Supplemental
Report
CC 09-17-2024
Item No. 10
Employer Contribution
for medical and
hospitalization insurance
CITY COUNCIL STAFF REPORT
SUPPLEMENTAL 1
Meeting: September 17, 2024
Agenda Item #10
Subject
Adopt a resolution increasing the employer's contribution for medical and hospitalization insurance consistent with the Public Employees’ Medical and Hospital Care Act (“PEMHCA” or the “Act”) for retired annuitants hired with the City of Cupertino prior to August 2004
Recommended Action
Adopt Resolution No. 24 -XXX increasing the employer's contribution for medical and hospitalization insurance for retired annuitants hired with the City of Cupertino prior to August 2004
Background
On September 11, 2024, the League of California Cities is urging the CalPERS not to lower the fund’s discount rate and expected rate of return (Attachment A). Cities can voice their concerns by sending a letter or providing testimony at the upcoming CalPERS Board meeting on September 17. As the CalPERS Board meeting coincides with the City Council Meeting, no position letter will be forwarded.
California Public Employees’ Retirement System’, CalPERS, preliminary investment returns for the fiscal year ending June 30, 2024, outpaced its discount rate , triggering an automatic review under the CalPERS Funding Risk Mitigation Policy. The investment return of 9.3% exceeded the established discount rate of 6.8%, prompting the CalPERS Board to consider whether to lower the discount rate for future years. This year, the Board could reduce the discount rate and the expected investment return by 0.05%, from 6.8% to
6.75%.
Typically, lowering the discount rate and expected investment rate of return would increase employer liabilities and contributions. However, in this case, the strong investment return of 9.3% for the prior fiscal year, is expected to offset the impact of the proposed rate reduction. As a result, the potential 0.05% decrease in the discount rate is not expected to materially change the City's future cash flows or contribution levels over the next several years.
It is important to note that s hould the discount rate decrease be approved, it will not impact the item before you this evening which, involves CalPERS health rate changes for retired annuitants. However, staff wanted to ensure the Council was informed on this pending decision and its potential implications for the City’s long-term budget planning.
Attachments Provided with Original Staff Report:
A - Draft Resolution Employees and Annuitants Hired Prior to August 1, 2004
Attachments Provided with Supplemental 1:
A – September 11 League of California Cities letter