City of San Leandro
Pension Trust Analysis
FINANCE COMMITTEE MEETING – MAY 27, 2026
N i c o l e G o n z a l e s, F i n a n c e D i re c t o r D re w B a l l a rd , F SA, EA, MAAA, FO ST E R & FO ST E R 1 2
City of San Leandro
Pension Trust Update
Provide routine updates on the City’s Pension Trust
Finance Committee directed staff to analyze pension trust drawdown to help mitigate budget challenges
MAY 27, 2026
3 ➢ A Section 115 Trust (often referred to in the context of IRS Section 115) is an irrevocable, tax-exempt trust established by a government entity, municipality, or public agency to pre-fund post-retirement employee benefits (OPEB), such as healthcare or pensions.
Section 115 Supplement Trust = Pension Trust
➢ Can only be used to:
• Reimburse City for CalPERS contributions
• Make payments directly to CalPERS
➢ Pension Trust cannot be used for any other expenses not related to pension reimbursement or payments.
What is Section 115 Supplement Trust?
MAY 27, 2026
4 ➢ Pension Trust helps stabilize pension costs, mitigate budget challenges, and ensures future financial obligations are met.
➢ Pension Trust allows for more flexibility, control over investment strategy and risk tolerance, and more visibility.
➢ City established a Pension Trust to ensure adequate funding for future obligations, specially during the peak of the CalPERS required annual payment.
➢ City established the Pension Trust in April 2021.
Why Establish a Pension Trust?
MAY 27, 2026
Pension Trust Contributions & Asset Balance
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Projected Pension Trust Performance
6 41,187
45,409
50,063
55,195
60,852
67,090
73,966
81,548
89,907
99,122
-
20,000
40,000
60,000
80,000
100,000
120,000
Projected Pension Trust Balance ($000s)
Balance No Drawdown
MAY 27, 2026
CalPERS Annual
Payment
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8 ➢ CalPERS annual payment is often referred to as the Actuarially Determined Contribution (ADC).
➢ ADC determined as the sum of:
➢ Normal Cost (as a percentage-of-payroll)
➢ Annual cost of pension benefits earned by active employees, representing the current cost of a workforce, paid as a percentage of payroll
➢ Paid through combination of both employer and employee contributions
➢ Payment to Amortize Unfunded Actuarial Accrued Liability (UAAL) (as a fixed dollar)
➢ Shortfall between the projected benefits to be paid and the assets currently held in the pension fund
What is the CalPERS Annual Payment?
MAY 27, 2026
9 Actuarially Determined Contribution
(ADC)
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10 Actuarially Determined Contribution
(ADC)
MAY 27, 2026
11 Unfunded Actuarial Accrued Liability
(UAAL)
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12 Unfunded Actuarial Accrued Liability
(UAAL)
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Projected CalPERS Annual Payment
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Pension Trust
Drawdown
Analysis
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15 ➢ During FY 2027 Mid-cycle budget process, Finance Committee directed staff to explore and analyze potential drawdown scenarios from the City’s Pension Trust.
➢ The intent of the analysis is to understand the impact on stabilizing the City’s budget challenges, while ensuring the City’s ability to meet long-term obligations.
Finance Committee Direction
MAY 27, 2026
Drawdown Scenario Analysis
16 Scenario Analyzed:
➢ City makes the annual ADC -- City’s annual payment to CalPERS (normal cost + UAAL).
➢ City’s projected annual ADC for FY 2027-2037 ranges from $27.9M- $30.4M.
• $25.5 million will be funded annually from City Accounts (i.e.
General Fund)
• Balance owed will be an annual withdrawal from Pension Trust ranging from $0.6M-$4.9M
➢ CalPERS projected contributions (projected payments) are based on 50th percentile run
• Best estimate based on stable market and portfolio expectations ➢ Pension Trust analysis reflects an assumed investment return of 5% MAY 27, 2026
Drawdown Scenario - City’s Pension Trust
17 2/28/2026 Trust Balance - $38.6 million
Year Withdrawal (millions)
FY 2027 $2.7
FY 2028 $3.0
FY 2029 $4.8
FY 2030 $4.8
FY 2031 $4.9
FY 2032 $4.2
FY 2033 $4.4
FY 2034 $4.5
FY 2035 $4.4
FY 2036 $2.4
FY 2037 $0.6
MAY 27, 2026
Projected CalPERS Payment Sources
18 City’s Annual CalPERS Payment (Contribution Projections*) *Projection based on 50th Percentile
MAY 27, 2026
Pension Trust Balance Comparison
19 41,187
45,409
50,063
55,195
60,852
67,090
73,966
81,548
89,907
99,122
38,464
34,447
28,058
22,131
15,267 13,686 15,089 16,636 18,341 20,221
-
20,000
40,000
60,000
80,000
100,000
120,000
Projected Pension Trust Balance ($000s)
Balance No Drawdown Balance with Drawdown
MAY 27, 2026
Potential Risks
➢Funding Status
• Not using the Pension Trust to accelerate pay down of the UAAL could cause a decline in the aggregate funded status.
➢Purpose
• Pension Trust was originally established to help mitigate significant future increases in pension payments due to fluctuation in investment performance, and assumptions.
➢Unpredictable Investment Performance
• Based on recent CalPERS investment performance, projected annual payment trends over the next 5–10 years are currently more stable than previously anticipated.
• May increase the City’s annual CalPERS payments.
• Utilizing Pension Trust funds at this time would reduce resources available in the future to offset annual payment increases that may occur during periods of poor CalPERS investment performance.
MAY 27, 2026 20
Advantages
➢Stabilization
• Help mitigate budget challenges, while ensuring future financial obligations are met.
➢Flexibility
• Using a draw-down approach allows the City control over the timing of the withdrawals strategically, and to respond to changing economic conditions.
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Impacts to Potential Changes to
CalPERS Rates
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25,068
26,993 28,224 28,536
30,271 30,311 30,369 29,682 29,911 29,979 29,930
27,941
25,068
26,993 28,224 28,536
31,284
32,670
34,263 35,071
37,235 38,180 39,424 40,221
0 5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
24/25 25/26 26/27 27/28 28/29 29/30 30/31 31/32 32/33 33/34 34/35 35/36 Current Rates Potential Change in Rates
Final Considerations
➢Pension Trust Drawdown is Risky
• Early drawdown could diminish available funds, that would be necessary if CalPERS were to experience poor investment returns, resulting in City rates (annual CalPERS payments) increasing beyond current projections.
• Ensuring money is available to pay the bill when obligations come due.
➢Legal mandate to meet benefits obligations
➢Too Risky Today, But Continue to Evaluation
• Changes in Market Performance
• Impacts from PEPRA
23 24
The City successfully addressed the $11.6M deficit during the FY 2027 Mid-Cycle budget process, with the City’s financial forecast assuming the fully required annual payment to CalPERS At this time, refrain from Pension Trust withdrawals – Reserving for time of significant economic downturn or large-scale changes in annual CalPERS payment Pension Trust Drawdown is
Not Necessary at this Time
A B C D E F G H I J K L
2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035
Actuals Adjusted Adopted Est. Est. Est. Est. Est. Est. Est. Est. 1 Beginning Fund Balance $74.9M $69.5M $53.5M $48.1M $48.7M $49.5M $49.9M $51.7M $51.1M $48.7M $50.6M 2 3 Revenue $147.7M $149.3M $153.7M $157.0M $160.6M $164.2M $168.2M $168.8M $172.7M $177.6M $182.9M 4 5 Operating Expenditures $144.3M $149.3M $150.6M $151.9M $156.2M $159.9M $163.9M $166.7M $169.9M $172.7M $175.9M 6 Prior Year Carryover $9.4M
7 Transfers $8.8M $6.6M $8.5M $4.5M $3.7M $3.8M $2.5M $2.7M $5.3M $3.0M $3.2M 8 Net/Use of Fund Balance -$5.4M -$16.0M -$5.3M $0.6M $0.7M $0.5M $1.8M -$0.6M -$2.5M $1.9M $3.8M 9 10 Ending Fund Balance $69.5M $53.5M $48.1M $48.7M $49.5M $49.9M $51.7M $51.1M $48.7M $50.6M $54.4M 11 12 % of Expenditures for Economic Uncertainties38.6% 25.0% 23.3% 21.5% 21.4% 21.1% 23.4% 22.6% 20.8% 21.5% 23.3% MAY 27, 2026
25 Discussion & Questions
MAY 27, 2026