Staff Report with Attachment and Exhibit A
PREPARED BY: JENNIFER ARMER, AICP
Senior Planner
110 E. Main Street Los Gatos, CA 95030 ● 408-354-6832
www.losgatosca.gov
MEETING DATE: 05/23/2019
ITEM: 1
TOWN OF LOS GATOS
GENERAL PLAN UPDATE ADVISORY COMMITTEE
REPORT
REPORT
DATE: MAY 15, 2019
TO: GENERAL PLAN UPDATE ADVISORY COMMITTEE
FROM: JOEL PAULSON, COMMUNITY DEVELOPMENT DIRECTOR
SUBJECT: CONTINUE THE DISCUSSION OF THE GENERAL PLAN VISION AND DISCUSS
GUIDING PRINCIPLES.
BACKGROUND:
On April 30, 2019, the General Plan Update Advisory Committee (GPAC) held its fourth meeting.
At the beginning of the meeting, several members of the GPAC expressed interest in a greater
understanding of the Town’s budget documents. Stephen Conway, Finance Director, prepared
the attached memo in response to the GPAC’s comments (Attachment 8).
On April 30, 2019, the GPAC reviewed the draft vision statement developed at the previous
meeting, along with draft vision statements provided by individual Committee members and
Mintier Harnish Planning Consultants. The following Vision Statement was developed at that
meeting:
The Town of Los Gatos is a safe, welcoming, and family-oriented community nestled in the
beautiful foothills of the Santa Cruz Mountains. The Town is a sustainable community that
provides a range of housing opportunities, historic neighborhoods, local culture and arts,
excellent schools, and a lively and accessible downtown. Los Gatos offers a choice of
mobility options, superior public facilities and services, and an open and responsive local
government that is fiscally sound. Los Gatos has a dynamic and thriving economy that
includes a mix of businesses throughout Town that serves all residents, workers, and
visitors. Los Gatos takes pride in its small town character and being a great place to live,
work, and visit.
The April 30, 2019 Addendum Report included initial information for t he GPAC discussion of
Guiding Principles, including the Guiding Principles adopted by the Town Council for the
General Plan update process, existing text from the 2020 General Plan, and a list of potential
PAGE 2 OF 4
SUBJECT: CONTINUE THE DISCUSSION OF THE GENERAL PLAN VISION AND DISCUSS
GUIDING PRINCIPLES.
MAY 15, 2019
N:\DEV\GPAC\GPAC Staff Reports\2019\5-23-19\Staff Report - Vision and GP.docx
topics developed by the consultant. The discussion of Guiding Principles was deferred to the
next meeting.
DISCUSSION:
As discussed in the April GPAC meetings, the purpose of Guiding Principles is to provide a high
level connection between the Vision Statement and the Goals, Policies, and Action Items within
the Elements of the General Plan.
Below is a set of Draft Guiding Principles developed by Mintier Harnish for consideration and
modification by the GPAC. Some of the language is pulled directly from the list of Guiding
Principles adopted by the Town Council for the update process. One principle is from the list,
but with a modified title (A Sense of Place). In developing these draft principles, the consultant
made sure that each element in the General Plan had a Guiding Principle assigned to it to help
guide future goal and policy development. The Land Use and Community Development
Element has multiple Guiding Principles associated with it since there is a large variety of topics
covered in that section.
1. Encourage Smart and Sensitive Development
(Land Use and Community Development Elements)
Protect and enhance the community character and heritage that defines Los Gatos by
guiding future development to establish higher standards that meet the needs of the
community, that are responsive to the environment, that complement the existing
community character, and which recognize the roots of the Town’s history, while still
allowing for change over time.
2. Recognize and Celebrate Diverse Neighborhoods
[Land Use and Community Development Elements (includes Housing)]
Recognize and celebrate the diverse neighborhoods that collectively make Los Gatos a
unique and attractive community by protecting each neighborhood’s character, and
ensuring all neighborhoods are safe, attractive, well maintained, and have convenient
access to a range of public and recreational services.
3. A Sense of Place
(Land Use and Community Development Elements)
Invigorate downtown Los Gatos as a special place for community gathering, commerce, and
other activities for residents, workers, and visitors. Foster the economic vitality of other Los
Gatos business locations. Protect the Town's historic resources that contribute to
community identity and pride.
PAGE 3 OF 4
SUBJECT: CONTINUE THE DISCUSSION OF THE GENERAL PLAN VISION AND DISCUSS
GUIDING PRINCIPLES.
MAY 15, 2019
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DISCUSSION (continued):
4. Housing for All Stages of Life
[Land Use and Community Development Elements (includes Housing)]
Encourage a diverse housing stock that meets the needs of the community by providing
places to live that meet the needs of all ages within the community.
5. Enhanced Mobility
(Transportation Element)
Create a well-connected and diverse circulation system that enables the safe and efficient
travel to all areas of the Town using a variety of mobility options, including walking, biking,
transit, and vehicles. The Town’s mobility system is designed to fully accommodate
residents, workers, visitors, and students of all ages and abilities.
6. Enhance Town Services and Fiscal Stability
(Public Facilities, Services, and Infrastructure Element)
Provide high-quality Town services and facilities while sustaining the Town’s long-term fiscal
health.
7. Protect Natural Resources
(Open Space, Parks, and Recreation Element)
Protect the natural resources and scenic assets that define Los Gatos, including open space
preserves, recreational trails, surrounding hillsides, and natural waterways.
8. A Sustainable Los Gatos
(Environment and Sustainability Element)
Foster a more sustainable environment by encouraging alternative modes of transportation
that reduce pollution emissions, provide for the use of sustainable best management
practices to reduce waste, reduce energy consumption, and reduce the depletion of natural
resources in order to provide a thriving community for future generations.
9. Promote Public Safety
(Safety Element)
Maintain and enhance Los Gatos as a safe community through preparation and planning,
education, and community design that is responsive to the range of potential natural and
man-made hazards and safety issues.
PAGE 4 OF 4
SUBJECT: CONTINUE THE DISCUSSION OF THE GENERAL PLAN VISION AND DISCUSS
GUIDING PRINCIPLES.
MAY 15, 2019
N:\DEV\GPAC\GPAC Staff Reports\2019\5-23-19\Staff Report - Vision and GP.docx
NEXT STEPS:
The next steps in the General Plan update process include:
• Conducting Town Council and Planning Commission Study Session(s) on the Vision
Statement and Guiding Principles; and
• Beginning Phase 4: Land Use Alternatives at the GPAC.
ATTACHMENTS:
Attachments previously received with April 30, 2019 Staff Report:
1. Budget Process Diagram (one page)
2. Example Vision Statements (23 pages)
3. Public Comments Received before 11:00 a.m., Friday, April 26, 2019
Attachment previously received with April 30, 2019 Addendum Report:
4. Comment from Committee Member
Attachments previously received with the first April 30, 2019 Desk Item Report:
5. Comment from Committee Member
6. Public Comments Received before 11:00 a.m., Tuesday, April 30, 2019
Attachment previously received with the second April 30, 2019 Desk Item Report:
7. Public Comments Received before 11:00 a.m., Tuesday, April 30, 2019
Attachments received with this Staff Report:
8. Memo from Finance Director (two pages) with Exhibit 1 (37 pages)
ATTACHMENT 8
MEMORANDUM
TO: GENERAL PLAN UPDATE ADVISORY COMMITTEE
FROM: STEPHEN CONWAY, DIRECTOR OF FINANCE
SUBJECT: ADDITIONAL FINANCIAL BACKGROUND INFORMATION
DATE: MAY 13, 2019
At its last meeting date on April 30, 2019, members of the Committee expressed interest in
updates to the Town’s Adopted Budget and additional information about the amount of total
unfunded pension and Other Post-Employment Benefits (OPEB) obligations. Planning staff is
working with the consultants to modify the Fiscal section of the Background report as
requested and as appropriate.
The following source documents provide updated budget and pension/OPEB information:
• The most current budget information can be obtained by examining the Town’s
Proposed FY 2019/20 Operating and Capital Budgets:
https://www.losgatosca.gov/2537/Proposed-FY-1920-Operating-Budget
The proposed balanced budget is being considered by the Town Council on Tuesday,
May 21, 2019. The budget transmittal letter found in Section A-1 through A-16 contains
information on the Town’s strategic goals and priorities, short- and long-term factors
affecting the development of the proposed budget, and forecasted financial information
through FY 2024/25.
• The Town’s actuaries, Bartel and Associates, presented a forecast of pension
contributions in a report entitled, “CalPERS Pension Plans” dated April 24, 2018 (see
Exhibit 1). The report includes projected contribution rates for both miscellaneous and
safety pension plans based upon a June 30, 2016 actuarial valuation date.
• To review the most recent compilation of the Town’s unfunded pension and OPEB
liabilities, please see the Town’s most recent Comprehensive Annual Financial Report
(CAFR) dated June 30, 2018:
https://www.losgatosca.gov/DocumentCenter/View/22243/FY-201718-CAFR
The CAFR is the Town’s official audited statement. It is the most authoritative source for
financial information for pension or liability amounts, or results of financial operations
(budget to actuals) for the fiscal year. The Town has two pension plans, one for all
sworn employees called the safety plan and another for all other employees called the
Miscellaneous Plan. Information regarding the total net pension liability of
approximately $30.8 M for the Miscellaneous Plan and $22.4 M for the Safety Plan (total
$53.2M) can be in Footnote 9 page 76 of the CAFR.
Page 2
The June 30, 2018 CAFR also provides information on the net OPEB liability of
approximately $11.2M on page 83, Note 10.
On page 42, the CAFR contains the final General Fund audited revenues and
expenditures measured against the FY 2017/18 original adopted and final amended
budget which reflects any additional budget amendments to revenues or expenditures
made during the fiscal year.
Staff will be preparing a similar statement for FY 2018/19 revenues and expenditures as
part of its preparation of the Town’s June 30, 2019 CAFR, which will be prepared after
final audit in late fall 2019.
Exhibit:
1. CalPERS Pension Plans
TOWN OF LOS GATOS
CALPERS PENSION PLANS
June 30, 2016 Actuarial Valuations
Actuarial Issues
Joseph R. D’Onofrio, FSA
Bianca Lin, Assistant Vice President
James Yuan, Associate Actuary
Bartel Associates, LLC
April 24, 2018
O:\Clients\Town of Los Gatos\Projects\CalPERS\6-30-16\BA LosGatosTn 18-04-24 CalPERS 16-06-30 valuation review.docx
CONTENTS
Topic Page
Definitions 1
Things That Impact Contributions 3
Benefits 4
Asset Allocation 7
Investment Return 11
Assumptions 13
Amortization Policy 15
Plan Maturity 17
Cost Sharing 19
Projection Assumptions 21
Miscellaneous Plan 23
Safety Plan 41
Combined Plans 59
Prefunding Options 61
EXHIBIT 1
April 24, 2018 1
DEFINITIONS
Actuarial Valuation
Estimates and allocates plan cost to past, present, and future years of service
Present Value of Benefits (PVB)
Discounted value of expected benefit payments
Expected benefit payments projected using assumptions about future events,
such as retirement, termination, pay, inflation, and lifetime
Actuarial Accrued Liability (AAL)
Portion of PVB allocated to past employer service
Measure of obligation accrued on valuation date
Present Value of Future Normal Costs (PVFNC)
Portion of PVB allocated to future service
Normal Cost (NC)
Portion of the PVFNC allocated to one fiscal year
Includes both expected employer and member contributions
Market Value of Assets (MVA)
Plan’s portion of assets in CalPERS pension trust
Funded portion of the AAL on valuation date
April 24, 2018 2
DEFINITIONS
Unfunded Accrued Liability (UAL)
Unfunded portion of AAL on valuation date (AAL less MVA)
Funded Ratio
Ratio of MVA to AAL
Measures funding progress
Employer Contribution
Normal Cost (percent of payroll)
Less expected statutory member contributions (percent of payroll)
Plus amortization of UAL (dollar amount)
Valuation determines contribution for second year after valuation date
6/30/15 valuation determined 2017/18 contribution
6/30/16 valuation determined 2018/19 contribution
CalPERS estimated employer contributions do not reflect employer-specific
cost-sharing, if any
Employer Paid Member Contributions (EPMC)
Member Cost Sharing Contributions
April 24, 2018 3
THINGS THAT IMPACT CONTRIBUTIONS
Benefits
Asset Allocation
Investment Return
Assumptions
Amortization Policy
Plan Maturity
Cost Sharing
April 24, 2018 4
BENEFITS
Benefit Formulas
Group Miscellaneous
(Agent Plan)
Police
(Risk Pool Plan)
Prior Formula 2% @ 55 3% @ 50
Classic Members 2.5% @ 55 3% @ 50
Tier 1 Hires < 9/15/12 Hires < 1/1/13
Classic Members 2% @ 60 n/a
Tier 2 Hires ≥ 9/15/12 n/a
PEPRA Members 2% @ 62 2.7% @ 57
Hires ≥ 1/1/13 Hires ≥ 1/1/13
April 24, 2018 5
BENEFITS
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67
Miscellaneous
2%@60 2%@55 2.5%@55
2.7%@55 3%@60 2%@62
April 24, 2018 6
BENEFITS
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
50 51 52 53 54 55 56 57
Safety
2%@55 2%@50 3%@55
3%@50 2.7%@57
April 24, 2018 7
ASSET ALLOCATION
Asset Allocation
Riskier investments expected to have higher earnings and result in lower
contributions over long-term with greater contribution volatility
Less risky investments expected to have lower earnings and result in greater
contributions over long-term with less contribution volatility
Target asset allocation selected with due regard to investment risk,
contribution volatility, funded status, plan maturity, and plan sustainability
CalPERS Interim Investment Policy
Adopted in September 2016
Reduced allocations to global and private equity
Increased allocations to real, inflation, and liquidity assets
Focused on long-term returns, lower risk, and sustainability
CalPERS Current Investment Policy
CalPERS reviews capital market assumptions and performs asset liability
management (ALM) study every 4 years
CalPERS Board adopted new target asset allocation on 12/18/17
Board retained current plan to gradually reduce discount rate from 7.5% for
6/30/15 valuation to 7% for 6/30/18 valuation
April 24, 2018 8
ASSET ALLOCATION
Target Asset Allocation1
Asset Class2
Interim
Policy
6/17/15
Interim
Policy
9/30/16
Current
Policy
12/18/17
Global Equity 51% 46% 50%
Private Equity 10% 8% 8%
Fixed Income 20% 20% 28%
Real Assets 12% 13% 13%
Inflation 6% 9% 0%
Liquidity 1% 4% 1%
Total 100% 100% 100%
Expected Annual Return
Years 1-10 7.1% 5.9% 6.1%
Years 11-60 n/a 8.0% 8.3%
Years 1-60 Blended 7.54% 6.77% 7.00%
Volatility 11.9% 11.0% 11.4%
1 From CalPERS “2017 Asset Liability Management Workshop” presentation, 11/13/17 CalPERS Board of
Administration meeting, Agenda Item 1, Attachment 1. The expected annual returns for the 12/18/17 policy include 2%
inflation for years 1-10 and 2.75% inflation for years 11-60.
2 Real assets include real estate, infrastructure, and forestland. Inflation assets include commodities and inflation-linked
bonds. Liquidity assets include US Treasuries with maturities less than 10 years.
April 24, 2018 9
ASSET ALLOCATION
Risk Mitigation
Reduce investment risk impact due to CalPERS plan maturity
Reduce probability benefit payments will exceed contributions and earnings
Lower impact of investment losses as a percentage of payroll
Abrupt change to more conservative investment portfolio and lower discount
rate would result in immediate contribution increase
Move to more conservative investment portfolio and lower discount rate over
time when investment return is greater than assumed mitigates immediate
large contribution increase
Excess
Earnings
Discount Rate
Reduction
2% 5 bp
7% 10 bp
10% 15 bp
13% 20 bp
17% 25 bp
Likely reach 6% discount rate over 20 or more years
Effective with 6/30/18 valuations for 2020/21 employer contributions
April 24, 2018 10
ASSET ALLOCATION
April 24, 2018 11
INVESTMENT RETURN
CalPERS Expected Net Return on Assets
6.1% first 10 years
8.3% after 10 years
7.0% average long-term
Difference between Actual Return and Expected Return
Impact on contributions spread over 30 years
Smooths the effect of annual investment return volatility
Amortization phased into and out of contributions over first and last 5 years
Further delays impact on employer contributions
CalPERS amortization policy for 6/30/13 through 6/30/18 valuations
Average Annual Geometric Return
Period Ending 6/30/163 6/30/174
5 6.6% 8.8%
10 5.0% 4.3%
15 5.8% 7.0%
20 7.0% 6.6%
30 8.2% 8.2%
3 From CalPERS 6/30/16 valuation report.
4 Includes 11.2% return for 2016/17.
April 24, 2018 12
INVESTMENT RETURN
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
MVA Return 16.3% 15.3% 20.1% 19.5% 12.5% 10.5% -7.2% -6.1% 3.7% 16.6% 12.3% 11.8% 19.1% -5.1% -24.0% 13.3% 21.7% 0.2% 13.2% 17.7% 2.4% 0.6% 11.2%
Discount Rate 8.50% 8.50% 8.25% 8.25% 8.25% 8.25% 8.25% 8.25% 7.75% 7.75% 7.75% 7.75%7.75% 7.75% 7.75% 7.75% 7.50% 7.50% 7.50% 7.50% 7.50% 7.375% 7.25%
‐30%
‐20%
‐10%
0%
10%
20%
30%
Annual Return on Market Value of Assets
April 24, 2018 13
ASSUMPTIONS
Actuarial Assumptions
Generally reviewed every 4 years
Economic - discount rate, inflation, payroll increases
Demographic - retirement, termination, disability, mortality
Discount Rate Changes
Reflects investment policy, expected real return, and assumed inflation
CalPERS Board approved ad hoc discount rate change on 12/21/16
Phase-in discount rate change from 7.50% to 7.00% over 3 years
Other Assumption Changes
1997-2015 Experience Study approved by CalPERS Board on 12/20/17
Will be used for 6/30/17 valuations for 2019/20 contributions
Impact on AAL
Immediate impact on AAL and Funded Ratio
Impact on Employer Contributions
Immediate impact on Normal Cost
Impact on AAL spread over 20 years for 6/30/13 through 6/30/18 valuations
Phased in and out of contributions over first and last 5 years
Delays impact of assumption changes on employer contributions
April 24, 2018 14
ASSUMPTIONS
CalPERS Estimated Impact
Discount rate changes
Included in 6/30/16 valuation contribution projections
Other assumption changes
Group Formula Normal Cost UAL Amortization
Misc 2,5%@55 -0.2% to +0.5% -1.8% to -1.0%
Misc 2%@60 -0.3% to +0.0% -5.5% to -3.1%
Misc PEPRA -0.1% to +0.0% n/a
Safety Police -0.3% to +0.0% +0.5% to +2.0%
Safety PEPRA -0.4% to +0.1% n/a
Percent of payroll change for Normal Cost rate
Relative change for UAL dollar amortization
Discount Rate and Inflation Assumption History
Valuation
Date
Contribution
Year
Discount
Rate
Assumed
Inflation
Real
Return
6/30/03 - 6/30/10 2005/06 - 2012/13 7.75% 3.00% 4.75%
6/30/11 - 6/30/15 2013/14 - 2017/18 7.50% 2.75% 4.75%
6/30/16 2018/19 7.375% 2.75% 4.625%
6/30/17 2019/20 7.25% 2.625% 4.625%
6/30/18 2020/21 7.00% 2.50% 4.50%
April 24, 2018 15
AMORTIZATION POLICY
Current Amortization Policy
Closed (fixed) amortization periods
30 years for investment and demographic experience gains and losses
20 years for assumption, method, and benefit changes5
Amortization amounts increase with payroll increase assumption
5-year phase-in (“ramp up”) and phase-out (“ramp down”) of new
amortization payments for gains/losses, assumption changes, and method
changes
Reflected in 6/30/13 and later valuations
First impacted 2015/16 contribution rates
Current
Policy
Investment
Gains/Losses
Demographic
Gains/Losses
Assumption
Changes
Method
Changes
Benefit
Changes
Amortization Period 30 years 30 years 20 years 20 years 20 years
Amortization Amount % Pay % Pay % Pay % Pay % Pay
Ramp Up 5 years 5 years 5 years 5 years n/a
Ramp Down 5 years 5 years 5 years 5 years n/a
5 Golden Handshake AAL impact amortized over 5 years.
April 24, 2018 16
AMORTIZATION POLICY
Amortization Policy Changes
20-year amortization for investment and demographic experience gains/losses
Level dollar amortization rather than level percent of payroll6
5-year phase in (not out) for investment gains and losses
No phase in and out for other amortization payments
Applies only to newly established amortization bases
Will result in faster increase in funding ratios and improve generational equity
Approved by CalPERS Board on 2/14/18
Effective for 6/30/19 valuations for 2021/22 contributions
Reflected in study projections
New
Policy
Investment
Gains/Losses
Demographic
Gains/Losses
Assumption
Changes
Method
Changes
Benefit
Changes
Amortization Period 20 years 20 years 20 years 20 years 20 years
Amortization Amount Level $ Level $ Level $ Level $ Level $
Ramp Up 5 years n/a n/a n/a n/a
Ramp Down n/a n/a n/a n/a n/a
6 Avoids “negative amortization” when amortization payments do not cover interest payments. This can occur with long
amortization periods, payments that increase with the payroll increase assumption, and direct rate smoothing (5-year
phase-in and phase-out of amortization payments).
April 24, 2018 17
PLAN MATURITY
Active/Retiree Ratio - Number of Actives / Number of Retirees
Decreases with plan maturity
1.1 to 0.5 for Miscellaneous and 2.3 to 0.5 for Safety over 20 years
Changes to AAL, plan assets, and contributions will be a greater percentage of
payroll as ratio decreases
Retiree AAL Ratio - Retiree AAL / Total AAL
Retirees include retired and survivor members
Increases with plan maturity
34% to 64% for Miscellaneous and 41% to 68% for Safety over 20 years
Changes to AAL and contributions will be greater percentage of payroll as
ratio increases
Inactive AAL Ratio - Inactive AAL / Total AAL
Inactives include retired, survivor, transferred, and separated members
Increases with plan maturity
60% to 78% for Miscellaneous over 10 years
62% to 73% for Safety over 14 years
Changes to AAL and contributions will be greater percentage of payroll as
ratio increases
April 24, 2018 18
PLAN MATURITY
Liability Volatility Ratio - Total AAL / Payroll
Increases with plan maturity
4.5 to 10.8 for Miscellaneous and 6.3 to 15.9 for Safety and over 20 years
Ratio of 10 means change of 1% in AAL translates to 10% of payroll
AAL volatility as percent of payroll increase as ratio increases
Asset Volatility Ratio - Assets / Payroll
Increases with plan maturity
5.1 to 7.4 for Miscellaneous and 6.7 to 11.6 for Safety over 20 years
Ratio of 10 means a change of 1% in plan assets translates to 10% of payroll
Asset volatility as a percent of payroll increase as the ratio increases
Unfunded Accrued Liability
UAL changes currently amortized as a level percent of payroll over 30 years
5-year phase-in and out for all gains and losses
UAL changes amortized as a level dollar amount over 20 years beginning with
6/30/19 valuation for 2021/22 contributions
5-year phase-in only for investment gains and losses
April 24, 2018 19
COST SHARING
Miscellaneous Plan
Classic Members
Statutory Member Contributions - 8% for 2.5%@55, 7% for 2%@60
Employer Paid Member Contributions - Town pays no portion of member
contributions
Member Cost Sharing Contributions - Members pay no portion of Town
contributions
PEPRA Cost Sharing - Town can impose members pay 50% of total normal
cost up to 8%
PEPRA Members
Statutory Member Contributions - 50% of Total Normal Cost
6.75% for 2018/19
Changes when Total Normal Cost changes by 1% of payroll
50% of new Total Normal Cost rate rounded to nearest quarter percent
Employer Paid Member Contributions - Employer cannot pay statutory
member contributions
Member Cost Sharing Contributions - Members pay no portion of Town
contributions
April 24, 2018 20
COST SHARING
Safety Plan
Classic Members
Statutory Member Contributions - 9% for 3%@50
Employer Paid Member Contributions - Town pays no portion of member
contributions
Member Cost Sharing Contributions - Members pay no portion of Town
contributions
PEPRA Cost Sharing - Town can impose members pay 50% of total normal
cost up to 12%
PEPRA Members
Statutory Member Contributions - 50% of Total Normal Cost
12.75% for 2018/19
Changes when Total Normal Cost changes by 1% of payroll
50% of new Total Normal Cost rate rounded to nearest quarter percent
Employer Paid Member Contributions - Employer cannot pay statutory
member contributions
Member Cost Sharing Contributions - Members pay no portion of Town
contributions
April 24, 2018 21
PROJECTION ASSUMPTIONS
Fund Earnings
11.2% for 2016/17 (CalPERS published return)
13.8% for 2017/18 (projection assumption at 50th percentile)7
Later years use stochastic analysis of 1,000 economic trials
Percentile8 25th Percentile 50th Percentile 75th Percentile
7.0% Investment Mix 0.1% 7.0% 14.8%
6.0% Investment Mix 0.8% 6.0% 11.4%
No other gains/losses, method/assumption changes, or benefit improvements
New Hires
50% of 2013 new hires are Classic members and 50% are PEPRA members
Percentage of Classic member hires assumed to decrease from 50% to 0%
over 20 years
7 CalPERS published return was 10.9% for 2017/18 through 1/31/18.
8 Nth percentile means N percentage of trials result in returns lower than the indicated rates.
April 24, 2018 22
PROJECTION ASSUMPTIONS
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April 24, 2018 23
MISCELLANEOUS PLAN - DEMOGRAPHICS
Plan Members
Member Demographics 6/30/96 6/30/06 6/30/15 6/30/16
Active Members 108 121 112 110
Average Age 44.7 47.8 45.2 44.8
Average Town Service 9.0 9.6 8.7 8.1
Average PERS Payroll for Prior Year $41,700 $71,300 $79,700 $79,700
PERS Payroll for Prior Year ($000’s) 4,508 8,629 8,930 8,762
Projected PERS Payroll ($000’s)9 5,144 9,497 9,758 9,574
Inactive Members
Transferred 60 84 91 96
Separated 49 71 80 81
Retired
Service n/a 130 185 190
Disabled n/a 11 11 11
Survivors n/a 18 20 20
Total Retired 95 159 216 221
Total Inactives 204 314 387 398
Total Members 312 435 499 508
Active / Retiree Ratio (Town) 1.1 0.8 0.5 0.5
Active / Retiree Ratio (CalPERS) n/a 1.7 1.3 1.3
9 Covered PERS payroll for the year prior to the valuation date was projected 3 years to the contribution year using a
payroll increase assumption of 4.5% per year for the 6/30/96 valuation, 3.25% per year for the 6/30/06 valuation, and
3% per year for the 6/30/15 and 6/30/16 valuations.
April 24, 2018 24
MISCELLANEOUS PLAN - DEMOGRAPHICS
Miscellaneous Plan - Members
April 24, 2018 25
MISCELLANEOUS PLAN - MATURITY
Plan Maturity
Inactive AAL Ratios (‘000s) 1996 2006 2015 2016
Actuarial Accrued Liability
Actives $ n/a $19,921 $22,274 $20,837
Transferred & Separated10 n/a 8,610 11,282 13,199
Retirees 6,874 21,432 57,241 60,568
Total 20,092 49,962 90,796 94,604
AAL Ratios
Retirees (Town) 34% 43% 63% 64%
Inactives (Town)11 n/a 60% 75% 78%
Inactives (CalPERS) n/a 49% 58% 59%
10 “Transferred” members left the Town and are currently working at another agency participating in CalPERS.
“Separated” members are currently not working for an agency participating in CalPERS.
11 “Inactives” include retirees, transferred, and separated members. For the CalPERS AAL ratio, transferred members
are not inactive to the system.
April 24, 2018 26
MISCELLANEOUS PLAN - MATURITY
Plan Maturity
Volatility Ratios (‘000s) 1996 2006 2015 2016
Liability Volatility Ratio
Actuarial Accrued Liability $20,092 $49,962 $90,796 $94,604
Prior Year Covered Payroll 4,508 8,629 8,930 8,762
Liability Volatility Ratio
Town 4.5 5.8 10.2 10.8
CalPERS n/a 6.0 8.7 8.8
Asset Volatility Ratio
Market Value of Assets12 22,880 48,648 66,194 64,414
Prior Year Covered Payroll 4,508 8,629 8,930 8,762
Asset Volatility Ratio
Town 5.1 5.6 7.4 7.4
CalPERS n/a 5.6 6.4 6.0
12 Excluding receivables.
April 24, 2018 27
MISCELLANEOUS PLAN - FUNDED STATUS
Miscellaneous Plan June 30, 2015 June 30, 2016 %PVB
Present Value of Benefits $102,848,000 $106,814,000 100%
Present Value of Future Normal Costs 12,052,000 12,210,000 11%
Actuarial Accrued Liability
Actives 22,274,000 20,837,000 20%
Transfers 9,160,000 10,852,000 10%
Separated 2,122,000 2,347,000 2%
Retirees and Beneficiaries 57,241,000 60,568,000 57%
Total 90,796,000 94,604,000 89%
Market Value of Assets 66,289,000 64,502,000 60%
Unfunded Accrued Liability 24,508,000 30,101,000 28%
Funded Ratio 73.0% 68.2%
April 24, 2018 28
MISCELLANEOUS PLAN - FUNDED STATUS
Miscellaneous Plan
Unfunded Accrued Liability Changes
Unfunded Accrued Liability on 6/30/15 $24,508,000
Passage of Time
Expected Benefit Payments (1,456,000)
Interest at 7.50% 1,784,000
Total 328,000
Expected Unfunded Accrued Liability on 6/30/16 24,836,000
Other Changes
Asset Loss (Gain) 4,607,000
Experience Loss (Gain) (860,000)
Assumption Change 1,360,000
Contribution Loss (Gain) 158,000
Total 5,265,000
Unfunded Accrued Liability on 6/30/16 30,101,000
April 24, 2018 29
MISCELLANEOUS PLAN - FUNDED STATUS
Miscellaneous Plan - MVA vs AAL13
13 6/30/17 and 6/30/18 amounts estimated.
April 24, 2018 30
MISCELLANEOUS PLAN - FUNDED STATUS
Miscellaneous Plan - Funded Ratio14
14 6/30/17 and 6/30/18 amounts estimated.
April 24, 2018 31
MISCELLANEOUS PLAN - CONTRIBUTIONS
Miscellaneous Plan Contributions 2017/18 2018/19 %NC
Total Normal Cost 17.509% 17.447% 100%
Member Normal Cost 7.577% 7.446% 43%
Employer Normal Cost 9.932% 10.001% 57%
UAL Amortization15 17.427% 20.869%
Employer Contribution Rate16 27.359% 30.870%
2017/18 Employer Contribution Rate 27.4%
Asset Method Change (4th Year) 4th Year 1.4%
6/30/14 Losses (Gains) (3rd Year) 3rd Year (1.0%)
6/30/14 Assumption Change (3rd Year) 3rd Year 0.9%
6/30/15 Losses (Gains) (2nd Year) 2nd Year 0.5%
6/30/16 Losses (Gains) (1st Year)17 1st Year 0.1%
6/30/16 Assumption Change (1st Year)18 1st Year 0.8%
Payroll Less than Expected 0.8%
2018/19 Employer Contribution Rate 30.9%
15 For illustration only. UAL amortization amount is assessed as a dollar amount and not as a percentage of payroll.
16 Does not reflect Employer Paid Member Contributions and Member Share of Employer Contributions, if any.
17 Includes the impact of PEPRA hires on the normal cost in addition to the amortization payment for losses (gains).
18 Includes the impact of the assumption change on the normal cost in addition to the amortization payment.
April 24, 2018 32
MISCELLANEOUS PLAN - CONTRIBUTIONS
Cost Sharing
2018/19
19 The Total Normal Cost rates for Classic Tier 1 and Classic Tier 2 are estimated.
20 The basis for the current PEPRA Employee Normal Cost rate of 6.75% is a PEPRA Total Normal Cost rate of
13.30%. The PEPRA Employee Normal Cost rate will increase from 6.75% to 7.25% if Total PEPRA Normal Cost
increases from 13.994% to 14.300%.
Benefit Formula
Classic
Tier 1
Classic
Tier 2
PEPRA
Total
Total Normal Cost19 18.8% 14.8% 13.994% 17.447%
Employee Normal Cost20 (8.0%) (7.0%) (6.750%) (7.446%)
Employer Normal Cost 10.8% 7.8% 7.244% 10.001%
Employer Paid Member Contribution 0.0% 0.0% n/a
Member Cost Sharing Contribution (0.0%) (0.0%) (0.000%)
Total Employer Normal Cost 10.8% 7.8% 7.244%
50% Member Normal Cost Target 9.4% 7.4% 6.997%
April 24, 2018 33
MISCELLANEOUS PLAN - CONTRIBUTIONS
Miscellaneous Plan - Historical Contribution Rates
April 24, 2018 34
MISCELLANEOUS PLAN - PROJECTIONS
Projected Contribution Rates - 7 Years
Fiscal Year CalPERS21 Study22
2018/19 30.9% 30.9%
2019/20 34.2% 33.7%
2020/21 36.9% 35.4%
2021/22 39.3% 37.2%
2022/23 41.2% 38.7%
2023/24 42.2% 39.4%
2024/25 42.9% 40.4%
21 CalPERS contribution projections included in the 6/30/16 valuation report. The projected normal cost does not take
into account lower normal costs for future hires due to PEPRA or lower cost benefit tiers or potential future discount
changes due to CalPERS’ rate mitigation policy.
22 This is the 50th percentile projection from this study. It takes into account lower normal costs for future hires due to
PEPRA or lower cost benefit tiers and potential future discount changes due to CalPERS’ rate mitigation policy.
April 24, 2018 35
MISCELLANEOUS PLAN - PROJECTIONS
Projected Contribution Rates - 10 Years
April 24, 2018 36
MISCELLANEOUS PLAN - PROJECTIONS
Projected Contribution Rates - 30 Years
April 24, 2018 37
MISCELLANEOUS PLAN - PROJECTIONS
Projected Contribution Rate Components - 10 Years23
(50th Percentile)
23 Different from CalPERS projections shown in the 6/30/16 valuation r eport since these projections assume a
portion of new hires are PEPRA hires and are at the 50th percentile of a stochastic projection that takes into account
the impact of risk mitigation.
April 24, 2018 38
MISCELLANEOUS PLAN - PROJECTIONS
Projected Contribution Amount Components - 10 Years24
(50th Percentile)
24 Different from CalPERS projections shown in the 6/30/16 valuation report since these projections assume a portion of
new hires are PEPRA hires and are at the 50th percentile of a stochastic projection that takes into account the impact of
risk mitigation.
April 24, 2018 39
MISCELLANEOUS PLAN - PROJECTIONS
Projected Impact of Amortization Policy Changes - 30 Years
(25th, 50th, and 75th Percentiles)
April 24, 2018 40
MISCELLANEOUS PLAN - PROJECTIONS
Projected Funded Status - 30 Years
April 24, 2018 41
SAFETY PLAN - DEMOGRAPHICS
Plan Members
Member Demographics 6/30/96 6/30/02 6/30/15 6/30/16
Active Members 41 46 39 39
Average PERS Payroll for Prior Year $57,800 $78,900 $128,300 $129,000
PERS Payroll for Prior Year ($000’s) 2,371 3,631 5,002 5,031
Projected PERS Payroll ($000’s) 25 2,705 4,055 5,466 5,498
Inactive Members
Transferred 14 22 16 14
Separated 3 5 2 2
Retired 18 33 66 71
Total 35 60 84 87
Total Members 76 106 123 126
Active / Retiree Ratio (Town) 2.3 1.4 0.6 0.5
Active / Retiree Ratio (PERF C26) n/a n/a n/a 1.3
Active / Retiree Ratio (CalPERS) n/a 2.0 1.3 1.3
25 Covered PERS payroll for the year prior to the valuation date was projected 3 years to the contribution year using a
payroll increase assumption of 4.5% per year for the 6/30/96 valuation, 3.75% per year for the 6/30/02 valuation, and
3% per year for the 6/30/15 and 6/30/16 valuations.
26 PERF C is CalPERS’ cost-sharing multiple-employer trust for public agencies with less than 100 active members.
April 24, 2018 42
SAFETY PLAN - DEMOGRAPHICS
Plan Members
June 30, 2016
Member Demographics Classic PEPRA Total
Active Members 35 4 39
Average PERS Payroll for Prior Year $131,900 $103,500 $129,000
PERS Payroll for Prior Year ($000’s) 4,617 414 5,031
Projected PERS Payroll ($000’s) 5,045 452 5,498
Inactive Members
Transferred 14 0 14
Separated 2 0 2
Retired 71 0 71
Total 87 0 87
Total Members 122 4 126
April 24, 2018 43
SAFETY PLAN - FUNDED STATUS
Safety Plan June 30, 2015 June 30, 2016 %PVB
Present Value of Projected Benefits $88,211,000 $93,345,000 100%
Present Value of Future Normal Costs 13,060,000 13,439,000 14%
Actuarial Accrued Liability
Actives 21,857,000 21,923,000 23%
Transfers 3,893,000 3,379,000 4%
Separated 22,000 24,000 0%
Retirees and Beneficiaries 49,379,000 54,581,000 58%
Total 75,151,000 79,906,000 86%
Market Value of Assets 58,769,000 58,188,000 62%
Unfunded Accrued Liability 16,382,000 21,719,000 23%
Funded Ratio 78.2% 72.8%
April 24, 2018 44
SAFETY PLAN - FUNDED STATUS
Plan Obligations
June 30, 2016
(Thousands of Dollars)
Plan Obligations Classic PEPRA Total
Present Value of Projected Benefits $91,812 $1,533 $93,345
Present Value of Future Normal Costs 12,032 1,407 13,439
Actuarial Accrued Liability
Actives 21,796 126 21,923
Transfers 3,379 0 3,379
Separated 24 0 24
Retirees and Beneficiaries 54,581 0 54,581
Total 79,780 126 79,906
Market Value of Assets 58,072 115 58,188
Unfunded Accrued Liability 21,708 11 21,719
Funded Ratio 72.8% 91.2% 72.8%
April 24, 2018 45
SAFETY PLAN - MATURITY
Plan Maturity
Inactive AAL Ratios (‘000s) 1996 2002 2015 2016
Actuarial Accrued Liability
Actives n/a $11,103 $21,857 $21,923
Transferred & Separated27 n/a 4,019 3,915 3,403
Retirees 6,063 14,356 49,379 54,581
Total 14,963 29,477 75,151 79,906
AAL Ratio
Retirees (Town) 41% 49% 66% 68%
Inactives (Town) 28 n/a 62% 71% 73%
Inactives (CalPERS) n/a n/a 58% 59%
27 “Transferred” members left the Town and are currently working at another agency participating in CalPERS.
“Separated” members are currently not working for an agency participating in CalPERS.
28 “Inactives” include retirees, transferred, and separated members. For the CalPERS AAL ratio, transferred members
are not inactive to the system.
April 24, 2018 46
SAFETY PLAN - MATURITY
Plan Maturity
Volatility Ratios (‘000s) 1996 2002 2015 2016
Liability Volatility Ratio
Actuarial Accrued Liability $14,963 $29,477 $75,151 $79,906
Prior Year Covered Payroll 2,371 3,631 5,002 5,031
Liability Volatility Ratio
Town 6.3 8.1 15.0 15.9
CalPERS n/a 5.0 8.7 8.8
Asset Volatility Ratio
Market Value of Assets 15,934 23,508 58,769 58,188
Prior Year Covered Payroll 2,371 3,631 5,002 5,031
Asset Volatility Ratio
Town 6.7 6.5 11.7 11.6
CalPERS n/a 4.3 6.4 6.0
April 24, 2018 47
SAFETY PLAN - CONTRIBUTIONS
Employer Contribution - 2017/18 Fiscal Year Classic PEPRA CalPERS
June 30, 2015 Valuation 3%@50 2.7%@57 Total
Plan Formula Base Employer Normal Cost 27.603% 23.490% 27.371%
Class 1 Benefit Surcharges
FAC1 (12-Month Highest Compensation) 1.108% 0.000% 1.046%
PRSA (Post Retirement Survivor Allowance) 1.695% 1.489% 1.683%
Risk Pool Total Normal Cost Rate 30.406% 24.979% 30.100%
Risk Pool Employee Contribution Rate (8.988%) (12.250%) (9.172%)
Employer Normal Cost Rate 21.418% 12.729% 20.928%
UAL Amortization Payment29 18.157% 0.010% 17.135%
Total Employer Contribution30 39.575% 12.739% 38.063%
Estimated Payroll ($000’s) $5,158 $308 $5,466
Estimated Employer Contribution ($000’s)
Employer Normal Cost 1,105 39 1,144
UAL Amortization Payment31 937 0 937
Total Employer Contribution 2,041 39 2,080
29 CalPERS assesses UAL Amortization Payment as a dollar amount and not as a percentage of payroll.
30 Does not reflect Employer Paid Member Contributions or Classic Member Cost Sharing Contributions.
31 UAL Amortization Payment can be prepaid by 7/31 with an interest discount.
April 24, 2018 48
SAFETY PLAN - CONTRIBUTIONS
Employer Contribution - 2018/19 Fiscal Year Classic PEPRA CalPERS
June 30, 2016 Valuation 3%@50 2.7%@57 Total
Plan Formula Base Employer Normal Cost 28.405% 24.141% 28.054%
Class 1 Benefit Surcharges
FAC1 (12-Month Highest Compensation) 1.140% n/a 1.046%
PRSA (Post Retirement Survivor Allowance) 1.790% 1.574% 1.772%
Risk Pool Total Normal Cost Rate 31.335% 25.715% 30.872%
Risk Pool Employee Contribution Rate (8.989%)(12.750%) (9.299%)
Employer Normal Cost Rate 22.346% 12.965% 21.574%
UAL Amortization Payment32 23.739% 0.996% 21.867%
Total Employer Contribution33 46.085% 13.961% 43.441%
Estimated Payroll ($000’s) $5,045 $452 $5,498
Estimated Employer Contribution ($000’s)
Employer Normal Cost 1,127 59 1,186
UAL Amortization Payment34 1,198 5 1,202
Total Employer Contribution 2,325 63 2,388
32 CalPERS assesses UAL Amortization Payment as a dollar amount and not as a percentage of payroll.
33 Does not reflect Employer Paid Member Contributions or Classic Member Cost Sharing Contributions.
34 UAL Amortization Payment can be prepaid by 7/31 with an interest discount.
April 24, 2018 49
SAFETY PLAN - CONTRIBUTIONS
Employer Contribution 2017/18 2018/19 %NC
Risk Pool Total Normal Cost 30.1% 30.9% 100%
Risk Pool Member Normal Cost (9.2%) (9.3%) (30%)
Employer Normal Cost 20.9% 21.6% 70%
UAL Amortization35 17.1% 21.9%
Employer Contribution Rate36 38.1% 43.4%
2017/18 Employer Contribution Rate 38.1%
Asset Method Change (4th Year) 4th Year 2.1%
6/30/14 Losses (Gains) (3rd Year) 3rd Year (1.6%)
6/30/14 Assumption Change (3rd Year) 3rd Year 1.4%
6/30/15 Losses (Gains) (2nd Year) 2nd Year 1.0%
6/30/16 Losses (Gains) (1st Year) 1st Year 0.6%
6/30/16 Assumption Change (1st Year) 1st Year 1.4%
Payroll Less than Expected 0.4%
2018/19 Employer Contribution Rate 43.4%
35 For illustration only. UAL amortization amount is assessed as a dollar amount and not as a percentage of payroll.
36 Does not reflect Employer Paid Member Contributions and Member Share of Employer Contributions, if any.
April 24, 2018 50
SAFETY PLAN - CONTRIBUTIONS
Cost Sharing
2018/19
37 The basis for the current PEPRA Employee Normal Cost rate of 12.75% is a PEPRA Total Normal Cost rate of
25.715%. The PEPRA Employee Normal Cost rate will increase from 12.75% to 13.25% if Total PEPRA Normal Cost
increases from 25.715% to 26.715%.
Benefit Formula
Classic
3%@50
FAE1
PEPRA
2.7%@57
FAE3
Risk Pool Total Normal Cost 31.335% 25.715%
Risk Pool Employee Normal Cost37 (8.989%) (12.750%)
Employer Normal Cost 22.346% 12.965%
Employer Paid Member Contribution 0.000% n/a
Employee Cost Sharing Contribution 0.000% n/a
Total Employer Normal Cost 22.346% 12.965%
50% x Normal Cost Target 15.668% 12.858%
Employee Contribution 9.000% 12.750%
April 24, 2018 51
SAFETY PLAN - PROJECTIONS
Projected Contribution Rates - 7 Years
Fiscal Year CalPERS38 Study39
2018/19 43.4% 43.4%
2019/20 49.0% 48.3%
2020/21 53.9% 51.8%
2021/22 57.9% 55.0%
2022/23 60.9% 57.3%
2023/24 62.4% 58.4%
2024/25 63.4% 60.2%
38 CalPERS contribution projections included in the 6/30/16 valuation report. The projected normal cost does not take
into account lower normal costs for future hires due to PEPRA or lower cost benefit tiers or potential future discount
changes due to CalPERS’ rate mitigation policy.
39 This is the 50th percentile projection from this study. It takes into account lower normal costs for future hires due to
PEPRA or lower cost benefit tiers and potential future discount changes due to CalPERS’ rate mitigation policy.
April 24, 2018 52
SAFETY PLAN - PROJECTIONS
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April 24, 2018 53
SAFETY PLAN - PROJECTIONS
Projected Contribution Rates - 10 Years
April 24, 2018 54
SAFETY PLAN - PROJECTIONS
Projected Contribution Rates - 30 Years
April 24, 2018 55
SAFETY PLAN - PROJECTIONS
Projected Contribution Rate Components - 10 Years40
(50th Percentile)
40 Different from CalPERS projections shown in the 6/30/16 valuation report since these projections assume a portion of
new hires are PEPRA hires and are at the 50th percentile of a stochastic projection that takes into account the impact
of risk mitigation.
April 24, 2018 56
SAFETY PLAN - PROJECTIONS
Projected Contribution Amount Components - 10 Years41
(50th Percentile)
41 Different from CalPERS projections shown in the 6/30/16 valuation report since these projections assume a portion of
new hires are PEPRA hires and are at the 50th percentile of a stochastic projection that takes into account the impact of
risk mitigation.
April 24, 2018 57
SAFETY PLAN - PROJECTIONS
Projected Impact of Amortization Policy Changes - 30 Years
(25th, 50th, and 75th Percentiles)
April 24, 2018 58
COMBINED PLANS
Projected Funded Status - 30 Years
April 24, 2018 59
COMBINED PLANS
Miscellaneous and Safety Plans June 30, 2015 June 30, 2016 %PVB
Present Value of Benefits $191,059,000 $200,159,000 100%
Present Value of Future Normal Costs 25,112,000 25,649,000 13%
Actuarial Accrued Liability
Actives 44,405,000 42,760,000 21%
Transfers 12,160,000 14,231,000 7%
Separated 2,142,000 2,371,000 1%
Retirees and Beneficiaries 107,241,000 115,148,000 58%
Total 165,947,000 174,510,000 87%
Market Value of Assets 125,057,000 122,690,000 61%
Unfunded Accrued Liability 40,890,000 51,820,000 26%
Funded Ratio 75.4% 70.3%
April 24, 2018 60
COMBINED PLANS
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April 24, 2018 61
PREFUNDING OPTIONS
Where Do You Get the Money?
One-Time Amount
Town resolution to use one-time funds
Annual Amounts
Earmark annual additional funding
Borrow from General Fund
Pay General Fund back like loan
Pension Obligation Bond
Often considered an interest arbitrage between expected pension fund earnings
and interest rate paid on bond
No guaranteed savings
PEPRA prevents contributions from falling below the normal cost
April 24, 2018 62
PREFUNDING OPTIONS
Where Do You Put the Money?
Payments Directly to CalPERS
Additional contribution
Immediate UAL and contribution impact
Retains contribution volatility
Request single shorter amortization period
Fresh start UAL amortization
Greater short-term payments
Less interest and smaller long-term payments
Target specific amortization bases
Pay off shorter period amortization bases, greater short-term contribution
reduction, less interest savings
Pay off longer amortization period bases, smaller short-term contribution
reduction, greater interest savings
April 24, 2018 63
PREFUNDING OPTIONS
Where Do You Put the Money?
Internal Service Fund
Limited investment opportunities
Short-term, high quality investments for capital preservation
Relatively low investment returns
Segregate assets on ad hoc basis or annually
Assets not restricted, can be used for CalPERS contributions or other purposes
Does not explicitly reduce UAL or accounting Net Pension Liability
Used for ad hoc contributions or contribution stabilization
Section 115 Trust
More investment opportunities
Diverse investment classes available
Investment return can be greater but more volatile
Invest initial amount and/or amounts annually
Assets restricted, can only be used to make payments directly to CalPERS or
reimburse Town for CalPERS contributions
Does not explicitly reduce accounting Net Pension Liability
Generally used for contribution stabilization
April 24, 2018 64
PREFUNDING OPTIONS
How Do You Use the Money?
Budgeting Contributions
Use to fund CalPERS contributions above a predetermined budgeted amount
Ad Hoc Contributions
As needed based on CalPERS contribution level and other Town financial
needs
April 24, 2018 65
PREFUNDING OPTIONS
Section 115 Trust Example
Initial 6/30/18 Fund Balance ($000)400
Stabilization Fund ‐ Rate of Return 5.0%
Target Rate 38.0%
18/19 19/20 20/21 21/22 22/23 23/24 24/25 25/26 26/27 27/28 28/29
(A) Add'l Contribution $ ($000)‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
(B) Add'l Contribution ‐ % of pay 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
(A) + (B) as % of Pay 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Budget ‐ CalPERS Rate 30.9% 33.7% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0%
Contribute at Target Rate?NNYYYYYYYYY
Miscellaneous Plan Rate Stabilization Fund Balance
0
250
500
750
1,000 Supplemental Trust Balance ($000s)
50th Percentile
April 24, 2018 66
PREFUNDING OPTIONS
Section 115 Trust Example
Initial 6/30/18 Fund Balance ($000)400
Stabilization Fund ‐ Rate of Return 5.0%
Target Rate 38.0%
18/19 19/20 20/21 21/22 22/23 23/24 24/25 25/26 26/27 27/28 28/29
(A) Add'l Contribution $ ($000)‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
(B) Add'l Contribution ‐ % of pay 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
(A) + (B) as % of Pay 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Budget ‐ CalPERS Rate 30.9% 33.7% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0%
Contribute at Target Rate?NNYYYYYYYYY
Miscellaneous Plan Rate Stabilization Fund Balance
25%
30%
35%
40%
45%
Contribution Rate Projections
Target 50th Percentile
April 24, 2018 67
PREFUNDING OPTIONS
Section 115 Trust Example
Initial 6/30/18 Fund Balance ($000)400
Stabilization Fund ‐ Rate of Return 5.0%
Target Rate 38.0%
18/19 19/20 20/21 21/22 22/23 23/24 24/25 25/26 26/27 27/28 28/29
(A) Add'l Contribution $ ($000)‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
(B) Add'l Contribution ‐ % of pay 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
(A) + (B) as % of Pay 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Budget ‐ CalPERS Rate 30.9% 33.7% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0%
Contribute at Target Rate?NNYYYYYYYYY
Miscellaneous Plan Rate Stabilization Fund Balance
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
$5,000
$5,500
Contribution Projections ($000s)
Target 50th Percentile
April 24, 2018 68
PREFUNDING OPTIONS
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April 24, 2018 69
PREFUNDING OPTIONS
Section 115 Trust Example
Initial 6/30/18 Fund Balance ($000)400
Stabilization Fund ‐ Rate of Return 5.0%
Target Rate 60.0%
18/19 19/20 20/21 21/22 22/23 23/24 24/25 25/26 26/27 27/28 28/29
(A) Add'l Contribution $ ($000)‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
(B) Add'l Contribution ‐ % of pay 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
(A) + (B) as % of Pay 0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%
Budget ‐ CalPERS Rate 45.1% 49.9% 60.0% 60.0% 60.0% 60.0% 60.0% 60.0% 60.0% 60.0% 60.0%
Pay (Budget‐CalPERS) To/(From) Trust NNYYYYYYYYY
Safety Plan Rate Stabilization Fund Balance
0
500
1,000
1,500
2,000
2,500 Supplemental Trust Balance ($000s)
50th Percentile
April 24, 2018 70
PREFUNDING OPTIONS
Section 115 Trust Example
Initial 6/30/18 Fund Balance ($000)400
Stabilization Fund ‐ Rate of Return 5.0%
Target Rate 60.0%
18/19 19/20 20/21 21/22 22/23 23/24 24/25 25/26 26/27 27/28 28/29
(A) Add'l Contribution $ ($000)‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
(B) Add'l Contribution ‐ % of pay 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
(A) + (B) as % of Pay 0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%
Budget ‐ CalPERS Rate 45.1% 49.9% 60.0% 60.0% 60.0% 60.0% 60.0% 60.0% 60.0% 60.0% 60.0%
Pay (Budget‐CalPERS) To/(From) Trust NNYYYYYYYYY
Safety Plan Rate Stabilization Fund Balance
40%
45%
50%
55%
60%
65%
70%Contribution Rate Projections
Target 50th Percentile
April 24, 2018 71
PREFUNDING OPTIONS
Section 115 Trust Example
Initial 6/30/18 Fund Balance ($000)400
Stabilization Fund ‐ Rate of Return 5.0%
Target Rate 60.0%
18/19 19/20 20/21 21/22 22/23 23/24 24/25 25/26 26/27 27/28 28/29
(A) Add'l Contribution $ ($000)‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
(B) Add'l Contribution ‐ % of pay 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
(A) + (B) as % of Pay 0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%
Budget ‐ CalPERS Rate 45.1% 49.9% 60.0% 60.0% 60.0% 60.0% 60.0% 60.0% 60.0% 60.0% 60.0%
Pay (Budget‐CalPERS) To/(From) Trust NNYYYYYYYYY
Safety Plan Rate Stabilization Fund Balance
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
Contribution Rate Projections ($000s)
Target 50th Percentile
April 24, 2018 72
PREFUNDING OPTIONS
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