Item 02 2024-00990 Fiscal Year (FY) 2022/23 Sacramento City Employees’ Retirement System Annual Financial Report

City of Sacramento
Budget and Audit Committee Report
915 I Street Sacramento, CA 95814
www.cityofsacramento.org
File ID: 2024-00990 5/28/2024 Consent Item 2.

Fiscal Year (FY) 2022/23 Sacramento City Employees’ Retirement System Annual Financial Report
File ID: 2024-00990
Location: Citywide
Recommendation: Pass a Motion accepting and forwarding to City Council the Fiscal Year (FY) 2022/23 Sacramento City Employees’ Retirement System Annual Financial Report.

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-FY2022/23 SCERS Annual Financial Report
3-FY2022/23 SCERS Report to AIFM Board and City Council 4-FY2022/23 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, 2023 was prepared by the Department of Finance, Accounting Division and audited by external auditors, to present the SCERS financial results. The June 30, 2023, Auditor’s Report to the Administration, Investment, and Fiscal Management Board (AIFM Board) and Members of Council provides additional information about the FY2022/23 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.

Environmental Considerations:

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File ID: 2024-00990 5/28/2024 Consent Item 2.

California Environmental Quality Act (CEQA): This action is not a project subject to CEQA because it involves only organizational or administrative activities that will not result in direct or indirect physical changes in the environment (CEQA Guidelines §15378(b)(5)).

Sustainability: Not applicable.

Commission/Committee Action: None.

Rationale for Recommendation: It is in the best interest of the Council to review the FY2022/23 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.
· As of June 30, 2023, the SCERS plan had 780 participants (one active) with an average age of 68.5 and an average of 46.3 years of service with the City. · As of June 30, 2023, SCERS is 95.5% funded representing an unfunded pension liability of $11.8 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 FY2022/23 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 FY2023/24 Approved Budget included the City’s annual required contribution of $1.4 million to the SCERS plan.

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

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S
ACRAMENTO CITY EMPLOYEES’ RETIREMENT SYSTEM
A Component Unit of the City of Sacramento, California
A
nnual Financial Report
F
iscal Year Ended June 30, 2023
(With Comparative Totals for the Fiscal Year Ended June 30, 2022)

SACRAMENTO CITY EMPLOYEES’ RETIREMENT SYSTEM
A Component Unit of the City of Sacramento, California
Fiscal Year Ended June 30, 2023
TA

BLE OF CONTENTS
Page
Introductory Section:

L
etter to the Members of the Sacramento City Employees’
Retirement System and the Sacramento City Council ..................................................................1-11 F
inancial Section:

I
ndependent Auditor’s Report .......................................................................................................12-15 Man
agement’s Discussion and Analysis (Unaudited)
(Required Supplementary Information) .........................................................................................16-19 B
asic Financial Statements:

S
tatement of Fiduciary Net Position ................................................................................................... 20 S
tatement of Changes in Fiduciary Net Position ................................................................................ 21 N
otes to the Basic Financial Statements ........................................................................................22-32 R
equired Supplementary Information:

S
chedule of Changes in Net Pension Liability (Asset) and Related Ratios ...................................33-34 S
chedule of Employer Contributions.............................................................................................35-36 Sc
hedule of Investment Returns ....................................................................................................37-38 O
ther Supplementary Information:

L
isting of Investments ...................................................................................................................39-41 A
ctuarial Section:

A
ctuarial 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, 2023

1 December 19, 2023

TO: Members of the Sacramento City Employees' Retirement System 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 2023 Fiscal Year, or June 30, 2023.

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 contains the Independent Auditor's Report , Management’s Discussion and Analysis (MD&A), the financial statements of SCERS, Required Supplementary Information (RSI), and Other Supplementary Information; and the Actuarial 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
Director of Finance (Leyne Milstein, Designee)

Public Citizen Members
David Bach
Manuel Leon – State of California

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, 2023

2 Howard Chan, City Manager, was appointed to his current position 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 and 2023.

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 investment activities of the City Treasurer’s Office, including the investment of City and SCERS funds. Mr. Colville has been a City employee since 2004.

Leyne Milstein, Assistant City Manager was serving for the vacant Director of Finance seat. Ms. Milstein has served the Board in various capacities since 2008.

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 for 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 wa s a percentage 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 fiscal year 2021/2022. No contribution was required for the current fiscal year ended June 30, 2023.

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 System (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 Cal PERS.

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, 2023, there is one active miscellaneous member and a total of 780 plan participants. As of said date, the one active miscellaneous member is 68.5 years old and has 46.3 years of service.

3 Pursuant to the Sacramento City Charter, the Board has exclusive authority to invest and manage the System’s funds. The Board, in turn, has selected the Sacramento City Treasurer and Treasurer’s Office investment personnel to conduct daily investment activities consistent with 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 utilize prudent investment practices to generate adequate long- term returns that, when combined with employer and 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, authorizes the investment in different ass et 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 continuing 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 particularly 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 status 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 reviews its asset allocation, i.e., the allocation of the System’s funds to different investment asset classes. On May 19, 2022, the Board established the asset allocation of the investment of SCERS funds during the fiscal year beginning July 1, 2022, and ended June 30, 2023. The approved asset allocation is as follows:

Fixed Income
Fixed Income/Real Estate 32.5%

Equity
Large Cap Growth 32.5%
Equity Income 30.0%
International 5.0%
100.0%

ACTUARIAL EARNINGS ASSUMPTION

During the fiscal year ended June 30, 2023, SCERS actuarial earnings assumption was 6.0%.

4 FINANCIAL RESULTS

The plan net position of SCERS decreased from $254.171 million to $249.966 million by the end of the fiscal year ended June 30, 2023. This $4.205 million decrease is summarized as follows:

SCERS PLAN NET POSITION

$ in thousands
Plan net position 6/30/22 $254,171
Members Contributions 3
Total Investment Income 24,292
Benefit Payments and Expenses (28,500)
Plan net position 6/30/23 $249,966

SCERS’ Total Pension Liability (TPL) as of June 30, 2023, is approximately $261.807 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 95.5% percent of TPL on June 30, 2023. The f unding 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 $0.96 of assets available for payment. SCERS has a Net Pension Liability of $11.841 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, 2023:

Table 1
SCERS Total Rate of Return

TOTAL PLAN ASSETS
For the periods ended June 30, 2023
Annualized Compound Returns 1 Yr. 3 Yrs. 10 Yrs.

SCERS – All Funds 10.1% 8.4% 7.6%
Custom Index – Target* 8.5% 6.7% 6.0%
Actuarial Assumption** 6.0% 6.2% 6.4%

*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% as of June 30, 2021.

5 For the fiscal year ended June 30, 2023, the total return of the System’s invested assets resulted in a 10.1% 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 also outperformed the 1-year actuarial assumption over these periods. Consistent with the “prudent person” standard set forth in the SCERS investment policy, the Board and its investment staff 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 System’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 contributions have been in constant decline, the number of retirees and hence the amount of cash n eeded for benefits payments has stabilized and has been declining since 2015. The preservation of the System’s assets at the same time as 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 securities. The emphasis on interest -bearing fixed income investments reached as high as 70% of plan assets in 1995, 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 started 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 stocks have certain bond-like attributes, such as a consistent, steady stream of periodic income, they behave sufficiently differently to warrant analyzing and managing such holdings separately from bond holdings. From and after 2008, such stocks were recorded in their own portfolio within the System known as the Equity Income Fund. The Equity Income Fund’s cash dividends, as well as the interest earned on Fixed Income Fund holdings, constitute 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 ended June 30, 2023, the System’s targeted allocation was 62.5% in income producing assets, with the Fixed Income Fund at 32.5% and the Equity Income Fund at 30.0%. The overweight to income - generating investments reflects the Board’s prudent approach to maintaining 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 portio ns of the SCERS portfolio. In overweighting the portfolio to these two Funds, the Board seeks more consistent cashflow and total returns while minimizing undue volatility in City contributions which may occur due to wide swings in portfolio values due to greater weightings to the more growth-oriented equity allocations.

6 Fixed Income Performance

Based on the Board’s asset allocation for FY 2023, 32.5% 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, 2023:

Table 2
SCERS Total Rate of Return

FIXED INCOME
For the periods ended June 30, 2023

Annualized Compound Returns

1 Yr.

3 Yrs.

10 Yrs.

SCERS Fixed Income Fund 1.3% -2.9% 2.9%
Fixed Portfolio Index* -.90% -4.0% 1.5%

*Fixed Portfolio Index = 100% Barclays US Aggregate Bond Index from March 2008 to present.

The Fixed Income Fund produced a total rate of return of 1.3% for the one-year period ended June 30, 2023, as rates continued to move up in the fiscal year as the Federal Reserve (Fed) continued to intervene with interest rate hikes to tame inflation. The fund outperformed its benchmark over the fiscal year ended June 2023, and has a long history of outperformance as reflected in the returns over the 10-year timeframe. Over the past 10 years, the Fixed Income Fund has returned 2.9% 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 of 1.3% is a significant increase over the previous year’s return of -12.3%.

This increase 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 Fund rate hikes through FY 2018 (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 and 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 rhetoric on the trade war front with China and flat GDP led the Fed to reduce interest rates three times by October 2019 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 shock and the Fed intervened twice within two 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, 2023

7 weeks in March 2020 and took the Fed Funds rate down to .25% to support an economy that had all but come to 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 FY 2022, rates hit historic lows 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 ended June 30, 2023, the Fed had raised rates 525 basis points since the March 2022 lows. This hawkish stance continued into the next fiscal year with the last raise occurring in July 2023 (after the end of the fiscal year in this report). As the yields on bonds increase, the underlying prices decrease. Regardless of this inverse relationship of rates and prices the fixed income portfolio still produced a positive return for the fiscal year. It is important to note, the coupons of the portfolio’s holdings continued to contribute approximately $3.1 million in cash interest payments, continuing the tr end of year over year interest income increases as more funds are allocate to the portfolio.

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 pay 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 sectors (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 into broad swaths of the market or into specific sectors of the economy. This is as opposed to requiring investors to identify stocks of individual 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 stocks 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, 2023, 67.50% of SCERS assets were to be allocated to equity investments, both domestic and international and including both growth and income objectives.

8 Table 3 shows the performance of SCERS’ equity investments, both domestic and international:

*Domestic Equity Index = February 2006 to present = 100% Russell 3000 Index (price) **Large Cap Index = June 2007 to present = 100% S&P 500 ***Equity Income Index = March 1992 to June 2016 = 100% Dow Jones Select Dividend Index, July 2016 to present = Russell 1000 value (price) *International Index = February 2006 – June 2007 = 33% Nikkei, 67% MSCI EAFE, July 2007 to present = 100% MSCI ACWI ex US

Per Table 3, the performance of the overall SCERS domestic equity portfolio was 15.1% for the one-year period as compared to the 17.0 % return by the benchmark (Russell 3000 which represents the stocks of approximately 98% of U .S. publicly traded corporations). Although the domestic equity port folios underperformed the benchmark on a 1-year basis, the underlying portfolios outperformed their respective benchmarks. This is due to the inefficiencies when “rolling” up into a benchmark. Both domestic equity sub portfolios outperformed their respective benchmarks by 150-200 basis points. Both portfolios also greatly outperformed the Plan’s actuarial rate of return of 6.0%. The above average performance of the portfolios and the market benchmarks are commensurate with a market that developed a comfort level in a higher interest rate environment and the prospects for recovery in the economy without the potential for a deep recession.

Table 3
SCERS Total Rate of Return

DOMESTIC EQUITY INVESTMENTS
For the periods ended June 30, 2023

Annualized Compound Returns 1 Yr. 3 Yrs. 10 Yrs.

SCERS Domestic Equities

15.1%

14.1%

10.7%
Domestic Equity Index* 17.0% 12.2% 10.3%

Individual SCERS Domestic Equity Portfolios
Large Cap Growth Fund 19.1% 14.4% 11.8%
Large Cap Index** 17.6% 12.8% 10.7%

Equity Income Fund 11.1% 13.6% 9.0%
Equity Income Index*** 9.0% 11.8% 7.4%
Table 4
SCERS Total Rate of Return

INTERNATIONAL EQUITY INVESTMENTS
For the periods ended June 30, 2023

Annualized Compound Returns 1 Yr. 3 Yrs. 10 Yrs.

SCERS International Fund

12.6%

7.7%

3.8%
International Equity Index* 9.6% 4.6% 2.1%
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, 2023

9 The two domestic stock portfolios, Large Cap Growth Fund and Equity Income Fund, showed highly correlated returns for the fiscal year as investors bought both growth-oriented stocks and income producing stocks at different stages over the fiscal year . Like these outstanding domestic returns, the international portfolio also recorded positive returns as recession fears continued to be tampered down in the United States and around the world.

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

The 1-year return outperformed the actuarial target and its corresponding benchmark in the short and long-term.

The markets began the year on a positive note and then began to falter at the start of the second quarter. The selloff was short lived, and by October 2022 the markets began a steady climb higher through June of 2023, leading to double digit gains for the fiscal year. Although the Large Cap Growth Fund’s primary objective is growth, the portfolio also generated over $1.2 5 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 provide a source of benefit payments. Just like the Large Cap Growth Fund, the Equity Income Fund had positive returns as a result of the rally that gained traction starting in the second quarter of FY 2023. 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. As a result, the Equity Income fund underperformed the Large Cap Growth Fund as growth was more attractive than value during the fiscal year. These equities provide a generous cash flow through dividends along with the potential for upside .

The big unknown that equity markets are attempting to assess is the continued fear of an upcoming recession, although recent signals point to a shallow one if it does indeed materialize. The Equity Income Fund helps to fulfill the Board’s objective of enhancing cash income to help pay benefits. The Fund’s dollar contribution from dividends was $1.70 million for the year, providing much needed cash into the System as intended.

The International Fund holds equities issued by foreign corporations. 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 ( 5.0% for the fiscal year ended June 30, 202 3) 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 June 30, 2023, not unlike our domestic markets, international markets benefitted from the belief the world could evade a long and sustained recession Our international portfolio turned in a 12.6% return for the FY 2023 compared to the benchmark return of 9.6%. 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 $0.2 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 had been temporarily halted as the Fund had struggled to find adequate specialist coverage for the program. The program restarted in November 2022 and ended the fiscal year providing a .10% boost to the returns of the Large Cap Gr owth Fund. This program is something that is prudent to run in a market that has more uncertainty and spiking volatility.

10 INDEPENDENT AUDIT

SCERS receives an independent audit of the basic financial stat ements. Macias Gini & O’Connell LLP (MGO) conducted the audit for the fiscal year ended June 30, 2023, an d 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 o f a s s e t s f r o m l o s s , t h e f t , o r m i s u s e , a n d f o r ensuring the accounting information generated is adequate to pr epare financial statements in conformity with accounting principles generally accepted in the U.S. The design 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, 2023, are presented in this document.

Very briefly, these reports identify a Net Pension Liability of $11.841 million as of June 30, 2023. This amount is a decrease from a Net Pension Liability of $16.370 million as of June 30, 2022.

PROFESSIONAL SERVICES

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

Firm Duties
Segal Marco Advisors Performance evaluation

Foster & Foster Actuarial evaluation and asset allocation (since 6/30/06) (formerly known as Bartel Associates)

J P M o r g a n C u s t ody and master trust (since 8/1/17)

BOARD MEETINGS

For the fiscal year ended June 30, 2023, the first two regular meetings of the Board were held via Zoom as a result of the Covid-19 pandemic. Those meetings were held at 1:30 pm o n September 22, 2022, and on November 17, 2022. The third regular meeting on May 25, 2023, was held in p erson as the City of Sacramento Clerk’s office resumed in person meetings. In both formats, the Board’s meetin gs were open to the public 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 on Bader, Chair Administration, Investment and A d m i n i s t r a t i o n , I n v e s t m e n t a n d F i s c a l M a n a g e m e n t B o a r d F i s c a l M a n a g e m e n t B o a r d

John Colville
Digitally signed by John
Colville
Date: 2023.12.15 14:27:17
-08'00'
Jason Bader
Digitally signed by Jason
Bader
Date: 2023.12.18 10:41:30
-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, 2023

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 end 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
A
dministration, Investment, and Fiscal Honorable Mayor and City Council Management Board City of Sacramento
Sacramento City Employees’ Retirement System Sacramento, California Sacramento, California
R
eport on the Audit of the Financial Statements
O
pinion
We
have audited 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, 2023, and the related notes to the financial statements, which collectively comprise the SCERS’ basic financial statements as listed in the table of contents.

I
n our opinion, the accompanying financial statements present fairly, in all material respects, the plan net position of SCERS as of June 30, 202 3, 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.

B
asis for Opinion
We
conducted our audit in accordance with auditing standards generally accepted in the United 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.

O
ther Matter
Pr
ior-Year Comparative Information
T
he financial 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 the SCERS’ financial statements for the fiscal year ended June 30, 2022, from which such partial information was derived.

13 Report on Partial Comparative Information

We have previously audited the SCERS’ 2022 financial statements, and we expressed an unmodified opinion on the financial statements in our report dated December 19, 2022. In our opinion, the partial comparative information presented herein as of and for the fiscal year ended June 30, 2022, is consistent, in all material respects, with the audited financial statements from which it has been derived.

Responsibilities of Management for the Financial Statements

The SCERS’ management 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 preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the 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 objectives 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 performing an audit in accordance with GAAS and Government Auditing Standards, we:

• Exercise 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 the 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 conditions or events, considered in the aggregate, that raise substantial doubt about the SCERS’ ability to continue as a going concern for a reasonable period of time.

We are required 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

Accounting principles generally accepted in the United States 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 G overnmental 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.

Supplementary Information

Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the 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 state ments 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 Information

The SCERS’ management is responsible for the other information included in the annual financial 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 basic financial statements does not cover the other information, and we do not express an opinion or any form of assurance thereon.

In connection 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 misstatement 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, 2023, on our consideration of the 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 describe 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 the SCERS’ internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the SCERS’ internal control over financial reporting and compliance.

Sa
cramento, California
December 19, 2023

SACRAMENTO CITY EMPLOYEES’ RETIREMENT SYSTEM
A Component Unit of the City of Sacramento
Management’s Discussion and Analysis (Unaudited)
Fiscal Year Ended June 30, 2023
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, 2023. We encourage readers to consider the information presented here in conjunction with the Financial Statements and Supplemental Schedules that follow this discussion.

Fina
ncial Highlights
• SCERS held $ 250.0 million of net position restricted for pension benefits as of June 30, 2023, and $254.2 million as of June 30, 2022. 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, 2023, SCERS had a funded status of 95.5% which means for every dollar of total pension liability, SCERS had approximately $0.9 6 of assets available to pay those benefits. This figure is based on the most recent actuarial valuation as of June 30, 2023. As of June 30, 2022, SCERS had a funded status of 93.9%. • For the fiscal year ended June 30, 2023, actuarially determined and actual employer contributions were zero. For the fiscal year ended June 30, 2022, employer contributions were $3.5 million. • For the fiscal year ended June 30, 2023, SCERS’ net income from investment activity was $ 23.3 million, compared to net investment loss of $32.3 million in the prior year. The increase in investment income was mainly due to appreciation in the fair value of investments of $ 17.5 million in 2023 compared to depreciation in the fair value of investments of $37.6 million in 2022.

Ove
rview 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. St
atement of Fiduciary Net Position is a snapshot of account balances as of June 30, 2023, with comparative amounts for 2022. 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.

Th
e 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) (Continued) Fiscal Year Ended June 30, 2023
17 Financial Analysis
S
CERS’ 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, 2023 and 2022 is as follows:

IDUCIARY NET POSITION SUMMARY
As of June 30, 2023 and 2022
(in thousands)
2023 2022 Change Percent
Cash and cash equivalents 4,414$ 7,825$ (3,411)$ -44% Receivables 926 888 38 4% Investments 244,682 247,750 (3,068) -1% Total assets 250,022 256,463 (6,441) -3%
Total liabilities 56 2,292 (2,236) -98%
Net position restricted for pensions 249,966$ 254,171$ (4,205)$ -2% S
CERS’ net position restricted for pension benefits decreased in 2023, as benefit payments exceeded contributions and investment income. Cash and investments decreased by $3.4 million and $3 .1 million, respectively. The decrease can be attributed to $ 27.5 million in benefit payments, offset by $23.3 million of net investment income. $2.2 million of June 2022 benefits payable were paid in 2023. Although fiduciary net position decreased by 2%, total pension liability decreased by 3%, which led to an increase in SCERS’ funded status from 93.9% to 95.5% in 2023.

HIGHL

IGHTS OF CHANGES IN FIDUCIARY NET POSITION
Fiscal years ended June 30, 2023 and 2022
(in thousands)
2023 2022 Change Percent
Additions:

Employer contributions -$ 3,479$ (3, 479)$ -100% Employee contributions 3 9 (6) -67%
Net appreciation (depreciation) in the
fair value of investments 17,525 (37,595) 55,120 147% Interest 3,411 2,779 632 23% D
ividends 3,356 3,732 (376) -10%
Investment expenses (999) (1,221) 222 18%
Total net additions 23,296 (28,817) 52,113 181% Deductions:

Benefit payments 27,501 28,145 (644) -2 % Total deductions 27,501 28,145 (644) -2 % Net decrease in fiduciary net position (4,205) (56,962) 52,757 93% Net position restricted for pensions:

Beginning of fiscal year 254,171 311,133 (56, 962) -18% End of fiscal year 249,966$ 254,171$ (4,205)$ -2% • For
the fiscal year ended June 30, 2023, actuarially determined and actual employer contributions were zero. Actuarially determined contributions were based on a June 30, 2021 valuation date. SCERS had a funded status of 110.2% at that time.
• Net appreciation (depreciation) in the fair value of investments increased by $55.1 million in 2023. The $17.5 million gain during the fiscal year ended June 30, 2023, consists of $8.8 million of unrealized gains and $8.7 million of realized gains, compared to $53.2 million of unrealized losses and $15.6 million of realized gains for the fiscal year ended June 30, 2022. • The decrease in realized gains is mainly due to the performance of the Large Cap Growth Fund, which recognized a $6.2 million gain in 2023 compared to a $11.4 million gain in 2022. Also, the Fixed Income Fund and International Fund recognized a combined loss of $500 thousand in 2023 compared to a $700 thousand gain in 2022. The increase in unrealized gains is mainly due to the performance of the Large Cap Growth Fund, which recognized a $6.3 million increase in fair value in 2023 compared to a $23.0 million decrease in fair value in 2022. Also, the Fixed Income Fund and Equity Income Fund recognized a combined $1.5 million increase in fair value in 2023 compared to a $24.4 million decrease fair value in 2022.
• 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) (Continued) Fiscal Year Ended June 30, 2023
19 Changes in Funded Ratio
S
CERS funded ratios as of June 30, 2022, and 2023 were 93.9% and 95.5%, respectively. The increase in funded ratio between June 30, 2022, and June 30, 2023, is due to the decrease in total pension liability of 3%, while fiduciary net position decreased by only 2%.

C
urrently Known Facts and Events
T
he overall risk profile of SCERS has remained unchanged since June 30, 2023, 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.

Req
uests for Information
T
his 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.

SACRAMENTO CITY EMPLOYEES' RETIREMENT SYSTEM
Statement of Fudiciary Net Position
June 30, 2023
With Comparative Totals as of June 30, 2023
2023 2022
Assets
Cash and cash equivalents 4,414$ 7,825 $ Receivables:

I
nterest and dividends 926 888
Total receivables 926 888
Investments:

Corporate bonds/notes 50,763 45,810
Equities 19,163 21,197
Exchange traded funds 147,933 149,073
Mortgage loans 274 558
Municipal bonds/notes 22,449 28,798
U.S. agency securities 1,129 745
U.S. Treasury bonds 2,971 1,569
Total investments 244,682 247,750
T
otal assets 250,022 256,463
Liabilities
Benefits payable 53 2,289
Accounts payable 3 3
Total liabilities 56 2,292
249,966$ 254,171 $
(Amounts Expressed in Thousands)
Net position restricted for pensions
See accompanying notes to basic financial statements.
20 SACRAMENTO CITY EMPLOYEES' RETIREMENT SYSTEM
Statement of Changes in Fudiciary Net Position
Fiscal Year Ended June 30, 2023
With Comparative Totals For the Fiscal Year Ended June 30, 2022 2023 2022
Additions
Contributions:

Employer -$ 3,479$
Employees 3 9
T
otal contributions 3 3,488
Investment income (loss):

From investment activities:

Net appreciation (depreciation) in the fair value of investments 17,525 (37,595) Interest 3,411 2,779
Dividends 3,356 3,732
Total investment income (loss) 24,292 (31,084)
Less investment expense:

B
anking, interest, fiscal agent and other 30 25
Professional services 969 1,196
Total investment expense 999 1,221
Net investment income (loss) 23,293 (32,305)
Total net additions 23,296 (28,817)
D
eductions
Benefit payments 27,501 28,145
Total deductions 27,501 28,145
N
et decrease in fiduciary net position (4,205) (56,962) N
et position restricted for pensions
Beginning of fiscal year 254,171 311,133
End of fiscal year 249,966$ 254,171$
(Amounts Expressed in Thousands)
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, 2023
(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 system known as the Sacramento City Employees’ Retirement System (SCERS). 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 rates 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 City 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 provide retirement, disability and death benefits to all City employees electing coverage at that date and to all employees 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.

SACRAMENTO CITY EMPLOYEES’ RETIREMENT SYSTEM
A Component Unit of the City of Sacramento
Notes to the Basic Financial Statements (Continued)
Fiscal Year Ended June 30, 2023
(Dollars in thousands, except as otherwise noted)

23 Note A – Plan Description (Continued)

Plan membership at June 30, 2023, consisted of the following:

Section
399
Equal
Shares
Section
175 Total
Inactive members or beneficiaries receiving benefits 712 27 35 774 Inactive members entitled to but not yet receiving benefits 4 - 1 5 Active plan members 1 - - 1
Total plan members 717 27 36 780

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 rise in the consumer price index. Cost-of-living benefits are payable to retirees and beneficiaries of all of the above plans after one year of retirement. The cost-of-living adjustment was 3% for fiscal year 202 3.

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’ contributions 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 tha n 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, 2023, 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, 2023, active member contributions ranged from 7% to 9% of payroll. At June 30, 2023, accumulated contributions and interest of the active member and the inactive members entitled to but not yet receiving benefits totaled approximately $645. For the fiscal year ended June 30, 2023, interest was credited to members’ contributions at the rate of 7.25%.

Members have an option to withdraw their accumulated contributions, including interest, upon termination of their employment with the City.

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 contributions are due. Employer 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.

Investments

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 and Cash Equivalents

SCERS 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 res olutions. 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 1.78 years as of June 30, 2023.

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. T hese standards are set forth 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 19, 2022, the Board adopted the following asset allocation policy for fiscal year 2023:

Asset Class Target Allocation
Fixed Income/Real Estate 32.5%
Large Cap Growth 32.5%
Equity Income 30.0%
International 5.0%
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, 2023, SCERS’ investments have maturities as follows:

Remaining Maturity in Years
Investment Type No Maturity Under 1 1-5
Over 5/
10 or less Over 10 Total
Cash and short-term investments:

City of Sacramento Investment Pool -$ 4,414$ -$ -$ -$ 4,414$ Investments:

Corporate bonds/notes - - 11,301 28,253 11,209 50,763 Equities 19,163 - - - - 19,163 Exchange traded funds 147,933 - - - - 147,933 Mortgage loans - 274 - - - 274 Municipal bonds/notes - - 6,793 10,095 5,561 22,449 U.S. agency securities - - 4 - 1,125 1,129 U.S. Treasury bonds - - 1,519 - 1,452 2,971 Total Investments 167,096 274 19,617 38,348 19,347 244,682 Total Cash and Investments 167,096$ 4,688$ 19,617$ 38,348$ 19,347$ 249,096$

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, 2023, by investment type are as follows:

Investment Type Total
Corporate bonds/notes 8,091$
Municipal bonds/notes 3,181
U.S. agency securities 361
11,633$

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, 2023, 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 $4 as of June 30, 2023.

At June 30, 2023, SCERS’ investments and credit ratings are as follows:

Investment Type S & P Total
City of Sacramento Investment Pool not rated 4,414$
Corporate bonds/notes A 13,730
AA 5,065
BBB 31,964
not rated 4
Municipal bonds/notes A 3,986
AA 12,096
not rated 6,367
U.S. agency securities AA 860
Total 78,486$

Concentration Risk

As of June 30, 2023, 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 ETF 37,327$
Technology Select Sector SPDR Fund (ETF) 17,979
Healthcare Select Sector SPDR Fund (ETF) 15,065

28 Note C – Cash and Investments (Continued)

Money-weighted Rate of Return

For the fiscal year ended June 30, 2023, the annual money-weighted rate of return on pension plan investments, net of pension plan investment expense was 9.64%. 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 out side party. As of June 30, 202 3, 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, 2023, 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 accounting 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 propriet ary, and provided by multiple independent sources that are actively 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 necessaril y 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 of 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 prices 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 markets. 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, 2023. 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, 2023:

Investments by Fair V alue Level
Balance at
June 30, 2023
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Corporate bonds/notes $ 50,763 -$ 50,763$ -$ Equities 19,163 19,163 - - Ex change traded funds 147,933 147,933 - - Mortgage loans 274 - - 274 Municipal bonds/notes 22,449 - 22,449 - U.S. agency securities 1,129 - 1,129 - U.S. Treasury bonds 2,971 2,971 - - Total Investments by Fair V alue Level 244,682 $ 170,067 $ 74,341 $ 274 Investments at Fair V alue not Subject to
Fair V alue Hierarchy
City of Sacram ento Investm ent Pool 4,414
Total Cash and Investm ents 249,096$
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, 2023, SCERS held revenue bonds issued by the Sacramento City Financing Authority (SCFA) in the amount of $3,124. 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 policy provides for actuarially determined contributions under the entry age normal method, which are discounted and adjusted annually 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, 2023, the City’s annual required and actual contribution was zero.

Note F – Net Pension Liability of the City

The components of the net pension liability of the City at June 30, 2023, is shown below. The total pension liability is based on an actuarial valuation as of June 30, 2023.

June 30, 2023
Total pension liability 261,807$
Plan fiduciary net position 249,966
City's net pension liability 11,841$
Plan fiduciary net position as a percentage of the total pension liability 95.5%

Actuarial assumptions

The total pension liability was determined by an actuarial valuation as of June 30, 2023, 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 S cale MP-2021.

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

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 unchanged.

The 6.0% 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) 31,642$ 11,841$ (5,551)$

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 2023 2022 2021 2020 2019
Total p ension liab ility
Service cost 5$ 6$ 18$ 49$ 66$ Interest 15,407 16,098 18,342 19,363 20,095 Differences between ex pected and actual ex perience 3,355 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 (27,501) (28,145) (28,992) (30,457) (31,134) Net change in total p ension liab ility (8,734) (11,818) (14,308) (16,406) (11,596) Total p ension liab ility -- b eginning 270,541 282,359 296,667 313,073 324,669 Total p ension liab ility -- end ing (a) 261,807$ 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 3 9 16 25 49 Net investm ent incom e (loss) 23,293 (32,305) 73,150 7,591 18,537 Benefits paym ents, including refunds of m em ber contributions (27,501) (28,145) (28,992) (30,457) (31,134) Net change in fiduciary net position (4,205) (56,962) 47,996 (18,431) (5,041) Plan fiduciary net position -- beginning 254,171 311,133 263,137 281,568 286,609 Plan fiduciary net position -- ending (b) 249,966$ 254,171$ 311,133$ 263,137$ 281,568$ Net pension liability (asset) -- ending (a) - (b) 11,841$ 16,370$ (28,774)$ 33,530$ 31,505$ Plan fiduciary net position as a percentage of the total pension liability 95.48% 93.95% 110.19% 88.70% 89.94% Covered payroll 103$ 189$ 270$ 362$ 678$ Net pension liability (asset) as a percentage of cov ered payroll 11496.12% 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.

Fiscal Year
For the fiscal year ended June 30, 2023, no assum ption changes were m ade from the previous 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 Employer Contributions
Last Ten Fiscal Years
(in thousands)

35 2023 2022 2021 2020 2019
Actuarially determ ined contributions -$ 3,479$ 3,822$ 4,410$ 5,268$ Contributions in relation to the actuarially determ ined contribution -$ 3,479$ 3,822$ 4,410$ 7,507$ Contribution deficiency (ex cess) -$ -$ -$ -$ (2,239)$ Covered payroll 103$ 189$ 270$ 362$ 678$ Contributions as a percentage of covered payroll 0% 1841% 1416% 1218% 1107% 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 2019 - 2023 Am ortization m ethod Level dollar paym ents over 11 years, open period for fiscal year 2023 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 Asset valuation m ethod 3 year smoothed market value for fiscal years 2019 - 2023 Inflation 2.50 % for fiscal year 2023

2.75% for fiscal years 2019 - 2022
Salary increases 2.50% CPI plus 0.5% merit for fiscal year 2023

2.75% CPI plus 0.5% merit for fiscal years 2019 - 2022
Investment rate of return 6.00% for fiscal year 2023

6.50% for fiscal years 2019-2022
Retirement age
Mortality CalPERS 1997-2015 Mortality Tables with Scale MP-2020 for fiscal year 2023 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 For fiscal years 2019- 2023, deferred vested members covered under Section 399 are assumed to retire at age 62; those covered under 175 are assumed to retire at age 65.

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

36 2018 2017 2016 2015 2014
Actuarially determ ined contributions 8,267$ 8,330$ 8,645$ 9,183$ 9,649$ Contributions in relation to the actuarially determ ined contribution 8,645$ 8,645$ 8,645$ 9,183 9,649 Contribution deficiency (ex cess) (378)$ (315)$ -$ -$ -$ Covered payroll 921$ 1,049$ 1,020$ 1,180$ 2,279$ Contributions as a percentage of covered payroll 939% 824% 848% 778% 423% 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 2014 - 2018 Am ortization m ethod Level dollar paym ents over 14 years, open period for fiscal years 2014 - 2018 Asset valuation m ethod 3 year smoothed market value for fiscal years 2014 - 2018 Inflation 3.00% for fiscal years 2014 - 2018
Salary increases 3.00% CPI plus 0.5% merit for fiscal years 2014 - 2018 Investment rate of return 6.50% for fiscal years 2014 - 2018 Retirement age
Mortality CalPERS 1997-2011 Mortality Tables with Scale MP-2014 for fiscal year 2018 CalPERS 1997-2007 Mortality Tables with Scale MP-2014 for fiscal year 2017 CalPERS 1997-2007 Mortality Tables with Scale AA for fiscal years 2014 - 2016 Fiscal Year
For fiscal years 2014 - 2018, deferred vested memb erscovered 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 2023 2022 2021 2020 2019
Annual m oney-weighted rate of return, net of investm ent ex pense 9.64% -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.

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

SACRAMENTO CITY EMPLOYEES' RETIREMENT SYSTEM
Listing of Investments
June 30, 2023
Investments
Maturity
Date Quantity Amortized Cost Fair Value

CORPORATE BONDS/NOTES
Amazon Com Inc 5/12/2031 2,000,000 2,010,535 $ 1,682,016 $ Apple Inc 2/9/2027 3,000,000 3,000,000 2,880,765 Bank of America Corp 10/21/2027 1,000,000 1,004,551 931,464 Barclays Bank Plc 4/8/2025 1,000,000 1,000,000 951,986 Boeing Co 3/1/2045 1,500,000 1,533,667 1,054,828 British Telecommunications Plc 11/8/2029 2,000,000 2,052,320 1,753,865 Cargill Inc 10/10/2025 500,000 499,540 495,073 Cigna Corp 3/15/2030 1,000,000 982,511 849,622 Citigroup Inc 7/22/2036 5,000,000 5,000,000 4,220,769 Colgate Palmolive Co 3/2/2026 500,000 500,858 501,790 Constellation Brands Inc 8/1/2029 2,000,000 2,093,139 1,802,730 Csx Corp 2/15/2030 1,000,000 999,278 863,235 CVS Health Corp 2/28/2031 1,000,000 1,006,820 794,252 Disney Walt Co 1/13/2031 3,000,000 3,192,618 2,611,915 Dollar Tree Inc 5/15/2025 500,000 494,598 484,020 Dow Chem Co 11/15/2030 1,000,000 1,013,517 825,768 Dow Chem Co 11/15/2042 1,500,000 1,630,146 1,263,506 Dupont De Nemours Inc 11/15/2025 500,000 491,448 489,674 Dupont De Nemours Inc 11/15/2028 500,000 493,042 491,705 Ebay Inc 7/15/2042 2,000,000 2,018,656 1,588,389 General Dynamics Corp 4/1/2027 350,000 348,531 334,002 General Mills Inc 4/17/2025 500,000 498,620 487,265 General Motors Financial Co Inc 1/8/2031 1,000,000 999,902 783,344 Gilead Sciences Inc 3/1/2026 350,000 348,508 336,704 Goldman Sachs Group Inc 2/7/2030 1,500,000 1,519,132 1,277,516 Honeywell Intl Inc 2/15/2028 500,000 503,488 506,703 HP INC 6/17/2031 1,000,000 1,003,363 806,099 HSBC Holdings PLC 8/18/2031 900,000 918,191 718,395 John Deere Capital Corp 1/20/2028 600,000 606,299 599,500 JP Morgan Chase & Co 4/22/2031 1,500,000 1,531,834 1,268,767 Kroger Co 5/1/2030 800,000 807,878 661,531 Lehman Bros Hldg Inc Escrow 12/29/2099 2,500,000 1,478,416 3,750 Lockheed Martin Corp 10/15/2025 500,000 503,543 498,965 Lowes Cos Inc 10/15/2030 1,000,000 997,892 801,299 Martin Marietta Material 3/15/2030 1,000,000 992,481 844,914 Mcdonalds Corp 1/30/2026 500,000 493,761 483,306 Mead Johnson Nutrition Company 11/15/2025 350,000 353,045 341,382 Mondelez Intl Inc 2/4/2031 1,000,000 992,442 785,403 Nasdaq Inc 1/15/2031 1,000,000 989,816 776,145 Norfolk Southern Corp 5/15/2031 1,000,000 1,014,554 830,710 Oracle Corp 3/25/2031 1,500,000 1,494,530 1,280,568 Quest Diagnostics Inc 6/30/2030 2,000,000 2,074,280 1,758,638 RTX Corporation 8/16/2025 500,000 497,397 489,898 Ryder Sys Inc 6/1/2025 500,000 489,411 488,318 Starbucks Corp 12/1/2047 1,500,000 1,602,573 1,182,787 Sysco Corp 2/15/2030 1,000,000 1,025,828 851,720 United Parcel Service Inc 4/1/2030 500,000 490,161 498,053 United Parcel Service Inc 3/15/2029 1,000,000 1,027,676 943,478 Unitedhealth Group Inc 5/15/2031 2,000,000 2,020,586 1,691,104 Verizon Communications Inc 3/15/2034 2,000,000 2,158,458 1,895,842 Sub-total 60,799,839 50,763,478 39 SACRAMENTO CITY EMPLOYEES' RETIREMENT SYSTEM
Listing of Investments
June 30, 2023
Investments
Maturity
Date Quantity Amortized Cost Fair Value

EQUITIES - LARGE CAP GROWTH
Alphabet, Inc. Cl C Capital Stock 8,000 196,461 967,760 Amazon.com Inc. 7,000 173,179 912,520 Apple Inc. 6,000 137,467 1,163,820 Constellation Brands Cl A 3,550 553,118 873,762 Home Depot Inc 2,900 310,681 900,856 MasterCard Incorporated 2,500 363,275 983,250 Mcdonald's Corp 3,000 758,339 895,230 Meta Platforms Inc 3,700 254,954 1,061,826 Unitedhealth Group Inc 1,900 560,841 913,216 Sub-total 3,308,314 8,672,240

EQUITIES - FIXED ALTERNATIVE EQUITIES
Bank of America Corp 22,310 340,666 640,074 Home Depot Inc 2,300 338,312 714,472 International Bus Mach 8,010 1,140,735 1,071,818 Jpmorgan Chase & Co 7,000 472,196 1,018,080 Lockheed Martin Corp 2,200 298,037 1,012,836 Merck & Co Inc (new) 9,000 448,417 1,038,510 Morgan Stanley Com New 9,000 935,985 768,600 Pfizer Inc 20,685 970,793 758,726 RTX Corporation 10,700 706,369 1,048,172 Union Pac Corp Com 4,000 438,135 818,480 Wal Mart Stores Inc 7,470 874,706 1,174,135 Walgreens Boots Allian Com 15,000 519,360 427,350 Sub-total 7,483,711 10,491,252

EXCHANGE TRADED FUNDS
Invesco S&P 500 Equal Weight ETF 6,000 834,990 897,840 Ishares Msci Acwi Us Etf 203,000 9,410,400 9,991,660 Ishares Preferred & Income Securities ET 65,260 2,490,642 2,018,492 Ishares Russell 2000 ETF 4,500 500,131 842,715 Ishares Tr Russell 1000 Val 236,500 28,289,357 37,326,795 Ishares Tr U.S. Real Es Etf 8,915 701,018 771,504 Ishares Tr Us Telecom Etf 32,742 986,340 723,598 Ishares U.S. Transportation ETF 14,600 2,207,579 3,647,372 Ishares Us Home Cons Etf 5,000 133,439 427,200 Select Sector Spdr Tr Communication 107,000 5,528,339 6,963,560 Select Sector Spdr Tr Rl Est Sel Sec 21,500 688,545 810,335 Select Sector Spdr Tr Sbi Cons Discr 34,000 3,016,566 5,773,540 Select Sector Spdr Tr Sbi Cons Stpls 80,500 4,215,353 5,970,685 Select Sector Spdr Tr Sbi Healthcare 113,500 9,910,453 15,064,855 Select Sector Spdr Tr Sbi Int-Energy 72,300 4,736,316 5,868,591 Select Sector Spdr Tr Sbi Int-Finl 193,000 4,651,936 6,506,030 Select Sector Spdr Tr Sbi Int-Inds 48,800 2,971,535 5,237,216 Select Sector Spdr Tr Sbi Int-Utils 30,055 1,374,327 1,966,799 Select Sector Spdr Tr Sbi Materials 45,915 2,874,271 3,804,976 Select Sector Spdr Tr Technology 103,410 5,905,591 17,978,863 Spdr Bberg Barclays ST High Yield Bond E 60,500 1,638,056 1,494,350 Spdr Series Trust Kbw Regn Bk Etf 58,400 2,660,898 2,384,472 Spdr Series Trust S&p Bk Etf 28,000 1,116,556 1,008,000 Spdr Series Trust S&p Retail Etf 9,100 869,656 580,125 Spdr Tr Unit Ser 1 13,000 3,533,292 5,762,640 Vaneck Vectors Semiconductor Etf 27,000 718,122 4,110,750 Sub-total 101,963,708 147,932,963 40 SACRAMENTO CITY EMPLOYEES' RETIREMENT SYSTEM
Listing of Investments
June 30, 2023
Investments
Maturity
Date Quantity Amortized Cost Fair Value

MORTGAGE LOANS
Walgreens Drugs/Adahi, Inc 5/1/2024 274,343 274,343 274,343 Sub-total 274,343 274,343

MUNICIPAL BONDS/NOTES
Bay Area Toll Auth Calif Toll 4/1/2030 2,190,000 2,182,103 1,997,174 California St 11/1/2030 1,500,000 1,478,052 1,228,650 California St 10/1/2028 500,000 511,367 504,755 California St Go Bds 11/1/2026 2,000,000 2,000,000 2,115,000 City of Salem Oregon 6/1/2026 500,000 504,968 498,520 El Dorado CA Irrigation Dist Rev Bonds 1/1/2025 200,000 200,087 193,502 Houston Tex Arpt Sys Rev Arpt Sys 1/1/2028 3,850,000 3,750,315 3,986,444 Moreland Calif Sch Dist 8/1/2030 1,235,000 1,235,000 1,211,794 New York St Urban Dev Corp Sales Tax Rev 3/15/2031 2,000,000 2,040,013 1,728,420 Pennsylvania Economic Dev Fing 6/15/2034 3,000,000 3,073,579 2,436,060 Sacramento Calif Pub Fing Auth 4/1/2050 3,000,000 3,151,297 3,123,960 Union City Calif Cmnty Redev A 10/1/2030 250,000 247,370 240,550 Univ Calif Regts Med Ctr Poole 5/15/2031 2,350,000 2,415,102 2,521,292 Wisconsin St 5/1/2032 200,000 200,000 170,702 Wisconsin St Gen Fund Annual Approp Reve 5/1/2029 500,000 492,072 491,860 Sub-total 23,481,324 22,448,683

US AGENCY SECURITIES
Fannie Mae Pool #256393 9/1/2036 21,816 21,744 22,653 Federal Farm Credit Bank 7/23/2035 500,000 499,754 361,244 Freddie Mac Pool #SD8278 12/1/2052 472,418 478,914 476,556 Gnma Pool #439515 3/15/2027 4,174 4,093 4,141 Gnma Pool #550718 11/15/2035 171,777 167,160 173,529 Gnma Pool #648348 10/15/2035 88,748 88,443 90,424 Sub-total 1,260,109 1,128,547

US TREASURY BONDS
U.S. Treasury Note 2/15/2041 2,000,000 1,874,439 1,452,422 U.S. Treasury Note 3/31/2025 240,000 240,066 235,284 U.S. Treasury Note 9/15/2025 300,000 297,138 291,891 U.S. Treasury Note 10/15/2025 500,000 495,872 494,414 U.S. Treasury Note 11/15/2025 500,000 499,316 497,402 Sub-total 3,406,831 2,971,413 TOTAL 201,978,179$ 244,682,919 $
41 APPENDIX A

City of Sacramento

Sacramento City Employees’
Retirement System

June 30, 2023
Actuarial Valuation

November 20, 2023

411 Borel Avenue, Suite 620 San Mateo, CA 94402 ꞏ (650) 377-1600 ꞏ 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, 2023 actuarial valuation of the Sacramento City Employees’ Retirement System (SCERS).

The purpose of this valuation is to:
 Determine the System’s June 30, 2023 Funded Status, and  Calculate the fiscal year 2024/25 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,

Drew Ballard, FSA, MAAA, EA
Senior Consulting Actuary

Katherine Moore, ASA, MAAA
Consulting Actuary

Braeleen Ballard, ASA, MAAA, EA
Consulting Actuary

TABLE OF CONTENTS

SECTION P AGE

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

l:\sacramentociers(scers)\pension\6-30-23_val\reports\f&f_sacramentociers(scers)_pension_6-30-2023_funding_report.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, 2022 valuation are provided for comparative purposes. --------amounts in $000’s---------
June 30,
2022 June 30,
2023
%
change
 Participant Counts
 Actives 2 1 -50.0%
 Terminated Vesteds & Reciprocals 5 5 0.0%
 Service Retirees 447 429 -4.0%
 Disableds 82 80 -2.4%
 Beneficiaries 292 265 -9.2%
 Total 828 780 -5.8%
 Actuarial Liabilities
 Present Value of Projected Benefits $ 270,548 $ 261,810 -3.2%  Actuarial Accrued Liability 270,541 261,807 -3.2%
 Assets
 Market Value of Assets 254,171 249,966 -1.7%
 Approximate Annual Rate of Return -10.8% 9.7%
 Actuarial Value of Assets 262,645 250,051 -4.8%
 Approximate Annual Rate of Return 4.4% 6.0%
 Plan Funded Status
 Actuarial Accrued Liability 270,541 261,807 -3.2%
 Actuarial Value of Plan Assets 262,645 250,051 -4.8%  Unfunded Actuarial Accrued Liability 7,896 11,756 48.9%  Funded Ratio 97.1% 95.5% -1.6%
 Funded Ratio, Market Value Basis 93.9% 95.5% 1.7%

2023/24 2024/25 %
change
 Annual Cost1 $1,399 $1,362 -2.6%
 Annual Cost (% Proj. Plan Payroll)1 933.2% 1,640.0%
 Annual Cost (% Proj. City Payroll) 0.3% 0.3%

1 See page 11 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 1 active member (out of a total plan membership of 780) remain.

Since the last valuation, the plan experienced overall losses on liabilities. Plan liabilities increased more than expected, by $3.6 million. This was mostly due to a larger COLA than expected2 ($5.3 million), but was offset by a gain due to retirees and beneficiaries not living as long as expected ($1.7 million). Market value return on assets was greater than expected, about 9.7% for the year.

On the smoothed actuarial basis, the return on assets was 6.0% which was the expected rate of return on plan 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.

No assumptions were changed since the prior valuation.

The July 1, 2023 total plan unfunded actuarial accrued liability (UAAL) is $11.8 million, as compared to an expected UAAL of $8.4 million.

The plan’s funded ratio on an actuarial value of assets basis is 95.5%, a decrease from 97.1% in the prior valuation. The plan’s funded ratio using market value of assets basis is 95.5%, an increase from 93.9% in the prior valuation.

The City’s contribution has decreased from $1.399 million for fiscal year 2023/24 to $1.362 million for fiscal year 2024/25.

The average life expectancy of the plan’s retirees is now 10.5 years, down from 10.9 years as of June 30, 2022. We recommend keeping the amortization at a rolling 11-year period for the 2024/25 recommended contribution.

2 The CPI used for COLA increases was 5.6%. 3% COLA was paid and COLA banks were increased. (Index used is CPI-U for San Francisco/Oakland/Hayward area.) SECTION 1

EXECUTIVE SUMMARY

Page 3 ends

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 is one remaining active employee with very little associated payroll. The following table presents various measures illustrating the plan’s maturity:

June 30, 2022 June 30, 2023
 Maturity Ratios
 Inactive AAL/total AAL 99.8% 99.9%
 Inactive participant count/total count 99.8% 99.9%
 Benefit payments/market value of assets 11.1% 11.0%
 Benefit payments/employer contributions 809.0% N/A
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

Low Default-Risk Obligation Measure
Actuarial Standards of Practice (“ASOP”) No. 4, Measuring Pension Obligations and Determining Pension Plan Costs or Contributions, was revised as of December 2021 to include communication of a “low-default-risk obligation measure” (LDROM). This liability measure is consistent with the determination of the actuarial accrued liability shown on page 5 in terms of member data, plan provisions, and assumptions/methods, including the use of the Entry Age Normal Cost Method, except that the discount rate is tied to low-default-risk fixed income securities. The S&P Municipal Bond 20 Year High Grade Rate Index (daily rate closest to, but not later than, the measurement date of June 30, 2023) was selected to represent a current market rate of low risk but longer-term investments that could be included in a low-risk asset portfolio.

The discount rate used in this LDROM valuation was 4.13%, resulting in an LDROM of $301 million. The LDROM should not be considered the “correct” liability measurement; it simply shows a possible outcome if the Board elected to hold a very low risk asset portfolio. Given that plan benefits are paid over time through the combination of contributions and investment returns, prudent investments selected by the Board help to balance asset accumulation through these two sources.

SECTION 1

EXECUTIVE SUMMARY

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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

Page 5 ends

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, 2022 June 30, 2023
Present Value of Projected Benefits
 Active Employees $ 481 $ 236
 Vested Terminated & Reciprocals 403 382
 Service Retirees 193,774 188,363
 Disabled Participants 24,697 24,605
 Beneficiaries 51,193 48,224
 Total 270,548 261,810
Actuarial Accrued Liability
 Active Employees $ 474 $ 233
 Vested Terminated & Reciprocals 403 382
 Service Retirees 193,774 188,363
 Disabled Participants 24,697 24,605
 Beneficiaries 51,193 48,224
 Total 270,541 261,807

2022/23 2023/24
Normal Cost
 Employer Normal Cost (beginning of
year)
$ 0 $ 1

June 30, 2022 June 30, 2022
Plan Funded Status
 Total Actuarial Accrued Liability $ 270,541 $ 261,807  Actuarial Value of Plan Assets 262,645 250,051
 Unfunded Actuarial Accrued Liability 7,896 11,756
 Funded Ratio 97.1% 95.5%

 Market Value of Assets 254,171 249,966
 Funded Ratio – Market Value Basis 93.9% 95.5%
SECTION 2

LIABILITY INFORMATION & FUNDED STATUS

Page 6 ends

Details of the June 30, 2023 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 $ - $ 236 $ 236
 Vested Terminated & Reciprocals - 382 382
 Service Retirees 7,510 180,853 188,363
 Disabled Participants 9,806 14,799 24,605
 Beneficiaries 12,817 35,407 48,224
 Total 30,133 231,677 261,810
Actuarial Accrued Liability
 Active Employees - 233 233
 Vested Terminated & Reciprocals - 382 382
 Service Retirees 7,510 180,853 188,363
 Disabled Participants 9,806 14,799 24,605
 Beneficiaries 12,817 35,407 48,224
 Total 30,133 231,674 261,807

Safety Miscellaneous Total
Normal Cost
 Employer Normal Cost (on
June 30, 2023) $ 0 $ 1 $ 1

SECTION 2

LIABILITY INFORMATION & FUNDED STATUS

Page 7 ends

Details of the June 30, 2023 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 $ - $ 236 $ 236  Vested Terminated & Reciprocals 50 332 382
 Service Retirees 4,211 184,152 188,363
 Disabled Participants 349 24,256 24,605
 Beneficiaries 3,681 44,543 48,224
 Total 8,291 253,519 261,810
Actuarial Accrued Liability
 Active Employees - 233 233
 Vested Terminated & Reciprocals 50 332 382
 Service Retirees 4,211 184,152 188,363
 Disabled Participants 349 24,256 24,605
 Beneficiaries 3,681 44,543 48,224
 Total 8,291 253,516 261,807

Section 175
Sections
302 & 399

Total
Normal Cost
 Employer Normal Cost (on
6/30/23) $ 0 $ 1 $ 1

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, 2021 through June 30, 2022 and the June 30, 2022 through June 30, 2023 market value of assets. Numbers may not add due to rounding. (amounts in $000’s)

2021/22 2022/23
 Beginning of Year Balance: $ 311,133 $ 254,171
 Member Contributions $ 9 $ 3
 City Contributions 3,479 -
 Investment Income (31,084) 24,292
 Total Additions (27,596) 24,295
 Benefit Payments 28,145 27,501
 Member Refunds - -
 Investment Expenses 1,221 999
 Total Deductions 29,366 28,500
 Net Assets at End of Year 254,171 249,966

 Approximate Return on Assets -10.8% 9.7%

SECTION 3

ASSET INFORMATION

Page 9 ends

Asset Allocation – Market Value of Assets
The July 1, 2023 trust asset allocation is provided by the City of Sacramento and based on an allocation strategy of 35.0% fixed income and 65.0% equity. Details are shown below. (amounts in $000’s)
Market Value Percentage
 Cash & Short Term Investments $ 4,414 1.8%
 Receivables 926 0.4%
 Investments
 US Agencies $ 1,129 0.5%
 US Treasury Bonds 2,971 1.2%
 Corporate Bonds 50,763 20.3%
 Equities 19,163 7.7%
 Exchange Traded Funds 147,933 59.2%
 Mortgage Loans 274 0.1%
 Municipal Bonds 22,449 9.0%
 Total Investments 244,682
 Total Assets 250,022
 Other Liabilities Payable (56) 0.0%
 Net Pension Benefit Trust Assets 249,966 100.0%

Target Allocation by Asset Class
The Administration, Investment and Fiscal Management Board of the Sacramento City Employees’ Retirement System changed the asset allocation May 18, 2023. The fund is rebalanced each year.

Current Allocation Prior Allocation
 Fixed Bonds/Real Estate 35.0% 32.5%
Total Fixed 35.0% 32.5%
 Large Cap Growth 30.0% 32.5%
 Equity Income 30.0% 30.0%
 International Equities 5.0% 5.0%
Total Equity 65.0% 67.5%
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)

2022/23
 Actuarial Value of Assets, Beginning of Year $ 262,645  Contributions 3
 Expected Earnings 14,946
 Benefit Payments (27,501)
 Expected Actuarial Value of Assets, End of Year

250,093
 Market Value of Assets, End of Year 249,966
 Difference between MVA & Expected AVA (127)

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

250,051
 Actuarial Value of Assets Corridor
 Cap: 115% of Market Value 287,461
 Min: 85% of Market Value 212,471
 Actuarial Value of Assets, End of Year
(No greater than Cap, not less than Min)

250,051

 Approximate Annual Rate of Return 6.0%

SECTION 4

CONTRIBUTION DEVELOPMENT

Page 11 ends

Actuarially Determined Contribution
Following is the development of the 2024/25 Actuarially Determined Contribution. The 2023/24 Actuarially Determined Contribution was calculated in the June 30, 2022 actuarial valuation and is shown for comparison.
(amounts in $000’s)
Contribution Year 2023/24 2024/25

 Actuarially Determined Contribution
 Employer Normal Cost $ 0 $ 1
 UAAL Amortization3 1,399 1,361
 Total Cost 1,399 1,362
 Projected Plan Payroll 150 83
 Actuarially Determined Contribution
(as a percent of plan payroll)
 Employer Normal Cost 0.0% 1.1%
 UAAL Amortization 933. 2% 1,638.9%
 Total Contribution 933.2% 1,640.0%

 Projected Total City Payroll 419,060 437,440
 Actuarially Determined Contribution
(as a percent of total City payroll)

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

3 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 2023/24 and 2024/25. As the plan continues to mature, this amortization period will be monitored.

SECTION 5

SCHEDULE OF FUTURE CONTRIBUTIONS

Page 12 ends

Below are the historic and projected contributions and benefit payments. City contributions for years ending 6/30/2026 and later are estimated assuming 6/30/24 and subsequent market value of assets earn 6.00% and assuming the Actuarially Determined Contribution is contributed each year. These contributions are designed to achieve 100% funding of the system.

Year Ending4
Member
Contributions

City Contributions

Benefit Payments
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 05 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 3,000 0 27,501,000
6/30/2024 2,000 1,399,000 27,094,000
6/30/2025 1,000 1,362,000 26,599,000
6/30/2026 1,000 1,274,000 26,031,000
6/30/2027 0 1,190,000 25,393,000
6/30/2028 0 1,112,000 24,703,000

4 Information prior to 6/30/2006 valuation is taken from prior actuary’s valuation report. Member contributions and benefit payments for years ending 6/30/2024 and later are estimated. 5 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, 2022 Actual Value $ 270,541 $ 262,645 $ 7,896  June 30, 2023 Expected Value6 258,179 249,810 8,369  COLA more than expected 5,336
 Demographic (Gain)/Loss7 (1,708)
 Investment loss on Actuarial Value
of Assets basis (42)
 Benefit payments less than expected 286
 Member contributions less than
expected (3)
 Total (Gain)/Loss 3,387
 June 30, 2023 Actual Value 261,807 250,051 11,756

6 Based on expected 2022/23 benefit payments and contributions. 7 Primarily due to more retiree an d beneficiary deaths than expected.

SECTION 7

SENSITIVITY ANALYSIS

Page 14 ends

The Plan’s June 30, 2023 funded status and 2024/25 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 $ 281,613 $ 261,810 $ 244,417  Funded Status
 Actuarial Accrued Liability 281,608 261,807 244,415  Actuarial Value of Assets 250,051 250, 051 250,051
 Unfunded Actuarial Accrued
Liability 31,557 11,756 (5,636)
 Funded Ratio 88.8% 95.5% 102.3%
 2024/25 Actuarially Determined Contribution
 Employer Normal Cost 2 1 0
 UAAL Amortization (11 years) 3,728 1,361 (960)
 Total Contribution (not less than 0) 3,730 1,362 0
 Total Employer Contribution (as a
percent of Plan payroll) 4,491.1% 1,640.0% 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)
2024 1 5 774 $ 27,094
2025 1 5 746 26,599
2026 0 5 716 26,031
2027 0 5 684 25,393
2028 0 5 651 24,703
2029 0 5 618 23,966
2030 0 5 585 23,165
2031 0 5 552 22,243
2032 0 5 519 21,288
2033 0 4 486 20,302

2034 0 4 454 19,284
2035 0 4 422 18,234
2036 0 4 391 17,155
2037 0 4 360 16,053
2038 0 4 330 14,932
2039 0 3 301 13,797
2040 0 3 273 12,657
2041 0 3 245 11,522
2042 0 2 219 10,404
2043 0 2 194 9,315

2044 0 2 171 8,268
2045 0 2 149 7,269
2046 0 1 129 6,328
2047 0 1 111 5,452
2048 0 1 94 4,648
2049 0 1 79 3,919
2050 0 0 66 3,270
2051 0 0 55 2,701
2052 0 0 45 2,209
2053 0 0 37 1,790

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)
2054 0 0 30 $ 1,439
2055 0 0 24 1,149
2056 0 0 19 914
2057 0 0 15 727
2058 0 0 12 579
2059 0 0 10 464
2060 0 0 8 375
2061 0 0 6 307
2062 0 0 5 254
2063 0 0 4 214

2064 0 0 4 183
2065 0 0 3 159
2066 0 0 3 140
2067 0 0 2 125
2068 0 0 2 112
2069 0 0 2 101
2070 0 0 2 93
2071 0 0 1 85
2072 0 0 1 78
2073 0 0 1 73
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 an 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 (2024/25). The June 30, 2022 valuation generated a contribution for fiscal year 2023/24.

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 7/1/2023. 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 the remaining employee. 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 expenses8.

Selected by the Board.
 Inflation

2.5%
 Salary Scale

2.5% CPI

0.50% Merit
 Social Security Wage Base

2.75%
 Termination
None assumed. The one remaining active is retirement-eligible.

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

Age Non Sec 175
69 33%
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

8 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-Retiremen t 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%

 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%

 Mortality Improvement Projection
Post-retirement mortality projected fully generational with Society of Actuaries Scale MP-2021.

 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.

 COLA

2.5% CPI
Future benefits increased with CPI up to 3.0% per year with actual COLA banks.  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, 2022 and June 30, 2023 actuarial valuations.

June 30, 2022 June 30, 2023
 Participant Counts
 Actives 2 1
 Terminated Vesteds 4 4
 Reciprocals 1 1
 Service Retirees 447 429
 Disableds 82 80
 Beneficiaries9 292 265
 Total 828 780
 Actives
 Average Age 68.4 68.5
 Average Service 45.2 46.3
 Salary
 Total $ 149,951 $83,054
 Average 74,976 83,054
 Overall City Payroll 395,004,000 412,329,000
 Terminated Vesteds & Reciprocals
 Average Age 71.7 72.7
 Retirees, Disableds & Beneficiaries
 Average Age 79.9 80.5
 Average Monthly Benefit $ 2,871 $ 2,974
 Life expectancy 10.9 10.5

9 The June 30, 2022 valuation incl uded 5 spouses of deceased retirees whom the City has not been able to contact and were not yet receiving benefits. One of these 5 spouses began collecting benefits and has since passed away. The remaining 4 have been excluded in the June 30, 2023 valuation as the City believes it is unlikely they will receive future benefits.

SECTION 11

PARTICIPANT DATA

Page 25 ends

June 30, 2023 Participant Data

Following summarizes participant demographic information for the June 30, 2023 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 - - - 1 1
 Average Age n/a n/a n/a 68.5 68.5
 Average Service n/a n/a n/a 46.3 46.3
 Projected Salary
 Average  $ - $ - $ - $83,054 $83,054
 Total (000's) - - - 83 83

 Vested Terms & Reciprocals
 Count - - 1 4 5
 Average Age n/a n/a 72.6 72.7 72.7

 All Inactives
 Count 15 98 20 641 774
 Average Age 87.3 84.5 83.5 79.6 80.5
 Avg. Monthly Benefit $2,526 $3,271 $2,473 $2,954 $2,974  Service Retirees
 Count 5 17 9 398 429
 Average Age 92.4 88.9 82.5 78.9 79.5
 Average Retirement Age 54.1 54.6 63.3 59.6 59.4  Avg. Monthly Benefit  $3,186 $5,405 $3,095 $3,585 $3,642  Disabled Retirees
 Count - 29 3 48 80
 Average Age n/a 81.0 89.5 77.2 79.0
 Average Retirement Age n/a 41.1 49.9 48.7 46.0
 Avg. Monthly Benefit  n/a $3,195 $1,469 $2,514 $2,722  Beneficiaries
 Count 10 52 8 195 265
 Average Age 84.8 85.0 82.3 81.7 82.5
 Avg. Monthly Benefit  $2,197 $2,616 $2,151 $1,775 $1,967 SECTION 11

PARTICIPANT DATA

Page 26 ends

Data Reconciliation
6/30/2022 to 6/30/2023

Terminated Receiving Payments
Actives Vested Reciprocal Disabled Benefic. Retirees Total  June 30, 2022 2 4 1 82 292 447 828
 New Hires - - - - - - -
 Disabled - - - - - - -
 Terminated - - - - - - -
 Deceased - - - (2) (30) (19) (51)
 New Beneficiaries - - - - 7 - 7
 Retired (1) - - - - 1 -
 Adjustment10 - - - - (4) - (4)
 June 30, 2023 1 4 1 80 265 429 780

10 Includes 4 spouses of deceased retirees whom the City has not been able to contact but were included in the June 30, 2022 valuation. Since it is unlikely the spouses will receive benefits in the future, they were removed from the data for the June 30, 2023 valuation.

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 - - - - - - 1 1
Total - - - - - - 1 1
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 - - 1 1
Avg. Benefit - - 2,040 2,040
70-74 Count 1 2 3 6
Avg. Benefit 5,021 3,008 1,986 2,833
75-79 Count 2 13 13 28
Avg. Benefit 4,860 3,388 2,209 2,946
80-84 Count 2 7 15 24
Avg. Benefit 2,918 2,564 2,716 2,689
85 & Over Count 17 7 30 54
Avg. Benefit 5,132 3,521 2,685 3,564
Total Count 22 29 62 113
Avg. Benefit 4,901 3,195 2,548 3,172
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 - - 2 2
Avg. Benefit - - 1,841 1,841
60-64 Count - - 3 3
Avg. Benefit - - 1,304 1,304
65-69 Count 39 10 14 63
Avg. Benefit 3,433 2,597 1,269 2,819
70-74 Count 86 16 25 127
Avg. Benefit 3,731 2,778 1,840 3,238
75-79 Count 123 6 47 176
Avg. Benefit 3,736 2,594 1,643 3,138
80-84 Count 79 6 31 116
Avg. Benefit 3,207 2,789 1,989 2,860
85 & Over Count 80 13 81 174
Avg. Benefit 3,589 1,720 1,890 2,658
Total Count 407 51 203 661
Avg. Benefit 3,574 2,452 1,790 2,940

APPENDIX B

City of Sacramento

Sacramento City Employees’
Retirement System

June 30, 2023
GASBS 67 & 68 Reporting

November 20, 2023

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, 2023 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, 2023 actuarial valuation of the System and our report dated October 16, 2023 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,

Drew Ballard, FSA, MAAA, EA
Senior Consulting Actuar
y

Katherine Moore, ASA, MAAA
Consulting Actuary

Braeleen Ballard, ASA, EA, MAAA
Consulting Actuary

TABLE OF CONTENTS

SECTION P AGE

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

l:\sacramentociers(scers)\pension\6-30-23_val\reports\f&f_sacramentociers(scers)_6-30-2023_gasbs_67&68_report.docx SECTION 1
GASBS 67 & 68 APPLICABLE DATES

Page 1 ends

Applicable Dates and Periods

Fiscal Year End June 30, 2023
Reporting Standard GASBS 67 GASBS 68
 Reporting date1 June 30, 2023 June 30, 2023
 Reporting period FY 2023 FY 2023
 Measurement date2 N/A June 30, 2023
 Measurement period N/A July 1, 2022 to
June 30, 2023
 Actuarial valuation date
3 June 30, 2023 June 30, 2023

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 6/30/23:
 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
No assumption changes.

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.

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 (65.0% equities and

4 The current recommended policy in cludes 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
6/30/23 6/30/22
 Total pension liability (TPL) $261,807 $270,541
 Fiduciary net position (FNP) 249,966 254,171
 Net pension liability (NPL) 11,841 16,370
 Funded status (FNP/TPL) 95.5% 93.9%
SECTION 2
GASBS 67 AND 68 NOTE DISCLOSURES

Page 3 ends

35.0% 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, 2023 Total Pension Liability is based on an actuarial valuation as of June 30, 2023.

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) $31,642 $11,841 $(5,551)

SECTION 3
GASBS 67 AND 68 REQUIRED SUPPLEMENTARY INFORMATION

Page 4 ends

Schedule of Changes in Net Pe nsion Liability & Related Ratios 5 (Amounts in $000’s)
Fiscal Year 2022/23
Total Pension Liability
Service cost $ 5
Interest 15,407
Changes of benefit terms 0
Differences between expected and actual experience 3,355 Changes of assumptions 0
Benefit payments (27,501)
Net change in Total Pension Liability (8,734)
Total Pension Liability at beginning of year 270,541
Total Pension Liability at end of year 261,807
Fiduciary Net Position
Contributions - employer 0
Contributions - member 3
Net investment income 23,293
Benefit payments (27,501)
Administrative expenses 0
Other income 0
Net change in Fiduciary Net Position (4,205)
Fiduciary Net Position at beginning of year 254,171
Fiduciary Net Position at end of year 249,966
Net Pension Liability (Asset) at end of year 11,841
Fiduciary Net Position as percentage of Total Pension
Liability 95.5%
Covered-employee payroll 103
Net Pension Liability (Asset) as percentage of Covered- employee Payroll 11,496.1%

Notes to Schedule of Changes in Net Pension Liability & Related Ratios The Total Pension Liability as of June 30, 2023 is based on an actuarial valuation as of June 30, 2023.

Changes of Assumptions. No assumpt ion changes were made in 2022/23.

Differences between actual and expected experien ce. The largest compone nt for 2022/23 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 repo rted 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 De termined 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)
2022/23 $ 0 $ 0 $ 0 $103 0.0%

Significant Methods and Assumptions U sed in Calculation of ADC for 2022/23

6 GASBS 67 and 68 require this information be repo rted 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 2022/23
 Actuarial valuation date  June 30, 2021
 Actuarial cost method  Entry Age Normal, level percent of payroll  Amortization method  Level dollar amount
 Amortization period  11 years open
 Asset method  Actuarial value of assets
 Gains/losses recognized over 3 years
 Corridor of 85% - 115% of market value of assets
 Inflation  2.5%
 Discount rate  6.0%, net of investment expenses
 Salary scale  3.0%
 Mortality rate table  CalPERS’ 1997-2015 Experience Study  Mortality projected fully generational with Scale MP-2020  All other  Same as used in determining total pension liability for 2022/23
SECTION 4
GASBS 68 ADDITIONAL NOTE DISCLOSURES

Page 6 ends

7 No administrative expenses are paid from the trus t. 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 6/30/2022 $270,541 $254,171 $16,370
 Changes for the year:
• Service cost 5 5
• Interest 15,407 15,407
• Change of assumptions 0 0
• Change of benefit terms 0 0
• Differences between expected
and actual experience 3,355 3,355
• Contributions—employer 0 0
• Contributions—member 3 (3)
• Net investment income 23,293 (23,293)
• Benefit payments, including
refunds of member contributions (27,501) (27,501) 0
• Administrative expense7 0 0 0
 Net changes (8,734) (4,205) (4,529)
 Balances at FYE 6/30/2023 261,807 249,966 11,841
Pension Expense/(Income) for Fiscal Year
(Amounts in 000’s)
2022/23
 Pension Expense/(Income) $3,079
SECTION 4
GASBS 68 ADDITIONAL NOTE DISCLOSURES

Page 7 ends

Balance of Deferred Outflows of Resources and Inflows of Resources as of June 30, 2023
(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 2,274 0
 Employer contributions made subsequent to the
Measurement Date N/A N/A
 Total 2,274 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
2024 ($1,127)
2025 (3,098)
2026 8,271
2027 (1,772)
2028 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 1.1 years of total expected future service divided by 780 plan participants, resulting in 0.001 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 2018/19 2019/20 2020/21 2021/22 2022/23 Total  Initial amount* $(673) $9,865 $(56,863) $50,233 $(8,868)  Initial recognition period 5 5 5 5 5
 Amount recognized in pension
expense for current fiscal year:
• 2022/23 (133) 1,973 (11,373) 10,047 (1,774) $(1,260)
 Amount recognized in pension
expense for future fiscal years:
• 2023/24 0 1,973 (11,373) 10,047 (1,774) (1,127)
• 2024/25 0 0 (11,371) 10,047 (1,774) (3,098)
• 2025/26 0 0 0 10,045 (1,774) 8,271
• 2026/27 0 0 0 0 (1,772) (1,772)
• 2027/28 0 0 0 0 0 0
 Deferred Outflows/(Inflows) as
of FYE 6/30/23 0 1,973 (22,744) 30,139 (7,094)
 Net Deferred Outflows/(Inflows)
as of FYE 6/30/23 2,274

* For 2022/23 Projected earnings = $14,425, actual earnings = $23,293, Difference = $(8,868)

SECTION 5
GASBS 68 SUPPORTING CALCULATIONS

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

FY 2022/23
 Service cost $5
 Interest on the total pension liability including service cost 15,407  Projected earnings on plan investments (14,425)
 Member contributions (3)
 Administrative expense 0
 Recognition of deferred outflows and inflows of resources:
• Difference between expected and actual experience 3,355 • Changes in assumptions and other inputs 0
• Difference between actual and projected earnings on investments (1,260)  Total Pension Expense/(Income) 3,079

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

Dollar
Amount
Expected
Return
Portion
of Year Interest
 Beginning Total Pension Liability $270,541 6.0% 1.0 $16,232  Service Cost 5 6.0% 1.0 0
 Benefit Payments (27,501) 6.0% 0.5 (825)
 Difference between expected and
actual experience 3,355 6.0% 0 0
 Changes of assumptions - 6.0% 0 0
 Interest on Total Pension Liability 15,407

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GASBS 68 SUPPORTING CALCULATIONS

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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 $254,171 6.0% 1.0 $15,250  Employer Contributions 0 6.0% 0.5 0
 Member Contributions 3 6.0% 0.5 0
 Benefit Payments (27,501) 6.0% 0.5 (825)
 Administrative Expenses 0 6.0% 0.5 0
 Projected Earnings on Investments 14,425

GASBS 68 Balance Equation
(Amounts in 000’s)

6/30/22 6/30/23 Change
 Total Pension Liability $270,541 $261,807 $(8,734)
 Fiduciary Net Position 254,171 249,966 (4,205)
 Net Pension Liability/(Asset) 16,370 11,841 (4,529)

 Deferred inflows of resources 0 0 0
 Deferred outflows of resources (9,882) (2,274) 7,608
 Employer contributions N/A 0 0
 Net impact on balance sheet 6,488 9,567 3,079

Check:
 Pension expense/(income) for year $3,079

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GASBS 68 SUPPORTING CALCULATIONS

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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 $83 $1,399 $2 $0 $1,400
2 57 1,362 1 0 1,363
3 39 1,274 1 0 1,274
4 0 1,190 0 0 1,190
5 0 1,112 0 0 1,112
6 0 979 0 0 979
7 0 900 0 0 900
8 0 835 0 0 835
9 0 770 0 0 770
10 0 709 0 0 709
11 0 652 0 0 652
12 0 600 0 0 600
13 0 552 0 0 552
14 0 507 0 0 507
15 0 465 0 0 465
16 0 799 0 0 799
17 0 644 0 0 644
18 0 517 0 0 517
19 0 414 0 0 414
20 0 330 0 0 330
21 0 261 0 0 261
22 0 206 0 0 206
23 0 161 0 0 161
24 0 125 0 0 125
25 0 97 0 0 97
* * * * * *
32 0 11 0 0 11
33 0 8 0 0 8
34 0 5 0 0 5
35 0 3 0 0 3
36 0 2 0 0 2
37 0 1 0 0 1
38 0 0 0 0 0
39 0 0 0 0 0
* * * * * *
74 0 0 0 0 0
75 0 0 0 0 0
76 0 0 0 0 0
77 0 0 0 0 0
Note: Years 26 to 31 and years 40 to 73 omitted.

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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 $249,966 $1,400 $27,094 $0 $14,227 $238,499
2 238,499 1,363 26,599 0 13,553 226,816
3 226,816 1,274 26,031 0 12,866 214,926
4 214,926 1,190 25,393 0 12,169 202,892
5 202,892 1,112 24,703 0 11,466 190,767
6 190,767 979 23,966 0 10,756 178,535
7 178,535 900 23,165 0 10,044 166,315
8 166,315 835 22,243 0 9,337 154,244
9 154,244 770 21,288 0 8,639 142,365
10 142,365 709 20,302 0 7,954 130,726
11 130,726 652 19,284 0 7,285 119,379
12 119,379 600 18,234 0 6,634 108,379
13 108,379 552 17,155 0 6,005 97,780
14 97,780 507 16,053 0 5,400 87,634
15 87,634 465 14,932 0 4,824 77,991
16 77,991 799 13,797 0 4,290 69,283
17 69,283 644 12,657 0 3,797 61,067
18 61,067 517 11,522 0 3,334 53,397
19 53,397 414 10,404 0 2,904 46,311
20 46,311 330 9,315 0 2,509 39,835
21 39,835 261 8,268 0 2,150 33,979
22 33,979 206 7,269 0 1,827 28,743
23 28,743 161 6,328 0 1,540 24,116
24 24,116 125 5,452 0 1,287 20,076
25 20,076 97 4,648 0 1,068 16,593
* * * * * * *
32 4,877 11 1,149 0 258 3,997
33 3,997 8 914 0 213 3,304
34 3,304 5 727 0 177 2,759
35 2,759 3 579 0 148 2,331
36 2,331 2 464 0 126 1,995
37 1,995 1 375 0 108 1,729
38 1,729 0 307 0 95 1,518
39 1,518 0 254 0 83 1,347
* * * * * * *
74 65 0 1 0 4 68
75 68 0 1 0 4 71
76 71 0 0 0 4 75
77 75 0 0 0 4 79
Note: Years 26 to 31 and years 40 to 73 omitted.

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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 $249,966 $27,094 $27,094 $0 $25,560 $0 $25,560
2 238,499 26,599 26,599 0 23,673 0 23,673
3 226,816 26,031 26,031 0 21,856 0 21,856
4 214,926 25,393 25,393 0 20,113 0 20,113
5 202,892 24,703 24,703 0 18,459 0 18,459
6 190,767 23,966 23,966 0 16,895 0 16,895
7 178,535 23,165 23,165 0 15,406 0 15,406
8 166,315 22,243 22,243 0 13,955 0 13,955
9 154,244 21,288 21,288 0 12,600 0 12,600
10 142,365 20,302 20,302 0 11,337 0 11,337
11 130,726 19,284 19,284 0 10,159 0 10,159
12 119,379 18,234 18,234 0 9,062 0 9,062
13 108,379 17,155 17,155 0 8,043 0 8,043
14 97,780 16,053 16,053 0 7,100 0 7,100
15 87,634 14,932 14,932 0 6,231 0 6,231
16 77,991 13,797 13,797 0 5,431 0 5,431
17 69,283 12,657 12,657 0 4,700 0 4,700
18 61,067 11,522 11,522 0 4,037 0 4,037
19 53,397 10,404 10,404 0 3,439 0 3,439
20 46,311 9,315 9,315 0 2,905 0 2,905
21 39,835 8,268 8,268 0 2,432 0 2,432
22 33,979 7,269 7,269 0 2,017 0 2,017
23 28,743 6,328 6,328 0 1,657 0 1,657
24 24,116 5,452 5,452 0 1,347 0 1,347
25 20,076 4,648 4,648 0 1,083 0 1,083
* * * * * * * *
32 4,877 1,149 1,149 0 178 0 178
33 3,997 914 914 0 134 0 134
34 3,304 727 727 0 100 0 100
35 2,759 579 579 0 75 0 75
36 2,331 464 464 0 57 0 57
37 1,995 375 375 0 43 0 43
38 1,729 307 307 0 33 0 33
39 1,518 254 254 0 26 0 26
* * * * * * * *
74 65 1 1 0 0 0 0
75 68 1 1 0 0 0 0
76 71 0 0 0 0 0 0
77 75 0 0 0 0 0 0
Total 253,300 0 253,300
Note: Years 26 to 31 and years 40 to 73 omitted.
1 December 19, 2023Administration, Investment and FiscalManagement BoardSacramento City Employees’ Retirement SystemSacramento, CaliforniaHonorable Major and City CouncilCity of SacramentoSacramento, CaliforniaThis letter is to inform the Administration, Investment and Fiscal Management Board (Board) of the Sacramento City Employees’ Retirement System (SCERS), a component unit of the City of Sacramento, California (City) about significant matters related to the conduct of our audit as of and for the fiscal year ended June 30, 2023, so that it can appropriately discharge its oversight responsibility and we comply with our professional responsibilities.Auditing standards generally accepted in the United States of America (AU-C 260, The Auditor’s Communication With Those Charged With Governance) (collectively hereafter, the Auditing Standards)require the auditor to promote effective two-way communication between the auditor and those charged with governance. Consistent with this requirement, the following summarizes our responsibilities regarding the financial statement audit as well as observations arising from our audit that are significant and relevant to your responsibility to oversee the financial reporting process.Our Responsibilities With Regard to the Financial Statement AuditOur responsibility under auditing standards generally accepted in the United States of America and Government Auditing Standards issued by the Comptroller General of the United States has been described to you in our engagement letter dated July 26, 2023. The audit of the financial statements does not relieve management or those charged with governance of their responsibilities, which are also described in that letter.Overview of the Planned Scope and Timing of the Financial Statement AuditWe have issued a separate communication dated July 26, 2023, regarding the planned scope and timing of our audit and identified significant risks. Accounting Policies and PracticesManagement has the ultimate responsibility for the appropriateness of the accounting policies used by the SCERS. The SCERS did not adopt any significant new accounting policies, nor have there been any changes to existing significant accounting policies during the current period. We did not identify any significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus. We also did not identify any significant unusual transactions. 2 Summary information about the process used by management in formulating particularly sensitive accounting estimates and about our conclusions regarding the reasonableness of those estimates is as follows.

Audit Adjustments and Uncorrected MisstatementsThere were no audit adjustments made to the original trial balance presented to us to begin our audit.Departure From the Auditor’s Standard Report Expected Other Matter Paragraph and ReportThe SCERS’ financial statements present prior-year comparative information. In light of this matter, we have included the following other matter paragraph and a report on the prior-year comparative information.Other MatterPrior-Year Comparative InformationThe financial 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 the SCERS’ financial statements for the fiscal year ended June 30, 2022, from which such partial information was derived.

Valuation of investmentsFair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Management’s estimate of the fair value of investments is based on a hierarchy of inputs. Observable inputs are developed based on market data obtained from sources independent from SCERS. Unobservable inputs are developed based on the best information available about the assumptions market participants would use in pricing the asset. MGO evaluated the assumptions through comparative analysis with third party pricing sources and determined that they are reasonable.Total pension liabilityManagement’s estimate of the total pension liability is based on actuarial measurements performed by an independent actuarial consultant in accordance with the parameters set forth in GASB Statement No. 67, Financial Reporting for Pension Plans, and actuarial standards of practice. The actuarial valuation is very sensitive to the underlying assumptions, including the discount rate. MGO evaluated the methodologies and assumptions used to develop the actuarial calculations through census data testing and engaging an actuarial consultant to evaluate the SCERS’actuarial valuation for reasonableness of assumptions and results and determined that they are reasonable. 3 Report on Partial Comparative InformationWe have previously audited the SCERS’ 2022 financial statements, and we expressed an unmodified opinion on the financial statements in our report dated December 19, 2022. In our opinion, the partial comparative information presented herein as of and for the fiscal year ended June 30, 2022, is consistent, in all material respects, with the audited financial statements from which it has been derived. Other Information Included in Annual ReportOur responsibility for other information included in annual reports is to read the information and consider whether its content or the manner of its presentation is materially inconsistent with the financial information covered by our auditor’s report, whether it contains a material misstatement of fact or whether the other information is otherwise misleading. We read the introductory and actuarial sections. We did not identify material inconsistencies with the audited financial statements. Internal Control Matters and Compliance under Government Auditing StandardsWe have issued our report dated December 19, 2023, on internal control over financial reporting and on compliance and other matters based on our audit of the SCERS’ financial statements performed in accordance with Government Auditing Standards. Disagreements With ManagementWe encountered no disagreements with management over the application of significant accounting principles, the basis for management’s judgments on any significant matters, the scope of the audit or significant disclosures to be included in the financial statements. Consultation With Other AccountantsWe are not aware of any consultations management had with other accountants about accounting or auditing matters.Significant Issues Discussed With ManagementNo significant issues arising from the audit were discussed or were the subject of correspondence with management.Significant Difficulties Encountered in Performing the AuditWe did not encounter any significant difficulties in dealing with management during the audit.Shared Responsibilities: AICPA IndependenceThe American Institute of Certified Public Accountants (AICPA) and the Government Accountability Office(GAO) regularly emphasizes that auditor independence is a joint responsibilityand is managed most effectively when management, audit committees (or their equivalents), and audit firms work together in considering compliance with AICPA and GAO independence rules. For MGO to fulfill its professional responsibility to maintain and monitor independence, management, the Board, and MGO each play an important role. 4 Our ResponsibilitiesAICPA and GAO rules require independence both of mind and in appearance when providing auditand other attestation services. MGO is to ensure that the AICPA and GAO’s General Requirements forperforming non-attest services are adhered to and included in all letters of engagement.Maintain a system of quality management over compliance with independence rules and firm policies.SCERS’ ResponsibilitiesTimely inform MGO, before the effective date of transactions or other business changes, of thefollowing:New affiliates, directors, or officers.Change in organizational structure or the reporting entity such as subsidiaries, partnerships, relatedentities, investments, joint ventures, component units, jointly governed organizations.Provide necessary affiliate information such as new or updated investment structure charts, as well asfinancial information required to perform materiality calculations needed for making affiliatedeterminations.Understand and conclude on the permissibility, prior to SCERS’ and its affiliates, officers, directors, orpersons in a decision-making capacity, engaging in business relationships with MGO.Not entering into relationships resulting in close family members of MGO covered persons, temporarilyor permanently acting as an officer, director, or person in an accounting or financial reporting oversightrole at SCERS.Management RepresentationsWe have requested certain written representations from management, which are included in the management representation letter dated December 19, 2023. ClosingWe will be pleased to respond to any questions you have about the foregoing. We appreciate the opportunity to continue to be of service to SCERS and the City. This report is intended solely for the information and use of the Board, City Council and management, and is not intended to be, and should not be, used by anyone other than these specified parties.

1 Independent Auditor’s Report on Internal Control Over Financial Reporting and onCompliance 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 (Government Auditing Standards), the financial statementsof 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, 2023, and the related notes to the financial statements, which collectively comprise the SCERS’ basic financial statements, and have issued our report thereon dated December 19, 2023. Report on Internal Control Over Financial ReportingIn planning and performing our audit of the financial statements, we considered the 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 the SCERS’ internal control. Accordingly, we do not express an opinion on the effectiveness of the 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’sfinancial 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 the 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, 2023

Budget and Audit CommitteeMay 28, 2024

Budget and Audit Committee
May 28, 2024