748,337) (271,717) (3,722,420) (279,325) (3,686,879) (287,146) (Gain)/Loss 6/30/12 No Ramp 2.80% 19 16,825,201 1,181,048 16,748,771 1,214,118 16,632,968 1,248,113 Payment (Gain)/Loss 6/30/12 No Ramp 2.80% 19 902,298 63,337 898,199 65,110 891,989 66,934 (Gain)/Loss 6/30/13 100% Up/Dn 2.80% 20 27,616,714 2,004,485 27,423,134 2,060,611 27,158,388 2,118,308 (Gain)/Loss 6/30/14 100% Up/Dn 2.80% 21 (18,886,012) (1,327,282) (18,798,593) (1,364,445) (18,666,824) (1,402,650) (Gain)/Loss 6/30/15 100% Up/Dn 2.80% 22 11,496,654 784,016 11,468,192 805,968 11,415,109 828,535 (Gain)/Loss 6/30/16 100% Up/Dn 2.80% 23 13,526,419 896,844 13,519,380 921,956 13,485,911 947,770 Assumption Change 6/30/16 100% Up/Dn 2.80% 13 5,393,198 534,839 5,207,211 549,815 4,993,100 565,209 (Gain)/Loss 6/30/17 100% Up/Dn 2.80% 24 (7,171,797) (463,145) (7,180,846) (476,113) (7,177,109) (489,444) Assumption Change 6/30/17 100% Up/Dn 2.80% 14 7,099,360 665,123 6,894,751 683,747 6,656,982 702,892 (Gain)/Loss 6/30/18 100% Up/Dn 2.80% 25 (2,318,353) (118,290) (2,353,755) (152,002) (2,356,725) (156,258) Assumption Change 6/30/18 100% Up/Dn 2.80% 15 11,663,751 844,580 11,584,063 1,085,285 11,250,201 1,115,673 Method Change 6/30/18 100% Up/Dn 2.80% 15 1,442,426 104,447 1,432,571 134,214 1,391,284 137,973 Non-Investment (Gain)/Loss 6/30/19 No Ramp 0.00% 16 3,160,586 299,661 3,065,824 299,661 2,964,618 299,661 Non-Investment (Gain)/Loss 6/30/20 No Ramp 0.00% 17 5,705,699 526,195 5,549,895 526,195 5,383,496 526,195

CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Carlsbad
CalPERS ID: 3747905882

Schedule of Amortization Bases (continued)
Reason for Base
Date
Est.

Ramp
Level
2025-26
Ramp
Shape
Escala-
tion
Rate
Amort.

Period
Balance
6/30/23
Expected
Payment
2023-24
Balance
6/30/24
Expected
Payment
2024-25
Balance
6/30/25
Minimum
Required
Payment
2025-26
Investment (Gain)/Loss 6/30/20 80% Up Only 0.00% 17 7,191,647 295,629 7,375,164 443,443 7,418,403 591,257 Assumption Change 6/30/21 No Ramp 0.00% 18 2,863,432 257,490 2,792,045 257,490 2,715,803 257,490 Net Investment (Gain) 6/30/21 60% Up Only 0.00% 18 (33,741,881) (725,271) (35,286,804) (1,450,543) (36,187,256) (2,175,814) Non-Investment (Gain)/Loss 6/30/21 No Ramp 0.00% 18 2,979,489 267,926 2,905,209 267,926 2,825,878 267,926 Risk Mitigation 6/30/21 No Ramp 0.00% 0 11,284,547 11,661,912 0 0 0 0 Risk Mitigation Offset 6/30/21 No Ramp 0.00% 0 (11,284,547) (11,661,912) 0 0 0 0 Benefit Change 6/30/22 No Ramp 0.00% 19 147,419 0 157,443 14,158 153,518 14,158 Investment (Gain)/Loss 6/30/22 40% Up Only 0.00% 19 47,637,906 0 50,877,284 1,093,592 53,206,777 2,187,183 Non-Investment (Gain)/Loss 6/30/22 No Ramp 0.00% 19 5,623,451 0 6,005,846 540,067 5,856,116 540,067 Investment (Gain)/Loss 6/30/23 20% Up Only 0.00% 20 1,983,696 0 2,118,587 0 2,262,651 48,635 Non-Investment (Gain)/Loss 6/30/23 No Ramp 0.00% 20 7,978,925 0 8,521,492 0 9,100,953 818,390 Total 122,735,022 5,935,778 124,946,729 7,360,036 125,836,945 9,387,155

CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Carlsbad
CalPERS ID: 3747905882

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 i n 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 lia bility payments.

Shown on the follow ing 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 a CalPERS 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 combinatio n 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 re placing the existing unfunded liability bases with a single “fresh start” base and amortizing it over an 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 fa ct arise since there will be additional bases added to the amortization schedule in each future year. Should such a scenario ari se in any future year, the actuary will take appropriate action based on guidelines in the CalPERS Actuarial Amortization Policy.

CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Carlsbad
CalPERS ID: 3747905882

Amortization Schedule and Alternatives (continued)

Alternative Schedules
Current Amortization
Schedule 15 Year Amortization 10 Year Amortization
Date Balance Payment Balance Payment Balance Payment
6/30/2025 125,836,945 9,387,155 125,836,945 13,200,757 125,836,945 17,176,670 6/30/2026 124,692,788 10,186,781 120,751,656 13,200,757 116,642,785 17,176,670 6/30/2027 122,644,464 10,778,653 115,320,567 13,200,757 106,823,422 17,176,670 6/30/2028 119,845,1 89 12,100,689 109,520,164 13,200,757 96,336,342 17,176,670 6/30/2029 115,489,317 12,334,168 103,325,334 13,200,757 85,136,141 17,176,670 6/30/2030 110,595,959 12,524,188 96,709,255 13,200,757 73,174,326 17,176,670 6/30/2031 105,173,477 12,719,528 89,643,283 13,200,757 60,399,108 17,176,670 6/30/2032 99,180,391 12,920,338 82,096,825 13,200,757 46,755,175 17,176,671 6/30/2033 92,572,251 13,126,768 74,037,208 13,200,758 32,183,453 17,176,670 6/30/2034 85,301,426 13,194,044 65,429,536 13,200,758 16,620,855 17,176,671 6/30/2035 77,466,660 13,073,862 56,236,542 13,200,758 6/30/2036 69,223,328 12,601,218 46,418,424 13,200,757 6/30/2037 60,907,902 12,096,219 35,932,675 13,200,758 6/30/2038 52,548,911 11,557,399 24,733,894 13,200,757 6/30/2039 44,178,348 11,149,668 12,773,597 13,200,757 6/30/2040 35,659,952 10,927,121
6/30/2041 26,792,297 9,565,637
6/30/2042 18,728,655 7,672,581
6/30/2043 12,073,047 10,841,179
6/30/2044 1,690,297 1,746,822
6/30/2045
6/30/2046
6/30/2047
6/30/2048
6/30/2049

Total 220,504,018 198,011,359 171,766,702
Interest Paid 94,667,073 72,174,414 45,929,757
Estimated Savings 22,492,659 48,737,316
CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Carlsbad
CalPERS ID: 3747905882

Reconciliation of Required Employer Contributions

Normal Cost (% of Payroll)

1. For Period 7/1/24 – 6/30/25
a) Employer Normal Cost 20.49%
b) Employee contribution 11.28%
c) Total Normal Cost 31.77%

2. Changes since the prior year annual valuation
a) Effect of demographic experience (0.47%)
b) Effect of plan changes 0.00%
c) Effect of discount rate change due to Funding Risk Mitigation 0.00% d) Effect of assumption changes 0.00%
e) Effect of method changes 0.00%
f) Net effect of the changes above [sum of (a) through (e)] (0.47%)

3. For Period 7/1/25 – 6/30/26
a) Employer Normal Cost 19.77%
b) Employee contribution 11.53%
c) Total Normal Cost 31.30%
Employer Normal Cost Change [(3a) – (1a)] (0.72%)
Employee Contribution Change [(3b) – (1b)] 0.25%

Unfunded Liability Contribution ($)

1. For Period 7/1/24 – 6/30/25 7,360,036

2. Changes since the prior year annual valuation
a) Effect of adjustments to prior year’s amortization schedule 0 b) Effect of elimination of amortization bases 480,211 c) Effect of progression of amortization bases 1 679,883 d) Effect of investment (gain) /loss during prior year2 48,635 e) Effect of non-investment (gain)/loss during prior year 818,390 f) Effect of re-amortizing existing bases due to Funding Risk Mitigation 0 g) Effect of Golden Handshake 0
h) Effect of plan changes 0
i) Effect of AL Significant Increase (Government Code section 20791) 0 j) Effect of assumption changes 0
k) Effect of adjustments to the amortization schedule (e.g., Fresh Start) 0 l) Effect of method change 0
m
)
Net effect of the changes above [sum of (a) through (l)] 2,027,119

3. For Period 7/1/25 – 6/30/26 [(1) + (2m)] 9,387,155

The amounts shown for the period 7/1/24 – 6/30/25 may be different if a prepayment of unfunded actuarial liability is made or a plan change became effective after the prior year’s actuarial valuation was performed.

1 Includes scheduled escalation in individual amortization base payments due to the 5-year ramp and payroll grow th assumption used in the pre-2019 amortization policy.
2 The unfunded liability contribution for the investment (gain)/loss during the year prior to the valuation date is 20% of the “full” annual requirement due to the 5-year ramp. Increases to this amount that occur during the ramp period w ill be included in line c) for each of the next four years.

CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Carlsbad
CalPERS ID: 3747905882

Employer Contribution History

The table below provides a 10-year history of the employer contribution requirements for the plan, as determined by the annual actuarial valuation. Changes due to prepayments or plan amendments after the valuation report was finalized are not reflected.

Valuation
Date
Contribution
Year
Employer
Normal Cost
Rate
Unfunded
Liability Rate
Unfunded
Liability Payment
06/30/2014 2016 - 17 19.920% 20.661% N/A
06/30/2015 2017 - 18 19.718% N/A 4,564,145
06/30/2016 2018 - 19 19.595% N/A 4,523,960
06/30/2017 2019 - 20 20.410% N/A 5,471,488
06/30/2018 2020 - 21 21.401% N/A 4,146,779
06/30/2019 2021 - 22 20.39% N/A 5,146,782
06/30/2020 2022 - 23 19.79% N/A 5,881,880
06/30/2021 2023 - 24 21.55% N/A 5,935,778
06/30/2022 2024 - 25 20.49% N/A 7,360,036
06/30/2023 2025 - 26 19.77% N/A 9,387,155

Funding History

The table below shows the recent history of the actuarial accrued liability, market value of assets, unfunded accrued liability, funded ratio and annual covered payroll.

Valuation
Date

Accrued
Liability
(AL)
Market Value of
Assets (MVA)
Unfunded
Accrued
Liability (UAL)

Funded
Ratio

Annual
Covered
Payroll
6/30/2014 $239,979,240 $186,190,042 $53,789,198 77.6% $17,495,303 6/30/2015 250,753,240 187,057,814 63,695,426 74.6% 18,114,657 6/30/2016 265,900,205 184,355,019 81,545,186 69.3% 18,517,461 6/30/2017 284,296,267 205,720,952 78,575,315 72.4% 19,289,890 6/30/2018 307,725,897 219,697,334 88,028,563 71.4% 20,345,676 6/30/2019 324,351,564 243,980,037 80,371,527 75.2% 21,491,727 6/30/2020 343,243,950 251,416,320 91,827,630 73.2% 24,919,615 6/30/2021 372,017,358 308,342,667 63,674,691 82.9% 25,834,015 6/30/2022 393,017,010 282,537,994 110,479,016 71.9% 27,595,346 6/30/2023 416,941,852 294,206,830 122,735,022 70.6% 29,565,417 CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Carlsbad
CalPERS ID: 3747905882

Normal Cost by Benefit Group

The table below displays the Total Normal Cost broken out by benefit group for FY 2025-26. The Total Normal Cost is the annual cost of service accrual for the fiscal year for active employees and can be viewed as the long -term contribution rate for the benefits contracted. Generally, the normal cost for a benefit group subject to more generous benefit provisions will exce ed the normal cost for a group with less generous benefits. However, based on the characteristics of the members (particularly when the number of actives is small), this may not be the case. Future measurements of the Total Normal Cost for each group may differ significantly from the current values due to such factors as: changes in the demographics of the group, changes in economic and demographic assumptions, changes in plan benefits or applicable law.

Plan
Identifier Benefit Group Name
Total
Normal Cost
FY 2025-26
Number of
Actives
Payroll on
6/30/2023
317 Safety Fire Second Level 29.98% 16 $2,095,799
25275 Safety Fire PEPRA Level 26.05% 43 $4,652,352
25276 Safety Police PEPRA Level 29.24% 84 $10,079,798
30366 Safety Police First Level 37.54% 30 $5,112,099
30367 Safety Police Second Level 34.30% 14 $1,987,547
30368 Safety Fire First Level 33.49% 38 $5,637,822
Plan Total 31.30% 225 $29,565,417

Note that if a Benefit Group above has multiple bargaining units, each of which has separately contracted for different benef its such as Employer Paid Member Contributions, then the Normal Cost shown for the respective benefit level does not reflect those differences. Additionally, if a Second Level Benefit Group amended to the same benefit formula as a First Level Benefit Group, their Normal Costs may be dissimilar due to demographic or other population differences. For questions in these situations, pleas e contact a CalPERS actuary.

Risk Analysis

• Future Investment Return Scenarios 27
• Discount Rate Sensitivity 28
• Mortality Rate Sensitivity 28
• Maturity Measures 29
• Maturity Measures History 30
• Funded Status – Termination Basis 31
• Funded Status – Low-Default-Risk Basis 32
CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Carlsbad
CalPERS ID: 3747905882

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 refle ct the impact of the CalPERS Funding Risk Mitigation Policy. The projected normal cost rates reflect that the rates are anticipated to decline over time as new employees are hired into lower -cost benefit tiers. The projections also assume that all other actuarial assumptions will be realiz ed 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 alter nate 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, 2043.

Assumed Annual Return
FY 2023-24
through FY 2042-43
Projected Employer Contributions
2026-27 2027-28 2028-29 2029-30 2030-31

3.0% (5th percentile)
Discoun t Rate 6.80% 6.80% 6.80% 6.80% 6.80%
Normal Cost Rate 19.5% 19.3% 19.0% 18.7% 18.4%
UAL Contribution $10,458,000 $11,598,000 $13,748,000 $15,098,000 $16,701,000

10.8% (95th percentile)
Discoun t Rate 6.75% 6.70% 6.65% 6.60% 6.55%
Normal Cost Rate 20.0% 20.1% 20.3% 20.4% 20.5%
UAL Contribution $9,933,000 $10,036,000 $10,599,000 $9,794,000 $8,622,000

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 illustrat es 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 one and two standard deviation investment loss es in FY 2023-24 on the FY 2026-27 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 impac ted 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 2026-27.

Assumed Annual Return for
Fiscal Year 2023-24
Required
Employer
Contributions
Projected
Employer
Contributions
2025-26 2026-27
(17.2% ) (2 standard deviation loss)
Discoun t Rate 6.80% 6.80%
Normal Cost Rate 19.77% 19.5%
UAL Contribution $9,387,155 $11,901,000
(5.2% ) (1 standard deviation loss)
Discoun t Rate 6.80% 6.80%
Normal Cost Rate 19.77% 19.5%
UAL Contribution $9,387,155 $11,044,000

• Without investment gains (returns higher than 6.8%) in FY 2024-25 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 2023-24.
• The Pension Outlook Tool can be used to model projected contributions for these scenarios beyond FY 2026-27 as well as to model other investment return scenarios .

CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Carlsbad
CalPERS ID: 3747905882

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, 2023, 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 discount 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, 2023
1% Lower
Real Return Rate
Current
Assumptions
1% Higher
Real Return Rate
Discount Rate 5.8% 6.8% 7.8%
Price Inflation 2.3% 2.3% 2.3%
Real Rate of Return 3.5% 4.5% 5.5%
a) Total Normal Cost 39.89% 31.30% 24.85%
b) Accrued Liability $476,102,587 $416,941,852 $368,799,206 c) Market Value of Assets $294,206,830 $294,206,830 $294,206,830 d) Unfunded Liability/(Surplus) [(b) - (c)] $181,895,757 $122,735,022 $74,592,376 e) Funded Ratio 61.8% 70.6% 79.8%

Sensitivity to the Price Inflation Assumption

As of June 30, 2023
1% Lower
Price Inflation
Current
Assumptions
1% Higher
Price Inflation
Discount Rate 5.8% 6.8% 7.8%
Price Inflation 1.3% 2.3% 3.3%
Real Rate of Return 4.5% 4.5% 4.5%
a) Total Normal Cost 33.01% 31.30% 28.29%
b) Accrued Liability $431,811,671 $416,941,852 $387,133,776 c) Market Value of Assets $294,206,830 $294,206,830 $294,206,830 d) Unfunded Liability/(Surplus) [(b) - (c)] $137,604,841 $122,735,022 $92,926,946 e) Funded Ratio 68.1% 70.6% 76.0%

Mortality Rate Sensitivity

The following table looks at the change in the June 30, 2023, plan costs and funded status under two different longevity scenarios, namely assuming rates of post-retirement 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 a change in the mortality assumption .

As of June 30, 2023
10% Lower
Mortality Rates
Current
Assumptions
10% Higher
Mortality Rates
a) Total Normal Cost 31.65% 31.30% 30.97%
b) Accrued Liability $423,634,418 $416,941,852 $410,749,531 c) Market Value of Assets $294,206,830 $294,206,830 $294,206,830 d) Unfunded Liability/(Surplus) [(b) - (c)] $129,427,588 $122,735,022 $116,542,701 e) Funded Ratio 69.4% 70.6% 71.6%

CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Carlsbad
CalPERS ID: 3747905882

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 variables and changes in longevity or other demographic assumptions.

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 increases.

A mature plan will often have a ratio above 60%-65%.

Ratio of Retiree Accrued Liability to
Total Accrued Liability June 30, 2022 June 30, 2023

1. Retiree Accrued Liability $272,472,654 $292,546,260

2. Total Accrued Liability $393,017,010 $416,941,852

3. Ratio of Retiree AL to Total AL [(1) ÷ (2)] 69% 70%

Another measure of the maturity level of CalPERS and its plans is 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 retir e, 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 careers 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 as of June 30, 2022, was 0.77 and was calculated consistently with how it is for the individual rate plan. Note that to calculate the support ratio for all public agency plan s, a retiree with service from more than one CalPERS agency is counted as a retiree more than once.

Support Ratio June 30, 2022 June 30, 2023

1. Number of Actives 220 225

2. Number of Retirees 285 295

3. Support Ratio [(1) ÷ (2)] 0.77 0.76

CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Carlsbad
CalPERS ID: 3747905882

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 increases , 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 a higher AVR experience more volatile employer contributions (as a percentage of payroll) due to investment return. For example, a plan with an AVR of 8 may experience twice the contribution volatility due to investment return volatility than a plan with an AVR 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 a 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 an LVR of 8 is expected to have twice the contribution volatility of a plan with an LVR of 4 when there is a change in accrued liability, such as when there is a change in actuarial assumptions . 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 10 0%.

Contribution Volatility June 30, 2022 June 30, 2023

1. Market Value of Assets without Receivables $282,119,193 $293,840,629

2. Payroll 27,595,346 29,565,417

3. Asset Volatility Ratio (AVR) [(1) ÷ (2)] 10.2 9.9

4. Accrued Liability $393,017,010 $416,941,852

5. Liability Volatility Ratio (LVR) [(4) ÷ (2)] 14.2 14.1

Maturity Measures History

Valuation Date
Ratio of
Retiree Accrued Liability
to
Total Accrued Liability Support Ratio
Asset
Volatility
Ratio
Liability
Volatility
Ratio

6/30/2017

66%

0.82 10.6

14.7 6/30/2018

67%

0.80 10.8

15.1 6/30/2019

71%

0.77 11.3

15.1 6/30/2020

70%

0.82 10.1

13.8 6/30/2021

69%

0.76 11.9

14.4 6/30/2022

69%

0.77 10.2

14.2 6/30/2023

70%

0.76 9.9

14.1 CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Carlsbad
CalPERS ID: 3747905882

Funded Status – Termination Basis

The funded status measured on a termination basis is an estimate of the financial position of the plan had the contract with CalPERS been terminated as of June 30, 2023. The accrued liability on a termination basis (termination liability) is calculated differently from the plan’s ongoing funding liability. For the 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. Unlike the actuarial cost method used for ongoing plans, the termination liability is the present value of the benefits earned through the valuation date.

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 remainder of the PERF and consequently, a lower discoun t rate assumption. The lower discount rate for the Terminated Agency Pool results in higher liabilities for terminated plans.

The discount rate used for actual termination valuations is a weighted average of the 10-year and 30-year Treasury yields where the weights are based on matching asset and liability durations as of the termination date. The discount rates used in the following analysis is based on 20-year Treasury bonds, which is a good proxy for most plans. The discount rate upon contract terminat ion will depend on actual Treasury rates on the date of termination , which varies over time, as shown below.

Valuation 20-Year Valuation 20-Year
Date Treasury Rate Date Treasury Rate
06/30/2014 3.08% 06/30/2019 2.31%
06/30/2015 2.83% 06/30/2020 1.18%
06/30/2016 1.86% 06/30/2021 2.00%
06/30/2017 2.61% 06/30/2022 3.38%
06/30/2018 2.91% 06/30/2023 4.06%

As Treasury rates are variable, the table below shows a range for the termination liability using discount rates 1% below and above the 20-year Treasury rate on the valuation date. The price inflation assumption is the 20 -year Treasury breakeven inflation rate, that is, the difference between the 20-year inflation indexed bond and the 20-year fixed-rate bond.

The Market Value of Assets (MVA) also varies with interest rates and will fluctuate depending on other market conditions on the date of termination . Since it is not possible to approximate how the MVA will change in different interest rate environments, the results below use the MVA as of the valuation date.

Discount Rate: 3.06%
Price Inflation: 2.50%
Discount Rate: 5.06%
Price Inflation: 2.50%

1. Termination Liability 1 $698,852,471 $505,016,436

2. Market Value of Assets (MVA) 294,206,830 294,206,830

3. Unfunded Termination Liability [(1) – (2)] $404,645,641 $210,809,606

4. Funded Ratio [(2) ÷ (1)] 42.1% 58.3%

1 The termination liabilities calculated above include a 5% contingency load. The contingency load and other actuarial assumptions can be found in Appendix A.

In order to terminate the plan, first contact our Pension Contract Services unit to initiate a Resolution of Intent to Termin ate. The completed Resolution will allow a CalPERS actuary to provide a preliminary termination valuation with a more up-to-date estimate of the plan’s assets and liabilities. Before beginning this process, please consult with a CalPERS actuary.

CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Carlsbad
CalPERS ID: 3747905882

Funded Status – Low-Default-Risk Basis

Actuarial Standard of Practice (ASOP) No. 4, Measuring Pension Obligations and Determining Pension Plan Costs or Contributions , requires the disclosure of a low-default-risk obligation measure (LDROM) of benefit costs accrued as of the valuation date using a discount rate based on the yields of high quality fixed income securities with cash flows that replicate expected benefit payments. Conceptually, this measure represents the level at which financial markets would value the accrued plan costs, and would be approximately equal to the cost of a portfolio of low-default-risk bonds with similar financial characteristics to accrued plan costs.

As permitted in ASOP No. 4, the Actuarial Office uses the Entry Age Actuarial Cost Method to calculate the LDROM. This methodology is in line with the measure of “benefit entitlements” calculated by the Bureau of Economic Analysis and used by the Federal Reserve to report the indebtedness due to pensions of plan sponsors and, conversely, the household wealth due to pensions of plan members.

As shown below, the discount rate used for the LDROM is 4.82%, which is the Standard FTSE Pension Liability Index1 discount rate as of June 30, 2023 , net of assumed administrative expenses.

Selected Measures on a Low-Default-Risk Basis June 30, 2023 Discount Rate 4.82%

1. Accrued Liability 2 – Low-Default-Risk Basis (LDROM) a) Active Members $161,878,505
b) Transferred Members 13,856,566
c) Separated Members 4,427,978
d) Members and Beneficiaries Receiving Payments 367,837,330 e) Total $548,000,379

2. Market Value of Assets (MVA) 294,206,830

3. Unfunded Accrued Liability – Low-Default-Risk Basis [(1e) – (2)] $253,793,549

4. Unfunded Accrued Liability – Funding Policy Basis 122,735,022

5. Present Value of Unearned Investment Risk Premium [(3) – (4)] $131,058,527

The difference between the unfunded liabilities on a low -default-risk basis and on the funding policy basis represents the present value of the investment risk premium that must be earned in future years to keep future contributions for currently accrued plan costs at the levels anticipated by the funding policy.

Benefit security for members of the plan relies on a combination of the assets in the plan, the investment income generated f rom those assets, and the ability of the plan sponso r to make necessary future contributions. If future returns fall short of 6.8%, benefit security could be at risk without higher than currently anticipated future contributions.

The funded status on a low-default-risk basis is not appropriate for assessing the sufficiency of plan assets to cover the cost of settling the plan’s benefit obligations (see Funded Status – Termination Basis ), nor is it appropriate for assessing the need for future contributions (see Funded Status – Funding Policy Basis ).

1 This index is based on a yield curve of hypothetical AA-rated zero coupon corporate bonds whose maturities range from 6 months to 30 years. The index represents the single discount rate that w ould produce the same present value as discounting a standardized set of liability cash flow s for a fully open pension plan using the yield curve. The liability cash flows are reasonably consistent with the pattern of benefits expected to be paid from the entire Public Employees’ Retirement Fund for current and former plan members. A different index, hence a different discount rate, may be needed to measure the LDROM for a subset of the fund, such as a single rate plan or a group of retirees.

2 If plan assets w ere invested entirely in the AA fixed income securities used to determine the discount rate of 4.82%, the CalPERS discount rate could, at various times, be below 4.5% or 5.25%, and some automatic annual retiree COLAs could be suspended (Gov. Code sections 21329 and 21335). Since there is currently no proposal to adopt an asset allocation entirely comprised of fixed income securities, the automatic COLAs have been fully valued in the measures above based on the assumptions used for plan funding. Removing future COLAs from the measurement w ould understate the statutory obligation.

Plan’s Major Benefit Options
CalPERS Actuarial Valuation - June 30, 2023
Safety Plan of the City of Carlsbad
CalPERS ID: 3747905882