CITY OF PALO ALTO
Finance Committee
Regular Meeting
Tuesday, June 04, 2024
Agenda Item
2. Accept June 30, 2023 Actuarial Valuation of Palo Alto's Retiree Healthcare and Other Post Employment Benefits and Recommend to the City Council to Approve Annual Actuarially Determined Contribution for Fiscal Year 2025 and 2026; CEQA Status – Not a Project
Finance Committee
Staff Report
From: City Manager
Report Type: ACTION ITEMS
Lead Department: Administrative Services
Meeting Date: June 4, 2024
Report #:2402-2673
TITLE
Accept June 30, 2023 Actuarial Valuation of Palo Alto's Retiree Healthcare and Other Post Employment Benefits and Recommend to the City Council to Approve Annual Actuarially Determined Contribution for Fiscal Year 2025 and 2026; CEQA Status – Not a Project
RECOMMENDATION
Staff recommends that the Finance Committee recommend the City Council:
1. Review and accept the June 30, 2023 actuarial valuation of Palo Alto's Retiree Healthcare Plan (Attachment B); and
2. Approve funding of the annual Actuarial Determined Contribution (ADC) for Fiscal Year 2025 and Fiscal Year 2026 using a two-year phase-in of the adjusted assumptions.
EXECUTIVE SUMMARY
In accordance with the Governmental Accounting Standards Board (GASB), the City Council is required to review and approve the actuarial valuation for retiree healthcare plan on a bi- annual basis for the upcoming two fiscal years and approve funding of the annual Actuarial Determined Contribution (ADC). This current study presents the fund's status as of June 30, 2023 and will be used to inform the FY 2025 and FY 2026 annual operating budgets. This report was finalized after the development of the FY 2025 Proposed Budget therefore, funding levels in the FY 2025 Proposed Budget reflect the out years of the prior completed study as of June 30, 2021 1.
The City’s retiree medical trust is held by the California Employers Retirement Benefit Trust (CERBT) Fund that is managed by CalPERS. The City continues to select CERBT’s Strategy 1 asset allocation, currently projected at a 6.25% discount rate. With the adoption of the 1 Finance Committee, June 7, 2022, Agenda item #3, CMR ID 14112:
https://portal.laserfiche.com/Portal/DocView.aspx?id=65179&repo=r-704298fc&searchid=5b3b872d-50f9-45a2- ab27-53454d1ae3cc
Retiree Benefits Funding Policy 2 the City Council directed staff to calculate additional discretionary payments ("prefunding") equivalent to a 5.75% discount rate and transmit amounts above payments at a 6.25% discount rate to the CERBT Fund. Through FY 2024, a total of $11.9 million in additional contributions are expected to be made to the CERBT due to this policy.
The June 30, 2023, valuation includes several changes that have impacted the CERBT fund status, primarily due to healthcare and economic fluctuations resulting from the COVID-19 pandemic and continued proactive funding contributions:
• Investment Returns: 2021-22 investment loss of -13.5%, compared to the 27.5% investment gains in 2020-21 (6.25% target);
• Projected Payroll: Higher than projected salary growth; • Health Premiums: Higher than projected healthcare premiums; and • Pre-Funding Policy: Actuarially Determined Contribution “ADC” (full ADC payments and pre-funding)
Compared to the favorable assumptions in the June 30, 2021 actuary study, these changes are advised to be taken in consideration of an uncertain environment. While the 2022-23 portfolio earnings yielded 6.4% and is within range of the 6.25% target, it is not known whether the recent change in healthcare premiums will be ongoing or an anomaly due to the significant governmental support of healthcare costs over the past two years. Because it is unknown whether these changes are the beginning of a trend, or merely a temporary anomaly, this report models short term significant rises in healthcare costs in alignment with inflation.
The outyears of the June 30, 2021 valuation report were used to develop the OPEB assumptions in the FY 2025 Proposed Budget. Based on these assumptions and the attached actuary report, $5.2 million ($3.3 million General Fund) should be added to the FY 2025 Budget to maintain pre-funding levels in alignment with City Council policy. On May 21, the Finance Committee (“Committee”) recommended full funding of the ADC and a 2- year phase-in of prefunding levels in accordance with City Council policy as part of the FY 2025 Budget. This action reduces the funding need in FY 2025 to $2.6 million ($1.65 million General Fund). The below table provides a summary of the difference between the funding FY 2025 Proposed Budget in all funds between the June 30, 2021 and June 30, 2023 valuation reports. A more detailed discussion of these is included in this report. 2 City Council, February 6, 2023, Agenda Item #3, Staff Report# 2212-0513:
https://portal.laserfiche.com/Portal/DocView.aspx?id=61647&repo=r-704298fc&searchid=81eeeb05-1df1-4590- 8ed4-5085f971df6d
Table 1: Funding for the FY 2025 OPEB Obligations*
FY25
Proposed
ADC (6/30/21
valuation)
FY25
Adjusted ADC
(6/30/23
valuation)
$ Change
Actuarially
Determined
Contribution
• Proactive contribution at
discount rate of 5.75%
• 15-year amortization period as
of June 30, 2021 (13 years
remaining)
$16.8M $21.9M $5.1M
*Approximately 65% of costs are allocated to the General Fund
BACKGROUND
The City of Palo Alto offers its employees and retirees a Retiree Healthcare benefit plan which is managed and administered by the California Public Employees' Retirement System (CalPERS), a State of California Retiree Healthcare Trust program. Bi-annually staff contracts with an actuary firm that provides an actuarial report detailing the latest status of the City of Palo Alto's Retiree Healthcare plans for employees and retirees. The actuarial report is used to calculate the annual ADC and pre-funding based on Council policy to the trust. In addition, updates on the rate of return, funding status, and changes to the trust based on various impacts are detailed in the report. Unlike the pension actuary reports, this actuary details impacts by Fund and Department, which inform the development of the annual budget.
There are four groups of benefits within the CalPERS Retiree Healthcare benefit plans.
Attachment A outlines the different benefits levels by Group. These benefit levels are negotiated and approved as part of the employee contracts. Employees and retirees have an open enrollment window in October each year in which they can make changes to their healthcare plans that take effect in January of the following year.
CALPERS Projected Contribution Levels
The actuary report has two components to the annual billing of the employer portion of retiree healthcare contributions that comprise the Actuarial Determined Contribution (ADC), (1) the Normal Cost (NC), and (2) the Unfunded Actuarial Accrued Liability (UAAL). • NC: This reflects a rate of contribution for the plan of retirement healthcare benefits provided to current employees based on the current set of assumptions.
• Employer Amortization of UAAL: This is an annual payment calculated to pay down an agency's unfunded accrued liability. Assuming every assumption in the actuarial valuation was accurate, an organization would eliminate its unfunded pension liability if it made these payments annually for 30 years. The City Council approved a closed period to amortize the entire net pension liability over a specific timeframe, and 22 years (before the adoption of a Retiree Benefit Funding Policy) of payments remain as of June 30, 2021. The total liability will vary from one year to the next because of assumption changes and actuarial experience that is different from anticipated, such as actual investment returns that do not meet expectations.
As established by the City Council, the City's CERBT Fund is invested in a Strategy 1 asset allocation at a 6.25% discount rate. With the adoption of the Retiree Benefits Funding Policy , directed staff to calculate additional discretionary payments ("prefunding") equivalent to a 5.75% discount rate and transmit amounts above payments at a
6.25% discount rate to the CERBT Fund. The City's CERBT Fund was established in May 2008 at a level of $33 million and it has grown to $173.0 million as of March 31, 2024.
ANALYSIS
Summary of Actuarial Report June 30, 2023
Staff contracted with Foster and Foster Actuary Consultants for this retiree healthcare actuarial report (Attachment B) to determine the City's retiree healthcare liability and the ADC for Fiscal Years 2025 and 2026. The actuarial analysis is based on current employees' accrued benefit, and retired employees as of June 30, 2023.
This updated valuation includes several changes that have impacted the CERBT fund status, primarily due to healthcare and economic fluctuations resulting from the COVID-19 pandemic, inflation levels, and active employee salary growth. Most notably, investment returns for 2020-21 reached an unprecedented level of 27.5% for the period and then performance dropped to -13.5% for 2021-22. This volatile level of return had a significant impact on the overall status of the fund and is not expected to continue in future periods.
Healthcare premiums are higher than anticipated due to significant current inflation levels and a return to pre-pandemic levels of utilization.
Discount Rate Assumptions
The City Council has taken steps to ensure long-term liability assumptions and costs for OPEB are being proactively addressed, including the adoption of a Retiree Benefit Funding Policy3 that invests at an estimated discount rate for OPEB of 6.25% and transmits additional contributions to prefund OPEB obligations at the equivalent of a 5.75% discount rate. Through FY 2024, a total of $11.9 million in additional contributions are expected.
Discussed above, the ADC is impacted when actual experience differs from assumptions. One of the more significant impacts to ADC occurs when actual investment returns do not meet expectations. Chart 1 below presents historical returns since 2008-09. 3 City Council, February 6, 2023, Agenda Item #3:
https://portal.laserfiche.com/Portal/DocView.aspx?id=61647&repo=r-704298fc&searchid=81eeeb05-1df1-4590- 8ed4-5085f971df6d
Chart 1: Historical Returns of the OPEB Trust
(Market Value of Plan Assets (MVA) and Expected Return) Projected Unfunded Actuarial Accrued Liability
This actuarial valuation includes the plan's "Funded Status." As of June 30, 2023, the CERBT Trust is funded at 56%, down 1,100 basis points from 67% in the June 30, 2021 actuarial valuation.
As of June 30, 2023, the Unfunded Actuarial Accrued Liability (UAAL) was $120.5 million for all funds and $77.9 million for the General Fund. Beginning with the June 30, 2013 valuations, the City aligned its actuarial analysis to align with GASB's rules regarding the "implied subsidy". The calculation of implied subsidy requires an agency to recognize that it pays the same medical premiums for active employees as those that are retired. The implied subsidy identifies and accounts for the agency paying the same blended premium for both active employees and retirees, even though the medical cost for active employees is lower than retirees .
Palo Alto had 902 active employees and 1,031 retirees as of June 30, 2023. The calculation increases the UAAL by $15.1 million or 18.9%; without the implied subsidy the UAAL for all funds would be at $76.8 million.
Table 2: Unfunded Actuarial Accrued Liability (UAAL) June 30,
2021
June 30,
2023
Projected
June 30,
2024
Citywide – UAAL $80,027 $120,511 $140,372
General Fund – UAAL $51,522 $77,914 $91,242
Citywide Funded Ratio 67% 56% 54%
Citywide UAAL % Chg. from prior valuation 50.6% 16.5%
Sensitivity Analysis: Discount Rate and Amortization Period CalPERS recognizes the varying assumptions that may impact a plan's unfunded actuarial accrued liability and therefore a retiree healthcare plan's funding status, especially the implications of the discount rate and amortization assumptions. Therefore, in addition to the actuarial assumptions used to develop this annual evaluation, the actuary includes a sensitivity analysis of the retiree healthcare plan. Table 4 below reflects the impact on UAAL resulting from a reduction in the discount rate. Table 5 reflects the impact on ADC if the UAAL is amortized over different timeframes. It should be noted that the Council has adopted a Pension Funding Policy 3 seeking to reach a 90% funded level by 2036, so with 13 remaining years as of this June 30, 2023 valuation, a shorter period than the sensitivity scenarios below. As illustrated by tables four and five, these alternative assumptions cause significant impacts. For example, changing from a discount rate of 6.25% to 5.75% causes UAAL to increase by almost 15%.
Table 3: Discount Rate Sensitivity
6.25% (Current CERBT
Strategy)
5.75% 5.25%
Citywide – UAAL $120,511 $137,059 $155,266
General Fund – UAAL $77,914 $89,088 $100,923
Funded Ratio 56% 53% 50%
Table 4: Amortization Sensitivity, 6.25% Discount Rate
20 Years (Current) 18 Years
Normal Cost $7,489 $7,489
UAAL Amortization* $8,933 $9,617
Total ACD $16,416 $17,105
ACD (% of payroll) 12.8% 13.4%
*Includes administrative expenses
Funding for the FY 2025 Including Actuarial Determined Contribution (ADC) This section outlines staff's recommended funding level for OPEB obligations beginning in FY 2025 for Finance Committee review and discussion. Staff recommend accepting the assumptions in this valuation report to inform the development of the FY 2025 and FY 2026 budgets, along with long range financial plans for the outyears. This is in alignment with the Retire Benefit Policy, including tenants such as continuing to use a reduced discount rate of 5.75% and an accelerated, closed amortization schedule of 15 years (as of the June 30, 2021 valuation). Staff recommends the Finance Committee continue with this funding approach that adjusts assumptions based on current data and the principles noted above. Included below is an optional two-year phase-in of the June 30, 2023 valuation results that the Finance Committee directed staff to consider, on May 21, 2024, in the development of the FY 2025 Budget for City Council adoption in June 2024. Staff have also outlined the actuarial "baseline" scenario for consideration that represents the minimal investment required but is incompliant with City policy. Funding levels may be adjusted annually based on City Council direction and policy adjustment, as long as the baseline ADC is met.
Unlike the CalPERS pension plan, additional City contributions do not go into a separate Section 115 trust; instead, they remain in the plan and are included as assets in the CERBT each subsequent year, impacting the calculation of the ADC. This treatment of prefunding contributions included in assets and effectively reduce the ADC each future year.
Full ADC and Prefunding of FY 2025 OPEB Obligations
Staff recommend adjusting funding from the typical baseline calculation to better align with City Council policy to continue to proactively fund long-term liabilities. Recommended revisions to baseline assumptions include:
• Exclude proactive contributions at a lower discount rate towards the ADC:
Consistent with the pension proactive funding, this would treat the proactive contributions assuming a lower discount rate of 5.75 as if in a separate "trust" or "saving account." ADC calculations will remain at consistent levels and these proactive contributions remain additive to baseline calculations of liability. • Continue to assume a shortened amortization period of 13 remaining years:
This amortization period aligns OPEB with the City's Pension Policy goals to reach a 90% funded status over 15 years as of the June 30, 2021 valuation (by FY 2036).
This results in an FY 2025 Adjusted ADC of $21.9 million citywide (approximately $13.9 million in the General Fund), a $5.1 million increase from the $16.8 million ADC from the June 30, 2021 valuation used to develop the FY 2025 Proposed Operating Budget .
Finance Committee Recommendation: Two-Year Phase-In
On May 21, 2024 the Finance Committee recommended a two-year phase-in of the financial impacts of the June 30, 2023 valuation. This recommendation mitigates the immediate impacts of this report’s expense escalation and supports financial flexibility for the provision of services citywide while continuing to proactively prefund long-term obligations in alignment with City Council policy.
This results in an FY 2025 Adjusted ADC of $19.4 million citywide (approximately $12.2 million in the General Fund), a $2.6 million ($1.65 million in the General Fund ) increase from the $16.8 million ADC from the June 30, 2021 valuation used to develop the FY 2025 Proposed Operating Budget .
Prior Valuation Additional Normal Cost Contributions
In the prior valuation period the City Council approved factoring in funding for the addition of nearly 60 full-time staff since the June 30, 2021 valuation date. Based on the average salary reported in that valuation and the variable portion of ADC, or normal cost for current employees, the retiree healthcare cost of the additional staffing was approximately $400,000 citywide ($298,000 or 74% General Fund). This associated retiree health cost was included in the FY 2023 and FY 2024 Adopted budgets in alignment with the assumptions noted above. This funding was included to proactively address the expected deviation in actuarial assumptions though as noted, were insufficient to mitigate the full impact of the changes from the FY 2023 report. Staff recommends removing this additional retiree health cost as the position additions that prompted it are now included in the June 30, 2023 valuation. The $416,000 programmed in the FY 2025 Proposed Budget for additional normal cost contributions partially offset the cost increase from the new valuation to bring it down to $5.1 million for all funds.
FISCAL/RESOURCE IMPACT
The FY 2025 Proposed Budget includes an ADC of $16.9 million, an increase of $2.9 million from FY 2024 Adopted levels of $14.0 million. Funding of the full ADC and two-year prefunding phase in recommended by the Finance Committee on May 21, 2024 increases the ACD in FY 2025 to $19.4 million. This recommendation by the Finance Committee will be included as an amendment to the FY 2025 Proposed Budget for City Council consideration during the adoption of the budget on June 17, 2024. Staff will incorporate this direction on an ongoing basis beginning in FY 2026. Funding for future fiscal years is subject to City Council approval through the annual budget process.
STAKEHOLDER ENGAGEMENT
The transmittal of the OPEB actuarial valuation as of June 30, 2023 begins conversations regarding the fiscal outlook for the City's OPEB liabilities and the appropriate contribution for the FY 2025 Actuarial Determined Contribution and prefunding levels. Initial public discussion was held with the Finance Committee on May 21, 2024, prior to City Council review and adoption of the FY 2025 Budget, scheduled for June 17, 2024.
ENVIRONMENTAL REVIEW
Committee action on this item is not a project as defined by CEQA because accepting and approving an annual actuarially determined contribution is a fiscal activity which does not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment. CEQA Guidelines section 15378(b)(4).
ATTACHMENTS
Attachment A: 4 Benefit Groups in the CalPERS Retiree Healthcare Benefits Plan Attachment B: City of Palo Alto Retiree Healthcare Plan June 30, 2023 Actuarial Valuation Contributions for FY 2025 and FY 2026
APPROVED BY:
Lauren Lai, Director of Administrative Services
Attachment A: 4 Benefit Groups in the CalPERS Retiree Healthcare benefit plans City of Palo Alto Retiree Healthcare Benefit Plans and Tiers Miscellaneous Safety: Fire Safety: Police
Group 1
Retired before January 1, 2007; eligibility starting at the age 50 and 5 years of service ; full premium up to family coverage
Retired before March 1,
2009 ; eligibility starting at
the age of 50 and 5 years of
service; full premium up to
family coverage
Group 2
Retired between January
1, 2007
and May 1, 2011;
eligibility starting at the
age 50 and 5 years of
service; same as Group
1, but premium limited to
2nd most expensive
medical plan
Retired between January
1, 2007
and December 1, 2011;
eligibility starting at the
age 50 and 5 years of
service; same as Group
1, but premium limited to
2nd most expensive
medical plan
Retired between March 1,
2009 and April 1, 2015
(POA), between January 1,
2007 and June 1, 2012
(PMA); eligibility starting at
the age 50 and 5 years of
service; same as Group 1,
but premium limited to 2nd
most expensive medical
plan
Group 3
(Retirees)
Retired after Group 2, did not elect into Group 4, benefit same as active employees
Group 3
(Actives)
Currently active, not in
Group 4. Flat Dollar Caps
equal to actives
N/A
(All active Group 3 IAFF &
FCA elected into Group 4)
N/A
(All active Group 3 POA & PMA
elected into Group 4)
Group 4 Vesting Schedule : 10 years gets 50%, 20 years gets 100%, formula amount
CITY OF PALO ALTO
RETIREE HEALTHCARE PLAN
June 30, 2023 Actuarial Valuation
Contributions for 2024/25 & 2025/26
Drew Ballard, FSA, EA, MAAA
Cathy Wandro, ASA, MAAA
Joseph Herm
Foster & Foster, Inc.
May 21, 2024
CONTENTS
L:\PaloAltoCity\OPEB\2023_Val\Reports\F&F_PaloAltoCity_24-05-21_OPEB_6-30-23_Funding_Report.docx Topic Page
Benefit Summary 1
Implied Subsidy 7
Participant Statistics 9
Actuarial Assumptions Highlights 15
Actuarial Methods 21
Assets 23
Results 25
Results – Details 39
Sensitivity Analysis 49
Comparison to Other Agencies 54
Actuarial Certification 57
Exhibits 58
May 21, 2024 1
BENEFIT SUMMARY
Eligibility Retire directly from the City under CalPERS (age 501 and 5 years of CalPERS service or disability)
Medical
Provider
CalPERS health plans (PEMHCA)
CalPERS administrative fees paid by City
Retiree Medical
Benefit for
Current
Retirees:
Hired < 1/1/04
(1/1/05 SEIU,
1/1/06 PAPOA)
&
Did Not Elect
into Group 4
GROUP 1 Retirees: Retired < 1/1/07 (3/1/09 for PAPOA) • Benefit = Full premium up to family coverage
GROUP 2 Retirees: Retired after GROUP 1 and before
5/1/11 (12/1/11 IAFF/FCA, 6/1/12 PMA, 4/1/15 POA)
• Benefit = Same as above but premium limited to 2nd most expensive Basic (non-Medicare) medical plan in PEMHCA
Region 1 (PERS Platinum in 2023 and 2024)
GROUP 3 Retirees: Retired after GROUP 2
• Benefit = same amount as active employees, which may change from time to time and in the future as bargaining agreements change (see next section for cap amounts)
1 Age 52 for Miscellane ous New Hires under PEPRA
May 21, 2024 2
BENEFIT SUMMARY
Retiree Medical
Benefit for
Current
Actives:
Hired < 1/1/04
(1/1/05 SEIU,
1/1/06 PAPOA)
&
Did Not Elect
into Group 4
GROUP 3 Future Retirees: Currently active and did not elect into Group 4
• No active Group 3 POA, PMA, IAFF or FCA
• Only remaining Group 3 actives in MGMT, SEIU, UMPAPA
(57 active members)
• Benefit = up to full premium, but limited to flat dollar caps same as active contribution
SEIU
Mgmt/UMPAPA/
Other Groups
2023 2024 2023 & 2024
Single $ 906 $ 943 $ 871
2-Party 1,812 1,885 1,742
Family 2,350 2,444 2,260
May 21, 2024 3
BENEFIT SUMMARY
Retiree Medical
Benefit for
those:
Hired ≥ 1/1/04
(1/1/05 SEIU,
1/1/06 PAPOA)
&
Employees
Hired Before
These Dates
Electing into
Group 4
2 GROUP 4 Future Retirees: Government Code §22893 “Vesting Schedule” (based on all CalPERS Service)3:
Years of Service % Years of Service %
< 10 0% 13 65%
10 50% 14 70%
11 55% ↓ ↓
12 60% > 20 100%
100% vesting for disability retirements
Vesting applies to 100/90 formula amounts, which are the maximum amounts payable by the City (retirees pay any difference between these amounts and actual premiums):
2023
2024
Single $ 883 $ 983
2-Party 1,699 1,890
Family 2,124 2,366
If have 20 years City service do not need to retire directly from City
2 All currently active POA/PMA, IAFF/FCA are Group 4. Some Mgmt/Conf and some SEIU remained in Group 3, and some elected into Group 4.
3 Minimum 5 years City Service.
May 21, 2024 4
BENEFIT SUMMARY
Dental, Vision
& Medicare
Part B
None
Surviving
Spouse Benefit
100% of retiree benefit continues to surviving spouse if retiree elects CalPERS pension survivor allowance
Waived Re-
election
Waived retirees/beneficiaries may re-elect coverage at a future date
Summary of
Changes Since
the Prior
Valuation
None
May 21, 2024 5
BENEFIT SUMMARY
Pay-As-You-
Go ($000s)
Fiscal
Year
Cash
Implied
Subsidy
Total
2022/23 $ 11,269 $ 3,025 $ 14,294
2021/22 10,880 2,619 13,499
2020/21 10,631 2,346 12,977
2019/20 10,344 2,384 12,728
2018/19 9,960 2,197 12,157
2017/18 9,660 2,444 12,104
2016/17 9,713 2,203 11,916
2015/16 9,681 1,960 11,641
2014/15 8,995 1,916 10,911
2013/14 7,317 - 7,317
2012/13 8,766 - 8,766
2011/12 8,165 - 8,165
May 21, 2024 6
BENEFIT SUMMARY
Monthly Benefit Cap Amounts
2023 2024
Group Single 2-Party Family Single 2-Party Family
Group 14 $1,210.71 $2,421.42 $3,147.85 $1,339.70 $2,679.40 $3,483.22 Group 2 1,200.12 2,400.24 3,120.31 1,314.27 2,628.54 3,417.10 Group 3 SEIU 906.00 1,912.00 2,350. 00 943.00 1,885.00 2,444.00 Group 3 Others5 871.00 1,742.00 2,260.00 871.00 1,742.00 2,260.00 Group 4 (100% vest) 883.00 1,699.00 2, 124.00 983.00 1,890.00 2,366.00 % Decrease from Group 1 (assumes Group 1 is in most expensive plan) Group 2 1% 1% 1% 2% 2% 2%
Group 3 SEIU 25% 25% 25% 30% 30% 30%
Group 3 Others 28% 28% 28% 35% 35% 35%
Group 4 27% 30% 33% 27% 29% 32%
4 No cap for Group 1. Amount shown is most expensive Non-Medicare Region 1 premium. 5 UMPAPA, Mgmt, IAFF, FCA, PMA, and PAPOA.
May 21, 2024 7
IMPLIED SUBSIDY
For PEMHCA, employer cost for allowing retirees to participate at active rates. • Kaiser 2024 Region 1 plan:
The City included the implied subsidy beginning with the June 30, 2013 valuation. 25 30 35 40 45 50 55 60 64
Premium 1,021 1,021 1,021 1,021 1,021 1,021 1,021 1,021 1,021 Male Cost by Age 371 412 487 579 696 866 1,094 1,376 1,636 Female Cost by Age 612 780 857 876 927 1,044 1,196 1,386 1,579 $-
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$Cost/Premium
Age
Kaiser 2024 - Single Coverage
May 21, 2024 8
IMPLIED SUBSIDY
This page intentionally blank
May 21, 2024 9
PARTICIPANT STATISTICS
Participant Statistics
6 Excludes all waived retirees, regardless of age, except as noted. 7 Includes 68 waived retirees over 65.
8 Excludes all waived retirees over 65; includes 38 waived under 65 retirees. 6/30/15 6/30/17 6/30/19 6/30/21 6/30/23
A c t i v e s
• Count 955 967 930 874 902
• Average Age 45.3 45.6 44.8 45.0 44.6
• Average City Service 10.8 10.9 10.8 11.2 10.4
• Average PERS Service 11.9 11.9 11.7 12.1 11.4
• Average Salary $91,714 $90,739 $110,969 $120,207 $134,338 • Total Salary (000’s) $87,586 $87,745 $103,201 $105,061 $121,173 Retirees:
• Count6 1,0077 959 8 974 1,009 1,031
• Average Age 68.9 68.9 70.0 70.9 71.5
• Average Retirement Age
o Service 57.7 57.7 58.0 58.2 58.2
o Disability 45.6 45.9 46.1 46.3 45.8
May 21, 2024 10
PARTICIPANT STATISTICS
Historical Active and Retiree Counts9
9 Retiree count is subscribers: retirees and surviving spouses 6/30/09 6/30/11 6/30/13 6/30/15 6/30/17 6/30/19 6/30/21 6/30/23 Active 955 923 948 955 967 930 874 902
Retired 710 860 968 1,007 959 974 1,009 1,031
43% 48% 50% 51% 50% 51% 54% 53%
57% 52% 50% 49% 50% 49% 46% 47%
-
500
1,000
1,500
2,000
2,500
May 21, 2024 11
PARTICIPANT STATISTICS
Participant Statistics
June 30, 2023
10 Based on June 30, 2023 PERSable pay rate.
11 Excludes retirees who have waiv ed coverage, regardless of age.
Group 1 Group 2 Group 3 Group 4 Total
Actives
• Count n/a n/a 57 845 902
• Average Age n/a n/a 55.8 43.9 44.6
• Average Entry Age n/a n/a 31.5 34.4 34.2
• Average City Service n/a n/a 24.3 9.5 10.4
• Average PERS Service n/a n/a 24.4 10.5 11.4
• Average Salary n/a n/a $134,880 $134,302 $134,338
• Total Salary (000’s)10 n/a n/a 7,688 113,485 121,173 Benefitting Retirees11:
• Count 396 280 165 190 1,031
• Average Age 79.3 70.7 65.7 61.5 71.5
• Avg Service Ret Age 57.3 57.8 59.1 59.0 58.2
• Avg Disability Ret Age 44.7 46.9 51.2 48.1 45.8
May 21, 2024 12
PARTICIPANT STATISTICS
Participant Statistics
June 30, 2021
12 Actual 2020/21 PERSable compensation.
13 Excludes retirees who have waiv ed coverage, regardless of age.
Group 1 Group 2 Group 3 Group 4 Total
Actives
• Count n/a n/a 69 805 874
• Average Age n/a n/a 54.1 44.2 45.0
• Average Entry Age n/a n/a 31.5 34.0 33.8
• Average City Service n/a n/a 22.6 10.2 11.2
• Average PERS Service n/a n/a 22.8 11.2 12.1
• Average Salary n/a n/a $114,220 $120,720 $120,207
• Total Salary (000’s)12 n/a n/a 7,881 97,180 105,061
Benefitting Retirees13:
• Count 429 290 152 138 1,009
• Average Age 77.8 68.8 64.0 61.4 70.9
• Avg Service Ret Age 57.5 57.9 59.1 59.4 58.2
• Avg Disability Ret Age 45.5 46.9 51.2 49.3 46.3
May 21, 2024 13
PARTICIPANT STATISTICS
Data Reconciliation14
6/30/2021 to 6/30/2023
Actives Retirees Disabled Benefic. Total
June 30, 2021 874 786 144 79 1,883
• New Hires/Rehires 199 - - - 199
• Disabled (8) - 8 - -
• Terminated15 (100) - - - (100)
• Died with Beneficiary16 - (8) (5) 13 -
• Died, no Beneficiary - (25) (7) (10) (42)
• Retired/covered (54) 54 - - -
• Retired/waived (9) - - - (9)
• Waived Retiree - (9) - (1) (10)
• Adjustment/Other - 7 1 4 12
June 30, 2023 902 805 141 85 1,933
14 Excludes retirees who have waived coverage.
15 All actives in June 30, 2021 valuation and not in June 30, 2023 valuation assumed terminated. 16 Retirees in the June 30, 2021 valuation not in the June 30, 2023 valuation assumed deceased.
May 21, 2024 14
PARTICIPANT STATISTICS
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May 21, 2024 15
ACTUARIAL ASSUMPTIONS HIGHLIGHTS
June 30, 2021 Valuation June 30, 2023 Valuation
Valuation
Date
June 30, 2021
ADC for Fiscal Years
2022/23 & 2023/24
(end of year)
1 year lag
June 30, 2023
ADC for Fiscal Years
2024/25 & 2025/26
(end of year)
1 year lag
Funding
Policy
Full Pre-funding through
CalPERS trust (CERBT)
Strategy #1
City may contribute additional
amounts based on lower
discount rate
Same
Discount Rate 6.25%, net of expenses based on
CERBT Strategy #1
Same
General
Inflation
2.50% Same
May 21, 2024 16
ACTUARIAL ASSUMPTIONS HIGHLIGHTS
June 30, 2021 Valuation June 30, 2023 Valuation
Payroll
Increases
Aggregate Increases: 2.75%
Merit Increases: CalPERS 2000-
2019 Experience Study
Same
Increase to
Group 3 Flat
Dollar Caps17
½ of Medical Trend, not less
than assumed inflation (2.50%)
Same
Medical
Trend
Non-Medicare: 6.50% for 2023,
decreasing to an ultimate rate of
3.75% in 2076
Medicare: 5.65% (non-Kaiser)
and 4.60% (Kaiser) for 2023,
decreasing to an ultimate rate of
3.75% in 2076
Non-Medicare: 8.50% for
2025, decreasing to an
ultimate rate of 3.45% in 2076
Medicare: 7.50% (non-Kaiser)
and 6.25% (Kaiser) for 2025,
decreasing to an ultimate rate
of 3.45% in 2076
17 Increase is for purposes of financial projection only and does not imply any obligation to increase the cap in the future.
May 21, 2024 17
ACTUARIAL ASSUMPTIONS HIGHLIGHTS
June 30, 2021 Valuation June 30, 2023 Valuation
Participation
at Retirement
Group 3: 98%
Group 4: if eligible for City
contribution: 95%; if not: 0%
Based on Plan experience18
Same
Retirement,
Mortality,
Termination,
Disability
CalPERS 2000-2019 Experience
Study
Society of Actuaries mortality
improvement scale MP-21
Same
Age-related
Claims Costs
for Medicare
Advantage
Plans
Included
Due to age-risk adjusted federal
subsidies, no age-based claims
costs were included for
Medicare Advantage plans
Same
18 Actual participation percentage for Gr oup 3 since 6/30/17 is 100% for Miscellaneous (there are no active Safety members in Group 3). Actual participation percentage for Group 4 since 6/30/17 who are eligible for a City contribution is 91%. Group 4 still has limited actual experience. We recommend continued monitoring for Group 4.
May 21, 2024 18
ACTUARIAL ASSUMPTIONS HIGHLIGHTS
June 30, 2021 Valuation June 30, 2023 Valuation
Basis for
Assumptions
(6/30/23
Valuation)
No experience study performed for this Plan
CalPERS experience study covering 2000 to 2019 experience was used
Mortality improvement is a Society of Actuaries table Inflation based on our estimate for the Plan’s long time horizon Capital market assumptions based on 2021 Foster & Foster stochastic analysis, taking into account capital market assumptions of investment advisory firms
Medical trends were based on expectations over the short term blended into long term medical trends developed using the Society of Actuaries Getzen Model of Long-Run Medical Cost Trends Age-based claims costs are based on tables published by the Society of Actuaries and demographic data for the CalPERS health plans provided by CalPERS
Medical coverage and participation based in part on Plan experience
May 21, 2024 19
ACTUARIAL ASSUMPTIONS HIGHLIGHTS
CERBT Investment Options
Asset Allocation
Strategy 1 Strategy 2 Strategy 3
Global Equity 49% 34% 23%
Long US Fixed Income 23% 41% 51%
TIPS 5% 5% 9%
Commodities 3% 3% 3%
Global REITs 20% 17% 14%
Total 100% 100% 100%
CalPERS’ projected 20-year
19 6.0% 5.5% 5.0%
19 CalPERS assumes 2.25% price inflation.
May 21, 2024 20
ACTUARIAL ASSUMPTIONS HIGHLIGHTS
Discount Rate
Future expected returns
Stochastic simulations of geometric average returns over 20 years – 5,000 trials 2.50% inflation assumption
Projections based on 8 independent Investment Advisors 2021 10-year Capital Market Assumptions and where available, investment advisors long-term trends Confidence levels:
Strategy 1 Strategy 2 Strategy 3
50% Confidence Level 6.25% 5.75% 5.25%
55% Confidence Level 6.00% 5.50% 5.00%
60% Confidence Level 5.75% 5.25% 4.75%
Expected returns, 50th percentile:
Strategy 1 Strategy 2 Strategy 3
Expected Real Rate of Return20 3.90% 3.39% 2.92%
Inflation Assumption 2.50% 2.50% 2.50%
Investment Expenses (0.05%) (0.05%) (0.05%)
Nominal Rate of Return 6.35% 5.84% 5.37%
Rounded to nearest 0.25% 6.25% 5.75% 5.25%
City currently in Strategy 1: Recommend 6.25% discount rate
20 Includes investment expenses
May 21, 2024 21
ACTUARIAL METHODS
Method June 30, 2021 Valuation June 30, 2023 Valuation
Cost Method Entry Age Normal Level %
of Pay
Same
Unfunded Liability
Amortization
22 years closed period
Level % of pay (2.75%
annual escalation)
Sensitivity analysis:
20 & 18 years
20 years closed period
Level % of pay (2.75%
annual escalation)
Sensitivity analysis:
18 years
Actuarial Asset Value Market Value of Assets21 Same Future New Entrants Closed group – no new participants Implied Subsidy Implied subsidy valued
Plan Continuance For purposes of financial projections, the plan and benefits are assumed to continue unchanged. The calculation of this obligation does not imply that there is any legal liability to provide or continue providing the benefits valued.
21 Using Market Value of Assets to determine the ADC will result in more volatile future ADCs than if a smoothed Market Value were used. For funding purposes, market value includes accrued contributions made for a previous fiscal year.
May 21, 2024 22
ACTUARIAL METHODS
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May 21, 2024 23
ASSETS
Market Value of Plan Assets (MVA)
Invested in CERBT Strategy 1 Fund
(Amounts in 000’s)
2019/20
2020/21
2021/22
2022/23
MVA (Beg. of Year) $118,497 $126,520 $164,170 $144,745 • Contributions 3,747 2,946 22 2,904 2,032
• Benefit Payments23 - - - -
• Admin. Expenses (59) (71) (80) (72)
• Investment Return24 4,335 34,776 (22,249) 9,356 MVA (End of Year) 126,520 164,170 144,745 156,061
Approx. Annual Return 3.6% 27.5% (13.5)% 6.4%
22 Includes $1,358 paid on 1/10/2022; MVA shown is not the same as market value for financial reporting purposes. 23 Benefit Payments made outside of trust by City in years other than 2018/19. Refer to Slide 5 for fiscal year amounts. 24 Net of investment expenses.
May 21, 2024 24
ASSETS
Historical Returns
08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 Market Value -22.5% 15.1% 24.4% 0.1% 11.2% 18.2% -0.2% 1.1% 10.4% 7.8% 6.3% 3.6% 27.5% -13.5% 6.4% Expected Return 7.75% 7.75% 7.75% 7.75% 7.75% 7.75% 7.61% 7.25% 7.25% 6.75% 6.75% 6.75% 6.75% 6.25% 6.25% (15%)
(10%)
(5%)
0%
5%
10%
15%
20%
25%
30%
May 21, 2024 25
RESULTS
Actuarial Obligations
(Amounts in 000’s)
Valuation Date 6/30/2021 6/30/2023
Discount Rate 6.25% 6.25%
Present Value of Benefits (PVB)
• Actives (future retirees) $131 ,926 $154 ,864
• Retirees 169,243 192,253
• Total 301 ,169 347 ,117
Actuarial Accrued Liability (AAL)
• Actives (future retirees) 74 ,954 84 ,319
• Retirees 169,243 192,253
• Total 244 ,197 276 ,572
Market Value of Assets (MVA) 164,170 156,061
Unfunded AAL (UAAL) 80 ,027 120 ,511
Funded Ratio 67% 56%
Normal Cost25 6,316 7 ,614
Pay-As-You-Go Cost (Cash) 11,190 12 ,827
Pay-As-You-Go Cost (IS) 3,025 2 ,745
25 Includes Administration fees.
May 21, 2024 26
RESULTS
Historical Funded Status
(Amounts in 000’s)
24% 27%
29%
33%
37%
49%
67% 56%
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
1/1/11 6/30/11 6/30/13 6/30/15 6/30/17 6/30/19 6/30/21 6/30/23 Retiree pay-go Retiree AAL less pay-go Active AAL AVA MVA X% Funded Ratio
May 21, 2024 27
RESULTS
Actuarial Gain/Loss
(Amounts in $000’s)
AAL Assets UAAL
Actual 6/30/21 $244,197 $164,170 $80,027
Expected 6/30/23 260,018 184,228 75,790
Experience (Gains)/Losses
• Premiums/Caps different than expected 286 286
• Demographic & other (2,315) (2,315)
Assumption Changes increasing/(decreasing) AAL
• Medical Plan election percentages changed 1,269 1,269 • Updated medical trend 17,314 17,314
Contribution and Benefit Payment Gain 6,131 (6,131) Investment Loss (34,297) 34,297
Total UAAL (Gain)/Loss 16,554 (28,167) 44,721
Actual 6/30/23 276,572 156,061 120,511
May 21, 2024 28
RESULTS
Actuarially Determined Contribution (ADC)
(Amounts in 000’s)
6/30/21 Valuation 6/30/23 Valuation
2022/23 2023/24 2024/25 2025/26
Discount Rate 6.25% 6.25%
ADC - $
• Normal Cost $ 6,196 $ 6,370 $ 7,489 $ 7,674
• Administrative Expenses26 120 126 125 133
• UAAL Amortization 5,112 5,253 8,802 9,044
• Total 11,428 11,749 16,416 16,851
Projected Payroll 110,919 113,969 127,929 131,447
ADC – Percent of Pay
• Normal Cost 5.6% 5.6% 5.9% 5.8%
• Administrative Expenses 0.1% 0.1% 0.1% 0.1%
• UAAL Amortization 4.6% 4.6% 6.9% 6.9%
• Total 10.3% 10.3% 12.8% 12.8%
26 Includes PEMHCA and CE RBT administration fees.
May 21, 2024 29
RESULTS
Actuarially Determined Contribution (ADC) Payment to Trust (Amounts in 000’s)
6/30/23 Valuation
2024/25 2025/26
Discount Rate 6.25%
ADC - $
• Normal cost $ 7,489 $ 7,674
• Administrative expenses27 125 133
• UAAL amortization 8,802 9,044
• Total 16,416 16,851
• Less: Implied subsidy benefit payments 2,745 2,871 • Remaining ADC 13,671 13,980
• Less: Estimated cash benefit payments 12,827 13,565
• Total Trust contribution
(If negative, indicates a reimbursement for City
out-of-pocket payments may be requested.)
844 415
27 Includes PEMHCA and CE RBT administration fees.
May 21, 2024 30
RESULTS
Historical Recommended Funding Contributions
(Amounts in 000’s)
May 21, 2024 31
RESULTS
Amortization Bases & Payments
(Amounts in 000’s)
6/30/21 Valuation 6/30/23 Valuation
6/30/22 6/30/23 6/30/24 6/30/25
Discount Rate 6.25% 6.25%
Payment Escalator 2.75% 2.75%
UAAL Balance $ 76,159 $ 75,807 $ 122,790 $ 121,662
Amortization Payment 5,112 5,253 8,802 9,044
Amortization Period
(years) 22 21 20 19
May 21, 2024 32
RESULTS
10 Year Contribution Projection
(Amounts in 000’s)
FYE ADC28
Contribution
Payroll
ADC
% of
Pay
Fund
%
Cash
Benefit
Payment
Implied
Subsidy
BP
Trust
Pre-
Funding Total
UAAL
Beg. Of
FY
2025 $16,416 $12,827 $2,745 $844 $16,416 $127,929 12.8% $122,791 57% 2026 16,851 13,565 2,871 415 16,851 131,447 12.8% 121,662 59% 2027 17,318 14,286 3,017 15 17,318 135,062 12.8% 120,223 61% 2028 17,785 14,868 2,992 (75) 17,785 138,776 12.8% 118,444 62% 2029 18,276 15,590 3,089 (403) 18,276 142,593 12.8% 116,298 64% 2030 18,775 16,348 3,285 (858) 18,775 146,514 12.8% 113,755 66% 2031 19,271 16,933 3,312 (974) 19,271 150,543 12.8% 110,784 68% 2032 19,803 17,554 3,434 (1,185) 19,803 154,683 12.8% 107,350 69% 2033 20,347 18,086 3,516 (1,255) 20,347 158,937 12.8% 103,416 71% 2034 20,882 18,626 3,575 (1,319) 20,882 163,307 12.8% 98,944 73%
28 Actuarially Determined Contribution
May 21, 2024 33
RESULTS
-$15
-$10
-$5
$0
$5
$10
$15
$20
$25
$30
$ Millions
Net Trust Payment/Reimbursement Benefit Payments Total ADC ADC, Benefit and Trust Payment/Reimbursement Projection (6.25% Discount Rate, 20 years level % of pay amortization)
May 21, 2024 34
RESULTS
0%
20%
40%
60%
80%
100%
120%
$0
$20
$40
$60
$80
$100
$120
$140
Funded Ratio
UAAL ($ Millions)
UAAL Funded Ratio
UAAL and Funded Ratio Projection
(6.25% Discount Rate, 20 years amortization)
May 21, 2024 35
RESULTS
% of Total Actuarial Accrued Liability for Actives and Retirees Miscellaneous
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
6/30/09 6/30/11 6/30/13 6/30/15 6/30/17 6/30/19 6/30/21 6/30/23 Actives Retirees
May 21, 2024 36
RESULTS
% of Total Actuarial Accrued Liability for Actives and Retirees Safety
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
6/30/09 6/30/11 6/30/13 6/30/15 6/30/17 6/30/19 6/30/21 6/30/23 Actives Retirees
May 21, 2024 37
RESULTS
This chart excludes the Implied Subsidy
and is provided for informational purposes only
(Amounts in 000’s)
Cash Benefit
Present Value of Benefits $ 294,841
Funded Status 6/30/23
• Actuarial Accrued Liability 232,822
• Actuarial Value of Assets29 156,061
• Unfunded AAL 76,761
Funded Ratio 67.0%
ADC 2024/25
• Normal Cost 6,570
• Administrative Expenses 125
• UAAL Amortization 5,590
• Total 12,285
• ADC % of Payroll 9.6%
29 All assets allocated to the cash benefit for illustrative purposes only.
May 21, 2024 38
RESULTS
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May 21, 2024 39
RESULTS - DETAILS
Actuarial Obligations by Pre/Post 65 Benefits
June 30, 2023
(Amounts in 000’s)
Benefits
Paid
Before
Age 65
Benefits
Paid On
or After
Age 65 Total
Present Value of Benefits
• Actives (future retirees) $78,087 $76,777 $154,864
• Retirees 48,369 143,884 192,253
• Total 126,456 220,661 347,117
Actuarial Accrued Liability
• Actives (future retirees) 40,543 43,776 84,319
• Retirees 48,369 143,884 192,253
• Total 88,912 187,660 276,572
Normal Cost 2024/2530 3,872 3,741 7,614
30 Includes Administration fees.
May 21, 2024 40
RESULTS - DETAILS
Actuarial Obligations by Group
June 30, 2023
(Amounts in 000’s)
Group 1 Group 2 Group 3 Group 4 Total
Present Value of Benefits
• Actives (future retirees) $ - $ - $12,507 $142,358 $154,864 • Retirees 47,911 53,548 36,227 54,567 192,253
• Total 47,911 53,548 48,734 196,925 347,117
Actuarial Accrued
Liability
• Actives (future retirees) - - 10,597 73,722 84,319
• Retirees 47,911 53,548 36,227 54,567 192,253
• Total 47,911 53,548 46,824 128,289 276,572
Normal Cost 2024/2531 n/a n/a 353 7,261 7,614
NC as % of Payroll n/a n/a 5.0% 6.0% 6.0%
Active Count n/a n/a 57 845 902
Projected Payroll n/a n/a 7,128 120,801 127,929
31 Includes Administration fees.
May 21, 2024 41
RESULTS - DETAILS
Actuarial Obligations by Cash/Implied Subsidy
June 30, 2023
(Amounts in 000’s)
Cash
Subsidy
Implied
Subsidy Total
Present Value of Benefits
• Actives (future retirees) $134,797 $20,067 $154,864
• Retirees 160,044 32,209 192,253
• Total 294,841 52,276 347,117
Actuarial Accrued Liability
• Actives (future retirees) 72,778 11,542 84,319
• Retirees 160,044 32,209 192,253
• Total 232,822 43,751 276,572
Market Value of Assets32 131,374 24,687 156,061
Unfunded AAL 101,448 19,064 120,511
Normal Cost 2024/2533 6,695 919 7,614
Pay-As-You-Go Cost 2024/25 12,827 2,745 15,572
32 Allocated in proportion to AAL for illustrative purposes. 33 Includes Administration fees.
May 21, 2024 42
RESULTS - DETAILS
Actuarially Determined Contribution by Cash/Implied Subsidy 2024/25 Fiscal Year
(Amounts in 000’s)
Cash
Subsidy
Implied
Subsidy Total
ADC - $
• Normal Cost $ 6,570 $ 919 $ 7,489
• Administrative Expenses 125 - 125
• UAAL Amortization 7,424 1,378 8,802
• ADC 14,119 2,297 16,416
Projected Payroll 127,929 127,929 127,929
ADC - % of Payroll
• Normal Cost 5.1% 0.7% 5.9%
• Administrative Expenses 0.1% 0.0% 0.1%
• UAAL Amortization 5.8% 1.1% 6.9%
• ADC 11.0% 1.8% 12.8%
May 21, 2024 43
RESULTS - DETAILS
Actuarial Obligations by Misc/Safety
June 30, 2023
(Amounts in 000’s)
Misc Safety Total
Present Value of Benefits
• Actives (future retirees) $112,057 $42,807 $154,864
• Retirees 120,219 72,034 192,253
• Total 232,276 114,841 347,117
Actuarial Accrued Liability
• Actives (future retirees) 63,059 21,260 84,319
• Retirees 120,219 72,034 192,253
• Total 183,278 93,294 276,572
Market Value of Assets34 103,418 52,643 156,061
Unfunded AAL 79,860 40,651 120,511
Normal Cost 2024/2535 5,495 2,118 7,614
Pay-As-You-Go Cost 2024/25 10,278 5,294 15,572
34 Allocated in proportion to the Actuarial Accrued Liability. 35 Includes Administration fees.
May 21, 2024 44
RESULTS - DETAILS
Actuarially Determined Contribution by Misc/Safety
2024/25 Fiscal Year
(Amounts in 000’s)
Misc Safety Total
ADC - $
• Normal Cost $ 5,412 $ 2,077 $ 7,489
• Administrative Expenses 83 42 125
• UAAL Amortization 5,848 2,954 8,802
• ADC 11,344 5,072 16,416
Projected Payroll 101,964 25,965 127,929
ADC - % of Payroll
• Normal Cost 5.3% 8.0% 5.9%
• Administrative Expenses 0.1% 0.2% 0.1%
• UAAL Amortization 5.7% 11.4% 6.9%
• ADC 11.1% 19.5% 12.8%
May 21, 2024 45
RESULTS - DETAILS
Actuarial Obligations by Bargaining Unit
June 30, 2023
(Amounts in 000’s)
FCA IAFF M/C PAPOA PMA SEIU UMPAPA Total
PVB
• Actives $1,362 $20,223 $32,491 $17,294 $2,521 $72,048 $8,927 $154,864 • Retirees 2,714 34,636 52,789 25,202 2,593 65,881 8,438 192,253 • Total 4,076 54,859 85,280 42,496 5,114 137,929 17,365 347,117 AAL
• Actives 1,074 9,545 18,930 7,485 2,058 38,985 6,242 84,319 • Retirees 2,714 34,636 52,789 25,202 2,593 65,881 8,438 192,253 • Total 3,788 44,181 71,719 32,687 4,651 104,866 14,680 276,572 MVA36 2,137 24,930 40,469 18,444 2,624 59,173 8,283 156,061 UAAL 1,651 19,251 31,250 14,243 2,027 45,693 6,397 120,511 NC 24/2537 48 928 1,617 981 102 3,583 356 7,614
Pay-Go 205 2,624 4,315 1,771 174 5,749 734 15,572
36 Allocated in proportion to the Actuarial Accrued Liability. 37 Includes Administration fees.
May 21, 2024 46
RESULTS - DETAILS
Actuarially Determined Contribution by Bargaining Unit
2024/25 Fiscal Year
(Amounts in 000’s)
FCA IAFF M/C PAPOA PMA SEIU UMPAPA Total
ADC - $
• Normal Cost $ 46 $ 908 $ 1,585 $ 966 $ 99 $ 3,536 $ 350 $ 7,489 • Admin. Expenses 2 20 32 15 2 48 7 125
• UAAL Amort 119 1,393 2,265 1,045 150 3,363 468 8,802 • ADC 166 2,321 3,881 2,026 252 6,947 824 16,416
Projected Payroll 803 10,826 34,117 11,174 1,880 59,705 9,424 127,929 ADC - %
• Normal Cost 5.7% 8.4% 4.6% 8.6% 5.3% 5.9% 3.7% 5.9%
• Admin. Expenses 0.2% 0.2% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% • UAAL Amort 14.8% 12.9% 6.6% 9.3% 8.0% 5.6% 5.0% 6.9% • ADC 20.7% 21.4% 11.4% 18.1% 13.4% 11.6% 8.7% 12.8%
May 21, 2024 47
RESULTS - DETAILS
Actuarially Determined Contribution by Bargaining Unit
2025/26 Fiscal Year
(Amounts in 000’s)
FCA IAFF M/C PAPOA PMA SEIU UMPAPA Total
ADC - $
• Normal Cost $ 47 $ 931 $ 1,624 $ 990 $ 102 $ 3,623 $ 358 $ 7,674 • Admin. Expenses 2 21 34 16 2 51 7 133
• UAAL Amort 122 1,431 2,327 1,073 154 3,456 481 9,044 • ADC 171 2,383 3,985 2,079 259 7,130 846 16,851
Projected Payroll 826 11,123 35,055 11,481 1,932 61,347 9,683 131,447 ADC - %
• Normal Cost 5.7% 8.4% 4.6% 8.6% 5.3% 5.9% 3.7% 5.8%
• Admin. Expenses 0.2% 0.2% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% • UAAL Amort 14.8% 12.9% 6.6% 9.3% 8.0% 5.6% 5.0% 6.9% • ADC 20.7% 21.4% 11.4% 18.1% 13.4% 11.6% 8.7% 12.8%
May 21, 2024 48
RESULTS - DETAILS
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May 21, 2024 49
SENSITIVITY ANALYSIS
Discount Rate Sensitivity
(Amounts in 000’s)
CERBT Strategy
#1 (Current) #2 #3
Discount Rate 6.25% 5.75% 5.25%
Present Value of Benefits $347,117 $375,439 $407,741
Funded Status 6/30/23
• Actuarial Accrued Liability 276,572 293,120 311,327
• Assets 156,061 156,061 156,061
• Unfunded AAL 120,511 137,059 155,266
Funded Ratio 56.4% 53.2% 50.1%
ADC 2024/25
• Normal Cost 7,489 8,379 9,394
• Administrative Expenses 125 125 125
• UAAL Amortization38 8,802 9,582 10,377
• Total 16,416 18,085 19,896
• ADC % of Payroll 12.8% 14.1% 15.6%
38 UAAL amortized over 20 years for all scenarios.
May 21, 2024 50
SENSITIVITY ANALYSIS
Amortization Period Sensitivity
Discount Rate – 6.25%, Level % of Pay with 2.75% Payment Escalation (Amounts in 000’s)
Amortization Period
Current
20 Years 18 Years
Funded Status 6/30/23
• Actuarial Accrued Liability $276,572 $276,572
• Assets 156,061 156,061
• Unfunded AAL 120,511 120,511
Total Projected Payroll 2024/25 127,929 127,929
ADC 2024/25
• Normal Cost 7,489 7,489
• Administrative Expenses 125 125
• UAAL Amortization 8,802 9,492
• Total 16,416 17,105
• ADC % of Payroll 12.8% 13.4%
May 21, 2024 51
SENSITIVITY ANALYSIS
Amortization Period Sensitivity
Discount Rate – 5.75%, Level % of Pay with 2.75% Payment Escalation (Amounts in 000’s)
Amortization Period
Current
20 Years 18 Years
Funded Status 6/30/23
• Actuarial Accrued Liability $293,120 $293,120
• Assets 156,061 156,061
• Unfunded AAL 137,059 137,059
Total Projected Payroll 2024/25 127,929 127,929
ADC 2024/25
• Normal Cost 8,379 8,379
• Administrative Expenses 125 125
• UAAL Amortization 9,582 10,371
• Total 18,085 18,875
• ADC % of Payroll 14.1% 14.8%
May 21, 2024 52
SENSITIVITY ANALYSIS
Actuarial Obligations by Bargaining Unit – 5.75%
June 30, 2023
(Amounts in 000’s)
FCA IAFF M/C PAPOA PMA SEIU UMPAPA Total
PVB
• Actives $1,487 $22,844 $36,048 $19,489 $2,733 $80,761 $9,832 $173,194 • Retirees 2,865 36,463 55,395 26,661 2,773 69,183 8,905 202,245 • Total 4,352 59,307 91,443 46,150 5,506 149,944 18,737 375,439 AAL
• Actives 1,153 10,284 20,354 8,089 2,200 42,076 6,719 90,875 • Retirees 2,865 36,463 55,395 26,661 2,773 69,183 8,905 202,245 • Total 4,018 46,747 75,749 34,750 4,973 111,259 15,624 293,120 MVA39 2,139 24,889 40,330 18,501 2,648 59,236 8,318 156,061 UAAL 1,879 21,858 35,419 16,249 2,325 52,023 7,306 137,059 NC 24/2540 54 1,039 1,797 1,091 115 4,007 399 8,504
Pay-Go 205 2,624 4,315 1,771 174 5,749 734 15,572
39 Allocated in proportion to the Actuarial Accrued Liability. 40 Includes Administration fees.
May 21, 2024 53
SENSITIVITY ANALYSIS
10 Year Contribution Projection – 5.75%
13 Year Amortization
(Amounts in 000’s)
FYE ADC41
Contribution
Payroll
ADC
% of
Pay
Fund
%
Cash
Benefit
Payment
Implied
Subsidy
BP
Trust
Pre-
Funding Total
UAAL
Beg. Of
FY
2025 $21,996 $12,827 $2,745 $6,424 $21,996 $127,929 17.2% $140,372 54% 2026 22,551 13,565 2,871 6,115 22,551 131,447 17.2% 134,951 57% 2027 23,180 14,286 3,017 5,877 23,180 135,062 17.2% 128,847 60% 2028 23,812 14,868 2,992 5,952 23,812 138,776 17.2% 122,011 63% 2029 24,474 15,590 3,089 5,795 24,474 142,593 17.2% 114,390 67% 2030 25,147 16,348 3,285 5,514 25,147 146,514 17.2% 105,928 70% 2031 25,821 16,933 3,312 5,576 25,821 150,543 17.2% 96,567 73% 2032 26,538 17,554 3,434 5,550 26,538 154,683 17.2% 86,242 77% 2033 27,272 18,086 3,516 5,670 27,272 158,937 17.2% 74,886 80% 2034 27,999 18,626 3,575 5,798 27,999 163,307 17.1% 62,429 84%
41 Actuarially Determined Contribution
May 21, 2024 54
COMPARISON TO OTHER AGENCIES
50% of 90% of
results results
are are
within within
this this
range range
5th Percentile
75th Percentile
50th Percentile
25th Percentile
Foster & Foster California OPEB Database
Sample Percentile Graph
95th Percentile
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
55%
Percent of Pay
May 21, 2024 55
COMPARISON TO OTHER AGENCIES
NC ADC NC ADC
95th Percentile 10.9% 24.2% 12.3% 35.5%
75th Percentile 5.4% 10.8% 5.0% 15.8%
50th Percentile 2.8% 5.4% 2.6% 6.2%
25th Percentile 1.5% 2.6% 1.5% 3.3%
5th Percentile 0.7% 0.7% 0.7% 0.9%
`
Percent of Pay (
♦) 5.3% 11.1% 8.0% 19.5%
Percentile 74% 76% 88% 84%
Miscellaneous Safety
Discount Rate = 6.25%, Average Amortization Period = 20.0 Years 0%
5%
10%
15%
20%
25%
30%
35%
40%
Percent of Pay
Foster & Foster California OPEB Database
Normal Cost & Actuarially Determined Contribution
May 21, 2024 56
COMPARISON TO OTHER AGENCIES
General
Miscellaneous Safety
95th Percentile 317% 440%
75th Percentile 173% 202%
50th Percentile 87% 88%
25th Percentile 40% 48%
5th Percentile 14% 15%
Percent of Pay (
♦) 185% 369%
Percentile 79% 91%
Discount Rate = 6.25%
0%
50%
100%
150%
200%
250%
300%
350%
400%
450%
500%
Percent of Pay
Foster & Foster California OPEB Database
Actuarial Accrued Liability
May 21, 2024 57
ACTUARIAL CERTIFICATION
This report presents the City of Palo Alto Retiree Healthcare Plan (“Plan”) June 30, 2023 actuarial valuation. The purpose of this valuation is to:
Determine the June 30, 2023 Benefit Obligations,
Determine the Plan’s June 30, 2023 Funded Status, and Calculate the 2024/25 and 2025/26 Actuarially Determined Contributions.
The report provides information intended for funding the City’s Plan, but may not be appropriate for other purposes.
Future actuarial measurements may differ significantly from the current measurements presented in this report due to such factors as: plan experience differing from that anticipated by the assumptions; changes in assumptions; changes expected as part of the natural progression of the plan; and changes in plan provisions or applicable law. Actuarial models necessarily rely on the use of estimates and are sensitive to changes. Small variations in estimates may lead to significant changes in actuarial measurements. Due to the limited scope of this assignment, we did not perform an analysis of the potential range of such measurements.
The valuation is based on Plan provisions, participant data, and asset information provided by the City as summarized in this report, which we relied on and did not audit. We reviewed the participant data for reasonableness.
To the best of our knowledge, this report is complete and accurate and has been conducted using generally accepted actuarial principles and practices. As members of the American Academy of Actuaries meeting the Academy Qualification Standards, we certify the actuarial results and opinions herein.
Respectfully submitted,
Drew Ballard, FSA, MAAA, EA
Foster & Foster, Inc.
Catherine A. Wandro, ASA, MAAA
Foster & Foster, Inc.
May 21, 2024 58
EXHIBITS
Topic Page
Premiums E- 1
Data Summary E- 5
Additional Actuarial Assumptions E-23
Results by Fund E-31
Results by GF Department E-33
Definitions E-35
May 21, 2024 E- 1
PREMIUMS
2023 PEMHCA Monthly Premiums
Region 1
Non-Medicare Eligible Medicare Eligible
Medical Plan Single 2-Party Family Single 2-Party Family Anthem Select $1,128.83 $2,257.66 $2,934.96 $413.59 $827.18 $1,240.77 Anthem Traditional 1,210.71 2,421.42 3,147.85 413.59 827.18 1,240.77 Blue Shield Access+ 1,035.21 2,070.42 2,691.55 361.90 723.80 1,085.70 Blue Shield Trio 888.94 1,777.88 2,311.24 361.90 723.80 1,085.70 Health Net SmartCare 1,174.50 2,349.00 3,053.70 n/a n/a n/a Kaiser 913.74 1,827.48 2,375.72 283.25 566.50 849.75
Kaiser Summit n/a n/a n/a 336.29 672.58 1,008.87
UnitedHealthcare Alliance 1,044.07 2,088.14 2,714.58 n/a n/a n/a UnitedHealthcare Group n/a n/a n/a 299.68 599.36 899.04 UnitedHealthcare Edge n/a n/a n/a 357.70 715.40 1,073.10 Western Health Advantage 760.17 1,520.34 1,976.44 331.11 662.22 993.33 PERS Platinum 1,200.12 2,400.24 3,120.31 420.02 840.04 1,260.06 PERS Gold 825.61 1,651.22 2,146.59 392.71 785.42 1,178.13 PORAC 825.00 1,875.00 2,300.00 465.00 1,030.00 1,395.00
May 21, 2024 E- 2
PREMIUMS
2024 PEMHCA Monthly Premiums
Region 1
Non-Medicare Eligible Medicare Eligible
Medical Plan Single 2-Party Family Single 2-Party Family Anthem Select $1,138.86 $2,277.72 $2,961.04 $405.83 $811.66 $1,217.49 Anthem Traditional 1,339.70 2,679.40 3,483.22 405.83 811.66 1,217.49 Blue Shield Access+ 1,076.84 2,153.68 2,799.78 392.68 785.36 1,178.04 Blue Shield Trio 946.84 1,893.68 2,461.78 392.68 785.36 1,178.04 Kaiser 1,021.41 2,042.82 2,655.67 324.79 649.58 974.37
Kaiser Summit n/a n/a n/a 386.55 773.10 1,159.65
UnitedHealthcare Alliance 1,091.13 2,182.26 2,836.94 n/a n/a n/a UnitedHealthcare Harmony 937.39 1,874.78 2,437.21 n/a n/a n/a UnitedHealthcare Group n/a n/a n/a 341.72 683.44 1,025.16 UnitedHealthcare Edge n/a n/a n/a 366.01 732.02 1,098.03 Western Health Advantage 807.23 1,614.46 2,098.80 268.62 537.24 805.86 PERS Platinum 1,314.27 2,628.54 3,417.10 448.15 896.30 1,344.45 PERS Gold 914.82 1,829.64 2,378.53 406.60 813.20 1,219.80 PORAC 931.00 2,117.00 2,651.00 465.00 1,030.00 1,395.00
May 21, 2024 E- 3
PREMIUMS
PEMHCA Monthly Premium Increases/(Decreases)
Region 1
Non-Medicare Eligible Medicare Eligible
Medical Plan 2023 2024 2023 2024
Anthem Select 11.1% 0.9% 14.8% (1.9%)
Anthem Traditional (7.2%) 10.7% 14.8% (1.9%)
Blue Shield Access+ (7.2%) 4.0% 2.5% 8.5%
Blue Shield Trio (1.1%) 6.5% 2.5% 8.5%
Health Net SmartCare 1.9% n/a n/a n/a
Kaiser 6.6% 11.8% (6.4%) 14.7%
Kaiser Summit n/a n/a n/a 14.9%
UnitedHealthcare Alliance 2.3% 4.5% n/a n/a
UnitedHealthcare Group n/a n/a 1.7% 14.0%
UnitedHealthcare Edge n/a n/a 3.0% 2.3%
Western Health Advantage 2.6% 6.2% 5.1% (18.9%)
PERS Platinum 13.5% 9.5% 10.0% 6.7%
PERS Gold 17.7% 10.8% 4.1% 3.5%
PORAC 3.3% 12.8% 0.9% 0.0%
May 21, 2024 E- 4
PREMIUMS
This page intentionally blank
May 21, 2024 E- 5
DATA SUMMARY
Participant Statistics by Bargaining Unit
June 30, 2023
FCA IAFF M/C PAPOA PMA SEIU UMPAPA Total
Actives
• Count 4 84 202 66 7 494 45 902
• Avg Age 48.0 39.1 46.9 38.9 48.9 44.8 50.5 44.6
• Avg City Svc 22.4 9.8 10.7 9.2 23.4 9.7 16.4 10.4
• Avg PERS Svc 22.4 10.3 12.4 10.2 24.2 10.4 17.6 11.4
• Avg Salary $190,356 $122,075 $159,976 $160,358 $254,449 $114,477 $198,351 $134,338 • Total Salary42 $761 $10,254 $32,315 $10,584 $1,781 $56,552 $8,926 $121,173 Retirees43:
• Count 8 147 313 96 6 432 29 1,031
• Avg Age 64.3 71.4 73.0 66.4 53.2 72.6 62.9 71.5
• Avg Service
Ret Age 55.8 54.7 58.1 52.5 50.4 59.7 58.2 58.2
• Avg Disab Ret
Age 50.1 48.8 50.5 41.8 n/a 46.7 n/a 45.8
42 Amount in 000’s. Based on June 30, 2023 PERSable pay rate. 43 Excludes retirees who have waived coverage.
May 21, 2024 E- 6
DATA SUMMARY
Participant Statistics by Bargaining Unit
June 30, 2021
FCA IAFF M/C PAPOA PMA SEIU UMPAPA Total
Actives
• Count 4 80 195 68 6 477 44 874
• Avg Age 42.6 42.5 47.3 39.8 46.9 44.8 49.1 45.0
• Avg City Svc 18.1 12.8 10.6 10.2 22.1 10.6 17.3 11.2 • Avg PERS Svc 18.1 13.3 12.2 11.2 23.1 11.2 18.1 12.1
• Avg Salary $209,498 $145,878 $134,380 $152,938 $228,619 $98,486 $172,711 $120,207 • Total Salary44 $838 $11,670 $26,204 $10,400 $1,372 $46,978 $7,599 $105,061 Retirees45:
• Count 6 148 307 89 5 430 24 1,009
• Avg Age 64.7 71.0 72.0 66.9 57.5 71.6 62.2 70.9
• Avg Service
Ret Age 56.7 54.6 58.3 52.3 50.4 59.6 58.8 58.2
• Avg Disab Ret
Age 50.1 48.8 50.5 42.0 n/a 48.0 n/a 46.3
44 Amount in 000’s. Actual 2020/21 PERSable compensations. 45 Excludes retirees who have waived coverage.
May 21, 2024 E- 7
DATA SUMMARY
Participant Statistics by CalPERS Pension Category
June 30, 2023
46 Based on June 30, 23 PERSable payrate.
47 Excludes retirees who have waived coverage.
Miscellaneous Police Fire Total
Actives
• Count 738 72 92 902
• Average Age 45.6 40.3 39.9 44.6
• Average City Service 10.3 10.8 10.8 10.4
• Average PERS Service 11.3 11.8 11.2 11.4
• Average Salary $130,866 $173,099 $131,856 $134,338
• Total Salary (000’s)46 $96,579 $12,463 $12,131 $121,173 Retirees47:
• Count 751 113 167 1,031
• Average Age 72.4 65.9 71.2 71.5
• Avg Service Ret Age 59.2 52.2 54.7 58.2
• Avg Disability Ret Age 47.1 41.9 48.9 45.8
May 21, 2024 E- 8
DATA SUMMARY
Participant Statistics by CalPERS Pension Category
June 30, 2021
48 Actual 2020/21 PERSable compensations.
49 Excludes retirees who have waived coverage.
Miscellaneous Police Fire Total
Actives
• Count 711 76 87 874
• Average Age 45.7 40.7 42.7 45.0
• Average City Service 11.0 11.0 13.2 11.2
• Average PERS Service 11.9 12.0 13.7 12.1
• Average Salary $112,031 $161,950 $150,562 $120,207
• Total Salary (000’s)48 $79,654 $12,308 $13,099 $105,061 Retirees49:
• Count 739 105 165 1,009
• Average Age 71.6 66.3 70.7 70.9
• Avg Service Ret Age 59.2 52.0 54.5 58.2
• Avg Disability Ret Age 48.1 42.1 48.9 46.3
May 21, 2024 E- 9
DATA SUMMARY
Medical Plan Participation – June 30, 2023
All Retirees
Medical Plan Actives Under 65 65 or Older Total
Miscellaneous/Safety M S M S M S M S
Anthem Select 2% 2% 3% - 1% - 1% -
Anthem Traditional 3% 1% 5% 4% 6% 5% 6% 5%
Blue Shield Access+ 10% 3% 7% 3% 1% 1% 3% 2%
Blue Shield Trio - - - 1% - - - -
Health Net SmartCare - - 1% - - - - -
Kaiser 68% 50% 43% 26% 29% 21% 32% 23%
Kaiser Summit - - - - 2% - 2% -
UnitedHealthcare - - 1% 1% 17% 10% 13% 7%
UnitedHealthcare Edge - - - - - - - -
Western Health Advantage - 1% - - - - - -
PERS Gold 7% 4% 4% - 1% - 1% -
PERS Platinum 10% 2% 35% 16% 42% 47% 41% 34%
PORAC - 37% 1% 49% 1% 16% 1% 29%
Total 100% 100% 100% 100% 100% 100% 100% 100%
May 21, 2024 E- 10
DATA SUMMARY
Medical Plan Participation – June 30, 2021
All Retirees
Medical Plan Actives Under 65 65 or Older Total
Miscellaneous/Safety M S M S M S M S
Anthem Select 6% 3% 5% 1% - - 2% -
Anthem Traditional 4% 1% 9% 8% 6% 5% 6% 6%
Blue Shield Access+ - - 3% 7% - - 1% 3%
Health Net SmartCare 1% 1% 1% 1% - - - -
Kaiser 65% 51% 40% 36% 30% 23% 32% 29%
UnitedHealthcare - - 1% 2% 18% 13% 14% 8%
Western Health Advantage - - 1% - - - - -
PERSCare - - 4% 9% 25% 37% 20% 25%
PERS Choice 22% 3% 32% 3% 21% 15% 24% 10%
PERS Select 1% 1% 3% - - - 1% -
PORAC - 40% 1% 32% - 8% - 19%
Total 100% 100% 100% 100% 100% 100% 100% 100%
May 21, 2024 E- 11
DATA SUMMARY
Active Medical Coverage – Miscellaneous
Medical Plan Single 2-Party Family Waived Total
Anthem Select 3 3 5 - 11
Anthem Traditional 9 3 5 - 17
Blue Shield Access+ 15 18 31 - 64
Blue Shield Trio - - 1 - 1
Health Net SmartCare - - 1 - 1
Kaiser 162 90 200 - 452
Western Health Advantage - - 1 - 1
PERS Gold 13 11 20 - 44
PERS Platinum 26 12 30 - 68
PORAC 1 - - - 1
Waived - - - 78 78
Total 229 137 294 78 738
% as of June 30, 2023 31% 18% 40% 11% 100%
% as of June 30, 2021 30% 22% 40% 9% 100%
May 21, 2024 E- 12
DATA SUMMARY
Active Medical Coverage – Safety
Medical Plan Single 2-Party Family Waived Total
Anthem Select 1 - 2 - 3
Anthem Traditional 1 - - - 1
Blue Shield Access+ 1 - 3 - 4
Blue Shield Trio - - - - -
Health Net SmartCare - - - - -
Kaiser 23 15 39 - 77
Western Health Advantage - - 1 - 1
PERS Gold 5 - 1 - 6
PERS Platinum 1 1 1 - 3
PORAC 7 7 43 - 57
Waived - - - 12 12
Total 39 23 90 12 164
% as of June 30, 2023 24% 14% 55% 7% 100%
% as of June 30, 2021 20% 14% 63% 2% 100%
May 21, 2024 E- 13
DATA SUMMARY
Retiree Medical Coverage50 - Miscellaneous
Medical Plan
Single 2-Party Family Total
<65 65+ <65 65+ <65 65+
Anthem Select 3 1 2 1 1 2 10
Anthem Traditional 7 11 2 21 - 2 43
Blue Shield Access+ 5 2 5 5 2 - 19
Health Net SmartCare 1 - - - - - 1
Kaiser 21 94 45 68 8 6 242
Kaiser Summit - 8 - 2 - 1 11
UnitedHealthcare - 64 1 32 - - 97
UnitedHealthcare Edge - 2 - 1 - - 3
Western Health Advantage - - - 1 - - 1
PERS Gold 1 1 2 2 4 - 10
PERS Platinum 19 129 32 111 10 7 308
PORAC - 3 1 1 - 1 6
Total 57 315 90 245 25 19 751
% as of June 30, 2023 8% 42% 12% 33% 3% 2% 100%
% as of June 30, 2021 9% 41% 12% 32% 4% 2% 100%
50 Approximately 77% of retirees have coverage in a region 1 plan. The rest are in other state regions or out of state.
May 21, 2024 E- 14
DATA SUMMARY
Retiree Medical Coverage51 - Safety
Medical Plan
Single 2-Party Family Total
<65 65+ <65 65+ <65 65+
Anthem Select - - - - - - -
Anthem Traditional 1 - 1 7 3 2 14
Blue Shield Access+ 1 - 2 - 1 1 5
Health Net SmartCare - - - - - - -
Kaiser 7 12 11 21 12 1 64
Kaiser Summit - - - - - - 0
UnitedHealthcare - 11 - 6 1 - 18
UnitedHealthcare Edge - - - - - - 0
Western Health Advantage - - - - - - 0
PERS Gold - - - - - - 0
PERS Platinum 7 39 6 37 5 2 96
PORAC 12 4 15 19 29 3 82
Total 28 66 35 90 52 9 280
% as of June 30, 2023 10% 24% 13% 32% 19% 3% 100%
% as of June 30, 2021 9% 25% 16% 29% 19% 2% 100%
51 Approximately 70% of retirees have coverage in a Region 1 plan. The rest are in other state regions or out of state.
May 21, 2024 E- 15
DATA SUMMARY
Retirees Medical Coverage by Age – Miscellaneous
Age Single 2-Party Family Total
Under 50 - 1 - 1
50-54 2 3 4 9
55-59 12 19 9 40
60-64 43 67 12 122
65-69 63 68 11 142
70-74 73 66 5 144
75-79 76 65 3 144
80-84 59 22 - 81
85 & Over 44 24 - 68
Total 372 335 44 751
Average Age 74.5 71.2 64.0 72.4
May 21, 2024 E- 16
DATA SUMMARY
Retirees Medical Coverage by Age – Police
Age Single 2-Party Family Total
Under 50 3 1 6 10
50-54 - 1 7 8
55-59 3 1 6 10
60-64 9 6 9 24
65-69 3 13 5 21
70-74 10 6 - 16
75-79 3 7 - 10
80-84 3 4 - 7
85 & Over 4 3 - 7
Total 38 42 33 113
Average Age 68.1 70.5 57.5 65.9
May 21, 2024 E- 17
DATA SUMMARY
Retirees Medical Coverage by Age – Fire
Age Single 2-Party Family Total
Under 50 - - - -
50-54 - 1 7 8
55-59 6 10 11 27
60-64 7 15 6 28
65-69 3 14 4 21
70-74 5 11 - 16
75-79 7 12 - 19
80-84 17 9 - 26
85 & Over 11 11 - 22
Total 56 83 28 167
Average Age 76.7 71.7 59.0 71.2
May 21, 2024 E- 18
DATA SUMMARY
Retirees Medical Coverage by Age – Total
Age Single 2-Party Family Total
Under 50 3 2 6 11
50-54 2 5 18 25
55-59 21 30 26 7 7
60-64 59 88 27 174
65-69 69 95 20 184
70-74 88 83 5 176
75-79 86 84 3 173
80-84 79 35 - 114
85 & Over 59 38 - 97
Total 466 460 105 1,031
Average Age 74.3 71.2 60.6 71.5
May 21, 2024 E- 19
DATA SUMMARY
Actives by Age and Service – Miscellaneous
City Service
Age < 1 1-4 5-9 10-14 15-19 20-24 ≥ 25 Total
< 25 8 4 - - - - - 12
25-29 21 26 4 - - - - 51
30-34 18 49 37 1 - - - 105
35-39 15 21 30 16 3 - - 85
40-44 7 23 35 22 10 10 1 108
45-49 8 14 23 19 19 21 1 105
50-54 2 12 18 13 13 19 13 90
55-59 1 13 14 16 13 22 10 89
60-64 5 5 9 10 10 10 15 64
≥ 65 2 2 4 3 8 6 4 29
Total 87 169 174 100 76 88 44 738
May 21, 2024 E- 20
DATA SUMMARY
Actives by Age and Service – Police
City Service
Age < 1 1-4 5-9 10-14 15-19 20-24 ≥ 25 Total
< 25 - 1 - - - - - 1
25-29 1 8 1 - - - - 10
30-34 - 7 5 - - - - 12
35-39 1 1 6 2 2 - - 12
40-44 1 1 2 8 4 - - 16
45-49 - - 1 2 1 7 1 12
50-54 - - - 1 1 2 1 5
55-59 - - 1 - - - 1 2
60-64 - - 1 - - 1 - 2
≥ 65 - - - - - - - -
Total 3 18 17 13 8 10 3 72
May 21, 2024 E- 21
DATA SUMMARY
Actives by Age and Service – Fire
City Service
Age < 1 1-4 5-9 10-14 15-19 20-24 ≥ 25 Total
< 25 1 2 - - - - - 3
25-29 9 11 - - - - - 20
30-34 2 7 3 - - - - 12
35-39 2 1 4 5 1 - - 13
40-44 - - 1 4 6 1 - 12
45-49 - - 2 2 3 1 - 8
50-54 - - - 2 3 10 5 20
55-59 - - - - 1 1 1 3
60-64 - - - - - 1 - 1
≥ 65 - - - - - - - -
Total 14 21 10 13 14 14 6 92
May 21, 2024 E- 22
DATA SUMMARY
Actives by Age and Service – Total
City Service
Age < 1 1-4 5-9 10-14 15-19 20-24 ≥ 25 Total
< 25 9 7 - - - - - 16
25-29 31 45 5 - - - - 81
30-34 20 63 45 1 - - - 129
35-39 18 23 40 23 6 - - 110
40-44 8 24 38 34 20 11 1 136
45-49 8 14 26 23 23 29 2 125
50-54 2 12 18 16 17 31 19 115
55-59 1 13 15 16 14 23 12 94
60-64 5 5 10 10 10 12 15 67
≥ 65 2 2 4 3 8 6 4 29
Total 104 208 201 126 98 112 53 902
May 21, 2024 E- 23
ADDITIONAL ACTUARIAL ASSUMPTIONS
June 30, 2021 Valuation June 30, 2023 Valuation
Retirement CalPERS 2000-2019
Experience Study- Expected
retirement age for each tier
Misc Fire & Police
Tier 1 2.7%@55 3%@50
Exp. RetAge 60.7 56.4 & 54.0
Tier 2 2%@60 3%@55
Exp. RetAge 63.0 57.7 & 56.4
PEPRA
2.5%@67 2.7%@57
Exp. RetAge 62.4 57.1 & 56.7
CalPERS 2000-2019
Experience Study - Expected
retirement age for each tier
Misc Fire & Police
Tier 1 2.7%@55 3%@50
Exp. RetAge 61.2 56.1 & 53.9
Tier 2 2%@60 3%@55
Exp. RetAge 63.1 57.7 & 57.2
PEPRA
2.5%@67 2.7%@57
Exp. RetAge 62.5 57.2 & 56.5
Spousal
Coverage at
Retirement
70% of covered retirees are
assumed to cover spouses
Based on Plan experience
Same
Waived Retiree
Re-election
0% Same
May 21, 2024 E- 24
ADDITIONAL ACTUARIAL ASSUMPTIONS
June 30, 2021 Valuation June 30, 2023 Valuation
Medical Trend Increase from Prior Year
Calendar
Year
Pre-
Medicare
Post-
Medicare
Other
Post-
Medicare
Kaiser
2019-20 n/a
2021 Actual Premiums
2022 Actual Premiums
2023 6.50% 5.65% 4.60%
2024 6.25% 5.45% 4.45%
2025 6.00% 5.25% 4.60%
2026 5.75% 5.05% 4.45%
2027 5.55% 4.90% 4.35%
2028 5.35% 4.75% 4.25%
2029 5.15% 4.60% 4.20%
2030 4.95% 4.45% 4.05%
2031-35 4.80% 4.35% 4.00%
2036-45 4.65% 4.25% 3.95%
2046-55 4.50% 4.20% 3.90%
2056-65 4.35% 4.15% 3.85%
2066-75 4.05% 3.95% 3.80%
2076+ 3.75% 3.75% 3.75%
Increase from Prior Year
Pre-
Medicare
Post-
Medicare
Other
Post-
Medicare
Year Kaiser
2021 n/a
2022 n/a
2023 Actual Premiums
2024 Actual Premiums
2025 8.50% 7. 50% 6.25%
2026 7.90% 6. 90% 5.65%
2027 7.35% 6. 50% 5.45%
2028 6.75% 6. 10% 5.25%
2029 6.20% 5. 70% 5.05%
2030 5.60% 5. 25% 4.85%
2031 5.05% 4. 85% 4.65%
2032-38 4.45% 4.45% 4.45%
2039-40 4.35% 4.35% 4.35%
2041 4.30% 4. 30% 4.30%
↓ ↓ ↓ ↓
2076+ 3.45% 3.45% 3.45%
May 21, 2024 E- 25
ADDITIONAL ACTUARIAL ASSUMPTIONS
June 30, 2021 Valuation June 30, 2023 Valuation
Medical Plan at
Retirement &
Retirees Attaining
age 65
Miscellaneous: <65 65+
Anthem Traditional 10% 5%
Blue Shield Access+ 5% 0%
Kaiser 50% 30%
PERS Choice 30% 20%
PERSCare 5% 25%
UnitedHealthcare 0% 20%
Safety: <65 65+
Anthem Traditional 10% 5%
Blue Shield Access+ 5% 0%
Kaiser 40% 25%
PERS Choice 0% 15%
PERSCare 10% 35%
PORAC 35% 10%
UnitedHealthcare 0% 10%
Based on Plan experience
Miscellaneous: <65 65+
Anthem Traditional 10% 5%
Blue Shield Access+ 5% 0%
Kaiser 45% 30%
PERS Gold 5% 0%
PERS Platinum 35% 45%
UnitedHealthcare 0% 20%
Safety: <65 65+
Anthem Traditional 5% 5%
Blue Shield Access+ 5% 0%
Kaiser 30% 25%
PERS Gold 0% 0%
PERS Platinum 15% 45%
PORAC 45% 15%
UnitedHealthcare 0% 10%
Based on Plan experience
May 21, 2024 E- 26
ADDITIONAL ACTUARIAL ASSUMPTIONS
June 30, 2021 Valuation June 30, 2023 Valuation
Family Coverage
at Retirement
(for future
retirees)
Misc: 15% until age 65
5% age 65-75
Safety: 50% until age 65
5% age 65-80
Based on Plan experience
Same
Spouse Age Actives – Males 3 years older
than females
Retirees – Males 3 years
older than females if spouse
birth date not available
Same
Surviving
Spouse
Participation
100% Same
May 21, 2024 E- 27
ADDITIONAL ACTUARIAL ASSUMPTIONS
June 30, 2021 Valuation June 30, 2023 Valuation
Medicare
Eligibility
Actives and retirees hired
before 4/1/86:
• Miscellaneous – 80%
• Safety – 90%
Actives and retirees hired on
or after 4/1/86: 100%
Retirees before 65 with
unknown hire date: 90%
Everyone eligible for
Medicare will elect Part B
coverage
Same
Future New
Participants
None – Closed Group Same
Retirees Missing
Fund
No retirees missing Fund
information.
Same
May 21, 2024 E- 28
ADDITIONAL ACTUARIAL ASSUMPTIONS
June 30, 2021 Valuation June 30, 2023 Valuation
Retirees Missing
Department
Assumed to have the same
department as the prior
valuation
Liability for retirees assumed
to be 75% GF allocated
proportionately across all
Departments
Same
Actuarial Models Our valuation was performed using and relying on ProVal, an actuarial model leased from Wintech. Our use of ProVal is consistent with its intended purpose. We have reviewed and understand ProVal and its operation, sensitivities and
dependencies.
Data Quality Our valuation used census data provided by the City and CalPERS OPEB data extract. We reviewed the data for
reasonableness and resolved any questions with the City. We believe the resulting data can be relied on for all purposes of this valuation without limitation.
May 21, 2024 E- 29
ADDITIONAL ACTUARIAL ASSUMPTIONS
June 30, 2021 Valuation June 30, 2023 Valuation
Sample Medical
Claims Costs
2024
Sample estimated monthly claims costs:
Region 1 – Non-Medicare Eligible
Kaiser PERS Platinum PORAC
Age M F M F M F
55 $1,094 $1,196 $1,197 $1,307 $1,083 $1,184
60 1,376 1,386 1,503 1,513 1,364 1,373
65 1,704 1,633 1,858 1,780 1,691 1,619
70 1,917 1,829 2,058 1,964 1,952 1,861
75 2,158 2,053 2,292 2,181 2,235 2,125
80 2,487 2,347 2,640 2,492 2,578 2,432
85 2,790 2,634 2,959 2,795 2,893 2,731
Region 1 – Medicare Eligible
Kaiser PERS Platinum PORAC
Age M F M F M F
65 n/a n/a $447 $428 $408 $391
70 n/a n/a 484 463 442 423
75 n/a n/a 516 495 471 452
80 n/a n/a 532 514 486 469
85 n/a n/a 526 512 480 468
May 21, 2024 E- 30
ADDITIONAL ACTUARIAL ASSUMPTIONS
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May 21, 2024 E- 31
RESULTS BY FUND
Actuarial Obligations – June 30, 2023 – 6.25% Discount Rate (Amounts in 000’s)
FUND AAL Assets52 UAAL
Airport $ 443 $ 250 $ 193
CIP 4,957 2,797 2,160
Elec53 31,933 18,019 13,914
Gas5353 12,636 7,130 5,506
GF 178,807 100,893 77,914
ISF – Technology 6,254 3,529 2,725
ISF – Vehicle 2,214 1,249 965
ISF – Printing & Mailing 125 70 55
ISF – Workers Comp 115 65 50
PARKING 656 371 285
Refuse 5,246 2,960 2,286
Storm Drain 2,344 1,324 1,020
Water5353 10,435 5,890 4,545
WWC53 3,028 1,708 1,320
WWT 17,379 9,806 7,573
Total 276,572 156,061 120,511
52 Assets allocated in proportion to AAL.
53 AAL for UTL employees allocated to Elec, Gas, Water, and WWC in proportion to each Fund’s AAL
May 21, 2024 E- 32
RESULTS BY FUND
Actuarially Determined Contribution (ADC) – 6.25% Discount Rate (Amounts in 000’s)
FUND 2024/25 2025/26
Airport $ 61 $ 63
CIP 440 452
Elec53 1,764 1,811
Gas53 781 802
GF 10,325 10,600
ISF – Technology 442 453
ISF – Vehicle 148 152
ISF – Printing & Mailing 11 11
ISF – Workers Comp 16 17
PARKING 76 77
Refuse 242 248
Storm Drain 172 177
Water53 616 631
WWC53 100 103
WWT 1,222 1,254
Total 16,416 16,851
May 21, 2024 E- 33
RESULTS BY GF DEPARTMENT
Actuarial Obligations – June 30, 2023 – 6.25% Discount Rate (Amounts in 000’s)
GF Department AAL Assets54 UAAL
ASD $ 9,447 $ 5,331 $ 4,116
ATT 2,674 1,509 1,166
AUD 141 79 61
CLK 713 402 311
COU 1,257 709 548
CSD 16,738 9,445 7,293
DSD 5,734 3,236 2,498
FIR 50,675 28,590 22,083
HRD 2,727 1,539 1,188
LIB 6,637 3,746 2,892
MGR 2,772 1,564 1,208
PLA 6,764 3,817 2,947
POL 55,075 31,078 23,998
PWD 17,453 9,848 7,605
Total 178,807 100,893 77,914
54 Assets allocated in proportion to AAL.
May 21, 2024 E- 34
RESULTS BY GF DEPARTMENT
Actuarially Determined Contribution (ADC) – 6.25% Discount Rate (Amounts in 000’s)
GF Department 2024/25 2025/26
ASD $ 584 $ 599
ATT 157 162
AUD 4 4
CLK 36 37
COU 69 71
CSD 1,059 1,086
DSD 478 491
FIR 2,588 2,657
HRD 157 161
LIB 492 505
MGR 186 191
PLA 420 431
POL 3,175 3,260
PWD 920 945
Total 10,325 10,600
May 21, 2024 E- 35
DEFINITIONS
Present Value of Benefits
May 21, 2024 E- 36
DEFINITIONS
Actuarially
Determined
Contribution
(ADC)
Contribution for the current period including:
• Normal Cost
• Administrative expenses
• Amortization of:
Initial Unfunded AAL
AAL for plan, assumption, and method changes
Experience gains/losses (difference between expected and actual) Contribution gains/losses (difference between ADC and actual)