The actual investment return for FY 2022-23 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 2022- 23 differs from 6.8%, the actual contribution requirements for FY 2025-26 will differ from those shown above.
For additional details regarding the assumptions and methods used for these projections,please refer to the “Projected Employer Contributions” in the “Highlights and Executive Summary” section. This section als o contains projected required contributions through FY2029-30.
Changes from Previous Year’s Valuations
There are no significant changes in actuarial assumptions or policies in the 2022 actuarial valuation. There may be changes specific to the plan such as contract amendments and funding changes.
Further descriptions of general changes are included in “Highlights and Executive Summary” and in Appendix A of the Section 2 report in “Actuarial Methods and Assumptions.” The effects of any changes on the required contributions are included in “Reconciliation of Required Employer Contributions,” also in the Section 2 report.
Questions
A CalPERS actuary is available to answer questions about this report. Other questions may be directed to the Customer Contact Center at (888)-CalPERS or (888-225-7377).
Sincerely,
SCOTT TERANDO, ASA, EA, MAAA, FCA, CFA
Chief Actuary, CalPERS
RANDALL DZIUBEK, ASA, MAAA
Deputy Chief Actuary, Valuation Services, CalPERS
Actuarial Valuation
as of June 30, 2022
for the
Safety Fire Plan
of the
City of Kingsburg
(CalPERS ID: 1210886769)
Required Contributions
for Fiscal Year
July 1, 2024 - June 30, 2025
Table of Contents
Section 1 – Plan Specific Information
Section 2 – Risk Pool Actuarial Valuation Information
Section 1
CAL I F O RNI A P UBL I C EM P L O YEES ’ RET I REM ENT S YS T EM Plan Specific Information
for the
Safety Fire Plan
of the
City of Kingsburg
(CalPERS ID: 1210886769)
(Rate Plan ID: 1348)
Rate Plan belonging to the Safety Risk Pool
Table of Contents
Actuarial Certification 1
Highlights and Executive Summary
Introduction 3
Purpose of Section 1 3
Required Contributions 4
Additional Discretionary Employer Contributions 5
Funded Status – Funding Policy Basis 6
Projected Employer Contributions 7
Other Pooled Safety Risk Pool Rate Plans 8
Cost 9
Changes Since the Prior Year’s Valuation 10
Subsequent Events 10
Assets and Liabilities
Breakdown of Entry Age Accrued Liability 12
Allocation of Plan’s Share of Pool’s Experience/Assumption Change 12 Development of Plan’s Share of Pool’s Market Value of Assets 12 Schedule of Amortization Bases 13
Amortization Schedule and Alternatives 15
Employer Contribution History 17
Funding History 17
Risk Analysis
Future Investment Return Scenarios 19
Discount Rate Sensitivity 20
Mortality Rate Sensitivity 20
Maturity Measures 21
Maturity Measures History 22
Funded Status – Termination Basis 23
Participant Data 24
List of Class 1 Benefit Provisions 24
Plan’s Major Benefit Options 25
CALPERS ACTUARIAL VALUATION - June 30, 2022
Safety Fire Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 1
Actuarial Certification
To the best of our knowledge, this report, compris ed of Sections 1 and 2, is complete and accurate and contains sufficient information to disclose, fully and fairly, the funded condition of the Safety Fire Plan of the City of Kingsburg and satisfies the actuarial valuation requirements of Government Code section 7504. This valuation is based on the member and financial data as of June 30, 2022 provided by the various CalPERS databases and the benefits under this plan with CalPERS as of the date this report was produced. Section 1 of this report is based on the member and financial data for City of Kingsburg, while Section 2 is based on the corresponding information for all agencies participating in the Safety Risk Pool to which the plan belongs.
As set forth in Section 2 of this report, the pool actuaries have certified that, in their opinion, the valuation of the Safety Risk Pool has been performed in accordance with generally accepted actuarial principles, in accordance with standards of practice prescribed by the Actuarial Standards Board, and that the assumptions and methods are internally consistent and reasonable for the risk pool as of the date of this valuation and as prescribed by the CalPERS Board of Administration according to provisions set forth in the California Public Employees’ Retirement Law.
Having relied upon the information set forth in Section 2 of this report and based on the census and benefit provision information for the rate plan, it is my opinion as the plan actuary that the Unfunded Accrued Liability amortization bases as of June 30, 2022 and employer contribution as of July 1, 2024 have been properly and accurately determined in accordance with the principles and standards stated above.
The undersigned is an actuary who satisfies the Qualification Standards for Actuaries Issuing Statements of Actuarial Opinion in the United States with regard to pensions.
TONY CUNY, ASA, MAAA
Senior Actuary, CalPERS
Highlights and Executive Summary
• Introduction
• Purpose of Section 1
• Required Contributions
• Additional Discretionary Employer Contributions
• Funded Status – Funding Policy Basis
• Projected Employer Contributions
• Other Pooled Safety Risk Pool Rate Plans
• Cost
• Changes Since the Prior Year’s Valuation
• Subsequent Events
CALPERS ACTUARIAL VALUATION - June 30, 2022
Safety Fire Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 3
Introduction
This report presents the results of the June 30, 2022 actuarial valuation of the Safety Fire Plan of the City of Kingsburg of the California Public Employees’ Retirement System (CalPERS). This actuarial valuation sets the minimum required contributions for fiscal year (FY) 2024-25.
Purpose of Section 1
This Section 1 report for the Safety Fire Plan of the City of Kingsburg of CalPERS was prepared by the Actuarial Office using data as of June 30, 2022. The purpose of the valuation is to:
• Set forth the assets and accrued liabilities of this rate plan as of June 30, 2022; • Determine the minimum required employer contributions for this rate plan for FY July 1, 2024 through June 30, 2025;
• Determine the required member contribution rate for FY July 1, 2024 through June 30, 2025 for employees subject to the California Public Employees' Pension Reform Act of 2013 (PEPRA); and • Provide actuarial information as of June 30, 2022 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 a Cost Sharing Employer Defined Benefit Pension Plan. A separate accounting valuation report for such purposes is 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 the plan 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 Standard 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, 2022
Safety Fire Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 4
Required Contributions
Fiscal Year
Required Employer Contributions 2024-25
Employer Normal Cost Rate 23.00%
Plus
Required Payment on Amortization Bases1 $147,912
Paid either as
1) Monthly Payment $12,326.00
Or
2) Annual Prepayment Option* $143,126
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) plus the Employer 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).
Fiscal Year Fiscal Year
2023-24 2024-25
Development of Normal Cost as a Percentage of Payroll
Base Total Normal Cost for Formula 31.82% 31.99%
Surcharge for Class 1 Benefits 2
None 0.00% 0.00%
Phase out of Normal Cost Difference3 0.00% 0.00%
Plan’s Total Normal Cost 31.82% 31.99%
Offset Due to Employee Contributions 8.99% 8.99%
Employer Normal Cost Rate 22.83% 23.00%
1 The required payment on amortization bases does not take into account any additional discretionary payment made after April 28, 2023.
2 Section 2 of this report contains a list of Class 1 benefits and corresponding surcharges. 3 When a rate plan joins the pool, the difference in normal cost betw een the pool and the rate plan is phased out over a fiveyear period in accordance with the CalPERS contribution allocation policy.
CALPERS ACTUARIAL VALUATION - June 30, 2022
Safety Fire Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 5
Additional Discretionary Employer Contributions
The minimum required employer contribution towards the Unfunded Accrued Liability (UAL) for this rate plan for FY 2024-25 is $147,912. 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 2024-25 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 the “Amortization Schedule and Alternatives” section of the report.
Agencies considering making an ADP should contact CalPERS for additional information.
Minimum Required Employer Contribution for Fiscal Year 2024-25 Estimated
Normal Cost
Minimum UAL
Payment
ADP Total UAL
Contribution
Estimated Total
Contribution
$54,489 $147,912 $0 $147,912 $202,401
Alternative Fiscal Year 2024-25 Employer Contributions for Greater UAL Reduction Funding
Horizon
Estimated
Normal Cost
Minimum UAL
Payment
ADP1 Total UAL
Contribution
Estimated Total
Contribution
15 years $54,489 $147,912 $5,123 $153,035 $207,524
10 years $54,489 $147,912 $51,216 $199,128 $253,617
5 years $54,489 $147,912 $194,525 $342,437 $396,926
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 w ould have to be less or more than the amount show n to have the same effect on the UAL amortization.
Note that the calculations above are based on the projected UAL as of June 30, 2024 as determined in the June 30, 2022 actuarial valuation. New unfunded liabilities can emerge 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 .
CALPERS ACTUARIAL VALUATION - June 30, 2022
Safety Fire Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 6
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 sizes.
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 toward the UAL will be required. Plans with a funded ratio greater than 100% have a negative UAL (or surplus) but are required 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 average 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 illustrative purposes, funded statuses based on a 1% lower and higher average future investment return (discount rate) are as follows:
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.
June 30, 2021 June 30, 2022
1. Present Value of Benefits $6,290,421 $6,548,429
2. Entry Age Accrued Liability 5,688,299 5,974,190
3. Market Value of Assets (MVA) 4,751,938 4,467,448
4. Unfunded Accrued Liability (UAL) [(2) – (3)] $936,361 $1,506,742
5. Funded Ratio [(3) / (2)] 83.5% 74.8%
1% Lower
Average Return
Current
Assumption
1% Higher
Average Return
Discount Rate 5.8% 6.8% 7.8%
1. Entry Age Accrued Liability $6,875,704 $5,974,190 $5,244,046
2. Market Value of Assets (MVA) 4,467,448 4,467,448 4,467,448
3. Unfunded Accrued Liability (UAL) [(1) – (2)] $2,408,256 $1,506,742 $776,598
4. Funded Ratio [(2) / (1)] 65.0% 74.8% 85.2%
CALPERS ACTUARIAL VALUATION - June 30, 2022
Safety Fire Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 7
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 2022-23 is assumed to be 6.80% per year, net of investment and administrative expenses. Future contribution requirements may differ significantly 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 2022-23 and Beyond) Fiscal Year 2024-25 2025-26 2026-27 2027-28 2028-29 2029-30 Rate Plan 1348 Results
Normal Cost % 23.00% 23.0% 23.0% 23.0% 23.0% 23.0%
UAL Payment $147,912 $160,000 $171,000 $181,000 $202,000 $206,000 For ongoing plans, investment gains and losses are amortized using a 5-year ramp up. For more information, please see “Amortization of the Unfunded Actuarial Accrued Liability” under “Actuarial Methods” in Appendix A of the Section 2 Report. 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 contributions 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” in the “Risk Analysis” section. 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, 2022
Safety Fire Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 8
Other Pooled Safety Risk Pool Rate Plans
All of the results presented in this Section 1 report, except those shown on this page, correspond to rate plan 1348. In many cases, employers have additional rate plans within the same risk pool. For cost analysis and budgeting it is useful to consider contributions for these rate plans as a whole rather than individually. The estimated contribution amounts and rates for all of the employer’s rate plans in the Safety Risk Pool are shown below and assume that the total employer payroll within the Safety Risk Pool will grow according to the overall payroll growth assumption of 2.80% per year for three years. In a refinement since the prior year’s report, Classic members who are projected to terminate employment are assumed to be replaced by PEPRA members.
Fiscal Year Fiscal Year
2023-24 2024-25
Estimated Combined Employer Contributions for all Pooled Safety Rate Plans Projected Payroll for the Contribution Year $2,654,762 $3,368,196 Estimated Employer Normal Cost $435,428 $530,975
Required Payment on Amortization Bases $440,947 $528,960 Estimated Total Employer Contributions $876,375 $1,059,935 Estimated Total Employer Contribution Rate (illustrative only) 33.01% 31.47% CALPERS ACTUARIAL VALUATION - June 30, 2022
Safety Fire Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 9
Cost
Actuarial Determination of Plan Cost
Contributions to fund the plan are comprised of two components:
• Normal Cost, expressed as a percentage of total active payroll • Amortization of the Unfunded Accrued Liability (UAL), expressed as a dollar amount For fiscal years prior to 2015-16, the Amortization of UAL component was expressed as a percentage of total active payroll. Starting with FY 2015-16, the Amortization of UAL component was expressed as a dollar amount and invoiced on a monthly basis. There is an option to prepay this amount during July of each fiscal year.
The Normal Cost component is expressed as a percentage of active payroll with employer and employee contributions payable as part of the regular payroll reporting process.
The determination of both components requires complex actuarial calculations. The calculations are based on a set of actuarial assumptions which can be divided into two categories:
• Demographic assumptions (e.g., mortality rates, retirement rates, employment termination rates, disability rates)
• Economic assumptions (e.g., future investment earnings, inflation, salary growth rates) These assumptions reflect CalPERS’ best estimate of future experience of the plan and are long term in nature.
We recognize that all assumptions will not be realized in any given year. For example, the investment earnings at CalPERS have averaged 6.9% over the 20 years ending June 30, 2022, yet individual fiscal year returns have ranged from -23.6% to +21.3%. In addition, CalPERS reviews all actuarial assumptions by conducting in-depth experience studies every four years, with the most recent experience study completed in 2021.
CALPERS ACTUARIAL VALUATION - June 30, 2022
Safety Fire Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 10
Changes Since the Prior Year’s Valuation
Benefits
The standard actuarial practice at CalPERS is to recognize mandated legislative benefit changes in the first annual valuation following the effective date of the legislation. Voluntary benefit changes by plan amendment are generally included in the first valuation that is prepared after the amendment becomes effective, even if the valuation date is prior to the effective date of the amendment.
This valuation generally reflects plan amendments effective before the date of the report. Please refer to the “Plan’s Major Benefit Options” in this report and Appendix B of the Section 2 Report for a summary of the plan provisions used in this valuation.
In 2022, SB 1168 increased the standard retiree lump sum death benefit from $500 to $2,000 for any death occurring on or after July 1, 2023. For pooled plans this is a Class 3 benefit and there is no normal cost surcharge.
The impact on the unfunded liability is included in the pool’s (gain)/loss.
Actuarial Methods and Assumptions
There are no significant changes to the actuarial methods or assumptions for the June 30, 2022 actuarial valuation.
Subsequent Events
This actuarial valuation report reflects fund investment return through June 30, 2022 and statutory/regulatory changes and board actions through January 2023.
During the time period between the valuation date and the publication of this report, inflation has been significantly 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, 2023 valuation. The actual impact of higher inflation on future valuation results will depen d on, among other factors, how long higher inflation persists. At this time, we continue to believe the long-term inflation assumption of 2.3% is appropriate.
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 and Liabilities
• Breakdown of Entry Age Accrued Liability
• Allocation of Plan’s Share of Pool’s Experience/Assumption Change • Development of Plan’s Share of Pool’s Market Value of Assets • Schedule of Amortization Bases
• Amortization Schedule and Alternatives
• Employer Contribution History
• Funding History
CALPERS ACTUARIAL VALUATION - June 30, 2022
Safety Fire Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 12
Breakdown of Entry Age Accrued Liability
Active Members $1,236,128
Transferred Members 1,519,641
Separated Members 30,049
Members and Beneficiaries Receiving Payments 3,188,372
Total $5,974,190
Allocation of Plan’s Share of Pool’s Experience/Assumption Change
It is the policy of CalPERS to ensure equity within the risk pools by allocating the pool’s experience gains/losses and assumption changes in a manner that treats each employer equitably and maintains benefit security for the members of the System while minimizing substantial variations in employer contributions. The Pool’s experience gains/losses and impact of assumption/method changes is allocated to the plan as follows:
1. Plan’s Accrued Liability $5,974,190
2. Projected UAL Balance at 6/30/2022 723,566
3. Other UAL Adjustments (Golden Handshake, Prior Service Purchase, etc.) 0
4. Adjusted UAL Balance at 6/30/2022 for Asset Share 801,317
5. Pool’s Accrued Liability1 28,855,988,965
6. Sum of Pool’s Individual Plan UAL Balances at 6/30/20221 4,262,073,817
7. Pool’s 2021-22 Investment (Gain)/Loss1 3,300,630,707
8. Pool’s 2021-22 Non-Investment (Gain)/Loss1 429,637,362
9. Plan’s Share of Pool’s Investment (Gain)/Loss: [(1) - (4)] ÷ [(5) - (6)] × (7) 694,226
10. Plan’s Share of Pool’s Non-Investment (Gain)/Loss: (1) ÷ (5) × (8) 88,950
11. Plan’s New (Gain)/Loss as of 6/30/2022:(9) + (10) 783,176
12. Increase in Pool’s Accrued Liability due to Change in Assumptions1 0
13. Plan’s Share of Pool’s Change in Assumptions: (1) ÷ (5) × (12) 0
14. Increase in Pool’s Accrued Liability due to Funding Risk Mitigation1 0
15. Plan’s Share of Pool’s Change due to Funding Risk Mitigation: (1) ÷ (5) × (14) 0
16. Offset due to Funding Risk Mitigation 0
17. Plan’s Investment (Gain)/Loss: (9) – (16) 694,226
1 Does not include plans that transferred to Pool on the valuation date.
Development of the Plan’s Share of Pool’s Market Value
of Assets
18. Plan’s UAL: (2) + (3) + (11) + (13) + (15) $1,506,742
19. Plan’s Share of Pool’s MVA: (1) - (18) $4,467,448
CALPERS ACTUARIAL VALUATION - June 30, 2022
Safety Fire Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 13
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 meas ured as of the valuation date: June 30, 2022. • The required employer contributions determined by the valuation are for the fiscal year beginning two years after the valuati on date: FY 2024-25.
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 exp ected payment on the UAL for the fiscal year and adjusting for interest. The expected payment for the first fiscal year is determined by the actuarial valuation two years ago and the contribution for the second year is from the actuarial valuation one year ago. Additional discretionary payments are reflected in the Expected Payments column in the fiscal year they were made by the agency.
Reason for Base
Date
Est.
Ramp
Level
2024-25
Ramp
Shape
Escalation
Rate
Amort.
Period
Balance
6/30/22
Expected
Payment
2022-23
Balance
6/30/23
Expected
Payment
2023-24
Balance
6/30/24
Minimum
Required
Payment
2024-25
Side Fund
2013 or
Prior No Ramp 2.80% 8 642,449 79,371 604,110 80,420 562,080 82,672 Investment (Gain)/Loss 6/30/13 100% Up/Dow n 2.80% 21 163,495 11,490 162,738 11,812 161,597 12,143 Non-Investment (Gain)/Loss 6/30/13 100% Up/Dow n 2.80% 21 (20,173) (1,451) (20,045) (1,455) (19,904) (1,496) Share of Pre-2013 Pool UAL 6/30/13 No Ramp 2.80% 13 107,768 9,739 105,032 9,820 102,026 10,095 Assumption Change 6/30/14 100% Up/Dow n 2.80% 12 163,512 17,524 156,521 17,718 148,854 18,214 Investment (Gain)/Loss 6/30/14 100% Up/Dow n 2.80% 22 (198,936) (13,896) (198,103) (13,922) (197,186) (14,312) Non-Investment (Gain)/Loss 6/30/15 100% Up/Dow n 2.80% 23 (625) (42) (624) (43) (622) (44) Assumption Change 6/30/16 100% Up/Dow n 2.80% 14 76,770 7,314 74,432 7,381 71,866 7,588 Non-Investment (Gain)/Loss 6/30/16 100% Up/Dow n 2.80% 24 (40,225) (2,665) (40,206) (2,666) (40,185) (2,740) Assumption Change 6/30/17 100% Up/Dow n 2.80% 15 111,503 8,220 110,590 10,361 107,403 10,651 Investment (Gain)/Loss 6/30/17 100% Up/Dow n 2.80% 25 (120,462) (6,313) (122,129) (7,887) (122,283) (8,108) Assumption Change 6/30/18 100% Up/Dow n 2.80% 16 166,451 9,080 168,386 12,193 167,236 15,668 Investment (Gain)/Loss 6/30/18 100% Up/Dow n 2.80% 26 (39,719) (1,564) (40,804) (2,082) (41,427) (2,675) Method Change 6/30/18 100% Up/Dow n 2.80% 16 36,855 2,010 37,284 2,700 37,029 3,469 Investment (Gain)/Loss 6/30/19 80% Up Only 0.00% 17 20,136 842 20,635 1,241 20,756 1,654 Non-Investment (Gain)/Loss 6/30/19 No Ramp 0.00% 17 23,474 2,200 22,797 2,161 22,114 2,161 Investment (Gain)/Loss 6/30/20 60% Up Only 0.00% 18 104,711 2,294 109,461 4,500 112,254 6,749 Non-Investment (Gain)/Loss 6/30/20 No Ramp 0.00% 18 18,026 1,648 17,549 1,618 17,070 1,618 Risk Mitigation 6/30/21 No Ramp 0.00% 0 150,299 (3,553) 164,191 169,682 0 0 Risk Mitigation Offset 6/30/21 No Ramp 0.00% 0 (153,738) 0 (164,191) (169,682) 0 0 CALPERS ACTUARIAL VALUATION - June 30, 2022
Safety Fire Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 14
Schedule of Amortization Bases (continued)
Reason for Base
Date
Est.
Ramp
Level
2024-25
Ramp
Shape
Escalation
Rate
Amort.
Period
Balance
6/30/22
Expected
Payment
2022-23
Balance
6/30/23
Expected
Payment
2023-24
Balance
6/30/24
Minimum
Required
Payment
2024-25
Assumption Change 6/30/21 No Ramp 0.00% 19 34,935 (2,776) 40,179 3,613 39,177 3,613 Net Investment (Gain) 6/30/21 40% Up Only 0.00% 19 (500,129) 0 (534,138) (11,481) (558,594) (22,962) Non-Investment (Gain)/Loss 6/30/21 No Ramp 0.00% 19 (22,811) 0 (24,362) (2,191) (23,754) (2,191) Investment (Gain)/Loss 6/30/22 20% Up Only 0.00% 20 694,226 0 741,433 0 791,850 17,021 Non-Investment (Gain)/Loss 6/30/22 No Ramp 0.00% 20 88,950 0 94,999 0 101,459 9,124 Total 1,506,742 119,472 1,485,735 123,811 1,458,816 147,912 The (gain)/loss bases are the plan’s allocated share of the risk pool’s (gain)/loss for the fiscal year as disclosed in “Allocation of Plan’s Share of Pool’s Experience/Assumption Change” earlier in this section. These (gain)/loss bases will be amortized in accordance with the CalPERS amortization policy in effect at the time the base was established.
CALPERS ACTUARIAL VALUATION - June 30, 2022
Safety Fire Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 15
Amortization Schedule and Alternatives
The amortization schedule on the previous page(s) shows the minimum contributions required according to the CalPERS amortization policy. Many agencies have expressed a desire for a more stable pattern of payments or have indicated interest in paying off the unfunded accrued liabilities more quickly than required. As such, we have provided alternative amortization schedules to help analyze the current amortization schedule and illustrate the potential savings of accelerating unfunded liability payments.
Shown on the following page are future year amortization payments based on 1) the current amortization schedule reflecting the individual bases and remaining periods shown on the previous page, and 2) alternative “fresh start” amortization schedules using two sample periods that would both result in interest savings relative to the current amortization schedule. To initiate a fresh start, please contact the plan actuary.
The Current Amortization Schedule typically contains both positive and negative bases. Positive bases result from plan changes, assumption changes, method changes or plan experience that increase unfunded liability. Negative bases result from plan changes, assumption changes, method changes, or plan experience that decrease unfunded liability. The combination of positive and negative bases within an amortization schedule can result in unusual or problematic circumstances in future years, such as:
• When a negative payment would be required on a positive unfunded actuarial liability; or • When the payment would completely amortize the total unfunded liability in a very short time period, and results in a large change in the employer contribution requirement.
In any year when one of the above scenarios occurs, the actuary will consider corrective action such as replacing the existing unfunded liability bases with a single “fresh start” base and amortizing it over 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 fact arise since there will be additional bases added to the amortization schedule in each future year. Should such a scenario arise in any future year, the actuary will take appropriate action based on guidelines in the CalPERS amortization policy.
CALPERS ACTUARIAL VALUATION - June 30, 2022
Safety Fire Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 16
Amortization Schedule and Alternatives (continued)
Alternate Schedules
Current Amortization
Schedule 10 Year Amortization 5 Year Amortization
Date Balance Payment Balance Payment Balance Payment
6/30/2024 1,458,816 147,912 1,458,816 199,128 1,458,816 342,437 6/30/2025 1,405,157 159,789 1,352,228 199,127 1,204,127 342,437 6/30/2026 1,335,573 171,349 1,238,394 199,128 932,119 342,437 6/30/2027 1,249,315 180,768 1,116,818 199,127 641,615 342,437 6/30/2028 1,147,456 201,777 986,976 199,128 331,356 342,437 6/30/2029 1,016,961 205,880 848,303 199,128
6/30/2030 873,348 210,096 700,201 199,127
6/30/2031 715,613 214,425 542,029 199,128
6/30/2032 542,680 111,229 373,100 199,128
6/30/2033 464,634 108,125 192,684 199,128
6/30/2034 384,489 102,800
6/30/2035 304,396 94,248
6/30/2036 227,695 79,853
6/30/2037 160,656 55,381
6/30/2038 114,350 44,380
6/30/2039 76,264 35,058
6/30/2040 45,218 28,534
6/30/2041 18,805 19,434
6/30/2042
6/30/2043
6/30/2044
6/30/2045
6/30/2046
6/30/2047
6/30/2048
6/30/2049
Total 2,171,038 1,991,277 1,712,185
Interest Paid 712,222 532,461 253,369
Estimated Savings 179,761 458,853
CALPERS ACTUARIAL VALUATION - June 30, 2022
Safety Fire Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 17
Employer Contribution History
The table below provides a recent history of the required and discretionary employer contributions for the plan.
The required amounts are based on the actuarial valuation from two years prior without subsequent adjustments, if any. Additional discretionary payments before July 1, 2019 or after April 28, 2023 are not included. [
Fiscal
Year
Employer
Normal Cost
Unfunded Liability
Payment ($)
Additional Discretionary
Payments
2016 - 17 16.656% $82,595 N/A
2017 - 18 16.842% 89,933 N/A
2018 - 19 17.614% 100,012 N/A
2019 - 20 18.928% 111,772 250,000
2020 - 21 20.585% 123,274 0
2021 - 22 20.64% 123,617 150,000
2022 - 23 20.64% 136,201 0
2023 - 24 22.83% 123,811
2024 - 25 23.00% 147,912
Funding History
The table below shows the recent history of the actuarial accrued liability, share of the pool’s market value of assets, unfunded accrued liability, funded ratio, and annual covered payroll.
Valuation
Date
Accrued
Liability
(AL)
Share of Pool’s
Market Value of
Assets (MVA)
Unfunded
Accrued Liability
(UAL)
Funded
Ratio
Annual
Covered
Payroll
06/30/2013 $2,332,888 $1,237,295 $1,095,593 53.0% $416,033 06/30/2014 2,734,967 1,661,599 1,073,368 60.8% 431,800
06/30/2015 3,023,743 1,858,294 1,165,449 61.5% 439,972
06/30/2016 3,589,180 2,227,341 1,361,839 62.1% 406,989
06/30/2017 4,097,128 2,730,883 1,366,245 66.7% 463,947
06/30/2018 4,577,676 3,055,682 1,521,994 66.8% 350,087
06/30/2019 4,992,360 3,417,708 1,574,652 68.5% 250,721
06/30/2020 5,296,423 3,877,254 1,419,169 73.2% 245,912
06/30/2021 5,688,299 4,751,938 936,361 83.5% 245,084
06/30/2022 5,974,190 4,467,448 1,506,742 74.8% 252,632
Risk Analysis
• Future Investment Return Scenarios
• Discount Rate Sensitivity
• Mortality Rate Sensitivity
• Maturity Measures
• Maturity Measures History
• Funded Status – Termination Basis
CalPERS Actuarial Valuation – June 30, 2022
Safety Fire Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 19
Future Investment Return Scenarios
Analysis using the investment return scenarios from the Asset Liability Management process completed in 2021 was performed to determine the effects of various future investment returns on required employer contributions. The projections below reflect the impact of the CalPERS Funding Risk Mitigation policy. The projections also assume that all other actuarial assumptions will be realized and that no further changes in assumptions, contributions, benefits, or funding will occur.
The first table shows projected contribution requirements if the fund were to earn either 3.0% or 10.8% annually. These alternate investment returns were chosen because 90% of long-term average returns are expected to fall between them over the 20-year period ending June 30, 2042.
Required contributions outside of this range are also possible. In particular, whereas it is unlikely that investment returns will average less than 3.0% or greater than 10.8% over a 20-year period, the likelihood of a single investment return less than 3.0% or greater than 10.8% in any given year is much greater. The following analysis illustrates the effect of an extreme, single year investment return.
The portfolio has an expected volatility (or standard deviation) of 12.0% per year. Accordingly, in any given year there is a 16% probability that the annual return will be -5.2% or less and a 2.5% probability that the annual return will be -17.2% or less. These returns represent one and two standard deviations below the expected return of 6.8%.
The following table shows the effect of a one or two standard deviation investment loss in FY 2022-23 on the FY 2025-26 contribution requirements. Note that a single-year investment gain or loss decreases or increases the required UAL contribution amount incrementally for each of the next five years, not just one, due to the 5 - year ramp in the amortization policy. However, the contribution requirements beyond the first year are also impacted by investment returns beyond the first year. Historically, significant downturns in the market are often followed by higher than average returns. Such investment gains would offset the impact of these single year negative returns in years beyond FY 2025-26.
Assumed Annual Return for
Fiscal Year 2022-23
Required
Employer
Contributions
Projected
Employer
Contributions
2024-25 2025-26
(17.2)% (2 standard deviation loss)
Normal Cost Rate 23.00% 23.0%
UAL Contribution $147,912 $186,000
(5.2)% (1 standard deviation loss)
Normal Cost Rate 23.00% 23.0%
UAL Contribution $147,912 $173,000
• Without investment gains (returns higher than 6.8%) in FY 2023-24 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 2022-23.
• The Pension Outlook Tool can be used to model projected contributions for these scenarios beyond FY 2025-26 as well as to model other investment return scenarios .
Assumed Annual Return
FY 2022-23
through 2041-42
Projected Employer Contributions
2025-26 2026-27 2027-28 2028-29 2029-30
3.0% (5th percentile)
Normal Cost Rate 23.0% 23.0% 23.0% 23.0% 23.0%
UAL Contribution $164,000 $184,000 $206,000 $244,000 $269,000
10.8% (95th percentile)
Normal Cost Rate 23.4% 23.8% 24.2% 24.6% 25.0%
UAL Contribution $156,000 $160,000 $158,000 $163,000 $0 CalPERS Actuarial Valuation – June 30, 2022
Safety Fire Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 20
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, 2022 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, 2022 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 39.99% 31.99% 25.87%
b) Accrued Liability $6,875,704 $5,974,190 $5,244,046
c) Market Value of Assets $4,467,448 $4,467,448 $4,467,448 d) Unfunded Liability/(Surplus) [(b) - (c)] $2,408,256 $1,506,742 $776,598 e) Funded Ratio 65.0% 74.8% 85.2%
Sensitivity to the Price Inflation Assumption
As of June 30, 2022 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 33.57% 31.99% 29.04%
b) Accrued Liability $6,207,847 $5,974,190 $5,471,057
c) Market Value of Assets $4,467,448 $4,467,448 $4,467,448 d) Unfunded Liability/(Surplus) [(b) - (c)] $1,740,399 $1,506,742 $1,003,609 e) Funded Ratio 72.0% 74.8% 81.7%
Mortality Rate Sensitivity
The following table looks at the change in the June 30, 2022 plan costs and funded status under two different longevity scenarios, namely assuming post-retirementrates of mortality are 10% lower or 10% higher than our current mortality assumptions adopted in 2021. This type of analysis highlights the impact on the plan of a change in the mortality assumption.
As of June 30, 2022 10% Lower
Mortality Rates
Current
Assumptions
10% Higher
Mortality Rates
a) Total Normal Cost 32.44% 31.99% 31.57%
b) Accrued Liability $6,071,077 $5,974,190 $5,884,173
c) Market Value of Assets $4,467,448 $4,467,448 $4,467,448 d) Unfunded Liability/(Surplus) [(b) - (c)] $1,603,629 $1,506,742 $1,416,725 e) Funded Ratio 73.6% 74.8% 75.9%
CalPERS Actuarial Valuation – June 30, 2022
Safety Fire Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 21
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.
Since it is the employer that bears the risk, it is appropriate to perform this analysis on a pension plan level considering all rate plans. The following measures are for one rate plan only. One way to look at the maturity level of CalPERS and its plans is to look at the ratio of a plan’s retiree liability to its total liability. A pension plan in its infancy will have a very low ratio of retiree liability to total liability. As the plan matures, the ratio starts increasing. A mature plan will often have a ratio above 60%-65%.
Ratio of Retiree Accrued Liability to
Total Accrued Liability June 30, 2021 June 30, 2022
1. Retired Accrued Liability $3,156,712 $3,188,372
2. Total Accrued Liability 5,688,299 5,974,190
3. Ratio of Retiree AL to Total AL [(1) / (2)] 0.55 0.53 Another measure of maturity level of CalPERS and its plans is to look at the ratio of actives to retirees, also called the support ratio. A pension plan in its infancy will have a very high ratio of active to retired members. As the plan matures and members retire, the ratio declines. A mature plan will often have a ratio near or below one.
To calculate the support ratio for the rate plan, retirees and beneficiaries receiving a continuance are each counted as one, even though they may have only worked a portion of their 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, 2021, was 0.78 and was calculated consistently with how it is for the individual rate plan. Note that to calculate the support ratio for all public agency plans, a retiree with service from more than one CalPERS agency is counted as a retiree more than once.
Support Ratio June 30, 2021 June 30, 2022
1. Number of Actives 3 3
2. Number of Retirees 6 6
3. Support Ratio [(1) / (2)] 0.50 0.50
CalPERS Actuarial Valuation – June 30, 2022
Safety Fire Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 22
Maturity Measures (continued)
The actuarial calculations supplied in this communication are based on various assumptions about long -term demographic and economic behavior. Unless these assumptions (e.g., terminations, deaths, disabilities, retirements, salary growth, investment return) are exactly realized each year, there will be differences on a yearto-year basis. The year-to-year differences between actual experience and the assumptions are called actuarial gains and losses and serve to lower or raise required employer contributions from one year to the next.
Therefore, employer contributions will inevitably fluctuate, especially due to the ups and downs of investment returns.
Asset Volatility Ratio
Shown in the table below is the asset volatility ratio (AVR), which is the ratio of market value of assets to payroll.
Plans that have higher AVR experience more volatile employer contributions (as a percentage of payroll) due to investment return. For example, a plan with AVR of 8 may experience twice the contribution volatility due to investment return volatility than a plan with 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 LVR of 8 is expected to have twice the contribution volatility of a plan with LVR of 4. It should be noted that this ratio indicates a longer-term potential for contribution volatility, since the AVR, described above, will tend to move closer to the LVR as the funded ratio approaches 100%.
Contribution Volatility June 30, 2021 June 30, 2022
1. Market Value of Assets $4,751,938 $4,467,448
2. Payroll 245,084 252,632
3. Asset Volatility Ratio (AVR) [(1) / (2)] 19.4 17.7
4. Accrued Liability $5,688,299 $5,974,190
5. Liability Volatility Ratio (LVR) [(4) / (2)] 23.2 23.6 Maturity Measures History
Valuation Date
Ratio of
Retiree Accrued Liability
to
Total Accrued Liability
Support Ratio
Asset
Volatility
Ratio
Liability
Volatility
Ratio
06/30/2017 0.24 1.75 5.9 8.8
06/30/2018 0.22 1.25 8.7 13.1
06/30/2019 0.47 0.80 13.6 19.9
06/30/2020 0.58 0.67 15.8 21.5
06/30/2021 0.55 0.50 19.4 23.2
06/30/2022 0.53 0.50 17.7 23.6
CalPERS Actuarial Valuation – June 30, 2022
Safety Fire Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 23
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, 2022. The accrued liability on a termination basis (termination liability) is calculated differently compared to 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 PERF and consequently, a lower discount rate is assumed. The lower discount rate for the Terminated Agency Pool results in higher liabilities for terminated plans.
The effective termination discount rate will depend on actual market rates of return for risk-free securities on the date of termination. As market discount rates are variable, the table below shows a range for the hypothetical termination liability based on the lowest and highest interest rates observed during an approximate 19-month period from 12 months before the valuation date to seven months after.
Discount Rate: 1.75%
Price Inflation: 2.50%
Discount Rate: 4.50%
Price Inflation: 2.75%
Market
Value of
Assets (MVA)
Termination
Liability1,2
Funded
Ratio
Unfunded
Termination
Liability
Termination
Liability1,2
Funded
Ratio
Unfunded
Termination
Liability
$4,467,448 $13,206,589 33.8% $8,739,141 $8,321,697 53.7% $3,854,249 1 The termination liabilities calculated above include a 5% contingency load. The contingency load and other actuarial assumptions can be found in Appendix A of the Section 2 report. 2 The discount rate used for termination valuations is a w eighted average of the 10-year and 30-year U.S. Treasury yields w here the weights are based on matching asset and liability durations as of the termination date. The discount rates used in the table are based on 20-year Treasury bonds, rounded to the nearest quarter percentage point, which is a good proxy for most plans. The 20-year Treasury yield w as 3.38% on June 30, 2022, the valuation date.
In order to terminate the plan, first contact our Pension Contract Services unit to initiate a Resolution of Intent to Terminate. The completed Resolution will allow the plan actuary to provide a preliminary termination valuation with a more up-to-date estimate of the plan liabilities. Before beginning this process, please consult with the plan actuary.
CalPERS Actuarial Valuation – June 30, 2022
Safety Fire Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 24
Participant Data
The table below shows a summary of the plan’s member data upon which this valuation is based:
June 30, 2021 June 30, 2022
Active Members
Counts 3 3
Average Attained Age 48.4 49.4
Average Entry Age to Rate Plan 36.2 36.1
Average Years of Credited Service 12.3 13.3
Average Annual Covered Pay $81,695 $84,211
Annual Covered Payroll $245,084 $252,632
Present Value of Future Payroll $1,807,088 $1,717,848
Transferred Members 8 8
Separated Members 3 2
Retired Members and Beneficiaries*
Counts 6 6
Average Annual Benefits $35,335 $36,320
Total Annual Benefits $212,013 $217,917
Counts of members included in the valuation are counts of the records processed by the valuation. Multiple records may exist for those who have service in more than one valuation group. This does not result in double counting of liabilities.
* Values include community property settlements.
List of Class 1 Benefit Provisions
This plan has the additional Class 1 Benefit Provisions:
• None
CALPERS ACTUARIAL VALUATION - June 30, 2022
Safety Fire Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 25
Plan’s Major Benefit Options
Shown below is a summary of the major optional benefits for which the agency has contracted. A description of principal standard and optional plan provisions is in Section 2.
Benefit Group
Member Category Fire Fire
Demographics
Actives Yes No
Transfers/Separated Yes No
Receiving Yes Yes
Benefit Group Key 100558 207857
Benefit Provision
Benefit Formula 3% @ 55
Social Security Coverage Yes
Full/Modified Modified
Employee Contribution Rate 9.00%
Final Average Compensation Period Three Year
Sick Leave Credit Yes
Non-Industrial Disability Standard
Industrial Disability Standard
Pre-Retirement Death Benefits
Optional Settlement 2 Yes
1959 Survivor Benefit Level No
Special Yes
Alternate (firefighters) No
Post-Retirement Death Benefits
Lump Sum $2000 $2000
Survivor Allowance (PRSA) No No
COLA 2% 2%
CALPERS ACTUARIAL VALUATION - June 30, 2022
Safety Fire Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 26
Section 2
CAL I F O RNI A P UBL I C EM P L O YEES ’ RET I REM ENT S YS T EM Risk Pool Actuarial Valuation Information
Section 2 may be found on the
CalPERS website (www.calpers.ca.gov)
in the Forms and Publications section
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 2023
PEPRA Safety Police Plan of the City of Kingsburg (CalPERS ID: 1210886769) Annual Valuation Report as of June 30, 2022
Dear Employer,
Attached to this letter is the June 30, 2022 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) 2024-25. 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.
Because this plan is in a risk pool, the following valuation report has been separated into two sections:
• Section 1 contains specific information for the plan including the development of the current and projected employer contributions, and
• Section 2 contains the Risk Pool Actuarial Valuation appropriate to the plan as of June 30, 2022.
Section 2 can be found on the CalPERS website (www.calpers.ca.gov). From the home page, go to “Forms & Publications” and select “View All”. In the search box, enter “Risk Pool” and from the results list download the Safety Risk Pool Actuarial Valuation Report for June 30, 2022.
Actuarial valuations are based on assumptions regarding future plan experience including investment return and payroll growth, eligibility for the types of benefits provided, and longevity among retirees. The CalPERS Board of Administration (board) adopts these assumptions after considering the advice of CalPERS actuarial and investment teams and other professionals. Each actuarial valuation reflects all prior differences between actual and assumed experience and adjusts the contribution requirements as needed. This valuation is based on an investment return assumption of 6.8%, which was adopted by the board in November 2021. Other assumptions used in this report are those recommended in the CalPERS Experience Study and Review of Actuarial Assumptions report from November 2021.
Required Contributions
The table below shows the minimum required employer contributions and the PEPRA member contribution rate for FY 2024-25 along with estimates of the required contributions for FY 2025-26. Employee contributions other than cost sharing (whether paid by the employer or the employee) are in addition to the results shown below. The required employer 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
2024-25 13.76% $8,248 13.75%
Projected Results
2025-26 13.8% $14,000 TBD
PEPRA Safety Police Plan of the City of Kingsburg
(CalPERS ID: 1210886769)
Annual Valuation Report as of June 30, 2022
The actual investment return for FY 2022-23 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 2022- 23 differs from 6.8%, the actual contribution requirements for FY 2025-26 will differ from those shown above.
For additional details regarding the assumptions and methods used for these projections,please refer to the “Projected Employer Contributions” in the “Highlights and Executive Summary” section. This section also contains projected required contributions through FY2029-30.
Changes from Previous Year’s Valuations
There are no significant changes in actuarial assumptions or policies in the 2022 actuarial valuation. There may be changes specific to the plan such as contract amendments and funding changes.
Further descriptions of general changes are included in “Highlights and Executive Summary” and in Appendix A of the Section 2 report in “Actuarial Methods and Assumptions.” The effects of any changes on the required contributions are included in “Reconciliation of Required Employer Contributions,” also in the Section 2 report.
Questions
A CalPERS actuary is available to answer questions about this report. Other questions may be directed to the Customer Contact Center at (888)-CalPERS or (888-225-7377).
Sincerely,
SCOTT TERANDO, ASA, EA, MAAA, FCA, CFA
Chief Actuary, CalPERS
RANDALL DZIUBEK, ASA, MAAA
Deputy Chief Actuary, Valuation Services, CalPERS
Actuarial Valuation
as of June 30, 2022
for the
PEPRA Safety Police Plan
of the
City of Kingsburg
(CalPERS ID: 1210886769)
Required Contributions
for Fiscal Year
July 1, 2024 - June 30, 2025
Table of Contents
Section 1 – Plan Specific Information
Section 2 – Risk Pool Actuarial Valuation Information
Section 1
CAL I F O RNI A P UBL I C EM P L O YEES ’ RET I REM ENT S YS T EM Plan Specific Information
for the
PEPRA Safety Police Plan
of the
City of Kingsburg
(CalPERS ID: 1210886769)
(Rate Plan ID: 25615)
Rate Plan belonging to the Safety Risk Pool
Table of Contents
Actuarial Certification 1
Highlights and Executive Summary
Introduction 3
Purpose of Section 1 3
Required Contributions 4
Additional Discretionary Employer Contributions 5
Funded Status – Funding Policy Basis 6
Projected Employer Contributions 7
Other Pooled Safety Risk Pool Rate Plans 8
Cost 9
Changes Since the Prior Year’s Valuation 10
Subsequent Events 10
Assets and Liabilities
Breakdown of Entry Age Accrued Liability 12
Allocation of Plan’s Share of Pool’s Experience/Assumption Change 12 Development of Plan’s Share of Pool’s Market Value of Assets 12 Schedule of Amortization Bases 13
Amortization Schedule and Alternatives 14
Employer Contribution History 16
Funding History 16
Risk Analysis
Future Investment Return Scenarios 18
Discount Rate Sensitivity 19
Mortality Rate Sensitivity 19
Maturity Measures 20
Maturity Measures History 21
Funded Status – Termination Basis 22
Participant Data 23
List of Class 1 Benefit Provisions 23
Plan’s Major Benefit Options 24
PEPRA Member Contribution Rates 25
CALPERS ACTUARIAL VALUATION - June 30, 2022
PEPRA Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 1
Actuarial Certification
To the best of our knowledge, this report, compris ed of Sections 1 and 2, is complete and accurate and contains sufficient information to disclose, fully and fairly, the funded condition of the PEPRA Safety Police Plan of the City of Kingsburg and satisfies the actuarial valuation requirements of Government Code section 7504. This valuation is based on the member and financial data as of June 30, 2022 provided by the various CalPERS databases and the benefits under this plan with CalPERS as of the date this report was produced. Section 1 of this report is based on the member and financial data for City of Kingsburg, while Section 2 is based on the corresponding information for all agencies participating in the Safety Risk Pool to which the plan belongs.
As set forth in Section 2 of this report, the pool actuaries have certified that, in their opinion, the valuation of the Safety Risk Pool has been performed in accordance with generally accepted actuarial principles, in accordance with standards of practice prescribed by the Actuarial Standards Board, and that the assumptions and methods are internally consistent and reasonable for the risk pool as of the date of this valuation and as prescribed by the CalPERS Board of Administration according to provisions set forth in the California Public Employees’ Retirement Law.
Having relied upon the information set forth in Section 2 of this report and based on the census and benefit provision information for the rate plan, it is my opinion as the plan actuary that the Unfunded Accrued Liability amortization bases as of June 30, 2022 and employer contribution as of July 1, 2024 have been properly and accurately determined in accordance with the principles and standards stated above.
The undersigned is an actuary who satisfies the Qualification Standards for Actuaries Issuing Statements of Actuarial Opinion in the United States with regard to pensions.
TONY CUNY, ASA, MAAA
Senior Actuary, CalPERS
Highlights and Executive Summary
• Introduction
• Purpose of Section 1
• Required Contributions
• Additional Discretionary Employer Contributions
• Funded Status – Funding Policy Basis
• Projected Employer Contributions
• Other Pooled Safety Risk Pool Rate Plans
• Cost
• Changes Since the Prior Year’s Valuation
• Subsequent Events
CALPERS ACTUARIAL VALUATION - June 30, 2022
PEPRA Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 3
Introduction
This report presents the results of the June 30, 2022 actuarial valuation of the PEPRA Safety Police Plan of the City of Kingsburg of the California Public Employees’ Retirement System (CalPERS). This actuarial valuation sets the minimum required contributions for fiscal year (FY) 2024-25.
Purpose of Section 1
This Section 1 report for the PEPRA Safety Police Plan of the City of Kingsburg of CalPERS was prepared by the Actuarial Office using data as of June 30, 2022. The purpose of the valuation is to:
• Set forth the assets and accrued liabilities of this rate plan as of June 30, 2022; • Determine the minimum required employer contributions for this rate plan for FY July 1, 2024 through June 30, 2025;
• Determine the required member contribution rate for FY July 1, 2024 through June 30, 2025 for employees subject to the California Public Employees' Pension Reform Act of 2013 (PEPRA); and • Provide actuarial information as of June 30, 2022 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 a Cost Sharing Employer Defined Benefit Pension Plan. A separate accounting valuation report for such purposes is 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 the plan 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 Standard 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, 2022
PEPRA Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 4
Required Contributions
Fiscal Year
Required Employer Contributions 2024-25
Employer Normal Cost Rate 13.76%
Plus
Required Payment on Amortization Bases1 $8,248
Paid either as
1) Monthly Payment $687.33
Or
2) Annual Prepayment Option* $7,981
Required PEPRA Member Contribution Rate 13.75%
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) plus the Employer 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 additional detail regarding the determination of the required contribution rate for PEPRA members, see “PEPRA Member Contribution Rates” section.
Fiscal Year Fiscal Year
2023-24 2024-25
Development of Normal Cost as a Percentage of Payroll
Base Total Normal Cost for Formula 27.29% 27.51%
Surcharge for Class 1 Benefits 2
None 0.00% 0.00%
Phase out of Normal Cost Difference3 0.00% 0.00%
Plan’s Total Normal Cost 27.29% 27.51%
Offset Due to Employee Contributions 13.75% 13.75%
Employer Normal Cost Rate 13.54% 13.76%
1 The required payment on amortization bases does not take into account any additional discretionary payment made after April 28, 2023.
2 Section 2 of this report contains a list of Class 1 benefits and corresponding surcharges. 3 When a rate plan joins the pool, the difference in normal cost betw een the pool and the rate plan is phased out over a fiveyear period in accordance with the CalPERS contribution allocation policy.
CALPERS ACTUARIAL VALUATION - June 30, 2022
PEPRA Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 5
Additional Discretionary Employer Contributions
The minimum required employer contribution towards the Unfunded Accrued Liability (UAL) for this rate plan for FY 2024-25 is $8,248. 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 2024-25 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 the “Amortization Schedule and Alternatives” section of the report.
Agencies considering making an ADP should contact CalPERS for additional information.
Minimum Required Employer Contribution for Fiscal Year 2024-25 Estimated
Normal Cost
Minimum UAL
Payment
ADP Total UAL
Contribution
Estimated Total
Contribution
$195,883 $8,248 $0 $8,248 $204,131
The minimum required contribution above is less than interest on the UAL. With no ADP the UAL is projected to increase over the following year. If the minimum UAL payment were split between interest and principal, the principal portion would be negative. This situation is referred to as negative amortization. If only the minimum required contribution is made, contributions are not expected to exceed interest on the UAL until FY 2027-28, as shown in the “Amortization Schedule and Alternatives” section of the report (see columns labeled “Current Amortization Schedule”).
Fiscal Year 2024-25 Employer Contribution Necessary to Avoid Negative Amortization Estimated
Normal Cost
Minimum UAL
Payment
ADP1 Total UAL
Contribution
Estimated Total
Contribution
$195,883 $8,248 $10,830 $19,078 $214,961
Alternative Fiscal Year 2024-25 Employer Contributions for Greater UAL Reduction Funding
Horizon
Estimated
Normal Cost
Minimum UAL
Payment
ADP1 Total UAL
Contribution
Estimated Total
Contribution
20 years $195,883 $8,248 $17,825 $26,073 $221,956
15 years $195,883 $8,248 $22,169 $30,417 $226,300
10 years $195,883 $8,248 $31,330 $39,578 $235,461
5 years $195,883 $8,248 $59,813 $68,061 $263,944
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 w ould have to be less or more than the amount show n to have the same effect on the UAL amortization.
Note that the calculations above are based on the projected UAL as of June 30, 2024 as determined in the June 30, 2022 actuarial valuation. New unfunded liabilities can emerge 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 .
CALPERS ACTUARIAL VALUATION - June 30, 2022
PEPRA Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 6
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 sizes.
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 toward the UAL will be required. Plans with a funded ratio greater than 100% have a negative UAL (or surplus) but are required 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 average future returns are less than the expected return, calculated normal costs and UAL contributions will not be s ufficient 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 illustrative purposes, funded statuses based on a 1% lower and higher average future investment return (discount rate) are as follows:
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.
June 30, 2021 June 30, 2022
1. Present Value of Benefits $5,026,358 $6,084,764
2. Entry Age Accrued Liability 1,314,958 1,734,547
3. Market Value of Assets (MVA) 1,349,855 1,494,606
4. Unfunded Accrued Liability (UAL) [(2) – (3)] ($34,897) $239,941
5. Funded Ratio [(3) / (2)] 102.7% 86.2%
1% Lower
Average Return
Current
Assumption
1% Higher
Average Return
Discount Rate 5.8% 6.8% 7.8%
1. Entry Age Accrued Liability $2,123,262 $1,734,547 $1,431,365
2. Market Value of Assets (MVA) 1,494,606 1,494,606 1,494,606
3. Unfunded Accrued Liability (UAL) [(1) – (2)] $628,656 $239,941 ($63,241)
4. Funded Ratio [(2) / (1)] 70.4% 86.2% 104.4%
CALPERS ACTUARIAL VALUATION - June 30, 2022
PEPRA Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 7
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 2022-23 is assumed to be 6.80% per year, net of investment and administrative expenses. Future contribution requirements may differ significantly 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 2022-23 and Beyond) Fiscal Year 2024-25 2025-26 2026-27 2027-28 2028-29 2029-30 Rate Plan 25615 Results
Normal Cost % 13.76% 13.8% 13.8% 13.8% 13.8% 13.8%
UAL Payment $8,248 $14,000 $19,000 $25,000 $31,000 $31,000 For ongoing plans, investment gains and losses are amortized using a 5-year ramp up. For more information, please see “Amortization of the Unfunded Actuarial Accrued Liability” under “Actuarial Methods” in Appendix A of the Section 2 Report. 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 contributions 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.
The required contribution for FY 2024-25 is less than interest on the UAL, a situation referred to as negative amortization, as explained in the “Additional Discretionary Employer Contributions” section earlier in this report.
If only the minimum required contribution is made, contributions are not expected to exceed interest on the UAL until FY 2027-28, as shown in the “Amortization Schedule and Alternatives” section of the report (see columns labelled “Current Amortization Schedule”).
For projected contributions under alternate investment return scenarios, please see the “Future Investment Return Scenarios” in the “Risk Analysis” section. 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, 2022
PEPRA Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 8
Other Pooled Safety Risk Pool Rate Plans
All of the results presented in this Section 1 report, except those shown on this page, correspond to rate plan 25615. In many cases, employers have additional rate plans within the same risk pool. For cost analysis and budgeting it is useful to consider contributions for these rate plans as a whole rather than individually. The estimated contribution amounts and rates for all of the employer’s rate plans in the Safety Risk Pool are shown below and assume that the total employer payroll within the Safety Risk Pool will grow according to the overall payroll growth assumption of 2.80% per year for three years. In a refinement since the prior year’s report, Classic members who are projected to terminate employment are assumed to be replaced by PEPRA members.
Fiscal Year Fiscal Year
2023-24 2024-25
Estimated Combined Employer Contributions for all Pooled Safety Rate Plans Projected Payroll for the Contribution Year $2,654,762 $3,368,196 Estimated Employer Normal Cost $435,428 $530,975
Required Payment on Amortization Bases $440,947 $528,960 Estimated Total Employer Contributions $876,375 $1,059,935 Estimated Total Employer Contribution Rate (illustrative only) 33.01% 31.47% CALPERS ACTUARIAL VALUATION - June 30, 2022
PEPRA Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 9
Cost
Actuarial Determination of Plan Cost
Contributions to fund the plan are comprised of two components:
• Normal Cost, expressed as a percentage of total active payroll • Amortization of the Unfunded Accrued Liability (UAL), expressed as a dollar amount For fiscal years prior to 2015-16, the Amortization of UAL component was expressed as a percentage of total active payroll. Starting with FY 2015-16, the Amortization of UAL component was expressed as a dollar amount and invoiced on a monthly basis. There is an option to prepay this amount during July of each fiscal year.
The Normal Cost component is expressed as a percentage of active payroll with employer and employee contributions payable as part of the regular payroll reporting process.
The determination of both components requires complex actuarial calculations. The calculations are based on a set of actuarial assumptions which can be divided into two categories:
• Demographic assumptions (e.g., mortality rates, retirement rates, employment termination rates, disability rates)
• Economic assumptions (e.g., future investment earnings, inflation, salary growth rates) These assumptions reflect CalPERS’ best estimate of future experience of the plan and are long term in nature.
We recognize that all assumptions will not be realized in any given year. For example, the investment earnings at CalPERS have averaged 6.9% over the 20 years ending June 30, 2022, yet individual fiscal year returns have ranged from -23.6% to +21.3%. In addition, CalPERS reviews all actuarial assumptions by conducting in-depth experience studies every four years, with the most recent experience study completed in 2021.
CALPERS ACTUARIAL VALUATION - June 30, 2022
PEPRA Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 10
Changes Since the Prior Year’s Valuation
Benefits
The standard actuarial practice at CalPERS is to recognize mandated legislative benefit changes in the first annual valuation following the effective date of the legislation. Voluntary benefit changes by plan amendment are generally included in the first valuation that is prepared after the amendment becomes effective, even if the valuation date is prior to the effective date of the amendment.
This valuation generally reflects plan amendments effective before the date of the report. Please refer to the “Plan’s Major Benefit Options” in this report and Appendix B of the Section 2 Report for a summary of the plan provisions used in this valuation.
In 2022, SB 1168 increased the standard retiree lump sum death benefit from $500 to $2,000 for any death occurring on or after July 1, 2023. For pooled plans this is a Class 3 benefit and there is no normal cost surcharge.
The impact on the unfunded liability is included in the pool’s (gain)/loss.
Actuarial Methods and Assumptions
There are no significant changes to the actuarial methods or assumptions for the June 30, 2022 actuarial valuation.
Subsequent Events
This actuarial valuation report reflects fund investment return through June 30, 2022 and statutory/regulatory changes and board actions through January 2023.
During the time period between the valuation date and the publication of this report, inflation has been significantly 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, 2023 valuation. The actual impact of higher inflation on future valuation results will depend on, among other factors, how long higher inflation persists. At this time, we continue to believe the long-term inflation assumption of 2.3% is appropriate.
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 and Liabilities
• Breakdown of Entry Age Accrued Liability
• Allocation of Plan’s Share of Pool’s Experience/Assumption Change • Development of Plan’s Share of Pool’s Market Value of Assets • Schedule of Amortization Bases
• Amortization Schedule and Alternatives
• Employer Contribution History
• Funding History
CALPERS ACTUARIAL VALUATION - June 30, 2022
PEPRA Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 12
Breakdown of Entry Age Accrued Liability
Active Members $1,466,238
Transferred Members 265,620
Separated Members 2,689
Members and Beneficiaries Receiving Payments 0
Total $1,734,547
Allocation of Plan’s Share of Pool’s Experience/Assumption Change
It is the policy of CalPERS to ensure equity within the risk pools by allocating the pool’s experience gains/losses and assumption changes in a manner that treats each employer equitably and maintains benefit security for the members of the System while minimizing substantial variations in employer contributions. The Pool’s experience gains/losses and impact of assumption/method changes is allocated to the plan as follows:
1. Plan’s Accrued Liability $1,734,547
2. Projected UAL Balance at 6/30/2022 (21,564)
3. Other UAL Adjustments (Golden Handshake, Prior Service Purchase, etc.) 0
4. Adjusted UAL Balance at 6/30/2022 for Asset Share (21,564)
5. Pool’s Accrued Liability1 28,855,988,965
6. Sum of Pool’s Individual Plan UAL Balances at 6/30/20221 4,262,073,817
7. Pool’s 2021-22 Investment (Gain)/Loss1 3,300,630,707
8. Pool’s 2021-22 Non-Investment (Gain)/Loss1 429,637,362
9. Plan’s Share of Pool’s Investment (Gain)/Loss: [(1) - (4)] ÷ [(5) - (6)] × (7) 235,679
10. Plan’s Share of Pool’s Non-Investment (Gain)/Loss: (1) ÷ (5) × (8) 25,826
11. Plan’s New (Gain)/Loss as of 6/30/2022:(9) + (10) 261,505
12. Increase in Pool’s Accrued Liability due to Change in Assumptions1 0
13. Plan’s Share of Pool’s Change in Assumptions: (1) ÷ (5) × (12) 0
14. Increase in Pool’s Accrued Liability due to Funding Risk Mitigation1 0
15. Plan’s Share of Pool’s Change due to Funding Risk Mitigation: (1) ÷ (5) × (14) 0
16. Offset due to Funding Risk Mitigation 0
17. Plan’s Investment (Gain)/Loss: (9) – (16) 235,679
18. Partial Fresh Start Base: (2) + (17) 214,115
1 Does not include plans that transferred to Pool on the valuation date.
Development of the Plan’s Share of Pool’s Market Value
of Assets
19. Plan’s UAL: (2) + (3) + (11) + (13) + (15) $239,941
20. Plan’s Share of Pool’s MVA: (1) - (19) $1,494,606
CALPERS ACTUARIAL VALUATION - June 30, 2022
PEPRA Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 13
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, 2022. • The required employer contributions determined by the valuation are for the fiscal year beginning two years after the valuati on date: FY 2024-25.
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 rol led 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 exp ected payment on the UAL for the fiscal year and adjusting for interest. The expected payment for the first fiscal year is determined by the actuarial valuation two years ago and the contributi on for the second year is from the actuarial valuation one year ago. Additional discretionary payments are reflected in the Expected Payments column in the fiscal year they were made by the agency.
Reason for Base
Date
Est.
Ramp
Level
2024-25
Ramp
Shape
Escalation
Rate
Amort.
Period
Balance
6/30/22
Expected
Payment
2022-23
Balance
6/30/23
Expected
Payment
2023-24
Balance
6/30/24
Minimum
Required
Payment
2024-25
Non-Investment (Gain)/Loss 6/30/22 No Ramp 0.00% 20 25,826 0 27,582 0 29,458 2,649 Partial Fresh Start 6/30/22 20% Up Only 0.00% 20 214,115 (14,736) 243,904 0 260,489 5,599 Total 239,941 (14,736) 271,486 0 289,947 8,248
The (gain)/loss bases are the plan’s allocated share of the risk pool’s (gain)/loss for the fiscal year as disclosed in “Allo cation of Plan’s Share of Pool’s Experience/Assumption Change” earlier in this section. These (gain)/loss bases will be amortized in accordance with the CalPERS amortization policy in effect at the time the base was established.
The partial fresh start base established June 30, 2022 is the sum of the UAL balance from the June 30, 2021 valuation (projec ted to June 30, 2022) and the June 30, 2022 investment loss, as shown on the previous page.
CALPERS ACTUARIAL VALUATION - June 30, 2022
PEPRA Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 14
Amortization Schedule and Alternatives
The amortization schedule on the previous page(s) shows the minimum contributions required according to the CalPERS amortization policy. Many agencies have expressed a desire for a more stable pattern of payments or have indicated interest in paying off the unfunded accrued liabilities more quickly than required. As such, we have provided alternative amortization schedules to help analyze the current amortization schedule and illustrate the potential savings of acceler ating unfunded liability payments.
Shown on the following page are future year amortization payments based on 1) the current amortization schedule reflecting the individual bases and remaining periods shown on the previous page, and 2) alternative “fres h start” amortization schedules using two sample periods that would both result in interest savings relative to the current amortization schedule. To initiate a fresh start, please contact the plan actuary.
The Current Amortization Schedule typically contains both positive and negative bases. Positive bases result from plan changes, assumption changes, method changes or plan experience that increase unfunded liability. Negative bases result from plan changes, assumption changes, method changes, or plan experience that decrease unfunded liability. The combination of positive and negative bases within an amortization schedule can result in unusual or problematic circumstances in future years, such as:
• When a negative payment would be required on a positive unfunded actuarial liability; or • When the payment would completely amortize the total unfunded liability in a very short time period, and results in a large change in the employer contribution requirement.
In any year when one of the above scenarios occurs, the actuary will consider corrective action such as replacing the existing unfunded liability bases with a single “fresh start” base and amortizing it over 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 fact arise since there will be additional bases added to the amortization schedule in each future year. Should such a scenario arise in any future year, the actuary will take appropriate action based on guidelines in the CalPERS amortization policy.
CALPERS ACTUARIAL VALUATION - June 30, 2022
PEPRA Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 15
Amortization Schedule and Alternatives (continued)
Alternate Schedules
Current Amortization
Schedule 20 Year Amortization 15 Year Amortization
Date Balance Payment Balance Payment Balance Payment
6/30/2024 289,947 8,248 289,947 26,073 289,947 30,417
6/30/2025 301,140 13,847 282,718 26,073 278,229 30,416
6/30/2026 307,308 19,446 274,998 26,073 265,715 30,416
6/30/2027 308,108 25,046 266,753 26,073 252,350 30,416
6/30/2028 303,175 30,645 257,947 26,073 238,077 30,417
6/30/2029 292,121 30,645 248,542 26,073 222,832 30,416
6/30/2030 280,315 30,645 238,498 26,073 206,551 30,416
6/30/2031 267,707 30,645 227,771 26,073 189,163 30,416
6/30/2032 254,241 30,645 216,315 26,073 170,593 30,417
6/30/2033 239,860 30,644 204,080 26,073 150,759 30,416
6/30/2034 224,501 30,644 191,013 26,073 129,577 30,416
6/30/2035 208,098 30,645 177,057 26,073 106,955 30,417
6/30/2036 190,579 30,644 162,152 26,073 82,794 30,416
6/30/2037 171,870 30,644 146,233 26,073 56,991 30,417
6/30/2038 151,889 30,645 129,232 26,073 29,432 30,416
6/30/2039 130,547 30,644 111,075 26,073
6/30/2040 107,756 30,645 91,683 26,073
6/30/2041 83,414 30,644 70,973 26,074
6/30/2042 57,418 30,645 48,853 26,073
6/30/2043 29,653 30,645 25,230 26,074
6/30/2044
6/30/2045
6/30/2046
6/30/2047
6/30/2048
6/30/2049
Total 556,901 521,462 456,245
Interest Paid 266,954 231,515 166,298
Estimated Savings 35,439 100,656
CALPERS ACTUARIAL VALUATION - June 30, 2022
PEPRA Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 16
Employer Contribution History
The table below provides a recent history of the required and discretionary employer contributions for the plan.
The required amounts are based on the actuarial valuation from two years prior without subsequent adjustments, if any. Additional discretionary payments before July 1, 2019 or after April 28, 2023 are not included. [
Fiscal
Year
Employer
Normal Cost
Unfunded Liability
Payment ($)
Additional Discretionary
Payments
2016 - 17 12.082% $55 N/A
2017 - 18 11.990% 188 N/A
2018 - 19 12.141% 714 N/A
2019 - 20 13.034% 5,739 0
2020 - 21 13.044% 9,410 0
2021 - 22 13.13% 10,064 0
2022 - 23 12.78% 11,233 0
2023 - 24 13.54% 0
2024 - 25 13.76% 8,248
Funding History
The table below shows the recent history of the actuarial accrued liability, share of the pool’s market value of assets, unfunded accrued liability, funded ratio, and annual covered payroll.
Valuation
Date
Accrued
Liability
(AL)
Share of Pool’s
Market Value of
Assets (MVA)
Unfunded
Accrued Liability
(UAL)
Funded
Ratio
Annual
Covered
Payroll
06/30/2014 $29,040 $30,273 ($1,233) 104.2% $159,288
06/30/2015 89,757 84,784 4,973 94.5% 314,490
06/30/2016 193,336 172,605 20,731 89.3% 459,610
06/30/2017 326,065 303,969 22,096 93.2% 581,840
06/30/2018 504,216 454,157 50,059 90.1% 569,627
06/30/2019 716,649 641,178 75,471 89.5% 753,522
06/30/2020 982,864 876,316 106,548 89.2% 845,331
06/30/2021 1,314,958 1,349,855 (34,897) 102.7% 1,005,700 06/30/2022 1,734,547 1,494,606 239,941 86.2% 1,162,904
Risk Analysis
• Future Investment Return Scenarios
• Discount Rate Sensitivity
• Mortality Rate Sensitivity
• Maturity Measures
• Maturity Measures History
• Funded Status – Termination Basis
CalPERS Actuarial Valuation – June 30, 2022
PEPRA Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 18
Future Investment Return Scenarios
Analysis using the investment return scenarios from the Asset Liability Management process completed in 2021 was performed to determine the effects of various future investment returns on required employer contributions. The projections below reflect the impact of the CalPERS Funding Risk Mitigation policy. The projections also assume that all other actuarial assumptions will be realized and that no further changes in assumptions, contributions, benefits, or funding will occur.
The first table shows projected contribution requirements if the fund were to earn either 3.0% or 10.8% annually. These alternate investment returns were chosen because 90% of long-term average returns are expected to fall between them over the 20-year period ending June 30, 2042.
Required contributions outside of this range are also possible. In particular, whereas it is unlikely that investment returns will average less than 3.0% or greater than 10.8% over a 20-year period, the likelihood of a single investment return less than 3.0% or greater than 10.8% in any given year is much greater. The following analysis illustrates the effect of an extreme, single year investment return.
The portfolio has an expected volatility (or standard deviation) of 12.0% per year. Accordingly, in any given year there is a 16% probability that the annual return will be -5.2% or less and a 2.5% probability that the annual return will be -17.2% or less. These returns represent one and two standard deviations below the expected return of 6.8%.
The following table shows the effect of a one or two standard deviation investment loss in FY 2022-23 on the FY 2025-26 contribution requirements. Note that a single-year investment gain or loss decreases or increases the required UAL contribution amount incrementally for each of the next five years, not just one, due to the 5 - year ramp in the amortization policy. However, the contribution requirements beyond the first year are also impacted by investment returns beyond the first year. Historically, significant downturns in the market are often followed by higher than average returns. Such investment gains would offset the impact of these single year negative returns in years beyond FY 2025-26.
Assumed Annual Return for
Fiscal Year 2022-23
Required
Employer
Contributions
Projected
Employer
Contributions
2024-25 2025-26
(17.2)% (2 standard deviation loss)
Normal Cost Rate 13.76% 13.8%
UAL Contribution $8,248 $23,000
(5.2)% (1 standard deviation loss)
Normal Cost Rate 13.76% 13.8%
UAL Contribution $8,248 $18,000
• Without investment gains (returns higher than 6.8%) in FY 2023-24 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 2022-23.
• The Pension Outlook Tool can be used to model projected contributions for these scenarios beyond FY 2025-26 as well as to model other investment return scenarios .
Assumed Annual Return
FY 2022-23
through 2041-42
Projected Employer Contributions
2025-26 2026-27 2027-28 2028-29 2029-30
3.0% (5th percentile)
Normal Cost Rate 13.8% 13.8% 13.8% 13.8% 13.8%
UAL Contribution $15,000 $24,000 $33,000 $45,000 $52,000
10.8% (95th percentile)
Normal Cost Rate 14.1% 14.5% 14.3% 14.7% 15.0%
UAL Contribution $13,000 $16,000 $18,000 $18,000 $0
CalPERS Actuarial Valuation – June 30, 2022
PEPRA Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 19
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, 2022 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, 2022 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 34.63% 27.51% 22.13%
b) Accrued Liability $2,123,262 $1,734,547 $1,431,365
c) Market Value of Assets $1,494,606 $1,494,606 $1,494,606 d) Unfunded Liability/(Surplus) [(b) - (c)] $628,656 $239,941 ($63,241) e) Funded Ratio 70.4% 86.2% 104.4%
Sensitivity to the Price Inflation Assumption
As of June 30, 2022 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 29.07% 27.51% 24.85%
b) Accrued Liability $1,821,937 $1,734,547 $1,571,222
c) Market Value of Assets $1,494,606 $1,494,606 $1,494,606 d) Unfunded Liability/(Surplus) [(b) - (c)] $327,331 $239,941 $76,616 e) Funded Ratio 82.0% 86.2% 95.1%
Mortality Rate Sensitivity
The following table looks at the change in the June 30, 2022 plan costs and funded status under two different longevity scenarios, namely assuming post-retirementrates of mortality are 10% lower or 10% higher than our current mortality assumptions adopted in 2021. This type of analysis highlights the impact on the plan of a change in the mortality assumption.
As of June 30, 2022 10% Lower
Mortality Rates
Current
Assumptions
10% Higher
Mortality Rates
a) Total Normal Cost 27.87% 27.51% 27.17%
b) Accrued Liability $1,764,810 $1,734,547 $1,706,445
c) Market Value of Assets $1,494,606 $1,494,606 $1,494,606 d) Unfunded Liability/(Surplus) [(b) - (c)] $270,204 $239,941 $211,839 e) Funded Ratio 84.7% 86.2% 87.6%
CalPERS Actuarial Valuation – June 30, 2022
PEPRA Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 20
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.
Since it is the employer that bears the risk, it is appropriate to perform this analysis on a pension plan level considering all rate plans. The following measures are for one rate plan only. One way to look at the maturity level of CalPERS and its plans is to look at the ratio of a plan’s retiree liability to its total liability. A pension plan in its infancy will have a very low ratio of retiree liability to total liability. As the plan matures, the ratio starts increasing. A mature plan will often have a ratio above 60%-65%.
Ratio of Retiree Accrued Liability to
Total Accrued Liability June 30, 2021 June 30, 2022
1. Retired Accrued Liability $0 $0
2. Total Accrued Liability 1,314,958 1,734,547
3. Ratio of Retiree AL to Total AL [(1) / (2)] 0.00 0.00 Another measure of maturity level of CalPERS and its plans is to look at the ratio of actives to retirees, also called the support ratio. A pension plan in its infancy will have a very high ratio of active to retired members. As the plan matures and members retire, the ratio declines. A mature plan will often have a ratio near or below one.
To calculate the support ratio for the rate plan, retirees and beneficiaries receiving a continuance are each counted as one, even though they may have only worked a portion of their 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, 2021, was 0.78 and was calculated consistently with how it is for the individual rate plan. Note that to calculate the support ratio for all public agency plans, a retiree with service from more than one CalPERS agency is counted as a retiree more than once.
Support Ratio June 30, 2021 June 30, 2022
1. Number of Actives 14 16
2. Number of Retirees 0 0
3. Support Ratio [(1) / (2)] N/A N/A
CalPERS Actuarial Valuation – June 30, 2022
PEPRA Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 21
Maturity Measures (continued)
The actuarial calculations supplied in this communication are based on various assumptions about long -term demographic and economic behavior. Unless these assumptions (e.g., terminations, deaths, disabilities, retirements, salary growth, investment return) are exactly realized each year, there will be differences on a yearto-year basis. The year-to-year differences between actual experience and the assumptions are called actuarial gains and losses and serve to lower or raise required employer contributions from one year to the next.
Therefore, employer contributions will inevitably fluctuate, especially due to the ups and downs of investment returns.
Asset Volatility Ratio
Shown in the table below is the asset volatility ratio (AVR), which is the ratio of market value of assets to payroll.
Plans that have higher AVR experience more volatile employer contributions (as a percentage of payroll) due to investment return. For example, a plan with AVR of 8 may experience twice the contribution volatility due to investment return volatility than a plan with 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 LVR of 8 is expected to have twice the contribution volatil ity of a plan with LVR of 4. It should be noted that this ratio indicates a longer-term potential for contribution volatility, since the AVR, described above, will tend to move closer to the LVR as the funded ratio approaches 100%.
Contribution Volatility June 30, 2021 June 30, 2022
1. Market Value of Assets $1,349,855 $1,494,606
2. Payroll 1,005,700 1,162,904
3. Asset Volatility Ratio (AVR) [(1) / (2)] 1.3 1.3
4. Accrued Liability $1,314,958 $1,734,547
5. Liability Volatility Ratio (LVR) [(4) / (2)] 1.3 1.5 Maturity Measures History
Valuation Date
Ratio of
Retiree Accrued Liability
to
Total Accrued Liability
Support Ratio
Asset
Volatility
Ratio
Liability
Volatility
Ratio
06/30/2017 0.00 N/A 0.5 0.6
06/30/2018 0.00 N/A 0.8 0.9
06/30/2019 0.00 N/A 0.9 1.0
06/30/2020 0.00 N/A 1.0 1.2
06/30/2021 0.00 N/A 1.3 1.3
06/30/2022 0.00 N/A 1.3 1.5
CalPERS Actuarial Valuation – June 30, 2022
PEPRA Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 22
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, 2022. The accrued liability on a termination basis (termination liability) is calculated differently compared to 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 PERF and consequently, a lower discount rate is assumed. The lower discount rate for the Terminated Agency Pool results in higher liabilities for terminated plans.
The effective termination discount rate will depend on actual market rates of return for risk-free securities on the date of termination. As market discount rates are variable, the table below shows a range for the hypothetical termination liability based on the lowest and highest interest rates observed during an approximate 19-month period from 12 months before the valuation date to seven months after.
Discount Rate: 1.75%
Price Inflation: 2.50%
Discount Rate: 4.50%
Price Inflation: 2.75%
Market
Value of
Assets (MVA)
Termination
Liability1,2
Funded
Ratio
Unfunded
Termination
Liability
Termination
Liability1,2
Funded
Ratio
Unfunded
Termination
Liability
$1,494,606 $3,917,933 38.1% $2,423,327 $1,867,672 80.0% $373,066 1 The termination liabilities calculated above include a 5% contingency load. The contingency load and other actuarial assumptions can be found in Appendix A of the Section 2 report. 2 The discount rate used for termination valuations is a w eighted average of the 10-year and 30-year U.S. Treasury yields w here the weights are based on matching asset and liability durations as of the termination date. The discount rates used in the table are based on 20-year Treasury bonds, rounded to the nearest quarter percentage point, which is a good proxy for most plans. The 20-year Treasury yield w as 3.38% on June 30, 2022, the valuation date.
In order to terminate the plan, first contact our Pension Contract Services unit to initiate a Resolution of Intent to Terminate. The completed Resolution will allow the plan actuary to provide a preliminary termination valuation with a more up-to-date estimate of the plan liabilities. Before beginning this process, please consult with the plan actuary.
CalPERS Actuarial Valuation – June 30, 2022
PEPRA Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 23
Participant Data
The table below shows a summary of the plan’s member data upon which this valuation is based:
June 30, 2021 June 30, 2022
Active Members
Counts 14 16
Average Attained Age 35.3 34.9
Average Entry Age to Rate Plan 31.6 31.0
Average Years of Credited Service 3.7 4.0
Average Annual Covered Pay $71,836 $72,682
Annual Covered Payroll $1,005,700 $1,162,904
Present Value of Future Payroll $12,679,770 $14,869,832 Transferred Members 3 4
Separated Members 1 1
Retired Members and Beneficiaries*
Counts 0 0
Average Annual Benefits $0 $0
Total Annual Benefits $0 $0
Counts of members included in the valuation are counts of the records processed by the valuation. Multiple records may exist for those who have service in more than one valuation group. This does not result in double counting of liabilities.
* Values include community property settlements.
List of Class 1 Benefit Provisions
This plan has the additional Class 1 Benefit Provisions:
• None
CALPERS ACTUARIAL VALUATION - June 30, 2022
PEPRA Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 24
Plan’s Major Benefit Options
Shown below is a summary of the major optional benefits for which the agency has contracted. A description of principal standard and optional plan provisions is in Section 2.
Benefit Group
Member Category Police
Demographics
Actives Yes
Transfers/Separated Yes
Receiving No
Benefit Group Key 111994
Benefit Provision
Benefit Formula 2.7% @ 57
Social Security Coverage Yes
Full/Modified Full
Employee Contribution Rate 13.75%
Final Average Compensation Period Three Year
Sick Leave Credit Yes
Non-Industrial Disability Standard
Industrial Disability Standard
Pre-Retirement Death Benefits
Optional Settlement 2 Yes
1959 Survivor Benefit Level No
Special Yes
Alternate (firefighters) No
Post-Retirement Death Benefits
Lump Sum $2000
Survivor Allowance (PRSA) No
COLA 2%
CALPERS ACTUARIAL VALUATION - June 30, 2022
PEPRA Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 25
PEPRA Member Contribution Rates
The California Public Employees’ Pension Reform Act of 2013 (PEPRA) established new benefit formulas, final compensation period, and contribution requirements for “new” employees (generally those first hired into a CalPERS-covered position on or after January 1, 2013). In accordance with Government Code Section 7522.30(b), “new members … shall have an initial contribution rate of at least 50% of the normal cost rate.” The normal cost for the plan is dependent on the benefit levels, actuarial assumptions, and demographics of the risk pool, particularly members’ entry age. Should the total normal cost rate change by more than 1% from the base total normal cost rate, the new member rate shall be 50% of the new normal cost rate rounded to the nearest quarter percent.
The table below shows the determination of the PEPRA member contribution rates effective July 1, 2024, based on 50% of the total normal cost rate as of the June 30, 2022 valuation.
Basis for Current Rate Rates Effective July 1, 2024
Rate Plan
Identifier Benefit Group Name
Total
Normal
Cost
Member
Rate
Total
Normal
Cost
Change Change
Needed
Member
Rate
25615 Safety Police PEPRA Level 27.29% 13.75% 27.51% 0.22% No 13.75% CALPERS ACTUARIAL VALUATION - June 30, 2022
PEPRA Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 26
Section 2
CAL I F O RNI A P UBL I C EM P L O YEES ’ RET I REM EN T S YS T EM Risk Pool Actuarial Valuation Information
Section 2 may be found on the
CalPERS website (www.calpers.ca.gov)
in the Forms and Publications section
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 2023
Safety Police Plan of the City of Kingsburg (CalPERS ID: 1210886769) Annual Valuation Report as of June 30, 2022
Dear Employer,
Attached to this letter is the June 30, 2022 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) 2024-25. 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.
Because this plan is in a risk pool, the following valuation report has been separated into two sections:
• Section 1 contains specific information for the plan including the development of the current and projected employer contributions, and
• Section 2 contains the Risk Pool Actuarial Valuation appropriate to the plan as of June 30, 2022.
Section 2 can be found on the CalPERS website (www.calpers.ca.gov). From the home page, go to “Forms & Publications” and select “View All”. In the search box, enter “Risk Pool” and from the results list download the Safety Risk Pool Actuarial Valuation Report for June 30, 2022.
Actuarial valuations are based on assumptions regarding future plan experience including investment return and payroll growth, eligibility for the types of benefits provided, and longevity among retirees. The CalPERS Board of Administration (board) adopts these assumptions after considering the advice of CalPERS actuarial and investment teams and other professionals. Each actuarial valuation reflects all prior differences between actual and assumed experience and adjusts the contribution requirements as needed. This valuation is based on an investment return assumption of 6.8%, which was adopted by the board in November 2021. Other assumptions used in this report are those recommended in the CalPERS Experience Study and Review of Actuarial Assumptions report from November 2021.
Required Contributions
The table below shows the minimum required employer contributions for FY 2024-25 along with estimates of the required contributions for FY 2025-26. Employee contributions other than cost sharing (whether paid by the employer or the employee) are in addition to the results shown below. The required employer 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
2024-25 23.00% $367,427
Projected Results
2025-26 23.0% $393,000
Safety Police Plan of the City of Kingsburg
(CalPERS ID: 1210886769)
Annual Valuation Report as of June 30, 2022
The actual investment return for FY 2022-23 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 2022- 23 differs from 6.8%, the actual contribution requirements for FY 2025-26 will differ from those shown above.
For additional details regarding the assumptions and methods used for these projections,please refer to the “Projected Employer Contributions” in the “Highlights and Executive Summary” section. This section als o contains projected required contributions through FY2029-30.
Changes from Previous Year’s Valuations
There are no significant changes in actuarial assumptions or policies in the 2022 actuarial valuation. There may be changes specific to the plan such as contract amendments and funding changes.
Further descriptions of general changes are included in “Highlights and Executive Summary” and in Appendix A of the Section 2 report in “Actuarial Methods and Assumptions.” The effects of any changes on the required contributions are included in “Reconciliation of Required Employer Contributions,” also in the Section 2 report.
Questions
A CalPERS actuary is available to answer questions about this report. Other questions may be directed to the Customer Contact Center at (888)-CalPERS or (888-225-7377).
Sincerely,
SCOTT TERANDO, ASA, EA, MAAA, FCA, CFA
Chief Actuary, CalPERS
RANDALL DZIUBEK, ASA, MAAA
Deputy Chief Actuary, Valuation Services, CalPERS
Actuarial Valuation
as of June 30, 2022
for the
Safety Police Plan
of the
City of Kingsburg
(CalPERS ID: 1210886769)
Required Contributions
for Fiscal Year
July 1, 2024 - June 30, 2025
Table of Contents
Section 1 – Plan Specific Information
Section 2 – Risk Pool Actuarial Valuation Information
Section 1
CAL I F O RNI A P UBL I C EM P L O YEES ’ RET I REM ENT S YS T EM Plan Specific Information
for the
Safety Police Plan
of the
City of Kingsburg
(CalPERS ID: 1210886769)
(Rate Plan ID: 23095)
Rate Plan belonging to the Safety Risk Pool
Table of Contents
Actuarial Certification 1
Highlights and Executive Summary
Introduction 3
Purpose of Section 1 3
Required Contributions 4
Additional Discretionary Employer Contributions 5
Funded Status – Funding Policy Basis 6
Projected Employer Contributions 7
Other Pooled Safety Risk Pool Rate Plans 8
Cost 9
Changes Since the Prior Year’s Valuation 10
Subsequent Events 10
Assets and Liabilities
Breakdown of Entry Age Accrued Liability 12
Allocation of Plan’s Share of Pool’s Experience/Assumption Change 12 Development of Plan’s Share of Pool’s Market Value of Assets 12 Schedule of Amortization Bases 13
Amortization Schedule and Alternatives 15
Employer Contribution History 17
Funding History 17
Risk Analysis
Future Investment Return Scenarios 19
Discount Rate Sensitivity 20
Mortality Rate Sensitivity 20
Maturity Measures 21
Maturity Measures History 22
Funded Status – Termination Basis 23
Participant Data 24
List of Class 1 Benefit Provisions 24
Plan’s Major Benefit Options 25
CALPERS ACTUARIAL VALUATION - June 30, 2022
Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 1
Actuarial Certification
To the best of our knowledge, this report, compris ed of Sections 1 and 2, is complete and accurate and contains sufficient information to disclose, fully and fairly, the funded condition of the Safety Police Plan of the City of Kingsburg and satisfies the actuarial valuation requirements of Government Code section 7504. This valuation is based on the member and financial data as of June 30, 2022 provided by the various CalPERS databases and the benefits under this plan with CalPERS as of the date this report was produced. Section 1 of this report is based on the member and financial data for City of Kingsburg, while Section 2 is based on the corresponding information for all agencies participating in the Safety Risk Pool to which the plan belongs.
As set forth in Section 2 of this report, the pool actuaries have certified that, in their opinion, the valuation of the Safety Risk Pool has been performed in accordance with generally accepted actuarial principles, in accordance with standards of practice prescribed by the Actuarial Standards Board, and that the assumptions and methods are internally consistent and reasonable for the risk pool as of the date of this valuation and as prescribed by the CalPERS Board of Administration according to provisions set forth in the California Public Employees’ Retirement Law.
Having relied upon the information set forth in Section 2 of this report and based on the census and benefit provision information for the rate plan, it is my opinion as the plan actuary that the Unfunded Accrued Liability amortization bases as of June 30, 2022 and employer contribution as of July 1, 2024 have been properly and accurately determined in accordance with the principles and standards stated above.
The undersigned is an actuary who satisfies the Qualification Standards for Actuaries Issuing Statements of Actuarial Opinion in the United States with regard to pensions.
TONY CUNY, ASA, MAAA
Senior Actuary, CalPERS
Highlights and Executive Summary
• Introduction
• Purpose of Section 1
• Required Contributions
• Additional Discretionary Employer Contributions
• Funded Status – Funding Policy Basis
• Projected Employer Contributions
• Other Pooled Safety Risk Pool Rate Plans
• Cost
• Changes Since the Prior Year’s Valuation
• Subsequent Events
CALPERS ACTUARIAL VALUATION - June 30, 2022
Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 3
Introduction
This report presents the results of the June 30, 2022 actuarial valuation of the Safety Police Plan of the City of Kingsburg of the California Public Employees’ Retirement System (CalPERS). This actuarial valuation sets the minimum required contributions for fiscal year (FY) 2024-25.
Purpose of Section 1
This Section 1 report for the Safety Police Plan of the City of Kingsburg of CalPERS was prepared by the Actuarial Office using data as of June 30, 2022. The purpose of the valuation is to:
• Set forth the assets and accrued liabilities of this rate plan as of June 30, 2022; • Determine the minimum required employer contributions for this rate plan for FY July 1, 2024 through June 30, 2025;
• Determine the required member contribution rate for FY July 1, 2024 through June 30, 2025 for employees subject to the California Public Employees' Pension Reform Act of 2013 (PEPRA); and • Provide actuarial information as of June 30, 2022 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 a Cost Sharing Employer Defined Benefit Pension Plan. A separate accounting valuation report for such purposes is 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 the plan 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 Standard 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, 2022
Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 4
Required Contributions
Fiscal Year
Required Employer Contributions 2024-25
Employer Normal Cost Rate 23.00%
Plus
Required Payment on Amortization Bases1 $367,427
Paid either as
1) Monthly Payment $30,618.92
Or
2) Annual Prepayment Option* $355,538
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) plus the Employer 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).
Fiscal Year Fiscal Year
2023-24 2024-25
Development of Normal Cost as a Percentage of Payroll
Base Total Normal Cost for Formula 31.82% 31.99%
Surcharge for Class 1 Benefits 2
None 0.00% 0.00%
Phase out of Normal Cost Difference3 0.00% 0.00%
Plan’s Total Normal Cost 31.82% 31.99%
Offset Due to Employee Contributions 8.99% 8.99%
Employer Normal Cost Rate 22.83% 23.00%
1 The required payment on amortization bases does not take into account any additional discretionary payment made after April 28, 2023.
2 Section 2 of this report contains a list of Class 1 benefits and corresponding surcharges. 3 When a rate plan joins the pool, the difference in normal cost betw een the pool and the rate plan is phased out over a fiveyear period in accordance with the CalPERS contribution allocation policy.
CALPERS ACTUARIAL VALUATION - June 30, 2022
Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 5
Additional Discretionary Employer Contributions
The minimum required employer contribution towards the Unfunded Accrued Liability (UAL) for this rate plan for FY 2024-25 is $367,427. 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 2024-25 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 the “Amortization Schedule and Alternatives” section of the report.
Agencies considering making an ADP should contact CalPERS for additional information.
Minimum Required Employer Contribution for Fiscal Year 2024-25 Estimated
Normal Cost
Minimum UAL
Payment
ADP Total UAL
Contribution
Estimated Total
Contribution
$113,556 $367,427 $0 $367,427 $480,983
Alternative Fiscal Year 2024-25 Employer Contributions for Greater UAL Reduction Funding
Horizon
Estimated
Normal Cost
Minimum UAL
Payment
ADP1 Total UAL
Contribution
Estimated Total
Contribution
10 years $113,556 $367,427 $99,988 $467,415 $580,971
5 years $113,556 $367,427 $436,380 $803,807 $917,363
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 w ould have to be less or more than the amount show n to have the same effect on the UAL amortization.
Note that the calculations above are based on the projected UAL as of June 30, 2024 as determined in the June 30, 2022 actuarial valuation. New unfunded liabilities can emerge 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 .
CALPERS ACTUARIAL VALUATION - June 30, 2022
Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 6
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 sizes.
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 toward the UAL will be required. Plans with a funded ratio greater than 100% have a negative UAL (or surplus) but are required 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 e xpected return, calculated normal costs and accrued liabilities provided in this report would be less/greater than the results shown. Therefore, for example, if actual average 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 illustrative purposes, funded statuses based on a 1% lower and higher average future investment return (discount rate) are as follows:
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 o f funded status that are appropriate for assessing the sufficiency of plan assets to cover estimated termination liabilities.
June 30, 2021 June 30, 2022
1. Present Value of Benefits $12,402,664 $13,315,807
2. Entry Age Accrued Liability 11,282,797 11,931,200
3. Market Value of Assets (MVA) 8,730,289 8,346,554
4. Unfunded Accrued Liability (UAL) [(2) – (3)] $2,552,508 $3,584,646
5. Funded Ratio [(3) / (2)] 77.4% 70.0%
1% Lower
Average Return
Current
Assumption
1% Higher
Average Return
Discount Rate 5.8% 6.8% 7.8%
1. Entry Age Accrued Liability $13,644,180 $11,931,200 $10,533,319
2. Market Value of Assets (MVA) 8,346,554 8,346,554 8,346,554
3. Unfunded Accrued Liability (UAL) [(1) – (2)] $5,297,626 $3,584,646 $2,186,765
4. Funded Ratio [(2) / (1)] 61.2% 70.0% 79.2%
CALPERS ACTUARIAL VALUATION - June 30, 2022
Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 7
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 2022-23 is assumed to be 6.80% per year, net of investment and administrative expenses. Future contribution requirements may differ significantly 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 2022-23 and Beyond) Fiscal Year 2024-25 2025-26 2026-27 2027-28 2028-29 2029-30 Rate Plan 23095 Results
Normal Cost % 23.00% 23.0% 23.0% 23.0% 23.0% 23.0%
UAL Payment $367,427 $393,000 $418,000 $439,000 $481,000 $491,000 For ongoing plans, investment gains and losses are amortized using a 5-year ramp up. For more information, please see “Amortization of the Unfunded Actuarial Accrued Liability” under “Actuarial Methods” in Appendix A of the Section 2 Report. 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 contributions 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” in the “Risk Analysis” section. 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, 2022
Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 8
Other Pooled Safety Risk Pool Rate Plans
All of the results presented in this Section 1 report, except those shown on this page, correspond to rate plan 23095. In many cases, employers have additional rate plans within the same risk pool. For cost analysis and budgeting it is useful to consider contributions for these rate plans as a whole rather than individually. The estimated contribution amounts and rates for all of the employer’s rate plans in the Safety Risk Pool are shown below and assume that the total employer payroll within the Safety Risk Pool will grow according to the overall payroll growth assumption of 2.80% per year for three years. In a refinement since the prior year’s report, Classic members who are projected to terminate employment are assumed to be replaced by PEPRA members.
Fiscal Year Fiscal Year
2023-24 2024-25
Estimated Combined Employer Contributions for all Pooled Safety Rate Plans Projected Payroll for the Contribution Year $2,654,762 $3,368,196 Estimated Employer Normal Cost $435,428 $530,975
Required Payment on Amortization Bases $440,947 $528,960 Estimated Total Employer Contributions $876,375 $1,059,935 Estimated Total Employer Contribution Rate (illustrative only) 33.01% 31.47% CALPERS ACTUARIAL VALUATION - June 30, 2022
Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 9
Cost
Actuarial Determination of Plan Cost
Contributions to fund the plan are comprised of two components:
• Normal Cost, expressed as a percentage of total active payroll • Amortization of the Unfunded Accrued Liability (UAL), expressed as a dollar amount For fiscal years prior to 2015-16, the Amortization of UAL component was expressed as a percentage of total active payroll. Starting with FY 2015-16, the Amortization of UAL component was expressed as a dollar amount and invoiced on a monthly basis. There is an option to prepay this amount during July of each fiscal year.
The Normal Cost component is expressed as a percentage of active payroll with employer and employee contributions payable as part of the regular payroll reporting process.
The determination of both components requires complex actuarial calculations. The calculations are based on a set of actuarial assumptions which can be divided into two categories:
• Demographic assumptions (e.g., mortality rates, retirement rates, employment termination rates, disability rates)
• Economic assumptions (e.g., future investment earnings, inflation, salary growth rates) These assumptions reflect CalPERS’ best estimate of future experience of the plan and are long term i n nature.
We recognize that all assumptions will not be realized in any given year. For example, the investment earnings at CalPERS have averaged 6.9% over the 20 years ending June 30, 2022, yet individual fiscal year returns have ranged from -23.6% to +21.3%. In addition, CalPERS reviews all actuarial assumptions by conducting in-depth experience studies every four years, with the most recent experience study completed in 2021.
CALPERS ACTUARIAL VALUATION - June 30, 2022
Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 10
Changes Since the Prior Year’s Valuation
Benefits
The standard actuarial practice at CalPERS is to recognize mandated legislative benefit changes in the first annual valuation following the effective date of the legislation. Voluntary benefit changes by plan amendment are generally included in the first valuation that is prepared after the amendment becomes effective, even if the valuation date is prior to the effective date of the amendment.
This valuation generally reflects plan amendments effective before the date of the report. Please refer to the “Plan’s Major Benefit Options” in this report and Appendix B of the Section 2 Report for a summary of the plan provisions used in this valuation.
In 2022, SB 1168 increased the standard retiree lump sum death benefit from $500 to $2,000 for any death occurring on or after July 1, 2023. For pooled plans this is a Class 3 benefit and there is no normal cost surcharge.
The impact on the unfunded liability is included in the pool’s (gain)/loss.
Actuarial Methods and Assumptions
There are no significant changes to the actuarial methods or assumptions for the June 30, 2022 actuarial valuation.
Subsequent Events
This actuarial valuation report reflects fund investment return through June 30, 2022 and statutory/regulatory changes and board actions through January 2023.
During the time period between the valuation date and the publication of this report, inflation has been significantly 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, 2023 valuation. The actual impact of higher inflation on future valuation results will depend on, among other factors, how long higher inflation persists. At this time, we continue to believe the long-term inflation assumption of 2.3% is appropriate.
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 and Liabilities
• Breakdown of Entry Age Accrued Liability
• Allocation of Plan’s Share of Pool’s Experience/Assumption Change • Development of Plan’s Share of Pool’s Market Value of Assets • Schedule of Amortization Bases
• Amortization Schedule and Alternatives
• Employer Contribution History
• Funding History
CALPERS ACTUARIAL VALUATION - June 30, 2022
Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 12
Breakdown of Entry Age Accrued Liability
Active Members $2,930,363
Transferred Members 3,100,658
Separated Members 972,809
Members and Beneficiaries Receiving Payments 4,927,370
Total $11,931,200
Allocation of Plan’s Share of Pool’s Experience/Assumption Change
It is the policy of CalPERS to ensure equity within the risk pools by allocating the pool’s experience gains/losses and assumption changes in a manner that treats each employer equitably and maintains benefit security for the members of the System while minimizing substantial variations in employer contributions. The Pool’s experience gains/losses and impact of assumption/method changes is allocated to the plan as follows:
1. Plan’s Accrued Liability $11,931,200
2. Projected UAL Balance at 6/30/2022 2,109,787
3. Other UAL Adjustments (Golden Handshake, Prior Service Purchase, etc.) 0
4. Adjusted UAL Balance at 6/30/2022 for Asset Share 2,265,293
5. Pool’s Accrued Liability1 28,855,988,965
6. Sum of Pool’s Individual Plan UAL Balances at 6/30/20221 4,262,073,817
7. Pool’s 2021-22 Investment (Gain)/Loss1 3,300,630,707
8. Pool’s 2021-22 Non-Investment (Gain)/Loss1 429,637,362
9. Plan’s Share of Pool’s Investment (Gain)/Loss: [(1) - (4)] ÷ [(5) - (6)] × (7) 1,297,215
10. Plan’s Share of Pool’s Non-Investment (Gain)/Loss: (1) ÷ (5) × (8) 177,644
11. Plan’s New (Gain)/Loss as of 6/30/2022:(9) + (10) 1,474,859
12. Increase in Pool’s Accrued Liability due to Change in Assumptions1 0
13. Plan’s Share of Pool’s Change in Assumptions: (1) ÷ (5) × (12) 0
14. Increase in Pool’s Accrued Liability due to Funding Risk Mitigation1 0
15. Plan’s Share of Pool’s Change due to Funding Risk Mitigation: (1) ÷ (5) × (14) 0
16. Offset due to Funding Risk Mitigation 0
17. Plan’s Investment (Gain)/Loss: (9) – (16) 1,297,215 1 Does not include plans that transferred to Pool on the valuation date.
Development of the Plan’s Share of Pool’s Market Value
of Assets
18. Plan’s UAL: (2) + (3) + (11) + (13) + (15) $3,584,646
19. Plan’s Share of Pool’s MVA: (1) - (18) $8,346,554
CALPERS ACTUARIAL VALUATION - June 30, 2022
Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 13
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, 2022. • The required employer contributions determined by the valuation are for the fiscal year beginning two years after the valuati on date: FY 2024-25.
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 year s 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 for the first fiscal year is determined by the actuarial valuation two years ago and the contribution for the second year is from the actuarial valuation one year ago. Additional discretionary payments are reflected in the Expected Payments column in the fiscal year they were made by the agency.
Reason for Base
Date
Est.
Ramp
Level
2024-25
Ramp
Shape
Escalation
Rate
Amort.
Period
Balance
6/30/22
Expected
Payment
2022-23
Balance
6/30/23
Expected
Payment
2023-24
Balance
6/30/24
Minimum
Required
Payment
2024-25
Side Fund
2013 or
Prior No Ramp 2.80% 6 1,100,524 163,610 1,006,278 166,102 903,048 170,753 Investment (Gain)/Loss 6/30/13 100% Up/Dow n 2.80% 21 718,152 51,651 713,608 51,795 708,606 53,246 Non-Investment (Gain)/Loss 6/30/13 100% Up/Dow n 2.80% 21 (56,926) (4,094) (56,566) (4,106) (56,169) (4,221) Share of Pre-2013 Pool UAL 6/30/13 No Ramp 2.80% 13 428,911 38,761 418,020 39,083 406,055 40,177 Assumption Change 6/30/14 100% Up/Dow n 2.80% 12 421,789 45,204 403,755 45,704 383,978 46,984 Investment (Gain)/Loss 6/30/14 100% Up/Dow n 2.80% 22 (578,884) (40,435) (576,461) (40,513) (573,793) (41,647) Non-Investment (Gain)/Loss 6/30/14 100% Up/Dow n 2.80% 22 8,657 605 8,620 606 8,580 623 Investment (Gain)/Loss 6/30/15 100% Up/Dow n 2.80% 23 238,569 15,818 238,445 16,261 237,854 16,716 Non-Investment (Gain)/Loss 6/30/15 100% Up/Dow n 2.80% 23 (1,532) (104) (1,529) (104) (1,525) (107) Assumption Change 6/30/16 100% Up/Dow n 2.80% 14 166,506 15,864 161,434 16,009 155,867 16,458 Non-Investment (Gain)/Loss 6/30/16 100% Up/Dow n 2.80% 24 (92,211) (6,109) (92,168) (6,111) (92,120) (6,282) Assumption Change 6/30/17 100% Up/Dow n 2.80% 15 230,678 17,007 228,788 21,435 222,194 22,035 Investment (Gain)/Loss 6/30/17 100% Up/Dow n 2.80% 25 (261,568) (13,707) (265,189) (17,126) (265,523) (17,605) Assumption Change 6/30/18 100% Up/Dow n 2.80% 16 354,194 19,321 358,312 25,946 355,864 33,340 Investment (Gain)/Loss 6/30/18 100% Up/Dow n 2.80% 26 (83,883) (3,303) (86,174) (4,397) (87,490) (5,650) Method Change 6/30/18 100% Up/Dow n 2.80% 16 79,740 4,350 80,667 5,841 80,116 7,506 Investment (Gain)/Loss 6/30/19 80% Up Only 0.00% 17 39,126 1,637 40,095 2,411 40,330 3,214 Non-Investment (Gain)/Loss 6/30/19 No Ramp 0.00% 17 48,000 4,498 46,616 4,420 45,218 4,420 Investment (Gain)/Loss 6/30/20 60% Up Only 0.00% 18 195,082 4,273 203,932 8,383 209,136 12,575 Non-Investment (Gain)/Loss 6/30/20 No Ramp 0.00% 18 36,278 3,317 35,317 3,257 34,353 3,257 CALPERS ACTUARIAL VALUATION - June 30, 2022
Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 14
Schedule of Amortization Bases (continued)
Reason for Base
Date
Est.
Ramp
Level
2024-25
Ramp
Shape
Escalation
Rate
Amort.
Period
Balance
6/30/22
Expected
Payment
2022-23
Balance
6/30/23
Expected
Payment
2023-24
Balance
6/30/24
Minimum
Required
Payment
2024-25
Assumption Change 6/30/21 No Ramp 0.00% 19 69,542 (5,750) 80,213 7,213 78,213 7,213 Net Investment (Gain) 6/30/21 40% Up Only 0.00% 19 (898,589) 0 (959,693) (20,628) (1,003,634) (41,257) Non-Investment (Gain)/Loss 6/30/21 No Ramp 0.00% 19 (45,247) 0 (48,324) (4,345) (47,120) (4,346) Risk Mitigation 6/30/21 No Ramp 0.00% 0 298,433 (7,359) 326,332 337,245 0 0 Risk Mitigation Offset 6/30/21 No Ramp 0.00% 0 (305,554) 0 (326,332) (337,245) 0 0 Investment (Gain)/Loss 6/30/22 20% Up Only 0.00% 20 1,297,215 0 1,385,426 0 1,479,635 31,804 Non-Investment (Gain)/Loss 6/30/22 No Ramp 0.00% 20 177,644 0 189,724 0 202,625 18,221 Total 3,584,646 305,055 3,513,146 317,136 3,424,298 367,427 The (gain)/loss bases are the plan’s allocated share of the risk pool’s (gain)/loss for the fiscal year as disclosed in “Allocation of Plan’s Share of Pool’s Experience/Assumption Change” earlier in this section.These (gain)/loss bases will be amortized in accordance with the CalPERS amortization policy in effect at the time the base was established.
CALPERS ACTUARIAL VALUATION - June 30, 2022
Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 15
Amortization Schedule and Alternatives
The amortization schedule on the previous page(s) shows the minimum contributions required according to the CalPERS amortization policy. Many agencies have expressed a desire for a more stable pattern of payments or have indicated interest in paying off the unfunded accrued liabilities more quickly than required. As such, we have provided alternative amortization schedules to help analyze the current amortization schedule and illustrate the potential savings of accelerating unfunded liability payments.
Shown on the following page are future year amortization payments based on 1) the current amortization schedule reflecting the individual bases and remaining periods shown on the previous page, and 2) alternative “fresh start” amortization schedules using two sample periods that would both result in interest savings relative to the current amortization schedule. To initiate a fresh start, please contact the plan actuary.
The Current Amortization Schedule typically contains both positive and negative bases. Positive bases result from plan changes, assumption changes, method changes or plan experience that increase unfunded liability. Negative bases result from plan changes, assumption changes, method changes, or plan experience that decrease unfunded liability. The combination of positive and negative bases within an amortization schedule can result in unusual or problematic circumstances in future years, such as:
• When a negative payment would be required on a positive unfunded actuarial liability; or • When the payment would completely amortize the total unfunded liability in a very short time period, and results in a large change in the employer contribution requirement.
In any year when one of the above scenarios occurs, the actuary will consider corrective action such as replacing the existing unfunded liability bases with a single “fresh start” base and amortizing it over 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 fact arise since there will be additional bases added to the amortization schedule in each future year. Should such a scenario arise in any future year, the actuary will take appropriate action based on guidelines in the CalPERS amortization policy.
CALPERS ACTUARIAL VALUATION - June 30, 2022
Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 16
Amortization Schedule and Alternatives (continued)
Alternate Schedules
Current Amortization
Schedule 10 Year Amortization 5 Year Amortization
Date Balance Payment Balance Payment Balance Payment
6/30/2024 3,424,298 367,427 3,424,298 467,415 3,424,298 803,807 6/30/2025 3,277,438 392,903 3,174,105 467,415 2,826,463 803,807 6/30/2026 3,094,262 417,836 2,906,898 467,415 2,187,975 803,807 6/30/2027 2,872,862 438,845 2,621,521 467,414 1,506,070 803,806 6/30/2028 2,614,695 480,757 2,316,740 467,415 777,797 803,807 6/30/2029 2,295,659 491,148 1,991,233 467,415
6/30/2030 1,944,192 300,309 1,643,591 467,415
6/30/2031 1,766,047 305,651 1,272,309 467,414
6/30/2032 1,570,268 299,419 875,781 467,414
6/30/2033 1,367,614 292,682 452,289 467,414
6/30/2034 1,158,144 281,086
6/30/2035 946,414 262,723
6/30/2036 739,261 231,820
6/30/2037 549,959 154,990
6/30/2038 427,184 132,908
6/30/2039 318,875 114,523
6/30/2040 222,206 101,952
6/30/2041 131,953 77,619
6/30/2042 60,710 50,114
6/30/2043 13,047 13,483
6/30/2044
6/30/2045
6/30/2046
6/30/2047
6/30/2048
6/30/2049
Total 5,208,195 4,674,146 4,019,034
Interest Paid 1,783,897 1,249,848 594,736
Estimated Savings 534,049 1,189,161
CALPERS ACTUARIAL VALUATION - June 30, 2022
Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 17
Employer Contribution History
The table below provides a recent history of the required and discretionary employer contributions for the plan.
The required amounts are based on the actuarial valuation from two years prior without subsequent adjustments, if any. Additional discretionary payments before July 1, 2019 or after April 28, 2023 are not included. [
Fiscal
Year
Employer
Normal Cost
Unfunded Liability
Payment ($)
Additional Discretionary
Payments
2016 - 17 16.656% $192,135 N/A
2017 - 18 16.842% 211,522 N/A
2018 - 19 17.614% 237,143 N/A
2019 - 20 18.928% 266,452 300,000
2020 - 21 20.585% 291,877 0
2021 - 22 20.64% 308,974 300,000
2022 - 23 20.64% 338,009 0
2023 - 24 22.83% 317,136
2024 - 25 23.00% 367,427
Funding History
The table below shows the recent history of the actuarial accrued liability, share of the pool’s market value of assets, unfunded accrued liability, funded ratio, and annual covered payroll.
Valuation
Date
Accrued
Liability
(AL)
Share of Pool’s
Market Value of
Assets (MVA)
Unfunded
Accrued Liability
(UAL)
Funded
Ratio
Annual
Covered
Payroll
06/30/2013 $6,584,330 $4,077,796 $2,506,534 61.9% $736,084 06/30/2014 7,306,516 4,866,517 2,439,999 66.6% 491,123
06/30/2015 7,426,758 4,727,031 2,699,727 63.6% 429,147
06/30/2016 8,227,931 5,083,661 3,144,270 61.8% 440,143
06/30/2017 9,080,346 5,926,140 3,154,206 65.3% 530,369
06/30/2018 9,923,435 6,443,677 3,479,758 64.9% 543,142
06/30/2019 10,208,337 6,639,204 3,569,133 65.0% 491,212 06/30/2020 10,659,733 7,221,173 3,438,560 67.7% 501,120 06/30/2021 11,282,797 8,730,289 2,552,508 77.4% 507,686 06/30/2022 11,931,200 8,346,554 3,584,646 70.0% 601,947 Risk Analysis
• Future Investment Return Scenarios
• Discount Rate Sensitivity
• Mortality Rate Sensitivity
• Maturity Measures
• Maturity Measures History
• Funded Status – Termination Basis
CalPERS Actuarial Valuation – June 30, 2022
Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 19
Future Investment Return Scenarios
Analysis using the investment return scenarios from the Asset Liability Management process completed in 2021 was performed to determine the effects of various future investment returns on required employer contributions. The projections below reflect the impact of the CalPERS Funding Risk Mitigation policy. The projections also assume that all other actuarial assumptions will be realized and that no further changes in assumptions, contributions, benefits, or funding will occur.
The first table shows projected contribution requirements if the fund were to earn either 3.0% or 10.8% annually. These alternate investment returns were chosen because 90% of long-term average returns are expected to fall between them over the 20-year period ending June 30, 2042.
Required contributions outside of this range are also possible. In particular, whereas it is unlikely that investment returns will average less than 3.0% or greater than 10.8% over a 20-year period, the likelihood of a single investment return less than 3.0% or greater than 10.8% in any given year is much greater. The following analysis illustrates the effect of an extreme, single year investment return.
The portfolio has an expected volatility (or standard deviation) of 12.0% per year. Accordingly, in any given year there is a 16% probability that the annual return will be -5.2% or less and a 2.5% probability that the annual return will be -17.2% or less. These returns represent one and two standard deviations below the expected return of 6.8%.
The following table shows the effect of a one or two standard deviation investment loss i n FY 2022-23 on the FY 2025-26 contribution requirements. Note that a single-year investment gain or loss decreases or increases the required UAL contribution amount incrementally for each of the next five years, not just one, due to the 5 - year ramp in the amortization policy. However, the contribution requirements beyond the first year are also impacted by investment returns beyond the first year. Historically, significant downturns in the market are often followed by higher than average returns. Such investment gains would offset the impact of these single year negative returns in years beyond FY 2025-26.
Assumed Annual Return for
Fiscal Year 2022-23
Required
Employer
Contributions
Projected
Employer
Contributions
2024-25 2025-26
(17.2)% (2 standard deviation loss)
Normal Cost Rate 23.00% 23.0%
UAL Contribution $367,427 $442,000
(5.2)% (1 standard deviation loss)
Normal Cost Rate 23.00% 23.0%
UAL Contribution $367,427 $417,000
• Without investment gains (returns higher than 6.8%) in FY 2023-24 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 2022-23.
• The Pension Outlook Tool can be used to model projected contributions for these scenarios beyond FY 2025-26 as well as to model other investment return scenarios .
Assumed Annual Return
FY 2022-23
through 2041-42
Projected Employer Contributions
2025-26 2026-27 2027-28 2028-29 2029-30
3.0% (5th percentile)
Normal Cost Rate 23.0% 23.0% 23.0% 23.0% 23.0%
UAL Contribution $401,000 $441,000 $486,000 $559,000 $609,000
10.8% (95th percentile)
Normal Cost Rate 23.4% 23.8% 24.2% 24.6% 25.0%
UAL Contribution $386,000 $396,000 $395,000 $406,000 $347,000 CalPERS Actuarial Valuation – June 30, 2022
Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 20
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, 2022 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, 2022 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 39.99% 31.99% 25.87%
b) Accrued Liability $13,644,180 $11,931,200 $10,533,319 c) Market Value of Assets $8,346,554 $8,346,554 $8,346,554 d) Unfunded Liability/(Surplus) [(b) - (c)] $5,297,626 $3,584,646 $2,186,765 e) Funded Ratio 61.2% 70.0% 79.2%
Sensitivity to the Price Inflation Assumption
As of June 30, 2022 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 33.57% 31.99% 29.04%
b) Accrued Liability $12,435,413 $11,931,200 $10,906,460 c) Market Value of Assets $8,346,554 $8,346,554 $8,346,554 d) Unfunded Liability/(Surplus) [(b) - (c)] $4,088,859 $3,584,646 $2,559,906 e) Funded Ratio 67.1% 70.0% 76.5%
Mortality Rate Sensitivity
The following table looks at the change in the June 30, 2022 plan costs and funded status under two different longevity scenarios, namely assuming post-retirementrates of mortality are 10% lower or 10% higher than our current mortality assumptions adopted in 2021. This type of analysis highlights the impact on the plan of a change in the mortality assumption.
As of June 30, 2022 10% Lower
Mortality Rates
Current
Assumptions
10% Higher
Mortality Rates
a) Total Normal Cost 32.44% 31.99% 31.57%
b) Accrued Liability $12,155,435 $11,931,200 $11,723,597 c) Market Value of Assets $8,346,554 $8,346,554 $8,346,554 d) Unfunded Liability/(Surplus) [(b) - (c)] $3,808,881 $3,584,646 $3,377,043 e) Funded Ratio 68.7% 70.0% 71.2%
CalPERS Actuarial Valuation – June 30, 2022
Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 21
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.
Since it is the employer that bears the risk, it is appropriate to perform this analysis on a pension plan level considering all rate plans. The following measures are for one rate plan only. One way to look at the maturity level of CalPERS and its plans is to look at the ratio of a plan’s retiree liability to its total liability. A pension plan in its infancy will have a very low ratio of retiree liability to total liability. As the plan matures, the ratio starts increasing. A mature plan will often have a ratio above 60%-65%.
Ratio of Retiree Accrued Liability to
Total Accrued Liability June 30, 2021 June 30, 2022
1. Retired Accrued Liability $4,558,685 $4,927,370
2. Total Accrued Liability 11,282,797 11,931,200
3. Ratio of Retiree AL to Total AL [(1) / (2)] 0.40 0.41 Another measure of maturity level of CalPERS and its plans is to look at the ratio of actives to retirees, also called the support ratio. A pension plan in its infancy will have a very high ratio of active to retired members. As the plan matures and members retire, the ratio declines. A mature plan will often have a ratio near or below one.
To calculate the support ratio for the rate plan, retirees and beneficiaries receiving a continuance are each counted as one, even though they may have only worked a portion of their 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, 2021, was 0.78 and was calculated consistently with how it is for the individual rate plan. Note that to calculate the support ratio for all public agency plans, a retiree with service from more than one CalPERS agency is counted as a retiree more than once.
Support Ratio June 30, 2021 June 30, 2022
1. Number of Actives 6 7
2. Number of Retirees 18 19
3. Support Ratio [(1) / (2)] 0.33 0.37
CalPERS Actuarial Valuation – June 30, 2022
Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 22
Maturity Measures (continued)
The actuarial calculations supplied in this communication are based on various assumptions about long -term demographic and economic behavior. Unless these assumptions (e.g., terminations, deaths, disabilities, retirements, salary growth, investment return) are exactly realized each year, there will be differences on a yearto-year basis. The year-to-year differences between actual experience and the assumptions are called actuarial gains and losses and serve to lower or raise required employer contributions from one year to the next.
Therefore, employer contributions will inevitably fluctuate, especially due to the ups and downs of investment returns.
Asset Volatility Ratio
Shown in the table below is the asset volatility ratio (AVR), which is the ratio of market value of assets to payroll.
Plans that have higher AVR experience more volatile employer contributions (as a percentage of payroll) due to investment return. For example, a plan with AVR of 8 may experience twice the contribution volatility due to investment return volatility than a plan with 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 LVR of 8 is expected to have twice the contribution volatility of a plan with LVR of 4. It should be noted that this ratio indicates a longer-term potential for contribution volatility, since the AVR, described above, will tend to move closer to the LVR as the funded ratio approaches 100%.
Contribution Volatility June 30, 2021 June 30, 2022
1. Market Value of Assets $8,730,289 $8,346,554
2. Payroll 507,686 601,947
3. Asset Volatility Ratio (AVR) [(1) / (2)] 17.2 13.9
4. Accrued Liability $11,282,797 $11,931,200
5. Liability Volatility Ratio (LVR) [(4) / (2)] 22.2 19.8 Maturity Measures History
Valuation Date
Ratio of
Retiree Accrued Liability
to
Total Accrued Liability
Support Ratio
Asset
Volatility
Ratio
Liability
Volatility
Ratio
06/30/2017 0.45 0.41 11.2 17.1
06/30/2018 0.42 0.41 11.9 18.3
06/30/2019 0.41 0.35 13.5 20.8
06/30/2020 0.39 0.35 14.4 21.3
06/30/2021 0.40 0.33 17.2 22.2
06/30/2022 0.41 0.37 13.9 19.8
CalPERS Actuarial Valuation – June 30, 2022
Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 23
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, 2022. The accrued liability on a termination basis (termination liability) is calculated differently compared to 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 PERF and consequently, a lower discount rate is assumed. The lower discount rate for the Terminated Agency Pool results in higher liabilities for terminated plans.
The effective termination discount rate will depend on actual market rates of return for risk-free securities on the date of termination. As market discount rates are variable, the table below shows a range for the hypothetical termination liability based on the lowest and highest interest rates observed during an approximate 19-month period from 12 months before the valuation date to seven months after.
Discount Rate: 1.75%
Price Inflation: 2.50%
Discount Rate: 4.50%
Price Inflation: 2.75%
Market
Value of
Assets (MVA)
Termination
Liability1,2
Funded
Ratio
Unfunded
Termination
Liability
Termination
Liability1,2
Funded
Ratio
Unfunded
Termination
Liability
$8,346,554 $26,527,938 31.5% $18,181,384 $16,846,439 49.5% $8,499,885 1 The termination liabilities calculated above include a 5% contingency load. The contingency load and other actuarial assumptions can be found in Appendix A of the Section 2 report. 2 The discount rate used for termination valuations is a w eighted average of the 10-year and 30-year U.S. Treasury yields w here the weights are based on matching asset and liability durations as of the termination date. The discount rates used in the table are based on 20-year Treasury bonds, rounded to the nearest quarter percentage point, which is a good proxy for most plans. The 20-year Treasury yield w as 3.38% on June 30, 2022, the valuation date.
In order to terminate the plan, first contact our Pension Contract Services unit to initiate a Resolution of Intent to Terminate. The completed Resolution will allow the plan actuary to provide a preliminary termination valuation with a more up-to-date estimate of the plan liabilities. Before beginning this process, please consult with the plan actuary.
CalPERS Actuarial Valuation – June 30, 2022
Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 24
Participant Data
The table below shows a summary of the plan’s member data upon which this valuation is based:
June 30, 2021 June 30, 2022
Active Members
Counts 6 7
Average Attained Age 48.3 48.1
Average Entry Age to Rate Plan 34.3 35.3
Average Years of Credited Service 14.0 12.9
Average Annual Covered Pay $84,614 $85,992
Annual Covered Payroll $507,686 $601,947
Present Value of Future Payroll $3,124,307 $3,788,335
Transferred Members 15 14
Separated Members 9 9
Retired Members and Beneficiaries*
Counts 18 19
Average Annual Benefits $18,713 $19,335
Total Annual Benefits $336,839 $367,362
Counts of members included in the valuation are counts of the records processed by the valuation. Multiple records may exist for those who have service in more than one valuation group. This does not result in double counting of liabilities.
* Values include community property settlements.
List of Class 1 Benefit Provisions
This plan has the additional Class 1 Benefit Provisions:
• None
CALPERS ACTUARIAL VALUATION - June 30, 2022
Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 25
Plan’s Major Benefit Options
Shown below is a summary of the major optional benefits for which the agency has contracted. A description of principal standard and optional plan provisions is in Section 2.
Benefit Group
Member Category Police Police
Demographics
Actives Yes No
Transfers/Separated Yes No
Receiving Yes Yes
Benefit Group Key 100561 218638
Benefit Provision
Benefit Formula 3% @ 55
Social Security Coverage Yes
Full/Modified Modified
Employee Contribution Rate 9.00%
Final Average Compensation Period Three Year
Sick Leave Credit Yes
Non-Industrial Disability Standard
Industrial Disability Standard
Pre-Retirement Death Benefits
Optional Settlement 2 Yes
1959 Survivor Benefit Level No
Special Yes
Alternate (firefighters) No
Post-Retirement Death Benefits
Lump Sum $2000 $2000
Survivor Allowance (PRSA) No No
COLA 2% 2%
CALPERS ACTUARIAL VALUATION - June 30, 2022
Safety Police Plan of the City of Kingsburg
CalPERS ID: 1210886769
Rate Plan belonging to the Safety Risk Pool Page 26
Section 2
CAL I F O RNI A P UBL I C EM P L O YEES ’ RET I REM ENT S YS T EM Risk Pool Actuarial Valuation Information
Section 2 may be found on the
CalPERS website (www.calpers.ca.gov)
in the Forms and Publications section