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HomeMy Public PortalAboutResolution 02-4094 California Public Employee's Retirement System (CalPers) 2.5% at 551 1 RESOLUTION NO. 02 -4094 A RESOLUTION OF INTENTION TO APPROVE AN AMENDMENT TO THE CONTRACT BETWEEN THE BOARD OF ADMINISTRATION OF THE CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM AND THE CITY COUNCIL OF THE CITY OF 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 changed: To provide Section 21354.4 (2.5% @ 55 Full and Modified formula) benefits for local miscellaneous members. 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 this 18th day of June, 2002. ATTEST: yClerk 0 City Clerk (16elet4'44' Mayor I, City Clerk of the City of Temple City, do hereby certify that the foregoing resolution, Resolution No. 02 -4094, was adopted by the City Council of the City of Temple City at a regular meeting held on the 18th day of June, 2002, by the following vote: AYES: Councilman- Souder, Wilson, Zovak, Vizcarra, Gillanders NOES: Councilman -None ABSENT: Councilman -None ABSTAIN: Councilman -None City Clerk Ca1PERS AM EXHIBIT 1 California Public Employees' Retirement System NDMEN is TO CONTRACT etween the oard of Administration California Public Employees' Retirement System and the City Council City of Temple City The Board of Administration, California Public Employees' Retirement System, hereinafter referred to as Board, and the governing body of the above public agency, hereinafter referred to as Public Agency, having entered into a contract effective October 1, 1965, and witnessed September 20, 1965, and as amended effective July 1, 1974, October 1, 1981, January 1, 1984, April 11, 1990, November 1, 1990, July 1, 2000 and November 3, 2000 which provides for participation of Public Agency in said System, Board and Public Agency hereby agree as follows: A. Paragraphs 1 through 11 are hereby stricken from said contract as executed effective November 3, 2000, and hereby replaced by the following paragraphs numbered 1 through 11 inclusive: 1. All words and terms used herein which are defined in the Public Employees' Retirement Law shall have the meaning as defined therein unless otherwise specifically provided. "Normal retirement age" shall ; u;a; , age 55 for local miscellaneous members. 2. Public Agei'cy shall participate in the Public Employees' Retirement System from and after October 1, 1965 making its employees as hereinafter provided, members of said System subject to all provisions of the Public Employees' Retirement Law except such as apply only on election of a contracting agency and are not provided for herein and to all amendmentF. to said Law hereafter enacted except those, which by express provisions thereof, apply only on the election of a contracting agency. 1 PLEASE DO 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. SAFETY EMPLOYEES. 5. The percentage of final compensation to be provided for each year of credited prior and current service for local miscellaneous members shall be determined in accordance- with Section 21354.4 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 (2.5% at age 55 Full and Modified). [Note that a future legislative proposal is being considered which could amend Government Code Section 21354.4 to make the 2.5% at 55 benefit formula applicable to both active members and inactive members who have not yet retired. If enacted, this amendment could have an effect on your agency's actuarial valuation and employer contribution rates in future years.] 6. Public Agency elected and elects to be subject to the following optional provisions: a. Section 21574 (Fourth 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). PLEASE DO NOT SIGN "EXHIBIT ONLY" 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 Government Code Section 20834. 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. 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 21574 of said Retirement Law: (Subject to annual change.) In addition, all assets and liabilities of Public Agency and its employees shall be pooled in a single account, based on term insurance rates, for survivors of all local miscellaneous members. 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. 1 1 1 1 1 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 Tess than the correct amount of contributions is paid for any period, proper adjustment shall be made in connection with subsequent remittances. Adjustments on account of errors in contributions required of any employee may be made by direct payments between the employee and the Board. B. This amendment shall be effective on the day of A. BOARD OF ADMINISTRATION° CITY COUNCIL PUBLIC EMPLOYEES' RETI'IMENT SYSTEM CITY OF TEMPLE CITY BY : BY KENNETH W. MARZIOI HIEF PRESIDING OFF 6R ACTUARIAL & EMPLO ER SERVICES DIVISION PUBLIC EMPLOYEE RETIREMENT SYSTEM C� ) 4,4T . AMENDMENT PERS - CON -702A (Rev. 8 \96) Witness Attest...) CONTRACT AMENDMENT COST ANALYSIS - VALUATION BASIS JUNE 30, 2000 MISCELLANEOUS PLAN FOR CITY OF TEMPLE EMPLOYER NUMBER 607 Benefit Description: Section 21354.4, 2.5% @ 55 Full and Modified Formula (Includes All Non - Retired Local Miscellaneous Members) New CaIPERS' Board Resolution Concerning Value of Assets On June 20, 2001, the Ca1PERS' Board adopted a new resolution concerning the value of assets to be used in determining the employer contribution rate due to benefit increases for amendments to public agency contracts. This new resolution applies to all contract amendments based upon the June 30, 2000 annual actuarial valuation and for which a Resolution of Intention to amend is filed with Ca1PERS by June 30,2002. This new resolution provides an increase in the actuarial value of assets in the amount of two times the increase in the Present Value of Benefits. Under the new resolution, the employer has the option of taking no increase in the actuarial value of assets and allowing the regular asset smoothing method to operate as it normally would. In addition, the employer may limit the actuarial value of assets used for rate setting purposes to 100% of market value if nonnal application of the resolution would otherwise exceed this limit. Under no circumstances will an actuarial value of assets in excess of 110% of market value be utilized. Further, the new resolution will apply to agencies whether or not they utilized the 95% asset value offered in the previous resolution. The available rate choices are offered under three different Alternatives: • Alternative 1 — No increase in Actuarial Value of Assets • Alternative 2 — Actuarial Value of Assets increased by twice the increase in the Present Value of Benefits due to the amendment, limited to 100% of Market Value of Assets • Alternative 3 — Actuarial Value of Assets increased by twice the increase in the Present Value of Benefits due to the amendment, limited to 110% of Market Value of Assets The employer should carefully consider its choices in choosing its new rate under the options made available by the new resolution. The recent stock market volatility and the choices created under this new board resolution can complicate your plan's future financial position. For many plans at Ca1PERS, the financial soundness of the plan will not be jeopardized regardless of the choice made by the employer. However, it is possible that, for some plans, some choices under the resolution would represent poor financial decisions. You are strongly encouraged to have in -depth discussions with your Ca1PERS actuary about the financial consequences of any amendment. Present Value of Projected Benefits The table below shows the change in the total present value of benefits for the proposed plan amendment. The present value of benefits represents the total dollars needed today to fund all future benefits for current members of the plan, i.e. without regard to future employees. The difference between this amount and current plan assets must be paid by future employee and employer contributions. As such, the change in the present value of benefits due to the plan amendment represents the "cost" of the plan amendment. However, for plans with excess assets some or all of this "cost" may already be covered by current excess assets. In this analysis, the increase in the present value of benefits due to the amendment is $1,023,478. Two times this increase is $2,046,956, or 19.2% of market value of assets. Therefore, under alternative 2, the actuarial value of assets will be increased to 100.0% of the market value of assets. Under alternative 3, the actuarial value of assets will be increased to 110.0% of the market value of assets. February 13, 2002 Page 1 of 8 7:55 AM 1 CONTRACT AMENDMENT COST ANALYSIS - VALUATION BASIS: JUNE 30, 2000 MISCELLANEOUS PLAN FOR CITY OF TEMPLE EMPLOYER NUMBER 607 Benefit Description: Section 21354.4, 2.5% @ 55 Full and Modified Formula (Includes All Non - Retired Local Miscellaneous Members) As of June 30, 2000 Current Plan Post- Amendment Alternative 1 Post - Amendment Alternative 2 Post - Amendment Alternative 3 Total Assets at Market Value $ 10,681,761 $ . 10,681,761 $ 10,681,761 $ 10,681,761 (1VIVA) Actuarial Value of Assets (AVA) 10,148,985 , 10,148,985 10,681,761 11,749,937 Increase in AVA 0 532,776 1,600,952 AVA / 1VIVA 95.0% 95.0% 100.0% 110.0% Present Value of Projected $ 9,003,981 $ 10,027,459 $ 10,027,459 $ 10,027,459 Benefits (PVB) Actuarial Value of Assets (AVA) 10,148,985 10,148,985 10,681,761 11,749,937 Present Value of Future Employer and Employee Contributions $ (1,145,004) $ (121,526) $ (654,302) $ (1,722,478) (PVB — AVA) Change to PVB 1,023,478 1,023,478 1,023,478 Accrued Liability It is not required, nor necessarily desirable, to have accumulated assets sufficient to cover the total present value of benefits until every member has left employment. Instead, the actuarial funding process calculates a regular contribution schedule of employee contributions and employer contributions (called normal costs) which are designed to accumulate with interest to equal the total present value of benefits by the time every member has left employment. As of each June 30, the actuary calculates the "desirable" level of plan assets as of that point in time by subtracting the present value of scheduled future employee contributions and future employer normal costs from the total present value of benefits. The resulting "desirable" level of assets is called the 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. The changes in your plan's accrued liability, unfunded accrued liability, and the funded ratio as of June 30, 2000 due to the plan amendment are shown in the table below. February 13, 2002 Page 2 of 8 7:55 AM CONTRACT AMENDMENT COST ANALYSIS - VALUATION BASIS: JUNE 30, 2000 MISCELLANEOUS PLAN FOR CITY OF TEMPLE EMPLOYER NUMBER 607 Benefit Description: Section 21354.4, 2.5% @ 55 Full and Modified Formula (Includes All Non - Retired Local Miscellaneous Members) As of June 30, 2000 Current Plan . Post- Amendment Alternative 1 Post- Amendment Alternative 2 Post - Amendment Alternative 3 Entry Age Normal Accrued $ 7,081,773 $ 7,882,245 $ 7,882,245 $ 7,882,245 Liability (AL) Actuarial Value of Assets (AVA) 10,148,985 10,148,985 10,681,761 11,749,937 Unfunded Liability/(Excess $ (3,067,212) $ (2,266,740) $ (2,799,516) $ (3,867,692) Assets) (UAL = AL - AVA) Funded Ratio (AVA / AL) 143.3% 128.8% 135.5% 149.1% Change to AL 800,472 800,472 800,472 Change to UAL 800,472 267,696 (800,480) Total Employer Contribution Rate 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, your actuary may choose to apply different rules to plans with a current employer contribution rate of zero. The pre- amendment excess assets in these plans were sufficient to cover the employer's normal cost for one or more years into the future. A plan amendment will use up some or all of the pre - amendment excess assets. In order to maintain our goal of providing rates that are relatively stable, while taking into account known or expected future events, your actuary may decide to spread any remaining excess assets over a single number of years. This is .known as a "fresh start' and will generally be for a period not less than 10 years. If the amendment uses up all excess assets and creates an unfunded liability (i.e. from being ahead of schedule to behind schedule), the total post - amendment unfunded liability may be amortized over 20 years. In no case may the annual contribution with regard to a positive unfunded liability be less than the amount which would be required to amortize that unfunded liability, as a level percent of pay, over 30 years. One aspect of the Board's June 20, 2001 Resolution is that, generally, if an agency elects an alternative which increases the actuarial value of assets (alternative 2 or 3), the result will be a lower short-term contribution and a higher longer -term contribution. To illustrate this we have estimated what the impact might be when the June 30, 2001 valuation is prepared. Please be aware this estimate assumes there are no changes to actuarial assumptions or methods, there are no actuarial gains or losses, and there are no plan changes such as work force changes and employer paid member contributions converted to pay. However, we have taken into account Ca1PERS' June 30,.2001 year -end market value rate of return, -7.2 %. The actual employer rate from July 1, 2003 to June 30, 2004 will be set by the June 30, 2001 annual valuation and will likely deviate from this estimate. February 13, 2002 Page 3 of 8 7:55 AM 1 CONTRACT AMENDMENT COST ANALYSIS - VALUATION BASIS: JUNE 30, 2000 MISCELLANEOUS PLAN FOR CITY OF TEMPLE EMPLOYER NUMBER 607 Benefit Description: Section 21354.4, 2.5% @ 55 Full and Modified Formula (Includes All Non - Retired Local Miscellaneous Members) The table below shows the change in your plan's employer contribution rate due to the plan amendment. As of June 30, 2000 Current Plan Post- Amendment Alternative 1 Post - Amendment Alternative 2 Post - Amendment Alternative 3 2002 -2003 Payment for Normal Cost 8.969% 10.319% 10.319% 10.319% Payment on Amortization Bases - 8.969% - 10.319% - 10.319% - 10.319% Payment for 1959 Survivor 0.000% 0.000% • 0.000% 0.000% Benefit Program Total Employer Rate 0.000% 0.000% 0.000% 0.000% Change to Normal Cost 1.350% 1.350% 1.350% Change to Total Employer Rate 0.000% 0.000% 0.000% Current Amortization Base 1 99 -year Amendment Amortization Base - Fresh Start 2 22 -year 34 -year 9999 -year - Multiple Base 3 N/A N/A N/A 2003 -2004 Estimated Employer Rate 4 (recognizing -7.2% investment return for 2000 -2001) 0.0% 0.0% 0.0% 0.0% Projection Amortization Base 47 -year 15 -year 19 -year 19 -year 1 - Details of the current amortization base are shown on page 7 of June 30, 2000 annual valuation report. If you have adopted any other subsequent amendments, the current amortization base is the schedule after these adopted amendments. 2 - If a fixed number of years is shown, it means that the current unfunded actuarial liability is projected and amortized over this fixed number of years. This amortization replaces the amortization schedule shown in your June 30, 2000 annual valuation and any other subsequent amendments you have adopted. 3 - If 20 -year is shown, it means that changes in liability due to plan amendments and changes in actuarial value of assets are amortized separately over a 20 -year period. This amortization schedule is in addition to the amortization schedule shown in the June 30, 2000 annual valuation and any other subsequent amendments you have adopted. 4 - Excludes 1959 Survivor Benefit Program rate. ' . In the above table, the information shown in the 2002 -2003 box represents the actual initial contribution rate that will apply during fiscal 2002 -2003 if you adopt the amendment by June 30, 2002. However, these figures do not incorporate the -7.2% investment return in 2000 -2001. The estimated employer rates shown in the 2003 -2004 box do take the negative return into consideration and will give you a better estimate of what to expect in 2003 -2004. 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. February 13, 2002 Page 4 of 8 7:55 AM CONTRACT AMENDMENT COST ANALYSIS - VALUATION BASIS: JUNE 30, 2000 MISCELLANEOUS PLAN FOR CITY OF TEMPLE - EMPLOYER NUMBER 607 Benefit Description: Section 21354.4, 2.5% @ 55 Full and Modified Formula (Includes All Non - Retired Local Miscellaneous Members) Disclosure If your agency is requesting cost information for two or more benefit changes, the cost of adopting more than one of these changes may not be obtained by adding the individual costs. Instead, a separate valuation must be done to provide a cost analysis for the combination of benefit changes. If the proposed plan amendment applies to only some of the employees in the plan, the rate change due to the plan amendment still applies to the entire plan, and is still based on the total plan payroll. Any mandated benefit improvements not included in the June 30, 2000 annual valuation (such as the change to the 90% cap for safety plans) have not been incorporated into this cost analysis. 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, 2001. If you have not taken action to amend your contract, and we have already mailed the June 30, 2001 annual valuation report, you must contact our office for an updated cost analysis, based on the new annual valuation. Descriptions of the actuarial methodologies, actuarial assumptions, and plan benefit provisions may be found in the appendices of the June 30, 2000 annual report. Please note that the results shown here are subject to change if any of the data or plan provisions change from what was used in this study. Certification This actuarial valuation for the proposed plan amendment is based on the participant, benefits, and asset data used in the June 30, 2000 annual valuation, with the benefits modified if necessary to reflect what is currently provided under your contract with CaIPERS, and further modified to reflect the proposed plan amendment. The valuation has been performed in accordance with standards of practice prescribed by the Actuarial Standards Board, and the assumptions and methods are internally consistent and reasonable for this plan, as prescribed by the Ca1PERS Board of Administration according to provisions set forth in the California Public Employees' Retirement Law. The valuation has been prepared in accordance with generally accepted actuarial practice except that, under a Ca1PERS Board resolution, an increased .. actuarial value of assets may be substituted for the actuarial value of assets that would have been .... produced by the current and generally accepted actuarial asset smoothing method described in the annual report. If your agency elects not to increase the actuarial value of assets permitted by the Board resolution, then no exception exists. Kung -pei Hwang, A.S.A., M.A.A.A. Senior Pension Actuary, Ca1PERS Fin Process Ids: Annual -70463 Base -86819 Altl -86820 Alt2 -86821 Alt3 -86822 February 13, 2002 7:55 AM Page 5 of 8 1 1 1 CONTRACT AMENDMENT COST ANALYSIS - VALUATION BASIS: JUNE 30, 2000 MISCELLANEOUS PLAN FOR CITY OF TEMPLE EMPLOYER NUMBER 607 Benefit Description: Section 21354.4, 2.5% @ 55 Full and Modified Formula (Includes All Non - Retired Local Miscellaneous Members) Summary of Plan Amendments Valued COVERAGE GROUP 70001 Pre - Amendment • The Service Retirement benefit calculated for service earned by this group of members is a monthly allowance equal to the product of the 2% @ 55 benefit factor, years of service, and final compensation. (Final compensation is reduced by $133.33 per month for members with a modified formula). The benefit factors for retirement at integral ages are shown below: Retirement 2% at 55 Retirement 2% at 55 Age Factor Age Factor 50 1.426% 57 2.104% 51 1.522% 58 2.156% 52 1.628% 59 2.210% 53 1.742% 60 2.262% 54 1.866% 61 2.314% 55 2.000% 62 2.366% 56 •2.052% 63 and older 2.418% • This group of members is required to contribute 7% of reportable earnings. (Members with a modified formula contribute 7% of reportable earnings in excess of $133.33 per month). Post - Amendment ;1 • The Service Retirement benefit calculated for service earned by this group of members (including all non- retired members) is a monthly allowance equal to the product of the 2.5% @ 55 benefit factor, years of service, and final compensation. (Final compensation is reduced by $133.33 per month for members with a modified formula). The benefit factors for retirement at integral ages are shown below: Retirement 2.5% at 55 Age Factor 50 2.000% 51 2.100% 52 2.200% 53 2.300% 54 2.400% 55 and older 2.500% • This group of members is required to contribute 8% of reportable earnings. (Members with a modified formula contribute 8% of reportable earnings in excess of $133.33 per month). February 13, 2002 Page 6 of 8 7:55 AM CONTRACT AMENDMENT COST ANALYSIS - VALUATION BASIS: JUNE 30, 2000 MISCELLANEOUS PLAN FOR CITY OF TEMPLE EMPLOYER NUMBER 607 Benefit Description: Section 21354.4, 2.5% @ 55 Full and Modified Formula (Includes All Non - Retired Local Miscellaneous Members) COVERAGE GROUP 70002 Pre - Amendment • The Service Retirement benefit calculated for service earned by this group of members is a monthly allowance equal to the product of the 2% @ 55 benefit factor, years of service, and final compensation. (Final compensation is reduced by $133.33 per month for members with a modified formula). The benefit factors for retirement at integral ages are shown below: Retirement 2% at 55 Retirement 2% at 55 Age Factor Age Factor 50 1.426% 57 2.104% • 51 1.522% 58 2.156% 52 1.628% 59 2.210% 53 1.742% 60 2.262% 54 1.866% 61 2.314% 55 • 2.000% 62 2.366% 56 2.052% 63 and older 2.418% • This group of members is required to contribute 7% of reportable earnings. (Members with a modified formula contribute 7% of reportable earnings in excess of $133.33 per month). Post - Amendment O The Service Retirement benefit calculated for service earned by this group of members (including all non - retired members) is a monthly allowance equal to the product of the 2.5% @ 55 benefit factor, years of service, and final compensation. (Final compensation is • reduced by $133.33 per month for members with a modified formula). The benefit factors for retirement at integral ages are shown below: Retirement 2.5% at 55 Age Factor 50 2.000% 51 2.100% 52 2.200% 53 2.300% 54 2.400% 55 and older 2.500% • This group of members is required to contribute 8% of reportable earnings. (Members with a modified formula contribute 8% of reportable earnings in excess of $133.33 per month). • February 13, 2002 Page 7 of 8 7:55 AM CONTRACT AMENDMENT COST ANALYSIS - VALUATION BASIS: JUNE 30, 2000 MISCELLANEOUS PLAN FOR CITY OF TEMPLE EMPLOYER NUMBER 607 Benefit Description: Section 21354.4, 2.5% @ 55 Full and Modified Formula (Includes All Non - Retired Local Miscellaneous Members) Probability of Retirement for New Miscellaneous Benefit Formulas The introduction of the three new miscellaneous formulas will affect future retirement behavior. As a result, we developed 3 sets of probability of retirements to reflect the estimated changes in retirement pattem. At this point, we cannot know the exact impact the new formulas will have. As we perform experience studies in the future, we will modify our retirement assumptions accordingly. The table below contains the new probability of retirement. February 13, 2002 7:55 AM Page 8 of 8 2.5% @ 55 2.7% @ 55 3% @ 60 Retirement Age • Male - Female Male Female Male Female 50 5% 7% 5% 7% 5% 7% 51 2% 5% 2% 5% 2% 5% 52 3% 5% 3% 5% 3% 5% 53 3% 5% 3% 6% 3% 5% 54 4% 5% 4% 6% ' 4% 5% 55 8% 9% 9% 10% 8% 9% 56 6% 7% 7% 8% 7% 8% 57 7% 6% 8% 7% 8% 7% 58 8% 10% 8% 10% 9% 11% 59 9% 9% 10% 9% 11% 10% 60 16% ' 12% 17% 13% 19% 15% 61 15% 10% 16% 11% 17% 12% 62 26% 21% 28% 23% • 31% 25% 63 22% 18% 23% 20% 26% 22% 64 15% • 13% 16% 14% 18% 16% 65 25% 25% 27% 27% 30% 30% 66 14% 15% 15% 16% 17% 18% 67 12% . 14% 13% 16% 14% 17% 68 12% 11% 13% 12% 15% 13% 69 9% 13% 10% 14% 11% 15% 70 100% 100% 100% 100% . 100% 100% February 13, 2002 7:55 AM Page 8 of 8 CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM Actuarial and Employer Services Division Public Agency Contract Services (916) 326 -3420 SUMMARY OF MAJOR PROVISIONS 2.5% @ 55 Formula (Section 21354.4) Local Miscellaneous Members SERVICE RETIREMENT To be eligible for service retirement, a member must be at least age 50 and have five years of CaIPERS credited service. There is no compulsory retirement age. The monthly retirement allowance is determined by age at retirement, years of service credit and final compensation. The basic benefit is 2.5% of final compensation for each year of credited service upon retirement at age 55. If retirement is earlier than age 55, the percentage of final compensation decreases for each quarter year of attained age to 2% at age 50. Final compensation is the average monthly pay rate during the last consecutive 36 months of employment, or 12 months if provided by the employer's contract, unless the member designates a different period of 36 or 12 consecutive months when the average pay rate was higher. DISABILITY RETIREMENT Members permanently incapacitated from performing their duties are eligible for disability retirement provided they have at least five years of service credit. The monthly retirement allowance is 1.8% of final compensation for each year of service. The maximum percentage for members who have between 10.000 and 18.518 years of service credit is one -third of their final compensation. If the member is eligible for service retirement, the member will receive the higher allowance payable, service or disability. If provided by the employer's contract, the benefit would be a minimum of 30% of final compensation for the first five years of service credit, plus 1% for each additional year of service to a maximum benefit of 50% of final compensation. INDUSTRIAL DISABILITY RETIREMENT If provided by the employer's contract, members permanently incapacitated from performing their duties as a result of a job - related injury or illness may receive 50% of their final compensation (or more by additional contract provisions). The industrial disability retirement allowance for members who entered membership in a miscellaneous category after January 1, 1980, cannot exceed the amount that would be payable for a service retirement if employment had continued to age 63. This limit may not apply if the member was disabled because of a direct violent act upon their person or as a result of hazardous and dangerous duty required for the position. If the member is eligible for service retirement, the service retirement allowance is payable if greater than the industrial disability retirement allowance. PRE - RETIREMENT DEATH BENEFITS Basic Death Benefit: This benefit is a refund of the member's contributions plus interest and up to six months' pay (one month's salary rate for each year of current service to a maximum of six months). PERS - CON -55 (Eff. 1/1/2002) 1 1 1957 Survivor Benefit: An eligible beneficiary may elect to receive either the Basic Death Benefit or the 1957 Survivor Benefit. The 1957 Survivor Benefit provides a monthly allowance equal to one -half of the highest service retirement allowance the member would have received had he /she retired on the date of death. The 1957 Survivor Benefit is payable to the surviving spouse until death or to eligible unmarried children until age 18. 1959 Survivor Benefit: (If provided by the employer's contract and the member is not covered under social security). A surviving spouse and eligible .children may receive a monthly allowance as determine by the level of coverage. This benefit is payable in addition to the Basic Death Benefit or 1957 Survivor Benefit. Children are eligible if under age 22 and unmarried. Pre - Retirement Optional Settlement 2 Death Benefit: (If provided by the employer's contract.) The spouse of a deceased member, who was eligible to retire for service at the time of death, may to elect to receive the Pre - Retirement Optional Settlement 2 Death Benefit in lieu of the lump sum Basic Death Benefit. The benefit is a monthly allowance equal to the amount the member would have received if he /she had retired for service on the date of death and elected Optional Settlement 2, the highest monthly allowance a member can leave a spouse. COST -OF- LIVING ADJUSTMENTS The cost of living allowance increases are limited to a maximum of 2% compounded annually unless the employer's contract provides a 3, 4, or 5% increase. DEATH AFTER RETIREMENT The lump sum death benefit is $500 (or $600, $2,000, $3,000, $4,000 or $5,000 if provided by the employer's contract) regardless of the retirement plan chosen by the member at the time of retirement. TERMINATION OF EMPLOYMENT Members who have separated from employment may elect to leave their contributions on deposit or request a refund of contributions and interest. Those who leave their contributions on deposit may apply at a later date for a monthly retirement allowance if the minimum service and age requirements are met. Members who request a refund of their contributions terminate their membership and are not eligible for any future benefits unless they return to CaIPERS membership. EMPLOYEE CONTRIBUTIONS Miscellaneous members covered by the 2.5% @ 55 formula contribute 8% of reportable earnings. Those covered under a modified formula (coordinated with Social Security) do not contribute on the first $133.33 earned. The employer also contributes toward the cost of the benefits. The amount contributed by the employer for current service retirement benefits generally exceeds the cost to the employee. In addition, the employer bears the entire cost of prior service benefits (the period of time before the employer provided retirement coverage under CaIPERS). All employer contribution rates are subject to adjustment by the CaIPERS Board of Administration. PERS- CON -55 (Eff. 1/1/2002) IcyaT2D lis3c®Eflc [it,e r_Do CvJC 6111 aPo "Yo ZE CSC ,r[lc1]. Exact Age and Percentage of Final Compensation Age 50 51 52 53 54 55+ Benefit Factor 2.00 2.10 2.20 2.30 2.40 2.50 Years of Service 5 - 10.00% 10.50 96 1.1.0A 1.1.50% 12.0096 12..50% 6 12.00% 12.60% 13.20% 13.80% 14.40% 15.00% 7 14:0095 1,;,,70% 15.40% 16.10% 16.80 96 17.50 %. 8 16.0096 16.80% 17.6090 18.4096 19.20% 20.00% 9 18.00 °0: 18.9096 19.80% 707076 21.60% 215096 10 20.0096 21.00% 22.00% 23.00% 24.00% 25.0096 11- 22.00% 23.10% 2420% 7530% 26.40% 27.50% 12 24.00% 25.20% 26.40% 27.6096 28.80% 30.00% 13 26.00% 2730% 2 +1.60% 2':'.9090 31.20% 32.50% 14 28.00% 29.40% 30.80% 32.2096 33.60% 35.00% 15 30.00% 31,5096 33.00% 3'.5096 36.00% 37.50% 16 32.00% 33.60% 35.20% 36.8096 38.4096 40.00% n 34.00% 35.70% 37.40% 39.10% 40.80% 42.50% 18 36.00% 37.80% 39.6096 41.4096 43.2096 45.00% 19 38.00% 39.90% 41,8096 43.70% 45.60 %° 4750 %.. 20 40.00% 42.00% 44.00% 46.0096 48.00% 50.00% 21 42.00% 14.10% 46.20% 433096 50.40% 52.5096 22 44.00% 46.20% 48.40% 50.60% 52.8096 55.00% 23 4.6.0C% . 48.30` 50:60% 52.90% 55.20% 575096 24 48.00% 50.40% 52.80% 55.20% 57.60% 60.00% 25 50.00% 52,50 96 15.0096 57.50% 60.00% 62.5096 26 52.0096 54.6096 57.20% 59.80% 62.40% 65.00% 27 54.0096 56.70% 59.4096 62. i0% 64.80% 675096 28 56.00% 58.8096 61.6096 64.4096 67.20% 70.00% 29 58.0096 60.90% 63.8090 66.7090 69.60% 72.50% 30 60.00% 63.00% 66.0096 69.00% 72.00% 75.00% 31 61.00% 65.1096 68.2096 71.30% 74.40% t 7.50% 32 64.00% 67.20% 70.40% 73.6096 76.80% 80.00% 33 66.0096 69.30% 72.60% 75.90% .79.20% 82.5096 34 - 71.40% 74.80% 78.2096 81.60% 85.00% 35:. - 77.70% 80.50% 8.00% 875096 36 - - 82.80% 86.40% 90.00% 37 r: - - - 88.8090 92.5096 38 - - - - - 95.0096 PERS - PUB -51 to be used with PUB 5 folder January 2002 1