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05 May 8, 2019 ExecutiveRIVERSIDE COUNTY TRANSPORTATION COMMISSION EXECUTIVE COMMITTEE MEETING AGENDA TIME: 9:00 a.m. DATE: Wednesday, May 8, 2019 LOCATION: MARCH FIELD CONFERENCE ROOM County of Riverside Administrative Center 4080 Lemon Street, Third Floor, Riverside � COMMITTEE MEMBERS � Chuck Washington, County of Riverside, District 3— Chair Ben J. Benoit, City of Wildomar — Vice Chair Jan Harnik, City of Palm Desert — Second Vice Chair Dana Reed, City of Indian Wells — Past Chair Lloyd White, City of Beaumont Brian Berkson, City of Jurupa Valley Lisa Middleton, City of Palm Springs Michael S. Naggar, City of Temecula Karen Spiegel, County of Riverside, District 2 V. Manuel Perez, County of Riverside, District 4 Jeff Hewitt, County of Riverside, District 5 k?... AREAS OF RESPONSIBILITY ..., Reviews and makes final decisions on personnel issues and office operational matters. Comments are welcomed by the Committee. If you wish to provide comments to the Committee, please complete and submit a Speaker Card to the Clerk of the Board. RIVERSIDE COUNTY TRANSPORTATION COMMISSION EXECUTIVE COMMITTEE MEETING AGENDA 9:00 A.M. WEDNESDAY, MAY 8, 2019 County of Riverside Administrative Center March Field Conference Room 4080 Lemon Street, Third Floor, Riverside In compliance with the Brown Act and Government Code Section 54957.5, agenda materials distributed 72 hours prior to the meeting, which are public records relating to open session agenda items, will be available for inspection by members of the public prior to the meeting at the Commission office, 4080 Lemon Street, Third Floor, Riverside, CA, and on the Commission's website, www.rctc.orq. In compliance with the Americans with Disabilities Act and Government Code Section 54954.2, if you need special assistance to participate in an Executive Committee meeting, please contact the Clerk of the Board at (951) 787-7141. Notification of at least 48 hours prior to meeting will assist staff in assuring that reasonable arrangements can be made to provide accessibility at the meeting. 1. CALL TO ORDER 2. PUBLIC COMMENTS 3. ADDITIONS/REVISIONS — The Committee may add an item to the Agenda after making a finding that there is a need to take immediate action on the item and that the item came to the attention of the Committee subsequent to the posting of the agenda. An action adding an item to the agenda requires 2/3 vote of the Committee. If there are less than 2/3 of the Committee members present, adding an item to the agenda requires a unanimous vote. Added items will be placed for discussion at the end of the agenda. 4. APPROVAL OF THE MINUTES — MARCH 13, 2018 5. CALIFORNIA PUBLIC EMPLOYEES RETIREMENT SYSTEM NET PENSION LIABILITY Page 1 This item is for the Committee to approve the plan to fund and pay off the Commission's California Public Employees Retirement System (CaIPERS) net pension liability in Fiscal Year 2019/20. 6. ADJOURNMENT AGENDA ITEM 4 MINUTES RIVERSIDE COUNTY TRANSPORTATION COMMISSION EXECUTIVE COMMITTEE SPECIAL MEETING MINUTES March 13, 2019 1. CALL TO ORDER The meeting of the Executive Committee was called to order by Chair Chuck Washington at 8:48 a.m. in the March Field Conference Room at the County of Riverside Administrative Center, 4080 Lemon Street, Third Floor, Riverside, California, 92501. ROLL CALL Commissioners Present Commissioners Absent Ben J. Benoit Brian Berkson Jan Harnik Jeff Hewitt* Lisa Middleton Mike Naggar* V. Manuel Perez Dana Reed Karen Spiegel Chuck Washington Lloyd White *arrived after meeting was called to order 2. PUBLIC COMMENTS There were no requests to speak from the public. 3. APPROVAL OF MINUTES M/S/C (Perez/Benoit) to approve the minutes of December 12, 2018 meeting as submitted. Abstain: Spiegel 4. ADDITIONS/REVISIONS There were no additions or revisions to the agenda. RCTC Executive Committee Special Meeting Minutes March 13, 2019 Page 2 5. 2019 CLASSIFICATION STUDY RECOMMENDATIONS AND FISCAL YEAR 2019/20 ORGANIZATION RECOMMENDATIONS Anne Mayer welcomed new Executive Committee Members and provided an overview of the duties and authority of the Executive Committee. Anne Mayer provided an overview of the results of the 2019 Classification Study of select positions performed by Koff & Associates, which recommended the reclassification of three positions. At this time, Commissioner Hewitt joined the meeting. Commissioner Spiegel asked for clarification of the salaries for the reclassified employees, and Ms. Mayer explained the employees will be moved to the bottom step of the salary range or given a 5 percent increase. Commissioner Berkson inquired if the employees currently in the positions being reclassified were to leave the organization if they would be filled at the reclassified level; Anne Mayer responded yes, the reclassification is of the position itself, not of the employee. Commissioner Spiegel asked how additional new positions would be added if there is a need, and Ms. Mayer stated new positions would come back to Executive Committee for approval. Commissioner Middleton inquired about recruitments for the new positions, and Ms. Mayer stated the Commission advertises positions using several different avenues such as through the RCTC.org website, industry websites, and professional associations. At this time, Commissioner Naggar joined the meeting. Commissioner Hewitt asked for the total fiscal impact, including PERS costs for employees. He also inquired about the fee for exiting PERS. Anne Mayer stated the total employee cost is included in the budget. She noted a presentation on the Commission's PERS liability was given at the June 2018 Executive Committee and that a copy of that staff report would be provided to all Executive Committee members. Anne Mayer discussed adding three new positions with the new budget cycle: An additional Senior Management Analyst for the Toll Program, an Accounting Supervisor, and a Financial Analyst. Also with the new budget cycle, Ms. Mayer discussed the application of a 3.5 percent salary range increase as well as a Consumer Price Index salary range adjustment structure for future fiscal year budgets. She noted the salary increase applies to the salary range only and does not result in any immediate or automatic salary increases. Salary increases must be earned through the current review/merit increase process. RCTC Executive Committee Special Meeting Minutes March 13, 2019 Page 3 Anne Mayer noted if approved, the reclassifications which are recommended actions 1-3 would be effective immediately so as not to have employees working out of class. The addition of the new positions as well as the salary range adjustments, which are recommended actions 4-9 will be included with the proposed 19/20 budget and not effective until July 1, 2019, if approve. M/S/C (Reed/Harnik) to approve the following actions, with items 1-3 being effective immediately and items 4-9 being subject to FY 19/20 budget approval: 1) Reclassify Management Analyst — Right of Way on range 35 ($6,211- $8,385) to Senior Management Analyst — Right of Way on range 43 ($7,550-$10,193); 2) Reclassify Management Analyst — Procurement on range 36 ($6,363- $8,590) to Senior Procurement Analyst on range 43 ($7,550-$10,193); 3) Reclassify Administrative Assistant on range 17 ($4,004-$5,405) to Senior Administrative Assistant on range 25 ($4,867-$6,570); 4) Approve the addition of a Senior Management Analyst — Toll Program on range 43 ($7,550-$10,193); 5) Approve the addition of an Accounting Supervisor on range 44 ($7,734- $10,441); 6) Approve the addition of a Financial Analyst on range 35 ($6,211-$8,385); 7) Apply a 3.5 percent salary range increase in Fiscal Year 2019/20 to all authorized salary ranges; 8) Approve a Consumer Price Index salary range adjustment structure subject to Commission approval of future fiscal year budgets; and 9) Direct staff to include these proposed actions in the draft FY 2019/20 operating budget for consideration by the Commission. Abstain: Hewitt 6. ADJOURNMENT There being no other items to be considered, the Executive Committee meeting adjourned at 9:30 a.m. Respectfully submitted, Lisa Mobley Clerk of the Board AGENDA ITEM 5 RIVERSIDE COUNTY TRANSPORTATION COMMISSION DATE: May 8, 2019 TO: Executive Committee FROM: Theresia Trevino, Chief Financial Officer Michele Cisneros, Deputy Director of Finance THROUGH: Anne Mayer, Executive Director SUBJECT: California Public Employees Retirement System Net Pension Liability STAFF RECOMMENDATION: This item is for the Committee to approve the plan to fund and pay off the Commission's California Public Employees Retirement System (CaIPERS) net pension liability in Fiscal Year 2019/20. BACKGROUND INFORMATION: In June 2018 staff presented to the Executive Committee a summary report of retirement and health benefits provided to Commission employees. The summary report provided potential issues for future consideration and that staff may return to the Executive Committee to present a strategic plan to fund the Commission's net pension liability. The Commission's retirement plan contributions are affected by the amortization of the net pension liability. The amortization over time includes the interest charge on the net pension liability. Based on the most recent CaIPERS Annual Valuation Report dated June 30, 2017, the CaIPERS Plan's funded status for Classic and Public Employees' Pension Reform Act (PEPRA) members are presented below: PEPRA or New Member Accrued Liability $32,776,088 $196,498 Market Value of Assets 24,661,731 186,010 Net Pension Liability $8,114,357 $10,488 Funded Ratio 75.2% 94.7% Interest Charge $7,504,312 $3,181 As a special district, the Commission is not faced with the same financial pressures as its members, as personnel costs are insignificant to the Commission's overall budget due to lean staffing, relative to the required tasks and demands. The Commission's CaIPERS plans are currently funded 75.2 percent and 94.7 percent for Classic and PEPRA members, respectively. Agenda Item 5 1 Staff recommends the payoff of the aggregate net pension liability balance of $8.1 million for Classic and PEPRA members in FY 2019/20. The payoff of the $8.1 million net pension liability results in the interest charge savings of $7.5 million over several years —funding that can be used for future Commission programs and capital projects. The Commission has available funds for this disbursement, and staff included this plan in the draft FY 2019/20 budget to be presented to the Commission at its May meeting. Should the Executive Committee not approve this plan, the $8.1 million expenditure will be eliminated from the final FY 2019/20 budget to be presented at the June Commission meeting for adoption. Financial Information In Fiscal Year Budget: Yes Year: FY 2019/20 Amount: $8,125,000 Source of Funds: 2009 Measure A, Transportation Development Act, Transportation Uniform Mitigation Fee, and Motorist Assistance funds and Toll Revenues Budget Adjustment: No GL/Project Accounting No.: XXX-XX-61001 (various funds and departments) Fiscal Procedures Approved: \lfai4,6 ,,14.mnm�O Date: 04/25/2019 Attachments: 1) Summary of California Public Employee Retirement System Contracts and Related Benefits —June 2018 2) Actuarial Valuation as of June 30, 2017 for Classic Members 3) Actuarial Valuation as of June 30, 2017 for PEPRA Members Agenda Item 5 2 ATTACHMENT 1 RIVERSIDE COUNTY TRANSPORTATION COMMISSION DATE: June 13, 2018 TO: Executive Committee FROM: Beth Gutierrez, Human Resources Administrator Theresia Trevino, Chief Financial Officer THROUGH: Anne Mayer, Executive Director SUBJECT: Summary of California Public Employee Retirement System Contracts and Related Benefits STAFF RECOMMENDATION: This item is for the Committee to receive and file the summary of California Public Employee Retirement System (CaIPERS) contracts and related benefits. BACKGROUND INFORMATION: At the April 11 Executive Committee meeting, staff committed to provide a report regarding the Commission's retirement benefits. This report is a summary of the retirement benefits under defined benefit plans, health benefits, and postemployment benefits other than pensions (OPEB); financial disclosures regarding the funding of these benefits; pending legislation that may impact these benefits; and potential issues for future consideration. Attachment 1 provides an overview of the history, governance, and investments and fund management of and benefits provided by CaIPERS. Retirement Benefits under Defined Benefit Plans CaIPERS administers a defined benefit plan that provides public employee retirement benefits based upon a contractual agreement with the Riverside County Transportation Commission (RCTC). Under this plan, retirement benefits are calculated using a member's years of service credit, age at retirement, and final compensation (average salary for a defined period of employment), and the retirement formulas as outlined in the contract between CaIPERS and RCTC. RCTC provides all regular and probationary employees with retirement benefits through CaIPERS. The California Public Employees' Pension Reform Act (PEPRA), which became effective in January 2013, changed the application of CaIPERS retirement and health benefits. As a result, there are two types of memberships dependent upon the employee's original hire date: Agenda Item 5 3 • Classic Members include any new employee enrolled into the CaIPERS system prior to January 1, 2013, and who does not have more than a 6-month break from membership if moving between PERS employers. • PEPRA or New Members include a new employee brought into the CaIPERS system for the first time on or after January 1, 2013, and who has no prior membership in any California public retirement system. A new hire would be considered a New Member if they held prior California public retirement system membership but had a break in service greater than six months. RCTC has contracted for retirement benefits through CaIPERS since September 3, 1977. Over the years, the Commission has executed minor amendments to the contract in order to remain current with Public Employee Retirement Law (PERL) as well as PEPRA. The benefits for both memberships are outlined below: Classic Member Benefits PEPRA or New Member Benefits Retirement Formula 2.7% @ 55 (earliest retirement at 2% @ 62 (earliest retirement at age 50 with a prorated formula). age 57 with a prorated formula). Final Compensation Period Highest average calculation over the last 12-month period. Highest average calculation over the last 36-month period. Cost of Living Allowance (COLA) Up to a 3% COLA: Based upon Consumer Price Index and paid in May of the 2' year of retirement. Pre -Retirement Death Benefit The surviving spouse of a member who has attained the minimum age for voluntary service retirement in his or her last employment preceding death may elect to receive an allowance equal to the amount that the member would have received in retirement. 1959 Survivor Post - Retirement Allowance (Level Three) The surviving spouse of a member continues to receive an allowance equal to the amount that the member received in retirement. Unused Sick Leave Credit A member may convert his or her unused sick leave to service credit at a rate of 8 hours per day. Industrial Disability Retirement Any local member incapacitated for the performance of duty as the result of an industrial disability shall be retired for disability regardless of age or amount of service. PEPRA caps the annual pensionable compensation used to calculate final compensation for New Members. This cap is tied to a compensation cap set by the Internal Revenue Service for Social Security Benefits, referred to as the 430(b) limit. Adjustments to the caps are permitted annually based on changes to the Consumer Price Index for All Urban Consumers. Member contributions will stop when the member's actual earnings reach the contribution limits. Member Retirement Contributions Member contribution rates are set by statute and can vary by membership category (miscellaneous or safety) and by benefit formula. Member contribution rates can change based on legislative law changes; however, the rise and fall of the contribution percentages does not Agenda Item 5 4 affect member -accrued retirement benefits that are guaranteed by law. RCTC employees, as miscellaneous employees, contribute a percentage of their salary throughout their active membership. Currently, RCTC Classic Member employees contribute 8 percent of their annual salary, and PEPRA or New Members contribute 7.25 percent of their annual salary representing 50 percent of the total normal cost of the benefit plan in which they participate. Employer Retirement Contributions On average, schools and other public agencies contribute 12.7 percent of payroll for their employees' retirement benefits; however, the rates can increase if CaIPERS' investments perform unfavorably and decrease if CaIPERS' investments perform favorably. According to CaIPERS, "The School Pool contribution rate is affected by the investment return of a given fiscal year in the second year that follows" and "Local public agency contribution rates are affected by the investment return of a given fiscal year in the third fiscal year that follows". CaIPERS' earnings and losses are averaged over 15 years to prevent extreme changes in employers' contribution rates. Employers' contributions and stated unfunded liabilities are calculated using the actuarial present value and an assumption that the fund will continually grow at 7.5 percent. However, if an employer seeks to leave CaIPERS, it will be required to immediately payoff the undisclosed current market value of the unfunded liabilities, which only assumes 2.56 percent growth. The employer normal cost contribution rates as a percentage of annual salaries for Fiscal Year 2016/17 compared to FY 2017/18 are presented in the following table: Employer Contribution Rates Classic Members PEPRA or New Members FY 2016/17 14.012 7.283% FY 2017/18 14.053 7.262% FY 2018/19 Pension Plan Financial Disclosures 14.719 7.654% The Commission's comprehensive annual financial report (CAFR) includes notes to the financial statements regarding the CaIPERS pension plan. Annual required contributions consist of (1) normal cost applied to reported payroll and (2) the employer payment toward the unfunded accrued liability (UAL) based on an amortization Agenda Item 5 5 schedule; the employer payments toward the UAL includes interest paid on the UAL balance or principal. The UAL represents the net pension liability', which is calculated as: Total Pension Liability Based on an actuarial valuation performed at least every two years, this represents the present value of projected benefit payments to be provided by the plan to current active and inactive employees that is attributed to those employee's past period of service. Less: Pension Plan's Fiduciary Net Position Represents plan's market value of assets Net Pension Liability (or UAL) Represents the plan's unfunded pension liability or principal balance owed, similar to bonded indebtedness. Contributions made during FY 2016/17 and the net pension liability as of June 30, 2017, are presented in the following table: FY 2016/17 Contributions $1,238,891 (Employer) $432,377 (Employee) Net Pension Liability $7,639,639 An additional disclosure in the notes to the financial statements is the sensitivity of the proportionate share of the net pension liability to changes in the discount rate used to measure the total pension liability. The total pension liability of $7,639,639, based on a June 30, 2015 actuarial valuation, used a discount rate of 7.65 percent. A one percent decrease in the discount rate to 6.65 percent results in a net pension liability of $11,481,801, while a one percent increase in the discount rate to 8.65 percent results in a net pension liability of $4,464,283. The CAFR also includes required supplementary information regarding the Commission's proportionate share of the net pension liability and pension contributions (Attachment 2). As of June 30, 2017, the plan is 74 percent funded. Health Benefits Since March 1, 1978, RCTC has provided employees access to group health insurance through the Public Employee's Medical and Hospital Care Act (PEMHCA). The CaIPERS Board of Administration administers the PEMHCA health benefits program and determines the benefits design, including any co -pays and deductibles, providers, and premiums. RCTC pays the cost of 1 The net pension liability of employers to employees for the defined benefit plan is now recorded as a liability on the Commission's government -wide financial statements in accordance with Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions —An Amendment of GASB Statement No. 27. Prior to the required implementation date for fiscal years beginning after June 15, 2014 (FY 2014/15 for the Commission), government employers did not record this liability but disclosed it in the notes to the financial statements —creating accountability and transparency issues. As a result of the recession, public awareness and debate are heightened regarding the underfunding of most public defined benefit pension plans and strain on government budgets due to increased contribution costs. Agenda Item 5 6 medical insurance to CaIPERS at the rate approved by the Executive Committee and as set forth in a resolution adopted in accordance with Government Code Section 22892(a). RCTC has provided $600 as its monthly employer contribution toward employee's health premiums since March 2005 (Resolution No. 05-004). At the April meeting, the Executive Committee approved an increase in the monthly employer contribution to $750 effective September 1, 2018. At the June Commission meeting, adoption of Resolution No. 18-004 related to the monthly employer contribution increase is the subject of a recommendation included in the adoption of the FY 2018/19 budget. CaIPERS currently offers health maintenance organization (HMO) and preferred provider organization (PPO) medical plans. RCTC employee participation in the medical plans is summarized below: • • • OPEB 71 percent of RCTC employees are enrolled in HMO plans administered by Blue Shield of California, Anthem Blue Cross, United Healthcare, Health Net, and Kaiser Permanente. 18 percent of RCTC staff are enrolled in PPO plans called "PERS Select," "PERS Care," and "PERS Choice," which are administered by Anthem Blue Cross. 11 percent of RCTC staff are not enrolled in medical plans through RCTC/CaIPERS. RCTC provides retirement health benefits based upon the PERL Vesting Schedule G.C. 22893. To be eligible for retirement health benefits, an employee's retirement from RCTC must be effective within 120 days of the employee's separation from employment with RCTC and the employee must be receiving a retirement allowance from CaIPERS resulting from the employee's service with RCTC. To determine the monthly amount RCTC will pay toward an employee's medical premium, the retiree must have at least ten years of CaIPERS membership and at least five of those years of service must have been performed entirely at RCTC. Retired employees who satisfy the preceding requirements are eligible to continue health coverage offered by CaIPERS. The level of benefits varies depending upon the employee's date of employment with RCTC. The benefit for these retirees will be determined, in part, by the retiree's years of service with a CaIPERS employer and, in part, by a contribution level based on a weighted average of the premiums of the four largest medical benefit plans offered by CaIPERS. The amount paid by RCTC toward the employee's monthly health premium is determined by the 100/90 State Annuitant Contribution schedule as follows: Agenda Item 5 7 Credited Years Applicable of PERS Service Percentage 10 50 11 55 12 60 13 65 14 70 15 75 16 80 17 85 18 90 19 95 20 or more 100 For 2018, the 100/90 State Annuitant Contribution towards retiree medical premiums is: Contribution Rates by Premium Tier Employee Only $725 Employee + 1 $1,377 Family $1,766 Attachment 3 provides a history of the 100/90 State Annuitant Contribution rates and percent change. In 2007, the Commission entered into an agreement with the California Employers' Retiree Benefit Trust (CERBT) administered by CaIPERS to establish a trust to fund the Commission's OPEB benefits. Previously, the Commission paid OPEB obligations on a pay-as-you-go basis. OPEB Financial Disclosures The Commission's CAFR also includes notes to the financial statements regarding RCTC's OPEB. Annual required contributions are based on an actuarially determined contribution comprised of normal cost and amortization of the unfunded actuarial accrued liability, or net OPEB liabilityz; the employer payment toward the net OPEB liability includes interest paid on the liability balance or principal. The net OPEB liability is calculated as: z The net OPEB liability of employers to employees for the OPEB plan is now recorded as a liability on the Commission's government -wide financial statements in accordance with GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. In FY 2016/17, the Commission early implemented GASB No. 75 prior to its required implementation date for fiscal years beginning after June 15, 2017. Before implementation, government employers did not record this liability but disclosed it in the notes to the financial statements —creating accountability and transparency issues similar to those noted regarding public pension plans. Agenda Item 5 8 Total OPEB Liability Based on an actuarial valuation performed at least every two years, this represents the present value of projected benefit payments to be provided by the plan to current active and inactive employees that is attributed to those employee's past period of service. Less: OPEB Plan's Fiduciary Net Position Represents plan's market value of assets Net OPEB Liability Represents the plan's unfunded OPEB liability or principal balance owed, similar to bonded indebtedness. Contributions made during FY 2016/17 to the OPEB plan trust and the net OPEB liability as of June 30, 2017, are presented in the following table: FY 2016/17 Contributions Net OPEB Liability $666,000 (100% Employer $676,000 An additional disclosure in the notes to the financial statements is the sensitivity of the proportionate share of the net OPEB liability to changes in the discount rate and the healthcare cost trend rate used to measure the total OPEB liability. The following table summarizes the impact of a 1 percent change in these rates. Discount Rate Healthcare Trend Rate Net OPEB Liability % Net OPEB Liability 1% Decrease $1,595,000 5.5%-6.5% Current Rate 6.00% L $676,000 1% Increase 7.00% ($68,000) 5.00% 6.5%-7.5% ($98,000) $676,000 7.5%-8.5% $1,623,000 The CAFR also includes required supplementary information regarding the Commission's proportionate share of the net OPEB liability and OPEB contributions (Attachment 2). As of June 30, 2017, the plan is 89 percent funded. Pending Legislation At the June Commission meeting, staff will provide information on Assembly Bill 1912 (AB 1912). This bill would make member agencies of a joint powers authority (JPA) jointly and severally liable for JPA public retirement obligations. • It would prohibit CaIPERS from contracting with a JPA unless member agencies agree to be liable. • It entitles CaIPERS to place a lien on assets of the JPA and member agencies. • It specifies if the parties do not enter into an agreement, the member agencies would assume JPA retirement obligations. Agenda Item 5 9 Due to deep concern over the financial liability AB 1912 poses to the Commission, as well as potential harmful impacts on the Commission's bond marketability and its credit rating, staff is recommending an "oppose" position on AB 1912. These are additional Senate bills (SB) currently under consideration that may impact the Commission's retirement benefits: • SB 1031 proposes to permit employers to freeze COLAs for retirees if the plan is not 80 percentfunded3. o This bill would prohibit a public retirement system from making a COLA to any allowance payable to, or on behalf of, a person retired under the -system who becomes a new member on or after January 1, 2019. o It would eliminate the benefit to any survivor or beneficiary of that retired member for the unfunded actuarial liability of that system if greater than 20 percent. o It would require that the determination of unfunded actuarial liability be based on a specified financial report and would apply the prohibition on COLAs, if any, to the calendar year following the fiscal year upon which the report is based. • SB 1032 proposes to make it easier for employers to exit CaIPERS without paying termination fees4. o This bill would authorize a contracting agency to terminate its contract with the board at the agency's will and would not require the contracting agency to fully fund the board's pension liability upon termination of the contract. o It would authorize the board to reduce the member's benefits in the terminated agency pool by the percentage of liability unfunded. o It would authorize a contracting agency who terminates its contract with the board to transfer the assets accumulated in the system to a pension provider designated by the contracting agency. • SB 1033 proposes to shift the burden of increased pension costs to the last employer that hired the employees. o This bill would require that an agency participating in CaIPERS who increases the compensation of a member previously employed by a different agency bear all actuarial liability for the action, if it results in an increased actuarial liability beyond what would have been reasonably expected for the member. • SB 1149 proposes to offer employees the option of choosing a more portable 401(k) plan and opt out of Cal PERS'. o This bill would create a new optional defined contribution plan for new public employees who first begin employment in a miscellaneous or industrial 3 Karol K. Denniston, "Pension Pain", The Bill is Due: Now What? Infrastructure, Pensions and the Environment, April 24, 2018 41bid. s Ibid. 61bid. Agenda Item 5 10 classification on or afterJanuary 1, 2020, and who were not members of any public retirement system prior to that date. The California Rule Finally, PEPRA represents an initial major effort in California related to pension reform, and it was primarily limited to new hires with no vested rights. Certain elements related to PEPRA have been challenged in the state courts. These cases are now pending before the California Supreme Court, and it is possible that the "California Rule" related to individual vested rights may be modified. As a result of various prior state court rulings, including the Long Beach decision in 1955, it has been the prevalent belief that a pension benefit offered upon hire becomes a vested right that is protected by contract law. Therefore, it cannot be reduced unless it is offset by a comparable new benefit that would eliminate any cost savings. This limitation has been an impediment to legal pension reform urged by many groups in order to mitigate the public pension crisis and impact on government services. Trial and appellate courts that have heard the cases pending before the state Supreme Court have found that current employees have a vested right to a "reasonable pension" and not the one offered upon hire. Should the high court affirm the lower court decisions, the "California Rule" would likely be reshaped via legislative changes and there would be no significant pension funding relief in the short-term. Potential Issues for Future Consideration As noted earlier, the proposed FY 2018/19 budget will be presented at the June Commission meeting for adoption. Although the Commission's toll operations are a service, the budget continues to demonstrate that the Commission is a project -driven agency. Unlike its member cities and the County of Riverside, personnel costs are insignificant in the FY 2018/19 budget of approximately $881 million as noted in the table below: Amount of Budget % of Personnel Costs Total Personnel Costs $10,354,700 1.17% 100 Benefit Costs included in Personnel Costs: Retirement 1,553,500 0.20% 15.00 Health 635,000 0.07% 6.13% OPEB 549,000 0.06% 5.30% As a special district, the Commission is not currently faced with the same financial pressures as its members; however, staff is keenly aware of the statewide pension sustainability conversation taking place as well as pending legislative and legal issues as they may have a direct and/or indirect impact on the Commission in the long-term. Some of the issues that staff is monitoring and may present to the Executive Committee for strategic planning at a future meeting are as follows: Agenda Item 5 11 • The 2009 Measure A is the major source of funding for the Commission's projects and programs, and it expires on June 30, 2039. Should the County's electorate not approve another transportation sales tax measure, the Commission may need to reduce the staff size due to a change in its operations. However, the Commission's obligations to fund retirement and OPEB benefits will continue. In recent years there has been increased attention to smaller special districts or governmental agencies that have had to terminate their contracts with CaIPERS at a very high cost. These terminations have been related to loss of funding sources or inability to sustain required contributions. As a result, retirees receiving retirement benefits have been impacted by reduced payments. • Among many factors, retirement plan contributions are affected by the amortization of the UAL or net pension liability. The amortization schedule over time includes an interest charge on the net pension liability; therefore, the sum of the employer payments toward the UAL consists of amortization of the net pension liability principal balance and the interest or finance charge. The Commission could pay off the net pension liability balance or it can apply a "fresh start" to the amortization schedule for the UAL related to the Classic Members plan'. This "fresh start" would collapse all the amortization bases into a single base to reamortize the UAL. Some of the "fresh start" options are presented below: Annual Payment 1,290,000 1,400,400 I3an,000 44QU4U 204,400 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 tCu rrent Schedu le -Total Paym erns= 15, 525,114 —ip-19 Yea Fre .h Start -Total Payments= 15,532,637 # 14 Yea F resh Start - Total Paym erns= 13,121,993 21 Yea Lew el Dollar F reh Start -Total P ap, ments= 15,464,554 Per the 2016 actuarial valuation, there are 93 Classic Members (consisting of active, transferred, separated, and retired employees) compared to 4 New Members. The amortization of the New Members' UAL is not material to the analysis. Agenda Item 5 12 Staff will continue to maintain an awareness of matters that impact the Commission's ability to fulfill its benefit obligations and present updates to the Executive Committee. Fiscal Impact This report is intended as a summary of retirement and health benefits provided by the Commission. Staff is not proposing any actions by the Executive Committee; however, legislative developments and other issues for future strategic consideration that may have a financial impact may be presented to the Executive Committee at a later date. Attachments: 1) PERS Overview 2) Financial Information Related to Net Pension/OPEB Liabilities and Pension/OPEB contributions 3) 100/90 State Annuitant Contribution Rates Agenda Item 5 13 ATTACHMENT 2 i Ca1PERS August 2018 California Public Employees' Retirement System Actuarial Office P.O. Box 942709 Sacramento, CA 94229-2709 TTY: (916) 795-3240 (888) 225-7377 phone — (916) 795-2744 fax www.calpers.ca.gov Miscellaneous Plan of the Riverside County Transportation Commission (Ca1PERS ID: 1431537449) Annual Valuation Report as of June 30, 2017 Dear Employer, As an attachment to this letter, you will find a copy of the June 30, 2017 actuarial valuation report of the pension plan. Because this plan is in a risk pool, the following valuation report has been separated into two sections: • Section 1 contains specific information for the plan including the development of the current and projected employer contributions, and • Section 2 contains the Risk Pool Actuarial Valuation appropriate to the plan as of June 30, 2017. Section 2 can be found on the Ca1PERS website at (www.calpers.ca.gov). From the home page, go to "Forms & Publications" and select "View All'. In the search box, enter "Risk Pool' and from the results list download the Miscellaneous or Safety Risk Pool Actuarial Valuation Report as appropriate. Your June 30, 2017 actuarial valuation report contains important actuarial information about your pension plan at Ca1PERS. Your assigned Ca1PERS staff actuary, whose signature appears in the Actuarial Certification section on page 1, is available to discuss the report with you after August 1, 2018. The exhibit below displays the minimum employer contributions, before any cost sharing, for Fiscal Year 2019-20 along with estimates of the required contributions for Fiscal Year 2020-21. Member contributions other than cost sharing (whether paid by the employer or the employee) are in addition to the results shown below. The employer contributions in this report do not reflect any cost sharing arrangements you may have with your employees. Required Contribution Fiscal Year Employer Normal Employer Payment of Cost Rate Unfunded Liability 2019-20 15.388% $776,076 Projected Results 2020-21 16.3 % $587, 000 The actual investment return for Fiscal Year 2017-18 was not known at the time this report was prepared. The projections above assume the investment return for that year would be 7.25 percent. If the actual investment return for Fiscal Year 2017-18 differs from Z25 percent, the actual contribution requirements for the projected years will differ from those shown above. Moreover, the projected results for Fiscal Year 2020-21 assume that there are no future plan changes, no further changes in assumptions other than those recently approved, and no liability gains or losses. Such changes can have a significant impact on required contributions. Since they cannot be predicted in advance, the projected employer results shown above are estimates. The actual required employer contributions for Fiscal Year 2020-21 will be provided in next year's report. For additional details regarding the assumptions and methods used for these projections please refer to the "Projected Employer Contributions" in the "Highlights and Executive Summary" section. The "Risk Analysis" section of the valuation report also contains estimated employer contributions in future years under a variety of investment return scenarios. 14 Miscellaneous Plan of the Riverside County Transportation Commission (CaIPERS ID: 1431537449) Annual Valuation Report as of June 30, 2017 Page 2 Changes since the Prior Year's Valuation At its December 2016 meeting, the CaIPERS Board of Administration lowered the discount rate from 7.50 percent to 7.00 percent using a three-year phase -in beginning with the June 30, 2016 actuarial valuations. The minimum employer contributions for Fiscal Year 2019-20 determined in this valuation were calculated using a discount rate of 7.25 percent. The projected employer contributions on Page 5 are calculated under the assumption that the discount rate will be lowered to 7.00 percent next year as adopted by the Board. On December 19, 2017, the CaIPERS Board of Administration adopted new actuarial assumptions based on the recommendations in the December 2017 CaIPERS Experience Study and Review of Actuarial Assumptions. This study reviewed the retirement rates, termination rates, mortality rates, rates of salary increases and inflation assumption for Public Agencies. These new assumptions are incorporated in your actuarial valuations and will impact the required contribution for FY 2019-20. In addition, the Board adopted a new asset portfolio as part of its Asset Liability Management. The new asset mix supports a 7.00 percent discount rate. The reduction of the inflation assumption will be implemented in two steps in conjunction with the decreases in the discount rate. For the June 30, 2017 valuation an inflation rate of 2.625 percent was used and a rate of 2.50 percent will be used in the following valuation. The CaIPERS Board of Administration has adopted a new amortization policy effective with the June 30, 2019 actuarial valuation. The new policy shortens the period over which actuarial gains and losses are amortized from 30 years to 20 years with the payments computed using a level dollar amount. In addition, the new policy removes the 5-year ramp -up and ramp -down on UAL bases attributable to assumption changes and non -investment gains/losses. The new policy removes the 5-year ramp -down on investment gains/losses. These changes will apply only to new UAL bases established on or after June 30, 2019. For inactive employers the new amortization policy imposes a maximum amortization period of 15 years for all unfunded accrued liabilities effective June 30, 2017. Furthermore, the plan actuary has the ability to shorten the amortization period on any valuation date based on the life expectancy of plan members and projected cash flow needs to the plan. The impact of this has been reflected in the current valuation results. The CaIPERS Board of Administration adopted a Risk Mitigation Policy which is designed to reduce funding risk over time. This Policy has been temporarily suspended during the period over which the discount rate is being lowered. More details on the Risk Mitigation Policy can be found on our website. Besides the above noted changes, there may also be changes specific to the plan such as contract amendments and funding changes. Further descriptions of general changes are included in the "Highlights and Executive Summary" section and in Appendix A, "Statement of Actuarial Data, Methods and Assumptions "of the Section 2 report. We understand that you might have a number of questions about these results. While we are very interested in discussing these results with your agency, in the interest of allowing us to give every public agency their results, we ask that you wait until after August 1 to contact us with actuarial related questions. If you have other questions, please call our customer contact center at (888) CaIPERS or (888-225-7377). Sincerely, SCOTT TERANDO Chief Actuary 15 Actuarial Valuation as of June 301 2017 for the Miscellaneous Plan of the Riverside County Transportation Commission (CaIPERS ID: 1431537449) Required Contributions for Fiscal Year July 1, 2019 - June 301 2020 Table of Contents Section 1 - Plan Specific Information Section 2 - Risk Pool Actuarial Valuation Information Section 1 CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM Plan Specific Information for the Miscellaneous Plan of the Riverside County Transportation Commission (CaIPERS ID: 1431537449) (Rate Plan: 1238) Table of Contents Actuarial Certification 1 Highlights and Executive Summary Introduction 3 Purpose of Section 1 3 Required Employer Contributions 4 Plan's Funded Status 5 Projected Employer Contributions 5 Changes Since the Prior Year's Valuation 6 Subsequent Events 6 Assets and Liabilities Breakdown of Entry Age Normal Accrued Liability 8 Allocation of Plan's Share of Pool's Experience/Assumption Change 8 Development of Plan's Share of Pool's MVA 8 Schedule of Plan's Amortization Bases 9 Amortization Schedule and Alternatives 10 Employer Contribution History 12 Funding History 12 Risk Analysis Analysis of Future Investment Return Scenarios 14 Analysis of Discount Rate Sensitivity 15 Volatility Ratios 16 Hypothetical Termination Liability 17 Participant Data 18 List of Class 1 Benefit Provisions 18 Plan's Major Benefit Options 20 (CY) FIN PROCESS CONTROL ID: 523032 (PY) FIN 1P9ROCESS CONTROL ID: 503075 REPORT ID: 114674 CALPERS ACTUARIAL VALUATION - June 30, 2017 Miscellaneous Plan of the Riverside County Transportation Commission CaIPERS ID: 1431537449 Actuarial Certification Section 1 of this report is based on the member and financial data contained in our records as of June 30, 2017 which was provided by your agency and the benefit provisions under your contract with CaIPERS. Section 2 of this report is based on the member and financial data as of June 30, 2017 provided by employers participating in the Miscellaneous Risk Pool to which the plan belongs and benefit provisions under the CaIPERS contracts for those agencies. As set forth in Section 2 of this report, the pool actuaries have certified that, in their opinion, the valuation of the risk pool containing your Miscellaneous Plan has been performed in accordance with generally accepted actuarial principles consistent with standards of practice prescribed by the Actuarial Standards Board, and that the assumptions and methods are internally consistent and reasonable for the risk pool as of the date of this valuation and as prescribed by the CaIPERS Board of Administration according to provisions set forth in the California Public Employees' Retirement Law. Having relied upon the information set forth in Section 2 of this report and based on the census and benefit provision information for the plan, it is my opinion as the plan actuary that Unfunded Accrued Liability amortization bases as of June 30, 2017 and employer contribution as of July 1, 2019, have been properly and accurately determined in accordance with the principles and standards stated above. The undersigned is an actuary for CaIPERS, a member of both the American Academy of Actuaries and Society of Actuaries and meets the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion contained herein. KURT SCHNEIDER, ASA, EA, FCA, MAAA Senior Pension Actuary, CaIPERS Plan Actuary Rate Plan belonging to the Miscellaneous Risk Pool Page 1 20 Highlights and Executive Summary • Introduction • Purpose of Section 1 • Required Employer Contributions • Plan's Funded Status • Projected Employer Contributions • Changes Since the Prior Year's Valuation • Subsequent Events CALPERS ACTUARIAL VALUATION - June 30, 2017 Miscellaneous Plan of the Riverside County Transportation Commission CaIPERS ID: 1431537449 Introduction This report presents the results of the June 30, 2017 actuarial valuation of the Miscellaneous Plan of the Riverside County Transportation Commission of the California Public Employees' Retirement System (CaIPERS). This actuarial valuation sets the required employer contributions for Fiscal Year 2019-20. Purpose of Section 1 This Section 1 report for the Miscellaneous Plan of the Riverside County Transportation Commission of the California Public Employees' Retirement System (CaIPERS) was prepared by the plan actuary in order to: • Set forth the assets and accrued liabilities of this plan as of June 30, 2017; • Determine the minimum required employer contribution for this plan for the fiscal year July 1, 2019 through June 30, 2020; and • Provide actuarial information as of June 30, 2017 to the CaIPERS Board of Administration and other interested parties. The pension funding information presented in this report should not be used in financial reports subject to GASB Statement No. 68 for a Cost Sharing Employer Defined Benefit Pension Plan. A separate accounting valuation report for such purposes is available from CaIPERS and details for ordering are available on our website. The measurements shown in this actuarial valuation may not be applicable for other purposes. The employer should contact their actuary before disseminating any portion of this report for any reason that is not explicitly described above. Future actuarial measurements may differ significantly from the current measurements presented in this report due to such factors as the following: plan experience differing from that anticipated by the economic or demographic assumptions; changes in economic or demographic assumptions; changes in actuarial policies; and changes in plan provisions or applicable law. California Actuarial Advisory Panel Recommendations This report includes all the basic disclosure elements as described in the Model Disclosure Elements for Actuarial Valuation Reports recommended in 2011 by the California Actuarial Advisory Panel (CARP), with the exception of including the original base amounts of the various components of the unfunded liability in the Schedule of Amortization Bases shown on page 9. Additionally, this report includes the following "Enhanced Risk Disclosures" also recommended by the CAAP in the Model Disclosure Elements document: • A "Deterministic Stress Test," projecting future results under different investment income scenarios • A "Sensitivity Analysis," showing the impact on current valuation results using alternative discount rates of 6.0 percent, 7.0 percent and 8.0 percent. Rate Plan belonging to the Miscellaneous Risk Pool Page 3 22 CALPERS ACTUARIAL VALUATION - June 30, 2017 Miscellaneous Plan of the Riverside County Transportation Commission CaIPERS ID: 1431537449 Required Employer Contributions Fiscal Year Required Employer Contributions 2019-20 Employer Normal Cost Rate 15.3880/0 Plus, Either 1) Monthly Employer Dollar UAL Payment $ 64,673.00 Or 2) Annual Lump Sum Prepayment Option $ 749,386 The total minimum required employer contribution is the sum of the Plan's Employer Normal Cost Rate (expressed as a percentage of payroll) plus the Employer Unfunded Accrued Liability (UAL) Contribution Amount (billed monthly in dollars). Only the UAL portion of the employer contribution can be prepaid (which must be received in full no later than July 31). Plan Normal Cost contributions will be made as part of the payroll reporting process. If there is contractual cost sharing or other change, this amount will change. In accordance with Sections 20537 and 20572 of the Public Employees' Retirement Law, if a contracting agency fails to remit the required contributions when due, interest and penalties may apply. Development of Normal Cost as a Percentage of Payrolll Base Total Normal Cost for Formula Surcharge for Class 1 Benefitsz a) FAC 1 b) PRSA c) 3% COLA d) 50% IDR for Miscellaneous Phase out of Normal Cost Difference3 Plan's Total Normal Cost Formula's Expected Employee Contribution Rate Employer Normal Cost Rate Projected Payroll for the Contribution Fiscal Year Fiscal Year 2018-19 Fiscal Year 2019-20 19.521% 20.468% 0.643% 0.872% 1.291% 0.344% 0.000% 0.668% 0.763% 1.152% 0.291% 0.000% 22.671% 23.342% 7.952% 7.954% 14.719% 15.388% $ 5,419,752 $ 5,584,110 Estimated Employer Contributions Based on Projected Payroll Plan's Estimated Employer Normal Cost $ 797,733 $ 859,283 Plan's Payment on Amortization Bases4 675,638 776,076 of Projected Payroll (illustrative only) 12.466% 13.898% Estimated Total Employer Contribution of Projected Payroll (illustrative only) $ 1,473,371 $ 1,635,359 27.185% 29.286% ' The results shown for Fiscal Year 2018-19 reflect the prior year valuation and may not take into account any lump sum payment, side fund payoff, or rate adjustment made after June 30, 2017. 2 Section 2 of this report contains a list of Class 1 benefits and corresponding surcharges for each benefit. 3 The normal cost difference is phased out over a five-year period. The phase out of normal cost difference is 100 percent for the first year of pooling, and is incrementally reduced by 20 percent of the original normal cost difference for each subsequent year. This is non -zero only for plans that joined a pool within the past 5 years. Most plans joined a pool June 30, 2003, when risk pooling was implemented. a See page 9 for a breakdown of the Amortization Bases. Rate Plan belonging to the Miscellaneous Risk Pool Page 4 23 CALPERS ACTUARIAL VALUATION - June 30, 2017 Miscellaneous Plan of the Riverside County Transportation Commission CaIPERS ID: 1431537449 Plan's Funded Status June 30, 2016 June 30, 2017 1. Present Value of Projected Benefits (PVB) $ 38,515,314 $ 41,857,564 2. Entry Age Normal Accrued Liability (AL) 30,406,943 32,776,088 3. Plan's Market Value of Assets (MVA) 22,041,666 24,661,731 4. Unfunded Accrued Liability (UAL) [(2) - (3)] 8,365,277 8,114,357 5. Funded Ratio [(3) / (2)] 72.5% 75.2% This measure of funded status is an assessment of the need for future employer contributions based on the selected actuarial cost method used to fund the plan. The UAL is the present value of future employer contributions for service that has already been earned and is in addition to future normal cost contributions for active members. For a measure of funded status that is appropriate for assessing the sufficiency of plan assets to cover estimated termination liabilities, please see "Hypothetical Termination Liability" in the "Risk Analysis" section. Projected Employer Contributions The table below shows projected employer contributions (before cost sharing) for the next six fiscal years. Projected results reflect the adopted changes to the discount rate described in Appendix A, "Statement of Actuarial Data, Methods and Assumptions" of the Section 2 report. The projections also assume that all actuarial assumptions will be realized and that no further changes to assumptions, contributions, benefits, or funding will occur during the projection period. Required Contribution Projected Future Employer Contributions (Assumes 7.250/0 Return for Fiscal Year 2017-18) Fiscal Year 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 Normal Cost % 15.388% 16.3% 16.3% 16.3% 16.3% 16.3% UAL Payment $776,076 $587,000 $677,000 $752,000 $794,000 $839,000 Changes in the UAL due to actuarial gains or losses as well as changes in actuarial assumptions or methods are amortized using a 5-year ramp up. For more information, please see "Amortization of the Unfunded Actuarial Accrued Liability" under "Actuarial Methods" in Appendix A of Section 2. This method phases in the impact of unanticipated changes in UAL over a 5-year period and attempts to minimize employer cost volatility from year to year. As a result of this methodology, dramatic changes in the required employer contributions in any one year are less likely. However, required contributions can change gradually and significantly over the next five years. In years where there is a large increase in UAL the relatively small amortization payments during the ramp up period could result in a funded ratio that is projected to decrease initially while the contribution impact of the increase in the UAL is phased in. Due to the adopted changes in the discount rate for next year's valuation in combination with the 5-year phase -in ramp, the increases in the required contributions are expected to continue for six years from Fiscal Year 2019-20 through Fiscal Year 2024-25. For projected contributions under alternate investment return scenarios, please see the "Analysis of Future Investment Return Scenarios" in the "Risk Analysis" section. Rate Plan belonging to the Miscellaneous Risk Pool Page 5 24 CALPERS ACTUARIAL VALUATION - June 30, 2017 Miscellaneous Plan of the Riverside County Transportation Commission CaIPERS ID: 1431537449 Changes since the Prior Year's Valuation Benefits None. This valuation generally reflects plan changes by amendments effective before the date of the report. Please refer to the "Plan's Major Benefit Options" and Appendix B of Section 2 for a summary of the plan provisions used in this valuation. Actuarial Methods and Assumptions At its December 2016 meeting, the CaIPERS Board of Administration lowered the discount rate from 7.50 percent to 7.00 percent using a three-year phase -in beginning with the June 30, 2016 actuarial valuations. The minimum employer contributions for Fiscal Year 2019-20 determined in this valuation were calculated using a discount rate of 7.25 percent. The projected employer contributions on page 5 are calculated assuming that the discount rate will be lowered to 7.00 percent next year as adopted by the Board. The decision to reduce the discount rate was primarily based on reduced capital market assumptions provided by external investment consultants and CaIPERS investment staff. The specific decision adopted by the Board reflected recommendations from CaIPERS staff and additional input from employer and employee stakeholder groups. Based on the investment allocation adopted by the Board and capital market assumptions, the reduced discount rate assumption provides a more realistic assumption for the long-term investment return of the fund. On December 19, 2017, the CaIPERS Board of Administration adopted new actuarial assumptions based on the recommendations in the December 2017 CaIPERS Experience Study and Review of Actuarial Assumptions. This study reviewed the retirement rates, termination rates, mortality rates, rates of salary increases and inflation assumption for Public Agencies. These new assumptions are incorporated in this actuarial valuation and will impact the required contribution for FY 2019-20. In addition, the Board adopted a new asset portfolio as part of its Asset Liability Management. The new asset mix supports a 7.00 percent discount rate. The reduction of the inflation assumption will be implemented in two steps in conjunction with the decreases in the discount rate. For the June 30, 2017 valuation an inflation rate of 2.625 percent will be used and a rate of 2.50 percent in the following valuation. Notwithstanding the Board's decision to phase into a 7.0 percent discount rate, subsequent analysis of the expected investment return of CaIPERS assets or changes to the investment allocation may result in a change to this three-year discount rate schedule. Subsequent Events The CaIPERS Board of Administration has adopted a new amortization policy effective with the June 30, 2019 actuarial valuation. The new policy shortens the period over which actuarial gains and losses are amortized from 30 years to 20 years with the payments computed using a level dollar amount. In addition, the new policy removes the 5-year ramp -up and ramp -down on UAL bases attributable to assumption changes and non -investment gains/losses. The new policy removes the 5-year ramp -down on investment gains/losses. These changes will apply only to new UAL bases established on or after June 30, 2019. For inactive employers the new amortization policy imposes a maximum amortization period of 15 years for all unfunded accrued liabilities effective June 30, 2017. Furthermore, the plan actuary has the ability to shorten the amortization period on any valuation date based on the life expectancy of plan members and projected cash flow needs to the plan. The impact of this has been reflected in the current valuation results. The contribution requirements determined in this actuarial valuation report are based on demographic and financial information as of June 30, 2017. Changes in the value of assets subsequent to that date are not reflected. Investment returns below the assumed rate of return will increase the retired contribution, while investment returns above the assumed rate of return will decrease the retired contribution. This actuarial valuation report reflects statutory changes, regulatory changes and CaIPERS Board actions through January 2018. Any subsequent changes or actions are not reflected. Rate Plan belonging to the Miscellaneous Risk Pool Page 6 25 Assets and Liabilities • Breakdown of Entry Age Normal Accrued Liability • Allocation of Plan's Share of Pool's Experience/Assumption Change • Development of Plan's Share of Pool's MVA • Schedule of Plan's Amortization Bases • Amortization Schedule and Alternatives • Employer Contribution History • Funding History 26 CALPERS ACTUARIAL VALUATION - June 30, 2017 Miscellaneous Plan of the Riverside County Transportation Commission CaIPERS ID: 1431537449 Breakdown of Entry Age Normal Accrued Liability Active Members Transferred Members Terminated Members Members and Beneficiaries Receiving Payments Total Allocation of Plan's Share of Pool's Experience/Assumption Change 17,507,099 1,425,189 646,407 13,197,393 32,776,088 It is the policy of CaIPERS to ensure equity within the risk pools by allocating the pool's experience gains/losses and assumption changes in a manner that treats each employer equitably and maintains benefit security for the members of the System while minimizing substantial variations in employer contributions. The Pool's experience gains/losses and impact of assumption/method changes is allocated to the plan as follows: 1. Plan's Accrued Liability $ 32,776,088 2. Projected UAL balance at 6/30/17 8,467,864 3. Pool's Accrued Liability' $ 15,780,998,593 4. Sum of Pool's Individual Plan UAL Balances at 6/30/171 3,912,002,885 5. Pool's 2016/17 Investment & Asset (Gain)/Loss (413,206,167) 6. Pool's 2016/17 Other (Gain)/Loss (21,126,605) 7. Plan's Share of Pool's Asset (Gain)/Loss [(1) - (2)] / [(3) - (4)] * (5) (846,264) 8. Plan's Share of Pool's Other (Gain)/Loss [(1)] / [(3)] * (6) (43,879) 9. Plan's New (Gain)/Loss as of 6/30/2017 [(7) + (8)] $ (890,143) 10. Increase in Pool's Accrued Liability due to Change in Assumptions' 258,379,047 11. Plan's Share of Pool's Change in Assumptions [(1)] / [(3)] * (10) $ 536,636 ' Does not include plans that transferred to Pool on the valuation date. Development of the Plan's Share of Pool's Market Value of Assets 12. Plan's UAL [(2) + (9) + (11)] 13. Plan's Share of Pool's MVA [(1) - (12)] $ 8,114,357 $ 24,661,731 Rate Plan belonging to the Miscellaneous Risk Pool Page 8 27 CALPERS ACTUARIAL VALUATION - June 30, 2017 Miscellaneous Plan of the Riverside County Transportation Commission CaIPERS ID: 1431537449 Schedule of Plan's Amortization Bases There is a two-year lag between the valuation date and the start of the contribution fiscal year. • The assets, liabilities, and funded status of the plan are measured as of the valuation date: June 30, 2017. • The employer contribution determined by the valuation is for the fiscal year beginning two years after the valuation date: Fiscal Year 2019-20. This two-year lag is necessary due to the amount of time needed to extract and test the membership and financial data, and the need to provide public agencies with their employer contribution well in advance of the start of the fiscal year. The Unfunded Accrued Liability (UAL) is used to determine the employer contribution and therefore must be rolled forward two years from the valuation date to the first day of the fiscal year for which the contribution is being determined. The UAL is rolled forward each year by subtracting the payment on the UAL for the fiscal year and adjusting for interest. Additional discretionary payments are reflected in the Expected Payments column in the fiscal year they were made by the agency. Reason for Base SIDE FUND SHARE OF PRE-2013 POOL UAL ASSET (GAIN)/LOSS NON -ASSET (GAIN)/LOSS ASSET(GAIN)/LOSS NON -ASSET (GAIN)/LOSS ASSUMPTION CHANGE ASSET (GAIN/LOSS NON -ASSET (GAIN)/LOSS 06/30/15 ASSET (GAIN)/LOSS 06/30/16 NON -ASSET (GAIN)/LOSS 06/30/16 ASSUMPTION CHANGE 06/30/16 ASSET (GAIN/LOSS 06/30/17 NON -ASSET (GAIN)/LOSS 06/30/17 ASSUMPTION CHANGE 06/30/17 TOTAL Ramp Date Up/Down Amortization Balance Payment Balance Established 2019-20 Period 6/30/17 2017-18 6/30/18 2013 or Prior No Ramp 1 $700,049 $252,706 $489,096 06/30/13 No Ramp 17 $2,782,641 $217,384 $2,759,256 06/30/13 100% —, 26 $2,447,569 $98,832 $2,522,666 06/30/13 ........_ 100% ......... 26..... $9,871.. $399 $10,173 06/30/14 80% T 27 $(2,076,626) $(56,807) $(2,168,351) 06/30/14 80% T ._....... 27 $2,417 $66 $2,524.... 06/30/14 80% 7 17 $1,406,275 $52,352 $1,454,013 06/30/15 60._%..........._..............._........................_28.........................._............................._$1,321,93.3......_....................................._$18,615....._....................._$1,398,49.5.... 60%.... T ._....... 28..... $.(112 00.1). $(1.,577) $(118,488) 40% 7....._..................... 29 $1,676,529 $0 _ ........ $1,798,077... 40% T 29 $(210,580) $0 $(225,847) 0 T 40 /0 19 $519,787 22 784 581 067 0 T 20 /0 30 846 264 0 907 619 20% T ._....... 30 $(43,879) $0 $(47,060) 20% T 20 $536,636 $(38,227) $615,130 $8,114,357 $520,959 $8,163,132 Amounts for Fiscal 2019-20 Scheduled Payment Balance Payment 2018-19 6/30/19 for2019-20 $259,057 $256,272 $265,399 $221,305 $2,730,115 $227,315 $133,761 $2,567,034 $171,777 $539 $10,352 $693 $(86,438) $(2,236,040) $(118,412) $101..... $2,602 $138 79 992 $1,476,588 $109,557 $37,737....._...................._$1,460,805................................................._$58,161 $(3,197) $(123,768) $(4,928) $24,951......_....................._$1,902,598....... $51,278 $(3,134) $(238,975) $(6,441) $10 965 $611 839 $22 530 $0....._........................_$.(973,421.)......................................... $.(13.,492) $0..... $(50,472)..................................................$(700.) $(39,326) $700,454 $13,201 $636,313 $8,095,983 $776,076 The (gain)/loss bases are the plan's allocated share of the risk pool's (gain)/loss for the fiscal year as disclosed on the previous page. These (gain)/loss bases will be amortized according to Board policy over 30 years with a 5-year ramp -up. If the total Unfunded Liability is negative (i.e., plan has a surplus), the scheduled payment is $0, because the minimum required contribution under PEPRA must be at least equal to the normal cost. Rate Plan belonging to the Miscellaneous Risk Pool Page 9 28 CALPERS ACTUARIAL VALUATION - June 30, 2017 Miscellaneous Plan of the Riverside County Transportation Commission CaIPERS ID: 1431537449 Amortization Schedule and Alternatives The amortization schedule on the previous page shows the minimum contributions required according to CaIPERS amortization policy. There has been considerable interest from many agencies in paying off these unfunded accrued liabilities sooner and the possible savings in doing so. As a result, we have provided alternate amortization schedules to help analyze the current amortization schedule and illustrate the advantages of accelerating unfunded liability payments. Shown on the following page are future year amortization payments based on: 1) the current amortization schedule reflecting the individual bases and remaining periods shown on the previous page, and 2) alternate "fresh start" amortization schedules using two sample periods that would both result in interest savings relative to the current amortization schedule. Note that the payments under each alternate scenario increase by 2.875 percent for each year into the future. The schedules do not attempt to reflect any experience after June 30, 2017 that may deviate from the actuarial assumptions. Therefore, future amortization payments displayed in the Current Amortization Schedule may not match projected amortization payments shown in connection with Projected Employer Contributions provided elsewhere in this report. The Current Amortization Schedule typically contains individual bases that are both positive and negative. Positive bases result from plan changes, assumption changes or plan experience that result in increases to unfunded liability. Negative bases result from plan changes, assumption changes or plan experience that result in decreases to unfunded liability. The combination of positive and negative bases within an amortization schedule can result in unusual or problematic circumstances in future years such as: • A positive total unfunded liability with a negative total payment, • A negative total unfunded liability with a positive total payment, or • Total payments that completely amortize the unfunded liability over a very short period of time In any year where one of the above scenarios occurs, the actuary will consider corrective action such as replacing the existing unfunded liability bases with a single "fresh start' base and amortizing it over a reasonable period. The Current Amortization Schedule on the following page may appear to show that, based on the current amortization bases, one of the above scenarios will occur at some point in the future. It is impossible to know today whether such a scenario will in fact arise since there will be additional bases added to the amortization schedule in each future year. Should such a scenario arise in any future year, the actuary will take appropriate action based on guidelines in the CaIPERS amortization policy. Rate Plan belonging to the Miscellaneous Risk Pool Page 10 29 CALPERS ACTUARIAL VALUATION - June 30, 2017 Miscellaneous Plan of the Riverside County Transportation Commission CaIPERS ID: 1431537449 Amortization Schedule and Alternatives Date Current Amortization Schedule Alternate Schedules 15 Year Amortization 10 Year Amortization Balance Payment Balance Payment Balance Payment 6/30/2019 8,095,983 776,076 8,095,983 736,175 8,095,983 1,004,058 6/30/2020 7,879,226 575,003 7,920,548 757,340 7,643,123 1,032,925 6/30/2021 7,854,987 644,913 7,710,474 779,114 7,127,537 1,062,622 6/30/2022 7,756,591 699,048 7,462,621 801,513 6,543,815 1,093,172 6/30/2023 7,594,999 718,035 7,173,601 824,557 5,886,136 1,124,601 6/30/2024 7,402,027 738,679 6,839,763 848,263 5,148,227 1,156,933 6/30/2025 7,173,687 759,916 6,457,172 872,650 4,323,335 1,190,195 6/30/2026 6,906,798 781,764 6,021,586 897,739 3,404,192 1,224,413 6/30/2027 6,597,934 804,239 5,528,439 923,549 2,382,975 1,259,615 6/30/2028 6,243,402 827,361 4,972,808 950,101 1,251,264 1,295,829 6/30/2029 5,839,220 851,148 4,349,398 977,416 6/30/2030 5,381,102 875,618 3,652,501 1,005,517 6/30/2031 4,864,427 900,792 2,875,978 1,034,426 6/30/2032 4,284,224 887,098 2,013,219 1,064,166 6/30/2033 3,676,137 871,872 1,057,110 1,094,760 6/30/2034 3,039,733 837,803 6/30/2035 2,392,472 780,279 6/30/2036 1,757,858 350,714 6/30/2037 1,522,097 320,046 6/30/2038 1,301,004 287,325 6/30/2039 1,097,768 272,316 6/30/2040 895,341 280,146 6/30/2041 670,130 223,848 6/30/2042 486,894 220,831 6/30/2043 293,498 182,420 6/30/2044 125,859 96,083 6/30/2045 35,479 34,285 6/30/2046 2,544 2,635 6/30/2047 6/30/2048 Totals 15,600,295 13,567,286 11,444,361 Interest Paid 7,504,312 5,471,303 3,348,378 Estimated Savings 2,033,010 4,155,935 * This schedule does not reflect the impact of adopted discount rate changes that will become effective beyond June 30, 2017. For Projected Employer Contributions, please see page 5. Rate Plan belonging to the Miscellaneous Risk Pool Page 11 30 CALPERS ACTUARIAL VALUATION - June 30, 2017 Miscellaneous Plan of the Riverside County Transportation Commission CaIPERS ID: 1431537449 Employer Contribution History The table below provides a recent history of the required employer contributions for the plan, as determined by the annual actuarial valuation. It does not account for prepayments or benefit changes made during a fiscal year. Fiscal Year Employer Unfunded Liability Normal Cost Payment ($) 2016 - 17 2017 - 18 2018 - 19 2019 - 20 Funding History 14.012% 14.053% 14.719% 15.388% $518,494 $581,969 $675,638 $776,076 The funding history below shows the plan's actuarial accrued liability, share of the pool's market value of assets, share of the pool's unfunded liability, funded ratio, and annual covered payroll. Valuation Date Accrued Liability (AL) Share of Pool's Market Value of Assets (MVA) Plan's Share of Pool's Unfunded Funded Liability Ratio Annual Covered Payroll 06/30/2011 06/30/2012 06/30/2013 06/30/2014 06/30/2015 06/30/2016 06/30/2017 $ 18,593,777 20,016,925 21,922,579 25,315,391 27,488,176 30,406,943 32,776,088 $ 13,091,242 13,453,982 15,789,942 19,752,805 20,971,675 22,041,666 24,661,731 $ 5,502,535 6,562,943 6,132,637 5,562,586 6,516,501 8,365,277 8,114,357 70.4% 67.2% 72.0% 78.0% 76.3% 72.5% 75.2% $ 3,953,065 3,849,036 4,171,490 4,528,862 4,688,620 4,959,841 5,128,903 Rate Plan belonging to the Miscellaneous Risk Pool Page 12 31 Risk Analysis • Analysis of Future Investment Return Scenarios • Analysis of Discount Rate Sensitivity • Volatility Ratios • Hypothetical Termination Liability 32 CALPERS ACTUARIAL VALUATION - June 30, 2017 Miscellaneous Plan of the Riverside County Transportation Commission CaIPERS ID: 1431537449 Analysis of Future Investment Return Scenarios Analysis was performed to determine the effects of various future investment returns on required employer contributions. The projections below provide a range of results based on five investment return scenarios assumed to occur during the next four fiscal years (2017-18, 2018-19, 2019-20 and 2020-21). The projections also assume that all other actuarial assumptions will be realized and that no further changes to assumptions, contributions, benefits, or funding will occur. Each of the five investment return scenarios assumes a return of 7.25 percent for fiscal year 2017-18. For fiscal years 2018-19, 2019-20, and 2020-21 each scenario assumes an alternate fixed annual return. The fixed return assumptions for the five scenarios are 1.0 percent, 4.0 percent, 7.0 percent, 9.0 percent and 12.0 percent. The alternate investment returns were chosen based on stochastic analysis of possible future investment returns over the four-year period ending June 30, 2021. Using the expected returns and volatility of the asset classes in which the funds are invested, we produced five thousand stochastic outcomes for this period based on the recently completed Asset Liability Management process. We then selected annual returns that approximate the 5tn, 25tn, 50tn, 75tn, and 95tn percentiles for these outcomes. For example, of all the 4-year outcomes generated in the stochastic analysis, approximately 25 percent of them had an average annual return of 4.0 percent or less. Required contributions outside of this range are also possible. In particular, whereas it is unlikely that investment returns will average less than 1.0 percent or greater than 12.0 percent over this four-year period, the possibility of a single investment return less than 1.0 percent or greater than 12.0 percent in any given year is much greater. Assumed Annual Return From 2018-19through 2020-21 Projected Employer Contributions 2020-21 2021-22 2022-23 2023-24 1.0% Normal Cost 16.3% 16.3% 16.3% 16.3% UAL Contribution $587,000 $702,000 $828,000 $949,000 4.0% Normal Cost 16.3% 16.3% 16.3% 16.3% UAL Contribution $587,000 $690,000 $791,000 $873,000 7.0% Normal Cost 16.3% 16.3% 16.3% 16.3% UAL Contribution $587,000 $677,000 $752,000 $794,000 9.0% Normal Cost 16.3% 16.6% 16.9% 17.2% UAL Contribution $587,000 $670,000 $732,000 $754,000 12.0% Normal Cost 16.3% 16.6% 16.9% 17.2% UAL Contribution $587,000 $658,000 $693,000 $671,000 Given the temporary suspension of the Risk Mitigation Policy during the period over which the discount rate assumption is being phased down to 7.0 percent, the projections above were performed without reflection of any possible impact of this Policy for Fiscal Year 2020-21. In addition, the projections above do not reflect the recent changes to the new amortization policy effective with the June 30, 2019 valuation but the impact on the results above is expected to be minimal. Rate Plan belonging to the Miscellaneous Risk Pool Page 14 33 CALPERS ACTUARIAL VALUATION - June 30, 2017 Miscellaneous Plan of the Riverside County Transportation Commission CaIPERS ID: 1431537449 Analysis of Discount Rate Sensitivity Shown below are various valuation results as of June 30, 2017 assuming alternate discount rates. Results are shown using the current discount rate of 7.25 percent as well as alternate discount rates of 6.0 percent, 7.0 percent, and 8.0 percent. The alternate rate of 7.0 percent was selected since the Board has adopted this rate as the final discount rate at the end of the three-year phase -in of the reduction in this assumption. The rates of 6.0 percent and 8.0 percent were selected since they illustrate the impact of a 1 percent increase or decrease to the 7.0 percent assumption. This analysis shows the potential plan impacts if the PERF were to realize investment returns of 6.0 percent, 7.0 percent, or 8.0 percent over the long-term. This type of analysis gives the reader a sense of the long-term risk to required contributions. For a measure of funded status that is appropriate for assessing the sufficiency of plan assets to cover estimated termination liabilities, please see "Hypothetical Termination Liability" at the end of this section. Sensitivity Analysis As of June 30, 2017 Plan's Total Normal Cost Accrued Liability Unfunded Accrued Liability Funded Status 7.250/0 (current discount rate) 23.3420/0 $32,776,088 $8,114,357 75.20/0 6.0% 30.282% $38,563,842 $13,902,111 64.0% 7.00/0 24.2730/0 $33,378,957 $8,717,226 73.9% 8.0% 19.676% $29,161,012 $4,499,281 84.6% Rate Plan belonging to the Miscellaneous Risk Pool Page 15 34 CALPERS ACTUARIAL VALUATION - June 30, 2017 Miscellaneous Plan of the Riverside County Transportation Commission CaIPERS ID: 1431537449 Volatility Ratios Actuarial calculations are based on a number of assumptions about long-term demographic and economic behavior. Unless these assumptions (terminations, deaths, disabilities, retirements, salary growth, and investment return) are exactly realized each year, there will be differences on a year-to-year basis. The year- to-year differences between actual experience and the assumptions are called actuarial gains and losses and serve to lower or raise required employer contributions from one year to the next. Therefore, employer contributions will inevitably fluctuate, especially due to the ups and downs of investment returns. Asset Volatility Ratio (AVR) Plans that have higher asset -to -payroll ratios experience more volatile employer contributions (as a percentage of payroll) due to investment return. For example, a plan with an asset -to -payroll ratio of 8 may experience twice the contribution volatility due to investment return volatility, than a plan with an asset -to - payroll ratio of 4. Shown below is the asset volatility ratio, a measure of the plan's current contribution volatility. It should be noted that this ratio is a measure of the current situation. It increases over time but generally tends to stabilize as the plan matures. Liability Volatility Ratio (LVR) Plans that have higher liability -to -payroll ratios experience more volatile employer contributions (as a percentage of payroll) due to investment return and changes in liability. For example, a plan with a liability -to - payroll ratio of 8 is expected to have twice the contribution volatility of a plan with a liability -to -payroll ratio of 4. The liability volatility ratio is also shown in the table below. It should be noted that this ratio indicates a longer -term potential for contribution volatility. The asset volatility ratio, described above, will tend to move closer to the liability volatility ratio as the plan matures. Since the liability volatility ratio is a long-term measure, it is shown below at the current discount rate (7.25 percent) as well as the discount rate the Board has adopted to determine the contribution requirement in the June 30, 2018 actuarial valuation (7.00 percent). Rate Volatility As of June 30, 2017 1. Market Value of Assets 2. Payroll 3. Asset Volatility Ratio (AVR) [(1) / (2)] 4. Accrued Liability 5. Liability Volatility Ratio (LVR) [(4) / (2)] 6. Accrued Liability (7.00% discount rate) 7. Projected Liability Volatility Ratio [(6) / (2)] 24,661,731 5,128,903 4.8 32,776,088 6.4 33,378,957 6.5 Rate Plan belonging to the Miscellaneous Risk Pool Page 16 35 CALPERS ACTUARIAL VALUATION - June 30, 2017 Miscellaneous Plan of the Riverside County Transportation Commission CaIPERS ID: 1431537449 Hypothetical Termination Liability The hypothetical termination liability is an estimate of the financial position of the plan had the contract with CaIPERS been terminated as of June 30, 2017. The plan liability on a termination basis is calculated differently compared to the plan's ongoing funding liability. For the hypothetical termination liability calculation, both compensation and service are frozen as of the valuation date and no future pay increases or service accruals are assumed. This measure of funded status is not appropriate for assessing the need for future employer contributions in the case of an ongoing plan, that is, for an employer that continues to provide CaIPERS retirement benefits to active employees. A more conservative investment policy and asset allocation strategy was adopted by the CaIPERS Board for the Terminated Agency Pool. The Terminated Agency Pool has limited funding sources since no future employer contributions will be made. Therefore, expected benefit payments are secured by risk -free assets and benefit security for members is increased while funding risk is limited. However, this asset allocation has a lower expected rate of return than the PERF and consequently, a lower discount rate is assumed. The lower discount rate for the Terminated Agency Pool results in higher liabilities for terminated plans. The effective termination discount rate will depend on actual market rates of return for risk -free securities on the date of termination. As market discount rates are variable, the table below shows a range for the hypothetical termination liability based on the lowest and highest interest rates observed during an approximate 2-year period centered around the valuation date. Market Value of Assets (MVA) $24,661,731 Hypothetical Termination Liabilityi,i @ 1.75% $61,366,983 Funded Status 40.2% Unfunded Termination Liability @ 1.75% $36,705,253 Hypothetical Termination Liabilityi,i @ 3.00% $53,094,874 Funded Status 46.5% Unfunded Termination Liability @ 3.00% $28,433,144 ' The hypothetical liabilities calculated above include a 5 percent mortality contingency load in accordance with Board policy. Other actuarial assumptions can be found in Appendix A. 2 The current discount rate assumption used for termination valuations is a weighted average of the 10-year and 30-year U.S. Treasury yields where the weights are based on matching asset and liability durations as of the termination date. The discount rates used in the table are based on 20-year Treasury bonds, rounded to the nearest quarter percentage point, which is a good proxy for most plans. The 20-year Treasury yield was 2.61 percent on June 30, 2017, and was 2.83 percent on January 31, 2018. In order to terminate the plan, you must first contact our Retirement Services Contract Unit to initiate a Resolution of Intent to terminate. The completed Resolution will allow the plan actuary to give you a preliminary termination valuation with a more up-to-date estimate of the plan liabilities. CaIPERS advises you to consult with the plan actuary before beginning this process. Rate Plan belonging to the Miscellaneous Risk Pool Page 17 36 CALPERS ACTUARIAL VALUATION - June 30, 2017 Miscellaneous Plan of the Riverside County Transportation Commission CaIPERS ID: 1431537449 Participant Data The table below shows a summary of your plan's member data upon which this valuation is based: Reported Payroll Projected Payroll for Contribution Purposes June 30, 2016 June 30, 2017 $ 4,959,841 $ 5,128,903 $ 5,419,752 $ 5,584,110 Number of Members Active 42 43 Transferred 12 9 Separated 15 19 Retired 24 25 List of Class 1 Benefit Provisions This plan has the additional Class 1 Benefit Provisions: • One Year Final Compensation (FAC 1) • Post -Retirement Survivor Allowance (PRSA) • 3% Annual Cost -of -Living Allowance Increase (3% COLA) • IDR For Local Miscellaneous Members (50% IDR) Rate Plan belonging to the Miscellaneous Risk Pool Page 18 37 Plan's Major Benefit Options 38 SECTION 1 — Plan Specific Information for the Miscellaneous Plan of the Riverside County Transportation Commission Plan's Major Benefit Options Shown below is a summary of the major optional benefits for which your agency has contracted. A description of principal standard and optional plan provisions is in Appendix B within Section 2 of this report. Contract package Active Inactive Receiving Misc Misc Misc Benefit Provision Benefit Formula 2.70/0 @ 55 2.0% @ 55 Social Security Coverage No No Full/Modified Full Full Employee Contribution Rate 8.000/0 Final Average Compensation Period One Year One Year Sick Leave Credit Yes Yes Non -Industrial Disability Standard Standard Industrial Disability Yes Yes Pre -Retirement Death Benefits Optional Settlement 2 Yes Yes 1959 Survivor Benefit Level level 3 level 3 Special No No Alternate (firefighters) No No No Post -Retirement Death Benefits Lump Sum $500 $500 $500 Survivor Allowance (PRSA) Yes Yes Yes COLA 3% 3% 3% Rate Plan belonging to the Miscellaneous Risk Pool Page 20 39 Section 2 CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM Section 2 may be found on the CaIPERS website (wwmcalpers.ca.gov) in the Forms and Publications section 40 ATTACHMENT 3 i Ca1PERS August 2018 California Public Employees' Retirement System Actuarial Office P.O. Box 942709 Sacramento, CA 94229-2709 TTY: (916) 795-3240 (888) 225-7377 phone — (916) 795-2744 fax www.calpers.ca.gov PEPRA Miscellaneous Plan of the Riverside County Transportation Commission (Ca1PERS ID: 1431537449) Annual Valuation Report as of June 30, 2017 Dear Employer, As an attachment to this letter, you will find a copy of the June 30, 2017 actuarial valuation report of the pension plan. Because this plan is in a risk pool, the following valuation report has been separated into two sections: • Section 1 contains specific information for the plan including the development of the current and projected employer contributions, and • Section 2 contains the Risk Pool Actuarial Valuation appropriate to the plan as of June 30, 2017. Section 2 can be found on the Ca1PERS website at (www.calpers.ca.gov). From the home page, go to "Forms & Publications" and select "View All'. In the search box, enter "Risk Pool' and from the results list download the Miscellaneous or Safety Risk Pool Actuarial Valuation Report as appropriate. Your June 30, 2017 actuarial valuation report contains important actuarial information about your pension plan at Ca1PERS. Your assigned Ca1PERS staff actuary, whose signature appears in the Actuarial Certification section on page 1, is available to discuss the report with you after August 1, 2018. The exhibit below displays the minimum employer contributions, before any cost sharing, for Fiscal Year 2019-20 along with estimates of the required contributions for Fiscal Year 2020-21. Member contributions other than cost sharing (whether paid by the employer or the employee) are in addition to the results shown below. The employer contributions in this report do not reflect any cost sharing arrangements you may have with your employees. Required Contribution Fiscal Year Employer Normal Employer Payment of Cost Rate Unfunded Liability 2019-20 8.069% $3,760 Projected Results 2020-21 7.9% $4,100 The actual investment return for Fiscal Year 2017-18 was not known at the time this report was prepared. The projections above assume the investment return for that year would be 7.25 percent. If the actual investment return for Fiscal Year 2017-18 differs from Z25 percent, the actual contribution requirements for the projected years will differ from those shown above. Moreover, the projected results for Fiscal Year 2020-21 assume that there are no future plan changes, no further changes in assumptions other than those recently approved, and no liability gains or losses. Such changes can have a significant impact on required contributions. Since they cannot be predicted in advance, the projected employer results shown above are estimates. The actual required employer contributions for Fiscal Year 2020-21 will be provided in next year's report. For additional details regarding the assumptions and methods used for these projections please refer to the "Projected Employer Contributions" in the "Highlights and Executive Summary" section. The "Risk Analysis" section of the valuation report also contains estimated employer contributions in future years under a variety of investment return scenarios. 41 PEPRA Miscellaneous Plan of the Riverside County Transportation Commission (CaIPERS ID: 1431537449) Annual Valuation Report as of June 30, 2017 Page 2 Changes since the Prior Year's Valuation At its December 2016 meeting, the CaIPERS Board of Administration lowered the discount rate from 7.50 percent to 7.00 percent using a three-year phase -in beginning with the June 30, 2016 actuarial valuations. The minimum employer contributions for Fiscal Year 2019-20 determined in this valuation were calculated using a discount rate of 7.25 percent. The projected employer contributions on Page 5 are calculated under the assumption that the discount rate will be lowered to 7.00 percent next year as adopted by the Board. On December 19, 2017, the CaIPERS Board of Administration adopted new actuarial assumptions based on the recommendations in the December 2017 CaIPERS Experience Study and Review of Actuarial Assumptions. This study reviewed the retirement rates, termination rates, mortality rates, rates of salary increases and inflation assumption for Public Agencies. These new assumptions are incorporated in your actuarial valuations and will impact the required contribution for FY 2019-20. In addition, the Board adopted a new asset portfolio as part of its Asset Liability Management. The new asset mix supports a 7.00 percent discount rate. The reduction of the inflation assumption will be implemented in two steps in conjunction with the decreases in the discount rate. For the June 30, 2017 valuation an inflation rate of 2.625 percent was used and a rate of 2.50 percent will be used in the following valuation. The CaIPERS Board of Administration has adopted a new amortization policy effective with the June 30, 2019 actuarial valuation. The new policy shortens the period over which actuarial gains and losses are amortized from 30 years to 20 years with the payments computed using a level dollar amount. In addition, the new policy removes the 5-year ramp -up and ramp -down on UAL bases attributable to assumption changes and non -investment gains/losses. The new policy removes the 5-year ramp -down on investment gains/losses. These changes will apply only to new UAL bases established on or after June 30, 2019. For inactive employers the new amortization policy imposes a maximum amortization period of 15 years for all unfunded accrued liabilities effective June 30, 2017. Furthermore, the plan actuary has the ability to shorten the amortization period on any valuation date based on the life expectancy of plan members and projected cash flow needs to the plan. The impact of this has been reflected in the current valuation results. The CaIPERS Board of Administration adopted a Risk Mitigation Policy which is designed to reduce funding risk over time. This Policy has been temporarily suspended during the period over which the discount rate is being lowered. More details on the Risk Mitigation Policy can be found on our website. Besides the above noted changes, there may also be changes specific to the plan such as contract amendments and funding changes. Further descriptions of general changes are included in the "Highlights and Executive Summary" section and in Appendix A, "Statement of Actuarial Data, Methods and Assumptions "of the Section 2 report. We understand that you might have a number of questions about these results. While we are very interested in discussing these results with your agency, in the interest of allowing us to give every public agency their results, we ask that you wait until after August 1 to contact us with actuarial related questions. If you have other questions, please call our customer contact center at (888) CaIPERS or (888-225-7377). Sincerely, SCOTT TERANDO Chief Actuary 42 Actuarial Valuation as of June 301 2017 for the PEPRA Miscellaneous Plan of the Riverside County Transportation Commission (CaIPERS ID: 1431537449) Required Contributions for Fiscal Year July 1, 2019 - June 301 2020 Table of Contents Section 1 - Plan Specific Information Section 2 - Risk Pool Actuarial Valuation Information Section 1 CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM Plan Specific Information for the PEPRA Miscellaneous Plan of the Riverside County Transportation Commission (CaIPERS ID: 1431537449) (Rate Plan: 26801) Table of Contents Actuarial Certification 1 Highlights and Executive Summary Introduction 3 Purpose of Section 1 3 Required Employer Contributions 4 Plan's Funded Status 5 Projected Employer Contributions 5 Changes Since the Prior Year's Valuation 6 Subsequent Events 6 Assets and Liabilities Breakdown of Entry Age Normal Accrued Liability 8 Allocation of Plan's Share of Pool's Experience/Assumption Change 8 Development of Plan's Share of Pool's MVA 8 Schedule of Plan's Amortization Bases 9 Amortization Schedule and Alternatives 10 Employer Contribution History 12 Funding History 12 Risk Analysis Analysis of Future Investment Return Scenarios 14 Analysis of Discount Rate Sensitivity 15 Volatility Ratios 16 Hypothetical Termination Liability 17 Participant Data 18 List of Class 1 Benefit Provisions 18 Plan's Major Benefit Options 20 (CY) FIN PROCESS CONTROL ID: 523767 (PY) FIN PROCESS CONTROL ID: 503824 46 REPORT ID: 115452 CALPERS ACTUARIAL VALUATION - June 30, 2017 PEPRA Miscellaneous Plan of the Riverside County Transportation Commission CaIPERS ID: 1431537449 Actuarial Certification Section 1 of this report is based on the member and financial data contained in our records as of June 30, 2017 which was provided by your agency and the benefit provisions under your contract with CaIPERS. Section 2 of this report is based on the member and financial data as of June 30, 2017 provided by employers participating in the Miscellaneous Risk Pool to which the plan belongs and benefit provisions under the CaIPERS contracts for those agencies. As set forth in Section 2 of this report, the pool actuaries have certified that, in their opinion, the valuation of the risk pool containing your PEPRA Miscellaneous Plan has been performed in accordance with generally accepted actuarial principles consistent with standards of practice prescribed by the Actuarial Standards Board, and that the assumptions and methods are internally consistent and reasonable for the risk pool as of the date of this valuation and as prescribed by the CaIPERS Board of Administration according to provisions set forth in the California Public Employees' Retirement Law. Having relied upon the information set forth in Section 2 of this report and based on the census and benefit provision information for the plan, it is my opinion as the plan actuary that Unfunded Accrued Liability amortization bases as of June 30, 2017 and employer contribution as of July 1, 2019, have been properly and accurately determined in accordance with the principles and standards stated above. The undersigned is an actuary for CaIPERS, a member of both the American Academy of Actuaries and Society of Actuaries and meets the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion contained herein. KURT SCHNEIDER, ASA, EA, FCA, MAAA Senior Pension Actuary, CaIPERS Plan Actuary Rate Plan belonging to the Miscellaneous Risk Pool Page 1 47 Highlights and Executive Summary • Introduction • Purpose of Section 1 • Required Employer Contributions • Plan's Funded Status • Projected Employer Contributions • Changes Since the Prior Year's Valuation • Subsequent Events CALPERS ACTUARIAL VALUATION - June 30, 2017 PEPRA Miscellaneous Plan of the Riverside County Transportation Commission CaIPERS ID: 1431537449 Introduction This report presents the results of the June 30, 2017 actuarial valuation of the PEPRA Miscellaneous Plan of the Riverside County Transportation Commission of the California Public Employees' Retirement System (CaIPERS). This actuarial valuation sets the required employer contributions for Fiscal Year 2019-20. Purpose of Section 1 This Section 1 report for the PEPRA Miscellaneous Plan of the Riverside County Transportation Commission of the California Public Employees' Retirement System (CaIPERS) was prepared by the plan actuary in order to: • Set forth the assets and accrued liabilities of this plan as of June 30, 2017; • Determine the minimum required employer contribution for this plan for the fiscal year July 1, 2019 through June 30, 2020; and • Provide actuarial information as of June 30, 2017 to the CaIPERS Board of Administration and other interested parties. The pension funding information presented in this report should not be used in financial reports subject to GASB Statement No. 68 for a Cost Sharing Employer Defined Benefit Pension Plan. A separate accounting valuation report for such purposes is available from CaIPERS and details for ordering are available on our website. The measurements shown in this actuarial valuation may not be applicable for other purposes. The employer should contact their actuary before disseminating any portion of this report for any reason that is not explicitly described above. Future actuarial measurements may differ significantly from the current measurements presented in this report due to such factors as the following: plan experience differing from that anticipated by the economic or demographic assumptions; changes in economic or demographic assumptions; changes in actuarial policies; and changes in plan provisions or applicable law. California Actuarial Advisory Panel Recommendations This report includes all the basic disclosure elements as described in the Model Disclosure Elements for Actuarial Valuation Reports recommended in 2011 by the California Actuarial Advisory Panel (CARP), with the exception of including the original base amounts of the various components of the unfunded liability in the Schedule of Amortization Bases shown on page 9. Additionally, this report includes the following "Enhanced Risk Disclosures" also recommended by the CAAP in the Model Disclosure Elements document: • A "Deterministic Stress Test," projecting future results under different investment income scenarios • A "Sensitivity Analysis," showing the impact on current valuation results using alternative discount rates of 6.0 percent, 7.0 percent and 8.0 percent. Rate Plan belonging to the Miscellaneous Risk Pool Page 3 49 CALPERS ACTUARIAL VALUATION - June 30, 2017 PEPRA Miscellaneous Plan of the Riverside County Transportation Commission CaIPERS ID: 1431537449 Required Employer Contributions Fiscal Year Required Employer Contributions 2019-20 Employer Normal Cost Rate 8.0690/0 Plus, Either 1) Monthly Employer Dollar UAL Payment $ 313.36 Or 2) Annual Lump Sum Prepayment Option $ 3,631 The total minimum required employer contribution is the sum of the Plan's Employer Normal Cost Rate (expressed as a percentage of payroll) plus the Employer Unfunded Accrued Liability (UAL) Contribution Amount (billed monthly in dollars). Only the UAL portion of the employer contribution can be prepaid (which must be received in full no later than July 31). Plan Normal Cost contributions will be made as part of the payroll reporting process. If there is contractual cost sharing or other change, this amount will change. In accordance with Sections 20537 and 20572 of the Public Employees' Retirement Law, if a contracting agency fails to remit the required contributions when due, interest and penalties may apply. Development of Normal Cost as a Percentage of Payrolll Base Total Normal Cost for Formula Surcharge for Class 1 Benefitsz a) PRSA b) 3% COLA c) 500/0 IDR for Miscellaneous Phase out of Normal Cost Difference3 Plan's Total Normal Cost Plan's Employee Contribution Rate Employer Normal Cost Rate Projected Payroll for the Contribution Fiscal Year Fiscal Year 2018-19 Fiscal Year 2019-20 13.092% 13.735% 0.674% 0.791% 0.347% 0.000% 0.587% 0.706% 0.291% 0.000% 14.904% 15.319% 7.250% 7.250% 7.654% 8.069% $ 397,031 $ 453,776 Estimated Employer Contributions Based on Projected Payroll Plan's Estimated Employer Normal Cost $ 30,389 $ 36,615 Plan's Payment on Amortization Bases4 3,724 3,760 of Projected Payroll (illustrative only) 0.938% 0.829% Estimated Total Employer Contribution of Projected Payroll (illustrative only) $ 34,113 $ 40,375 8.592% 8.898% ' The results shown for Fiscal Year 2018-19 reflect the prior year valuation and may not take into account any lump sum payment, side fund payoff, or rate adjustment made after June 30, 2017. 2 Section 2 of this report contains a list of Class 1 benefits and corresponding surcharges for each benefit. 3 The normal cost difference is phased out over a five-year period. The phase out of normal cost difference is 100 percent for the first year of pooling, and is incrementally reduced by 20 percent of the original normal cost difference for each subsequent year. This is non -zero only for plans that joined a pool within the past 5 years. Most plans joined a pool June 30, 2003, when risk pooling was implemented. a See page 9 for a breakdown of the Amortization Bases. Rate Plan belonging to the Miscellaneous Risk Pool Page 4 50 CALPERS ACTUARIAL VALUATION - June 30, 2017 PEPRA Miscellaneous Plan of the Riverside County Transportation Commission CaIPERS ID: 1431537449 Plan's Funded Status June 30, 2016 June 30, 2017 1. Present Value of Projected Benefits (PVB) $ 615,595 $ 761,657 2. Entry Age Normal Accrued Liability (AL) 114,761 196,498 3. Plan's Market Value of Assets (MVA) 103,368 186,010 4. Unfunded Accrued Liability (UAL) [(2) - (3)] 11,393 10,488 5. Funded Ratio [(3) / (2)] 90.1% 94.7% This measure of funded status is an assessment of the need for future employer contributions based on the selected actuarial cost method used to fund the plan. The UAL is the present value of future employer contributions for service that has already been earned and is in addition to future normal cost contributions for active members. For a measure of funded status that is appropriate for assessing the sufficiency of plan assets to cover estimated termination liabilities, please see "Hypothetical Termination Liability" in the "Risk Analysis" section. Projected Employer Contributions The table below shows projected employer contributions (before cost sharing) for the next six fiscal years. Projected results reflect the adopted changes to the discount rate described in Appendix A, "Statement of Actuarial Data, Methods and Assumptions" of the Section 2 report. The projections also assume that all actuarial assumptions will be realized and that no further changes to assumptions, contributions, benefits, or funding will occur during the projection period. Required Contribution Projected Future Employer Contributions (Assumes 7.250/0 Return for Fiscal Year 2017-18) Fiscal Year 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 Normal Cost % 8.069% 7.9% 7.9% 7.9% 7.90/0 7.9% UAL Payment $3,760 $4,100 $4,400 $4,800 $5,200 $1,300 Changes in the UAL due to actuarial gains or losses as well as changes in actuarial assumptions or methods are amortized using a 5-year ramp up. For more information, please see "Amortization of the Unfunded Actuarial Accrued Liability" under "Actuarial Methods" in Appendix A of Section 2. This method phases in the impact of unanticipated changes in UAL over a 5-year period and attempts to minimize employer cost volatility from year to year. As a result of this methodology, dramatic changes in the required employer contributions in any one year are less likely. However, required contributions can change gradually and significantly over the next five years. In years where there is a large increase in UAL the relatively small amortization payments during the ramp up period could result in a funded ratio that is projected to decrease initially while the contribution impact of the increase in the UAL is phased in. Due to the adopted changes in the discount rate for next year's valuation in combination with the 5-year phase -in ramp, the increases in the required contributions are expected to continue for six years from Fiscal Year 2019-20 through Fiscal Year 2024-25. For projected contributions under alternate investment return scenarios, please see the "Analysis of Future Investment Return Scenarios" in the "Risk Analysis" section. Rate Plan belonging to the Miscellaneous Risk Pool Page 5 51 CALPERS ACTUARIAL VALUATION - June 30, 2017 PEPRA Miscellaneous Plan of the Riverside County Transportation Commission CaIPERS ID: 1431537449 Changes since the Prior Year's Valuation Benefits None. This valuation generally reflects plan changes by amendments effective before the date of the report. Please refer to the "Plan's Major Benefit Options" and Appendix B of Section 2 for a summary of the plan provisions used in this valuation. Actuarial Methods and Assumptions At its December 2016 meeting, the CaIPERS Board of Administration lowered the discount rate from 7.50 percent to 7.00 percent using a three-year phase -in beginning with the June 30, 2016 actuarial valuations. The minimum employer contributions for Fiscal Year 2019-20 determined in this valuation were calculated using a discount rate of 7.25 percent. The projected employer contributions on page 5 are calculated assuming that the discount rate will be lowered to 7.00 percent next year as adopted by the Board. The decision to reduce the discount rate was primarily based on reduced capital market assumptions provided by external investment consultants and CaIPERS investment staff. The specific decision adopted by the Board reflected recommendations from CaIPERS staff and additional input from employer and employee stakeholder groups. Based on the investment allocation adopted by the Board and capital market assumptions, the reduced discount rate assumption provides a more realistic assumption for the long-term investment return of the fund. On December 19, 2017, the CaIPERS Board of Administration adopted new actuarial assumptions based on the recommendations in the December 2017 CaIPERS Experience Study and Review of Actuarial Assumptions. This study reviewed the retirement rates, termination rates, mortality rates, rates of salary increases and inflation assumption for Public Agencies. These new assumptions are incorporated in this actuarial valuation and will impact the required contribution for FY 2019-20. In addition, the Board adopted a new asset portfolio as part of its Asset Liability Management. The new asset mix supports a 7.00 percent discount rate. The reduction of the inflation assumption will be implemented in two steps in conjunction with the decreases in the discount rate. For the June 30, 2017 valuation an inflation rate of 2.625 percent will be used and a rate of 2.50 percent in the following valuation. Notwithstanding the Board's decision to phase into a 7.0 percent discount rate, subsequent analysis of the expected investment return of CaIPERS assets or changes to the investment allocation may result in a change to this three-year discount rate schedule. Subsequent Events The CaIPERS Board of Administration has adopted a new amortization policy effective with the June 30, 2019 actuarial valuation. The new policy shortens the period over which actuarial gains and losses are amortized from 30 years to 20 years with the payments computed using a level dollar amount. In addition, the new policy removes the 5-year ramp -up and ramp -down on UAL bases attributable to assumption changes and non -investment gains/losses. The new policy removes the 5-year ramp -down on investment gains/losses. These changes will apply only to new UAL bases established on or after June 30, 2019. For inactive employers the new amortization policy imposes a maximum amortization period of 15 years for all unfunded accrued liabilities effective June 30, 2017. Furthermore, the plan actuary has the ability to shorten the amortization period on any valuation date based on the life expectancy of plan members and projected cash flow needs to the plan. The impact of this has been reflected in the current valuation results. The contribution requirements determined in this actuarial valuation report are based on demographic and financial information as of June 30, 2017. Changes in the value of assets subsequent to that date are not reflected. Investment returns below the assumed rate of return will increase the retired contribution, while investment returns above the assumed rate of return will decrease the retired contribution. This actuarial valuation report reflects statutory changes, regulatory changes and CaIPERS Board actions through January 2018. Any subsequent changes or actions are not reflected. Rate Plan belonging to the Miscellaneous Risk Pool Page 6 52 Assets and Liabilities • Breakdown of Entry Age Normal Accrued Liability • Allocation of Plan's Share of Pool's Experience/Assumption Change • Development of Plan's Share of Pool's MVA • Schedule of Plan's Amortization Bases • Amortization Schedule and Alternatives • Employer Contribution History • Funding History 53 CALPERS ACTUARIAL VALUATION - June 30, 2017 PEPRA Miscellaneous Plan of the Riverside County Transportation Commission CaIPERS ID: 1431537449 Breakdown of Entry Age Normal Accrued Liability Active Members Transferred Members Terminated Members Members and Beneficiaries Receiving Payments Total Allocation of Plan's Share of Pool's Experience/Assumption Change 183,274 0 13,224 0 196,498 It is the policy of CaIPERS to ensure equity within the risk pools by allocating the pool's experience gains/losses and assumption changes in a manner that treats each employer equitably and maintains benefit security for the members of the System while minimizing substantial variations in employer contributions. The Pool's experience gains/losses and impact of assumption/method changes is allocated to the plan as follows: 1. Plan's Accrued Liability $ 196,498 2. Projected UAL balance at 6/30/17 13,891 3. Pool's Accrued Liabilityl $ 15,780,998,593 4. Sum of Pool's Individual Plan UAL Balances at 6/30/171 3,912,002,885 5. Pool's 2016/17 Investment & Asset (Gain)/Loss (413,206,167) 6. Pool's 2016/17 Other (Gain)/Loss (21,126,605) 7. Plan's Share of Pool's Asset (Gain)/Loss [(1) - (2)] / [(3) - (4)] * (5) (6,357) 8. Plan's Share of Pool's Other (Gain)/Loss [(1)] / [(3)] * (6) (263) 9. Plan's New (Gain)/Loss as of 6/30/2017 [(7) + (8)] $ (6,620) 10. Increase in Pool's Accrued Liability due to Change in Assumptions) 258,379,047 11. Plan's Share of Pool's Change in Assumptions [(1)] / [(3)] * (10) $ 3,217 1 Does not include plans that transferred to Pool on the valuation date. Development of the Plan's Share of Pool's Market Value of Assets 12. Plan's UAL [(2) + (9) + (11)] $ 10,488 13. Plan's Share of Pool's MVA [(1) - (12)] $ 186,010 Rate Plan belonging to the Miscellaneous Risk Pool Page 8 54 CALPERS ACTUARIAL VALUATION - June 30, 2017 PEPRA Miscellaneous Plan of the Riverside County Transportation Commission CaIPERS ID: 1431537449 Schedule of Plan's Amortization Bases There is a two-year lag between the valuation date and the start of the contribution fiscal year. • The assets, liabilities, and funded status of the plan are measured as of the valuation date: June 30, 2017. • The employer contribution determined by the valuation is for the fiscal year beginning two years after the valuation date: Fiscal Year 2019-20. This two-year lag is necessary due to the amount of time needed to extract and test the membership and financial data, and the need to provide public agencies with their employer contribution well in advance of the start of the fiscal year. The Unfunded Accrued Liability (UAL) is used to determine the employer contribution and therefore must be rolled forward two years from the valuation date to the first day of the fiscal year for which the contribution is being determined. The UAL is rolled forward each year by subtracting the payment on the UAL for the fiscal year and adjusting for interest. Additional discretionary payments are reflected in the Expected Payments column in the fiscal year they were made by the agency. Amounts for Fiscal 2019-20 Ramp Scheduled Date Up/Down Amortization Balance Payment Balance Payment Balance Payment Reason for Base Established 2019-20 Period 6/30/17 2017-18 6/30/18 2018-19 6/30/19 for2019-20 FRESH START 06/30/17 No Ramp 5 $10,488 $(4,696) $16,112 $528 $16,733 $3,760 TOTAL $10,488 $(4,696) $16,112 $528 $16,733 $3,760 The (gain)/loss bases are the plan's allocated share of the risk pool's (gain)/loss for the fiscal year as disclosed on the previous page. These (gain)/loss bases will be amortized according to Board policy over 30 years with a 5-year ramp -up. If the total Unfunded Liability is negative (i.e., plan has a surplus), the scheduled payment is $0, because the minimum required contribution under PEPRA must be at least equal to the normal cost. Rate Plan belonging to the Miscellaneous Risk Pool Page 9 55 CALPERS ACTUARIAL VALUATION - June 30, 2017 PEPRA Miscellaneous Plan of the Riverside County Transportation Commission CaIPERS ID: 1431537449 Amortization Schedule and Alternatives The amortization schedule on the previous page shows the minimum contributions required according to CaIPERS amortization policy. There has been considerable interest from many agencies in paying off these unfunded accrued liabilities sooner and the possible savings in doing so. As a result, we have provided alternate amortization schedules to help analyze the current amortization schedule and illustrate the advantages of accelerating unfunded liability payments. Shown on the following page are future year amortization payments based on: 1) the current amortization schedule reflecting the individual bases and remaining periods shown on the previous page, and 2) alternate "fresh start" amortization schedules using two sample periods that would both result in interest savings relative to the current amortization schedule. Note that the payments under each alternate scenario increase by 2.875 percent for each year into the future. The schedules do not attempt to reflect any experience after June 30, 2017 that may deviate from the actuarial assumptions. Therefore, future amortization payments displayed in the Current Amortization Schedule may not match projected amortization payments shown in connection with Projected Employer Contributions provided elsewhere in this report. The Current Amortization Schedule typically contains individual bases that are both positive and negative. Positive bases result from plan changes, assumption changes or plan experience that result in increases to unfunded liability. Negative bases result from plan changes, assumption changes or plan experience that result in decreases to unfunded liability. The combination of positive and negative bases within an amortization schedule can result in unusual or problematic circumstances in future years such as: • A positive total unfunded liability with a negative total payment, • A negative total unfunded liability with a positive total payment, or • Total payments that completely amortize the unfunded liability over a very short period of time In any year where one of the above scenarios occurs, the actuary will consider corrective action such as replacing the existing unfunded liability bases with a single "fresh start" base and amortizing it over a reasonable period. The Current Amortization Schedule on the following page may appear to show that, based on the current amortization bases, one of the above scenarios will occur at some point in the future. It is impossible to know today whether such a scenario will in fact arise since there will be additional bases added to the amortization schedule in each future year. Should such a scenario arise in any future year, the actuary will take appropriate action based on guidelines in the CaIPERS amortization policy. Rate Plan belonging to the Miscellaneous Risk Pool Page 10 56 CALPERS ACTUARIAL VALUATION - June 30, 2017 PEPRA Miscellaneous Plan of the Riverside County Transportation Commission CaIPERS ID: 1431537449 Amortization Schedule and Alternatives Date Current Amortization Schedule Alternate Schedules 0 Year Amortization 0 Year Amortization Balance Payment Balance Payment Balance Payment 6/30/2019 16,733 3,760 N/A N/A N/A N/A 6/30/2020 14,052 3,869 6/30/2021 11,065 3,980 6/30/2022 7,745 4,094 6/30/2023 4,067 4,212 6/30/2024 6/30/2025 6/30/2026 6/30/2027 6/30/2028 6/30/2029 6/30/2030 6/30/2031 6/30/2032 6/30/2033 6/30/2034 6/30/2035 6/30/2036 6/30/2037 6/30/2038 6/30/2039 6/30/2040 6/30/2041 6/30/2042 6/30/2043 6/30/2044 6/30/2045 6/30/2046 6/30/2047 6/30/2048 Totals 19,915 N/A N/A Interest Paid 3,181 N/A N/A Estimated Savings N/A N/A * This schedule does not reflect the impact of adopted discount rate changes that will become effective beyond June 30, 2017. For Projected Employer Contributions, please see page 5. Rate Plan belonging to the Miscellaneous Risk Pool Page 11 57 CALPERS ACTUARIAL VALUATION - June 30, 2017 PEPRA Miscellaneous Plan of the Riverside County Transportation Commission CaIPERS ID: 1431537449 Employer Contribution History The table below provides a recent history of the required employer contributions for the plan, as determined by the annual actuarial valuation. It does not account for prepayments or benefit changes made during a fiscal year. Fiscal Employer Unfunded Liability Year Normal Cost Payment ($) 2016 - 17 7.283% $21 2017 - 18 7.262% $79 2018 - 19 7.654% $3,724 2019 - 20 8.069% $3,760 Funding History The funding history below shows the plan's actuarial accrued liability, share of the pool's market value of assets, share of the pool's unfunded liability, funded ratio, and annual covered payroll. Accrued Share of Pool's Plan's Share of Annual Valuation Liability Market Value of Pool's Unfunded Funded Covered Date (AL) Assets (MVA) Liability Ratio Payroll 06/30/2014 $ 13,776 $ 14,389 $ (613) 104.5% $ 136,440 06/30/2015 44,688 42,487 2,201 95.1% 246,072 06/30/2016 114,761 103,368 11,393 90.1% 363,340 06/30/2017 196,498 186,010 10,488 94.7% 416,785 Rate Plan belonging to the Miscellaneous Risk Pool Page 12 58 Risk Analysis • Analysis of Future Investment Return Scenarios • Analysis of Discount Rate Sensitivity • Volatility Ratios • Hypothetical Termination Liability 59 CALPERS ACTUARIAL VALUATION - June 30, 2017 PEPRA Miscellaneous Plan of the Riverside County Transportation Commission CaIPERS ID: 1431537449 Analysis of Future Investment Return Scenarios Analysis was performed to determine the effects of various future investment returns on required employer contributions. The projections below provide a range of results based on five investment return scenarios assumed to occur during the next four fiscal years (2017-18, 2018-19, 2019-20 and 2020-21). The projections also assume that all other actuarial assumptions will be realized and that no further changes to assumptions, contributions, benefits, or funding will occur. Each of the five investment return scenarios assumes a return of 7.25 percent for fiscal year 2017-18. For fiscal years 2018-19, 2019-20, and 2020-21 each scenario assumes an alternate fixed annual return. The fixed return assumptions for the five scenarios are 1.0 percent, 4.0 percent, 7.0 percent, 9.0 percent and 12.0 percent. The alternate investment returns were chosen based on stochastic analysis of possible future investment returns over the four-year period ending June 30, 2021. Using the expected returns and volatility of the asset classes in which the funds are invested, we produced five thousand stochastic outcomes for this period based on the recently completed Asset Liability Management process. We then selected annual returns that approximate the 5tn, 25tn, 50tn, 75tn, and 95tn percentiles for these outcomes. For example, of all the 4-year outcomes generated in the stochastic analysis, approximately 25 percent of them had an average annual return of 4.0 percent or less. Required contributions outside of this range are also possible. In particular, whereas it is unlikely that investment returns will average less than 1.0 percent or greater than 12.0 percent over this four-year period, the possibility of a single investment return less than 1.0 percent or greater than 12.0 percent in any given year is much greater. Assumed Annual Return From 2018-19through 2020-21 Projected Employer Contributions 2020-21 2021-22 2022-23 2023-24 1.0% Normal Cost 7.90/0 7.9% 7.9% 7.9% UAL Contribution $4,100 $4,600 $5,400 $6,400 4.0% Normal Cost 7.90/0 7.9% 7.9% 7.9% UAL Contribution $4,100 $4,500 $5,100 $5,800 7.0% Normal Cost 7.90/0 7.9% 7.9% 7.9% UAL Contribution $4,100 $4,400 $4,800 $5,200 9.0% Normal Cost 7.90/0 8.10/0 8.30/0 8.5% UAL Contribution $4,100 $4,400 $4,700 $1,900 12.0% Normal Cost 7.9% 8.1% 8.3% 8.5% UAL Contribution $4,100 $4,300 $210 $0 Given the temporary suspension of the Risk Mitigation Policy during the period over which the discount rate assumption is being phased down to 7.0 percent, the projections above were performed without reflection of any possible impact of this Policy for Fiscal Year 2020-21. In addition, the projections above do not reflect the recent changes to the new amortization policy effective with the June 30, 2019 valuation but the impact on the results above is expected to be minimal. Rate Plan belonging to the Miscellaneous Risk Pool Page 14 60 CALPERS ACTUARIAL VALUATION - June 30, 2017 PEPRA Miscellaneous Plan of the Riverside County Transportation Commission CaIPERS ID: 1431537449 Analysis of Discount Rate Sensitivity Shown below are various valuation results as of June 30, 2017 assuming alternate discount rates. Results are shown using the current discount rate of 7.25 percent as well as alternate discount rates of 6.0 percent, 7.0 percent, and 8.0 percent. The alternate rate of 7.0 percent was selected since the Board has adopted this rate as the final discount rate at the end of the three-year phase -in of the reduction in this assumption. The rates of 6.0 percent and 8.0 percent were selected since they illustrate the impact of a 1 percent increase or decrease to the 7.0 percent assumption. This analysis shows the potential plan impacts if the PERF were to realize investment returns of 6.0 percent, 7.0 percent, or 8.0 percent over the long-term. This type of analysis gives the reader a sense of the long-term risk to required contributions. For a measure of funded status that is appropriate for assessing the sufficiency of plan assets to cover estimated termination liabilities, please see "Hypothetical Termination Liability" at the end of this section. Sensitivity Analysis As of June 30, 2017 Plan's Total Normal Cost Accrued Liability Unfunded Accrued Liability Funded Status 7.250/0 (current discount rate) 15.319% $196,498 $10,488 94.70/0 6.0% 19.706% $233,324 $47,314 79.7% 7.00/0 15.919% $200,536 $14,526 92.80/0 8.0% 13.012% $173,849 $(12,161) 107.0% Rate Plan belonging to the Miscellaneous Risk Pool Page 15 61 CALPERS ACTUARIAL VALUATION - June 30, 2017 PEPRA Miscellaneous Plan of the Riverside County Transportation Commission CaIPERS ID: 1431537449 Volatility Ratios Actuarial calculations are based on a number of assumptions about long-term demographic and economic behavior. Unless these assumptions (terminations, deaths, disabilities, retirements, salary growth, and investment return) are exactly realized each year, there will be differences on a year-to-year basis. The year- to-year differences between actual experience and the assumptions are called actuarial gains and losses and serve to lower or raise required employer contributions from one year to the next. Therefore, employer contributions will inevitably fluctuate, especially due to the ups and downs of investment returns. Asset Volatility Ratio (AVR) Plans that have higher asset -to -payroll ratios experience more volatile employer contributions (as a percentage of payroll) due to investment return. For example, a plan with an asset -to -payroll ratio of 8 may experience twice the contribution volatility due to investment return volatility, than a plan with an asset -to - payroll ratio of 4. Shown below is the asset volatility ratio, a measure of the plan's current contribution volatility. It should be noted that this ratio is a measure of the current situation. It increases over time but generally tends to stabilize as the plan matures. Liability Volatility Ratio (LVR) Plans that have higher liability -to -payroll ratios experience more volatile employer contributions (as a percentage of payroll) due to investment return and changes in liability. For example, a plan with a liability -to - payroll ratio of 8 is expected to have twice the contribution volatility of a plan with a liability -to -payroll ratio of 4. The liability volatility ratio is also shown in the table below. It should be noted that this ratio indicates a longer -term potential for contribution volatility. The asset volatility ratio, described above, will tend to move closer to the liability volatility ratio as the plan matures. Since the liability volatility ratio is a long-term measure, it is shown below at the current discount rate (7.25 percent) as well as the discount rate the Board has adopted to determine the contribution requirement in the June 30, 2018 actuarial valuation (7.00 percent). Rate Volatility As of June 30, 2017 1. Market Value of Assets 2. Payroll 3. Asset Volatility Ratio (AVR) [(1) / (2)] 4. Accrued Liability 5. Liability Volatility Ratio (LVR) [(4) / (2)] 6. Accrued Liability (7.00% discount rate) 7. Projected Liability Volatility Ratio [(6) / (2)] 186,010 416,785 0.4 196,498 0.5 200,536 0.5 Rate Plan belonging to the Miscellaneous Risk Pool Page 16 62 CALPERS ACTUARIAL VALUATION - June 30, 2017 PEPRA Miscellaneous Plan of the Riverside County Transportation Commission CaIPERS ID: 1431537449 Hypothetical Termination Liability The hypothetical termination liability is an estimate of the financial position of the plan had the contract with CaIPERS been terminated as of June 30, 2017. The plan liability on a termination basis is calculated differently compared to the plan's ongoing funding liability. For the hypothetical termination liability calculation, both compensation and service are frozen as of the valuation date and no future pay increases or service accruals are assumed. This measure of funded status is not appropriate for assessing the need for future employer contributions in the case of an ongoing plan, that is, for an employer that continues to provide CaIPERS retirement benefits to active employees. A more conservative investment policy and asset allocation strategy was adopted by the CaIPERS Board for the Terminated Agency Pool. The Terminated Agency Pool has limited funding sources since no future employer contributions will be made. Therefore, expected benefit payments are secured by risk -free assets and benefit security for members is increased while funding risk is limited. However, this asset allocation has a lower expected rate of return than the PERF and consequently, a lower discount rate is assumed. The lower discount rate for the Terminated Agency Pool results in higher liabilities for terminated plans. The effective termination discount rate will depend on actual market rates of return for risk -free securities on the date of termination. As market discount rates are variable, the table below shows a range for the hypothetical termination liability based on the lowest and highest interest rates observed during an approximate 2-year period centered around the valuation date. Market Value of Assets (MVA) $186, 010 Hypothetical Termination Liabilityi,i @ 1.75% $474,711 Funded Status 39.2% Unfunded Termination Liability @ 1.75% $288,701 Hypothetical Termination Liabilityi,i @ 3.00% $407,497 Funded Status 45.7% Unfunded Termination Liability @ 3.00% $221,486 ' The hypothetical liabilities calculated above include a 5 percent mortality contingency load in accordance with Board policy. Other actuarial assumptions can be found in Appendix A. 2 The current discount rate assumption used for termination valuations is a weighted average of the 10-year and 30-year U.S. Treasury yields where the weights are based on matching asset and liability durations as of the termination date. The discount rates used in the table are based on 20-year Treasury bonds, rounded to the nearest quarter percentage point, which is a good proxy for most plans. The 20-year Treasury yield was 2.61 percent on June 30, 2017, and was 2.83 percent on January 31, 2018. In order to terminate the plan, you must first contact our Retirement Services Contract Unit to initiate a Resolution of Intent to terminate. The completed Resolution will allow the plan actuary to give you a preliminary termination valuation with a more up-to-date estimate of the plan liabilities. CaIPERS advises you to consult with the plan actuary before beginning this process. Rate Plan belonging to the Miscellaneous Risk Pool Page 17 63 CALPERS ACTUARIAL VALUATION - June 30, 2017 PEPRA Miscellaneous Plan of the Riverside County Transportation Commission CaIPERS ID: 1431537449 Participant Data The table below shows a summary of your plan's member data upon which this valuation is based: Reported Payroll Projected Payroll for Contribution Purposes June 30, 2016 June 30, 2017 $ 363,340 $ 416,785 $ 397,031 $ 453,776 Number of Members Active 3 4 Transferred 0 0 Separated 1 1 Retired 0 0 List of Class 1 Benefit Provisions This plan has the additional Class 1 Benefit Provisions: • Post -Retirement Survivor Allowance (PRSA) • 3% Annual Cost -of -Living Allowance Increase (3% COLA) • IDR For Local Miscellaneous Members (50% IDR) Rate Plan belonging to the Miscellaneous Risk Pool Page 18 64 Plan's Major Benefit Options 65 SECTION 1 — Plan Specific Information for the PEPRA Miscellaneous Plan of the Riverside County Transportation Commission Plan's Major Benefit Options Shown below is a summary of the major optional benefits for which your agency has contracted. A description of principal standard and optional plan provisions is in Appendix B within Section 2 of this report. Contract package Active Misc Benefit Provision Benefit Formula 2.0% @ 62 Social Security Coverage No Full/Modified Full Employee Contribution Rate 7.25% Final Average Compensation Period Three Year Sick Leave Credit Yes Non -Industrial Disability Standard Industrial Disability Yes Pre -Retirement Death Benefits Optional Settlement 2 Yes 1959 Survivor Benefit Level level 3 Special No Alternate (firefighters) No Post -Retirement Death Benefits Lump Sum $500 Survivor Allowance (PRSA) Yes COLA 3% Rate Plan belonging to the Miscellaneous Risk Pool Page 20 66 Section 2 CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM Section 2 may be found on the CaIPERS website (wwmcalpers.ca.gov) in the Forms and Publications section 67 Tara Bve rl From: Tara Byerly Sent: Wednesday, May 01, 2019 11:13 AM To: Tara Byerly Cc: Anne Mayer; JOHN STANDIFORD; Lisa Mobley Subject: ROTC: May Executive Committee - May 8, 2019 Good morning Executive Committee Members, The May Agenda for the Executive Committee meeting scheduled for Wednesday, May 8 @ 9:00 a.m. is available. Please copy the link: http://rctcdev.info/uploads/media items/may-executive-committee-agenda-may-8-2019.original.pdf Let me know if you have any questions or concerns. Respectfully, Tara Byerly Deputy Clerk of the Board Riverside County Transportation Commission 951.787.7141 W 1951.787.7906 F 4080 Lemon St. 3rd FI. 1 P.O. Box 12008 Riverside, CA 92502 rctc.org f in 03 i RIVERSIDE COUNTY TRANSPORTATION COMMISSION EXECUTIVE COMMITTEE ROLL CALL MAY 8, 2019 County of Riverside, District II County of Riverside, District III County of Riverside, District IV County of Riverside, District V City of Beaumont City of Jurupa Valley City of Indian Wells City of Palm Desert City of Palm Springs City of Temecula City of Wildomar Present -17r. ,6 Absent O O O O El O O O O O CI RIVERSIDE COUNTY TRANSPORTATION COMMISSION EXECUTIVE COMMITTEE SIGN -IN SHEET MAY 8, 2019 N AGENCY EMAIL ADDRESS nME Cis Z/C4 ��7�-�7/Alk711 AIV.("0 3 I {L 1-PALYI Dn.a--FT- .; '' j1 l2ee4 3�Aia,RN (sOai S.A.. tt-.Tk.o-o �.ETv.-) --Pv.tu>e.o....)(b S 4 DYD (i)fr) /-i �i i14U/'110//7