HomeMy WebLinkAboutCalPERS Actuarial Valuation prepared by John Bartel, Bartel COMMUNICATIO"
Meeting Date
C-)A�
Agenda Item NO. am�
k�43'.I44i*
CITY OF HUNTINGTON BEACH
MISCELLANEOUS AND SAFETY FLANS
Ca1PERS Actuarial Issues — 6/30/09 Valuation
Preliminary Results
dOHN E.BARTEL
RTEL
SSO(AN1'l-'fir LLCw
April 4,2011
Agenda
Topic Page
Definitions l
Safety Plan
Demographic Information 3
Plan Funded Status 5
Plan Assets &Actuarial Obligations 7
Contribution Rates&Projections 12
Miscellaneous Plan:
Demographic Information 15
Plan Funded Status 17
Plan Assets &Actuarial Obligations 19
Contribution Rates,&Projections 24
Contribution Policy 27
Ca1PERS Smoothing 29
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Plan Funded Status
Miscellaneous
Present Value of Benefits Present Value of Benefits
June 30,2008 June 30,2009
U.11u.&d PVB Unfunded PVB
(Unfunded
Li.bilit�)
(Unfunded
4,1 Libilit,
Actuarial
Actuarial Lit t�
Li.bilit.,
June 30" 2008 June 30, 2009
$ 320,200,000 Actuarial Liability 363,600,000
307,500,000 Actuarial Asset Value 321,400,000
(12,700,000) (Unfunded Liability) (42,200,000)
April 4,2011 17
Plan Funded Status
Miscellaneous
■ What happened between 6/30/08 and 6/30/09?
• Market Value Asset (loss) = (90)million
• Unfunded Liability increase z (29.5) million
■ Reasons for Unfunded Liability increase
• Actuarial Asset gain/(loss): = (6.1) million
• Assumption Changes: z (20.0) million
(Mortality)
• Other gain/(loss): = (3.4) million
0 Demographic
0 Contributions
April 4,2011 18
Actuarial Investment Return
Miscellaneous
15.50%
7.75%
0.00%
-7.75%
-15.50%
-23.25%
-31.00%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 200$ 2009 2010 2011
A AVA Modified 8.3% 8.7% 9.2% 9.4% 8.5% 8.4% 7.1% 4.5% 6.8% Z6°/ 80% 82% 9.2% 8.3% 6.1% 6.1% 0.3%
-�-MVA Rate I6,3%15.3%20.1%19.5%125%10.5%-Z2% -6.0% 3.7% 16.6%123%11.9%18.8%-5.1% -24.0 13.3% 7,8%
---0--AVA Unmodified 8.3% 8.7% 92% 94% 8.5% 8.4% 7.1% 45% 6.8% 7.6% 8.09/6 8.29/4 9.2% 8.3% -6.9% 6.99% 6.9%
April 4,2011 19
Actuarial Investment Return
Miscellaneous
■ Above assumes contributions, payments, etc. received evenly throughout year.
Market Actuarial
■ June 30, 2008:
® Return (5.1)% 8.3%
® Gain/Loss 12.9 % 0.4%
® June 30, 2009
® Return (24.0)% 6.1%
® Gain/Loss 31.8 % 1.7 %
■ June 30, 2010
® Return 13.3% 6.1%
• Gain/Loss 5.5% 1.7 %
® June 30, 2011 Market Value return through 1/3 1/11 15.0 %
April 4,2011 20 -
Asset Values (Millions)
Miscellaneous
350
300 ,
g.
250 °
200
150
100
50
0
2001
❑OMAcutukar eti al 1994995 97 1998
32 226 23064 2204095 2206076 2208077 2300088 2302019
3 2303150 2303L01 205 232 257 283 335 315 236 261 275
6/30/10&6/30/11 asset values estimated.
April 4,2011 21
Funded Status (Millions)
Miscellaneous
160%
140%
120%
51L-
100%
80% !,
60%
40%
20%
r
e
0%
1994 1995 1996 1997 W1999 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
❑Funded Ratio-AVA l03%104%]08%127% 134%116%102%]Ol% 98% 98% 97% 96% 88% 87% 8L❑Funded Ratio-MVA 103%110-L17%141% 125%106% 92% 99% 101%104%113% 98% 65% 68% 68%
6/30/10&6/30/11 funded status estimated
April 4,2011 22 ._
Funded Status (Millions)
Miscellaneous
450.0
400.0
350.0
300.0
250.0
200.0
i
150.0
100.0
41
w
50.0
i
1994 1995 1996 1997 1999 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
OAcruarial Liabil it} 102.7 1 11.7 120 8 119.7 127.5 147 2 163 7 1775 19 2.0 222.2 2346 253.3 271.3 295.1 320.2 363.6 384.5 405.9
ElActaarial Assct Value 105.6 115.7 L30.8 15 LS 180.0 210.1 23Q2 237.1 2234 2257 2362 249.4 266.6 287.3 307.5 32 L4 335.3 329.7
6/30/10&6/30/11 funded status estimated
(11_.
April 4,2011 23
Contribution Rates
Miscellaneous
20°i°
10%
5%
`a
1 s
0% €
_5%
1994 �19951 ��7 �81 �02 �2�00� ; 20i17 2008 2009❑Normal Cost 5.3% 69% 6.9% 7.70 T6% 8.0%
DUALA-t -0.6% -1.1% -3.3% -4.1% -4.1% -5.7% -0.1% -6.3% -6.4% 0.3% 28% 1,3% 1A% 2.1% 2.6% 73% -
EITotal 4.7% 4.1% L 7% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 7.2% 7.8% 8.2% 8.2% 9.8% 10.2% 15.3%
P�
April 4,2011 24 -
Employer Rate Projections
Miscellaneous
■ Market Value Investment Return:
® June 30, 2010 13.3%2
® June 30, 2011 - 2015 Poor Investment Return: z 0.4% - 3.6%
Expected Investment Ret: z 7.75%
Good Investment Return: z 11.8% - 15.3%
® No Other: Gains or Losses, Method or Assumption Changes or Benefit
Improvements
■ Excludes Employer Paid Member Contributions (EPMC)
■ Note:
® "UnMod AVA" -Anticipated contribution rates if CalPERS Board had not
modified the Actuarial Value of Assets
® "Mod AVA"-Anticipated contribution rates using CalPERS modified
Actuarial Value of Assets
Z As reported by CalPERS press release.
April 4,2011 25
Employer Rate Projections
Miscellaneous
Investment Return Varies
(7.75%)
30% ...............--...-_.._..__._......- -.._.....-- --- -- ---
25%
20% a•- A
15%
10%
5%
09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17
a UnMod AVA,Exp IR 9.8% 10.2% 20.2% 20.5% 20.8% 21.0% 21.1% 21.3%
-�Mod AVA,Poor IR 9.8% 10.2% 15.3% 16.0% 21.9% 24.1% 26.0% 27.5%
-A-Mod AVA,Exp IR 9.8% 10.2% 15.3% 16.0% 19.1% 19.5% 20.0% 20.4%
-0--Mod AVA,Good IR 9.8% 10.2% 15.3% 16.0% 16.5% 16.8% 17.0% 17.2%
April 4,2011 26 --
Contribution Policy
® Consider policy implications of not increasing CalPERS contributions:
® UAL not being paid off
® Generational shift of Unfunded Liability
® Similar to minimum payment on credit card balance
Bd
April 4,2011 27 ,-
Contribution Policy
0 Consider one of the following:
® Adjust contribution to get rate close to rate prior to asset smoothing
modification
❑ Requires changing amortization period each year:
O Asking CalPERS to use "Fresh Start"
O Higher rates 2011/12 and beyond
® Fresh start with declining period
❑ 2011/12 30 years
❑ 2012/13 29 years
❑ CalPERS will not automatically do this
® Use fixed amortization schedule:
❑ CalPERS will not keep track of bases
❑ Requires:
O Asking CalPERS to use"Fresh Start"
O Shorter amortization period
® Use one time gooney to buy down the UAL
❑ Requires discussing with CalPERS before sending money
April 4,2011 28 --
Definitions
Present Value of Benefits
June 30,2009
Future Normal
Costs
Current Normal
Coat
„0
4f'
Act—al
Liability
® PVB-Present Value of all Projected Benefits:
• Discounted value(at valuation date - 6/30/09), of all future expected benefit
payments based on various (actuarial) assumptions
s Actuarial Liability:
• Discounted value(at valuation date)of benefits earned through valuation date
[value of past service benefit]
• Portion of PVB "earned"at measurement
■ Current Normal Cost:
• Portion of PVB allocated to (or"earned"during)current year
• Value of employee and employer current service benefit
1,
April 4,2011
Definitions
Present Value of Benefits
June 30,2009
Unfunded PVB
Excess Assets
�I
Actuarial Liabilih
® Target- Have money in the bank to cover Actuarial Liability (past service)
■ Unfunded Liability- Money short of target at valuation date
■ Excess Assets/Surplus:
• Money over and above target at that point in time.
• Doesn't mean you're done contributing.
■ Super Funded:
• Assets cover whole pie (PVB)
• If everything goes exactly like PERS calculated,you'll never have to put another
(employer or employee)dime in.
I l
13
- April 4,2011 2 __.
Summary of Demographic Information
Safe
1994 2001 2008 -2009
Actives
■ Counts 388 381 374 387
® Average
® Age 41 41 41 41
® City Service 15 13 12 13
PERSable Wages $56,600 $72,700 $98,400 $104,400
■ Total PERSable Wages millions 22.0 27.7 36.8 40.4
Receiving Payments
® Counts
Service 133 218 220
Disablity 172 202 205
® Beneficiaries 18 36 35
Total 197 323 456 460
® Average Annual City Provided Benefit
Service $38,600 $51,400 $52,600
• Disability 29,100 39,100 41,200
• Service Retirements in last 5 years 36,300 57,100 56,800
April 4,2011 3 _
Members Included in Valuation
Safety
500
450
400
350
300
250
200
150
100
50
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
LM
Active 388 371 364 364 357 372 363 381 370 371 349 351 372 375 374 387
ReceivingPayments 197 246 249 263 287 306 318 323 348 374 407 417 427 439 457 462
T") April 4,2011 4
Plan Funded Status
Safety
Present Value of Benefits Present Value of Benefits
June 30,2008 June 30,2009
Unfunded PVB
At$. Unfunded PVB
Actuarial
f � -
Actuarial ` (Unfunded
Liabilih' i
Liability Liabaih')
(Unfunded
Liability)
June 30, 2008 June 30, 2009
$ 439,700,000 Actuarial Liability $ 478,800,000
357,800,000 Actuarial Asset Value 370,200,000
(81,900,000) (Unfunded Liability) (108,600,000)
April 4,2011 5 -
Plan Funded Status
Safety
■ What happened between 6/30/08 and 6/30/09?
® Market Value Asset (loss) z (105) million
® Unfunded Liability increase z (16.7) million
• Reasons for Unfunded Liability increase
® Actuarial Asset gain/(loss): z (7.2) million
® Assumption Changes: = (8.9) million
(Mortality)
® Other gain/(loss): z (10.6)million
❑ Demographic
❑ Contributions
i April 4,2011 6 --
Actuarial Investment Return
Safety
15.50%
I
7.75%
0.00% n:
-7.75%
I
-15.50%
I
-23.25%
r
-31.00%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011�
A AVA Modified 8.3% 8.7%9.1%9.4% 8.9% 8.6% 7.0% 3.8%6.8% 7.6 o 8.0°/8.3%9.2% 8.1% 5.8%6.0%-0.7%
f MVA Rate 16.3 15.3 20.1 19.5 12.5 10.5 -7.2%-6.0°i 3.7% 16.6 12.3 11.9 18.8 -5.1%-24.0 13.3 7.8%
-4-AVAUnmodified 8.3% 8.7%9.1%94% 8.9% 8.6% 7.0°/ 3.8%6.8% 7.6% 8.0%8.3%9.2%8.1%-6.9%6.9% 6.9%
t
April 4,2011 7
Actuarial Investment Return
Safety
® Above assumes contributions,payments, etc. received evenly throughout year.
Market Actuarial
® June 30, 2008:
® Return (5.1)% 8.1%
® Gain/Loss 12.9 % 0.3%
® June 30, 2009
® Return (24.0)% 5.8%
® Gain/Loss 31.8 % 2.0 %
® June 30, 2010
® Return 13.3% 6.0%
® Gain/Loss 5.5% 1.8 %
® June 30, 2011 Market Value return through 1/31/11 � 15.0%
April 4,2011 8 .-
Asset Values (Millions)
Safety
400
350
t�
300
250
s=
200
150
100
50
fit I L I L I
1994 1995 1996 L997 1998 1:I 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
❑Actuarial 141 152 171 195 229 257 291 295 272 271 281 296 316 338 358 370 385 374
OMarket 140 162 184 216 255 283 304 274 r2411 246 1 277 306 337 395 367 269 297 311
6/30/10&6/30/11 asset values estimated
April 4,2011 9
Funded Status
Safety
140% 'I
120%
I
100%
I
80%
60%
I
40%
i
20%
I
0%
1994 1995 1996 1991 1998 1999 2000 20o 1 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
❑Funded Ratio-AVA 101% 96% 96% 106%ll3%119%ll2%104/ 91% 94% 83% 83% 82% 82% 81% 77% 76% 71%
❑Funded Ratio-MVA 100%102%104%118%125%130%117% 97% 830/. 77% 829/6 850% 889% 96% 83% 56% 59% 59%
6/30/10&6/30/11 funded status estimated
April 4,2011 10 _
Funded Status (Millions)
Safety
600.0
500.0
c'j s
400.0
300.0
200.0
h
100.0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010-2011
❑Actuarial Liability 140.1 158.5 176.9 183. 203.2 2172 258-8 283.4 299.1 320-7 339.3 356.8 382.9 409- 439.7 1 8. 503.2 527.9
❑Actuarial Asset Value 140.8 152.3 170.6 194. 229.5 257.3 290.7 295.3 272. 270.5 280. 296.5 316.0 338 3 3528 370.3 384.9 373.5
6/30/10&6/30/11 asset values estimated
April 4,2011 11
Contribution hates
Safety
35%
30%
25%
20%
15%
10% fi"
5%
0%
IF
-5%
20% 1994 19951996 1997 1999 1999 2000 2001 2002 2003 2004 2005 2006 20077 2008 2009�
❑Normal Cost 132% 13.3% 13.5% 11.0% 12.5% 12.5% 17.6% IZ2% 173% 16.2% 16.4% 16.7% 16.4% l65% 16.5%
pUALA-rt -0-2% 23% 28% -5.9% -125%-12.5%-176% -9.2% 7.8% 13.7% 12.2% IL6% Ill% 1L5°lo 12.7% I6.t"lo
®Total 13-11% 15.6% 16.3% 5.1% 0-0% 0.0% 00% 9.0% 25.1% 300% 28.6% 28.3% 281% 2R.0% 29.2% 34.2%
April 4,2011 12
Employer Rate Projections
Safety
• Market Value Investment Return:
• June 30, 2010 13.3%1
• June 30, 2011 - 2015 Poor Investment Return: z 0.4% -3.6%
Expected Investment Ret: z 7.75%
Good Investment Return: z 11.8% - 15.3%
• No Other: Gains or Losses, Method or Assumption Changes or Benefit
Improvements
• Excludes Employer Paid Member Contributions (EPMC)
■ Note:
• "UnMod AVA" -Anticipated contribution rates if CaIPERS Board had not
modified the Actuarial Value of Assets
• "Mod AVA"-Anticipated contribution rates using CalPERS modified
Actuarial Value of Assets
As reported by Ca1PERS.
April 4,2011 13
Employer Rate Projections
Safety
Investment Return Varies
(7,75%)
55% - - ---
50%
45%
.A,.....----A
40%
35%
30%
25%
09/10 10/11 11/12 12/13 13/14 14115 15/16 16/17
A- UnMod AVA,Exp IR 28.0% 29.2% 41.5% 41.6% 41.6% 41.6% 41.7% 41.7%
--W-Mod AVA,Poor IR 28.0% 29.2% 34.2% 34.9% 43.2% 46.0% 48.4% 50.2%
�-Mod AVA,Exp IR 28.0% 29.2% 34.2% 34.9% 39.4% 39.7% 40.1% 40.4%
--�Mod AVA,Good IR 28.0% 29.2% 34.2% 34.9% 35.4% 35.6% 35.79/ 35.6%
April 4,201 1 14 401,
Summary of Demographic Information
Miscellaneous
1994 2001 2009 % 2009:,-
Actives
■ Counts 709 705 742 723
® Average
Age 44 46 47 47
City Service 12 13 13 13
® PERSable Wages $47,000 $51,000 $64,400 $67,000
® Total PERSable Wages millions 33.5 36.0 47.8 48.4
Receiving Payments
■ Counts
• Service 306 474 518
• Disablity 79 85 89
® Beneficiaries 56 82 88
® Total 301 441 641 695
■ Average Annual City Provided Benefit
® Service $15,700 $20,100 $22,500
® Disability 8,400 9,700 9,300
® Service Retirements in last 5 years 17,500 19,400 24,300
3
April 4,2011 15 ..
Members Included in Valuation
Miscellaneous
goo
700
600 ,
500
400
I
300
200
100
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
❑Active 709 675 660 655 645 666 701 705 702 663 640 648 687 729 742 723
®Receiving Payments 301 331 328 346 364 396 424 4— 451 507 551 580 600 b25 641 695
1 April 4,2011 16 __
Ca1PERS Smoothing Method
6/30/2009: Unmodified Modified
Market Value 100.0% 100.0%
Actuarial Value 120.0% 137.0%
6/30/2010: 13.3% 13.3%
Market Value 113.3% 113.3%
Actuarial Value:
1. Project @ 7.75% 129.3% 147.6%
2. Adjust:[(MV-AV) x (1/15)] 128.2% 145.3%
3. Limited by corridor
[Unmodified: 120%,
Modified: 130%] 128.2% 145.3%
Actuarial Rate of Return 6.9% 6.1%
Ratio of Actuarial Value to Market Value 113.2% 128.2%
L
April 4,2011 29
Ca1PERS Smoothing Method
Actuarial Asset Values Unmodified Modified
• Project Assets forward 7.75% 7.75%
• Asset Gain/Losses Recognized 15 Years 15 Years
• Ratio of Actuarial to Market Value
of Assets 80-120% 60-140%
Actuarial Asset Methods
• Amortization
o Years 30 Years 30 Years
o Factor 6% 6%
• Minimum Normal Cost Normal Cost
less 30 Year less 30 Year
Amortization Amortization
of Surplus of Surplus
i
April 4,2011 30
Remarks to the Huntington Beach City Council
4/3/11
Daniel P. Gooch
UNFUNDED LIABILITY FOR PENSION AND HEALTH EXPENSES:
At a public meeting last Thursday evening attended by the Mayor and Councilman
Bohr, the City Manager indicated the unfunded liability is currently at "around
$100 million. When asked how this was being addressed in the current budget his
answer was non-specific.
As recently as 18-24 months ago the City Council granted increases in the pensions
of a segment of the City workers that, according to the City Manager's power point
that evening, increased the unfunded liability by approximately $5 V7 million.
I'm hopeful that tonight this unfunded liability will be addressed by City staff and,
if not, that the City Council direct staff TO address this huge liability to the citizens
of H.B.
NEGOTIATIONS WITH EMPLOYEE UNIONS:
The City Manager also indicated that some of the unions "are aware" of the City's
financial status and are in the process of sitting down with management and
agreeing to concessions that will result in over$1 million in savings to the City.
While this is a wonderful gesture the City Council should direct the City Manager
and the city's negotiators that in formulating these concessions they DO NOT agree
in principle to any future limitations on negotiations by the City. These concessions
SHOULD NOT preclude the City from seeking a different retirement tier for new
employees. It is only by addressing the pension costs on a long-term basis that the
city will be able to get the $100 million paid down.
STUDIES REGARDING CONTRACTING OUT OF SERVICES:
When asked if the City was currently studying any service for potential contracting
out, the response was "no". If the City Council does not direct the City Manager to
conduct these type of studies how will we ever know if we can secure similar services
at a reduced cost. Many cities in Los Angeles County have looked to H.B. as a
leader in this field as demonstrated by the successful privatization of our refuse
collection. I'm quite certain there are other opportunities as well. We simply need
the will to pursue them.