HomeMy Public PortalAboutResolution 00-3841 California Employee's Retirement System (CalPers) Amendment to Contract1
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RESOLUTION NO. 00 -3841
A RESOLUTION OF INTENTION OF THE CITY COUNCIL OF THE
CITY OF TEMPLE CITY TO APPROVE AN AMENDMENT TO THE
CONTRACT BETWEEN THE BOARD OF ADMINISTRATION OF THE
CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM AND
THE CITY COUNCIL OF THE CITY OF TEMPLE CITY
WHEREAS, the Public Employees' Retirement Law permits the participation of public agencies
and their employees in the Public Employees' Retirement System by the execution of a contract, and sets
forth the procedure by which said public agencies may elect to subject themselves and their employees to
amendments to said law; and
WHEREAS, one of the steps in the procedures to amend this contract is the adoption by the
governing body of the public agency of a resolution giving notice of its intention to approve an amendment
to said contract, which resolution shall contain a summary of the change proposed in said contract; and
WHEREAS, the following is a statement of the proposed change:
To provide Section 21354 (2% @ 55 Full and Modified formula) for local miscellaneous members.; and
WHEREAS, this proposed amendment would change the Total Present Value of Benefits of the
City of Temple City by $704,274 from a pre - amendment amount of $7,419,288 to a post - amendment
amount of $8,123,562; and
WHEREAS, the proposed amendment would change the Unfunded Liability of the city by $16,716
from a pre - amendment amount of $(2,221,676) to a post - amendment amount of $(2,204,960) (NOTE: a
negative liability is a surplus); and
WHEREAS, the proposed amendment would result in a 0.000% change in the employer rate
(currently at 000.0 %) which the Ca]PERS actuarial staff has calculated would hold for 33 years after the
amendment versus an indefinite period of time without the amendment;
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Temple City does
hereby give notice of intention to approve an amendment to the contract between said public agency and
the Board of Administration of the Public Employees' Retirement System, a copy of said amendment being
attached hereto, as an "Exhibit" and by this reference made a part hereof.
PASSED, APPROVED, AND ADOPTED on this 6th day of June, 2000.
ATTEST:
City Cler
Attachment:
(Exhibit) Amendment to Contract between the Board of Administration California Public
Employees' Retirement System and the City Council of the City of Temple City
Resolution No. 00 -3841
Page 2
I, City Clerk of the City of Temple City, hereby certify that the foregoing resolution, Resolution
No. 00 -3841, was adopted by the City Council of the City of Temple City at a regular meeting held on the
6th day of June 2000, by the following vote:
AYES: Councilman- Breazeal, Brook, Gillanders, Wilson, Souder
NOES: Councilman -None
ABSENT: Councilman -None
rk 0 q-(2tL'r dIA)
City Clerk
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a n d t h e
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t o a s P u b l i c A g e n c y , h a v i n g e n t e r e d i n t o a c o n t r a c t e f f e c t i v e O c t o b e r 1 , 1 9 6 5 , a n d w i t n e s s e d
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1 9 8 4 , A p r i l 1 1 , 1 9 9 0 a n d N o v e m b e r 1 , 1 9 9 0 w h i c h p r o v i d e s f o r p a r t i c i p a t i o n o f P u b l i c A g e n c y
i n s a i d S y s t e m , B o a r d a n d P u b l i c A g e n c y h e r e b y a g r e e a s f o l l o w s :
A . P a r a g r a p h s 1 t h r o u g h 1 1 a r e h e r e b y s t r i c k e n f r o m s a i d c o n t r a c t a s e x e c u t e d e f f e c t i v e
N o v e m b e r 1 , 1 9 9 0 , a n d h e r e b y r e p l a c e d b y t h e f o l l o w i n g p a r a g r a p h s n u m b e r e d 1
t h r o u g h 1 1 i n c l u s i v e :
1 . A l l w o r d s a n d t e r m s u s e d h e r e i n w h i c h a r e d e f i n e d i n t h e P u b l i c E m p l o y e e s '
R e t i r e m e n t L a w s h a l l h a v e t h e m e a n i n g a s d e f i n e d t h e r e i n u n l e s s o t h e r w i s e
s p e c i f i c a l l y p r o v i d e d . " N o r m a l r e t i r e m e n t a g e " s h a l l m e a n a g e 5 5 f o r l o c a l
m i s c e l l a n e o u s m e m b e r s .
2 . P u b l i c A g e n c y s h a l l p a r t i c i p a t e i n t h e P u b l i c E m p l o y e e s ' R e t i r e m e n t S y s t e m f r o m
a n d a f t e r O c t o b e r 1 , 1 9 6 5 m a k i n g i t s e m p l o y e e s a s h e r e i n a f t e r p r o v i d e d ,
m e m b e r s o f s a i d S y s t e m s u b j e c t t o a l l p r o v i s i o n s o f t h e P u b l i c E m p l o y e e s '
R e t i r e m e n t L a w e x c e p t s u c h a s a p p l y o n l y o n e l e c t i o n o f a c o n t r a c t i n g a g e n c y
a n d a r e n o t p r o v i d e d f o r h e r e i n a n d t o a l l a m e n d m e n t s t o s a i d L a w h e r e a f t e r
e n a c t e d e x c e p t t h o s e , w h i c h b y e x p r e s s p r o v i s i o n s t h e r e o f , a p p l y o n l y o n t h e
e l e c t i o n o f a c o n t r a c t i n g a g e n c y .
PI P!'l S7 £O NOT SIGN' EXHIBIT ONLY.'
3. Employees of Public Agency in the following classes shall become members of
said Retirement System except such in each such class as are excluded by law
or this agreement:.
a. Employees other than local safety members (herein referred to as local
miscellaneous members).
4. In addition to the classes of employees excluded from membership by said
Retirement Law, the following classes of employees shall not become members
of said Retirement System:
a. APPOINTIVE COMMISSIONS, BOARD AND COMMITTEES;
b. PERSONS COMPENSATED ON AN HOURLY BASIS;
c. CITY ATTORNEY; AND
d. ALL SAFETY EMPLOYEES.
5. The percentage of final compensation to be provided for local miscellaneous
members for each year of credited prior and current service shall be determined
in accordance with Section 21354 of said Retirement Law, subject to the
reduction provided therein for service prior to June 30, 1974, termination of
Social Security, for members whose service has been included in Federal Social
Security (2% at age 55 Full and Modified).
6. Public Agency elected and elects to be subject to the following optional
provisions:
a. Section 21573 (Third Level of 1959 Survivor Benefits).
b. Section 20042 (One -Year Final Compensation).
c. Section 20965 (Credit for Unused Sick Leave).
d. Section 21024 (Military Service Credit as Public Service), Statutes of
1976.
e. Sections 21624 and 21626 (Post- Retirement Survivor Allowance).
7. Public Agency, in accordance with Government Code Section 20790, ceased to
be an "employer" for purposes of Section 20834 effective on October 1, 1981.
Accumulated contributions of Public Agency shall be fixed and determined as
provided in Government Code Section 20834, and accumulated contributions
thereafter shall be held by the Board as provided in Govemment Code Section
20834.
8. Public Agency shall contribute to said Retirement System the contributions
determined by actuarial valuations of prior and future service liability with respect
to local miscellaneous members of said Retirement System.
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9. Public Agency shall also contribute to said Retirement System as follows:
a. Contributions required per covered member on account of the 1959
Survivor Benefits provided under Section 21573 of said Retirement Law.
(Subject to annual change.) In addition, all assets and liabilities of Public
Agency and its employees shall be pooled in a single account, based on
term insurance rates, for survivors of all local miscellaneous members.
b. A reasonable amount, as fixed by the Board, payable in one installment
within 60 days of date of contract to cover the costs of administering said
System as it affects the employees of Public Agency, not including the
costs of special valuations or of the periodic investigation and valuations
required by law.
c. A reasonable amount, as fixed by the Board, payable in one installment as
the occasions arise, to cover the costs of special valuations on account of
employees of Public Agency, and costs of the periodic investigation and
valuations required by law.
10. Contributions required of Public Agency and its employees shall be subject to
adjustment by Board on account of amendments to the Public Employees'
Retirement Law, and on account of the experience under the Retirement System
as determined by the periodic investigation and valuation required by said
Retirement Law.
11. Contributions required of Public Agency and its employees shall be paid by
Public Agency to the Retirement System within fifteen days after the end of the
period to which said contributions refer or as may be prescribed by Board
regulation. If more or less than the correct amount of contributions is paid for any
period, proper adjustment shall be made in connection with subsequent
remittances. Adjustments on account of errors in contributions required of any
employee may be made by direct payments between the employee and the
Board. . ,
O
B. This amendment shall be effect n the day of , •
BOARD OF ADMINISTRATION Z CITY COUNCIL ,zb "0
PUBLIC EMPLOYEES' RETIRED T SYSTEM CITY OF TEMPLE CITY '
BY �O BY .....,
KENNETH W. MARZION, la, PRESIDING OFFICER -
ACTUARIAL & EMPLOY ; ERVICES DIVISION
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PUBLIC EMPLOYEES' '� IREMENT SYSTEM A
.,
r
Amendment
PERS- CON -702A (Rev. 8/96)
Witness Date--; •
Attest:
Clerk
CONTRACT AMENDMENT COST ANALYSIS - VALUATION BASIS: JUNE 30, 1998
MISCELLANEOUS PLAN FOR CITY OF TEMPLE CITY
EMPLOYER NUMBER 607
Benefit Description: 21354, 2% ® 55 Full and Modified Formula
The table below shows the change in the total present value of benefits for the proposed plan amendment.
The present value of benefits represents the total dollars needed today to fund all future benefits for
current members of the plan, i.e. without regard to future employees. The difference between this amount
and current plan assets must be paid by future employee and employer contributions. As such, the change
in the present value of benefits due to the plan amendment represents the "cost" of the plan amendment.
However, for plans with excess assets some or all of this "cost" may already be covered by current excess
assets.
The Ca1PERS Board has adopted a resolution providing a one -time increase in the 'actuarial value of
assets from 90% of market value to 95% of market value for the calculation of the July 1, 2000 through
June 30, 2001 employer rate. This applies only to plans that amend their contract between July 1, 1999
and June 30, 2001. The tables below show the impact on the plan's liabilities due to the change in benefits
and the change in assets due to the one -time change in actuarial method.
It is not required, nor necessarily desirable, to have accumulated assets sufficient to cover the total present
value of benefits until every member has left employment. Instead, the actuarial funding process
calculates a regular contribution schedule of employee contributions and employer contributions (called
normal costs) which are designed to accumulate with interest to equal the total present value of benefits
by the time every member has left employment. As of each June 30, the actuary calculates the
"desirable" level of plan assets as of that point in time by subtracting the present value of scheduled future
employee contributions and future employer normal costs from the total present value of benefits. The
resulting "desirable" level of assets is called the accrued liability.
A plan with assets exactly equal to the plan's accrued liability is simply "on schedule" in funding that
plan, and only future employee contributions and future employer normal costs are needed. A plan with
assets below the accrued liability is "behind schedule ", or is said to have an unfunded liability, and must
temporarily increase contributions to get back on schedule. A plan with assets in excess of the plan's
accrued liability is "ahead of schedule ", or is said to have excess assets, and can temporarily reduce future
contributions. A plan with assets in excess of the total present value of benefits is called super - funded,
and neither future employer nor employee contributions are required. Of course, events such as plan
amendments and investment or demographic gains or losses can change a plan's condition from year to
year. For example, a plan amendment could cause a plan to move all the way from being super - funded to
being in an unfunded position.
April 12, 2000
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Pre- Amendment
Change Due to
Plan Amendment
& Method Change
Post - Amendment
Post Method
Change
Total Present Value of Benefits
Actuarial Value of Plan Assets
Present Value of Future Employer
and Employee Contributions
S 7,419,288
7,956,989
S 704,274
442,055
S 8,123,562
8,399,044
$ (537,701)
S 262,219
S (275,482)
It is not required, nor necessarily desirable, to have accumulated assets sufficient to cover the total present
value of benefits until every member has left employment. Instead, the actuarial funding process
calculates a regular contribution schedule of employee contributions and employer contributions (called
normal costs) which are designed to accumulate with interest to equal the total present value of benefits
by the time every member has left employment. As of each June 30, the actuary calculates the
"desirable" level of plan assets as of that point in time by subtracting the present value of scheduled future
employee contributions and future employer normal costs from the total present value of benefits. The
resulting "desirable" level of assets is called the accrued liability.
A plan with assets exactly equal to the plan's accrued liability is simply "on schedule" in funding that
plan, and only future employee contributions and future employer normal costs are needed. A plan with
assets below the accrued liability is "behind schedule ", or is said to have an unfunded liability, and must
temporarily increase contributions to get back on schedule. A plan with assets in excess of the plan's
accrued liability is "ahead of schedule ", or is said to have excess assets, and can temporarily reduce future
contributions. A plan with assets in excess of the total present value of benefits is called super - funded,
and neither future employer nor employee contributions are required. Of course, events such as plan
amendments and investment or demographic gains or losses can change a plan's condition from year to
year. For example, a plan amendment could cause a plan to move all the way from being super - funded to
being in an unfunded position.
April 12, 2000
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CONTRACT AMENDMENT COST ANALYSIS - VALUATION BASIS: JUNE 30, 1998
MISCELLANEOUS PLAN FOR CITY OF TEMPLE CITY
EMPLOYER NUMBER 607
Benefit Description: 21354, 2% @ 55 Full and Modified Formula
The changes in your plan's accrued liability, unfunded accrued liability, and the funded ratio as of June
30, 1998 due to the plan amendment are shown in the table below.
While the tables above give the changes in the "cost" and funded status of the plan due to the amendment,
there remains the question of what will happen to the employer contribution rate because of the change in
plan provisions.
Ca1PERS policy is to implement rate changes due to plan amendments immediately on the effective date
of the change in plan benefits. In general, the policy also provides that the change in unfunded liability
due to the plan amendment will be separately amortized over a period of 20 years from the effective date
of the amendment and all other components of the plan's unfunded liability/excess assets will continue to
be amortized separately.
However, special rules have to be applied to plans with a current employer contribution rate of zero. The
pre - amendment excess assets in these plans were sufficient to cover the employer's normal cost for one or
more years into the future. A plan amendment will use up some or all of the pre - amendment excess
assets. If there is still excess assets (i.e. if the plan is still ahead of schedule) after the plan amendment,
the remaining excess assets were spread over the greater of 5 years or the number of years for which the
excess assets would keep the employer rate equal to zero. If the amendment uses up all excess assets and
creates an unfunded liability (i.e. from being ahead of schedule to behind schedule), the post - amendment
unfunded liability was amortized over 20 years.
The table below shows the immediate short-term change in your plan's employer contribution rate due to
the plan amendment.
Rate
Component
Pre - Amendment
Change Due to
Plan Amendment
& Method Change
Post - Amendment
Post Method Change
Accrued Liability
S 5,735,313
S 458,771
S 6,194,084
Assets
7,956,989
442,055
8,399,044
Unfunded Liability
S (2,221,676)
S 16,716
S (2,204,960)
Funded Ratio
138.7%
(0.000)%
135.6%
While the tables above give the changes in the "cost" and funded status of the plan due to the amendment,
there remains the question of what will happen to the employer contribution rate because of the change in
plan provisions.
Ca1PERS policy is to implement rate changes due to plan amendments immediately on the effective date
of the change in plan benefits. In general, the policy also provides that the change in unfunded liability
due to the plan amendment will be separately amortized over a period of 20 years from the effective date
of the amendment and all other components of the plan's unfunded liability/excess assets will continue to
be amortized separately.
However, special rules have to be applied to plans with a current employer contribution rate of zero. The
pre - amendment excess assets in these plans were sufficient to cover the employer's normal cost for one or
more years into the future. A plan amendment will use up some or all of the pre - amendment excess
assets. If there is still excess assets (i.e. if the plan is still ahead of schedule) after the plan amendment,
the remaining excess assets were spread over the greater of 5 years or the number of years for which the
excess assets would keep the employer rate equal to zero. If the amendment uses up all excess assets and
creates an unfunded liability (i.e. from being ahead of schedule to behind schedule), the post - amendment
unfunded liability was amortized over 20 years.
The table below shows the immediate short-term change in your plan's employer contribution rate due to
the plan amendment.
Rate
Component
Pre - Amendment
Change Due to
Plan Amendment
& Method Change
Post - Amendment
Post Method
Change
Normal Cost
6.413%
1.820%
8.233%
Unfunded/Excess Asset Cost
(6.413)%
(1.820)%
(8.233)%
1959 Survivor
0.000%
0.000%
0.000%
Total Employer Rate
0.000%
(0.000)%
0.000%
Amortization Period
9999 Years
33 Years
April 12, 2000
4:19 PM
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CONTRACT AMENDMENT COST ANALYSIS - VALUATION BASIS: JUNE 30, 1998
MISCELLANEOUS PLAN FOR CITY OF TEMPLE CITY
EMPLOYER NUMBER 607
Benefit Description: 21354, 2% ® 55 Full and Modified Formula
Note that the change in normal cost in the table above may be much more indicative of the long term
change in the employer contribution rate due to the plan amendment. The plan's unfunded
liability/excess asset cost shown in the table above is a temporary adjustment to the employer contribution
to "get the plan back on schedule ". This temporary adjustment to the employer rate varies in duration
from plan to plan. For example, a plan with initial excess assets being amortized over a short period of
time will typically experience a large rate increase when excess assets are fully amortized. While a plan
amendment for such a plan may produce little or no increase in the employer contribution rate now, the
change in normal cost due to the plan amendment will become fully reflected in the employer
contribution rate as soon as initial excess assets are fully amortized.
If your agency is requesting cost information for two or more benefit changes, the cost of adopting more
than one of these changes may not be obtained by adding the individual costs. Instead, a separate
valuation should be done to provide a cost analysis for the combination of benefit changes. If the
proposed plan amendment applies to only some of the employees in the plan, the rate change due to the
plan amendment still applies to the entire plan, and is still based on the total plan payroll.
Please note that the cost analysis provided in this document may not be relied upon once the Ca1PERS
actuarial staff have completed the next annual valuation, that is, the annual valuation as of June 30, 1999.
If you have not taken action to amend your contract, and we have already mailed the June 30, 1999
annual valuation report, you must contact our office for an updated cost analysis, based on the new annual
valuation.
This actuarial valuation for this proposed plan amendment is based on the participant, benefits, and asset
data used in the June 30, 1998 annual valuation, with the benefits modified if necessary to reflect what is
currently provided under your contract with Ca1PERS, and further modified to reflect the proposed plan
amendment. Descriptions of the actuarial methodologies, actuarial assumptions, and plan benefit
provisions may be found in the appendices of the June 30, 1998 annual report. Please note that the results
shown here are subject to change if any of the data or plan provisions changes from what was used in this
study. It is our opinion that the valuation has been performed in accordance with generally accepted
actuarial principles, in accordance with standards of practice prescribed by the Actuarial Standards Board,
and that the assumptions and methods are internally consistent and reasonable for this plan, as prescribed
by the Ca1PERS Board of Administration according to provisions set forth in the California Public
Employees' Retirement Law.
✓� . (vJ
Kung -pei Hwang, A.S.A., M.A.A.A.
Senior Pension Actuary, Ca1PERS
Fin Process Ids: Annual -34466 Base -41651 Proposal -41652
April 12, 2000
4:19 PM
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