Item 02 2023-01073 Fiscal Year (FY) 2021 22 Sacramento City Employees’ Retirement System Annual Financial Report — Sacramento City Council, September 12, 2023

City of Sacramento
City Council - 5PM Report
915 I Street Sacramento, CA 95814
www.cityofsacramento.org
File ID: 2023-01073 9/12/2023 Consent Item 2.

Fiscal Year (FY) 2021/22 Sacramento City Employees’ Retirement System Annual Financial Report
File ID: 2023-01073
Location: Citywide
Recommendation: Receive and file.

Contact: Osvaldo Lopez, Finance Manager, (916) 808-4740, [email protected]; Peter Coletto, Finance Director, (916) 808-5416, [email protected], Department of Finance Presenter: None
Attachments:
1-Description/Analysis
2-FY2021/22 SCERS Annual Financial Report
3-FY2021/22 SCERS Report to AIFM Board and City Council 4-FY2021/22 SCERS Independent Auditor’s Report on Internal Control Over Financial Reporting Description/Analysis
Issue Detail: The Sacramento City Employees’ Retirement System (SCERS) Annual Financial Report for the fiscal year that ended June 30, 2022 was prepared by the Department of Finance Accounting Division and audited by external auditors, to present the SCERS financial results. The June 30, 2022, Auditor’s Report to the Administration, Investment, and Fiscal Management Board (AIFM Board) and Members of Council provides additional information about the FY2021/22 SCERS audit (Attachment 3).

Policy Considerations: This report is consistent with the City’s fiscal transparency and accountability principles and is required by the AIFM Board Policy Statement.

Economic Impacts: None.

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File ID: 2023-01073 9/12/2023 Consent Item 2.

Environmental Considerations:

California Environmental Quality Act (CEQA): This action does not constitute a “project” as it involves only organizational or administrative activities that will not result in direct or indirect physical changes in the environment and is therefore exempt according to CEQA Guidelines Section 15061 (b)(1) and 15378 (b)(3).

Sustainability: Not applicable.

Commission/Committee Action: None.

Rationale for Recommendation: It is in the best interest of the Council to review the FY2021/22 SCERS Annual Financial Report, Auditor's Report to the AIFM Board and Members of Council and the Independent Auditor’s Report on Internal Control Over Financial Reporting to understand the structure, obligations, and liabilities of the City’s SCERS retirement program:
· SCERS is a defined benefit plan in which retirement benefits for members (applicable City employees) are based upon age, final compensation, and length of service. In 1977, with the passage of Measure E, SCERS became a closed system. Since that time, all the City’s full-time and eligible part-time employees participate in the California Public Employees’ Retirement System (PERS) rather than SCERS.
o As of June 30, 2022, the SCERS plan had 828 participants (2 active) with an average age of 68.4 and an average of 45.2 years of service with the City. o As of June 30, 2022, SCERS is 93.9% funded representing an unfunded pension liability of $16.4 million for the plan.
· Assets for SCERS are held in trust. Trust monies are used to pay benefits to plan participants and their beneficiaries. The trust is managed pursuant to the City Charter under the direction of the AIFM Board.

The public accounting firm of Macias Gini & O’Connell LLP audited the SCERS FY2021/22 financial statements and rendered its unmodified opinion that the financial statements are fairly presented in accordance with generally accepted accounting principles. The Auditor’s Report to the AIFM Board and Members of Council provides communication required by audit standards and include statements specifying that there were no significant audit adjustments or disagreements with management in connection with this year’s audit.

Financial Considerations: The FY2022/23 Approved Budget was the first year where the City’s annual required contribution was reduced to $0 for the SCERS plan since the plan was fully funded in

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File ID: 2023-01073 9/12/2023 Consent Item 2.

FY2020/21. As the plan is no longer fully funded as of the end of FY2021/22, the City is anticipated to have required annual contributions in future fiscal years.

Local Business Enterprise (LBE): No goods or services are being purchased under this report.

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SACRAMENTO CITY EMPLOYEES’ RETIREMENT SYSTEM
A Component Unit of the City of Sacramento, California

Annual Financial Report

Fiscal Year Ended June 30, 2022
(With Comparative Totals for the Fiscal Year Ended June 30, 2021)

SACRAMENTO CITY EMPLOYEES’ RETIREMENT SYSTEM
A Component Unit of the City of Sacramento, California
Fiscal Year Ended June 30, 2022

TABLE O

F CONTENTS
Page
In
troductory Section:

Lett
er to the Members of the Sacramento City Employees’
Retirement System and the Sacramento City Council .................................................................... 1-11 Fina
ncial Section:

Indepe
ndent Auditor’s Report ......................................................................................................... 12-15 Managem
ent’s Discussion and Analysis (Unaudited)
(Required Supplementary Information) .......................................................................................... 16-19 Bas
ic Financial Statements:

Stat
ement of Fiduciary Net Position ..................................................................................................... 20 Stat
ement of Changes in Fiduciary Net Position .................................................................................. 21 Note
s to the Basic Financial Statements ......................................................................................... 22-32 Requi
red Supplementary Information:

Sched
ule of Changes in Net Pension Liability (Asset) and Related Ratios .................................... 33-34 Schedu
le of Employer Contributions .............................................................................................. 35-36 Schedu
le of Investment Returns ...................................................................................................... 37-38 Othe
r Supplementary Information:

Lis
ting of Investments ..................................................................................................................... 39-41 Act
uarial Section:

Actu
arial Valuation ............................................................................................................... Appendix A GASB 67 & 68 Reporting ..................................................................................................... Appendix B SACRAMENTO CITY EMPLOYEES’ RETIREMENT SYSTEM
A Component Unit of the City of Sacramento
Letter to the Members of the Sacramento City Employees’ Retirement System and the Sacramento City Council
Fiscal Year Ended June 30, 2022

1 December 19, 2022

TO: Members of the Sacramento City Employees' Retirement Syste m Members of the Sacramento City Council

Transmitted herewith is the annual report of the Administration , Investment and Fiscal Management Board (Board) for the Sacramento City Employees' Retirement System (SCERS or System). This report addresses Board membership, history of the System, investment objectives, asset allocation, financial results, members' interest credit, fund performance, administration highlights, together with reports by an independent auditor and actuary, all as of the close of the 2022 Fiscal Year, or June 30, 2022.

The Annual Financial Report consists of three main sections: an Introductory Section represented by this letter of transmittal and the identification of the System’s financial governing body, and the administrative and consulting services utilized by SCERS; the Financial Section which contain s the Independent Auditor's Report, Management’s Discussion and Analysis (MD&A), the financial stat ements of SCERS, Required Supplementary Information (RSI), and Additional Information; and the Actuaria l Section which contains the independent consulting actuary's valuation along with related actuarial data and statements.

BOARD MEMBERSHIP

As set out in the Sacramento City (City) Charter, the Board is comprised of five members, three of whom are City officials (or their designees), and two of whom are public citizen members appointed by the City Council. The Sacramento City Manager, City Treasurer and Director of Finance are the City officials designated to serve on this Board. By City Charter, the public citizen members must be residents of the City of Sacramento, not connected with City government, and at least one of these members must be qualified by training and experience in the management and investment of funds.

The members of the Board as of the close of the fiscal year are as follows:

City Officials
Howard Chan, City Manager (Jason Bader, Designee)
John Colville, City Treasurer
Emily Combs, Director of Finance

Public Citizen Members
David Bach
Manuel Leon – State of California

2 Howard Chan, City Manager, was appointed to his current positio n in February 2017 and assumed the Board membership position at that time. Mr. Chan has appointed Jason Bader, Principal Management Analyst, to serve as his designee. He has been with the City since 2005 and has served as Vice Chair and was most recently elected as Chair of the Board in 2022.

John Colville, City Treasurer, was appointed to his current position in February 2016 and assumed his position on the Board in February 2016 upon his appointment as Interim City Treasurer. Prior to his appointment as City Treasurer, Mr. Colville served as Interim City Treasurer and prior to that, as Chief Investment Officer for the City.

As Chief Investment Officer, Mr. Colville supervised the invest ment activities of the City Treasurer’s Office, including the investment of City and SCERS funds. Mr. Colville has been a City employee since 2004.

Emily Combs, Director of Finance joined her first Board meeting on February 10, 2022 as the replacement for the retirement of the previous Finance Director Dawn Holm.

David Bach is a public citizen member and joined the Board in early 2022.

Manuel Leon, an employee of the State of California, State Senate, was appointed to the Board in February 2016 as a public citizen Board member and served as the Vice-Chair from April 2016 to January 2018. In January 2018 he was elected as Chair and served until 2021.

HISTORY

SCERS is a defined benefit plan in which retirement benefits fo r City member employees are based upon age, final compensation, and length of service. City employee members make contributions to the System and, until 1993, the City made a normal contribution which was a percentag e of total City payrolls. These cash payments are held in trust and invested to meet the retirement benefits of members. However, if these invested assets prove inadequate to meet the defined benefits, the City must contribute additional monies to pay benefits. Between fiscal year 1988/1989 and fiscal year 2006/2007, the System’s anticipated liabilities were fully funded or in an actuarial surplus condition, and the City was not required to make contributions to the System during that time period. The City has been required to make contributions from fiscal year 2007/2008 through the current fiscal year ended June 30, 2022.

In 1977, with the passage of Measure E, SCERS became a “closed” system, i.e., there would be no additional employees participating in the plan. Since that time, all full- time and eligible part-time employees of the City participate in the California Public Employees’ Retirement Syst em (CalPERS) rather than SCERS. In 1977, the average age of SCERS active members was 36 years.

In June 1989, the voters of Sacramento approved the transfer of SCERS active safety members to CalPERS.

Effective December 30, 1989, SCERS active safety members were transferred to CalPERS with a cash transfer of $103.3 million in January 1990.

As of June 30, 2022, the average age of SCERS active members is 68.4 years and the average years of service is

45.2 years. As of said date, there are 2 active miscellaneous members and a total of 828 plan participants.

3 Pursuant to the Sacramento City Charter, the Board has exclusiv e authority to invest and manage the System’s funds. The Board, in turn, has selected the Sacramento City Tr easurer and Treasurer’s Office investment personnel to conduct daily investment activities consistent wit h Board-approved policies and direction. The City Treasurer’s office also serves as staff to the Board.

INVESTMENT OBJECTIVES

The overarching goal of the SCERS investment program is to util ize prudent investment practices to generate adequate long-term returns that, when combined with employer an d employee contributions, will result in sufficient assets to pay the present and future obligations of the System. In furtherance of this goal, the Board has adopted an investment policy that, among other things, authoriz es the investment in different asset classes to promote both long-term returns and short-term cash needs. The emphasis on cash income and fixed-income investments is intended to meet current benefit payments on a c ontinuing basis, while equity investments are intended to grow the asset base with dividend income providing additional support for current benefit payments.

The emphasis on interest revenue and dividend income is particu larly important for SCERS as there are no new entrants to the System to provide a continuing source of funds to help cover the liabilities of the System. Cash payments for benefits have exceeded contributions since 1989. Accordingly, the cash generation emphasis in SCERS investments is a critical feature required from SCERS sta tus as a “closed” plan, that has negligible and declining numbers of active, contributing members. Equity investments are permitted to inject an element of growth within the investment portfolios to grow the System’s asset base.

The Board annually reviews and approves the SCERS investment policy and forwards the same to the City Council for its approval pursuant to City Charter requirements. All SCERS investments are held by a third-party custodian, except for the sole remaining real estate trust deed.

ASSET ALLOCATION

Pursuant to the SCERS investment policy, the Board annually rev iews its asset allocation, i.e., the allocation of the System’s funds to different investment asset classes. On M ay 20, 2021, the Board established the asset allocation of the investment of SCERS funds during the fiscal y ear beginning July 1, 2021, and ending June 30, 2022. The approved asset allocation is as follows:

Fixed Income
F i x e d I n c o me/Real Estate 30.0%

E q u i t y
L a r g e C a p G r o w t h 35.0%
E q u i t y I n c o m e 2 7 . 5 %
I n t e r n a t i o n a l 7.5%
100.0%

ACTUARIAL EARNING ASSUMPTION

During the fiscal year ended June 30, 2022, SCERS actuarial earnings assumption was 6.0%

4 FINANCIAL RESULTS

The plan net position of SCERS decreased from $311.133 million to $254.171 million by the end of the fiscal year ended June 30, 2022. This $56.962 million decrease is summarized as follows:

SCERS PLAN NET POSITION

$ in thousands
Plan net position 6/30/21 $311,133
Members Contributions 9
City Contributions 3,479
Total Investment Loss (31,084)
Benefit Payments and Expenses (29,366)
Plan net position 6/30/22 $254,171

SCERS’ Total Pension Liability (TPL) as of June 30, 2022, is ap proximately $270.541 million. TPL represents the present value of all future benefits that will be paid by SCERS. SCERS funding ratio using fair value of assets was 93.9% percent of TPL on June 30, 2022. The funding ratio is defined as that portion of the total TPL for which there are assets available for benefits. As such, the System’s actuary indicates that for every dollar of benefits due, SCERS has approximately $0.94 of assets available for payment. SCERS has a Net Pension Liability of $16.37 million.

TOTAL FUND PERFORMANCE

As required by the SCERS Investment Policy, the Board retained a third-party firm, namely Segal Marco Advisors (formerly Rogerscasey) to calculate total investment return and measure investment performance. Segal Marco Advisors is an independent fund evaluation and performance measurement service that calculates and reports the investment results of over 2,500 managed pension investment portfolios in the U.S. Segal Marco Advisors calculates the investment results of the managed portfolios and compares such results to the database of predetermined industry benchmarks.

Table 1 below shows investment return results of SCERS for the specified periods ended June 30, 2022:

Table 1
SCERS Total Rate of Return

TOTAL PLAN ASSETS
For the periods ended June 30, 2022
Annualized Compound Returns 1 Yr. 3 Yrs. 10 Yrs.

SCERS – All Funds -10.7% 6.1% 7.4%
Custom Index – Target* -11.1% 4.2% 6.0%
Actuarial Assumption** 6.0% 6.3% 6.5%

*The Custom Index is a blended return based on the actual market performance of Segal Marco Advisors benchmarks representing each of the investment asset classes utilized by the System pursuant to the Board’s established asset allocation. ** The Actuarial Assumption was changed to 6.0% in the fiscal year ended June 2021.

5 For the fiscal year ended June 30, 2022, the total return of the System’s invested assets resulted in a -10.7% overall return. The System’s investment returns exceeded the market-based benchmarks utilized by Segal Marco Advisors for each of the 1-year, 3-year and 10-year time frames. The System underperformed the 1-year actuarial assumption but is beating the target over the longer term. Consistent with the “prudent person” standard set forth in the SCERS investment policy, the Board and its investment st aff does not attempt to boost performance to the actuarial rate of return by going into riskier investments that would inject more volatile, non-transparent and/or illiquid assets into the portfolio. Rather, driven by the Syste m’s status as a “closed” fund virtually devoid of present and future member cash contributions, the System’s investment policy points to a relatively conservative investment strategy that stresses the importance of preservation of capital and generation of cash flows from such assets.

Preservation of the SCERS’ assets is challenged by the required cash payments of retiree benefits paid from such assets. As the number of active members and their contribution s have been in constant decline, the number of retirees and hence the amount of cash needed for benefits payme nts has stabilized and has been declining since 2015. The preservation of the System’s assets at the same time the liabilities of the plan decline (declining retiree benefits being paid) will facilitate improving funding ratios over time. Increasing the funding ratio over time will further decrease the need to incur risk in the portfolio as the System works towards an endgame of meeting the benefit payments of a dwindling retiree pool in an orderly, non-volatile manner.

To best manage the long-term competing factors of capital preservation and cash generation, the Board historically has placed emphasis on income-generating investments. Such investments include allocations to interest-bearing fixed income instruments as well as dividend-paying equity secu rities. The emphasis on interest-bearing fixed income investments reached as high as 70% of plan assets in 199 5, all with the goal of generating cash yields close to the actuarial return assumption of 6.0%. Such fixed income investments are within the Fixed Income Fund maintained by the System.

Long-term interest rates continued to fall from their high levels in the early 1980’s, including consistent declines since then through the 2008-2009 financial crisis that resulted in historic low rates. As the yield on long maturity bonds fell below the actuarial return assumption, the Board sta rted to allocate funds to dividend-paying equities.

At first, these dividend-paying equity holdings were lumped together with interest-bearing fixed income securities, all within the Fixed Income Fund. While the dividend-paying st ocks have certain bond-like attributes, such as a consistent, steady stream of periodic income, they behave sufficiently different to warrant analyzing and managing such holdings separately from bond holdings. From and after 20 08, such stocks were recorded in their own portfolio within the System known as the Equity Income Fund. T he Equity Income Fund’s cash dividends, as well as the interest earned on Fixed Income Fund holdings, cons titute an important portion of the return on the System’s assets. In addition, Equity Income stock holdings may also contribute capital returns in the form of higher share values.

For the fiscal year, approximately 57.5% of the System’s assets were allocated to the Fixed Income Fund (30%) and Equity Income Fund (27.5%). The overweight to income-generating investments reflects the Board’s prudent approach to maintain the actuarial soundness of the System and the ability to pay retiree benefits. Moreover, the volatility of the Fixed Income Fund and Equity Income Fund has been less than what is experienced in the other growth equity portions of the SCERS portfolio. In overweighting the portfolio to these two Funds, the Board seeks more consistent cashflow and total returns while minimizi ng undue volatility in City contributions which may take place as a result of wide swings in portfolio value from greater weightings to the more growth-oriented equity allocations.

SACRAMENTO CITY EMPLOYEES’ RETIREMENT SYSTEM
A Component Unit of the City of Sacramento
Letter to the Members of the Sacramento City Employees’ Retirement System and the Sacramento City Council
Fiscal Year Ended June 30, 2022
6 Fixed Income Performance
Based on the
Board’s asset allocation for FY2022, 30% of SCERS assets were allocated to fixed income investments within the Fixed Income Fund. During the year, such fixed income investments included corporate, municipal, and mortgage-backed bonds, short-term high yield ETFs, plus short-term, cash-equivalent investments.

In addition, the Fund includes a real estate first trust deed funded by the System with a maturity date of 2024. All told, the Fixed Income Fund’s investments are debt securities whose primary source of portfolio return is interest income, with increases in value of the holdings a secondary source of return.

Table 2 reflects SCERS’ performance of the Fixed Income Fund for various periods ended June 30, 2022:

Table 2
SCERS Total Rate of Return

FIXED INCOME
For the periods ended June 30, 2022
Annualized Compound Returns 1 Yr. 3 Yrs. 10 Yrs.

SCERS Fixed Income Fund -12.3% -1.0% 3.2%
Fixed Portfolio Index* -10.3% -.9% 1.5%
*Fixed Portfolio Index = 100% Barclays US A
ggregate Bond Index from March 2008 to present.

The Fixed Income
Fund produced a total rate of return of -12.3% for the one-year period ended June 30, 2022, as rates shot up later in the fiscal year as the Federal Reserve ( Fed) intervened with interest rate hikes to tame inflation. Although the fund underperformed its benchmark over the fiscal year ended June 2022, the fund still has a long history of outperformance as reflected by the returns over the 10-year timeframe. Over the past 10 years, the Fixed Income Fund has returned 3.2% which exceeds the benchmark return of 1.5%. The Fixed Income Fund continues to generate significant cashflow to the fund, and is primarily invested in high-quality, high coupon corporate and municipal securities.

This year’s Fixed Income Fund’s return at -12.3% is a decrease over the previous year’s return of 3.1%. This decrease in return occurred in a changing interest rate environment. In the Fall of 2014, the Fed terminated their bond purchase program. They continued with their first hike of the Federal Funds rate in December 2015. The tightening strategy grew in momentum with six 0.25% Federal Fun d rate hikes through FY2018 (bond prices move inversely to interest rates as higher rates result in lower bond values). Those rate hikes in the short-term Federal Funds rate, coupled with a strengthening labor market a nd economy, resulted in an upward shift in rates across all maturities on the yield curve. However, at the last hike in December 2018, the Fed faced great criticism that the last hike may not have been warranted due to softening economic data. While equity and bond markets suffered in the aftermath of the December 2018 hike, the Fed maintained their stance of being data dependent and made no changes to interest rates through June of 2019, citing stable unemployment and low inflation which stabilized fixed income markets. As the new fiscal year began in June of 2019, markets were stable, and the economy was expanding but inflation was stagnant. Increased rhe toric on the trade war front with China and flat GDP led the Fed to reduce interest rates 3 times by October 201 9 down to 1.75%. In late 2019 and early 2020, rumors of an uncontrollable pandemic began to echo through global markets. In the first calendar quarter of 2020, the United States equity markets experienced a major downward s hock and the Fed intervened twice within 2 weeks in March 2020 and took the Fed Funds rate down to .25% to support an economy that had all but come to 7 SACRAMENTO CITY EMPLOYEES’ RETIREMENT SYSTEM
A Component Unit of the City of Sacramento
Letter to the Members of the Sacramento City Employees’ Retirement System and the Sacramento City Council
Fiscal Year Ended June 30, 2022
a standstill. As the fiscal year ended in 2021 the Fed had communicated its intent to keep this .25% rate in effect for the next 12 months. In FY2022, rates hit historic l ows and with the backdrop of rising inflation the Fed began aggressively raising interest
rates. The first hike raised the Federal funds rate off essentially 0% in March 2022.

By the end of
the fiscal year 2022, the Fed had raised rates 150 basis points. This hawkish stance has continued
into the next fiscal year and contributed to the negative returns across all Fund portfolios. As the yields on bonds has in
creased, the underlying price decreases, creating a much lower return environment. It is important to note, the coupons
of the portfolio’s holdings continued to contribute approximately $2.9 million dollars in cash interest payments.

Equity Investment Performance
Equity investment is a
broad term used to describe investments in ownership interests in the issuing corporation.

Common stocks represent corporate ownership interests. Stocks are typically purchased with the desire to capitalize on the growth of the issuing corporation. Also, many corporations p ay dividends to holders of their common stock which
provides shareholders with cash income. Common stocks can be purchased individually so the shareholders can target
specific companies for growth and/or income purposes. Common stocks may also be purchased in groups
through exchange traded funds (ETFs). ETFs can hold stocks of companies included in indexes (e.g., S&P 500 and Russell 2000) or which participate in various economic sector s (e.g., technology, financial and
energy sectors) or focus on different investment themes (e.g., growth and value stocks). ETFs provide investors with effective tools to provide exposure in to broad swaths of the market or into specific sectors
of the economy.

This is as opposed to requiring investors to i dentify stocks of indivi dual companies to achieve the same exposure, all while incurring the risk that such selected individual companies fail to perform in-line with the index or sector (known as “single company risk”). While an ETF represents a collection of stocks, each ETF trades like stoc
ks of individual companies on the major exchanges. SCERS equity portfolios are invested in both single company stocks and ETFs.

By Board policy for
the fiscal year ended June 30, 2022, 70% of SCERS assets were t o be allocated to equity investments, both
domestic and international and including b
oth growth and income objectiv es.

SACRAMENTO CITY EMPLOYEES’ RETIREMENT SYSTEM
A Component Unit of the City of Sacramento
Letter to the Members of the Sacramento City Employees’ Retirement System and the Sacramento City Council
Fiscal Year Ended June 30, 2022
8 Table 3 shows the performance of SCERS’ equity investments, both domestic and international:
*Domestic Equity Index = Feb 2006 to present = 100% Russell 3000 Index (price) **Large Cap Index = June 2007 to present = 100% S&P 500 ***Equity Income Index = Mar 1992 to June 2016 = 100% Dow Jones Select Dividend Index, July 2016 to present = Russell 1000 value (price) *International Index = Feb 2006 – Jun 2007 = 33% Nikkei, 67% MSCI EAFE, Jul 2007 to present = 100% MSCI ACWI ex US Per Table 3, the performance of the overall SCERS domestic equi ty portfolio was -9.4% for the one-year period as compared to the -15.1% return by the benchmark (Russell 3000 which represents the stocks of approximately 98% of US publicly traded corporations). These domestic portfol ios (and the benchmark) underperformed the Plan’s actuarial rate of return of 6.0%. The below average perf ormance of the portfolios and the market benchmarks are commensurate with surging inflation and a rising interest rate market environment which contributed to an overriding risk off market environment.

Table 3
SCERS Total Rate of Return

DOMESTIC EQUITY INVESTMENTS
For the periods ended June 30, 2022
Annualized Compound Returns 1 Yr. 3 Yrs. 10 Yrs.

SCERS Domestic Equities -9.4% 9.6% 10.6%
Domestic Equity Index* -15.1% 8.0% 10.5%
Individu
al SCERS Domestic Equity Portfolios
Large Cap Growth Fund -12.7% 10.6% 11.4%
Large Cap Index** -11.9% 8.8% 10.8%
Equity Income Fund -6.0% 7.6% 9.0%
Equity Income Index*** -8.7% 4.4% 7.9%
T a b l e 4
SCERS Total Rate of Return

INTERNATIONAL EQUITY INVESTMENTS
For the periods ended June 30, 2022
Annualized Compound Returns 1 Yr. 3 Yrs. 10 Yrs.

SCERS International Fund -18.6% 1.6% 2.4%
International Equity Index* -21.5% -1.0% 2.2%
SACRAMENTO CITY EMPLOYEES’ RETIREMENT SYSTEM
A Component Unit of the City of Sacramento
Letter to the Members of the Sacramento City Employees’ Retirement System and the Sacramento City Council
Fiscal Year Ended June 30, 2022

9 The two domestic stock portfolios, Large Cap Growth Fund and Eq uity Income Fund, showed highly correlated returns for the fiscal year as investors sold both growth-oriented stocks and income producing stocks at different stages over the fiscal year. Similar to these outstanding domestic returns, the international portfolio also recorded dramatic negative returns as recession fears were not contained to simply the United States.

The Plan’s largest equity portfolio is the Large Cap Growth Fun d which is benchmarked to the S&P 500 Index.

While the 1 year return underperformed the actuarial target, its long term returns over the 3 and 10 year term show double digit returns exceeding the 6% target. The markets bega n the year on a positive note and the turn in the equity market really accelerated in early 2022 when it became c lear the rampant inflation would lead to multiple interest rate hikes. The fund showed positive unaudited return s through the third quarter, and saw the fourth downward trend wipe out 9 months of positive equity returns. T he fiscal year was truly a tale of two different markets as markets digest the economic background noise. Althou gh the Large Cap Growth Fund’s primary objective is growth, the portfolio also generated over $1.28 million in dividend payments to fund the System’s operating needs.

The second largest equity portfolio is the Equity Income Fund. As stated above, the purpose of this Fund is primarily to boost the dividend cash income of the Plan to prov ide a source of benefit payments. Just like the Large Cap Growth Fund, the Equity Income Fund had negative returns as a result of the selloff that gained traction in the fourth quarter of the fiscal year. Typically, investors flock to dividend paying stocks but in a rising interest rate environment these stocks look less attractive as risk free rates are competitive. These equities still provide a generous cash flow through dividends along with the potential for upside. The big unknown that equity markets are attempting to gauge and price are the fears of an upcoming recession and if it will be shallow or deep. The Equity Income Fund helps to fulfill the Board’s objective of en hancing cash income to help pay benefits. The Fund’s dollar contribution from dividends was $1.63 million for the year, providing much needed cash into the System as intended.

The International Fund holds equities issued by foreign corpora tions. It is the smallest of the three equity portfolios. While almost half of the world’s investable equities are issued by foreign companies, the Board has kept the portfolio’s weighting low (7.5% for the year ended Jun e 30, 2022) due to global economic and political uncertainties as well as geo-political strife. The lower weighting to international stocks was reflective of the past ten years when international stocks were either in bear markets or otherwise vastly underperformed the domestic stock market by posting low single digit returns over the longer time periods. For the fiscal year ended 2022, not unlike our domestic markets, international markets were struck by the risk off environment and worldwide recession fears. Our international portfolio turned in a -18.6% return for the FY2022 compared to the benchmark return of -21.5%. While the international component of the portfolio does not contribute significant cashflow into the System, it offers prudent diversification away from the domestic holdings which comprise the majority of the Fund’s assets. The International Fund generated almost $0.7 million in dividend payments over the fiscal year.

In 2014, the Board authorized an options program primarily involving the writing of call options on existing equity holdings. The purpose of the options program is to increase cash income to the Fund and provide a hedge against the decline in its investments. Since its inception, the call- write program has had a neutral impact on the returns and cash generation of the Fund. The options program has been t emporarily halted as the Fund has struggled to find adequate specialist coverage for the program. We anticipa te that the options program will be active once again for the FY ending in 2023. This program is something that is prudent to run in a market that has more uncertainty and spiking volatility, as we have seen since the start of fourth quarter of FY2022.

SACRAMENTO CITY EMPLOYEES’ RETIREMENT SYSTEM
A Component Unit of the City of Sacramento
Letter to the Members of the Sacramento City Employees’ Retirement System and the Sacramento City Council
Fiscal Year Ended June 30, 2022
10 INDEPENDENT AUDIT
SCERS receives an independent audit of the basic financial statements. Macias Gini & O’Connell LLP (MGO) conducted the audit for the fiscal year ended June 30, 2022 and issued an unmodified or “clean” opinion. The Independent Auditor’s Report can be found on page 12 of this report. The City is responsible for establishing and maintaining internal controls designed to ensure the protection of assets from loss, theft, or misuse, and for ensuring the accounting information generated is adequate to pr epare financial statements in conformity with accounting principles generally accepted in the U.S. The desig n of the internal controls is to provide reasonable assurance, although not absolute assurance, of achieving these objectives. The accuracy and completeness of the data outlined in this report is the sole responsibility of the management of SCERS.

ACTUARIAL VALUATION

The actuarial valuation and GASB 67 & 68 reports for SCERS as of June 30, 2022, are presented in this document.

Very briefly, these reports identify a Net Pension Liability of $16.37 million as of June 30, 2022. This amount is an increase from a Net Pension Asset of $28.77 million as of June 30, 2021.

PROFESSIONAL SERVICES

SCERS engages the following consultants to assist in the management and investment of assets:

Firm Duties
Segal Marco Advisors Performance evaluation

F o s t e r & F o s t e r A c t u a r ial evaluation and asset allocation (since 6/30/06) (
formerly known as Bartel Associates)

JPMorgan Custody and master trust (since 8/1/17)

BOARD MEETINGS

For the fiscal year ended June 30, 2022, regular meetings of the Board were held via Zoom as a result of the Covid-19 pandemic. The meetings were held at 1:30 pm September 23, 2021, November 18, 2021, February 10, 2022 and May 19, 2022. The Board’s meetings were open to the pu blic and attendees were afforded the opportunity to provide input on any matter on the meeting agenda or not on the agenda that may be related to the Board’s activities.

__________________ ___________
John Colville, City Treasurer J a s o n B a d e r , C h a i r Administration, Investment and A d m i n i s t r ation, Investment and Fiscal Management Board F i s cal Management Board

____________________
on Bader, Chair
12/12/22John Colville
Digitally signed by John Colville
Date: 2022.12.13 13:41:40
-08'00'
SACRAMENTO CITY EMPLOYEES’ RETIREMENT SYSTEM
A Component Unit of the City of Sacramento
Letter to the Members of the Sacramento City Employees’ Retirement System and the Sacramento City Council
Fiscal Year Ended June 30, 2022

11 POLICY STATEMENT

As a matter of policy, the Administration, Investment and Fiscal Management Board has determined the following schedules shall be included as addenda to the Annual Financial Report of the Sacramento City Employees' Retirement System:

1. A letter of transmittal to the City Council from the Board Chair;

2. An independent auditor’s report;

3. A statement of the System's fiduciary net position;

4. A statement of changes in the fiduciary net position

5. A detailed listing of investments (by security) as of the en d of the fiscal year;

6. A statement from the Actuary showing the estimated position of the Fund based on latest actuarial projections; and

7. The policy statement of the Board. The Board shall notify recognized employee organizations and the City Council of any changes in the policy statement that are to be made.

Adopted May 1978
www.mgocpa.com
Macias Gini & O’Connell LLP
500 Capitol Mall, Suite 2200
Sacramento, CA 95814

12 Independent Auditor’s Report
Adminis
tration, Investment, and Fiscal Honorable Mayor and City Council Management Board City of Sacramento
Sacramento City Employees’ Retirement System Sacramento, California Sacramento, California
Report
on the Audit of the Financial Statements
Opinion

We have au
dited the financial statements of the Sacramento City Employees’ Retirement System (SCERS), a component unit of the City of Sacramento, California, as of and for the fiscal year ended June 30, 2022, and the related notes to the basic financial statements, which collectively comprise SCERS’ basic financial statements as listed in the table of contents.

In our opini
on, the accompanying financial statements present fairly, in all material respects, the plan net position of SCERS as of June 30, 202 2, and the changes in its plan net position for the fiscal year then ended in accordance with accounting principles generally accepted in the United States of America.

Basis f
or Opinion
We condu
cted our audit in accordance with auditing standards generally accepted in the Un ited States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States (Government Auditing Standards). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of SCERS and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Other Mat
ter
Prior-Yea
r Comparative Information
The fi
nancial statements include partial prior -year comparative information. Such information does not include all of the information required to constitute a presentation in conformity with accounting principles generally accepted in the United States of America. Accordingly, such information should be read in conjunction with SCERS’ financial statements for the fiscal year ended June 30, 2021, from which such partial information was derived.
13 Report on Partial Comparative Information
We have
previously audited SCERS’ 2021 financial statements, and we expressed an unmodified opinion on the financial statements in our report dated December 15, 2021. In our opinion, the partial comparative information presented herein as of and for the fiscal year ended June 30, 2021, is consistent, in all material respects, with the audited financial statements from which it has been derived.

Respo
nsibilities of Management for the Financial Statements
SCERS’ mana
gement is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In prep
aring the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about SCERS’ ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.

Auditor
’s Responsibilities for the Audit of the Financial Statements Our ob
jectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In perfor
ming an audit in accordance with GAAS and Government Auditing Standards, we:
• Exerci
se professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of SCERS’ internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
• Conclude whether, in our judgment, there are c onditions or events, considered in the aggregate, that raise substantial doubt about SCERS’ ability to continue as a going concern for a reasonable period of time.

We are requ
ired to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control–related matters that we identified during the audit.
14 Required Supplementary Information
Accounti
ng principles generally accepted in the United St ates of America require that the management’s discussion and analysis, the schedule of changes in net pension liability (asset) and related ratios, the schedule of employer contributions and the schedule of investment returns, as listed in the table of contents, be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with GAAS, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Supplem
entary Information
Our aud
it was conducted for the purpose of forming an opinion on the financial statements that collectively comprise SCERS’ basic financial statements. The listing of investments is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with GAAS . In our opinion, the listing of investments is fairly stated, in all material respects, in relation to the basic financial statements as a whole.

Other I
nformation
SCERS’ ma
nagement is responsible for the other information included in the annual report. The other information comprises t he introductory and actuarial sections but does not include the basic financial statements and our auditor’s report thereon. Our opinion on the basi c financial statements does not cover the other information, and we do not express an opinion or any form of assurance thereon.

In connect
ion with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material mi sstatement of the other information exists, we are required to describe it in our report.

15 Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated December 19, 2022, on our consideration of SCERS’ internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters.

The purpose of that report is solely to descr ibe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of internal control over financial reporting or on compliance. That report is an in tegral part of an audit performed in accordance with Government Auditing Standards in considering SCERS’ internal control over financial reporting and compliance.

Sacramento, California
December 19, 2022

SACRAMENTO CITY EMPLOYEES’ RETIREMENT SYSTEM
A Component Unit of the City of Sacramento
Management’s Discussion and Analysis (Unaudited)
Fiscal Year Ended June 30, 2022

16 The management of the Sacramento City Employees’ Retirement System (SCERS) is pleased to provide this overview and analysis of the financial activities of SCERS for the fiscal year ended June 30, 2022. We encourage readers to consider the information presented here in conjunction with the Financial Statements and Supplemental Schedules that follow this discussion.

Financial Highlights

• SCERS held $ 254.2 million of net positio n restricted for pension benefits as of June 30, 2022 and $311.1 million as of June 30, 2021. SCERS’ entire net position balance is restricted for its ongoing obligation to plan participants and their beneficiaries. • SCERS’ funding objective is to maintain sufficient net position through investments and contributions to meet long-term obligations for benefits. As of June 30, 2022, SCERS had a funded status of 93.9% which means for every dollar of total pension liability, SCERS had approximately $0.94 of assets available to pay those benefits. This figure is based on the most recent actuarial valuation as of June 30, 2022. As of June 30, 2021, SCERS had a funded status 110.2%. • SCERS’ employer contributions were $3.5 million for the fiscal year ended June 30, 2022, a decrease from $3.8 million for 2021.
• For the fiscal year ended June 30, 2022, SCERS’ net loss from investment activity was $32.3 million, compared to net investment income of $73.2 million in the prior year. The decrease in investment income was mainly due to depreciation in the fair value of investments of $37.6 million in 2022 compared to appreciation in the fair value of investments of $67.4 million in 2021.

Overview of Financial Statements

The following discussion and analysis are intended to serve as an introduction to SCERS ’ financial statements, which are comprised of the following components:

1. Statement of Fiduciary Net Position is a snapshot of account balances as of June 30, 2022 with comparative amounts for 2021. It indicates the total assets and the total liabilities as well as the net position available for future payment of retirement benefits and investment expenses.

2. Statement of Changes in Fiduciary Net Position provides a view of additions and deductions to SCERS’ net position during each of the fiscal years.

3. Notes to the Basic Financial Statements and Required Supplementary Information provide additional information that is essential to a full understanding of the data provided in the basic financial statements.

The statement of fiduciary net position and the statement of changes in fiduciary net position report information about SCERS ’ financial activities, prepared using the accrual basis of accounting.

Contributions to SCERS are recognized when due, and benefits and refunds are recognized when due and payable. Investments are reported at fair value, except mortgage loans , which are reported at amortized cost. The estimated fair value of investments is based on available quoted market prices or other significant observable inputs. Purchases and sales of investments are recorded on a trade date basis.

SACRAMENTO CITY EMPLOYEES’ RETIREMENT SYSTEM
A Component Unit of the City of Sacramento
Management’s Discussion and Analysis (Unaudited)
Fiscal Year Ended June 30, 2022

17 Financial Analysis

SCERS’ net position may serve as a useful indicator of SCERS’ financial position over time. As mentioned earlier, SCERS’ entire net position balance is restricted for SCERS’ ongoing obligation to plan participants and their beneficiaries. Net position as of June 30, 2022 and 2021 is as follows:

FIDUCIARY NET POSITION SUMMARY
As of June 30, 2022 and 2021
(in thousands)

2022 2021 Change Percent
Cash and cash equivalents 7,825 $ 13,416 $ (5,591)$ - 42% Receivables 888 849 39 5% Investments 247,750 299,186 (51,436) - 17% Total assets 256,463 313,451 (56,988) -18%
Tota
l liabilities 2,292 2,318 (26) -1%
Net position restricted for pensions 254,171 $ 311,133 $ (56,962) $ -18%

SCERS’ net position restricted for pension benefits decreased in 2022, as there was a significant net investment loss combined with ongoing pension benefit payments. Cash and investments decreased by $5.6 million and $51.4 million, respectively. The decrease in cash and investments can be mainly attributed to the net investment loss in 2022. In 2022, SCERS’ money- weighted rate of return on pension plan investments, net of pension plan inv estment expense was -10.57%. Total pension liability also decreased but at a lower rate of 4%, which led to a decrease in plan fiduciary net position as a percentage of total pension liability from 110.2% to 93.9% in 2022.

SACRAMENTO CITY EMPLOYEES’ RETIREMENT SYSTEM
A Component Unit of the City of Sacramento
Management’s Discussion and Analysis (Unaudited)
Fiscal Year Ended June 30, 2022

18 The following table summarizes additions and deductions for 2022 and 2021:

HIGHLIGHTS OF CHANGES IN FIDUCIARY NET POSITION
Fiscal years ended June 30, 2022 and 2021
(in thousands)

2022 2021 Change Per cent
Additions:

Employer contributions 3,479$ 3,822$ (343)$ - 9% Employee contributions 9 16 (7) -44% Net appreciation (depreciation) in the
fair value of investments (37,595) 67,367 (104,962) -156% Interest 2,779 3,238 (459) - 14% Dividends 3,732 3,674 58 2% Investment expenses (1,221) (1,129) (92) 8% Total net additions (28,817) 76,988 (105,805) -137% Deductions:

Benefit payments 28,145 28,992 (847) -3% Total deductions 28,145 28,992 (847) - 3% Net increase/(decrease) in fiduciary net position (56,962) 47,996 (104,958) -219% Net position restricted for pensions:

Beginning of fiscal year 311,133 263,137 47,996 18% E
nd of fiscal year 254,171$ 311,133$ (56,962)$ -18%

• Required employer contributions decreased for the fiscal year ended June 30, 2022, due to improved performance of the investment portfolio over the past several years. • Employee contributions for the fiscal year ended June 30, 2022 decreased from 2021 due to retirement of active members. Contributions are expected to decline as the system is closed to new members and the number of active members decreases with each passing year. • Net appreciation (depreciation) in the fair value of investments decreased by $105 million in 2022. The $37.6 million loss during the fiscal year ended June 30, 2022 consists of $53.2 million of unrealized losses and $15.6 million of realized gains, compared to $52.5 million of unrealized gains and $14.9 million of realized gains for the fiscal year ended June 30, 2021. • The increase in realized gains is mainly due to the performance of the Fixed Bonds Fund, Equity Income Fund, and International Fund, combined $4.2 million gain in 2022 compared to $2.6 million in 2021, offset partially by the performance of the Large Cap Growth Fund, $11.4 million gain in 2022 compared to $12.3 million in 2021. The unrealized loss in 2022 can be mainly attributed to fair value decreases across all SCERS Funds. The Large Cap Growth Fund had the largest fair value decrease of $23 million in 2022. The Fixed Bonds Fund, Equity Income Fund and International Fund had fair value decreases of $14.2 million, $10.2 million, and $5.2 million in 2022, respectively. • Benefit payments to plan participants decreased due to a decline in the number of participants receiving benefits. The decrease was slightly offset by the annual cost-of-living adjustment made to the benefit amount. As the plan has been closed since 1977, the number of participants receiving benefits declines each year.

SACRAMENTO CITY EMPLOYEES’ RETIREMENT SYSTEM
A Component Unit of the City of Sacramento
Management’s Discussion and Analysis (Unaudited)
Fiscal Year Ended June 30, 2022

19 Changes in Funded Ratio

SCERS funded ratios as of June 30, 2021 and 2022 were 110.2% and 93.9%, respectively. The decrease in funded ratio between June 30, 2021 and June 30, 2022 is largely due to the decrease in plan fiduciary net position of $57 million in 2022, as there was a significant decrease in investment income.

Currently Known Facts and Events

The overall risk profile of SCERS has remained unchanged since June 30, 2022, and the volatility of the investment portfolio remains in line with the overall financial markets. The global capital markets are highly dynamic and the value of SCERS investments changes every day.

Requests for Information

This financial report is designed to provide a general overview of SCERS ’ finances and to demonstrate SCERS’ accountability for the money it receives and distributes. If you have questions about this report, or need additional financial information, contact the City of Sacramento Department of Finance, Accounting Division, 915 I Street, 4
th floor, Sacramento, CA, 95814.
2022 2021
Assets
Cash and cash equivalents 7,825$ 13,416$ Receivables:

Interest and dividends 888 849
Total receivables 888 849
Investments:

Corporate bonds/notes 45,810 39,181
Equities 21,197 30,236
Exchange traded funds 149,073 187,545
Mortgage loans 558 824
Municipal bonds/notes 28,798 38,438
U.S. agencies 745 1,004
U.S. Treasury bonds 1,569 1,958
Total investments 247,750 299,186

Total assets 256,463 313,451
Liabilities
Benefits payable 2,289 2,312
Accounts payable 3 6
Total liabilities 2,292 2,318
254,171$ 311,133$
(Amounts Expressed in Thousands)
Net position restricted for pensions

SACRAMENTO CITY EMPLOYEES' RETIREMENT SYSTEM
Statement of Fiduciary Net Position
June 30, 2022
With Comparative Totals as of June 30, 2021
See accompanying notes to basic financial statements.
20 2022 2021
Additions
Contributions:

Employer 3,479$ 3,822$
Employees 9 16
Total contributions 3,488 3,838
Investment income (loss):

From investment activities:

Net appreciation (depreciation) in the fair value of investments (37,595) 67,367 Interest 2,779 3,238
Dividends 3,732 3,674
Total investment income (loss) (31,084) 74,279
Less investment expense:

Banking, interest, fiscal agent and other 25 26 Professional services 1,196 1,103
Total investment expense 1,221 1,129
Net investment income (loss) (32,305) 73,150
Total net additions (28,817) 76,988

Deductions
Benefit payments 28,145 28,992
Total deductions 28,145 28,992

Net increase/(decrease) in fiduciary net position (56,962) 47,996

Net position restricted for pensions
Beginning of fiscal year 311,133 263,137
End of fiscal year 254,171$ 311,133$

SACRAMENTO CITY EMPLOYEES' RETIREMENT SYSTEM
Statement of Changes in Fiduciary Net Position
Fiscal Year Ended June 30, 2022
(Amounts Expressed in Thousands)
With Comparative Totals For the Fiscal Year Ended June 30, 2021 See accompanying notes to basic financial statements.
21 SACRAMENTO CITY EMPLOYEES’ RETIREMENT SYSTEM
A Component Unit of the City of Sacramento
Notes to the Basic Financial Statements
Fiscal Year Ended June 30, 2022
(Dollars in thousands, except as otherwise noted)

22 Note A – Plan Description

The City of Sacramento, California, (City) sponsors and administers a defined benefit contributory pension sy stem known as the Sacramento City Employ ees’ Retirement Sy stem (S CERS). The fiscal management of SCERS is vested in the five-member Administration, Investment, and Fiscal Management Board (Board), consisting of the City Manager, Director of Finance, City Treasurer and two public members who are appointed by the City Council. Because of this relationship with the City, SCERS is reported as a component unit of the City.

SCERS is a single-employer system and an integral part of the City. The accompanying financial statements are included as a pension trust fund in the basic financial statements of the City. The system covers all City employees hired before January 29, 1977 and is closed to new members.

Employee contribution ra tes are generally frozen (with minor exceptions) and the City is responsible for any actuarially determined unfunded obligation of the plan. SCERS is comprised of the individual plans listed below. The Ci ty Charter establishes plan membership, contributions, and benefit provisions. Any changes must be approved by the electorate of the City.

1. Charter Section 399 Plan – This defined benefit plan was established effective January 1, 1977 to provide retirement, disability and death benefits. Active members contribute at a rate based upon entry age and type of employment. Members of this plan who have completed at least 5 years of service in the aggregate and attained the age of 50 are eligible for service retirement.

2. Equal Shares Plan – This defined benefit plan was established July 1, 1970 to provi de retirement, disability and death benefits to all City employees electing coverage at that date and to all employ ees who were hired from that date through January 1, 1977.

Members of this plan who have completed at least 5 years of service in the aggregate and attained the age of 55 for miscellaneous members or age 50 for safety members are eligible for service retirement.

3. Charter Section 175 Plans – These defined benefits were established in 1953 and provide for retirement, disability and death benefits at a lower amount than the successor Equal Shares Plan. Members of this plan who have completed at least 20 years of service in the aggregate and attained the age of 55 are eligible for service retirement.

For each of the plans above, service retirement allowance as a percentage of average monthly compensation is calculated with set rates based on plan and age at retirement multiplied by the number of service years credited to the member at retirement. Service retirement allowance is capped at 75% of a member’s final compensation for the Charter Section 399 Plan and Equal Shares Plan.

23 Note A – Plan Description (Continued)

Plan membership at June 30, 2022 consisted of the following:

Section
399
Equal
Shares
Section
175 Total
Inactive members or beneficiaries receiving benefits 750 34 37 821 Inactive members entitled to but not yet receiving benefits 4 - 1 5 Active plan members 2 - - 2
Total plan members 756 34 38 828

Cost-of-Living Adjustment – This adjustment, established in 1969, provides for annual retirement benefit increases of up to 3% of normal benefits based on a corresponding r ise in the consumer price index. Cost-of-living benefits are payable to retirees and beneficiaries of all of the above plans after one y ear of retirement. The cost-of-living adjustment was 1.7% for fiscal year 2022 .

Members contribute to this adjustment at a rate of 1% of their normal retirement contributions.

The City is required to fund all costs in excess of members’ contributi ons and investment earnings.

Social Security Adjustment – For members participating in Social Security, their benefit will be adjusted at the later of age 62 or actual retirement age. The amount of the adjustment is one half of the primary insurance amount (PIA) from Social Security, multiplied by the ratio of the sum of salary earned from the City to the sum of salary from all sources used in the calculation of the Social Security amount. The member’s benefit under SCERS plus the amount received from Social Security cannot be less than the member’s benefit under SCERS calculated with no reductions at the time of retirement. This adjustment applies to service retirees and not to disabled retirees.

SCERS reports the assets and activities of all plans in one trust fund. All assets accumulated for the

payment of benefits may be used to pay benefits to any of the plan members or beneficiaries.

Benefits fully vest after five years of service. All accumulated benefits as of June 30, 2022 are fully vested.

As the
plans included in SCERS are closed to new members, the number of active members in the system is declining. Member contributions have declined as members retire. During the fiscal year ended June 30, 2022, active member contributions ranged from 7% to 9 % of payroll. At June 30, 2022, active members’ accumulated contributions, including interest, totaled approximately $909. For the fiscal year ended June 30, 2022, interest was credited to members’ contributions at the rate of 7 %. Members have an option to withdraw their accumulated contributions, including interest, upon termination of their employment with the City.

SACRAMENTO CITY EMPLOYEES’ RETIREMENT SYSTEM
A Component Unit of the City of Sacramento
Notes to the Basic Financial Statements
Fiscal Year Ended June 30, 2022
(Dollars in thousands, except as otherwise noted)
24 Note B – Summary of Significant Accounting Policies
Basis of Accounting
SCERS’ financial statements are prepared using the accrual basis of accounting. Member contributions are recognized in the period in which the contributi ons are due. Employ er contributions to each plan are recognized when due pursuant to legal requirements. Benefits and refunds are recognized when due and payable in accordance with the terms of the plan.

Investm
ents
SCERS’ investments are recorded at fair value, except mortgage loans, which are recorded at amortized cost. Investments are reported at fair value based on available quoted market prices or other significant observable inputs. The mortgage loans are collateralized loans whose fair value is unknown. Purchases and sales of investments are recorded on a trade date basis.

Administrative Costs
The City charter requires all costs of administration, excluding investment activity, to be paid by the City. These costs are, therefore, excluded from the accompanying financial statements.

Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates.

Note C – Cash and Investments
Cash an
d Cash Equivalents
SCER
S participates in the City of Sacramento’s investment pool, which is not rated by a nationally recognized statistical rating organization. The City Treasurer is granted authority for managing the pool by City Charter and City Council ordinances and resolutions. The City Treasurer reports investment activity monthly to the City Council and the investment policy is reaffirmed annually by the City Council. The pool is accounted for on an amortized cost basis during the year. The value of the pool shares that may be withdrawn at any time is determined on an amortized cost basis, which is different than the fair value of SCERS’ position in the pool. Information regarding the investments within the City’s pool, including the related risks, can be found in the City’s Annual Comprehensive Financial Report (ACFR). The City’s investment pool is not rated and has a weighted average maturity of 2.54 years as of June 30, 2022.

25 Note C – Cash and Investments (Continued)

Investments

The City Charter vests the Board with the authority to administer and invest the funds of the System consistent with charter provisions. The Board is mandated to adopt general investment standards that the City Council shall either approve or disapprove. These standards are set fort h in an Investment Policy document that is annually reviewed by the Board and approved by the City Council. The Investment Policy sets forth the type of investments the System may hold and directs the Board to determine how the System funds may be allocated to different general asset classes. The Board sets the asset allocations by resolution effective for each fiscal year. The Board and its investment managers are required to conform their investment practices to the terms of the Investment Policy and related Board resolutions.

On May 20, 2021, the Board adopted the following asset allocation policy for fiscal year 2022:

Asset Class Target Allocation
Fixed Income/Real Estate 30.0%
Large Cap Growth 35.0 %
Equity Income 27.5 %
International 7.5 %
Total 100.0%

Interest Rate Risk

Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that SCERS manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturing evenly over time as necessary to provide the cash flow and liquidity needed for operations.

Information about the sensitivity of the fair values of SCERS’ investments to market interest rate fluctuations is provided by the following table that shows the distribution of SCERS’ investments by maturity. The remaining maturity of the SCERS’ investments included in the tables below is based on the stated maturity dates of the individual investments, except in the case of variable rate investments where the maturity date below is the next reset date. Variable rate securities are investments with terms that provide for the adjustment of interest rates on specified dates based on predefined mathematical formulas. The fair value of such investments can reasonably be expected to be affected at each interest rate reset date.

26 Note C – Cash and Investments (Continued)

Interest Rate Risk (Continued)

At June 30, 2022, SCERS’ investments have maturities as follows:

Rem aining Maturity in Y ears
Investm ent Type No Maturity Under 1 1-5
Over 5/
10 or less Over 10 Total
Cash and short-term investm ents:

City of Sacram ento Investm ent Pool -$ 7,825$ -$ - $ -$ 7,825$ Investm ents:

Corporate bonds/notes - - 5,943 28,391 11,476 45,810 Equities 21,197 - - - - 21,197 Ex change traded funds 149,073 - - - - 149,073 Mortgage loans - - 558 - - 558 Municipal bonds/notes - - 2,466 20,319 6,013 28,798 U.S. agency securities - - 5 - 740 745 U.S. Treasury bonds - - - - 1,569 1,569 Total Investm ents 170,270 - 8,972 48,710 19,798 247,750 Total Cash and Investm ents 170,270$ 7,825$ 8,972$ 48,710$ 19,798$ 255,575$

Investments in callable securities are investments that, although having clearly defined maturities, allow for the issuer to redeem or call such securities earlier than their respective maturity dates. The investor must then replace the called securities with investments that may have lower yields than the original securities.

The fair values of the callable securities held at June 30, 2022 by investment type are as follows:

Investment Type Total
Corporate bonds/notes 8,154$
Municipal bonds/notes 3,366
U.S. agency securities 400
11,920$

27 Note C – Cash and Investments (Continued)

Credit Risk

Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. As of June 30, 2022, SCERS held a bond that is currently in default of the semi-annual interest payments. The bond issuer Lehman Brothers filed for Chapter 11 bankruptcy protection on September 15, 2008. The bond has a maturity date of December 29, 2099 and a fair value of $10 as of June 30, 2022.

At June 30, 2022, SCERS’ investments and credit ratings are as follows:

Investment Type S & P Total
City of Sacramento Investment Pool not rated 7,825$
Corporate bonds/notes A 7,973
AA 4,694
BBB 33,133
not rated 10
Municipal bonds/notes AA 18,393
BBB 4,780
not rated 5,625
U.S. agency securities AA 400
AAA 30
Total 82,863$

Concentration Risk

As of June 30, 2022, SCERS held the following investments in an individual issuer exceeding 5% of fiduciary net position (other than investments issued or explicitly guaranteed by the U.S. government):
iShares Russell 1000 Value EFT 39,983 $
Technology Select Sector SPDR Fund (ETF) 16,705
Healthcare Select Sector SPDR Fund (ETF) 14,996

28 Note C – Cash and Investments (Continued)

Money-weighted Rate of Return

For the fiscal year ended June 30, 2022, the annual money-weighted rate of return on pension plan investments, net of pension plan investment expense was -10.57%. The money- weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested.

Custodial Credit Risk

Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, SCERS will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. As of June 30, 202 2, all SCERS cash and cash equivalents are held with the City of Sacramento Investment Pool and SCERS is not exposed to custodial credit risk for deposits.

The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, SCERS will not be able to recover the value of its investment or collateral securities that are in the possession of another party. As of June 30, 2022, all SCERS investments held with the custodian were held in SCERS’ name and SCERS is not exposed to custodial credit risk for investments.

Fair Value Measurement and Application

SCERS categorizes its fair value measurements within the fair value hierarchy established by generally accepted acco unting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described as follows:

Level 1 – Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that SCERS has the ability to access.

Level 2 – Inputs to the valuation methodology include:

• Quoted prices for similar assets or liabilities in active markets; • Quoted prices for identical or similar assets or liabilities in inactive markets; • Inputs other than quoted prices that are observable for the asset or liability; and • Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair value measurement. Unobservable inputs reflect SCERS’ own assumptions about the inputs market participants would use in pricing the asset or liability (including assumptions about risk).

29 Note C – Cash and Investments (Continued)

Fair Value Measurement and Application (Continued)

Unobservable inputs are developed based on the best information available in the circumstances and may include SCERS’ own data.

The asset’s level within the hierarchy is based on the lowest level of input that is significant to the fair value measurement. Valuation techniques used, need to maximize the use of observable inputs and minimize the use of unobservable inputs . The determination of what constitutes observable requires judgment by SCERS’ management. SCERS management considers observable data to be that market data, which is readily available, regularly distributed or updated, reliable, and verifiable, not proprietary, and provided by multiple independent sources that are active ly involved in the relevant market. The categorization of an investment within the hierarchy is based upon the relative observability of the inputs to its fair value measurement and does not necessarily correspond to SCERS management’s perceived risk of that investment.

In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. SCERS’ assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset or liability.

SCERS’ treasury pool’s asset market prices are derived from closing bid prices as o f the end of business day as supplied b y ICE Data Services DBA ICE Data Pricing & Reference Data, LLC .

Where prices are not available from generally recognized sources, the securities are priced using a yield-based matrix system to arrive at an estimated market value. Prices that fall between data points are interpolated.

The following is a description of the valuation methods and assumptions used by SCERS to estimate the fair value of its investments:

• When available, quoted process are used to determine fair value. When quoted prices in active markets are available, investments are classified within Level 1 of the fair value hierarchy. • For investments classified within Level 2 of the fair value hierarchy, SCERS’ custodian generally use a multi-dimensional relational model. Inputs to their pricing models are based on observable market inputs in active mar kets. The inputs to the pricing models are typically benchmark yields, reported trades, broker- dealer quotes, issuer spreads and benchmark securities, among others.
• SCERS held one type of investment that is measured using Level 3 inputs, Mortgage Loans.

The Mortgage Loan is reported using the income approach. The value of the Mortgage Loan on the books is materially close to the Discounted Cash Flow, therefore the book value is reported.

30 Note C – Cash and Investments (Continued)

Fair Value Measurement and Application (Continued)

There have been no changes in the methods and assumptions used at June 30, 20 22. The methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. SCERS management believes its valuation methods are appropriate and consistent with other market participants. The use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

SCERS has the following recurring fair value measurements as of June 30, 2022:

Investments by Fair V alue Level
Balance at
June 30, 2022
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Corporate bonds/notes $ 45,810 -$ 45,810$ -$ Equities 21,197 21,197 - - Ex change traded funds 149,073 149,073 - - Mortgage loans 558 - - 558 Municipal bonds/notes 28,798 - 28,798 - U.S. agency securities 745 - 745 - U.S. Treasury bonds 1,569 1,569 - - Total Investments by Fair V alue Level 247,750 $ 171,839 $ 75,353 $ 558 Investments at Fair V alue not Subject to
Fair V alue Hierarchy
City of Sacram ento Investm ent Pool 7,825
Total Cash and Investm ents 255,575$
Fair V alue Measurements on a Recurring Basis Using

Deposits and withdrawals in the City of Sacramento Investment Pool are made on the basis of $1 and not fair value. Accordingly, the measurement of fair value of SCERS’ investment in the investment pool is based on uncategorized inputs not defined as Level 1, Level 2, or Level 3.

31 Note D – Related Party Transactions

At June 30, 2022, SCERS held revenue bonds issued by the Sacramento City Financing Authority (SCFA) in the amount of $3,494. SCFA is a blended component unit of the City of Sacramento because its Board is comprised of all City Council members, and there is a financial benefit/burden relationship between the City and SCFA. These bonds are measured at fair value using level 2 inputs.

Note E – Funding Policy

The City’s funding poli cy provides for actuarially determined contributions under the entry age normal method, which are discounted and adjusted annuall y to ensure that sufficient assets will be available to pay benefits when due. The City Council established and may amend the obligations of the plan members and the City to contribute to the plan. For the fiscal year ended June 30, 2022, the City’s annual required and actual contribution was $3,479.

Note F – Net Pension Liability of the City

The components of the net pension liability of the City at June 30, 2022 is shown below. The total pension liability is based on an actuarial valuation as of June 30, 2022.

June 30, 2022
Total pension liability 270,541$
Pl
an fiduciary net position 254,171
City's net pension liability 16,370$
Plan fiduciary net position as a percentage of the total pension liability 93.9%

Actuarial assumptions

The total pension liability was determined by an actuarial valuation as of June 30, 2022, using the following actuarial assumptions, applied to all periods included in the measurement.

Inflation 2.5%
Salary increases 2.5% CPI plus 0.5% merit, average
Discount rate 6.0%

Mortality rates for service retirements and beneficiaries were based on CalPERS 2000-2019 Mortality Table projected for future mortality improvement utilizing Society of Actuaries Scale MP-2021. Mortality rates for disability retirements were based on CalPERS 2000-2019 Mortality Table for non-work Disabled Retirees for Miscellaneous and CalPERS 2000-2019 Mortality Table for work -related Disabled Retirees for Safety. Both tables were projected for future mortality improvement utilizing Society of Actuaries Scale MP -2021.

32 Note F – Net Pension Liability of the City (Continued)

Actuarial assumptions (continued)

The previous actuarial valuation as of June 30, 2021 used CalPERS 1997 -2015 experience study tables and the Society of Actuaries Scale MP -2020 for mortality projections.

Discount rate

The Discount Rate was set equal to the long-term expected rate of return. The long -term expected rate of return was used since current assets, future City contributions, and future member contributions are projected to be sufficient to cover all future benefit payments and expenses. This “crossover test” was performed in accordance with the requirements specified in GASB Statement 67, including a projection that Plan’s funding policy will remain unchanged.

The 6% long -term expected rate of return was selected by the Board. SCERS’ Actuary, Foster & Foster estimates that a passively managed portfolio with a similar asset allocation would exceed the selected rate about 45% of the time and concludes the selected rate is reasonable. The sensitivity of the discount rate to a 1% change is shown below.

Sensitivity of the net pension liability to changes in the discount rate

The following presents the net pension liability of the City, calculated using the discount rate of 6%, as well as what the City’s net pension liability (asset) would be if it were calculated using a discount rate that is 1 percentage-point lower (5%) or 1 percentage-point higher (7%) than the current rate:

1% decrease
(5%)
Current
Discount
Rate (6%)
1% increase
(7%)
City net pension liability/(asset) 37,244$ 16,370$ (1,916)$

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Actuarially determined amounts are subject to continual revision as actual results are compared to past expectations and new estimates are made about the future. Actuarial calculations reflect a long- term perspective and are based on the benefits provided under the terms of the substantive plan in effect at the time of each valuation.

REQUIRED SUPPLEMENTARY INFORMATION
Sacramento City Employees’ Retirement System
Schedule of Changes in Net Pension Liability (Asset) and Related Ratios Last Ten Fiscal Years
(in thousands)

33 2022 2021 2020 2019
Total p ension liab ility
Service cost 6$ 18$ 49$ 66$ Interest 16,098 18,342 19,363 20,095 Differences between ex pected and actual ex perience 5 (6,349) (3,768) 304 Changes of assum ptions 218 2,673 (1,593) (927) Benefit paym ents, including refunds of m em ber contributions (28,145) (28,992) (30,457) (31,134) Net change in total p ension liab ility (11,818) (14,308) (16,406) (11,596) Total p ension liab ility -- b eginning 282,359 296,667 313,073 324,669 Total p ension liab ility -- end ing (a) 270,541$ 282,359$ 296,667$ 313,073$ Plan fiduciary net position
Contributions -- em ployer 3,479$ 3,822$ 4,410$ 7,507$ Contributions -- m em ber 9 16 25 49 Net investm ent incom e (loss) (32,305) 73,150 7,591 18,537 Benefits paym ents, including refunds of m em ber contributions (28,145) (28,992) (30,457) (31,134) Net change in fiduciary net position (56,962) 47,996 (18,431) (5,041) Plan fiduciary net position -- beginning 311,133 263,137 281,568 286,609 Plan fiduciary net position -- ending (b) 254,171$ 311,133$ 263,137$ 281,568$ Net pension liability (asset) -- ending (a) - (b) 16,370$ (28,774)$ 33,530$ 31,505$ Plan fiduciary net position as a percentage of the total pension liability 93.95% 110.19% 88.70% 89.94% Covered payroll 189$ 270$ 362$ 678$ Net pension liability (asset) as a percentage of cov ered payroll 8661.38% -10657.04% 9262.43% 4646.76% Notes to Schedule:

The inform ation in this schedule is prepared in accordance with G ASB Statem ent No. 67, Financial Reporting for Pension Plans, which SCERS im plem ented for the fiscal year ended June 30, 2014. Data is not available for the years prior to im plem entation, so only nine fiscal years are presented.

For the fiscal year ended June 30, 2022, the calculation of the total pension liability was affected by the change in m ortality tables used to the CalPERS 2000- 2019 ex perience study tables, and change in assum ption of m ortality im provem ent to use Society of Actuaries Scale MP-2021.

Fiscal Year
Sacramento City Employees’ Retirement System
Schedule of Changes in Net Pension Liability (Asset) and Related Ratios Last Ten Fiscal Years
(in thousands)

34 2018 2017 2016 2015 2014
Total p ension liab ility
Service cost 92$ 96$ 103$ 131$ 176 Interest 20,877 22,759 23,416 23,134 23,779 Differences between ex pected and actual ex perience (2,457) (3,701) (1,173) (8,783) - Changes of assum ptions 862 (16,246) - 23,117 - Benefit paym ents, including refunds of m em ber contributions (31,583) (32,171) (32,683) (33,791) (33,688) Net change in total p ension liab ility (12,209) (29,263) (10,337) 3,808 (9,733) Total p ension liab ility -- b eginning 336,878 366,141 376,478 372,670 382,403 Total p ension liab ility -- end ing (a) 324,669$ 336,878$ 366,141$ 376,478$ 372,670 Plan fiduciary net position
Contributions -- em ployer 8,645$ 8,645$ 8,645$ 9,183$ 9,649 Contributions -- m em ber 55 63 146 82 161 Net investm ent incom e 20,982 26,803 7,799 13,375 40,317 Benefits paym ents, including refunds of m em ber contributions (31,583) (32,171) (32,683) (33,791) (33,688) Net change in fiduciary net position (1,901) 3,340 (16,093) (11,151) 16,439 Plan fiduciary net position -- beginning 288,510 285,170 301,263 312,414 295,975 Plan fiduciary net position -- ending (b) 286,609$ 288,510$ 285,170$ 301,263$ 312,414 Net pension liability -- ending (a) - (b) 38,060$ 48,368$ 80,971$ 75,215$ 60,256 Plan fiduciary net position as a percentage of the total pension liability 88.28% 85.64% 77.89% 80.02% 83.83% Covered payroll 921$ 1,049$ 1,020$ 1,180$ 2,279$ Net pension liability as a percentage of cov ered payroll 4132.46% 4610.87% 7938.33% 6374.15% 2643.97% Fiscal Year
Sacramento City Employees’ Retirement System
Schedule of Contributions
Last Ten Fiscal Years
(in thousands)

35 2022 2021 2020 2019 2018
Actuarially determ ined contributions 3,479$ 3,822$ 4,410$ 5,268$ 8,267$ Contributions in relation to the actuarially determ ined contribution 3,479$ 3,822$ 4,410$ 7,507$ 8,645$ Contribution deficiency (ex cess) -$ -$ -$ (2,239)$ (378)$ Covered payroll 189$ 270$ 362$ 678$ 921$ Contributions as a percentage of covered payroll 1841% 1416% 1218% 1107% 939% Notes to Schedule
V aluation date:

Actuarially determ ined contributions are calculated as of June 30, two years prior to the end of the fiscal year in which contributions are reported.

Methods and assum ptions used to determ ine contribution rates above:

Actuarial cost method Entry age normal for fiscal years 2018 - 2022 Am ortization m ethod Level dollar paym ents over 12 years, open period for fiscal years 2021 - 2022 Level dollar paym ents over 13 years, open period for fiscal years 2019 - 2020 Level dollar paym ents over 14 years, open period for fiscal year 2018 Asset valuation m ethod 3 year smoothed market value for fiscal years 2018 - 2022 Inflation 2.75% for fiscal years 2019 - 2022

3.00% for fiscal year 2018
Salary increases 2.75% CPI plus 0.5% merit for fiscal years 2019 - 2022

3.00% CPI plus 0.5% merit for fiscal year 2018
Investment rate of return 6.50% for fiscal years 2018-2022 Retirement age
Mortality CalPERS 1997-2015 Mortality Tables with Scale MP-2019 for fiscal year 2022 CalPERS 1997-2015 Mortality Tables with Scale MP-2018 for fiscal year 2021 CalPERS 1997-2015 Mortality Tables with Scale MP-2017 for fiscal year 2020 CalPERS 1997-2011 Mortality Tables with Scale MP-2016 for fiscal year 2019 CalPERS 1997-2011 Mortality Tables with Scale MP-2014 for fiscal year 2018 Fiscal Year
For fiscal years 2018- 2022,deferred vested memb erscovered und er Section 399 are assumed to retire at age 62; those covered under 175 are assumed to retire at age 65.

Sacramento City Employees’ Retirement System
Schedule of Contributions
Last Ten Fiscal Years
(in thousands)

36 2017 2016 2015 2014 2013
Actuarially determ ined contributions 8,330$ 8,645$ 9,183$ 9,649$ 10,573$ Contributions in relation to the actuarially determ ined contribution 8,645$ 8,645$ 9,183 9,649 10,573 Contribution deficiency (ex cess) (315)$ -$ -$ -$ -$ Covered payroll 1,049$ 1,020$ 1,180$ 2,279$ 2,279$ Contributions as a percentage of covered payroll 824% 848% 778% 423% 464% Notes to Schedule
V aluation date:

Actuarially determ ined contributions are calculated as of June 30, two years prior to the end of the fiscal year in which contributions are reported.

Methods and assum ptions used to determ ine contribution rates:

Actuarial cost method Entry age normal for fiscal years 2013 - 2017 Am ortization m ethod Level dollar paym ents over 14 years, open period for fiscal years 2014 - 2017 Level dollar paym ents over 15 years, open period for fiscal year 2013 Asset valuation m ethod 3 year smoothed market value for fiscal years 2013 - 2017 Inflation 3.00% for fiscal years 2013 - 2017
Salary increases 3.00% CPI plus 0.5% merit for fiscal years 2013 - 2017 Investment rate of return 6.50% for fiscal years 2013 - 2017 Retirement age
Mortality CalPERS 1997-2007 Mortality Tables with Scale MP-2014 for fiscal year 2017 CalPERS 1997-2007 Mortality Tables with Scale AA for fiscal years 2013 - 2016 Fiscal Year
The actuarial valuation was rolled forward from 6/30/2013to 6/30/ 2014. As a res ult,the covered payroll used to calculate the contributions as a percentage of covered payroll is the sam e for both years.

For fiscal years 2013 - 2017, deferred vested memb erscov ered under Section 399are assumed to retire at age 62; those covered under 175 are assumed to retire at age 65.

Sacramento City Employees’ Retirement System
Schedule of Investment Returns
Last Ten Fiscal Years

37 2022 2021 2020 2019
Annual m oney weighted rate of return, net of investm ent ex pense -10.57% 29.13% 3.21% 7.08% Notes to Schedule:

The inform ation in this schedule is prepared in accordance with G ASB Statem ent No. 67, Financial Reporting for Pension Plans , which SCERS implemented for the fiscal year ended June 30, 2014. Data is not available for the years prior to im plem entation so only nine fiscal years are presented.

Sacramento City Employees’ Retirement System
Schedule of Investment Returns
Last Ten Fiscal Years

38 2018 2017 2016 2015 2014
Annual m oney weighted rate of return, net of investm ent ex pense 7.96% 10.22% 3.05% 4.86% 14.56%

OTHER SUPPLEMENTARY INFORMATION
Investments
Maturity
Date Quantity Amortized Cost Fair Value

CORPORATE BONDS/NOTES
Amazon Com Inc 5/12/2031 2,000,000 2,011,875$ 1,713,313$ Apple Inc 2/9/2027 3,000,000 3,000,000 2,980,662 Bank of America Corp 10/21/2027 1,000,000 1,005,608 939,917 Barclays Bank Plc 4/8/2025 1,000,000 1,000,000 966,084 Boeing Co 3/1/2045 1,500,000 1,535,220 1,016,703 British Telecommunications Plc 11/8/2029 2,000,000 2,060,553 1,784,059 Cigna Corp 3/15/2030 1,000,000 979,904 863,154 Citigroup Inc 7/22/2036 5,000,000 5,000,000 4,241,295 Constellation Brands Inc 8/1/2029 2,000,000 2,108,443 1,800,125 Csx Corp 2/15/2030 1,000,000 999,169 875,963 CVS Health Corp 2/28/2031 1,000,000 1,007,709 800,773 Disney Walt Co 1/13/2031 3,000,000 3,218,183 2,640,271 Dollar Tree Inc 5/15/2025 500,000 491,714 496,833 Dow Chem Co 11/15/2042 1,500,000 1,636,863 1,321,275 Dow Chem Co 11/15/2030 1,000,000 1,015,349 823,989 Ebay Inc 7/15/2042 2,000,000 2,019,635 1,702,460 General Mills Inc 4/17/2025 500,000 497,851 499,607 General Motors Financial Co Inc 1/8/2031 1,000,000 999,889 775,284 Goldman Sachs Group Inc 2/7/2030 1,500,000 1,522,030 1,279,376 HP INC 6/17/2031 1,000, 000 1,003,786 803,298 HSBC Holdings PLC 8/18/2031 900,000 920,427 729,500 JP Morgan Chase & Co 4/22/2031 1,500,000 1,535,910 1,277,578 Kroger Co 5/1/2030 800,000 809,031 675,157 Lehman Bros Hldg Inc Escrow 12/29/2099 2,500,000 1,465,712 10,000 Lowes Cos Inc 10/15/2030 1,000,000 997,603 801,887 Martin Marietta Material 3/15/2030 1,000,000 991,360 843,542 Mcdonalds Corp 1/30/2026 500,000 491,343 498,471
Mondelez Intl Inc 2/4/2031 1,000,000 991,447 784,017 Nasdaq Inc 1/15/2031 1,000,000 988,465 782,765 Norfolk Southern Corp 5/15/2031 1,000,000 1,016,403 853,131 Oracle Corp 3/25/2031 1,500,000 1,493,822 1,235,869 Quest Diagnostics Inc 6/30/2030 2,000,000 2,084,891 1,759,914 Raytheon Technologies Corp 8/16/2025 500,000 496,172 501,047 Starbucks Corp 12/1/2047 1,500,000 1,606,773 1,215,553 Sysco Corp 2/15/2030 1,000,000 1,029,726 852,805 United Parcel Service Inc 3/15/2029 1,000,000 1,032,523 963,494 Unitedhealth Group Inc 5/15/2031 2,000,000 2,023,200 1,732,140 Verizon Communications Inc 3/15/2034 2,000,000 2,173,260 1,968,950 Sub-total 55,261,851 45,810,258

EQUITIES - LARGE CAP GROWTH
Alphabet, Inc. Cl C Capital Stock 500 245,576 1,093,725 Amazon.com Inc. 10,000 247,398 1,062,100 Apple Inc. 7,000 160,379 957,040 Constellation Brands Cl A 3,550 553,118 827,363 Disney (Walt) Com 5,650 703,746 533,360 Home Depot Inc 3,400 364,247 932,518 MasterCard Incorporated 3,300 479,523 1,041,084 Mcdonald's Corp 3,000 758,339 740,640 Meta Platforms Inc 4,100 282,516 661,125 Unitedhealth Group Inc 3,100 915,056 1,592,253 Sub-total 4,709,897 9,441,208

SACRAMENTO CITY EMPLOYEES' RETIREMENT SYSTEM

LISTING OF INVESTMENTS
JUNE 30, 2022
39 Investments
Maturity
Date Quantity Amortized Cost Fair Value

SACRAMENTO CITY EMPLOYEES' RETIREMENT SYSTEM

LISTING OF INVESTMENTS
JUNE 30, 2022

EQUITIES - FIXED ALTERNATIVE EQUITIES
Bank of America Corp 22,310 340,666$ 694,510$ Costco Whsl Corp New Com 2,660 776,183 1,274,885 Home Depot Inc 2,300 338,312 630,821 International Bus Mach 8,010 1,140,735 1,130,932 Jpmorgan Chase & Co 7,000 472,196 788,270 Lockheed Martin Corp 2,670 361,709 1,147,993 Merck & Co Inc (new) 13,347 665,002 1,216,846 Morgan Stanley Com New 9,000 935,985 684,540 Pfizer Inc 20,685 970,793 1,084,515 Raytheon Technologies Com 13,955 921,251 1,341,215 Union Pac Corp Com 4,000 438,135 853,120 Wal Mart Stores Inc 7,470 874,706 908,203 Sub-total 8,235,672 11,755,849

EXCHANGE TRADED FUNDS
Ishares Msci Acwi Us Etf 260,000 12,052,729 11,700,000 Ishares Preferred & Income Securities ET 65,260 2,490,642 2,145,749 Ishares Russell 2000 ETF 6,050 672,399 1,024,628 Ishares Tr Russell 1000 Val 275,800 32,983,061 39,982,726 Ishares Tr U.S. Real Es Etf 8,915 701,018 820,002 Ishares Tr Us Telecom Etf 32,742 986,340 822,806 Ishares U.S. Transportation ETF 14,600 2,207,579 3,108,340 Ishares Us Home Cons Etf 8,200 218,840 430,500 Select Sector Spdr Tr Communication 104,809 5,295,469 5,687,984 Select Sector Spdr Tr Rl Est Sel Sec 21,500 688,545 878,490 Select Sector Spdr Tr Sbi Cons Discr 38,200 3,357,216 5,251,736 Select Sector Spdr Tr Sbi Cons Stpls 73,880 3,717,885 5,332,658 Select Sector Spdr Tr Sbi Healthcare 116,940 9,842,478 14,996,386 Select Sector Spdr Tr Sbi Int-Energy 72,300 4,736,316 5,170,173 Select Sector Spdr Tr Sbi Int-Finl 238,000 5,780,078 7,485,100 Select Sector Spdr Tr Sbi Int-Inds 48,800 2,971,535 4,262,192 Select Sector Spdr Tr Sbi Int-Utils 33,055 1,499,234 2,318,147 Select Sector Spdr Tr Sbi Materials 45,915 2,874,271 3,379,344 Select Sector Spdr Tr Technology 131,410 7,490,807 16,704,839 Spdr Bberg Barclays ST High Yield Bond E 60,500 1,638,056 1,459,260 Spdr Series Trust Kbw Regn Bk Etf 66,400 3,064,224 3,857,176
Spdr Series Trust S&p Bk Etf 48,000 1,914,096 2,106,240 Spdr Series Trust S&p Retail Etf 9,100 869,656 529,256 Spdr Tr Unit Ser 1 17,400 4,598,292 6,564,150 Vaneck Vectors Semiconductor Etf 15,000 797,913 3,055,950 Sub-total 113,448,679 149,073,833

MORTGAGE LOANS
Walgreens Drugs/Adahi, Inc 5/1/2024 558,213 558,213 558,213 Sub-total 558,213 558,213
40 Investments
Maturity
Date Quantity Amortized Cost Fair Value

SACRAMENTO CITY EMPLOYEES' RETIREMENT SYSTEM

LISTING OF INVESTMENTS
JUNE 30, 2022

MUNICIPAL BONDS/NOTES
Bay Area Toll Auth Calif Toll 4/1/2030 1,500,000 1,484,145$ 1,306,290$ Bay Area Toll Auth Calif Toll Toll Brid 4/1/2030 775,000 782,627 857,600 California St 11/1/2030 1,500,000 1,475,062 1,271,835 California St Go Bds 11/1/2026 2,000,000 2,000,000 2,268,940 El Dorado CA Irrigation Dist Rev Bonds 1/1/2025 200,000 200,145 197,348 Houston Tex Arpt Sys Rev Arpt Sys 1/1/2028 4,450,000 4,309,199 4,779,612 Moreland Calif Sch Dist 8/1/2030 1,235,000 1,235,000 1,294,428 New York St Urban Dev Corp Sales Tax Rev 3/15/2031 2,000,000 2,045,205 1,812,700 Pennsylvania Economic Dev Fing 6/15/2034 3,000,000 3,080,293 2,518,230 Sacramento Calif Pub Fing Auth 4/1/2050 3,000,000 3,156,952 3,494,070 Union City Calif Cmnty Redev A 10/1/2030 250,000 247,007 258,700 Univ Calif Regts Med Ctr Poole 5/15/2031 2,350,000 2,423,370 2,633,481 University Calif Revs For Prev 5/15/2031 5,755,000 6,173,413 5,923,622 Wisconsin St 5/1/2032 200,000 200,000 180,918
Sub-total 28,812,418 28,797,772

US GOVERNMENT OBLIGATIONS
Fannie Mae Pool #256393 9/1/2036 27,171 29,752 27,082 F
ederal Farm Credit Bank 7/23/2035 500,000 499,734 399,836 Gnma Pool #329837 11/15/2022 157 155 157
Gnma Pool #439515 3/15/2027 5,219 5,118 5,232 Gnma Pool #550718 11/15/2035 198,427 193,094 209,610
Gnma Pool #648348 10/15/2035 93,622 93,300 99,997 Sub-total 818,483 744,584

US TREASURY BONDS
U.S. Treasury Bond 2/15/2041 2,000,000 1,867,320 1,568,516 Sub-total 1,867,320 1,568,516
Total 213,712,532$ 247,750,234$
41 APPENDIX A

City of Sacramento

Sacramento City Employees’
Retirement System

June 30, 2022
Actuarial Valuation

December 8, 2022

411 Borel Avenue, Suite 620 San Mateo, CA 94402 · (650) 377-1600 · www.foster-foster.com

ACTUARIAL VALUATION

CITY OF SACRAMENTO
SACRAMENTO CITY EMPLOYEES’ RETIREMENT SYSTEM (SCERS)

DEFINED BENEFIT PLAN

We are pleased to present the results of our June 30, 2022 actuarial valuation of the Sacramento City Employees’ Retirement System (SCERS).

The purpose of this valuation is to:
 Determine the System’s June 30, 2022 Funded Status, and  Calculate the fiscal year 2023/24 Actuarially Determined Contribution (ADC).

The information in this report may not be appropriate for purposes other than System funding but may be useful to the City for the System’s financial management. 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 the System’s benefit provisions summarized in Section 9, employee data, and on the System’s financial information, all furnished by the City. We reviewed the financial and employee data for reasonableness, including comparing to prior year data , but did not perform an
audit.

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 Academy Qualification Standards, we certify the actuarial results and opinions herein.

Respectfully submitted,

Mary Elizabeth Redding, FSA, MAAA, EA
Senior Consulting Actuary

Drew Ballard, ASA, MAAA, EA
Senior Consulting Actuary

Katherine Moore, ASA, MAAA
Consulting Actuary

TABLE OF CONTENTS

SECTION PAGE

1. Executive Summary 1

2. Liability Information & Funded Status 5

3. Asset Information 8

4. Contribution Development 11

5. Schedule of Future Contributions 12

6. Actuarial Gain/Loss Analysis 13

7. Sensitivity Analysis 14

8. Headcount & Benefit Payment Projection 15

9. Plan Provisions 17

10. Methods and Assumptions 20

11. Participant Data 24

"N:\Public_CA\SaCiERS\6-30-22_Val\Reports\FF_SacCiSCERS_22-12-08_Pension_6-30-2022_funding_report_FINAL.docx" SECTION 1

EXECUTIVE SUMMARY

Page 1 ends

Following are the valuation results. See notes following the table for a description of terms.

Results from the June 30, 2021 valuation are provided for comparative purposes. --------amounts in $000’s---------
June 30,
2021 June 30,
2022
%
change
 Participant Counts
• Actives 3 2 -33.3%
• Terminated Vesteds & Reciprocals 5 5 0.0%
• Service Retirees 473 447 -5.5%
• Disableds 89 82 -7.9%
• Beneficiaries 306 292 -4.6%
• Total 876 828 -5.5%
 Actuarial Liabilities
• Present Value of Projected Benefits $ 282,371 $ 270,548 -4.2% • Actuarial Accrued Liability 282,359 270,541 -4.2%
 Assets
• Market Value of Assets 311,133 254,171 -18.3%
• Approximate Annual Rate of Return 29.2% -10.8%
• Actuarial Value of Assets 275,724 262,645 -4.7%
• Approximate Annual Rate of Return 13.5% 4.4%
 Plan Funded Status
• Actuarial Accrued Liability 282,359 270,541 -4.2%
• Actuarial Value of Plan Assets 275,724 262,645 -4.7% • Unfunded Actuarial Accrued Liability 6,635 7,896 19.0% • Funded Ratio 97.7% 97.1% -0.6%
• Funded Ratio, Market Value Basis 110.2% 93.9% -14.8%

2022/23 2023/24 %
change
 Annual Cost1 $0 $1,399 N/A
 Annual Cost (% Proj. Plan Payroll)1 0.0% 933.2%
 Annual Cost (% Proj. City Payroll) 0.0% 0.3%

1 See page 12 for details.

SECTION 1

EXECUTIVE SUMMARY

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Purpose of Actuarial Valuation
The actual costs of a defined benefit plan are determined entirely by the amount of the benefit promise, the actual salaries and service of the plan participants, and how long they and their beneficiaries live to receive payments. An actuarial valuation is a mathematical model which attempts to quantify this actual cost by setting assumptions that, it is hoped, duplicate reality as closely as possible. In addition, the actuarial methodology provides a reasonable plan, or method, towards funding the expected plan costs. This information assists the plan trustees so they can make informed decisions regarding plan investments and how much in contributions will be required from the employer to eventually fully pay the plan’s costs.

Summary Information & Results
The Sacramento City Employees’ Retirement System (SCERS) is a closed defined benefit pension plan. It has not accepted new members since January 28, 1977, and only 2 active members (out of a total plan membership of 828) remain.

Since the last valuation, the plan experienced overall losses on liabilities and market assets. Plan liabilities increased more than expected, by $0.3 million. This was mostly due to a larger COLA than expected
2 ($1.6 million), but was offset by a gain due to retirees and beneficiaries not living as long as expected ($1.4 million). Market value return on assets was less than expected, about negative 10.8% for the year which resulted in a loss of $4.2 million on the actuarial (smoothed) value of assets. Lower benefit payments than expected resulted in a $0.3 million gain to the assets.

Since the last valuation, the plan’s asset allocation was changed to be slightly more conservative.

Based on discussions, the discount rate used in the valuation has not changed. We believe 6.0% is a reasonable discount rate for this plan.

A few assumptions were changed since the prior valuation.  The mortality improvement projection was updated to a more recent Society of Actuaries’ table, MP-2021. This increased liabilities by $0.9 million.  The mortality tables were updated to the CalPERS 2000-2019 experience study rates. This decreased liabilities by $0.7 million.

After these assumption changes, the July 1, 2022 total plan unfunded actuarial accrued liability (UAAL) is $7.9 million, as compared to an expected UAAL of $3.4 million.

The plan’s funded ratio on an actuarial value of assets basis is 97.1%, a decrease from 97.7% in the prior valuation. The plan’s funded ratio using market value of assets basis is 93.9%, a decrease from 110.2% in the prior valuation.

In the prior valuation, the plan was projected to be overfunded on June 30, 2022. The City’s contribution was $0 million for fiscal year 2022/23 and projected to be $0 million for 2023/24.

Due to the experience losses and assumption changes discussed above, the plan is projected to be underfunded on June 30, 2023 on an actuarial value of assets basis and the recommended City contribution is $1.399 million for fiscal year 2023/24.

2 The CPI used for COLA increases was 3.2%. 3% COLA was paid and COLA banks were increased.

The prior valuation assumed CPI of 2.75%. (Index used is CPI-U for San Francisco/Oakland/Hayward area.)
SECTION 1

EXECUTIVE SUMMARY

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The average life expectancy of the plan’s retirees is now 10.9 years, down from 11.1 years as of June 30, 2021. We recommend keeping the amortization at a rolling 11-year period for the 2023/24 recommended contribution.

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EXECUTIVE SUMMARY

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Discussion of Plan Risks
Actuarial Standard of Practice No. 51, Assessment and Disclosure of Risk Associated with Measuring Pension Obligations and Determining Pension Plan Contributions, requires the actuary to assess and disclose the risk that actual future measurements may differ significantly from expected future measurements.

This plan is considered a very mature pension plan since almost all of its liabilities are for retirees, and there are almost no remaining active employees with very little associated payroll.

The following table presents various measures illustrating the plan’s maturity:

June 30, 2021 June 30, 2022
 Maturity Ratios
• Inactive AAL/total AAL 99.7% 99.8%
• Inactive participant count/total count 99.7% 99.8%
• Benefit payments/market value of assets 9.3% 11.1%
• Benefit payments/employer contributions 758.6% 809.0% A very mature pension plan presents unique risks. The plan has negative cash flow (benefit payments exceed contributions), and benefit payments are relatively large compared to the asset value. The plan’s investment manager must carefully manage the plan’s liquidity needs as the plan “winds down” over the next 50 or more years. In addition to investment risk (investment returns being different than expected), asset/liability mismatch risk (changes in asset values not matched by changes in liabilities) could be significant for this plan. The plan is also subject to longevity risk (the potential that participants will live longer than projected) but we believe this risk is less significant than investment and asset/liability mismatch risk.

The scope of this valuation did not include a risk assessment - an evaluation of the potential impacts of these factors on the plan’s funded status or projected employer contributions.

However, we have included the following to assist in the plan’s management:
• Table of expected benefit payments for the next 50 years • Sensitivity analysis: Contributions calculated under different discount rates

Definitions
The Present Value of Projected Benefits (PVPB) is the present value of all future benefits for current plan participants. The Actuarial Accrued Liability (AAL) represents the portion of the PVPB attributable to past service. The AAL is recognized over service through the date a participant is expected to commence benefits. Therefore, the AAL is equal to the PVPB for current retirees. The Normal Cost is the portion of the PVPB allocated or earned during the year following the valuation date.

PVPB
AAL
Normal Cost
Future Normal Costs
SECTION 2

LIABILITY INFORMATION & FUNDED STATUS

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A comparison of the Present Value of Benefits, Actuarial Accrued Liability, Employer Normal Cost, and the Funded Ratio for the current and prior valuations follows. (Note that numbers throughout the report may not add due to rounding.)
(amounts in $000’s)
June 30, 2021 June 30, 2022
Present Value of Projected Benefits
 Active Employees $ 986 $ 481
 Vested Terminated & Reciprocals 430 403
 Service Retirees 201,090 193,774
 Disabled Participants 26,645 24,697
 Beneficiaries 53,221 51,193
 Total 282,371 270,548
Actuarial Accrued Liability
 Active Employees $ 974 $ 474
 Vested Terminated & Reciprocals 430 403
 Service Retirees 201,090 193,774
 Disabled Participants 26,645 24,697
 Beneficiaries 53,221 51,193
 Total 282,359 270,541

2021/22 2022/23
Normal Cost
 Employer Normal Cost (beginning of
year)
$ 0 $ 0

June 30, 2021 June 30, 2022
Plan Funded Status
 Total Actuarial Accrued Liability $ 282,359 $ 270,541  Actuarial Value of Plan Assets 275,724 262,645
 Unfunded Actuarial Accrued Liability 6,635 7,896
 Funded Ratio 97.7% 97.1%

 Market Value of Assets 311,133 254,171
 Funded Ratio – Market Value Basis 110.2% 93.9%
SECTION 2

LIABILITY INFORMATION & FUNDED STATUS

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Details of the June 30, 2022 Present Value of Benefits, Actuarial Accrued Liability and Employer Normal Cost by employee category:
(amounts in $000’s)
Safety Miscellaneous Total
Present Value of Projected Benefits
 Active Employees $ 0 $ 481 $ 481
 Vested Terminated & Reciprocals 0 403 403
 Service Retirees 9,256 184,517 193,774
 Disabled Participants 9,716 14,981 24,697
 Beneficiaries 14,059 37,134 51,193
 Total 33,030 237,518 270,548
Actuarial Accrued Liability
 Active Employees 0 474 474
 Vested Terminated & Reciprocals 0 403 403
 Service Retirees 9,256 184,517 193,774
 Disabled Participants 9,716 14,981 24,697
 Beneficiaries 14,059 37,134 51,193
 Total 33,030 237,511 270,541

Safety Miscellaneous Total
Normal Cost
 Employer Normal Cost (on
June 30, 2022) $ 0 $ 0 $ 0

SECTION 2

LIABILITY INFORMATION & FUNDED STATUS

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Details of the June 30, 2022 Present Value of Benefits, Actuarial Accrued Liability and Employer Normal Cost by benefit section:
(amounts in $000’s)

Section 175
Sections
302 & 399

Total
Present Value of Projected Benefits
 Active Employees $ 0 $ 481 $ 481
 Vested Terminated & Reciprocals 52 351 403
 Service Retirees 4,204 189,570 193,774
 Disabled Participants 547 24,150 24,697
 Beneficiaries 3,792 47,401 51,193
 Total 8,595 261,953 270,548
Actuarial Accrued Liability
 Active Employees 0 474 474
 Vested Terminated & Reciprocals 52 351 403
 Service Retirees 4,204 189,570 193,774
 Disabled Participants 547 24,150 24,697
 Beneficiaries 3,792 47,401 51,193
 Total 8,595 261,946 270,541

Section 175
Sections
302 & 399

Total
Normal Cost
 Employer Normal Cost (on
6/30/22) $ 0 $ 0 $ 0

SECTION 3

ASSET INFORMATION

Page 8 ends

Assets for SCERS are held in trust. Trust monies may be used to pay benefits to plan participants and their beneficiaries. The trust is managed under the direction of the Administration, Investment, and Fiscal Management Board. Asset information is provided by the City of Sacramento, and has not yet been audited.

Asset Reconciliation – Market Value of Assets
Following reconciles the June 30, 2020 through June 30, 2021 and the June 30, 2021 through June 30, 2022 market value of assets. Numbers may not add due to rounding. (amounts in $000’s)
2020/21 2021/22
 Beginning of Year Balance: $ 263,137 $ 311,133
• Member Contributions $ 16 $ 9
• City Contributions 3,822 3,479
• Investment Income 74,279 (31,084)
 Total Additions 78,117 (27,596)
• Benefit Payments 28,992 28,145
• Member Refunds - -
• Investment Expenses 1,129 1,221
 Total Deductions 30,121 29,366
 Net Assets at End of Year 311,133 254,171

 Approximate Return on Assets 29.2% -10.8%

SECTION 3

ASSET INFORMATION

Page 9 ends

Asset Allocation – Market Value of Assets
The July 1, 2022 trust asset allocation is provided by the City of Sacramento and based on an allocation strategy of 32.5% fixed income and 67.5% equity. Details are shown below. (amounts in $000’s)
Market Value Percentage
 Cash & Short Term Investments $ 7,825 3.1%
 Receivables 888 0.3%
 Investments
• US Agencies $ 745 0.3%
• US Treasury Bonds 1,569 0.6%
• Corporate Bonds 45,810 18.0%
• Equities 21,197 8.3%
• Exchange Traded Funds 149,073 58.7%
• Mortgage Loans 558 0.2%
• Municipal Bonds 28,798 11.3%
 Total Investments 247,750
 Total Assets 256,463
 Other Liabilities Payable (2,292) -0.9%
 Net Pension Benefit Trust Assets 254,171 100.0%

Target Allocation by Asset Class
The Administration, Investment and Fiscal Management Board of the Sacramento City Employees’ Retirement System changed the asset allocation May 19, 2022. The fund is rebalanced each year.

Current Allocation Prior Allocation
 Fixed Bonds/Real Estate 32.5% 30.0%
Total Fixed 32.5% 30.0%
 Large Cap Growth 32.5% 35.0%
 Equity Income 30.0% 27.5%
 International Equities 5.0% 7.5%
Total Equity 67.5% 70.0%
Total Fixed & Equity 100.0% 100.0%

SECTION 3

ASSET INFORMATION

Page 10 ends

Development of Actuarial Value of Assets
The Actuarial Value of Assets is based upon a three year smoothing of market assets. This method reduces volatility in contribution rates, and also reduces volatility in the size of the actuarial gains and losses due to asset returns. Because the plan is frozen to new membership and the membership is primarily composed of retirees and beneficiaries, it is important from a cash flow perspective that asset values used in calculating contribution rates not stray too far from market value. For this reason, a corridor of 15% around the market value is imposed upon the actuarial value.

(amounts in $000’s)

2021/22
 Actuarial Value of Assets, Beginning of Year $ 275,724 • Contributions 3,488
• Expected Earnings 15,815
• Benefit Payments (28,145)
 Expected Actuarial Value of Assets, End of Year

266,882
 Market Value of Assets, End of Year 254,171
 Difference between MVA & Expected AVA (12,711)

 Preliminary Actuarial Value of Assets, End of
Year
(Expected AVA+ 1/3 Difference)

 Actuarial Value of Assets Corridor 262,645
• Cap: 115% of Market Value 292,297
• Min: 85% of Market Value 216,045
 Actuarial Value of Assets, End of Year
(No greater than Cap, not less than Min)

262,645

 Approximate Annual Rate of Return 4.4%

SECTION 4

CONTRIBUTION DEVELOPMENT

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Actuarially Determined Contribution
Following is the development of the 2023/24 Actuarially Determined Contribution. The 2022/23 Actuarially Determined Contribution was calculated in the June 30, 2021 actuarial valuation and is shown for comparison.
(amounts in $000’s)
Contribution Year 2022/23 2023/24

 Actuarially Determined Contribution
• Employer Normal Cost $ 0 $ 0
• UAAL Amortization4 (1,116) 1,399
• Total Cost (not less than zero) 0 1,399
 Projected Plan Payroll 145 150
 Actuarially Determined Contribution
(as a percent of plan payroll)
• Employer Normal Cost 0.0% 0.0%
• UAAL Amortization 0.0% 933.2%
• Total Contribution 0.0% 933.2%

 Projected Total City Payroll 398,930 419,060
 Actuarially Determined Contribution
(as a percent of total City payroll)

• Employer Normal Cost 0.0% 0.0%
• UAAL Amortization 0.0% 0.3%
• Total Contribution 0.0% 0.3%

4 The Unfunded Actuarial Accrued Liability (UAAL) as of the beginning of the contribution year is being amortized as a level dollar amount over a rolling 11-year period for 2022/23 and 2023/24. As the plan continues to mature, this amortization period will be monitored.

SECTION 5

SCHEDULE OF FUTURE CONTRIBUTIONS

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Below are the historic and projected contributions and benefit payments. City contributions for years ending 6/30/2024 and later are estimated assuming 6/30/23 and subsequent market value of assets earn 5.75% and assuming the Actuarially Determined Contribution is contributed each year. These contributions are designed to achieve 100% funding of the system.

Year Ending5
Member
Contributions

City Contributions

Benefit Payments
6/30/1996 $1,228,000 $0 $25,027,000
6/30/1997 1,080,000 0 23,274,000
6/30/1998 1,090,000 0 23,825,000
6/30/1999 1,136,000 0 24,249,000
6/30/2000 1,079,000 06 24,901,000
6/30/2001 989,000 0 25,087,000
6/30/2002 1,011,000 0 25,588,000
6/30/2003 978,000 0 26,619,000
6/30/2004 1,056,000 0 26,772,000
6/30/2005 809,000 0 27,524,000
6/30/2006 789,000 0 28,749,000
6/30/2007 699,000 0 29,604,000
6/30/2008 596,000 3,534,000 29,896,000
6/30/2009 607,000 3,159,000 30,707,000
6/30/2010 377,000 3,431,000 31,719,000
6/30/2011 342,000 10,547,000 33,003,000
6/30/2012 332,000 10,361,000 33,057,000
6/30/2013 219,000 10,573,000 33,237,000
6/30/2014 161,000 9,649,000 33,688,000
6/30/2015 82,000 9,183,000 33,791,000
6/30/2016 69,000 8,645,000 32,683,000
6/30/2017 63,000 8,645,000 32,171,000
6/30/2018 55,000 8,645,000 31,583,000
6/30/2019 49,000 7,507,000 31,134,000
6/30/2020 25,000 4,410,000 30,457,000
6/30/2021 16,000 3,822,000 28,992,000
6/30/2022 9,000 3,479,000 28,145,000
6/30/2023 6,000 0 27,779,000
6/30/2024 4,000 1,399,000 27,288,000
6/30/2025 2,000 1,566,000 26,642,000
6/30/2026 1,000 1,646,000 25,939,000
6/30/2027 0 1,666,000 25,180,000

5 Information prior to 6/30/2006 valuation is taken from prior actuary’s valuation report. Member contributions and benefit payments for years ending 6/30/2023 and later are estimated. 6 Shown as a negative 1.367 million by prior actuary.

SECTION 6

ACTUARIAL (GAIN)/LOSS ANALYSIS

Page 13 ends

The gain/loss analysis of plan assets, actuarial liability, and unfunded actuarial liability for the one year period between valuation dates:

(amounts in $000’s)

Actuarial
Accrued
Liability
(Gain)/Loss

Actuarial
Value of
Assets
Gain/(Loss)
Unfunded
Actuarial
Accrued
Liability
(Gain)/Loss
 June 30, 2021 Actual Value $ 282,359 $ 275,724 $ 6,635  June 30, 2022 Expected Value7 270,067 266,620 3,447  COLA more than expected 1,648
 Demographic (Gain)/Loss8 (1,392)
 Investment Loss on Actuarial Value
of Assets Basis (4,236)
 Benefit payments less than expected 264
 Member contributions less than
expected (2)
 Total (Gain)/Loss 4,231
 June 30, 2022 Prior to Changes in
Assumptions 270,323 262,645 7,678
 Change in mortality improvement
assumption 933
 Change to CalPERS 2000-2019
Experience Study mortality tables (715)
 Total (Gain)/Loss from Assumption
Changes 218
 June 30, 2022 Actual Value 270,541 262,645 7,896

7 Based on expected 2021/22 benefit payments and contributions. 8 Primarily due to more retiree and beneficiary deaths than expected.

SECTION 7

SENSITIVITY ANALYSIS

Page 14 ends

The Plan’s June 30, 2022 funded status and 2023/24 fiscal year contribution are shown below at

5.00%, 6.00%, and 7.00% discount rates.
(amounts in $000’s)
Discount Rate

5.00%
Current

6.00%

7.00%

 Present Value of Projected Benefits $ 291,425 $ 270,548 $ 252,260  Funded Status
• Actuarial Accrued Liability 291,415 270,541 252,255 • Actuarial Value of Assets 262,645 262,645 262,645
• Unfunded Actuarial Accrued
Liability 28,770 7,896 (10,390)
 Funded Ratio 90.1% 97.1% 104.1%
 2023/24 Actuarially Determined Contribution
• Employer Normal Cost 1 0 0
• UAAL Amortization (11 years) 3,898 1,399 (1,044)
• Total Contribution 3,898 1,399 0
• Total Employer Contribution (as a
percent of Plan payroll) 2599.7% 933.2% 0.0%
• Total Employer Contribution (as a
percent of total City payroll) 0.9% 0.3% 0.0%

SECTION 8

HEADCOUNT AND BENEFIT PAYMENT PROJECTION

Page 15 ends

Headcount and Benefit Payment Projection

Fiscal Year
Ending June 30,
Active
Count

Term Vested
Count
Retiree
Count
Annual Benefit
Payments
(000's)
2023 2 5 821 $ 27,779
2024 1 5 793 27,288
2025 0 5 763 26,642
2026 0 5 730 25,939
2027 0 5 697 25,180
2028 0 5 663 24,378
2029 0 5 629 23,535
2030 0 5 595 22,656
2031 0 5 561 21,744
2032 0 5 527 20,801

2033 0 5 494 19,828
2034 0 4 461 18,824
2035 0 4 428 17,790
2036 0 4 396 16,731
2037 0 4 365 15,649
2038 0 4 335 14,551
2039 0 4 305 13,442
2040 0 3 276 12,328
2041 0 3 249 11,221
2042 0 3 222 10,131

2043 0 3 197 9,072
2044 0 2 173 8,052
2045 0 2 151 7,082
2046 0 2 131 6,167
2047 0 1 112 5,316
2048 0 1 96 4,534
2049 0 1 81 3,827
2050 0 1 67 3,196
2051 0 1 56 2,642
2052 0 0 46 2,162

SECTION 8

HEADCOUNT AND BENEFIT PAYMENT PROJECTION

Page 16 ends

Fiscal Year
Ending June 30,
Active
Count

Term Vested
Count
Retiree
Count
Annual Benefit
Payments
(000's)
2053 0 0 37 $ 1,754
2054 0 0 30 1,411
2055 0 0 24 1,127
2056 0 0 19 897
2057 0 0 15 713
2058 0 0 12 568
2059 0 0 10 455
2060 0 0 8 367
2061 0 0 7 300
2062 0 0 5 248

2063 0 0 4 209
2064 0 0 4 178
2065 0 0 3 155
2066 0 0 3 136
2067 0 0 2 121
2068 0 0 2 108
2069 0 0 2 98
2070 0 0 2 90
2071 0 0 1 82
2072 0 0 1 76
SECTION 9

PLAN PROVISIONS

Page 17 ends

A. Plan Effective Date
Originally established effective April 1, 1935.

B. Plan Year
July 1 to June 30.

C. Participation
The plan is closed with no new members since January 28, 1977.

D. Eligibility to Retire
Section 175: Age 70, or age 55 and 20 years of service.

Sections 302 and 399: Age 70, or age 50 and 5 years of service.

E. Vesting
100% vesting with five years of participation.

F. Average Monthly Compensation
Average monthly salary for the 36 months prior to termination.

G. Employee Contributions
Each participant contributes a certain percentage based on his or her age at entry into the plan.

H. Service Retirement Benefit
Section 175:

Average Monthly Compensation times years of service times Benefit Factor. For retirement after age 65 with 20 years of service, benefit is a minimum of $60 per month.

Sections 302 and 399:

Average Monthly Compensation times years of service times Benefit Factor, but no larger than 75% of final average earnings.

Benefit Factors at sample ages:

Retirement Age Section 175 Sections 302 and 399
50 n/a 1.10%
55 1.10% 1.75%
60 1.67% 2.40%
65 2.44% 2.40%

SECTION 9

PLAN PROVISIONS

Page 18 ends

I. Vested Termination Benefit
Return of employee contributions with interest, or if the value is greater than $500, the member may choose to leave the contributions in the system. The member may become eligible in the future for retirement, disability or death benefits.

J. Non-Industrial (Ordinary) Disability Benefit
Eligibility is ten years of service.

Section 175:

With 16 2/3 years of service: 1½% of final average salary times years of service to disability.

Less than 16 2/3 years of service: Minimum of 1½% of final average salary times years of service would have earned to age 60, or 25% of final average earnings.

Sections 302 and 399:

Not Eligible for Retirement: Lesser of 1½% of Final Average Earnings times years of service or final average earnings times benefit factor at age 50 times years of service at age 50, minimum of 25% of final average earnings.

Eligible for Retirement: Maximum of retirement allowance or 25% of final average earnings.

K. Industrial Disability Benefit
Sections 302 and 399:

Not Eligible for Retirement: 50% of final average earnings.

Eligible for retirement: Maximum of retirement allowance or 50% of final average earnings.

L. Death Benefit – Pre Retirement Eligibility
Return of employee contributions with interest, plus 1/12 of salary in the year preceding death multiplied by the smaller of 6 or years of service.

M. Death Benefit – Post Retirement Eligibility
50% of the member’s benefit as if the member retired at the time of death, paid as a lifetime benefit to the spouse.

N. Death Benefit – Post Retirement Death
$500 paid to the member’s estate upon death.

SECTION 9

PLAN PROVISIONS

Page 19 ends

O. Social Security Reduction at age 62

For members participating in Social Security, their benefit will be reduced at the later of age 62 or actual retirement age. The amount of the reduction is one half of the PIA from Social Security, multiplied by the ratio of the sum of salary earned from the City to the sum of salary from all sources used in the calculation of the Social Security amount. The member’s benefit under the System plus the amount received from Social Security cannot be less than the member’s benefit under the System calculated with no reductions as of his retirement age. The City applies this offset to service retirees, not to disabled retirees.

P. Reduction Account

A member can choose to reduce his normal contributions to the System by an amount equal to the taxes paid for Social Security coverage. At the time of retirement, the regular retirement benefit will be reduced by the actuarial equivalent of the accumulated value of the reduction of contributions.

Q. Cost of Living
Benefits will be increased each July 1 by the change in the CPI for the San Francisco/Oakland area for the preceding calendar year limited to 3% (with COLA bank).

R. Benefit Forms
Section 175:

Lifetime benefit to the member, which may be actuarially reduced to provide a continuance to a beneficiary.

Section 302 and 399:

Lifetime benefit to the member, with an automatic 50% continuance to the spouse.

SECTION 10

METHODS AND ASSUMPTIONS

Page 20 ends

Actuarial Methods
The actuarial cost method used for this valuation is the Entry Age Normal (EAN) method. The Present Value of Projected Benefits (PVPB) is the present value of all future benefits for current plan participants. The Actuarial Accrued Liability (AAL) represents the portion of the PVPB attributable to past service. The AAL is recognized over service through the date a participant is expected to commence benefits.

We recommend amortizing the current unfunded AAL over a 11-year rolling period as a level dollar amount. Because the plan is closed, the amortization period should be regularly reviewed.

The Board has regularly reduced the amortization period in the recent past. Under current Board policy, when the average future life expectancy of the plan participants drops below 5 years, the amortization period will be reduced to no more than 5 years.

Plan funded status based on excess of
1) Value of Normal Retirement Benefit in excess of employee contributions over 2) Actuarial Value of Assets

The contribution generated by the current valuation will be payable for the City’s fiscal year beginning one year later (2023/24). The June 30, 2021 valuation generated a contribution for fiscal year 2022/23.

The Actuarial Value of Assets is a 3-year smoothed market value. Gains and losses will be recognized over a three year period. For June 30, 2006, the first year of this method, the Actuarial Asset Value was set equal to the Market Value. The Actuarial Value of Assets will be limited by a 15% corridor. The Actuarial Value of Assets will be no greater than 115% of Market Value of Assets and no less than 85% of Market Value of Assets.

Data
The City provided participant data as of 7/1/2022. 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.

Basis for Assumptions
Mortality assumptions are based on CalPERS 2000-2019 experience study, since that study is based on populations similar to this plan. Mortality improvement is the Society of Actuaries Scale MP-2021. Inflation is based on our estimate for the plan’s very long-time horizon. The salary merit assumption is based on our expectation of overall payroll growth, due to the current age of remaining employees. The 6.00% discount rate was selected by the Board. Foster & Foster estimates that a passively managed portfolio with a similar asset allocation would exceed that selected rate about 45% of the time. We believe the 6.00% discount rate is reasonable.

Retirement and disablement rates are insignificant due to the age of the remaining participants and are based on rates used historically.

The Social Security offset, marriage, retirement age for deferred vesteds, and reciprocal assumptions are based in part on plan experience. Due to the small number and age of remaining employees and deferred vested, these assumptions are not significant.

SECTION 10

METHODS AND ASSUMPTIONS

Page 21 ends

Actuarial Assumptions
Assumptions used in the valuation are as follows:

 Discount Rate

6.00% net of investment expenses9.

Selected by the Board.
 Inflation

2.5%
 Salary Scale

2.5% CPI

0.50% Merit
 Social Security Wage Base

2.75%
 Termination
None assumed. All active employees are retirement-eligible.

 Retirement
Rates vary based on age. Sample rates follow:

Age Non Sec 175
55 6%
60 26%
65 40%
70 100%

 Disability
Rates vary based on age, gender and if the disability is job-related or not. Sample rates follow:

Job Related Ordinary
Male Female Male Female
59 .00612 .00336 .01683 .00924
60 .00639 .00351 .01761 .00969
61 .00000 .00000 .00000 .00000

9 Administrative expenses are not paid from plan assets.

SECTION 10

METHODS AND ASSUMPTIONS

Page 22 ends

 Healthy Mortality
CalPERS 2000-2019 Pre-Retirement Mortality table for males and females and CalPERS 2000- 2019 Post-Retirement Mortality table for males and females. Sample rates are as follows:

Pre-Retirement Post-Retirement
Age Male Female Male Female
50 0.13% 0.08% 0.27% 0.20%
60 0.29% 0.18% 0.57% 0.46%
70 0.59% 0.40% 1.34% 1.00%
80 1.03% 0.76% 4.38% 3.40%
90 n/a n/a 14.54% 11.09%
100 n/a n/a 36.20% 31.58%

Prior valuation used CalPERS 1997-2015 tables.
 Post-Retirement Disabled Mortality
For Miscellaneous retirees, CalPERS 2000-2019 Non-Work-Related Disability table for males and females. For Safety retirees, CalPERS 2000-2019 Work-Related Disability table for males and females. Sample rates are as follows:

Non-Work-Related Work-Related
Age Male Female Male Female
50 1.73% 1.44% 0.44% 0.31%
60 2.68% 1.96% 0.94% 0.87%
70 4.06% 2.91% 2.19% 1.86%
80 8.04% 6.11% 5.93% 5.18%
90 16.77% 14.40% 16.74% 12.43%
100 36.20% 31.58% 36.20% 31.58%
Prior valuation used CalPERS 1997-2015 tables.
 Mortality Improvement Projection
Post-retirement mortality projected fully generational with Society of Actuaries Scale MP-2021.

Prior valuation used mortality projected fully generational with Society of Actuaries Scale MP- 2020.

 Social Security Offset
Monthly benefits for current retirees and vested terminated assumed to decrease at the later of age 62 or actual retirement, based on the average expected offset of future retirees.

 Marriage
85% of male employees and 60% of female employees are assumed to be married. Wives are assumed to be four years younger than husbands.

SECTION 10

METHODS AND ASSUMPTIONS

Page 23 ends

 Retirement Age
Deferred vested members covered under Section 399 are assumed to retire at age 62; those covered under Section 175 are assumed to retire at age 65.

 Reciprocal Members
All remaining deferred vested members are assumed to have reciprocity with other retirement systems, and their pay is assumed to increase with salary scale after separation from the City.

 Actuarial Modeling
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.

 COVID-19
No adjustments to the assumptions have been made for COVID-19 since the future impacts are unknown.

SECTION 11

PARTICIPANT DATA

Page 24 ends

Data Summary
Following summarizes participant demographic information for the June 30, 2021 and June 30, 2022 actuarial valuations.

June 30, 2021 June 30, 2022
 Participant Counts
• Actives 3 2
• Terminated Vesteds 4 4
• Reciprocals 1 1
• Service Retirees 473 447
• Disableds 89 82
• Beneficiaries10 306 292
• Total 876 828
 Actives
• Average Age 66.5 68.4
• Average Service 45.1 45.2
• Salary
 Total $ 218,098 $ 149,951
 Average 72,699 74,976
• Overall City Payroll 376,030,000 395,004,000
 Terminated Vesteds & Reciprocals
• Average Age 70.7 71.7
 Retirees, Disableds & Beneficiaries
• Average Age 79.5 79.9
• Average Monthly Benefit $ 2,772 $ 2,871
• Life expectancy 11.1 10.9

10 The June 30, 2021 valuation and June 30, 2022 valuation include 4 and 5 respectively, former spouses of deceased retirees whom the City has not been able to contact and are not yet receiving benefits.

SECTION 11

PARTICIPANT DATA

Page 25 ends

June 30, 2022 Participant Data

Following summarizes participant demographic information for the June 30, 2022 actuarial valuation, broken out by employee category and benefit section.

Safety Miscellaneous

Section
175
Section
302 & 399
Section
175
Section
302 & 399

Total
 Actives
• Count - - - 2 2
• Average Age n/a n/a n/a 68.4 68.4
• Average Service n/a n/a n/a 45.2 45.2
• Projected Salary
 Average $ - $ - $ - $ 74,976 $ 74,976
 Total (000's) - - - 150 150

 Vested Terms & Reciprocals
• Count - - 1 4 5
• Average Age n/a n/a 71.6 71.7 71.7

 All Inactives
• Count 16 110 21 674 821
• Average Age 86.5 83.9 82.3 79.1 79.9
• Avg. Monthly Benefit $ 2,389 $ 3,177 $ 2,368 $ 2,848 $ 2,871  Service Retirees
• Count 5 22 9 411 447
• Average Age 91.4 88.1 81.5 78.1 78.8
• Average Retirement Age 54.1 54.1 63.3 59.6 59.3
• Avg. Monthly Benefit $ 3,094 $ 5,200 $ 3,005 $ 3,504 $ 3,573  Disabled Retirees
• Count - 29 4 49 82
• Average Age n/a 80.0 86.3 76.5 78.2
• Average Retirement Age n/a 41.1 50.0 48.7 46.1
• Avg. Monthly Benefit n/a $ 3,072 $ 1,496 $ 2,429 $ 2,611  Beneficiaries
• Count 11 59 8 214 292
• Average Age 84.3 84.2 81.3 81.4 82.1
• Avg. Monthly Benefit $ 2,068 $ 2,474 $ 2,088 $ 1,686 $ 1,870 SECTION 11

PARTICIPANT DATA

Page 26 ends

Data Reconciliation
6/30/2021 to 6/30/2022

Terminated Receiving Payments
Actives Vested Reciprocal Disabled Benefic. Retirees Total  June 30, 2021 3 4 1 89 306 473 876
• New Hires - - - - - - -
• Disabled - - - - - - -
• Terminated - - - - - - -
• Deceased - - - (7) (26) (27) (60)
• New Beneficiaries - - - - 11 - 11
• Retired (1) - - - - 1 -
• Adjustment/Cash Out - - - - 1 - 1  June 30, 2022 2 4 1 82 292 447 828

SECTION 11

PARTICIPANT DATA

Page 27 ends

Active Age/Service
Following are active counts by age and service groups:

Service
Age 0-4 5-9 10-14 15-19 20-24 25-29 30 &
Over Total
Under 25 - - - - - - - -
25-29 - - - - - - - -
30-34 - - - - - - - -
35-39 - - - - - - - -
40-44 - - - - - - - -
45-49 - - - - - - - -
50-54 - - - - - - - -
55-59 - - - - - - - -
60-64 - - - - - - - -
65 &
Over - - - - - - 2 2
Total - - - - - - 2 2
SECTION 11

PARTICIPANT DATA

Page 28 ends

Inactives Age/Status/Monthly Benefit
Following are inactive counts and monthly benefit by age and status.

Safety

Age Service
Retirees
Disability
Retirees Beneficiaries Total
Under 50 Count - - - -
Avg. Benefit - - - -
50-54 Count - - - -
Avg. Benefit - - - -
55-59 Count - - - -
Avg. Benefit - - - -
60-64 Count - - - -
Avg. Benefit - - - -
65-69 Count - - 2 2
Avg. Benefit - - 1,977 1,977
70-74 Count 1 2 6 9
Avg. Benefit 4,875 2,921 1,686 2,315
75-79 Count 3 15 13 31
Avg. Benefit 4,449 3,167 2,319 2,935
80-84 Count 3 5 15 23
Avg. Benefit 3,295 2,359 2,745 2,733
85 & Over Count 20 7 34 61
Avg. Benefit 5,088 3,419 2,451 3,427
Total Count 27 29 70 126
Avg. Benefit 4,810 3,072 2,410 3,077
SECTION 11

PARTICIPANT DATA

Page 29 ends

Miscellaneous

Age Service
Retirees
Disability
Retirees Beneficiaries Total
Under 50 Count - - - -
Avg. Benefit - - - -
50-54 Count - - - -
Avg. Benefit - - - -
55-59 Count - - 3 3
Avg. Benefit - - 1,659 1,659
60-64 Count 2 1 4 7
Avg. Benefit 4,258 3,472 998 2,283
65-69 Count 48 12 20 80
Avg. Benefit 3,539 2,461 1,395 2,841
70-74 Count 106 14 35 155
Avg. Benefit 3,459 2,803 1,706 3,004
75-79 Count 110 6 38 154
Avg. Benefit 3,530 2,154 1,725 3,031
80-84 Count 76 9 40 125
Avg. Benefit 3,307 2,568 1,825 2,780
85 & Over Count 78 11 82 171
Avg. Benefit 3,619 1,521 1,735 2,581
Total Count 420 53 222 695
Avg. Benefit 3,493 2,359 1,700 2,834

APPENDIX B

City of Sacramento

Sacramento City Employees’
Retirement System

June 30, 2022
GASBS 67 & 68 Reporting

December 8, 2022

411 Borel Avenue, Suite 620 San Mateo, CA 94402 · (650) 377-1600 · www.foster-foster.com

GASBS 67 & 68 REPORTING

CITY OF SACRAMENTO
SACRAMENTO CITY EMPLOYEES’ RETIREMENT SYSTEM (SCERS)

DEFINED BENEFIT PLAN

This report presents reporting and disclosure information for the Sacramento City Employees’ Retirement System (SCERS) for the fiscal year ending June 30, 2022 to assist the City in preparing financial statement information in accordance with Governmental Accounting Standards Board Statements No. 67 and 68 (GASBS 67 and 68).

The report provides information intended for reporting under GASBS 67 and 68, but may not be appropriate for other purposes. Information provided in this report may be useful to the City for the System’s financial management. 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.

This report is based on our June 30, 2022 actuarial valuation of the System and our report dated October 17, 2022 which contains complete details of that valuation and is to be considered a part of this report.

To the best of our knowledge, this report is complete and accurate and has been conducted using generally accepted actuarial principles and practices. Additionally, in our opinion, actuarial methods and assumptions comply with GASBS 67 and 68. As members of the American Academy of Actuaries meeting the Academy Qualification Standards, we certify the actuarial results and opinions herein.

Respectfully submitted,

Mary Elizabeth Redding, FSA, MAAA, EA
Senior Consulting Actuary

Drew Ballard, ASA, MAAA, EA
Senior Consulting Actuary

Katherine Moore, ASA, MAAA
Consulting Actuary

TABLE OF CONTENTS

SECTION PAGE

1. GASBS 67 & 68 Applicable Dates 1

2. GASBS 67 and 68 Note Disclosures 2

3. GASBS 67 and 68 Required Supplementary Information 4

4. GASBS 68 Additional Note Disclosures 6

5. GASBS 68 Supporting Calculations 8

"N:\Public_CA\SaCiERS\6-30-22_Val\Reports\FF_SacCiSCERS_22-12-08_SCERS 6-30-2022_GASBS_67&68_report_FINAL.docx" SECTION 1
GASBS 67 & 68 APPLICABLE DATES

Page 1 ends

Applicable Dates and Periods

Fiscal Year End June 30, 2022
Reporting Standard GASBS 67 GASBS 68
 Reporting date1 June 30, 2022 June 30, 2022
 Reporting period FY 2022 FY 2022
 Measurement date2 N/A June 30, 2022
 Measurement period N/A July 1, 2021 to
June 30, 2022
 Actuarial valuation date
3 June 30, 2022 June 30, 2022

1 Employer’s or plan’s fiscal year-end.
2 No earlier than employer’s prior fiscal year end.
3 Within 30 months of fiscal year end.

SECTION 2
GASBS 67 AND 68 NOTE DISCLOSURES

Page 2 ends

Exhibit 1: Notes to Financial Statements ($000’s)

Significant Assumptions and Other Inputs Used to Measure Total Pension Liability at 6/30/22:
 Discount Rate  6.00%, net of investment expenses
 Inflation Rate  2.50%
 Salary Scale  3.00%
 Mortality Assumption for Service
retirements & beneficiaries
 CalPERS 2000-2019 Post-Retirement Mortality
Table projected fully generational with Society of
Actuaries Scale MP-2021.
 Mortality Assumption for Disability
retirements
 CalPERS 2000-2019 Mortality Table for non-work
Disabled Retirees for Miscellaneous and CalPERS
2000-2019 Mortality Table for work-related
Disabled Retirees for Safety. Both tables were
projected fully generational with Society of
Actuaries Scale MP-2021.

Changes of assumptions and changes in experience affecting the measurement of the Total Pension Liability since the prior measurement date
Mortality tables were changed from the CalPERS 1997-2015 experience study tables to the CalPERS 2000-2019 experience study tables.

Mortality improvement was changed from fully generational projection with Society of Actuaries Scale MP-2020 to fully generational projection with Society of Actuaries Scale MP-2021.

The overall experience loss was due to a cost of living increase greater than expected, but this was offset by more deaths than expected.

Discount rate
The discount rate was set equal to the long-term expected rate of return. The long-term expected rate of return was used since current assets, future City contributions, and future member contributions are projected to be sufficient to cover all future benefit payments and expenses.

This “crossover test” was performed in accordance with the requirements specified in GASB Statement 67, including a projection that the Plan’s funding policy will remain unchanged4. No administrative expenses were assumed to be paid from Trust assets since the City Charter requires the City to pay all administrative expenses.

4 The current recommended policy includes a change in the amortization period from 11 years to 5 years when the average future life expectancy of plan participants is below 5 years.

Net Pension Liability/(Asset)
(Amounts in 000’s)
Fiscal Year Ending
6/30/22 6/30/21
 Total pension liability (TPL) $270,541 $282,359
 Fiduciary net position (FNP) 254,171 311,133
 Net pension liability (NPL) 16,370 (28,774)
 Funded status (FNP/TPL) 93.9% 110.2%
SECTION 2
GASBS 67 AND 68 NOTE DISCLOSURES

Page 3 ends

The 6.00% long-term expected rate of return was selected by the Board. Foster & Foster estimates that a passively managed portfolio with a similar asset allocation (67.5% equities and

32.5% fixed income) would exceed the selected rate about 45% of the time. We believe the

6.0% rate is reasonable.

Date of actuarial valuation
The June 30, 2022 Total Pension Liability is based on an actuarial valuation as of June 30, 2022.

Sensitivity of the net pension liability to a 1% change in the discount rate

1% Decrease

5.00%
Discount Rate

6.00%
1% Increase

7.00%
Net Pension Liability (NPL) $37,244 $16,370 $(1,916)

SECTION 3
GASBS 67 AND 68 REQUIRED SUPPLEMENTARY INFORMATION

Page 4 ends

Schedule of Changes in Net Pension Liability & Related Ratios 5 (Amounts in $000’s)
Fiscal Year 2021/22
Total Pension Liability
Service cost $ 6
Interest 16,098
Changes of benefit terms 0
Differences between expected and actual experience 5
Changes of assumptions 218
Benefit payments (28,145)
Net change in Total Pension Liability (11,818)
Total Pension Liability at beginning of year 282,359
Total Pension Liability at end of year 270,541
Fiduciary Net Position
Contributions - employer 3,479
Contributions - member 9
Net investment income (32,305)
Benefit payments (28,145)
Administrative expenses 0
Other income 0
Net change in Fiduciary Net Position (56,962)
Fiduciary Net Position at beginning of year 311,133
Fiduciary Net Position at end of year 254,171
Net Pension Liability (Asset) at end of year 16,370
Fiduciary Net Position as percentage of Total Pension
Liability 93.9%
Covered-employee payroll 189
Net Pension Liability (Asset) as percentage of Covered- employee Payroll 8661.4%

Notes to Schedule of Changes in Net Pension Liability & Related Ratios The Total Pension Liability as of June 30, 2022 is based on an actuarial valuation as of June 30, 2022.

Changes of Assumptions. In 2021/22, the mortality tables were changed to the CalPERS 2000 - 2019 experience study tables , and mortality improvement was change d to use Society of Actuaries Scale MP-2021.

Differences between actual and expected experience. The largest component for 2021/22 was a cost of living increase greater than expected, but this was offset by more deaths than expected.

5 GASBS 67 and 68 require this information be reported in the Required Supplementary Information for 10 years or as many years are available upon implementation. Only the current year is shown in this report.

SECTION 3
GASBS 67 AND 68 REQUIRED SUPPLEMENTARY INFORMATION

Page 5 ends

Employer Actuarially Determined Contribution 6
(Amounts in $000’s)

Fiscal
Year
(1)
Actuarially
Determined
Contribution
(ADC)
(2)
Employer
Contributions in
relation to the
Actuarially
Determined
Contribution
(3)
Contribution
Deficiency
(Excess)
(1)-(2)
(4)
Covered-
Employee
Payroll
(5)
Employer
Contribution
/ Covered-
Employee
Payroll
(2)/(4)
2021/22 $ 3,479 $ 3,479 $ 0 $189 1840.7%

Significant Methods and Assumptions Used in Calculation of ADC for 20 21/22

6 GASBS 67 and 68 require this information be reported in the Required Supplementary Information for 10 years or as many years are available upon implementation. Only the current year is shown in this report.

Actuarial Assumption FY 2021/22
 Actuarial valuation date  June 30, 2020
 Actuarial cost method  Entry Age Normal, level percent of payroll  Amortization method  Level dollar amount
 Amortization period  12 years open
 Asset method  Actuarial value of assets
 Gains/losses recognized over 3 years
 Corridor of 85% - 115% of market value of assets
 Inflation  2.75%
 Discount rate  6.50%, net of investment expenses
 Salary scale  3.25%
 Mortality rate table  CalPERS’ 1997-2015 Experience Study  Mortality projected fully generational with Scale MP-2019  All other  Same as used in determining total pension liability for 2021/22
SECTION 4
GASBS 68 ADDITIONAL NOTE DISCLOSURES

Page 6 ends

7 No administrative expenses are paid from the trust. As required by City Charter, the City pays all administrative expenses of the plan.

Changes in Net Pension Liability/(Asset)
(Amounts in 000’s)
Total Pension
Liability
(a)
Plan
Fiduciary
Net Position
(b)
Net Pension
Liability/
(Asset)
(a) – (b)
 Balances at FYE 6/30/2021 $282,359 $311,133 $(28,774)  Changes for the year:
• Service cost 6 6
• Interest 16,098 16,098
• Change of assumptions 218 218
• Change of benefit terms 0 0
• Differences between expected
and actual experience 5 5
• Contributions—employer 3,479 (3,479)
• Contributions—member 9 (9)
• Net investment income (32,305) 32,305
• Benefit payments, including
refunds of member contributions (28,145) (28,145) 0
• Administrative expense7 0 0 0  Net changes (11,818) (56,962) 45,144
 Balances at FYE 6/30/2022 270,541 254,171 16,370
Pension Expense/(Income) for Fiscal Year
(Amounts in 000’s)
2021/22
 Pension Expense/(Income) $(1,691)
SECTION 4
GASBS 68 ADDITIONAL NOTE DISCLOSURES

Page 7 ends

Balance of Deferred Outflows of Resources and Inflows of Resources as of June 30, 2022
(Amounts in 000’s)

Deferred
Outflows
of Resources
Deferred
Inflows
of Resources
 Differences between expected and actual experience $0 $0  Changes of assumptions and other inputs 0 0
 Net difference between actual and projected earnings
on investments 9,882 0
 Employer contributions made subsequent to the
Measurement Date N/A N/A
 Total 9,882 0

Recognition of Deferred Outflows of Resources and Inflows of Resources in Future Pension Expense/(Income)
(Amounts in 000’s)
Measurement Period
Ended June 30:

Net Deferred
Outflows/(Inflows) of
Resources
2023 $514
2024 647
2025 (1,324)
2026 10,045
2027 0
Thereafter 0
SECTION 5
GASBS 68 SUPPORTING CALCULATIONS

Page 8 ends

Recognition of Deferred Outflows and Inflows of Resources

Differences between Actual and Expected Experience
Changes in Assumptions and Other Inputs

The average expected remaining service lifetime (AERSL) for the plan is calculated as 2.1 years of total expected future service divided by 828 plan participants, resulting in 0.003 years. Since the AERSL is less than 1.0, a recognition period of 1.0 year is used. Therefore all deferred outflows and inflows of resources for differences between actual and expected experience, and for changes in assumptions and other inputs, are fully recognized immediately. No recognition schedules are maintained for these amounts.

SECTION 5
GASBS 68 SUPPORTING CALCULATIONS

Page 9 ends

Recognition of Deferred Outflows and Inflows of Resources (cont.) (Amounts in 000’s)

Projected Versus Actual Earnings on Investments
Measurement Period 2017/18 2018/19 2019/20 2020/21 2021/22 Total  Initial amount* $(2,973) $(673) $9,865 $(56,863) $50,233  Initial recognition period 5 5 5 5 5
 Amount recognized in pension
expense for current fiscal year:
• 2021/22 (593) (135) 1,973 (11,373) 10,047 (81)
 Amount recognized in pension
expense for future fiscal years:
• 2022/23 0 (133) 1,973 (11,373) 10,047 514
• 2023/24 0 0 1,973 (11,373) 10,047 647
• 2024/25 0 0 0 (11,371) 10,047 (1,324)
• 2025/26 0 0 0 0 10,045 10,045
• 2026/27 0 0 0 0 0 0
 Deferred Outflows/(Inflows) as
of FYE 6/30/22 0 (133) 3,946 (34,117) 40,186
 Net Deferred Outflows/(Inflows)
as of FYE 6/30/22 9,882

* For 2021/22 Projected earnings = $17,928, actual earnings = $(32,305). Difference = $50,233

SECTION 5
GASBS 68 SUPPORTING CALCULATIONS

Page 10 ends

Components of GASBS 68 Pension Expense/(Income) for Fiscal Year (Amounts in 000’s)

FY 2021/22
 Service cost $6
 Interest on the total pension liability including service cost 16,098  Projected earnings on plan investments (17,928)
 Member contributions (9)
 Administrative expense 0
 Recognition of deferred outflows and inflows of resources:
• Difference between expected and actual experience 5
• Changes in assumptions and other inputs 218
• Difference between actual and projected earnings on investments (81)  Total Pension Expense/(Income) (1,691)

Calculation of Interest on the Total Pension Liability
(Amounts in 000’s)

Dollar
Amount
Expected
Return
Portion
of Year Interest
 Beginning Total Pension Liability $282,359 6.0% 1.0 $16,942  Service Cost 6 6.0% 1.0 -
 Benefit Payments (28,145) 6.0% 0.5 (844)
 Difference between expected and
actual experience 5 6.0% 0 0
 Changes of assumptions 218 6.0% 0 0
 Interest on Total Pension Liability 16,098

SECTION 5
GASBS 68 SUPPORTING CALCULATIONS

Page 11 ends

Calculation of Projected Earnings on Pension Plan Investments (Amounts in 000’s)

Dollar
Amount
Expected
Return
Portion
of Year
Projected
Earnings
 Beginning Fiduciary Net Position $311,133 6.0% 1.0 $18,668  Employer Contributions 3,479 6.0% 0.5 104
 Member Contributions 9 6.0% 0.5 -
 Benefit Payments (28,145) 6.0% 0.5 (844)
 Administrative Expenses 0 6.0% 0.5 0
 Projected Earnings on Investments 17,928

GASBS 68 Balance Equation
(Amounts in 000’s)

6/30/21 6/30/22 Change
 Total Pension Liability $282,359 $270,541 $(11,818)
 Fiduciary Net Position 311,133 254,171 (56,962)
 Net Pension Liability/(Asset) (28,774) 16,370 45,144

 Deferred inflows of resources 40,432 0 (40,432)
 Deferred outflows of resources 0 (9,882) (9,882)
 Employer contributions N/A 3,479 3,479
 Net impact on balance sheet 11,658 9,967 (1,691)

Check:
 Pension expense/(income) for year $(1,691)

SECTION 5
GASBS 68 SUPPORTING CALCULATIONS

Page 12 ends

Discount Rate “Crossover” Test
Projection of Contributions – amounts in $000’s

Year Payroll
Employer
Contributions
for Current
Employees
Employee
Contributions
for Current
Employees
Contributions
from Payroll
of Future
Employees
Total
Contributions
1 $150 $0 $6 $0 $6
2 103 1,399 4 0 1,403
3 39 1,566 2 0 1,568
4 27 1,646 1 0 1,647
5 0 1,666 0 0 1,666
6 0 2,038 0 0 2,038
7 0 1,683 0 0 1,683
8 0 1,817 0 0 1,817
9 0 1,633 0 0 1,633
10 0 1,465 0 0 1,465
11 0 1,313 0 0 1,313
12 0 1,175 0 0 1,175
13 0 1,050 0 0 1,050
14 0 937 0 0 937
15 0 835 0 0 835
16 0 743 0 0 743
17 0 1,238 0 0 1,238
18 0 964 0 0 964
19 0 744 0 0 744
20 0 568 0 0 568
21 0 429 0 0 429
22 0 319 0 0 319
23 0 233 0 0 233
24 0 166 0 0 166
25 0 115 0 0 115
26 0 76 0 0 76
27 0 47 0 0 47
28 0 26 0 0 26
29 0 10 0 0 10
30 0 0 0 0 0
31 0 0 0 0 0
32 0 0 0 0 0
33 0 0 0 0 0
* * * * * *
75 0 0 0 0 0
76 0 0 0 0 0
77 0 0 0 0 0
78 0 0 0 0 0
Note: Years 34 to 74 omitted .

SECTION 5
GASBS 68 SUPPORTING CALCULATIONS

Page 13 ends

Discount Rate “Crossover” Test
Projection of Fiduciary Net Position – amounts in $000’s

Year
Projected
Beginning
Fiduciary Net
Position
Projected
Total
Contributions
Projected
Benefit
Payments
Projected
Administrative
Expense
Projected
Investment
Earnings
Projected
Ending
Fiduciary Net
Position
1 $254,171 $6 $27,779 $0 $14,417 $240,816
2 240,816 1,403 27,288 0 13,672 228,603
3 228,603 1,568 26,642 0 12,964 216,493
4 216,493 1,647 25,939 0 12,261 204,462
5 204,462 1,666 25,180 0 11,562 192,510
6 192,510 2,038 24,378 0 10,880 181,051
7 181,051 1,683 23,535 0 10,208 169,408
8 169,408 1,817 22,656 0 9,539 158,108
9 158,108 1,633 21,744 0 8,883 146,880
10 146,880 1,465 20,801 0 8,233 135,777
11 135,777 1,313 19,828 0 7,591 124,853
12 124,853 1,175 18,824 0 6,962 114,166
13 114,166 1,050 17,790 0 6,348 103,773
14 103,773 937 16,731 0 5,753 93,732
15 93,732 835 15,649 0 5,179 84,096
16 84,096 743 14,551 0 4,632 74,920
17 74,920 1,238 13,442 0 4,129 66,845
18 66,845 964 12,328 0 3,670 59,150
19 59,150 744 11,221 0 3,235 51,908
20 51,908 568 10,131 0 2,828 45,173
21 45,173 429 9,072 0 2,451 38,981
22 38,981 319 8,052 0 2,107 33,355
23 33,355 233 7,082 0 1,796 28,302
24 28,302 166 6,167 0 1,518 23,819
25 23,819 115 5,316 0 1,273 19,891
26 19,891 76 4,534 0 1,060 16,493
27 16,493 47 3,827 0 876 13,589
28 13,589 26 3,196 0 720 11,139
29 11,139 10 2,642 0 589 9,097
30 9,097 0 2,162 0 481 7,416
31 7,416 0 1,754 0 392 6,054
32 6,054 0 1,411 0 321 4,964
33 4,964 0 1,127 0 264 4,101
* * * * * * *
75 1,959 0 1 0 118 2,076
76 2,076 0 1 0 125 2,200
77 2,200 0 0 0 132 2,332
78 2,332 0 0 0 140 2,472
Note: Years 34 to 74 omitted .

SECTION 5
GASBS 68 SUPPORTING CALCULATIONS

Page 14 ends

Discount Rate “Crossover” Test
Present Values of Projected Benefit Payments – amounts in $000’s

Year
Projected
Beginning
Fiduciary
Net Position
Projected
Benefit
Payments
"Funded"
Portion of
Benefit
Payments
"Unfunded"
Portion of
Benefit
Payments
PV of
"Funded"
Benefit
Payments
PV of
"Unfunded"
Benefit
Payments
PV of Benefit
Payments
using 6.00%
Discount Rate
1 $254,171 $27,779 $27,779 $0 $26,206 $0 $26,206
2 240,816 27,288 27,288 0 24,286 0 24,286
3 228,603 26,642 26,642 0 22,369 0 22,369
4 216,493 25,939 25,939 0 20,546 0 20,546
5 204,462 25,180 25,180 0 18,816 0 18,816
6 192,510 24,378 24,378 0 17,185 0 17,185
7 181,051 23,535 23,535 0 15,652 0 15,652
8 169,408 22,656 22,656 0 14,215 0 14,215
9 158,108 21,744 21,744 0 12,870 0 12,870
10 146,880 20,801 20,801 0 11,615 0 11,615
11 135,777 19,828 19,828 0 10,445 0 10,445
12 124,853 18,824 18,824 0 9,355 0 9,355
13 114,166 17,790 17,790 0 8,341 0 8,341
14 103,773 16,731 16,731 0 7,400 0 7,400
15 93,732 15,649 15,649 0 6,530 0 6,530
16 84,096 14,551 14,551 0 5,728 0 5,728
17 74,920 13,442 13,442 0 4,992 0 4,992
18 66,845 12,328 12,328 0 4,319 0 4,319
19 59,150 11,221 11,221 0 3,709 0 3,709
20 51,908 10,131 10,131 0 3,159 0 3,159
21 45,173 9,072 9,072 0 2,669 0 2,669
22 38,981 8,052 8,052 0 2,235 0 2,235
23 33,355 7,082 7,082 0 1,854 0 1,854
24 28,302 6,167 6,167 0 1,523 0 1,523
25 23,819 5,316 5,316 0 1,239 0 1,239
26 19,891 4,534 4,534 0 997 0 997
27 16,493 3,827 3,827 0 794 0 794
28 13,589 3,196 3,196 0 625 0 625
29 11,139 2,642 2,642 0 488 0 488
30 9,097 2,162 2,162 0 377 0 377
31 7,416 1,754 1,754 0 288 0 288
32 6,054 1,411 1,411 0 219 0 219
33 4,964 1,127 1,127 0 165 0 165
* * * * * * * *
75 1,959 1 1 0 0 0 0
76 2,076 1 1 0 0 0 0
77 2,200 0 0 0 0 0 0
78 2,332 0 0 0 0 0 0
Total 261,767 0 261,767
Note: Years 34 to 74 omitted.
www.mgocpa.com500 Capitol Mall, Suite 2200Sacramento, CA 958141 December 19, 2022 Administration, Investment and FiscalManagement BoardSacramento City Employees’ Retirement SystemSacramento, CaliforniaHonorable Major and City CouncilCity of SacramentoSacramento, CaliforniaWe have audited the financial statements of the Sacramento City Employees’ Retirement System (SCERS),a component unit of the City of Sacramento, California (City) as of and for the fiscal year ended June 30, 2022,and have issued our report thereon dated December 19, 2022. Professional standards require that we advise you of the following matters relating to our audit.Our Responsibility in Relation to the Financial Statement AuditAs communicated in our engagement letter dated May 25, 2022, our responsibility, as described by professional standards, is to form and express an opinion about whether the financial statements that have been prepared by management with your oversight are presented fairly, in all material respects, in accordance with accounting principles generally accepted in the United States of America. Our audit of the financial statements does not relieve you or management of your respective responsibilities.Our responsibility, as prescribed by professional standards, is to plan and perform our audit to obtain reasonable, rather than absolute, assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, as part of our audit, we considered the internal control of SCERS solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control. We are also responsible for communicating significant matters related to the audit that are, in our professional judgment, relevant to your responsibilities in overseeing the financial reporting process. However, we are not required to design procedures for the purpose of identifying other matters to communicate to you. We have provided our report on internal control over financial reporting and compliance in a separate letter to you dated December 19, 2022. Planned Scope and Timing of the AuditWe conducted our audit consistent with the planned scope and timing we previously communicated to you. 2 Compliance with All Ethics Requirements Regarding IndependenceThe engagement team, others in our firm, as appropriate, our firm, and our network firms have complied with all relevant ethical requirements regarding independence.Qualitative Aspects of the Entity’s Significant Accounting PracticesSignificant Accounting PoliciesManagement has the responsibility to select and use appropriate accounting policies. A summary of the significant accounting policies adopted by SCERS is included in Note B to the financial statements. There have been no initial selection of accounting policies and no changes in significant accounting policies or their application during the fiscal year ended June 30, 2022. No matters have come to our attention that would require us, under professional standards, to inform you about (1) the methods used to account for significant unusual transactions and (2) the effect of significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus.Significant Accounting EstimatesAccounting estimates are an integral part of the financial statements prepared by management and are based on management’s current judgments. Those judgments are normally based on knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ markedly from management’s current judgments.The most sensitive accounting estimates affecting the financial statements are the actuarial valuations of the total pension liability and actuarially determined contributions and the fair value of fixed income investments.Management’s estimate of the total pension liability and actuarially determined contributions is based on actuarial measurements performed by SCERS’ third-party actuary in accordance with the parameters set forth in Governmental Accounting Standards Board (GASB) Statement No. 67, Financial Reporting for Pension Plans – an amendment of GASB Statement No. 25,and actuarial standards of practice. The actuarial valuations are very sensitive to the underlying assumptions, including the discount rate. Fixed income investments, except for mortgage loans, are reported at fair value using a multi-dimensional relation model. JP Morgan Chase is the custodian of the SCERS’ investments and utilizes pricing services that deliver current fair values and security information, which is input into their trust accounting systems. Inputs to their pricing models are based on observable market inputs in active markets. The inputs to the pricing models are typically benchmark yields, reported trades, broker-dealer quotes, issuer spreads and benchmark securities, among others. The mortgage loan is valued using the income approach under thediscounted cash flow methodology, but is reported at book value which is not materially different from the income approach. We evaluated the key factors and assumptions used to develop these estimates and determined that they are reasonable in relation to the basic financial statements taken as a whole. 3 Financial Statement Disclosures Certain financial statement disclosures involve significant judgment and are particularly sensitive because of their significance to financial statement users. The most sensitive disclosures affecting SCERS’ financial statements relate to the net pension liability of the City, which is based on the total pension liability determined in the actuarial valuation as of June 30, 2022, less the plan’s fiduciary net position as of June 30, 2022.Significant Difficulties Encountered during the AuditWe encountered no significant difficulties in dealing with management relating to the performance of the audit.Uncorrected and Corrected MisstatementsFor purposes of this communication, professional standards also require us to accumulate all known and likely misstatements identified during the audit, other than those that we believe are trivial, and communicate them to the appropriate level of management. Further, professional standards require us to also communicate the effect of uncorrected misstatements related to prior periods on the relevant classes of transactions, account balances or disclosures, and the financial statements as a whole. In addition, professional standards require us to communicate to you all material, corrected misstatements that were brought to the attention of management as a result of our audit procedures. There were no uncorrected orcorrected misstatements identified during the audit.Disagreements with ManagementFor purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting, or auditing matter, which could be significant to SCERS’ financial statements or the auditor’s report. No such disagreements arose during the course of the audit.Representations Requested from ManagementWe have requested certain written representations from management, which are included in themanagement representation letter dated December 19, 2022.Management’s Consultations with Other AccountantsIn some cases, management may decide to consult with other accountants about auditing and accounting matters. Management informed us that, and to our knowledge, there were no consultations with other accountants regarding auditing and accounting matters.Other Significant Matters, Findings, or IssuesIn the normal course of our professional association with SCERS, we generally discuss a variety of matters, including the application of accounting principles and auditing standards, significant events or transactions that occurred during the year, operating and regulatory conditions affecting the entity, and operational plans and strategies that may affect the risks of material misstatement. None of the matters discussed resulted in a condition to our retention as SCERS’ auditors. 4 Other Information Included in the Annual ReportPursuant to professional standards, our responsibility as auditors for other information, whether financial or nonfinancial, included in SCERS’ annual report, does not extend beyond the information identified in the audit report, and we are not required to perform any procedures to corroborate such other information. However, in accordance with such standards, we have applied certain limited procedures to the following required supplementary information (RSI) that supplements the basic financial statements:1. Management’s Discussion and Analysis 2. Schedule of Changes in Net Pension Liability (Asset) and Related Ratios3. Schedule of Employer Contributions 4. Schedule of Investment Returns Our procedures consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We did not audit the RSI and do not express an opinion or provide any assurance on the RSI.We were engaged to report on the listing of investments, which accompanies the basic financial statements but is not RSI. With respect to the supplementary information, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the basic financial statements or to the basic financial statements themselves.We were not engaged to report on the introductory and actuarial sections, which accompany the basic financial statements but are not RSI. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it. Our responsibility also includes communicating to you any information which we believe is a material misstatement of fact. Nothing came to our attention that caused us to believe that such information, or its manner of presentation, is materially inconsistent with the information, or manner of its presentation, appearing in the financial statements.Restriction on Use This report is intended solely for the information and use of the Administration, Investment, and Fiscal Management Board, the Honorable Mayor and City Council, and management of the City and SCERS and is not intended to be and should not be used by anyone other than these specified parties.December 19, 2022

www.mgocpa.com500 Capitol Mall, Suite 2200Sacramento, CA 958141 Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing StandardsAdministration, Investment, and FiscalManagement BoardSacramento City Employees’ Retirement SystemSacramento, CaliforniaHonorable Mayor and City CouncilCity of SacramentoSacramento, CaliforniaWe have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the Sacramento City Employees’ Retirement System (SCERS), a component unit of the City of Sacramento, California, as of and for the fiscal year ended June 30, 2022, and the related notes to the financial statements, which collectively comprise SCERS’ basic financial statements, and have issued our report thereon dated December 19, 2022. Report on Internal Control over Financial ReportingIn planning and performing our audit of the financial statements, we considered SCERS’ internal control over financial reporting (internal control) as a basis for designing procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of SCERS’ internal control. Accordingly, we do not express an opinion on the effectiveness of SCERS’ internal control. Adeficiency in internal controlexists when the design or operation of a control does not allow management or employees in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weaknessis a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiencyis a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses or significant deficiencies may exist that were not identified. 2 Report on Compliance and Other MattersAs part of obtaining reasonable assurance about whether SCERS’ financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.Purpose of this ReportThe purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Sacramento, CaliforniaDecember 19, 2022

Sacramento City CouncilSeptember 12, 2023

Sacramento City Council
September 12, 2023