HomeMy WebLinkAboutAdopt Resolution of Intention No. 2008-16 Amending the Contr d
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Council Meeting Date: 03/03/08 Department ID Number: HR 08-02
CITY OF HUNTINGTON BEACH
REQUEST FOR CITY COUNCIL ACTION
SUBMITTED TO: HONORABLE MAYOR AND CITY C CIL ME R
SUBMITTED BY: PAUL EMERY, INTERIM T MINI T
PREPARED BY: MICHELE CARR, CES
SUBJECT: ADOPT A RESOL 10 F INTENTION TO APPROVE AN AMENDMENT
TO THE CONT CT TWEEN THE BOARD OF ADMINISTRATION OF
THE CALIFOR A P BLIC EMPLOYEES' RETIREMENT SYSTEM AND THE
CITY COUNC THE CITY OF HUNTINGTON BEACH
Statement of Issue,Funding Source, Recommended Action,Alternative Action(s),Analysis,Environmental Status,Attachments)
Statement of Issue:
The City and representatives of MEA, MEO and POA met and conferred regarding the
implementation of enhanced retirement benefits — CalPERS 2.5% 55 Formula. Appropriate
modifications to Memorandums of Understanding have been approved by Council.
Funding Source:
The cost to implement the retirement plan enhancement will be borne by the affected
employees in all groups; MEA, MEO, POA miscellaneous (non-safety) members and NA
employees.
Recommended Action:
Motion to:
1. Adopt Resolution No. 2008-16 , a Resolution Of Intention To Approve An Amendment
To The Contract Between The Board Of Administration Of The California Public
Employees' Retirement System And The City Council Of The City Of Huntington
Beach.
2. Authorize the City Clerk to execute the Certification of Governing Body's Action and
the Certification of Compliance with Government Code Section 7507 (PERS-CON-12).
3. Authorize and approve the Mayor to execute CalPERS Resolution of Intention (PERS-
CON-12A).
Res. No. 2008-16
STATE OF CALIFORNIA
COUNTY OF ORANGE ) ss:
CITY OF HUNTINGTON BEACH )
I, ,LOAN L. FLYNN the duly elected, qualified City Clerk of the City of
Huntington Beach, and ex-officio Clerk of the City Council of said City, do hereby
certify that the whole number of members of the City Council of the City of
Huntington Beach is seven; that the foregoing resolution was passed and adopted
by the affirmative vote of at least a majority of all the members of said City Council
at a regular meeting thereof held on March 17, 2008 by the following vote:
AYES: Bohr, Coerper, Green, Carchio
NOES: Cook, Hardy, Hansen
ABSENT: None
ABSTAIN: None
City erk and ex-officio C rk of the
City Council of the City of
Huntington Beach, California
ATTACHMENT #2
CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM
Actuarial and Employer Services Branch
Public Agency Contract Services
P.O. Box 942709
Sacramento, CA 94229-2709
(888) CalPERS (225-7377)
CERTIFICATION OF GOVERNING BODY'S ACTION
I hereby certify that the foregoing is a true and correct copy of a Resolution adopted by the
City Council of the
(governing body)
City of Huntington Beach
(public agency)
on March 17, 2008
(date)
er Secre ry
City Clerk
Title
PERS-CON-12(rev. 1/96)
ATTACHMENT #3
CONTRACT AMENDMENT COST ANALYSIS-VALUATION BASIS:June 30,2006
MISCELLANEOUS PLAN FOR CITY OF HUNTINGTON BEACH
Employer Number:97
Benefit Description:Section 21354.4,2.5%@ 55 Full Formula(Includes All Active Local Miscellaneous Members
Only)
Actuarial Cost Estimates in General
What will this amendment cost? Unfortunately,there is no simple answer.There are two major reasons for the
complexity of the answer:
First, all actuarial calculations, including the ones in this cost estimate are based on a lot of assumptions
about the future— demographic assumptions about the percentage of your employees that will terminate,
die, become disabled, and retire in each future year, and economic assumptions about what salary
increases each employee receives and the most important assumption: what the assets at CalPERS will
earn for each year into the future until the last dollar is paid to current members of your plan. While
CalPERS has set these assumptions as our best estimate of the real future of your plan, it must be
understood that these assumptions are very long term predictors and will surely not be realized each year
as we go forward. For example, the asset earnings for the past 15 years at CalPERS have ranged from
-7.2%to 20.1%, yet the 15 year compound return has been 10.0%,well above our assumption.
® Second, the very nature of actuarial funding produces the answer to the question of amendment cost as
the sum of two separate pieces:
1. The increase in Normal Cost (i.e., the increase in future annual premiums in the absence of
surplus or unfunded liability)expressed as a percentage of total active payroll, and
2. The increase in Past Service Cost (i.e., Accrued Liability — representing the current value of the
increased benefit for all past service of current members)which is expressed as a lump sum dollar
amount.
The cost is the sum of a percent of future pay and a lump sum dollar amount(the sum of an apple and an
orange if you will). To communicate the total cost, either the increase in Normal Cost (i.e., future percent
of payroll) must be converted to a lump sum dollar amount(in which case the result is called the increase
in the present value of benefits), or the Past Service Cost (i.e., the lump sum) must be converted to a
percent of payroll (in which case the result is the increase in the employer's rate). Converting the Past
Service Cost lump sum to a percent of payroll requires a specific amortization period. So, the new
employer rate can be computed in many different ways depending on how long one will take to pay for it.
And don't forget the first bullet point above; all of these results depend on all of the assumptions being
exactly realized.
Rate Volatility
As is stated above, the cost estimates supplied in this communication are based on a number of assumptions about
very long term demographic and economic behavior. Even if these assumptions are exactly realized (terminations,
deaths, disabilities, retirements, salary growth, and investment return) there will be differences on a year to year
basis. This year to year difference between actual experience and the assumptions is called gains and losses and
serve to raise or lower the employer's rates from year to year. So,the rates will bounce around,especially due to the
ups and downs of investment returns.
The volatility in annual employer rates may be affected by this amendment. The reason is that higher benefits and
earlier retirement ages require the accumulation of more assets per member earlier in their career. Rate volatility
can be measured by the ratio of plan assets to active member payroll. Higher asset to payroll ratios produce more
volatile employer rates.To see this, consider two plans, one with assets that are 4 times active member payroll, and
the other with assets that are 8 times active member payroll. In a given year, see what happens when assets rise or
fall 10% above or below the actuarial assumption. For the plan with a.ratio of 4, this 10 percent gain or loss in
assets is the same in dollars as 40%of payroll; and for the plan with a ratio of 8,this is equivalent to 80%of payroll.
If this gain or loss is spread over 20 years (and we oversimplify by ignoring interest on the gain or loss), then the
first plan's rate changes by 2%of pay while the second plan's rate changes by 4%of pay.
November 26, 2007 Page 1
CONTRACT AMENDMENT COST ANALYSIS-VALUATION BASIS:June 30,2006
MISCELLANEOUS PLAN FOR CITY OF HUNTINGTON BEACH
Employer Number:97
Benefit Description:Section 21354.4,2.5%@ 55 Full Formula(Includes All Active Local Miscellaneous Members
Only)
When a plan is amended, liability changes but assets do not. In addition, the desired state is to be 100% funded
(i.e.,to bring assets to equal accrued liability). Therefore, we disclose the ratio of accrued liability to payroll rather
than assets to payroll as a measure of the plan's potential future rate volatility. The higher the ratio, the more
volatile the future rate may be.The table below contains these measures of potential future rate volatility.
As of June 30,2006 Current Plan Post-Amendment
Accrued Liability $ 271,253,508 $ 277,409,472
Payroll 41,263,267 41,263,267
Volatility Index 6.6 6.7
It should also be noted that these ratios tend to stabilize as the plan matures. That is, all plans with no past service
start their lives with zero assets and zero accrued liability—and so asset to payroll ratio and liability to payroll ratio of
zero. However, as time goes by these ratios begin to rise and then tend to stabilize at some constant amount as the .
plan matures. Higher benefit levels and earlier expected retirements produce higher constant future ratios. For
example, our miscellaneous plans have average ratios that range from 2.6%for 2%@ 60 plans to 5.1%for 2.7% @
55 plans. For safety plans,the ratios range from 5.2%for 2%@ 55 plans to 9.3%for 3% @ 50 plans.
Present Value of Projected Benefits
The table below shows the change in the total present value of benefits for the proposed plan amendment. The
present value of benefits represents the total dollars needed today to fund all future benefits for current members of
the plan (i.e., without regard to future employees). The difference between this amount and current plan assets
must be paid by future employee and employer contributions. As such, the change in the present value of benefits
due to the plan amendment represents the"cost"of the plan amendment.
However,for plans with excess assets some or all of this"cost"may already be covered by current excess assets.
As of June 30, 2006 Current Plan Post-Amendment
'total Assets at Market Value(MVA) $ 282,746,299 $ 282,746,299
Actuarial Value of Assets(AVA) 266,642,383 266,642,383
AVA/ MVA 94.3% 94.3%
Present Value of Projected Benefits(PVB) $ 318,398,811 $ 331,423,858
Actuarial Value of Assets(AVA) 266,642,383 266,642,383
Present Value of Future Employer and
Employee Contributions(PVB—AVA) $ 51,756,428 $ 64,781,475
Change to PVB 13,025,047
Accrued Liability
It is not required, nor necessarily desirable,to have accumulated assets sufficient to cover the total present value of
benefits until every member has left employment. Instead, the actuarial funding process calculates a regular
contribution schedule of employee contributions and employer contributions(called normal costs)which are designed
to accumulate with interest to equal the total present value of benefits by the time every member has left
employment. As of each June 30,the actuary calculates the'desirable'level of plan assets as of that point in time
by subtracting the present value of scheduled future employee contributions and future employer normal costs from
the total present value of benefits. The resulting"desirable"level of assets is called the accruedliability.
November 26,2007 Page 2
REQUEST FOR CITY COUNCIL ACTION
MEETING DATE: 03/03/08 DEPARTMENT ID NUMBER: HR 08-02
Alternative Action(s):
Do not adopt Resolution No. 2008-16 , a Resolution Of Intention To Approve An
Amendment To The Contract Between The Board Of Administration Of The California Public
Employees' Retirement System And The City Council Of The City Of Huntington Beach.
Do not authorize the City Clerk to execute the Certification of Governing Body's Action and
the Certification of Compliance with Government Code Section 7507 (PERS-CON-12).
Do not a authorize and approve the Mayor to execute CaIPERS Resolution of Intention
(PERS-CON-12A).
Analysis:
Representatives of MEA, MEO and POA have agreed to the additional terms and conditions
as outlined in the current MOU(s) or approved Side Letter Agreement(s) previously approved
by City Council. The current NA Resolution (for non-represented employees), reflects the
appropriate terms and conditions associated with the proposed benefit enhancement and has
been approved by City Council.
The City and the Associations have agreed to implement the CalPERS 2.5% @ 55
Miscellaneous Retirement Plan Formula, subject to Council approval and attainment of the
required majority approval vote in accordance with CalPERS requirements. The
Associations and the City agreed that the eligible Association members would absorb all of
the additional costs of the enhanced plan benefit from the implementation date through the
end of the contract terms.
For POA non-safety/miscellaneous members, in the event the additional employee costs
drop below 2.25%, the Association members agree to absorb 2.25% of the employee share
of the additional costs for the enhanced retirement plan benefit formula.
Based upon the CaIPERS Contract Amendment Cost Analysis, the overall percentage
change to the City's contribution rate, which will be borne by the affected employees'
is 3.285%. This reflects a change in the total employer rate of 2.285% + 1% - increase in the
contribution rate of reportable earnings (currently 7% to 8% post-amendment).
Cost Disclosure
Change in the Present Value of Benefits $13,025,047
Change in Accrued Liability $ 6,155,964
Change in Total Employer Rate 2.285%
The local miscellaneous member contribution rate will be 8% of reportable earnings, as of the
effective date of the amendment to the contract.
Strategic Plan Goal:
Provide quality public services with the highest professional standards to meet community
expectations and needs, assuring that the city is sufficiently staffed and equipped overall.
-2- 2/25/2008 1:36 PM
REQUEST FOR CITY COUNCIL ACTION
MEETING DATE: 03/03/08 DEPARTMENT ID NUMBER: HR 08-02
Fully understand the financial implications of financial decisions before they are made, and
recognize and disclose fiscal impacts of the pension crisis.
Environmental Status:
n/a
Attachment(s):
City qllotk�s.
Page Number ® o .
1. RESOLUTION OF INTENTION TO APPROVE AN AMENDMENT TO
CONTRACT BETWEEN THE BOARD OF ADMINISTRATION
CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM AND
THE CITY COUNCIL CITY OF HUNTINGTON BEACH
EXHIBIT A — AMENDMENT TO CONTRACT BETWEEN THE BOARD
OF ADMINISTRATION CALIFORNIA PUBLIC EMPLOYEES'
RETIREMENT SYSTEM AND THE CITY COUNCIL CITY OF
HUNTINGTON BEACH
2. CERTIFICATION OF GOVERNING BODY'S ACTION (PERS-CON-
12
3. CONTRACT AMENDMENT COST ANALYSIS — MISCELLANEOUS
PLAN FOR CITY OF HUNTINGTON BEACH
4. CERTIFICATION OF COMPLIANCE WITH GOVERNMENT CODE
SECTION 7507 PERS-CON-12A
-3- 2/25/2008 3:00 PM
ATTACHMENT # 1
RESOLUTION NO. 2008-16
RESOLUTION OF INTENTION
TO APPROVE AN AMENDMENT TO CONTRACT
BETWEEN THE
BOARD OF ADMINISTRATION
CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM!
AND THE
CITY COUNCIL
CITY OF HUNTINGTON BEACH
WHEREAS, the Public Employees' Retirement Law permits the participation of public
agencies and their employees in the Public Employees' Retirement System
by the execution of a contract, and sets forth the procedure by which said
public agencies may elect to subject themselves and their employees to
amendments to said Law; and
WHEREAS, one of the steps in the procedures to amend this contract is the adoption
by the governing body of the public agency of a resolution giving notice of
its intention to approve an amendment to said contract, which resolution
shall contain a summary of the change proposed in said contract; and
WHEREAS, the following is a statement of the proposed change:
To provide Section 21354.4 (2.5% @ 55 Full formula) for
local miscellaneous members.
NOW, THEREFORE, BE IT RESOLVED that the governing body of the above agency
does hereby give notice of intention to approve an amendment to the
contract between said public agency and the Board of Administration of the
Public Employees' Retirement System, a copy of said amendment being
ttached hereto, as an "Exhibit" and by this reference made a part hereof.
REVIEW APP 0 D
11
By:
P esiding Officer
City Administr or
Mayor
Title
March 17 2008
Date adopted and approved
aAS TO FORD
Ja
c
(Amendment) A`I'g'aRNEX 'b
CON-302(Rev.4/96)
Exhibit - Resolution No. 2008-16
CaIPERS
EXHIBIT
California
Public Employees' Retirement System
TO CONTRACT
Between the
Board of Administration
California Public Employees ' Retirement System
and the
City Council
City of Huntington Beach
The Board of Administration, California Public Employees' Retirement System,
hereinafter referred to as Board, and the governing body of the above public agency,
hereinafter referred to as Public Agency, having entered into a contract effective
October 1, 1945, and witnessed October 27, 1945, and as amended effective January
1, 1950, March 1, 1952, November 1, 1957, March 1, 1958, October 1, 1961, January 1,
1971, January 12, 1974, April 18, 1975, February 21, 1976, August 7, 1976, September
17, 1977, September 30, 1978, June 6, 1981, March 18, 1982, February 24, 1983,
December 4, 1986, March 18, 1988, November 4, 1999, April 20, 2000, June 30, 2001,
October 5, 2001, February 6, 2003, May 8, 2003 and March 11, 2006 which provides for
participation of Public Agency in said System, Board and Public Agency hereby agree
as follows:
A. Paragraphs 1 through 12 are hereby stricken from said contract as executed
effective March 11, 2006, and hereby replaced by the following paragraphs
numbered 1 through 13 inclusive:
1. All words and terms used herein which are defined in the Public
Employees' Retirement Law shall have the meaning as defined therein
unless otherwise specifically provided. "Normal retirement age" shall
mean age 55 for local miscellaneous members and age 50 for local safety
members.
Exhibit - Resolution No. 2008-16
2. Public Agency shall participate in the Public Employees' Retirement
System from and after October 1, 1945 making its employees as
hereinafter provided, members of said System subject to all provisions of
the Public Employees' Retirement Law except such as apply only on
election of a contracting agency and are not provided for herein and to all
amendments to said Law hereafter enacted except those, which by
express provisions thereof, apply only on the election of a contracting
agency.
3. Employees of Public Agency in the following classes shall become
members of said Retirement System except such in each such class as
are excluded by law or this agreement:
a. Local Fire Fighters (herein referred to as local safety members);
b. Local Police Officers (herein referred to as local safety members);
1. Local Police Officers shall include individuals defined by
Section 20020 of the Government code prior to its amendment
at the 1975-76 Regular Legislative Session, effective January 1,
1976, employed by Public Agency prior to such amendment.
C. Ocean Beach Lifeguards (included as local safety members);
d. Employees other than local safety members (herein referred to as
local miscellaneous members).
4. In addition to the classes of employees excluded from membership by
said Retirement Law, the following classes of employees shall not become
members of said Retirement System:
a. CROSSING GUARDS, EMPLOYEES IN STUDENT DESIGNATED
POSISTIONS AND SENIOR OUTREACH ASSISTANTS HIRED
ON AND AFTER MARCH 18, 1982; AND
b. RESERVE FIREFIGHTERS HIRED ON AND AFTER DECEMBER
4, 1986.
5. The percentage of final compensation to be provided for each year of
credited prior and current service as a local miscellaneous member in
employment before and not on or after the effective date of this
amendment to contract shall be determined in accordance with Section
21354 of said Retirement Law (2% at age 55 Full).
6. The percentage of final compensation to be provided for each year of
credited prior and current service as a local miscellaneous member in
employment on or after the effective date of this amendment to contract
shall be determined in accordance with Section 21354.4 of said
Retirement Law (2.5% at age 55 Full).
Exhibit - Resolution No. 2008-16
7. The percentage of final compensation to be provided for each year of
credited prior and current service as a local safety member shall be
determined in accordance with Section 21362.2 of said Retirement Law
(3% at age 50 Full).
8. Public Agency elected and elects to be subject to the following optional
provisions:
a. Section 21574 (Fourth Level of 1959 Survivor Benefits).
b. Section 20421 ("Local Safety Member" shall include ocean beach
lifeguards of a city as described in Government Code Section
20421).
C. Sections 21624, 21626 and 21628 (Post-Retirement Survivor
Allowance) for local fire members only.
d. Section 20020.1 ("Local Police Officer" shall include employees of
a police department who were employed to perform identification or
communication duties on August 4, 1972 and who elected to be
local safety members within six months of April 18, 1975).
Legislation repealed said Section effective January 1, 1985.
e_ Section 21024 (Military Service Credit as Public Service).
f. Section 20042 (One-Year Final Compensation).
g. Section 20903 (Two Years Additional Service Credit).
h. Section 21037 (Cancellation of Payment for Optional Service Credit
Upon Retirement for Industrial Disability) for local safety members
only.
i. Section 21548 (Pre-Retirement Option 2W Death Benefit).
9. Public Agency, in accordance with Government Code Section 20790,
ceased to be an "employer" for purposes of Section 20834 effective on
April 18, 1975. Accumulated contributions of Public Agency shall be fixed
and determined as provided in Government Code Section 20834, and
accumulated contributions thereafter shall be held by the Board as
provided in Government Code Section 20834.
10. Public Agency shall contribute to said Retirement System the contributions
determined by actuarial valuations of prior and future service liability with
respect to local miscellaneous members and local safety members of said
Retirement System.
Exhibit - Resolution No. 2008-16
11. Public Agency shall also contribute to said Retirement System as follows_
a. Contributions required per covered member on account of the 1959
Survivor Benefits provided under Section 21574 of said Retirement
Law. (Subject to annual change.) In addition, all assets and
liabilities of Public Agency and its employees shall be pooled in a
single account, based on term insurance rates, for survivors of all
local miscellaneous members and local safety members.
b. A reasonable amount, as fixed by the Board, payable in one
installment within 60 days of date of contract to cover the costs of
administering said System as it affects the employees of Public
Agency, not including the costs of special valuations or of the
periodic investigation and valuations required by law.
C. A reasonable amount, as fixed by the Board, payable in. one
installment as the occasions arise, to cover the costs of special
valuations on account of employees of Public Agency, and costs of
the periodic investigation and valuations required by law.
12. Contributions required of Public Agency and its employees shall be
subject to adjustment by Board on account of amendments to the Public
Employees' Retirement Law, and on account of the experience under the
Retirement System as determined by the periodic investigation and
valuation required by said Retirement Law.
13. Contributions required of Public Agency and its employees shall be paid
by Public Agency to the Retirement System within fifteen days after the
end of the period to which said contributions refer or as may be prescribed
by Board regulation. If more or less than the correct amount of
contributions is paid for any period, proper adjustment shall be made in
connection with subsequent remittances. Adjustments on account of
errors in contributions required of any employee may be made by direct
payments between the employee and the Board.
B. This amendment shall be effective on the day of ,
BOARD OF ADMINISTRATION CITY COUNICL
PUBLIC EMPLOYEES' RETIREMENT SYSTEM CITY OF HUNTINGTON BEACH
BY ,C` °' BY
LORI MCGARTLAND, CHIEF PRESIDING OFFICER
EMPLOYER SERVICES°DIVISION
PUBLIC EMPLOYEES'"RETIREMENT SYSTEM
Witness;Date'
d
Clerk
AMENDMENT ER#0097
PFRS_C:0N_7n7A 1PA,, 10\nr�
CONTRACT AMENDMENT COST ANALYSIS-VALUATION BASIS:June 30,2006
MISCELLANEOUS PLAN FOR CITY OF HUNTINGTON BEACH
Employer Number:97
Benefit Description:Section 21354.4,2.5%@ 55 Full Formula(Includes All Active Local Miscellaneous Members
Only)
A plan with assets exactly equal to the plan's accrued liability is simply"on schedule" in funding that plan, and only
future employee contributions and future employer normal costs are needed. A plan with assets below the accrued
liability is"behind schedule", or is said to have an unfunded liability, and must temporarily increase contributions to
get back on schedule. A plan with assets in excess of the plan's accrued liability is"ahead of schedule", or is said to
have excess assets, and can temporarily reduce future contributions. A plan with assets (AVA) in excess of the total
present value of benefits is called super-funded, and neither future employer nor employee contributions are
required. Of course, events such as plan amendments and investment or demographic gains or losses can change a
plan's condition from year to year. For example, a plan amendment could cause a plan to move all the way from
being super-funded to being in an unfunded position.
The changes in your plan's accrued liability, unfunded accrued liability, and the funded ratio as of June 30, 2006 due
to the plan amendment are shown in the table below.
As of June 30, 2006 Current Plan Post-Amendment
Entry Age Normal Accrued Liability(AL) $ 271,253,508 $ 277,409,472
Actuarial Value of Assets(AVA) 266,642,383 266,642,383
Unfunded Liability/(Excess Assets)(UAL=AL— $ 4,611,125 $ 10,767,089
AVA)
Funded Ratio(AVA/ AL) 98.3% 96.1%
Change to AL 6,155,964
Total Employer Contribution Rate
While the table above gives the changes in the accrued liability and funded status of the plan due to the amendment,
there remains the question of what will happen to the employer contribution rate because of the change in plan
provisions.
CalPERS policy is to implement rate changes due to plan amendments immediately on the effective date of the
change in plan benefits. This change is displayed as the"Change to Total Employer Rate"on the following page. If
the contract amendment effective date is on or before June 30, 2008, the change in the employer contribution rate
should be added to the employer's current rate. In general, the policy also provides that the change in unfunded
liability due to the plan amendment will be separately amortized over a period of 20 years from the effective date of
the amendment and all other components of the plan's unfunded liability/excess assets will continue to be amortized
separately.
However,your actuary may choose to apply different rules to plans with a current employer contribution rate of zero.
The pre-amendment excess assets in these plans were sufficient to cover the employer's normal cost for one or more
years into the future. A plan amendment will use up some or all of the pre-amendment excess assets. In order to
maintain our goal of providing rates that are relatively stable, while taking into account known or expected future
events, your actuary may decide to spread any remaining excess assets over a single number of years. This is
known as a "fresh start" and will, in no case, be less than 5 years. You may call your actuary to discuss further
alternative financing options. If the amendment uses up all excess assets and creates an unfunded liability (i.e.,
from being ahead of schedule to behind schedule),the total post-amendment unfunded liability may be amortized
over 20 years.
In no case may the annual contribution with regard to a positive unfunded liability be less than the amount which
would be required to amortize that unfunded liability, as a level percent of pay, over 30 years. The table on the
following page shows the change in your plan's employer contribution rate due to the plan amendment for fiscal year
2008-2009.
November 26, 2007 Page 3
CONTRACT AMENDMENT COST ANALYSIS-VALUATION BASIS:June 30,2006
MISCELLANEOUS PLAN FOR CITY OF HUNTINGTON BEACH
Employer Number:97
Benefit Description:Section 21354.4,2.5%@ 55 Full Formula(Includes All Active Local Miscellaneous Members
Only)
As of June 30, 2006 Current Plan Post-Amendment
2008-2009 Employer Rate
Payment for Normal Cost 6.891% 7.706%
Payment on Amortization Bases 1.354% 2.824%
Total Employer Rate 8.245% 10.530%
Change to Normal Cost 0.815%
Change to Total Employer Rate 2.285%
Current Amortization Bases 1 Multiple Bases
Amendment Amortization Base
- Fresh Start 2 N/A
- Multiple Base 3 20-year
2008-2009 Employee Rate
Total Employee Rate 7.000% 8.000%
Change to Total Employee Rate 1.000%
2009-2010
Estimated Employer Rate(recognizing
18.5%investment return for 2006-2007) 7.8% 10.1%
Projection Amortization Base Multiple Base Multiple Base
1 — Details of the current amortization base are shown on page 13 of June 30, 2006 annual valuation report. If you have adopted any other
subsequent amendments,the current amortization base is the schedule after these adopted amendments.
2-If a fixed number of years is shown, it means that the current unfunded actuarial liability is projected and amortized over this fixed number of
years. This amortization replaces the amortization schedule shown in your June 30,2006 annual valuation and any other subsequent amendments
you have adopted.
3-If 20-year is shown,it means that the change in liability due to plan amendments is amortized separately over a 20-year period. This amortization.
schedule is in addition to the amortization schedule shown in the June 30,2006 annual valuation and any other subsequent amendments you have
adopted.
In the above table, the information shown represents the actual initial contribution rate that will apply during fiscal
year 2008-2009 if you adopt the amendment. However, these figures do not incorporate the projected 18.5%
investment return in 2006-2007. The estimated employer rates shown for 2009-2010,which incorporate this return,
will give you a good estimate of what to expect in 20G9-2010.
Note that the change in normal cost in the table above may be much more indicative of the long term change in the
employer contribution rate due to the plan amendment. The plan's payment on amortization bases shown in the
table above is a temporary adjustment to the employer contribution to "get the plan back on schedule". This
temporary adjustment to the employer rate varies in duration from plan to plan. For example, a plan with initial
excess assets being amortized over a short period of time will typically experience a large rate increase when excess
assets are fully amortized. While a plan amendment for such a plan may produce little or no increase in the
employer contribution rate now,the change in normal cost due to the plan amendment will become fully reflected in
the employer contribution rate as soon as initial excess assets are fully amortized.
November 26, 2007 Page 4
CONTRACT AMENDMENT COST ANALYSIS-VALUATION BASIS:June 30,2006
MISCELLANEOUS PLAN FOR CITY OF HUNTINGTON BEACH
Employer Number:97
Benefit Description:Section 21354.4,2.5%@ 55 Full Formula(Includes All Active Local Miscellaneous Members
Only)
Disclosure
If your agency is requesting cost information for two or more benefit changes,the cost of adopting more than one of
these changes may not be obtained by adding the individual costs. Instead, a separate valuation must be done to
provide a cost analysis for the combination of benefit changes. If the proposed plan amendment applies to only
some of the employees in the plan,the rate change due to the plan amendment still applies to the entire plan, and is
still based on the total plan payroll.
Any mandated benefit improvements not included in the June 30, 2006 annual valuation have not been incorporated
into this cost analysis.
Please note that the cost analysis provided in this document may not be relied upon after August 1, 2008. If you
have not taken action to amend your contract, by this date, you must contact our office for an updated cost analysis,
based on the new annual valuation.
Descriptions of the actuarial methodologies, actuarial assumptions, and plan benefit provisions may be found in the
appendices of the June 30, 2006 annual report. Please note that the results shown here are subject to change if any
of the data or plan provisions change from what was used in this study.
Certification
This actuarial valuation for the proposed plan amendment is based on the participant, benefits, and asset data used
in the June 30, 2006 annual valuation, with the benefits modified if necessary to reflect what is currently provided
under your contract with CalPERS, and further modified to reflect the proposed plan amendment. The valuation has
been performed in accordance with standards of practice prescribed by the Actuarial Standards Board, and the
assumptions and methods are internally consistent and reasonable for this plan, as prescribed by the CalPERS Board
of Administration according to provisions set forth in the California Public Employees'Retirement Law.
Richard Santos,ASA, 14Ai;�
Senior Pension Actuary,CaIPERS
Fin Process Ids: Annual-296917 Base-303672 Proposal-303673
November 26, 2007 Page 5
CONTRACT AMENDMENT COST ANALYSIS-VALUATION BASIS:June 30,2006
MISCELLANEOUS PLAN FOR CITY OF HUNTINGTON BEACH
Employer Number:97
Benefit Description:Section 21354.4,2.5%@ 55 Full Formula(Includes All Active Local Miscellaneous Members
Only)
Summary Of Plan Amendments Valued
COVERAGE GROUP 70001
Pre-Amendment
• The Service Retirement benefit calculated for service earned by this group of members is a monthly
allowance equal to the product of the 2% @ 55 benefit factor,years of service,and final compensation.
(Final compensation is reduced by$133.33 per month for members with a modified formula). The
benefit factors for retirement at integral ages are shown below:
Retirement 2%at 55 Retirement 2%at 55
Age Factor Acme Factor
50 1.426% 57 2.104%
51 1.522% 58 2.156%
52 1.628% 59 2.210%
53 1.742% 60 2.262%
54 1.866% 61 2.314%
55 2.000% 62 2.366%
56 2.052% 63 and older 2.418%
• This group of members is required to contribute 7%of reportable earnings. (Members with a modified
formula contribute 7% of reportable earnings in excess of$133.33 per month).
Post-Amendment
• The Service Retirement benefit calculated for service earned by this group of members(applying to
active members only) is a monthly allowance equal to the product of the 2.5% @ 55 benefit factor,
years of service,and final compensation. (Final compensation is reduced by$133.33 per month for
members with a modified formula). The benefit factors for retirement at integral ages are shown
below:
Retirement 2.5%at 55
Age Factor
50 2.000%
51 2.100%
52 2.200%
53 2.300%
54 2.400%
55 and older 2.500%
• This group of members is required to contribute 8%of reportable earnings. (Members with a modified
formula contribute 8%of reportable earnings in excess of$133.33 per month).
November 26, 2007 Page 6
CONTRACT AMENDMENT COST ANALYSIS-VALUATION BASIS:June 30,2006
MISCELLANEOUS PLAN FOR CITY OF HUNTINGTON BEACH
Employer Number:97
@ 55 Full Formula(Includes All Active Local Miscellaneous Members
Benefit Description:Section 21354.4,2.5%
Only)
Probability of Retirement for New Miscellaneous Benefit Formulas
The introduction of the three new miscellaneous formulas will affect future retirement behavior. As a result,we
developed 3 sets of probability of retirements to reflect the estimated changes in retirement pattern. At this point,
we cannot know the exact impact the new formulas will have. As we perform experience studies in the future,we
will modify our retirement assumptions accordingly. The table below contains the new probability of retirement.
2.5/o @ 55
0 2.7%@ 55 3%@ 60
Female
Retirement a Male Female Male Female Mole 7%
0 5 /o
50 5% 7% % 7% 5% 5%
0 5%
51 2% 5% 2% 5%
52 3% 5 0 3% 5%
53 3% 5% 4% 6% 4% 5%
54 4% 500 8% 9%
55 8% 9% 0 9% 10 0% 7% 8%
56 6% 6% 8% 7% 8% 7%
57 7%58 8% 10/o 8%
% 10%
0 0 11% 10%
59 9% 9°0° 107 0
60 16% 12 11% 17% 12%
C1 15% 10% 1 160
0 28 23/o
62 26% 21/o %0 20%
63 22% 18% 23/o 0 18% 16%
° 14/o
64 15% 13% 16%0 27% 30% 30%
65 25% 25% 27
66 14% 15/o 0 16% 14% 17%
67 129/6 1470 13/o ° 15% 13%
° 13% 12/o
68 12% 11/o 0 14% 11% 15%
69 9% 13% 10/o
70 100% 100
100% 100% 100% 100%
%
Page 7
November 26,2007
ATTACHMENT #4
CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM
Actuarial and Employer Services Branch
Public Agency Contract Services
P.O. Box 942709
Sacramento, CA 94229-2709
(888) CalPERS (225-7377)
CERTIFICATION OF COMPLIANCE WITH
GOVERNMENT CODE SECTION 7507
1 hereby certify that in accordance with Section 7507 of the Government Code
the future annual costs as determined by the System Actuary for the increase
in retirement benefit(s) have been made public at a public meeting of the
City Council of the
(governing body)
City of Huntington Beach
(public agency)
on March 17, 2008 which is at least two weeks prior to the adoption of the
(date)
Resolution / Ordinance.
1�:er ecreta /
City Clerk
Title
Date March 31 2008
PERS-CON-12A(rev. 1/96)
RCA ROUTING SHEET
INITIATING DEPARTMENT: HUMAN RESOURCES
SUBJECT: ADOPT A RESOLUTION OF INTENTION TO APPROVE
AN AMENDMENT TO THE CONTRACT BETWEEN THE
BOARD OF ADMINISTRATION OF THE CALIFORNIA
PUBLIC EMPLOYEES' RETIREMENT SYSTEM AND THE
CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH
COUNCIL MEETING DATE: MARCH 3, 2008
RCA ATTACHMENTS STATUS
Ordinance (w/exhibits & legislative draft if applicable) Attached ❑
Not Applicable
Resolution (w/exhibits & legislative draft if applicable) Attached
Not Applicable ❑
Tract Map, Location Map and/or other Exhibits Attached ❑
Not Applicable
Contract/Agreement (w/exhibits if applicable) Attached
(Signed in full by the City Attorney) Not Applicable ❑
Subleases, Third Party Agreements, etc. Attached ❑
(Approved as to form by City Attorney) Not Applicable
Certificates of Insurance (Approved by the City Attorney) Attached ❑
Not Applicable
Fiscal Impact Statement (Unbudgeted, over $5,000) Attached
Not Applicable ❑
Bonds (If applicable) Attached ❑
Not Applicable
Staff Report (If applicable) Attached
Not Applicable ❑
Commission, Board or Committee Report (If applicable) Attached ❑
Not Applicable
Findings/Conditions for Approval and/or Denial Attached ❑
Not Applicable
EXPLANATI04 FOR MISSINGTT
REVIEWED RETURNED FORWARDED
Administrative Staff ( )
Deputy City Administrator (Initial) ) ( )
City Administrator (Initial) ( ) ( )
City Clerk ( )
EXPLANATION,FOR RETURN OF ITEM: `
RCA Author: MICHELE CARR
0 -sh e-7Xg;.,C_ ?4#AJ 6,Xu
IZLJ0
�2A CITY OF HUNTINGTON BEACH
TO: Honorable Mayor and City Council Membe
FROM: Paul Emery, Interim City Administrator
DATE: March 3, 2008
SUBJECT: Date Communication Regarding March 3,2008,Agenda Item E-7-
Resolution of Intent to Amend Contract Between City of Huntington Beach and
Calpers
I am requesting this item be removed from the agenda and reagendized for the meeting of March
17, 2008.
PE/pf
c: Joan Flynn, City Clerk
�— .. Cam