HomeMy WebLinkAboutFinance Committee Agenda - November 18, 20131 This Finance Committee is subject to the Ralph M. Brown Act. Among other things, the Brown Act requires that the Finance
Committee’s agenda be posted at least seventy-two (72) hours in advance of each regular meeting and that the public be
allowed to comment on agenda items before the Finance Committee and items not on the agenda but are within the subject matter jurisdiction of the Finance Committee. The Finance Committee may limit public comments to a reasonable amount of time, generally three (3) minutes per person.
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CITY OF NEWPORT BEACH
FINANCE COMMITTEE AGENDA Newport Coast Conference Room, Bay 2E 100 Civic Center Drive, Newport Beach Monday, November 18, 2013 – 4:00 PM
Finance Committee Members: Staff Members:
Mike Henn, Council Member, Chair Keith Curry, Mayor
Tony Petros, Council Member
Dave Kiff, City Manager Dan Matusiewicz, Finance Director
Steve Montano, Deputy Finance Director
____________________________________________________ 1) CALL MEETING TO ORDER 2) ROLL CALL 3) PUBLIC COMMENTS
Public comments are invited on agenda and non-agenda items generally considered to be
within the subject matter jurisdiction of the Finance Committee. Speakers must limit comments to 3 minutes. Before speaking, we invite, but do not require, you to state your name for the
record. The Finance Committee has the discretion to extend or shorten the speakers’ time limit
on agenda or non-agenda items, provided the time limit adjustment is applied equally to all speakers. As a courtesy, please turn cell phones off or set them in the silent mode. 4) APPROVAL OF MINUTES Approval of the October 15, 2013 Finance Committee meeting minutes. 5) CURRENT BUSINESS
A. Review of Public Employees Retirement System (PERS) Valuations: Staff will present the
latest actuarial valuation changes to actuarial assumptions, a review of investment returns,
and the potential impact of future rates. (Presentation only)
B. Quarterly Financial Review Q4 FY 2012-13 and Q1 FY 2013-14: In addition to the preliminary
year-end closing results and Q4 financial results for FY 12-13, staff will present the Q1 FY 13-14
financial results prior to the publication of the Quarterly Business Report.
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C. Budget Process Strategy and Roadmap: Staff will seek guidance and input from the
Committee regarding budget process strategies prior to the preparation of the FY 2014-15 annual budget. In consideration of current revenue performance trends and anticipated
expenditures, staff will also provide the Committee with preliminary (high-level) budget
assumptions for FY 2014-15.
6) FINANCE COMMITTEE ANNOUNCEMENTS OR MATTERS WHICH MEMBERS WOULD LIKE PLACED ON A FUTURE AGENDA FOR DISCUSSION, ACTION OR REPORT (NON-DISCUSSION ITEM)
7) ADJOURNMENT
All documents distributed for this meeting are available in the
administration office of the Finance Department
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CITY OF NEWPORT BEACH CITY COUNCIL FINANCE COMMITTEE
OCTOBER 15, 2013 MEETING MINUTES 1. CALL TO ORDER
The meeting was called to order at 1:45 p.m. in the Newport Coast Conference
Room, Bay 2E, 100 Civic Center Drive, Newport Beach, California 92660.
2. ROLL CALL
Present: Council Member Mike Henn (Chair), Mayor Keith Curry and Council
Member Tony Petros
Staff present: City Manager Dave Kiff, Finance Director Dan Matusiewicz,
Deputy Finance Director Steve Montano, City Attorney Aaron Harp and Budget
Manager Susan Giangrande
Members of the public: Jim Mosher; Nicole Shine, OC Register; Robert Hawkins
3. PUBLIC COMMENTS
Mr. Jim Mosher stated his belief that all three members of the Finance
Committee are good and honorable men doing their best to serve the city. Two
scheduled meetings on August 29th and on September 23rd were both
cancelled. When meetings are skipped with increasing frequency, it would lead
a reasonable person to assume that the Finance Committee’s work is being
neglected or done in a non-public way.
Council Member Henn asserted that Mr. Mosher is a good and honorable man,
yet his concerns are misplaced. Mr. Henn said that as Finance Committee Chair
he has continued the tradition to set agendas with standard items; however the
Committee’s work plan is subject to adjustment based on facts and
circumstances. He requested input from others including staff regarding any
issues that have not been addressed by the Committee.
City Attorney Harp cautioned against a lengthy discussion on this item as it was
not on the agenda.
City Manager Kiff said that a couple of things have recently gotten in the way of
the Finance Committee agenda including the need for staff to focus on a detailed PERS audit and the initial meetings regarding the implementation of a
new Enterprise Resources Program (ERP).
Finance Director Matusiewicz agreed that the work plan is a plan and that some unanticipated things, including the two weeks of ERP meetings in August, did
All documents distributed for this meeting are available in the
administration office of the Finance Department
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require some leniency with the agenda, but that staff will resume work plan items in November.
Mayor Curry said that Mr. Henn has done a superlative job managing the
Finance Committee and the City’s finances have never been stronger. 4. APPROVAL OF MINUTES
Council Member Henn said he had no problem with the three minor changes to
the draft minutes that Mr. Mosher submitted. Mayor Curry moved, Council Member Petros seconded to approve the minutes of the July 22, 2013, Finance
Committee meeting with corrections. The Committee voted all ayes to approve the minutes.
5. CURRENT BUSINESS
A. Response to Ralph M. Brown Act Allegations Pursuant to California Government
Code Section 54960.2(C)(1).
Council Member Henn requested input from the City Attorney.
City Attorney Harp reported that on September 17, 2013, Mr. Mosher submitted
correspondence alleging a Brown Act violation based on an article in the newspaper executed by Mayor Curry and Council Member Henn. He noted the
article regarding outsourcing trash pickup was written in their capacities as Council members. Mr. Harp stated that his office reviewed the allegation and
determined this was not a violation of the Brown Act because Mayor Curry and Council Member Henn were not acting in their capacity as Finance Committee
members; however in order to avoid litigation, Mr. Harp recommended execution of the proposed letter by the Finance Committee Chair that indicates
that the Finance Committee, on a go forward basis, would not write joint articles for a newspaper.
Council Member Henn stated that he had no problem with the letter.
Mayor Curry commented that it was a waste of taxpayer time and effort to
respond to this. He noted the Brown Act is to avoid secret meetings among the
City Council. He further stated that the letter was submitted to the newspaper
after the item had been discussed in the public forum.
Council Member Petros agreed with Mayor Curry’s comments.
Mr. Mosher said that if nothing else, it is his hope that this agenda item would
answer the question, “Does this committee allow members to discuss the City’s
financial affairs outside of publicly noticed meetings?” He had four additional
comments: 1) if elected and appointed officials followed the rules, there would
be no need to raise these concerns, 2) he doesn’t raise all the concerns that
All documents distributed for this meeting are available in the
administration office of the Finance Department
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come to mind, and hopes he would be shown respect for his restraint, 3) his phone number and email address were provided in his complaint letter so if staff
felt his comments were frivolous they could have informed him, and 4) by issuing the proposed response letter which does not remotely respond to the issues as
required by State law, the Committee is daring him to litigate and he questioned if that is a good use of taxpayer money.
Mr. Hawkins announced that he is an attorney, but was speaking as a resident,
and does not represent Mr. Mosher. He feels that Mayor Curry has taken the opportunity to abuse Mr. Mosher in an unacceptable fashion. Brown Act
violations extend further than the Finance Committee. In his view it was a problem at the September 10, 2013, Council meeting for the Mayor to point to a
collective bargaining agreement that was not reported on until the entire
hearing had been concluded, instead of after Closed Session. He urged the
Finance Committee members not to write an editorial prior to hearing an issue as
citizens are entitled to full and fair hearings.
Mayor Curry moved, Council Member Petros seconded approval of the
proposed letter as drafted. Council Member Henn asked if the proposed letter
was ok to sign given Mr. Mosher’s statements that the response was insufficient.
City Attorney Harp said in his legal judgment the proposed letter adequately
addresses Mr. Mosher’s concerns and satisfies the commitment required by the
Brown Act. The Committee voted all ayes to approve the proposed letter.
6. FINANCE COMMITTEE ANNOUNCEMENTS OR MATTERS WHICH MEMBERS WOULD LIKE PLACED ON A FUTURE AGENDA FOR DISCUSSION, ACTION OR REPORT (NON-DISCUSSION ITEM)
There were no announcements or matters placed on a future agenda.
7. ADJOURNMENT
The Finance Committee adjourned at 2:04 p.m.
Filed with these minutes are copies of all material distributed at the meeting.
Attest:
Mike Henn, Chair Date
Finance Committee Chair
California Public Employees’ Retirement System
Actuarial Office P.O. Box 942701 Sacramento, CA 94229-2701 TTY: (916) 795-3240 (888) 225-7377 phone • (916) 795-2744 fax
www.calpers.ca.gov
October 2013
SAFETY PLAN OF THE CITY OF NEWPORT BEACH (CalPERS ID: 1545983430)
Annual Valuation Report as of June 30, 2012
Dear Employer,
As an attachment to this letter, you will find a copy of the June 30, 2012 actuarial valuation
report of your pension plan. Your 2012 actuarial valuation report contains important actuarial
information about your pension plan at CalPERS. Your CalPERS staff actuary, whose signature
appears in the Actuarial Certification Section on page 1, is available to discuss the report with you
after October 31, 2013. Future Contribution Rates
The exhibit below displays the Minimum Employer Contribution Rate for fiscal year 2014-15 and a
projected contribution rate for 2015-16, before any cost sharing. The projected rate for 2015-16
is based on the most recent information available, including an estimate of the investment return
for fiscal year 2012-13, namely 12 percent, and the impact of the new smoothing methods
adopted by the CalPERS Board in April 2013 that will impact employer rates for the first time in
fiscal year 2015-16. For a projection of employer rates beyond 2015-16, please refer to the
“Analysis of Future Investment Return Scenarios” in the “Risk Analysis” section, which includes
rate projections through 2019-20 under a variety of investment return scenarios. Please disregard
any projections that we may have provided you in the past.
Fiscal Year Employer Contribution Rate
2014-15 44.522%
2015-16 46.7% (projected)
Member contributions other than cost sharing, (whether paid by the employer or the employee)
are in addition to the above rates. The employer contribution rates in this report do not
reflect any cost sharing arrangement you may have with your employees. The estimate for 2015-16 also assumes that there are no future contract amendments and no
liability gains or losses (such as larger than expected pay increases, more retirements than
expected, etc.). This is a very important assumption because these gains and losses do occur and
can have a significant impact on your contribution rate. Even for the largest plans, such gains
and losses often cause a change in the employer’s contribution rate of one or two percent of
payroll and may be even larger in some less common instances. These gains and losses cannot
be predicted in advance so the projected employer contribution rates are just estimates. Your
actual rate for 2015-16 will be provided in next year’s report.
SAFETY PLAN OF THE CITY OF NEWPORT BEACH (CalPERS ID: 1545983430)
Annual Valuation Report as of June 30, 2012
Page 2
Changes since the Prior Year’s Valuation
On January 1, 2013, the Public Employees’ Pension Reform Act of 2013 (PEPRA) took effect. The
impact of most of the PEPRA changes will first show up in the rates and the benefit provision
listings of the June 30, 2013 valuation for the 2015-16 rates. For more information on PEPRA,
please refer to the CalPERS website.
On April 17, 2013, the CalPERS Board of Administration approved a recommendation to change
the CalPERS amortization and rate smoothing policies. Beginning with the June 30, 2013
valuations that set the 2015-16 rates, CalPERS will no longer use an actuarial value of assets and
will employ an amortization and smoothing policy that will pay for all gains and losses over a
fixed 30-year period with the increases or decreases in the rate spread directly over a 5-year
period. The impact of this new actuarial methodology is reflected in the “Analysis of Future
Investment Return Scenarios” subsection of the “Risk Analysis” section of your report.
A review of the preferred asset allocation mix for CalPERS investment portfolio will be performed
in late 2013, which could influence future discount rates. In addition, CalPERS will review
economic and demographic assumptions, including mortality rate improvements that are likely to
increase employer contribution rates in future years. The “Analysis of Future Investment Return
Scenarios” subsection does not reflect the impact of assumption changes that we expect will
also impact future rates.
Besides the above noted changes, there may also be changes specific to your plan such as
contract amendments and funding changes. Further descriptions of general changes are included in the “Highlights and Executive Summary”
section and in Appendix A, “Actuarial Methods and Assumptions.” The effect of the changes on
your rate is included in the “Reconciliation of Required Employer Contributions.”
We understand that you might have a number of questions about these results. While we are
very interested in discussing these results with your agency, in the interest of allowing us to give
every public agency their results, we ask that you wait until after October 31 to contact us with
actuarial questions. If you have other questions, you may call the Customer Contact Center at
(888)-CalPERS or (888-225-7377).
Sincerely,
ALAN MILLIGAN
Chief Actuary
ACTUARIAL VALUATION
as of June 30, 2012
for the
SAFETY PLAN
of the
CITY OF NEWPORT BEACH
(CalPERS ID: 1545983430)
REQUIRED CONTRIBUTIONS
FOR FISCAL YEAR
July 1, 2014 – June 30, 2015
TABLE OF CONTENTS
ACTUARIAL CERTIFICATION 1
HIGHLIGHTS AND EXECUTIVE SUMMARY
Introduction 5
Purpose of the Report 5
Required Employer Contribution 6
Plan’s Funded Status 6
Cost 7
Changes Since the Prior Year’s Valuation 8
Subsequent Events 8
ASSETS
Reconciliation of the Market Value of Assets 11
Development of the Actuarial Value of Assets 11
Asset Allocation 12
CalPERS History of Investment Returns 13
LIABILITIES AND RATES
Development of Accrued and Unfunded Liabilities 17
(Gain) / Loss Analysis 06/30/11 - 06/30/12 18
Schedule of Amortization Bases 19
Reconciliation of Required Employer Contributions 20
Employer Contribution Rate History 21
Funding History 21
RISK ANALYSIS
Volatility Ratios 25
Projected Rates 26
Analysis of Future Investment Return Scenarios 26 Analysis of Discount Rate Sensitivity 27
Hypothetical Termination Liability 28
GASB STATEMENT NO. 27
Information for compliance with GASB Statement No. 27 31
PLAN’S MAJOR BENEFIT PROVISIONS
Plan’s Major Benefit Options 35
APPENDIX A – ACTUARIAL METHODS AND ASSUMPTIONS A1 - A17
APPENDIX B – PRINCIPAL PLAN PROVISIONS B1 - B8
APPENDIX C – PARTICIPANT DATA
Summary of Valuation Data C-1
Active Members C-2
Transferred and Terminated Members C-3
Retired Members and Beneficiaries C-4
APPENDIX D – GLOSSARY OF ACTUARIAL TERMS D1 – D3
(CY) FIN PROCESS CONTROL ID: 404359 (PY) FIN PROCESS CONTROL ID: 389901 REPORT ID: 72034 (edited)
CALPERS ACTUARIAL VALUATION - June 30, 2012 SAFETY PLAN OF THE CITY OF NEWPORT BEACH
CalPERS ID: 1545983430
Page 1
ACTUARIAL CERTIFICATION
To the best of our knowledge, this report is complete and accurate and contains sufficient information to
disclose, fully and fairly, the funded condition of the SAFETY PLAN OF THE CITY OF NEWPORT BEACH. This
valuation is based on the member and financial data as of June 30, 2012 provided by the various CalPERS databases and the benefits under this plan with CalPERS as of the date this report was produced. 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
CalPERS Board of Administration according to provisions set forth in the California Public Employees’
Retirement Law.
The undersigned is an actuary for CalPERS, who is a member of the American Academy of Actuaries and the Society of Actuaries and meets the Qualification Standards of the American Academy of Actuaries to render
the actuarial opinion contained herein.
KERRY J. WORGAN, MAAA, FSA, FCIA
Senior Pension Actuary, CalPERS
HIGHLIGHTS AND EXECUTIVE SUMMARY
x INTRODUCTION
x PURPOSE OF THE REPORT
x REQUIRED EMPLOYER CONTRIBUTION
x PLAN’S FUNDED STATUS
x COST
x CHANGES SINCE THE PRIOR YEAR’S VALUATION
x SUBSEQUENT EVENTS
CALPERS ACTUARIAL VALUATION - June 30, 2012 SAFETY PLAN OF THE CITY OF NEWPORT BEACH
CalPERS ID: 1545983430
Page 5
Introduction
This report presents the results of the June 30, 2012 actuarial valuation of the SAFETY PLAN OF THE CITY
OF NEWPORT BEACH of the California Public Employees’ Retirement System (CalPERS). This actuarial
valuation sets the fiscal year 2014-15 required employer contribution rates.
On January 1, 2013, the Public Employees’ Pension Reform Act of 2013 (PEPRA) took effect. The impact of
most of the PEPRA changes will first show up in the rates and the benefit provision listings of the June 30,
2013 valuation, which sets the 2015-16 contribution rates. For more information on PEPRA, please refer to the CalPERS website.
On April 17, 2013, the CalPERS Board of Administration approved a recommendation to change the CalPERS
amortization and smoothing policies. Prior to this change, CalPERS employed an amortization and smoothing
policy, which spread investment returns over a 15-year period while experience gains and losses were
amortized over a rolling 30-year period. Effective with the June 30, 2013 valuations, CalPERS will no longer
use an actuarial value of assets and will employ an amortization and smoothing policy that will spread rate increases or decreases over a 5-year period, and will amortize all experience gains and losses over a fixed
30-year period.
The new amortization and smoothing policy will be used for the first time in the June 30, 2013 actuarial
valuations. These valuations will be performed in the fall of 2014 and will set employer contribution rates for
the fiscal year 2015-16.
As stewards of the System, CalPERS must ensure that the pension fund is sustainable over multiple generations. Our strategic plan calls for us to take an integrated view of our assets and liabilities and to take
steps designed to achieve a fully funded plan. A review of the preferred asset allocation mix for CalPERS
investment portfolio will be performed in late 2013, which could influence future discount rates. In addition,
CalPERS will review economic and demographic assumptions, including mortality rate improvements that are
likely to increase employer contribution rates in future years.
Purpose of the Report
The actuarial valuation was prepared by the CalPERS Actuarial Office using data as of June 30, 2012. The
purpose of the report is to:
x Set forth the actuarial assets and accrued liabilities of this plan as of June 30, 2012;
x Determine the required employer contribution rate for the fiscal year July 1, 2014 through June 30, 2015;
x Provide actuarial information as of June 30, 2012 to the CalPERS Board of Administration and other
interested parties, and to;
x Provide pension information as of June 30, 2012 to be used in financial reports subject to Governmental
Accounting Standards Board (GASB) Statement Number 27 for a Single Employer Defined Benefit
Pension Plan.
California Actuarial Advisory Panel Recommendations
This report includes all the basic disclosure elements as described in the Model Disclosure Elements for
Actuarial Valuation Reports recommended in 2011 by the California Actuarial Advisory Panel (CAAP), with
the exception of including the original base amounts of the various components of the unfunded liability in
the Schedule of Amortization Bases shown on page 19.
Additionally, this report includes the following “Enhanced Risk Disclosures” also recommended by the CAAP in the Model Disclosure Elements document:
x A “Deterministic Stress Test,” projecting future results under different investment income
scenarios
x A “Sensitivity Analysis,” showing the impact on current valuation results using a 1% plus or minus
change in the discount rate.
CALPERS ACTUARIAL VALUATION - June 30, 2012 SAFETY PLAN OF THE CITY OF NEWPORT BEACH
CalPERS ID: 1545983430
Page 6
The use of this report for any other purposes may be inappropriate. In particular, this report does not
contain information applicable to alternative benefit costs. The employer should contact their actuary before
disseminating any portion of this report for any reason that is not explicitly described above.
Required Employer Contribution
Fiscal Year Fiscal Year
2013-14 2014-15
Actuarially Determined Employer Contributions
1. Contribution in Projected Dollars
a) Total Normal Cost $ 8,142,754 $ 8,223,593
b) Employee Contribution1 2,834,344 2,796,929
c) Employer Normal Cost [(1a) – (1b)] 5,308,410 5,426,664
d) Unfunded Contribution 7,501,900 8,409,499
e) Required Employer Contribution [(1c) + (1d)] $ 12,810,310 $ 13,836,163
Projected Annual Payroll for Contribution Year $ 31,492,708 $ 31,076,988
2. Contribution as a Percentage of Payroll
a) Total Normal Cost 25.856% 26.462%
b) Employee Contribution1 9.000% 9.000%
c) Employer Normal Cost [(2a) – (2b)] 16.856% 17.462%
d) Unfunded Rate 23.821% 27.060%
e) Required Employer Rate [(2c) + (2d)] 40.677% 44.522%
Minimum Employer Contribution Rate2 40.677% 44.522%
Annual Lump Sum Prepayment Option3 $ 12,355,360 $ 13,344,781
1This is the percentage specified in the Public Employees Retirement Law, net of any reduction from the use
of a modified formula or other factors. Employee cost sharing is not shown in this report.
2The Minimum Employer Contribution Rate under PEPRA is the greater of the required employer rate or the
employer normal cost.
3Payment must be received by CalPERS before the first payroll reported to CalPERS of the new fiscal year
and after June 30. If there is contractual cost sharing or other change, this amount will change.
Plan’s Funded Status
June 30, 2011 June 30, 2012
1. Present Value of Projected Benefits $ 478,192,205 $ 496,438,761
2. Entry Age Normal Accrued Liability 405,879,283 424,868,507
3. Actuarial Value of Assets (AVA) 295,075,720 302,365,698
4. Unfunded Liability (AVA Basis) [(2) – (3)] $ 110,803,563 $ 122,502,809
5. Funded Ratio (AVA Basis) [(3) / (2)] 72.7% 71.2%
6. Market Value of Assets (MVA) $ 262,881,439 $ 252,131,503
7. Unfunded Liability (MVA Basis) [(2) – (6)] $ 142,997,844 $ 172,737,004
8. Funded Ratio (MVA Basis) [(6) / (2)] 64.8% 59.3%
Superfunded Status No No
CALPERS ACTUARIAL VALUATION - June 30, 2012 SAFETY PLAN OF THE CITY OF NEWPORT BEACH
CalPERS ID: 1545983430
Page 7
Cost
Actuarial Cost Estimates in General
What will this pension plan cost? Unfortunately, there is no simple answer. There are two major reasons for the complexity of the answer. First, actuarial calculations, including the ones in this report, are based on a
number of assumptions about the future. These assumptions can be divided into two categories.
x Demographic assumptions include the percentage of employees that will terminate, die, become
disabled, and retire in each future year.
x Economic assumptions include future salary increases for each active employee, and the
assumption with the greatest impact, future asset returns at CalPERS for each year into the future
until the last dollar is paid to current members of your plan.
While CalPERS has set these assumptions to reflect our best estimate of the real future of your plan, it must
be understood that these assumptions are very long-term predictors and will surely not be realized in any
one year. For example, while the asset earnings at CalPERS have averaged more than the assumed return of
7.5 percent for the past twenty year period ending June 30, 2013, returns for each fiscal year ranged from
negative -24 percent to +21.7 percent.
Second, the very nature of actuarial funding produces the answer to the question of plan cost as the sum of two separate pieces.
x The Normal Cost (i.e., the future annual premiums in the absence of surplus or unfunded liability)
expressed as a percentage of total active payroll.
x The Past Service Cost or Accrued Liability (i.e., the current value of the benefit for all credited past
service of current members) which is expressed as a lump sum dollar amount.
The cost is the sum of a percent of future pay and a lump sum dollar amount (the sum of an apple and an
orange if you will). To communicate the total cost, either the Normal Cost (i.e., future percent of payroll) must be converted to a lump sum dollar amount (in which case the total cost is the present value of
benefits), or the Past Service Cost (i.e., the lump sum) must be converted to a percent of payroll (in which
case the total cost is expressed as the employer’s rate, part of which is permanent and part temporary).
Converting the Past Service Cost lump sum to a percent of payroll requires a specific amortization period,
and the employer rate will vary depending on the amortization period chosen.
CALPERS ACTUARIAL VALUATION - June 30, 2012 SAFETY PLAN OF THE CITY OF NEWPORT BEACH
CalPERS ID: 1545983430
Page 8
Changes since the Prior Year’s Valuation
Benefits
The standard actuarial practice at CalPERS is to recognize mandated legislative benefit changes in the first annual valuation following the effective date of the legislation. Voluntary benefit changes by plan
amendment are generally included in the first valuation that is prepared after the amendment becomes
effective even if the valuation date is prior to the effective date of the amendment.
This valuation generally reflects plan changes by amendments effective before the date of the report. Please
refer to Appendix B for a summary of the plan provisions used in this valuation. The effect of any mandated
benefit changes or plan amendments on the unfunded liability is shown in the “(Gain)/Loss Analysis” and the effect on your employer contribution rate is shown in the “Reconciliation of Required Employer
Contributions.” It should be noted that no change in liability or rate is shown for any plan changes, which
were already included in the prior year’s valuation.
Public Employees’ Pension Reform Act of 2013 (PEPRA)
On January 1, 2013, the Public Employees’ Pension Reform Act of 2013 (PEPRA) took effect, requiring that a
public employer’s contribution to a defined benefit plan, in combination with employee contributions to that
defined benefit plan, shall not be less than the normal cost rate. Beginning July 1, 2013, this means that
some plans with surplus will be paying more than they otherwise would. For more information on PEPRA,
please refer to the CalPERS website.
Subsequent Events
Actuarial Methods and Assumptions
On April 17, 2013, the CalPERS Board of Administration approved a recommendation to change the CalPERS
amortization and smoothing policies. Beginning with the June 30, 2013 valuations that set the 2015-16
rates, CalPERS will no longer use an actuarial value of assets and will employ an amortization and rate
smoothing policy that will pay for all gains and losses over a fixed 30-year period with the increases or decreases in the rate spread directly over a 5-year period. The impact of this new actuarial methodology is
reflected in the “Expected Rate Increases” subsection of the “Risk analysis” section of your report.
Not reflected in the “Expected Rate Increases” subsection of the “Risk analysis” section is the impact of assumption changes that we expect will also, impact future rates. A review of the preferred asset allocation
mix for CalPERS investment portfolio will be performed in late 2013, which could influence future discount
rates. In addition, CalPERS will review economic and demographic assumptions, including mortality rate
improvements that are likely to increase employer contribution rates in future years.
ASSETS
x RECONCILIATION OF THE MARKET VALUE OF ASSETS
x DEVELOPMENT OF THE ACTUARIAL VALUE OF ASSETS
x ASSET ALLOCATION
x CALPERS HISTORY OF INVESTMENT RETURNS
CALPERS ACTUARIAL VALUATION - June 30, 2012 SAFETY PLAN OF THE CITY OF NEWPORT BEACH
CalPERS ID: 1545983430
Page 11
Reconciliation of the Market Value of Assets
1. Market Value of Assets as of 6/30/11 Including Receivables $ 262,881,439
2. Receivables for Service Buybacks as of 6/30/11 559,217
3. Market Value of Assets as of 6/30/11 262,322,222
4. Employer Contributions 9,804,594
5. Employee Contributions 2,737,505
6. Benefit Payments to Retirees and Beneficiaries (22,212,336)
7. Refunds (11,301)
8. Lump Sum Payments 0
9. Transfers and Miscellaneous Adjustments (889,516)
10. Investment Return (580,191)
11. Market Value of Assets as of 6/30/12 $ 251,170,977
12. Receivables for Service Buybacks as of 6/30/12 960,526
13. Market Value of Assets as of 6/30/12 Including Receivables $ 252,131,503
Development of the Actuarial Value of Assets
1. Actuarial Value of Assets as of 6/30/11 Used For Rate Setting Purposes $ 295,075,720
2. Receivables for Service Buybacks as of 6/30/11 559,217
3. Actuarial Value of Assets as of 6/30/11 294,516,503
4. Employer Contributions 9,804,594
5. Employee Contributions 2,737,505
6. Benefit Payments to Retirees and Beneficiaries (22,212,336)
7. Refunds (11,301)
8. Lump Sum Payments 0
9. Transfers and Miscellaneous Adjustments (889,516)
10. Expected Investment Income at 7.5% 21,699,490
11. Expected Actuarial Value of Assets $ 305,644,939
12. Market Value of Assets as of 6/30/12 $ 251,170,977
13. Preliminary Actuarial Value of Assets [(11) + ((12) – (11)) / 15] 302,013,342
14. Maximum Actuarial Value of Assets (120% of (12)) 301,405,172
15. Minimum Actuarial Value of Assets (80% of (12)) 200,936,782
16. Actuarial Value of Assets {Lesser of [(14), Greater of ((13), (15))]} 301,405,172
17. Actuarial Value to Market Value Ratio 119.9%
18. Receivables for Service Buybacks as of 6/30/12 960,526
19. Actuarial Value of Assets as of 6/30/12 Used for Rate Setting Purposes $ 302,365,698
CALPERS ACTUARIAL VALUATION - June 30, 2012 SAFETY PLAN OF THE CITY OF NEWPORT BEACH
CalPERS ID: 1545983430
Page 12
Asset Allocation
CalPERS adheres to an Asset Allocation Strategy which establishes asset class allocation policy targets and
ranges, and manages those asset class allocations within their policy ranges. CalPERS recognizes that over
90 percent of the variation in investment returns of a well-diversified pool of assets can typically be attributed to asset allocation decisions. In December 2010 the Board approved the policy asset class targets
and ranges listed below. These policy asset allocation targets and ranges are expressed as a percentage of
total assets and were expected to be implemented over a period of one to two years beginning July 1, 2011
and reviewed again in December 2013.
The asset allocation and market value of assets shown below reflect the values of the Public Employees
Retirement Fund (PERF) in its entirety as of June 30, 2012. The assets for CITY OF NEWPORT BEACH SAFETY PLAN are part of the Public Employees Retirement Fund (PERF) and are invested accordingly.
(A)
Asset Class
(B)
Market Value ($ Billion)
(C)
Policy Target Allocation
(D)
Policy Target Range
1) Public Equity 113.0 50.0% +/- 7%
2) Private Equity 33.9 14.0% +/- 4%
3) Fixed Income 42.6 17.0% +/- 5%
4) Cash Equivalents 7.5 4.0% +/- 5%
5) Real Assets 24.8 11.0% +/- 3%
6) Inflation Assets 7.0 4.0% +/- 3%
7) Absolute Return Strategy (ARS) 5.1 0.0% N/A
Total Fund $233.9 100.0% N/A
Public Equity
48.3%
Private Equity
14.5%
Income
18.2%
3.2%
Liquidity
Real Assets
10.6%
3.0%
Inflation
ARS
2.2%
Asset Allocation at 6/30/2012
CALPERS ACTUARIAL VALUATION - June 30, 2012SAFETY PLAN OF THE CITY OF NEWPORT BEACH
CalPERS ID: 1545983430
Page 13
CalPERS History of Investment Returns
The following is a chart with historical annual returns of the Public Employees Retirement Fund for each
fiscal year ending on June 30. Beginning in 2002, the figures are reported as gross of fees.
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
1
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LIABILITIES AND RATES
x DEVELOPMENT OF ACCRUED AND UNFUNDED LIABILITIES
x (GAIN) / LOSS ANALYSIS 06/30/11 - 06/30/12
x SCHEDULE OF AMORTIZATION BASES
x RECONCILIATION OF REQUIRED EMPLOYER CONTRIBUTIONS
x EMPLOYER CONTRIBUTION RATE HISTORY
x FUNDING HISTORY
CALPERS ACTUARIAL VALUATION - June 30, 2012 SAFETY PLAN OF THE CITY OF NEWPORT BEACH
CalPERS ID: 1545983430
Page 17
Development of Accrued and Unfunded Liabilities
1. Present Value of Projected Benefits
a) Active Members $ 173,222,301
b) Transferred Members 6,245,707
c) Terminated Members 3,585,321
d) Members and Beneficiaries Receiving Payments 313,385,432
e) Total $ 496,438,761
2. Present Value of Future Employer Normal Costs $ 46,429,185
3. Present Value of Future Employee Contributions $ 25,141,069
4. Entry Age Normal Accrued Liability
a) Active Members [(1a) - (2) - (3)] $ 101,652,047
b) Transferred Members (1b) 6,245,707
c) Terminated Members (1c) 3,585,321
d) Members and Beneficiaries Receiving Payments (1d) 313,385,432
e) Total $ 424,868,507
5. Actuarial Value of Assets (AVA) $ 302,365,698
6. Unfunded Accrued Liability (AVA Basis) [(4e) – (5)] $ 122,502,809
7. Funded Ratio (AVA Basis) [(5) / (4e)] 71.2%
8. Market Value of Assets (MVA) $ 252,131,503
9. Unfunded Liability (MVA Basis) [(4e) - (8)] $ 172,737,004
10. Funded Ratio (MVA Basis) [(8) / (4e)] 59.3%
CALPERS ACTUARIAL VALUATION - June 30, 2012 SAFETY PLAN OF THE CITY OF NEWPORT BEACH
CalPERS ID: 1545983430
Page 18
(Gain) /Loss Analysis 6/30/11 – 6/30/12
To calculate the cost requirements of the plan, assumptions are made about future events that affect the
amount and timing of benefits to be paid and assets to be accumulated. Each year actual experience is compared to the expected experience based on the actuarial assumptions. This results in actuarial gains or
losses, as shown below.
A Total (Gain)/Loss for the Year
1. Unfunded Accrued Liability (UAL) as of 6/30/11 $ 110,803,563 2. Expected Payment on the UAL during 2011/2012 5,394,340
3. Interest through 6/30/12 [.075 x (A1) - ((1.075)½ - 1) x (A2)] 8,111,636
4. Expected UAL before all other changes [(A1) - (A2) + (A3)] 113,520,859
5. Change due to plan changes 0
6. Change due to assumption change 0
7. Expected UAL after all other changes [(A4) + (A5) + (A6)] 113,520,859
8. Actual UAL as of 6/30/12 122,502,809
9. Total (Gain)/Loss for 2011/2012 [(A8) - (A7)] $ 8,981,950
B Contribution (Gain)/Loss for the Year
1. Expected Contribution (Employer and Employee) $ 13,069,667
2. Interest on Expected Contributions 481,252 3. Actual Contributions 12,542,099
4. Interest on Actual Contributions 461,826
5. Expected Contributions with Interest [(B1) + (B2)] 13,550,919
6. Actual Contributions with Interest [(B3) + (B4)] 13,003,925
7. Contribution (Gain)/Loss [(B5) - (B6)] $ 546,994
C Asset (Gain)/Loss for the Year
1. Actuarial Value of Assets as of 6/30/11 Including Receivables $ 295,075,720
2. Receivables as of 6/30/11 559,217
3. Actuarial Value of Assets as of 6/30/11 294,516,503
4. Contributions Received 12,542,099 5. Benefits and Refunds Paid (22,223,637)
6. Transfers and miscellaneous adjustments (889,516)
7. Expected Int. [.075 x (C3) + ((1.075)½ - 1) x ((C4) + (C5) + (C6))] 21,699,490
8. Expected Assets as of 6/30/12 [(C3) + (C4) + (C5) + (C6) + (C7)] 305,644,939
9. Receivables as of 6/30/12 960,526
10. Expected Assets Including Receivables 306,605,465 11. Actual Actuarial Value of Assets as of 6/30/12 302,365,698
12. Asset (Gain)/Loss [(C10) - (C11)] $ 4,239,767
D Liability (Gain)/Loss for the Year
1. Total (Gain)/Loss (A9) $ 8,981,950 2. Contribution (Gain)/Loss (B7) 546,994
3. Asset (Gain)/Loss (C12) 4,239,767
4. Liability (Gain)/Loss [(D1) - (D2) - (D3)] $ 4,195,189
Development of the (Gain)/Loss Balance as of 6/30/12
1. (Gain)/Loss Balance as of 6/30/11 $ 0
2. Payment Made on the Balance during 2011/2012 0
3. Interest through 6/30/12 [.075 x (1) - ((1.075)1/2 - 1) x (2)] 0
4. Scheduled (Gain)/Loss Balance as of 6/30/12 [(1) - (2) + (3)] $ 0
5. (Gain)/Loss for Fiscal Year ending 6/30/12 [(A9) above] 8,981,950
6. Final (Gain)/Loss Balance as of 6/30/12 [(4) + (5)] $ 8,981,950
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CALPERS ACTUARIAL VALUATION - June 30, 2012 SAFETY PLAN OF THE CITY OF NEWPORT BEACH
CalPERS ID: 1545983430
Page 20
Reconciliation of Required Employer Contributions
Percentage
of
Projected
Payroll
Estimated $
Based on
Projected
Payroll
1. Contribution for 7/1/13 – 6/30/14 40.677% $ 12,810,310
2. Effect of changes since the prior year annual valuation
a) Effect of unexpected changes in demographics and financial results 3.845% 1,194,955
b) Effect of plan changes 0.000% 0
c) Effect of changes in Assumptions 0.000% 0
d) Effect of change in payroll - (169,102)
e) Effect of elimination of amortization base 0.000% 0
f) Effect of changes due to Fresh Start 0.000% 0
g) Net effect of the changes above [Sum of (a) through (f)] 3.845% 1,025,853
3. Contribution for 7/1/14 – 6/30/15 [(1)+(2g)] 44.522% 13,836,163
The contribution actually paid (item 1) may be different if a prepayment of unfunded actuarial liability is made or a plan change became effective after the prior year’s actuarial valuation was performed.
CALPERS ACTUARIAL VALUATION - June 30, 2012 SAFETY PLAN OF THE CITY OF NEWPORT BEACH
CalPERS ID: 1545983430
Page 21
Employer Contribution Rate History
The table below provides a recent history of the employer contribution rates for your plan, as determined by the
annual actuarial valuation. It does not account for prepayments or benefit changes made in the middle of the year.
[required_by_valuation] Required By Valuation
Fiscal
Year
Employer
Normal Cost Unfunded Rate
Total Employer
Contribution Rate
2010 - 2011 15.407% 14.795% 30.202%
2011 - 2012 16.461% 18.567% 35.028%
2012 - 2013 16.094% 19.840% 35.934%
2013 - 2014 16.856% 23.821% 40.677%
2014 - 2015 17.462% 27.060% 44.522%
Funding History
The Funding History below shows the recent history of the actuarial accrued liability, the market value of assets,
the actuarial value of assets, funded ratios and the annual covered payroll. The Actuarial Value of Assets is used
to establish funding requirements and the funded ratio on this basis represents the progress toward fully funding
future benefits for current plan participants. The funded ratio based on the Market Value of Assets is an indicator of the short-term solvency of the plan.
[funding_history]
Valuation
Date
Accrued
Liability
Actuarial
Value of
Assets (AVA)
Market Value
of
Assets (MVA)
Funded
Ratio
AVA MVA
Annual
Covered
Payroll
06/30/08 $ 336,060,918 $ 264,634,222 $ 272,104,409 78.7% 81.0% $28,055,510
06/30/09 366,918,353 274,649,310 200,973,963 74.9% 54.8% 30,252,789
06/30/10 382,338,494 284,617,445 223,281,274 74.4% 58.4% 29,752,737
06/30/11 405,879,283 295,075,720 262,881,439 72.7% 64.8% 28,820,289
06/30/12 424,868,507 302,365,698 252,131,503 71.2% 59.3% 28,439,846
RISK ANALYSIS
x VOLATILITY RATIOS
x PROJECTED RATES
x ANALYSIS OF FUTURE INVESTMENT RETURN SCENARIOS
x ANALYSIS OF DISCOUNT RATE SENSITIVITY
x HYPOTHETICAL TERMINATION LIABILITY
CALPERS ACTUARIAL VALUATION - June 30, 2012 SAFETY PLAN OF THE CITY OF NEWPORT BEACH
CalPERS ID: 1545983430
Page 25
Volatility Ratios
The actuarial calculations supplied in this communication are based on a number of assumptions about very long-
term demographic and economic behavior. Unless these assumptions (terminations, deaths, disabilities,
retirements, salary growth, and investment return) are exactly realized each year, there will be differences on a year-to-year basis. The year-to-year differences between actual experience and the assumptions are called
actuarial gains and losses and serve to lower or raise the employer’s rates from one year to the next. Therefore,
the rates will inevitably fluctuate, especially due to the ups and downs of investment returns.
Asset Volatility Ratio (AVR)
Plans that have higher asset to payroll ratios produce more volatile employer rates due to investment return. For example, a plan with an asset to payroll ratio of 8 may experience twice the contribution volatility due to
investment return volatility, than a plan with an asset to payroll ratio of 4. Below we have shown your asset
volatility ratio, a measure of the plan’s current rate volatility. It should be noted that this ratio is a measure of the
current situation. It increases over time but generally tends to stabilize as the plan matures.
Liability Volatility Ratio
Plans that have higher liability to payroll ratios produce more volatile employer rates due to investment return and
changes in liability. For example, a plan with a liability to payroll ratio of 8 is expected to have twice the
contribution volatility of a plan with a liability to payroll ratio of 4. The liability volatility ratio is also included in the
table below. It should be noted that this ratio indicates a longer-term potential for contribution volatility and the
asset volatility ratio, described above, will tend to move closer to this ratio as the plan matures.
Rate Volatility As of June 30, 2012
1. Market Value of Assets without Receivables $ 251,170,977
2. Payroll 28,439,846
3. Asset Volatility Ratio (AVR = 1. / 2.) 8.8
4. Accrued Liability $ 424,868,507
5. Liability Volatility Ratio (4. / 2.) 14.9
CALPERS ACTUARIAL VALUATION - June 30, 2012 SAFETY PLAN OF THE CITY OF NEWPORT BEACH
CalPERS ID: 1545983430
Page 26
Projected Rates
On April 17, 2013, the CalPERS Board of Administration approved a recommendation to change the CalPERS
amortization and smoothing policies. Beginning with the June 30, 2013 valuations that will set the 2015-16 rates,
CalPERS will employ an amortization and rate smoothing policy that will pay for all gains and losses over a fixed 30-year period with the increases or decreases in the rate spread directly over a 5-year period. The table below
shows projected employer contribution rates (before cost sharing) for the next five Fiscal Years, assuming
CalPERS earns 12% for fiscal year 2012-13 and 7.50 percent every fiscal year thereafter, and
assuming that all other actuarial assumptions will be realized and that no further changes to assumptions,
contributions, benefits, or funding will occur between now and the beginning of the fiscal year 2015-16.
Consequently, these projections do not take into account potential rate increases from likely future
assumption changes. Nor do they take into account the positive impact PEPRA is expected to gradually have on the normal cost.
New Rate Projected Future Employer Contribution Rates
2014-15 2015-16 2016-17 2017-18 2018-19 2019-20
Contribution Rates: 44.522% 46.7% 48.9% 51.1% 53.2% 55.4%
Analysis of Future Investment Return Scenarios
In July 2013, the investment return for fiscal year 2012-13 was announced to be 12.5 percent. Note that this
return is before administrative expenses and also does not reflect final investment return information for real
estate and private equities. The final return information for these two asset classes is expected to be available later
in October. For purposes of projecting future employer rates, we are assuming a 12 percent investment return for
fiscal year 2012-13.
The investment return realized during a fiscal year first affects the contribution rate for the fiscal year 2 years later.
Specifically, the investment return for 2012-13 will first be reflected in the June 30, 2013 actuarial valuation that
will be used to set the 2015-16 employer contribution rates, the 2013-14 investment return will first be reflected in
the June 30, 2014 actuarial valuation that will be used to set the 2016-17 employer contribution rates and so forth.
Based on a 12 percent investment return for fiscal year 2012-13 and the April 17, 2013 CalPERS Board-
approved amortization and rate smoothing method change, and assuming that all other actuarial assumptions will be realized, and that no further changes to assumptions, contributions, benefits, or funding will
occur between now and the beginning of the fiscal year 2015-16, the effect on the 2015-16 Employer Rate is as
follows: (Note that this estimated rate does not reflect additional assumption changes as discussed in the
“Subsequent Events” section.)
Estimated 2015-16 Employer Rate Estimated Increase in Employer Rate between
2014-15 and 2015-16
46.7% 2.2%
As part of this report, a sensitivity analysis was performed to determine the effects of various investment returns
during fiscal years 2013-14, 2014-15 and 2015-16 on the 2016-17, 2017-18 and 2018-19 employer rates. Once
again, the projected rate increases assume that all other actuarial assumptions will be realized and that no further
changes to assumptions, contributions, benefits, or funding will occur.
CALPERS ACTUARIAL VALUATION - June 30, 2012 SAFETY PLAN OF THE CITY OF NEWPORT BEACH
CalPERS ID: 1545983430
Page 27
Five different investment return scenarios were selected.
x The first scenario is what one would expect if the markets were to give us a 5th percentile return from
July 1, 2013 through June 30, 2016. The 5th percentile return corresponds to a -4.1 percent return for
each of the 2013-14, 2014-15 and 2015-16 fiscal years.
x The second scenario is what one would expect if the markets were to give us a 25th percentile return
from July 1, 2013 through June 30, 2016. The 25th percentile return corresponds to a 2.6 percent return
for each of the 2013-14, 2014-15 and 2015-16 fiscal years. x The third scenario assumed the return for 2013-14, 2014-15, 2015-16 would be our assumed 7.5 percent investment return which represents about a 49th percentile event.
x The fourth scenario is what one would expect if the markets were to give us a 75th percentile return from
July 1, 2013 through June 30, 2016. The 75th percentile return corresponds to a 11.9 percent return for
each of the 2013-14, 2014-15 and 2015-16 fiscal years.
x Finally, the last scenario is what one would expect if the markets were to give us a 95th percentile return
from July 1, 2013 through June 30, 2016. The 95th percentile return corresponds to a 18.5 percent
return for each of the 2013-14, 2014-15 and 2015-16 fiscal years.
The table below shows the estimated projected contribution rates and the estimated increases for your plan under
the five different scenarios.
2013-16 Investment
Return Scenario
Estimated Employer Rate Estimated Change in Employer Rate
between 2015-16
and 2018-19 2016-17 2017-18 2018-19
-4.1% (5th percentile) 50.4% 55.5% 61.8% 15.1%
2.6% (25th percentile) 49.5% 53.0% 57.0% 10.3%
7.5% 48.9% 51.1% 53.2% 6.5%
11.9%(75th percentile) 48.3% 49.3% 49.6% 2.9%
18.5%(95th percentile) 47.4% 46.5% 43.8% -2.9%
Analysis of Discount Rate Sensitivity
The following analysis looks at the 2014-15 employer contribution rates under two different discount rate
scenarios. Shown below are the employer contribution rates assuming discount rates that are 1 percent lower and
1 percent higher than the current valuation discount rate. This analysis gives an indication of the potential required
employer contribution rates if the PERF were to realize investment returns of 6.50 percent or 8.50 percent over the
long-term.
This type of analysis gives the reader a sense of the long-term risk to the employer contribution rates.
2014-15 Employer Contribution Rate
As of June 30, 2012 6.50% Discount Rate
(-1%) 7.50% Discount Rate
(assumed rate) 8.50% Discount Rate
(+1%)
Employer Normal Cost 23.983% 17.462% 12.447%
Unfunded Rate Payment 38.712% 27.060% 16.044%
Total 62.695% 44.522% 28.491%
CALPERS ACTUARIAL VALUATION - June 30, 2012 SAFETY PLAN OF THE CITY OF NEWPORT BEACH
CalPERS ID: 1545983430
Page 28
Hypothetical Termination Liability
Below is an estimate of the financial position of your plan if you had terminated your contract with CalPERS as of
June 30, 2012 using the discount rates shown below. Your plan liability on a termination basis is calculated
differently compared to the plan’s ongoing funding liability. In December 2012, the CalPERS Board adopted a more conservative investment policy and asset allocation strategy for the Terminated Agency Pool. Since the Terminated
Agency Pool has limited funding sources, expected benefit payments are secured by risk-free assets. With this
change, CalPERS increased benefit security for members while limiting its funding risk. This asset allocation has a
lower expected rate of return than the PERF. Consequently, the lower discount rate for the Terminated Agency
pool results in higher liabilities for terminated plans.
In order to terminate your plan, you must first contact our Retirement Services Contract Unit to initiate a
Resolution of Intent to Terminate. The completed Resolution will allow your plan actuary to give you a preliminary
termination valuation with a more up-to-date estimate of your plan liabilities. CalPERS advises you to consult with
your plan actuary before beginning this process.
[estimated_termination_liability]
Valuation
Date
Hypothetical
Termination
Liability1
Market Value
of Assets
(MVA)
Unfunded
Termination
Liability
Termination
Funded
Ratio
Termination
Liability
Discount
Rate2
06/30/11 $ 600,452,456 $262,881,439 $ 337,571,017 43.8% 4.82%
06/30/12 799,680,164 252,131,503 547,548,661 31.5% 2.98%
1 The hypothetical liabilities calculated above include a 7 percent mortality contingency load in accordance with
Board policy. Other actuarial assumptions, such as wage and inflation assumptions, can be found in appendix A.
2 The discount rate assumption used for termination valuations is a weighted average of the 10 and 30-year US
Treasury yields in effect on the valuation date that equal the duration of the pension liabilities. For purposes of this
hypothetical termination liability estimate, the discount rate used, 2.98 percent, is the yield on the 30-year US
Treasury Separate Trading of Registered Interest and Principal of Securities (STRIPS) as of June 30, 2012. In last
year’s report the May 2012 rate of 2.87 percent was inadvertently shown rather than the June rate of 2.98
percent. Please note, as of June 30, 2013 the 30-year STRIPS yield was 3.72 percent.
GASB STATEMENT NO. 27
CALPERS ACTUARIAL VALUATION - June 30, 2012 SAFETY PLAN OF THE CITY OF NEWPORT BEACH
CalPERS ID: 1545983430
Page 31
SAFETY PLAN of the CITY OF NEWPORT BEACH
Information for Compliance with GASB Statement No. 27
Disclosure under GASB 27 follows. However, note that effective for financial statements for fiscal
years beginning after June 15, 2014, GASB 68 replaces GASB 27. GASB 68 will require additional
reporting. CalPERS is planning to provide GASB 68 disclosure information upon request for an additional fee. We urge you to start discussions with your auditors on how to implement GASB 68.
Under GASB 27, an employer reports an annual pension cost (APC) equal to the annual required contribution
(ARC) plus an adjustment for the cumulative difference between the APC and the employer’s actual plan
contributions for the year. The cumulative difference is called the net pension obligation (NPO). The ARC for the
period July 1, 2013 to June 30, 2014 has been determined by an actuarial valuation of the plan as of June 30,
2012. The unadjusted GASB compliant contribution rate for the indicated period is 44.522 percent of payroll. In
order to calculate the dollar value of the ARC for inclusion in financial statements prepared as of June 30, 2014, this contribution rate, less any employee cost sharing, as modified by any amendments for the year, would be
multiplied by the payroll of covered employees that was actually paid during the period July 1, 2013 to June 30,
2014. The employer and the employer’s auditor are responsible for determining the NPO and the APC.
A summary of principal assumptions and methods used to determine the ARC is shown below.
Retirement Program Valuation Date June 30, 2012
Actuarial Cost Method Entry Age Normal Cost Method
Amortization Method Level Percent of Payroll
Average Remaining Period 27 Years as of the Valuation Date
Asset Valuation Method 15 Year Smoothed Market
Actuarial Assumptions
Discount Rate 7.50% (net of administrative expenses)
Projected Salary Increases 3.30% to 14.20% depending on Age, Service, and type of employment Inflation 2.75%
Payroll Growth 3.00%
Individual Salary Growth A merit scale varying by duration of employment coupled with an assumed
annual inflation growth of 2.75% and an annual production growth of 0.25%.
Initial unfunded liabilities are amortized over a closed period that depends on the plan’s date of entry into
CalPERS. Subsequent plan amendments are amortized as a level percentage of pay over a closed 20-year period.
Gains and losses that occur in the operation of the plan are amortized over a 30-year rolling period, which results in an amortization of about 6 percent of unamortized gains and losses each year. If the plan’s accrued liability
exceeds the actuarial value of plan assets, then the amortization payment on the total unfunded liability may not
be lower than the payment calculated over a 30-year amortization period. More detailed information on
assumptions and methods is provided in Appendix A of this report. Appendix B contains a description of benefits
included in the valuation.
The Schedule of Funding Progress below shows the recent history of the actuarial accrued liability, actuarial value
of assets, their relationship and the relationship of the unfunded actuarial accrued liability to payroll.
Valuation
Date
Accrued
Liability
(a)
Actuarial Value
of Assets (AVA)
(b)
Unfunded
Liability (UL)
(a)-(b)
Funded Ratios Annual
Covered Payroll
(c)
UL As a
% of Payroll
[(a)-(b)]/(c) (AVA)
(b)/(a)
Market
Value
06/30/08 $ 336,060,918 $ 264,634,222 $ 71,426,696 78.7% 81.0% $ 28,055,510 254.6%
06/30/09 366,918,353 274,649,310 92,269,043 74.9% 54.8% 30,252,789 305.0%
06/30/10 382,338,494 284,617,445 97,721,049 74.4% 58.4% 29,752,737 328.4%
06/30/11 405,879,283 295,075,720 110,803,563 72.7% 64.8% 28,820,289 384.5%
06/30/12 424,868,507 302,365,698 122,502,809 71.2% 59.3% 28,439,846 430.7%
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6
APPENDICES
x APPENDIX A – ACTUARIAL METHODS AND ASSUMPTIONS
x APPENDIX B – PRINCIPAL PLAN PROVISIONS
x APPENDIX C – SUMMARY OF PARTICIPANT DATA
x APPENDIX D – GLOSSARY OF ACTUARIAL TERMS
APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
x ACTUARIAL DATA
x ACTUARIAL METHODS
x ACTUARIAL ASSUMPTIONS
x MISCELLANEOUS
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS
A-1
Actuarial Data
As stated in the Actuarial Certification, the data, which serves as the basis of this valuation, has been
obtained from the various CalPERS databases. We have reviewed the valuation data and believe that it is
reasonable and appropriate in aggregate. We are unaware of any potential data issues that would have a
material effect on the results of this valuation, except that data does not always contain the latest salary information for former members now in reciprocal systems and does not recognize the potential for
unusually large salary deviation in certain cases such as elected officials. Therefore, salary information in
these cases may not be accurate. These situations are relatively infrequent, however, and when they do
occur, they generally do not have a material impact on the employer contribution rates.
Actuarial Methods
Funding Method
The actuarial funding method used for the Retirement Program is the Entry Age Normal Cost Method. Under this method, projected benefits are determined for all members and the associated liabilities are spread in a
manner that produces level annual cost as a percent of pay in each year from the age of hire (entry age) to
the assumed retirement age. The cost allocated to the current fiscal year is called the normal cost.
The actuarial accrued liability for active members is then calculated as the portion of the total cost of the
plan allocated to prior years. The actuarial accrued liability for members currently receiving benefits, for
active members beyond the assumed retirement age, and for members entitled to deferred benefits, is equal to the present value of the benefits expected to be paid. No normal costs are applicable for these
participants.
The excess of the total actuarial accrued liability over the actuarial value of plan assets is called the
unfunded actuarial accrued liability. Funding requirements are determined by adding the normal cost and an
amortization of the unfunded liability as a level percentage of assumed future payrolls. All changes in
liability due to plan amendments, changes in actuarial assumptions, or changes in actuarial methodology are amortized separately over a 20-year period. All new gains or losses are tracked and amortized over a rolling
30-year period. If a plan’s accrued liability exceeds the actuarial value of assets, the annual contribution
with respect to the total unfunded liability may not be less than the amount produced by a 30-year
amortization of the unfunded liability.
Additional contributions will be required for any plan or pool if their cash flows hamper adequate funding
progress by preventing the expected funded status on a market value of assets basis to either:
x Increase by at least 15% by June 30, 2043; or
x Reach a level of 75% funded by June 30, 2043
The necessary additional contribution will be obtained by changing the amortization period of the gains and
losses, except for those occurring in the fiscal years 2008-2009, 2009-2010, and 2010-2011 to a period,
which will result in the satisfaction of the above criteria. CalPERS actuaries will reassess the criteria above
when performing each future valuation to determine whether or not additional contributions are necessary.
An exception to the funding rules above is used whenever the application of such rules results in
inconsistencies. In these cases, a “fresh start” approach is used. This simply means that the current
unfunded actuarial liability is projected and amortized over a set number of years. As mentioned above, if
the annual contribution on the total unfunded liability was less than the amount produced by a 30-year
amortization of the unfunded liability, the plan actuary would implement a 30-year fresh start. However, in
the case of a 30-year fresh start, just the unfunded liability not already in the (gain)/loss base (which is
already amortized over 30 years), will go into the new fresh start base. In addition, a fresh start is needed in the following situations:
1) When a positive payment would be required on a negative unfunded actuarial liability (or
conversely a negative payment on a positive unfunded actuarial liability); or
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS
A-2
2) When there are excess assets, rather than an unfunded liability. In this situation, a 30-year fresh start is used, unless a longer fresh start is needed to avoid a negative total rate.
It should be noted that the actuary may choose to use a fresh start under other circumstances. In all cases,
the fresh start period is set by the actuary at what is deemed appropriate; however, the period will not be
less than five years, nor greater than 30 years.
Asset Valuation Method
In order to dampen the effect of short-term market value fluctuations on employer contribution rates, the
following asset smoothing technique is used. First, an Expected Value of Assets is computed by bringing
forward the prior year’s Actuarial Value of Assets and the contributions received and benefits paid during the
year at the assumed actuarial rate of return. The Actuarial Value of Assets is then computed as the
Expected Value of Assets plus one-fifteenth of the difference between the actual Market Value of Assets and
the Expected Value of Assets, as of the valuation date. However, in no case will the Actuarial Value of Assets be less than 80% or greater than 120% of the actual Market Value of Assets.
In June 2009, the CalPERS Board adopted changes to the asset smoothing method in order to phase in over
a three-year period the impact of the negative -24 percent investment loss experienced by CalPERS in fiscal
year 2008-2009. The following changes were adopted:
x Increase the corridor limits for the actuarial value of assets from 80 percent/120 percent of market
value to 60 percent/140 percent of market value on June 30, 2009 x Reduce the corridor limits for the actuarial value of assets to 70 percent/130 percent of market
value on June 30, 2010
x Return to the 80 percent/120 percent of market value corridor limits for the actuarial value of
assets on June 30, 2011 and thereafter
On April 17, 2013, the CalPERS Board of Administration approved a recommendation to change
the CalPERS amortization and rate smoothing policies. Beginning with the June 30, 2013
valuations that set the 2015-16 rates, CalPERS will employ an amortization and smoothing policy that will pay for all gains and losses over a fixed 30-year period with the increases or
decreases in the rate spread directly over a 5-year period. Details of the agenda item can be
found on our website CalPERS On-Line:
http://www.calpers.ca.gov/index.jsp?bc=/about/committee-meetings/archives/pension-201304.xml
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS
A-3
Actuarial Assumptions
Economic Assumptions
Discount Rate
7.5% compounded annually (net of expenses). This assumption is used for all plans.
Termination Liability Discount Rate
The discount rate used for termination valuation is a weighted average of the 10 and 30-year US
Treasury yields in effect on the valuation date that equal the duration of the pension liabilities. For
purposes of this hypothetical termination liability estimate, the discount rate used, 2.98 percent, is
the yield on the 30-year US Treasury Separate Trading of Registered Interest and Principal of
Securities (STRIPS) as of June 30, 2012. Please note, as of June 30, 2013 the 30-year STRIPS yield was 3.72 percent.
Salary Growth
Annual increases vary by category, entry age, and duration of service. A sample of assumed
increases are shown below.
Public Agency Miscellaneous
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1420 0.1240 0.0980
1 0.1190 0.1050 0.0850
2 0.1010 0.0910 0.0750
3 0.0880 0.0800 0.0670
4 0.0780 0.0710 0.0610
5 0.0700 0.0650 0.0560
10 0.0480 0.0460 0.0410
15 0.0430 0.0410 0.0360
20 0.0390 0.0370 0.0330
25 0.0360 0.0360 0.0330
30 0.0360 0.0360 0.0330
Public Agency Fire
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1050 0.1050 0.1020
1 0.0950 0.0940 0.0850
2 0.0870 0.0830 0.0700
3 0.0800 0.0750 0.0600
4 0.0740 0.0680 0.0510
5 0.0690 0.0620 0.0450
10 0.0510 0.0460 0.0350
15 0.0410 0.0390 0.0340
20 0.0370 0.0360 0.0330
25 0.0350 0.0350 0.0330
30 0.0350 0.0350 0.0330
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS
A-4
Salary Growth (continued)
Public Agency Police
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1090 0.1090 0.1090
1 0.0930 0.0930 0.0930
2 0.0810 0.0810 0.0780
3 0.0720 0.0700 0.0640
4 0.0650 0.0610 0.0550
5 0.0590 0.0550 0.0480
10 0.0450 0.0420 0.0340
15 0.0410 0.0390 0.0330
20 0.0370 0.0360 0.0330
25 0.0350 0.0340 0.0330
30 0.0350 0.0340 0.0330
Public Agency County Peace Officers
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1290 0.1290 0.1290
1 0.1090 0.1060 0.1030
2 0.0940 0.0890 0.0840
3 0.0820 0.0770 0.0710
4 0.0730 0.0670 0.0610
5 0.0660 0.0600 0.0530
10 0.0460 0.0420 0.0380
15 0.0410 0.0380 0.0360
20 0.0370 0.0360 0.0340
25 0.0350 0.0340 0.0330
30 0.0350 0.0340 0.0330
Schools
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1080 0.0960 0.0820
1 0.0940 0.0850 0.0740
2 0.0840 0.0770 0.0670
3 0.0750 0.0700 0.0620
4 0.0690 0.0640 0.0570
5 0.0630 0.0600 0.0530
10 0.0450 0.0440 0.0410
15 0.0390 0.0380 0.0350 20 0.0360 0.0350 0.0320
25 0.0340 0.0340 0.0320
30 0.0340 0.0340 0.0320
x The Miscellaneous salary scale is used for Local Prosecutors.
x The Police salary scale is used for Other Safety, Local Sheriff, and School Police.
Overall Payroll Growth
3.00 percent compounded annually (used in projecting the payroll over which the unfunded liability
is amortized). This assumption is used for all plans.
Inflation
2.75 percent compounded annually. This assumption is used for all plans.
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS
A-5
Non-valued Potential Additional Liabilities
The potential liability loss for a cost-of-living increase exceeding the 2.75 percent inflation
assumption, and any potential liability loss from future member service purchases are not reflected
in the valuation.
Miscellaneous Loading Factors
Credit for Unused Sick Leave
Total years of service is increased by 1 percent for those plans that have accepted the provision
providing Credit for Unused Sick Leave.
Conversion of Employer Paid Member Contributions (EPMC)
Total years of service is increased by the Employee Contribution Rate for those plans with the
provision providing for the Conversion of Employer Paid Member Contributions (EPMC) during the final compensation period.
Norris Decision (Best Factors)
Employees hired prior to July 1, 1982 have projected benefit amounts increased in order to reflect
the use of “Best Factors” in the calculation of optional benefit forms. This is due to a 1983
Supreme Court decision, known as the Norris decision, which required males and females to be
treated equally in the determination of benefit amounts. Consequently, anyone already employed
at that time is given the best possible conversion factor when optional benefits are determined. No loading is necessary for employees hired after July 1, 1982.
Termination Liability
The termination liabilities include a 7 percent contingency load. This load is for unforeseen
improvements in mortality.
Demographic Assumptions
Pre-Retirement Mortality
Non-Industrial Death Rates vary by age and gender. Industrial Death rates vary by age. See
sample rates in table below. The non-industrial death rates are used for all plans. The industrial
death rates are used for Safety Plans (except for Local Prosecutor safety members where the
corresponding Miscellaneous Plan does not have the Industrial Death Benefit).
Non-Industrial Death Industrial Death (Not Job-Related) (Job-Related)
Age Male Female Male and Female
20 0.00047 0.00016 0.00003
25 0.00050 0.00026 0.00007
30 0.00053 0.00036 0.00010
35 0.00067 0.00046 0.00012
40 0.00087 0.00065 0.00013 45 0.00120 0.00093 0.00014
50 0.00176 0.00126 0.00015
55 0.00260 0.00176 0.00016
60 0.00395 0.00266 0.00017
65 0.00608 0.00419 0.00018
70 0.00914 0.00649 0.00019
75 0.01220 0.00878 0.00020
80 0.01527 0.01108 0.00021
Miscellaneous Plans usually have Industrial Death rates set to zero unless the agency has specifically
contracted for Industrial Death benefits. If so, each Non-Industrial Death rate shown above will be
split into two components; 99 percent will become the Non-Industrial Death rate and 1 percent will
become the Industrial Death rate.
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS
A-6
Post-Retirement Mortality
Rates vary by age, type of retirement and gender. See sample rates in table below. These rates are
used for all plans.
Healthy Recipients
Non-Industrially Disabled Industrially Disabled
(Not Job-Related) (Job-Related)
Age Male Female Male Female Male Female
50 0.00239 0.00125 0.01632 0.01245 0.00443 0.00356
55 0.00474 0.00243 0.01936 0.01580 0.00563 0.00546
60 0.00720 0.00431 0.02293 0.01628 0.00777 0.00798
65 0.01069 0.00775 0.03174 0.01969 0.01388 0.01184
70 0.01675 0.01244 0.03870 0.03019 0.02236 0.01716
75 0.03080 0.02071 0.06001 0.03915 0.03585 0.02665
80 0.05270 0.03749 0.08388 0.05555 0.06926 0.04528 85 0.09775 0.07005 0.14035 0.09577 0.11799 0.08017
90 0.16747 0.12404 0.21554 0.14949 0.16575 0.13775
95 0.25659 0.21556 0.31025 0.23055 0.26108 0.23331
100 0.34551 0.31876 0.45905 0.37662 0.40918 0.35165
105 0.58527 0.56093 0.67923 0.61523 0.64127 0.60135
110 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000
The mortality assumptions are based on mortality rates resulting from the most recent CalPERS Experience Study adopted by the CalPERS Board, first used in the June 30, 2009 valuation. For
purposes of the post-retirement mortality rates, those revised rates include 5 years of projected on-
going mortality improvement using Scale AA published by the Society of Actuaries until June 30, 2010.
There is no margin for future mortality improvement beyond the valuation date. The mortality
assumption will be reviewed with the next experience study expected to be completed for the June 30,
2013 valuation to determine an appropriate margin to be used.
Marital Status
For active members, a percentage who are married upon retirement is assumed according to
member category as shown in the following table.
Member Category Percent Married
Miscellaneous Member 85%
Local Police 90%
Local Fire 90%
Other Local Safety 90%
School Police 90%
Age of Spouse
It is assumed that female spouses are 3 years younger than male spouses are. This assumption is
used for all plans.
Terminated Members
It is assumed that terminated members refund immediately if non-vested. Terminated members
who are vested are assumed to follow the same service retirement pattern as active members but
with a load to reflect the expected higher rates of retirement, especially at lower ages. The following table shows the load factors that are applied to the service retirement assumption for
active members to obtain the service retirement pattern for separated vested members:
Age Load Factor
50 450%
51 250%
52 through 56 200%
57 through 60 150%
61 through 64 125%
65 and above 100% (no change)
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS
A-7
Termination with Refund Rates vary by entry age and service for Miscellaneous Plans. Rates vary by service for Safety Plans.
See sample rates in tables below.
Public Agency Miscellaneous
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45
0 0.1742 0.1674 0.1606 0.1537 0.1468 0.1400
1 0.1545 0.1477 0.1409 0.1339 0.1271 0.1203
2 0.1348 0.1280 0.1212 0.1142 0.1074 0.1006
3 0.1151 0.1083 0.1015 0.0945 0.0877 0.0809
4 0.0954 0.0886 0.0818 0.0748 0.0680 0.0612
5 0.0212 0.0193 0.0174 0.0155 0.0136 0.0116
10 0.0138 0.0121 0.0104 0.0088 0.0071 0.0055
15 0.0060 0.0051 0.0042 0.0032 0.0023 0.0014
20 0.0037 0.0029 0.0021 0.0013 0.0005 0.0001
25 0.0017 0.0011 0.0005 0.0001 0.0001 0.0001
30 0.0005 0.0001 0.0001 0.0001 0.0001 0.0001
35 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001
Public Agency Safety
Duration of Service Fire Police County Peace Officer
0 0.0710 0.1013 0.0997
1 0.0554 0.0636 0.0782
2 0.0398 0.0271 0.0566
3 0.0242 0.0258 0.0437
4 0.0218 0.0245 0.0414
5 0.0029 0.0086 0.0145
10 0.0009 0.0053 0.0089
15 0.0006 0.0027 0.0045
20 0.0005 0.0017 0.0020
25 0.0003 0.0012 0.0009
30 0.0003 0.0009 0.0006
35 0.0003 0.0009 0.0006
The Police Termination and Refund rates are also used for Public Agency Local Prosecutors, Other Safety, Local Sheriff and School Police.
Schools
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45
0 0.1730 0.1627 0.1525 0.1422 0.1319 0.1217
1 0.1585 0.1482 0.1379 0.1277 0.1174 0.1071
2 0.1440 0.1336 0.1234 0.1131 0.1028 0.0926
3 0.1295 0.1192 0.1089 0.0987 0.0884 0.0781
4 0.1149 0.1046 0.0944 0.0841 0.0738 0.0636
5 0.0278 0.0249 0.0221 0.0192 0.0164 0.0135
10 0.0172 0.0147 0.0122 0.0098 0.0074 0.0049
15 0.0115 0.0094 0.0074 0.0053 0.0032 0.0011
20 0.0073 0.0055 0.0038 0.0020 0.0002 0.0002
25 0.0037 0.0023 0.0010 0.0002 0.0002 0.0002
30 0.0015 0.0003 0.0002 0.0002 0.0002 0.0002
35 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS
A-8
Termination with Vested Benefits
Rates vary by entry age and service for Miscellaneous Plans. Rates vary by service for Safety Plans.
See sample rates in tables below.
Public Agency Miscellaneous
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40
5 0.0656 0.0597 0.0537 0.0477 0.0418
10 0.0530 0.0466 0.0403 0.0339 0.0000
15 0.0443 0.0373 0.0305 0.0000 0.0000
20 0.0333 0.0261 0.0000 0.0000 0.0000
25 0.0212 0.0000 0.0000 0.0000 0.0000
30 0.0000 0.0000 0.0000 0.0000 0.0000
35 0.0000 0.0000 0.0000 0.0000 0.0000
Public Agency Safety
Duration of
Service Fire Police
County Peace
Officer
5 0.0162 0.0163 0.0265
10 0.0061 0.0126 0.0204
15 0.0058 0.0082 0.0130
20 0.0053 0.0065 0.0074
25 0.0047 0.0058 0.0043
30 0.0045 0.0056 0.0030
35 0.0000 0.0000 0.0000
x When a member is eligible to retire, the termination with vested benefits probability is set to
zero.
x After termination with vested benefits, a miscellaneous member is assumed to retire at age 59
and a safety member at age 54. x The Police Termination with vested benefits rates are also used for Public Agency Local
Prosecutors, Other Safety, Local Sheriff and School Police.
Schools
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40
5 0.0816 0.0733 0.0649 0.0566 0.0482
10 0.0629 0.0540 0.0450 0.0359 0.0000
15 0.0537 0.0440 0.0344 0.0000 0.0000
20 0.0420 0.0317 0.0000 0.0000 0.0000
25 0.0291 0.0000 0.0000 0.0000 0.0000
30 0.0000 0.0000 0.0000 0.0000 0.0000
35 0.0000 0.0000 0.0000 0.0000 0.0000
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS
A-9
Non-Industrial (Not Job-Related) Disability Rates vary by age and gender for Miscellaneous Plans. Rates vary by age and category for Safety
Plans.
Miscellaneous Fire Police County Peace Officer Schools
Age Male Female Male and Female Male and Female Male and Female Male Female
20 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001
25 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001
30 0.0002 0.0002 0.0001 0.0002 0.0001 0.0002 0.0001
35 0.0006 0.0009 0.0001 0.0003 0.0004 0.0006 0.0004
40 0.0015 0.0016 0.0001 0.0004 0.0007 0.0014 0.0009
45 0.0025 0.0024 0.0002 0.0005 0.0013 0.0028 0.0017
50 0.0033 0.0031 0.0005 0.0008 0.0018 0.0044 0.0030
55 0.0037 0.0031 0.0010 0.0013 0.0010 0.0049 0.0034
60 0.0038 0.0025 0.0015 0.0020 0.0006 0.0043 0.0024
x The Miscellaneous Non-Industrial Disability rates are used for Local Prosecutors. x The Police Non-Industrial Disability rates are also used for Other Safety, Local Sheriff and School Police.
Industrial (Job-Related) Disability
Rates vary by age and category.
Age Fire Police County Peace Officer
20 0.0002 0.0007 0.0003
25 0.0012 0.0032 0.0015
30 0.0025 0.0064 0.0031
35 0.0037 0.0097 0.0046
40 0.0049 0.0129 0.0063
45 0.0061 0.0161 0.0078
50 0.0074 0.0192 0.0101
55 0.0721 0.0668 0.0173
60 0.0721 0.0668 0.0173
x The Police Industrial Disability rates are also used for Local Sheriff and Other Safety.
x Fifty Percent of the Police Industrial Disability rates are used for School Police.
x One Percent of the Police Industrial Disability rates are used for Local Prosecutors.
x Normally, rates are zero for Miscellaneous Plans unless the agency has specifically contracted
for Industrial Disability benefits. If so, each miscellaneous non-industrial disability rate will be
split into two components: 50 percent will become the Non-Industrial Disability rate and 50
percent will become the Industrial Disability rate.
Service Retirement
Retirement rates vary by age, service, and formula, except for the safety ½ @ 55 and 2% @ 55
formulas, where retirement rates vary by age only.
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS
A-10
Service Retirement
Public Agency Miscellaneous 1.5% @ 65
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.008 0.011 0.013 0.015 0.017 0.019
51 0.007 0.010 0.012 0.013 0.015 0.017
52 0.010 0.014 0.017 0.019 0.021 0.024
53 0.008 0.012 0.015 0.017 0.019 0.022
54 0.012 0.016 0.019 0.022 0.025 0.028
55 0.018 0.025 0.031 0.035 0.038 0.043
56 0.015 0.021 0.025 0.029 0.032 0.036
57 0.020 0.028 0.033 0.038 0.043 0.048
58 0.024 0.033 0.040 0.046 0.052 0.058
59 0.028 0.039 0.048 0.054 0.060 0.067
60 0.049 0.069 0.083 0.094 0.105 0.118
61 0.062 0.087 0.106 0.120 0.133 0.150
62 0.104 0.146 0.177 0.200 0.223 0.251
63 0.099 0.139 0.169 0.191 0.213 0.239
64 0.097 0.136 0.165 0.186 0.209 0.233
65 0.140 0.197 0.240 0.271 0.302 0.339
66 0.092 0.130 0.157 0.177 0.198 0.222
67 0.129 0.181 0.220 0.249 0.277 0.311
68 0.092 0.129 0.156 0.177 0.197 0.221
69 0.092 0.130 0.158 0.178 0.199 0.224
70 0.103 0.144 0.175 0.198 0.221 0.248
Public Agency Miscellaneous 2% @ 60
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.011 0.015 0.018 0.021 0.023 0.026
51 0.009 0.013 0.016 0.018 0.020 0.023
52 0.013 0.018 0.022 0.025 0.028 0.031
53 0.011 0.016 0.019 0.022 0.025 0.028
54 0.015 0.021 0.025 0.028 0.032 0.036
55 0.023 0.032 0.039 0.044 0.049 0.055
56 0.019 0.027 0.032 0.037 0.041 0.046
57 0.025 0.035 0.042 0.048 0.054 0.060
58 0.030 0.042 0.051 0.058 0.065 0.073
59 0.035 0.049 0.060 0.068 0.076 0.085
60 0.062 0.087 0.105 0.119 0.133 0.149
61 0.079 0.110 0.134 0.152 0.169 0.190
62 0.132 0.186 0.225 0.255 0.284 0.319
63 0.126 0.178 0.216 0.244 0.272 0.305
64 0.122 0.171 0.207 0.234 0.262 0.293
65 0.173 0.243 0.296 0.334 0.373 0.418
66 0.114 0.160 0.194 0.219 0.245 0.274
67 0.159 0.223 0.271 0.307 0.342 0.384
68 0.113 0.159 0.193 0.218 0.243 0.273
69 0.114 0.161 0.195 0.220 0.246 0.276
70 0.127 0.178 0.216 0.244 0.273 0.306
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS
A-11
Service Retirement
Public Agency Miscellaneous 2% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.015 0.020 0.024 0.029 0.033 0.039
51 0.013 0.016 0.020 0.024 0.027 0.033
52 0.014 0.018 0.022 0.027 0.030 0.036
53 0.017 0.022 0.027 0.032 0.037 0.043
54 0.027 0.034 0.041 0.049 0.056 0.067
55 0.050 0.064 0.078 0.094 0.107 0.127
56 0.045 0.057 0.069 0.083 0.095 0.113
57 0.048 0.061 0.074 0.090 0.102 0.122
58 0.052 0.066 0.080 0.097 0.110 0.131
59 0.060 0.076 0.092 0.111 0.127 0.151
60 0.072 0.092 0.112 0.134 0.153 0.182
61 0.089 0.113 0.137 0.165 0.188 0.224
62 0.128 0.162 0.197 0.237 0.270 0.322
63 0.129 0.164 0.199 0.239 0.273 0.325
64 0.116 0.148 0.180 0.216 0.247 0.294
65 0.174 0.221 0.269 0.323 0.369 0.439
66 0.135 0.171 0.208 0.250 0.285 0.340
67 0.133 0.169 0.206 0.247 0.282 0.336
68 0.118 0.150 0.182 0.219 0.250 0.297
69 0.116 0.147 0.179 0.215 0.246 0.293
70 0.138 0.176 0.214 0.257 0.293 0.349
Public Agency Miscellaneous 2.5% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.026 0.033 0.040 0.048 0.055 0.062
51 0.021 0.026 0.032 0.038 0.043 0.049
52 0.021 0.026 0.032 0.038 0.043 0.049
53 0.026 0.033 0.040 0.048 0.055 0.062
54 0.043 0.054 0.066 0.078 0.089 0.101
55 0.088 0.112 0.136 0.160 0.184 0.208
56 0.055 0.070 0.085 0.100 0.115 0.130
57 0.061 0.077 0.094 0.110 0.127 0.143
58 0.072 0.091 0.111 0.130 0.150 0.169
59 0.083 0.105 0.128 0.150 0.173 0.195
60 0.088 0.112 0.136 0.160 0.184 0.208
61 0.083 0.105 0.128 0.150 0.173 0.195
62 0.121 0.154 0.187 0.220 0.253 0.286
63 0.105 0.133 0.162 0.190 0.219 0.247
64 0.105 0.133 0.162 0.190 0.219 0.247
65 0.143 0.182 0.221 0.260 0.299 0.338
66 0.105 0.133 0.162 0.190 0.219 0.247
67 0.105 0.133 0.162 0.190 0.219 0.247
68 0.105 0.133 0.162 0.190 0.219 0.247
69 0.105 0.133 0.162 0.190 0.219 0.247
70 0.125 0.160 0.194 0.228 0.262 0.296
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS
A-12
Service Retirement
Public Agency Miscellaneous 2.7% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.028 0.035 0.043 0.050 0.058 0.065
51 0.022 0.028 0.034 0.040 0.046 0.052
52 0.022 0.028 0.034 0.040 0.046 0.052
53 0.028 0.035 0.043 0.050 0.058 0.065
54 0.044 0.056 0.068 0.080 0.092 0.104
55 0.091 0.116 0.140 0.165 0.190 0.215
56 0.061 0.077 0.094 0.110 0.127 0.143
57 0.063 0.081 0.098 0.115 0.132 0.150
58 0.074 0.095 0.115 0.135 0.155 0.176
59 0.083 0.105 0.128 0.150 0.173 0.195
60 0.088 0.112 0.136 0.160 0.184 0.208
61 0.085 0.109 0.132 0.155 0.178 0.202
62 0.124 0.158 0.191 0.225 0.259 0.293
63 0.107 0.137 0.166 0.195 0.224 0.254
64 0.107 0.137 0.166 0.195 0.224 0.254
65 0.146 0.186 0.225 0.265 0.305 0.345
66 0.107 0.137 0.166 0.195 0.224 0.254
67 0.107 0.137 0.166 0.195 0.224 0.254
68 0.107 0.137 0.166 0.195 0.224 0.254
69 0.107 0.137 0.166 0.195 0.224 0.254
70 0.129 0.164 0.199 0.234 0.269 0.304
Public Agency Miscellaneous 3% @ 60
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.026 0.033 0.040 0.048 0.055 0.062
51 0.021 0.026 0.032 0.038 0.043 0.049
52 0.019 0.025 0.030 0.035 0.040 0.046
53 0.025 0.032 0.038 0.045 0.052 0.059
54 0.039 0.049 0.060 0.070 0.081 0.091
55 0.083 0.105 0.128 0.150 0.173 0.195
56 0.055 0.070 0.085 0.100 0.115 0.130
57 0.061 0.077 0.094 0.110 0.127 0.143
58 0.072 0.091 0.111 0.130 0.150 0.169
59 0.080 0.102 0.123 0.145 0.167 0.189
60 0.094 0.119 0.145 0.170 0.196 0.221
61 0.088 0.112 0.136 0.160 0.184 0.208
62 0.127 0.161 0.196 0.230 0.265 0.299
63 0.110 0.140 0.170 0.200 0.230 0.260
64 0.110 0.140 0.170 0.200 0.230 0.260
65 0.149 0.189 0.230 0.270 0.311 0.351
66 0.110 0.140 0.170 0.200 0.230 0.260
67 0.110 0.140 0.170 0.200 0.230 0.260
68 0.110 0.140 0.170 0.200 0.230 0.260
69 0.110 0.140 0.170 0.200 0.230 0.260
70 0.132 0.168 0.204 0.240 0.276 0.312
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS
A-13
Service Retirement
Public Agency Fire ½ @ 55 and 2% @ 55
Age 50
51
52
53
54
55
Rate 0.01588
0.00000
0.03442
0.01990
0.04132
0.07513
Age 56
57
58
59
60
Rate 0.11079
0.00000
0.09499
0.04409
1.00000
Public Agency Police ½ @ 55 and 2% @ 55
Age
50 51
52
53
54
55
Rate
0.02552 0.00000
0.01637
0.02717
0.00949
0.16674
Age
56 57
58
59
60
Rate
0.06921 0.05113
0.07241
0.07043
1.00000
Public Agency Police 2%@ 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.014 0.014 0.014 0.014 0.025 0.045
51 0.012 0.012 0.012 0.012 0.023 0.040
52 0.026 0.026 0.026 0.026 0.048 0.086
53 0.052 0.052 0.052 0.052 0.096 0.171
54 0.070 0.070 0.070 0.070 0.128 0.227
55 0.090 0.090 0.090 0.090 0.165 0.293
56 0.064 0.064 0.064 0.064 0.117 0.208
57 0.071 0.071 0.071 0.071 0.130 0.232
58 0.063 0.063 0.063 0.063 0.115 0.205
59 0.140 0.140 0.140 0.140 0.174 0.254
60 0.140 0.140 0.140 0.140 0.172 0.251
61 0.140 0.140 0.140 0.140 0.172 0.251
62 0.140 0.140 0.140 0.140 0.172 0.251
63 0.140 0.140 0.140 0.140 0.172 0.251
64 0.140 0.140 0.140 0.140 0.172 0.251
65 1.000 1.000 1.000 1.000 1.000 1.000
x These rates also apply to Local Prosecutors, Local Sheriff, School Police and Other Safety.
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS
A-14
Service Retirement
Public Agency Fire 2%@50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.007 0.007 0.007 0.007 0.010 0.015
51 0.008 0.008 0.008 0.008 0.013 0.019
52 0.017 0.017 0.017 0.017 0.027 0.040
53 0.047 0.047 0.047 0.047 0.072 0.107
54 0.064 0.064 0.064 0.064 0.098 0.147
55 0.087 0.087 0.087 0.087 0.134 0.200
56 0.078 0.078 0.078 0.078 0.120 0.180
57 0.090 0.090 0.090 0.090 0.139 0.208
58 0.079 0.079 0.079 0.079 0.122 0.182
59 0.073 0.073 0.073 0.073 0.112 0.168
60 0.114 0.114 0.114 0.114 0.175 0.262
61 0.114 0.114 0.114 0.114 0.175 0.262
62 0.114 0.114 0.114 0.114 0.175 0.262
63 0.114 0.114 0.114 0.114 0.175 0.262
64 0.114 0.114 0.114 0.114 0.175 0.262
65 1.000 1.000 1.000 1.000 1.000 1.000
Public Agency Police 3%@ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.019 0.019 0.019 0.019 0.040 0.060
51 0.024 0.024 0.024 0.024 0.049 0.074
52 0.024 0.024 0.024 0.024 0.051 0.077
53 0.059 0.059 0.059 0.059 0.121 0.183
54 0.069 0.069 0.069 0.069 0.142 0.215
55 0.116 0.116 0.116 0.116 0.240 0.363
56 0.076 0.076 0.076 0.076 0.156 0.236
57 0.058 0.058 0.058 0.058 0.120 0.181
58 0.076 0.076 0.076 0.076 0.157 0.237
59 0.094 0.094 0.094 0.094 0.193 0.292
60 0.141 0.141 0.141 0.141 0.290 0.438
61 0.094 0.094 0.094 0.094 0.193 0.292
62 0.118 0.118 0.118 0.118 0.241 0.365
63 0.094 0.094 0.094 0.094 0.193 0.292
64 0.094 0.094 0.094 0.094 0.193 0.292
65 1.000 1.000 1.000 1.000 1.000 1.000
x These rates also apply to Local Prosecutors, Local Sheriff, School Police and Other Safety.
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS
A-15
Service Retirement
Public Agency Fire 3%@55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.012 0.012 0.012 0.018 0.028 0.033
51 0.008 0.008 0.008 0.012 0.019 0.022
52 0.018 0.018 0.018 0.027 0.042 0.050
53 0.043 0.043 0.043 0.062 0.098 0.114
54 0.057 0.057 0.057 0.083 0.131 0.152
55 0.092 0.092 0.092 0.134 0.211 0.246
56 0.081 0.081 0.081 0.118 0.187 0.218
57 0.100 0.100 0.100 0.146 0.230 0.268
58 0.081 0.081 0.081 0.119 0.187 0.219
59 0.078 0.078 0.078 0.113 0.178 0.208
60 0.117 0.117 0.117 0.170 0.267 0.312
61 0.078 0.078 0.078 0.113 0.178 0.208
62 0.098 0.098 0.098 0.141 0.223 0.260
63 0.078 0.078 0.078 0.113 0.178 0.208
64 0.078 0.078 0.078 0.113 0.178 0.208
65 1.000 1.000 1.000 1.000 1.000 1.000
Public Agency Police 3%@ 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.070 0.070 0.070 0.131 0.193 0.249
51 0.050 0.050 0.050 0.095 0.139 0.180
52 0.061 0.061 0.061 0.116 0.171 0.220
53 0.069 0.069 0.069 0.130 0.192 0.247
54 0.071 0.071 0.071 0.134 0.197 0.255
55 0.090 0.090 0.090 0.170 0.250 0.322
56 0.069 0.069 0.069 0.130 0.191 0.247
57 0.080 0.080 0.080 0.152 0.223 0.288
58 0.087 0.087 0.087 0.164 0.242 0.312
59 0.090 0.090 0.090 0.170 0.251 0.323
60 0.135 0.135 0.135 0.255 0.377 0.485
61 0.090 0.090 0.090 0.170 0.251 0.323
62 0.113 0.113 0.113 0.213 0.314 0.404
63 0.090 0.090 0.090 0.170 0.251 0.323
64 0.090 0.090 0.090 0.170 0.251 0.323
65 1.000 1.000 1.000 1.000 1.000 1.000
x These rates also apply to Local Prosecutors, Local Sheriff, School Police and Other Safety.
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS
A-16
Service Retirement
Public Agency Fire 3%@50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.034 0.034 0.034 0.048 0.068 0.080
51 0.046 0.046 0.046 0.065 0.092 0.109
52 0.069 0.069 0.069 0.097 0.138 0.163
53 0.084 0.084 0.084 0.117 0.166 0.197
54 0.103 0.103 0.103 0.143 0.204 0.241
55 0.127 0.127 0.127 0.177 0.252 0.298
56 0.121 0.121 0.121 0.169 0.241 0.285
57 0.101 0.101 0.101 0.141 0.201 0.238
58 0.118 0.118 0.118 0.165 0.235 0.279
59 0.100 0.100 0.100 0.140 0.199 0.236
60 0.150 0.150 0.150 0.210 0.299 0.354
61 0.100 0.100 0.100 0.140 0.199 0.236
62 0.125 0.125 0.125 0.175 0.249 0.295
63 0.100 0.100 0.100 0.140 0.199 0.236
64 0.100 0.100 0.100 0.140 0.199 0.236
65 1.000 1.000 1.000 1.000 1.000 1.000
Schools 2%@ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.005 0.009 0.013 0.015 0.016 0.018
51 0.005 0.010 0.014 0.017 0.019 0.021
52 0.006 0.012 0.017 0.020 0.022 0.025
53 0.007 0.014 0.019 0.023 0.026 0.029
54 0.012 0.024 0.033 0.039 0.044 0.049
55 0.024 0.048 0.067 0.079 0.088 0.099
56 0.020 0.039 0.055 0.065 0.072 0.081
57 0.021 0.042 0.059 0.070 0.078 0.087
58 0.025 0.050 0.070 0.083 0.092 0.103
59 0.029 0.057 0.080 0.095 0.105 0.118
60 0.037 0.073 0.102 0.121 0.134 0.150
61 0.046 0.090 0.126 0.149 0.166 0.186
62 0.076 0.151 0.212 0.250 0.278 0.311
63 0.069 0.136 0.191 0.225 0.251 0.281
64 0.067 0.133 0.185 0.219 0.244 0.273
65 0.091 0.180 0.251 0.297 0.331 0.370
66 0.072 0.143 0.200 0.237 0.264 0.295
67 0.067 0.132 0.185 0.218 0.243 0.272
68 0.060 0.118 0.165 0.195 0.217 0.243
69 0.067 0.133 0.187 0.220 0.246 0.275
70 0.066 0.131 0.183 0.216 0.241 0.270
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS
A-17
Miscellaneous
Superfunded Status
Prior to enactment of the Public Employees’ Pension Reform Act (PEPRA) that became effective January 1,
2013, a plan in superfunded status (actuarial value of assets exceeding present value of benefits) would normally pay a zero employer contribution rate while also being permitted to use its superfunded assets to
pay its employees’ normal member contributions.
However, Section 7522.52(a) of PEPRA states, “In any fiscal year a public employer’s contribution to a
defined benefit plan, in combination with employee contributions to that defined benefit plan, shall not be
less than the total normal cost rate…” This means that not only must employers pay their employer normal
cost regardless of plan surplus, but also, employers may no longer use superfunded assets to pay employee normal member contributions.
Internal Revenue Code Section 415
The limitations on benefits imposed by Internal Revenue Code Section 415 are taken into account in this
valuation. Each year the impact of any changes in this limitation since the prior valuation is included and
amortized as part of the actuarial gain or loss base. This results in lower contributions for those employers contributing to the Replacement Benefit Fund and protects CalPERS from prefunding expected benefits in
excess of limits imposed by federal tax law.
Internal Revenue Code Section 401(a)(17)
The limitations on compensation imposed by Internal Revenue Code Section 401(a)(17) are taken into
account in this valuation. Each year, the impact of any changes in the compensation limitation since the
prior valuation is included and amortized as part of the actuarial gain or loss base.
PEPRA Assumptions
The Public Employees’ Pension Reform Act of 2013 (PEPRA) mandated new benefit formulas and new
member contributions for new members (as defined by PEPRA) hired after January 1, 2013. For non-pooled
plans, these new members will first be reflected in the June 30, 2013 non-pooled plan valuations. New
members in pooled plans will first be reflected in the new Miscellaneous and Safety risk pools created by the CalPERS Board in November 2012 in response to the passage of PEPRA, also beginning with the June 30,
2013 valuation. Different assumptions for these new PEPRA members will be disclosed in the 2013
valuation.
APPENDIX B
PRINCIPAL PLAN PROVISIONS
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX B SAFETY PLAN OF THE CITY OF NEWPORT BEACH
PRINCIPAL PLAN PROVISIONS
B-1
The following is a description of the principal plan provisions used in calculating costs and liabilities. We have indicated whether a plan provision is standard or optional. Standard benefits are applicable to all members while
optional benefits vary among employers. Optional benefits that apply to a single period of time, such as Golden
Handshakes, have not been included. Many of the statements in this summary are general in nature, and are
intended to provide an easily understood summary of the complex Public Employees’ Retirement Law. The law itself
governs in all situations.
PEPRA Benefit Changes
The Public Employees’ Pension Reform Act of 2013 (PEPRA) requires new benefits and member contributions for new
members as defined by PEPRA, that are hired after January 1, 2013. For non-pooled plans, these members will first
be reflected in June 30, 2013 non-pooled plan valuations. Members in pooled plans will be reflected in the new
Miscellaneous and Safety risk pools created by the CalPERS Board in November 2012 in response to the passage of
PEPRA, beginning with the June 30, 2013 valuation.
Service Retirement
Eligibility
A classic CalPERS member becomes eligible for Service Retirement upon attainment of age 50 with at least 5 years of
credited service (total service across all CalPERS employers, and with certain other Retirement Systems with which
CalPERS has reciprocity agreements). For employees hired into a plan with the 1.5% at 65 formula, eligibility for
service retirement is age 55 with at least 5 years of service.
Benefit
The Service Retirement benefit is a monthly allowance equal to the product of the benefit factor, years of service,
and final compensation.
x The benefit factor depends on the benefit formula specified in your agency’s contract. The table below shows
the factors for each of the available formulas. Factors vary by the member’s age at retirement. Listed are the
factors for retirement at whole year ages:
Miscellaneous Plan Formulas
Retirement Age 1.5% at 65 2% at 60 2% at 55 2.5% at 55 2.7% at 55 3% at 60
50 0.5000% 1.092% 1.426% 2.0% 2.0% 2.0%
51 0.5667% 1.156% 1.522% 2.1% 2.14% 2.1%
52 0.6334% 1.224% 1.628% 2.2% 2.28% 2.2%
53 0.7000% 1.296% 1.742% 2.3% 2.42% 2.3%
54 0.7667% 1.376% 1.866% 2.4% 2.56% 2.4%
55 0.8334% 1.460% 2.0% 2.5% 2.7% 2.5%
56 0.9000% 1.552% 2.052% 2.5% 2.7% 2.6%
57 0.9667% 1.650% 2.104% 2.5% 2.7% 2.7%
58 1.0334% 1.758% 2.156% 2.5% 2.7% 2.8%
59 1.1000% 1.874% 2.210% 2.5% 2.7% 2.9%
60 1.1667% 2.0% 2.262% 2.5% 2.7% 3.0%
61 1.2334% 2.134% 2.314% 2.5% 2.7% 3.0%
62 1.3000% 2.272% 2.366% 2.5% 2.7% 3.0%
63 1.3667% 2.418% 2.418% 2.5% 2.7% 3.0%
64 1.4334% 2.418% 2.418% 2.5% 2.7% 3.0%
65 & Up 1.5000% 2.418% 2.418% 2.5% 2.7% 3.0%
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX B SAFETY PLAN OF THE CITY OF NEWPORT BEACH
PRINCIPAL PLAN PROVISIONS
B-2
Safety Plan Formulas
Retirement
Age ½ at 55 * 2% at 55 2% at 50 3% at 55 3% at 50
50 1.783% 1.426% 2.0% 2.40% 3.0%
51 1.903% 1.522% 2.14% 2.52% 3.0%
52 2.035% 1.628% 2.28% 2.64% 3.0%
53 2.178% 1.742% 2.42% 2.76% 3.0%
54 2.333% 1.866% 2.56% 2.88% 3.0%
55 & Up 2.5% 2.0% 2.7% 3.0% 3.0%
* For this formula, the benefit factor also varies by entry age. The factors shown are for members with an entry age of 35 or greater. If entry age is less than 35, then the age 55 benefit factor is 50% divided by the difference between
age 55 and entry age. The benefit factor for ages prior to age 55 is the same proportion of the age 55 benefit factor
as in the above table.
x The years of service is the amount credited by CalPERS to a member while he or she is employed in this group
(or for other periods that are recognized under the employer’s contract with CalPERS). For a member who has
earned service with multiple CalPERS employers, the benefit from each employer is calculated separately
according to each employer’s contract, and then added together for the total allowance. An agency may contract for an optional benefit where any unused sick leave accumulated at the time of retirement will be converted to
credited service at a rate of 0.004 years of service for each day of sick leave.
x The final compensation is the monthly average of the member’s highest 36 or 12 consecutive months’ full-time
equivalent monthly pay (no matter which CalPERS employer paid this compensation). The standard benefit is 36
months. Employers have the option of providing a final compensation equal to the highest 12 consecutive
months. Final compensation must be defined by the highest 36 consecutive months’ pay under the 1.5% at 65 formula.
x Employees must be covered by Social Security with the 1.5% at 65 formula. Social Security is optional for all
other benefit formulas. For employees covered by Social Security, the Modified formula is the standard benefit.
Under this type of formula, the final compensation is offset by $133.33 (or by one third if the final compensation
is less than $400). Employers may contract for the Full benefit with Social Security that will eliminate the offset
applicable to the final compensation. For employees not covered by Social Security, the Full benefit is paid with
no offsets. Auxiliary organizations of the CSUC system may elect reduced contribution rates, in which case the offset is $317 if members are not covered by Social Security or $513 if members are covered by Social Security.
x The Miscellaneous Service Retirement benefit is not capped. The Safety Service Retirement benefit is capped at
90 percent of final compensation.
Vested Deferred Retirement
Eligibility for Deferred Status
A CalPERS member becomes eligible for a deferred vested retirement benefit when he or she leaves employment,
keeps his or her contribution account balance on deposit with CalPERS, and has earned at least 5 years of credited
service (total service across all CalPERS employers, and with certain other Retirement Systems with which CalPERS
has reciprocity agreements).
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX B SAFETY PLAN OF THE CITY OF NEWPORT BEACH
PRINCIPAL PLAN PROVISIONS
B-3
Eligibility to Start Receiving Benefits The CalPERS member becomes eligible to receive the deferred retirement benefit upon satisfying the eligibility
requirements for Deferred Status and upon attainment of age 50 (55 for employees hired into a 1.5% @ 65 plan).
Benefit
The vested deferred retirement benefit is the same as the Service Retirement benefit, where the benefit factor is
based on the member’s age at allowance commencement. For members who have earned service with multiple
CalPERS employers, the benefit from each employer is calculated separately according to each employer’s contract,
and then added together for the total allowance.
Non-Industrial (Non-Job Related) Disability Retirement
Eligibility
A CalPERS member is eligible for Non-Industrial Disability Retirement if he or she becomes disabled and has at least 5 years of credited service (total service across all CalPERS employers, and with certain other Retirement Systems
with which CalPERS has reciprocity agreements). There is no special age requirement. Disabled means the member is
unable to perform his or her job because of an illness or injury, which is expected to be permanent or to last
indefinitely. The illness or injury does not have to be job related. A CalPERS member must be actively employed by
any CalPERS employer at the time of disability in order to be eligible for this benefit.
Standard Benefit
The standard Non-Industrial Disability Retirement benefit is a monthly allowance equal to 1.8 percent of final compensation, multiplied by service, which is determined as follows:
x Service is CalPERS credited service, for members with less than 10 years of service or greater than 18.518 years
of service; or
x Service is CalPERS credited service plus the additional number of years that the member would have worked
until age 60, for members with at least 10 years but not more than 18.518 years of service. The maximum
benefit in this case is 33 1/3 percent of Final Compensation.
Improved Benefit
Employers have the option of providing the improved Non-Industrial Disability Retirement benefit. This benefit
provides a monthly allowance equal to 30% of final compensation for the first 5 years of service, plus 1% for each
additional year of service to a maximum of 50% of final compensation.
Members who are eligible for a larger service retirement benefit may choose to receive that benefit in lieu of a disability benefit. Members eligible to retire, and who have attained the normal retirement age determined by their
service retirement benefit formula, will receive the same dollar amount for disability retirement as that payable for
service retirement. For members who have earned service with multiple CalPERS employers, the benefit attributed to
each employer is the total disability allowance multiplied by the ratio of service with a particular employer to the total
CalPERS service.
Industrial (Job Related) Disability Retirement
All safety members have this benefit. For miscellaneous members, employers have the option of providing this
benefit. An employer may choose to provide the Increased benefit option or the Improved benefit option.
Eligibility An employee is eligible for Industrial Disability Retirement if he or she becomes disabled while working, where
disabled means the member is unable to perform the duties of the job because of a work-related illness or injury,
which is, expected to be permanent or to last indefinitely. A CalPERS member who has left active employment within
this group is not eligible for this benefit, except to the extent described below.
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX B SAFETY PLAN OF THE CITY OF NEWPORT BEACH
PRINCIPAL PLAN PROVISIONS
B-4
Standard Benefit
The standard Industrial Disability Retirement benefit is a monthly allowance equal to 50 percent of final
compensation.
Increased Benefit (75 percent of Final Compensation)
The increased Industrial Disability Retirement benefit is a monthly allowance equal to 75 percent final compensation
for total disability.
Improved Benefit (50 percent to 90 percent of Final Compensation)
The improved Industrial Disability Retirement benefit is a monthly allowance equal to the Workman’s Compensation
Appeals Board permanent disability rate percentage (if 50 percent or greater, with a maximum of 90 percent) times
the final compensation.
For a CalPERS member not actively employed in this group who became disabled while employed by some other CalPERS employer, the benefit is a return of accumulated member contributions with respect to employment in this
group. With the standard or increased benefit, a member may also choose to receive the annuitization of the
accumulated member contributions.
If a member is eligible for Service Retirement and if the Service Retirement benefit is more than the Industrial
Disability Retirement benefit, the member may choose to receive the larger benefit.
Post-Retirement Death Benefit
Standard Lump Sum Payment
Upon the death of a retiree, a one-time lump sum payment of $500 will be made to the retiree’s designated
survivor(s), or to the retiree’s estate.
Improved Lump Sum Payment
Employers have the option of providing an improved lump sum death benefit of $600, $2,000, $3,000, $4,000 or
$5,000.
Form of Payment for Retirement Allowance
Standard Form of Payment
Generally, the retirement allowance is paid to the retiree in the form of an annuity for as long as he or she is alive.
The retiree may choose to provide for a portion of his or her allowance to be paid to any designated beneficiary after
the retiree’s death. CalPERS provides for a variety of such benefit options, which the retiree pays for by taking a
reduction in his or her retirement allowance. Such reduction takes into account the amount to be provided to the beneficiary and the probable duration of payments (based on the ages of the member and beneficiary) made
subsequent to the member’s death.
Improved Form of Payment (Post Retirement Survivor Allowance)
Employers have the option to contract for the post retirement survivor allowance.
For retirement allowances with respect to service subject to the modified formula, 25 percent of the retirement
allowance will automatically be continued to certain statutory beneficiaries upon the death of the retiree, without a reduction in the retiree’s allowance. For retirement allowances with respect to service subject to the full or
supplemental formula, 50 percent of the retirement allowance will automatically be continued to certain statutory
beneficiaries upon the death of the retiree, without a reduction in the retiree’s allowance. This additional benefit is
often referred to as post retirement survivor allowance (PRSA) or simply as survivor continuance.
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX B SAFETY PLAN OF THE CITY OF NEWPORT BEACH
PRINCIPAL PLAN PROVISIONS
B-5
In other words, 25 percent or 50 percent of the allowance, the continuance portion, is paid to the retiree for as long as he or she is alive, and that same amount is continued to the retiree’s spouse (or if no eligible spouse, to
unmarried children until they attain age 18; or, if no eligible children, to a qualifying dependent parent) for the rest
of his or her lifetime. This benefit will not be discontinued in the event the spouse remarries.
The remaining 75 percent or 50 percent of the retirement allowance, which may be referred to as the option portion
of the benefit, is paid to the retiree as an annuity for as long as he or she is alive. Or, the retiree may choose to
provide for some of this option portion to be paid to any designated beneficiary after the retiree’s death. Benefit
options applicable to the option portion are the same as those offered with the standard form. The reduction is calculated in the same manner but is applied only to the option portion.
Pre-Retirement Death Benefits
Basic Death Benefit
This is a standard benefit.
Eligibility
An employee’s beneficiary (or estate) may receive the Basic Death benefit if the member dies while actively
employed. A CalPERS member must be actively employed with the CalPERS employer providing this benefit to be eligible for this benefit. A member’s survivor who is eligible for any other pre-retirement death benefit may choose to
receive that death benefit instead of this Basic Death benefit.
Benefit
The Basic Death Benefit is a lump sum in the amount of the member’s accumulated contributions, where interest is
currently credited at 7.5 percent per year, plus a lump sum in the amount of one month's salary for each completed
year of current service, up to a maximum of six months' salary. For purposes of this benefit, one month's salary is defined as the member's average monthly full-time rate of compensation during the 12 months preceding death.
1957 Survivor Benefit
This is a standard benefit.
Eligibility
An employee’s eligible survivor(s) may receive the 1957 Survivor benefit if the member dies while actively employed,
has attained at least age 50, and has at least 5 years of credited service (total service across all CalPERS employers
and with certain other Retirement Systems with which CalPERS has reciprocity agreements). A CalPERS member must be actively employed with the CalPERS employer providing this benefit to be eligible for this benefit. An eligible
survivor means the surviving spouse to whom the member was married at least one year before death or, if there is
no eligible spouse, to the member's unmarried children under age 18. A member’s survivor who is eligible for any
other pre-retirement death benefit may choose to receive that death benefit instead of this 1957 Survivor benefit.
Benefit
The 1957 Survivor benefit is a monthly allowance equal to one-half of the unmodified Service Retirement benefit that
the member would have been entitled to receive if the member had retired on the date of his or her death. If the benefit is payable to the spouse, the benefit is discontinued upon the death of the spouse. If the benefit is payable to
a dependent child, the benefit will be discontinued upon death or attainment of age 18, unless the child is disabled.
The total amount paid will be at least equal to the Basic Death benefit.
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX B SAFETY PLAN OF THE CITY OF NEWPORT BEACH
PRINCIPAL PLAN PROVISIONS
B-6
Optional Settlement 2W Death Benefit
This is an optional benefit.
Eligibility
An employee’s eligible survivor may receive the Optional Settlement 2W Death benefit if the member dies while actively employed, has attained at least age 50, and has at least 5 years of credited service (total service across all
CalPERS employers and with certain other Retirement Systems with which CalPERS has reciprocity agreements). A
CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An
eligible survivor means the surviving spouse to whom the member was married at least one year before death. A
member’s survivor who is eligible for any other pre-retirement death benefit may choose to receive that death benefit
instead of this Optional Settlement 2W Death benefit.
Benefit The Optional Settlement 2W Death benefit is a monthly allowance equal to the Service Retirement benefit that the
member would have received had the member retired on the date of his or her death and elected Optional
Settlement 2W. (A retiree who elects Optional Settlement 2W receives an allowance that has been reduced so that it
will continue to be paid after his or her death to a surviving beneficiary.) The allowance is payable as long as the
surviving spouse lives, at which time it is continued to any unmarried children under age 18, if applicable. The total
amount paid will be at least equal to the Basic Death Benefit.
Special Death Benefit
This is a standard benefit for safety members. An employer may elect to provide this benefit for miscellaneous
members.
Eligibility
An employee’s eligible survivor(s) may receive the Special Death benefit if the member dies while actively employed
and the death is job-related. A CalPERS member who is no longer actively employed with any CalPERS employer is
not eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married prior to the onset of the injury or illness that resulted in death. If there is no eligible spouse, an eligible survivor means the
member's unmarried children under age 22. An eligible survivor who chooses to receive this benefit will not receive
any other death benefit.
Benefit
The Special Death benefit is a monthly allowance equal to 50% of final compensation, and will be increased
whenever the compensation paid to active employees is increased but ceasing to increase when the member would
have attained age 50. The allowance is payable to the surviving spouse until death at which time the allowance is continued to any unmarried children under age 22. There is a guarantee that the total amount paid will at least equal
the Basic Death Benefit.
If the member’s death is the result of an accident or injury caused by external violence or physical force incurred in
the performance of the member’s duty, and there are eligible surviving children (eligible means unmarried children
under age 22) in addition to an eligible spouse, then an additional monthly allowance is paid equal to the
following:
x if 1 eligible child: 12.5% of final compensation
x if 2 eligible children: 20.0% of final compensation
x if 3 or more eligible children: 25.0% of final compensation
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX B SAFETY PLAN OF THE CITY OF NEWPORT BEACH
PRINCIPAL PLAN PROVISIONS
B-7
Alternate Death Benefit for Local Fire Members
This is an optional benefit available only to local fire members.
Eligibility
An employee’s eligible survivor(s) may receive the Alternate Death benefit in lieu of the Basic Death Benefit or the 1957 Survivor Benefit if the member dies while actively employed and has at least 20 years of total CalPERS service.
A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An
eligible survivor means the surviving spouse to whom the member was married prior to the onset of the injury or
illness that resulted in death. If there is no eligible spouse, an eligible survivor means the member's unmarried
children under age 18.
Benefit
The Alternate Death benefit is a monthly allowance equal to the Service Retirement benefit that the member would have received had the member retired on the date of his or her death and elected Optional Settlement 2W. (A retiree
who elects Optional Settlement 2W receives an allowance that has been reduced so that it will continue to be paid
after his or her death to a surviving beneficiary.) If the member has not yet attained age 50, the benefit is equal to
that which would be payable if the member had retired at age 50, based on service credited at the time of death.
The allowance is payable as long as the surviving spouse lives, at which time it is continued to any unmarried
children under age 18, if applicable. The total amount paid will be at least equal to the Basic Death Benefit.
Cost-of-Living Adjustments (COLA)
Standard Benefit
Beginning the second calendar year after the year of retirement, retirement and survivor allowances will be annually
adjusted on a compound basis by 2 percent.
Improved Benefit
Employers have the option of providing any of these improved cost-of-living adjustments by contracting for any one
of these Class 1 optional benefits. An improved COLA is not available in conjunction with the 1.5% at 65 formula.
Beginning the second calendar year after the year of retirement, retirement and survivor allowances will be annually
adjusted on a compound basis by either 3 percent, 4 percent or 5 percent. However, the cumulative adjustment may
not be greater than the cumulative change in the Consumer Price Index since the date of retirement.
Purchasing Power Protection Allowance (PPPA)
Retirement and survivor allowances are protected against inflation by PPPA. PPPA benefits are cost-of-living
adjustments that are intended to maintain an individual’s allowance at 80 percent of the initial allowance at
retirement adjusted for inflation since retirement. The PPPA benefit will be coordinated with other cost-of-living
adjustments provided under the plan.
Employee Contributions
Each employee contributes toward his or her retirement based upon the retirement formula. The standard employee
contribution is as described below.
The percent contributed below the monthly compensation breakpoint is 0 percent. The monthly compensation breakpoint is $0 for full and supplemental formula members and $133.33 for
employees covered by the modified formula.
The percent contributed above the monthly compensation breakpoint depends upon the benefit formula, as
shown in the table below.
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX B SAFETY PLAN OF THE CITY OF NEWPORT BEACH
PRINCIPAL PLAN PROVISIONS
B-8
Benefit Formula Percent Contributed above the
Breakpoint
Miscellaneous, 1.5% at 65 2%
Miscellaneous, 2% at 60 7%
Miscellaneous, 2% at 55 7%
Miscellaneous, 2.5% at 55 8%
Miscellaneous, 2.7% at 55 8%
Miscellaneous, 3% at 60 8%
Safety, 1/2 at 55 Varies by entry age
Safety, 2% at 55 7%
Safety, 2% at 50 9%
Safety, 3% at 55 9%
Safety, 3% at 50 9%
The employer may choose to “pick-up” these contributions for the employees (Employer Paid Member Contributions
or EPMC). An employer may also include Employee Cost Sharing in the contract, where employees contribute an
additional percentage of compensation based on any optional benefit for which a contract amendment was made on or after January 1, 1979.
Auxiliary organizations of the CSUC system may elect reduced contribution rates, in which case the offset is $317 and
the contribution rate is 6 percent if members are not covered by Social Security. If members are covered by Social
Security, the offset is $513 and the contribution rate is 5 percent.
Refund of Employee Contributions
If the member’s service with the employer ends, and if the member does not satisfy the eligibility conditions for any of the retirement benefits above, the member may elect to receive a refund of his or her employee contributions,
which are credited annually with 6 percent interest.
1959 Survivor Benefit
This is a pre-retirement death benefit available only to members not covered by Social Security. Any agency joining
CalPERS subsequent to 1993 was required to provide this benefit if the members were not covered by Social
Security. The benefit is optional for agencies joining CalPERS prior to 1994. Levels 1, 2 and 3 are now closed. Any
new agency or any agency wishing to add this benefit or increase the current level must choose the 4th or Indexed
Level.
This benefit is not included in the results presented in this valuation. More information on this benefit is available on the CalPERS website at www.calpers.ca.gov.
APPENDIX C
PARTICIPANT DATA
x SUMMARY OF VALUATION DATA
x ACTIVE MEMBERS
x TRANSFERRED AND TERMINATED MEMBERS
x RETIRED MEMBERS AND BENEFICIARIES
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX C
SAFETY PLAN OF THE CITY OF NEWPORT BEACH
PARTICIPANT DATA
C-1
Summary of Valuation Data
June 30, 2011 June 30, 2012
1. Active Members
a) Counts 257 255
b) Average Attained Age 38.20 38.36
c) Average Entry Age to Rate Plan 27.22 27.55
d) Average Years of Service 10.98 10.81
e) Average Annual Covered Pay $ 112,141 $ 111,529
f) Annual Covered Payroll 28,820,289 28,439,846
g) Projected Annual Payroll for Contribution Year 31,492,708 31,076,988
h) Present Value of Future Payroll 284,363,454 279,360,915
2. Transferred Members
a) Counts 45 46
b) Average Attained Age 42.44 43.11
c) Average Years of Service 3.40 4.23
d) Average Annual Covered Pay $ 98,185 $ 92,275
3. Terminated Members
a) Counts 32 36
b) Average Attained Age 41.38 41.52
c) Average Years of Service 2.91 4.11
d) Average Annual Covered Pay $ 64,727 $ 74,732
4. Retired Members and Beneficiaries
a) Counts 387 398
b) Average Attained Age 63.46 63.71
c) Average Annual Benefits $ 55,656 $ 58,247
5. Active to Retired Ratio [(1a) / (4a)] 0.66 0.64
Counts of members included in the valuation are counts of the records processed by the valuation. Multiple
records may exist for those who have service in more than one valuation group. This does not result in double counting of liabilities.
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX C
SAFETY PLAN OF THE CITY OF NEWPORT BEACH
PARTICIPANT DATA
C-2
Active Members
Counts of members included in the valuation are counts of the records processed by the valuation. Multiple records
may exist for those who have service in more than one valuation group. This does not result in double counting of
liabilities.
Distribution of Active Members by Age and Service
Years of Service at Valuation Date
Attained
Age 0-4 5-9 10-14 15-19 20-25 25+ Total
15-24 4 0 0 0 0 0 4
25-29 28 10 0 0 0 0 38
30-34 13 39 14 0 0 0 66
35-39 4 21 16 3 0 0 44
40-44 4 10 13 7 4 0 38
45-49 4 2 3 15 13 6 43
50-54 0 1 2 0 3 8 14
55-59 2 0 0 0 1 5 8
60-64 0 0 0 0 0 0 0
65 and over 0 0 0 0 0 0 0
All Ages 59 83 48 25 21 19 255
Distribution of Average Annual Salaries by Age and Service
Years of Service at Valuation Date
Attained
Age 0-4 5-9 10-14 15-19 20-25 25+ Average
15-24 $62,801 $0 $0 $0 $0 $0 $62,801
25-29 77,235 98,295 0 0 0 0 82,777
30-34 84,356 106,896 119,801 0 0 0 105,194
35-39 101,771 108,993 122,017 125,672 0 0 114,209
40-44 51,333 108,289 128,784 128,026 133,804 0 115,627
45-49 137,397 95,425 120,192 115,398 131,531 149,368 126,467
50-54 0 89,428 135,266 0 161,405 157,624 150,369
55-59 173,631 0 0 0 145,039 129,147 142,254
60-64 0 0 0 0 0 0 0
65 and over 0 0 0 0 0 0 0
All Ages $85,079 $106,071 $123,641 $120,167 $136,875 $147,523 $111,529
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX C
SAFETY PLAN OF THE CITY OF NEWPORT BEACH
PARTICIPANT DATA
C-3
Transferred and Terminated Members
Distribution of Transfers to Other CalPERS Plans by Age and Service
Years of Service at Valuation Date
Attained
Age 0-4 5-9 10-14 15-19 20-25 25+ Total
Average
Salary
15-24 0 0 0 0 0 0 0 $0
25-29 1 0 0 0 0 0 1 89,015
30-34 6 0 0 0 0 0 6 73,153
35-39 10 1 0 0 0 0 11 103,350
40-44 7 1 1 1 0 0 10 91,419
45-49 7 1 1 1 0 0 10 89,647
50-54 2 2 0 0 0 1 5 114,363
55-59 2 0 0 0 0 0 2 78,709
60-64 1 0 0 0 0 0 1 40,000
65 and over 0 0 0 0 0 0 0 0
All Ages 36 5 2 2 0 1 46 92,275
Distribution of Terminated Participants with Funds on Deposit by Age and Service
Years of Service at Valuation Date
Attained Age 0-4 5-9 10-14 15-19 20-25 25+ Total Average Salary
15-24 0 0 0 0 0 0 0 $0
25-29 3 0 0 0 0 0 3 63,734
30-34 8 0 1 0 0 0 9 70,798
35-39 4 1 1 0 0 0 6 95,213
40-44 3 0 1 0 1 0 5 103,224
45-49 3 3 0 0 1 0 7 69,600
50-54 1 0 0 0 0 0 1 25,438
55-59 2 0 1 0 0 0 3 30,444
60-64 1 1 0 0 0 0 2 85,302
65 and over 0 0 0 0 0 0 0 0
All Ages 25 5 4 0 2 0 36 74,732
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX C
SAFETY PLAN OF THE CITY OF NEWPORT BEACH
PARTICIPANT DATA
C-4
Retired Members and Beneficiaries
Distribution of Retirees and Beneficiaries by Age and Retirement Type*
Attained
Age
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Total
Under 30 0 0 0 0 0 0 0
30-34 0 0 1 0 0 0 1
35-39 0 0 1 0 0 0 1
40-44 0 0 4 0 0 0 4
45-49 0 0 10 0 1 1 12
50-54 29 0 7 0 1 1 38
55-59 63 0 25 0 1 1 90
60-64 63 0 25 0 0 2 90
65-69 48 0 21 0 0 7 76
70-74 23 1 13 0 0 4 41
75-79 14 0 10 0 0 1 25
80-84 6 0 1 0 0 5 12
85 and Over 1 0 1 0 0 6 8
All Ages 247 1 119 0 3 28 398
Distribution of Average Annual Amounts for Retirees and Beneficiaries by Age
and Retirement Type*
Attained
Age
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Average
Under 30 $0 $0 $0 $0 $0 $0 $0
30-34 0 0 48,514 0 0 0 48,514
35-39 0 0 46,066 0 0 0 46,066
40-44 0 0 46,702 0 0 0 46,702
45-49 0 0 40,479 0 74,619 36,471 42,990
50-54 87,067 0 57,672 0 57,848 3,025 78,671
55-59 83,620 0 54,246 0 86,074 81,234 75,461
60-64 75,034 0 42,880 0 0 14,916 64,766
65-69 57,821 0 34,077 0 0 23,163 48,068
70-74 54,853 14,478 31,331 0 0 48,047 45,746
75-79 42,777 0 28,092 0 0 11,497 35,652
80-84 14,850 0 24,789 0 0 24,168 19,561
85 and Over 28,334 0 36,154 0 0 9,302 15,037
All Ages $69,933 $14,478 $41,872 $0 $72,847 $24,751 $58,247
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX C
SAFETY PLAN OF THE CITY OF NEWPORT BEACH
PARTICIPANT DATA
C-5
Retired Members and Beneficiaries (continued)
Distribution of Retirees and Beneficiaries by Years Retired and Retirement Type*
Years
Retired
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Total
Under 5 Yrs 70 0 15 0 0 9 94
5-9 94 0 29 0 1 11 135
10-14 38 0 15 0 1 1 55
15-19 26 0 20 0 1 4 51
20-24 10 1 13 0 0 2 26
25-29 5 0 10 0 0 1 16
30 and Over 4 0 17 0 0 0 21
All Years 247 1 119 0 3 28 398
Distribution of Average Annual Amounts for Retirees and Beneficiaries by Years Retired and
Retirement Type*
Years
Retired
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Average
Under 5 Yrs $86,803 $0 $60,759 $0 $0 $21,669 $76,411
5-9 75,360 0 61,419 0 86,074 22,212 68,114
10-14 60,663 0 38,835 0 57,848 47,144 54,413
15-19 46,663 0 41,146 0 74,619 37,533 44,332
20-24 40,226 14,478 20,894 0 0 21,000 28,091
25-29 26,790 0 22,877 0 0 14,418 23,571
30 and Over 14,688 0 22,615 0 0 0 21,105
All Years $69,933 $14,478 $41,872 $0 $72,847 $24,751 $58,247
* Counts of members do not include alternate payees receiving benefits while the member is still working.
Therefore, the total counts may not match information on page 25 of the report. Multiple records may exist for
those who have service in more than one coverage group. This does not result in double counting of liabilities.
APPENDIX D
GLOSSARY OF ACTUARIAL TERMS
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX D SAFETY PLAN OF THE CITY OF NEWPORT BEACH
GLOSSARY OF ACTUARIAL TERMS
D-1
Glossary of Actuarial Terms
Accrued Liability (also called Actuarial Accrued Liability or Entry Age Normal Accrued Liability)
The total dollars needed as of the valuation date to fund all benefits earned in the past for current members.
Actuarial Assumptions
Assumptions made about certain events that will affect pension costs. Assumptions generally can be broken
down into two categories: demographic and economic. Demographic assumptions include such things as
mortality, disability and retirement rates. Economic assumptions include discount rate, salary growth and
inflation.
Actuarial Methods
Procedures employed by actuaries to achieve certain funding goals of a pension plan. Actuarial methods include funding method, setting the length of time to fund the Accrued Liability and determining the Actuarial Value of
Assets.
Actuarial Valuation
The determination, as of a valuation date, of the Normal Cost, Accrued liability, Actuarial Value of Assets and
related actuarial present values for a pension plan. These valuations are performed annually or when an
employer is contemplating a change to their plan provisions.
Actuarial Value of Assets
The Actuarial Value of Assets used for funding purposes is obtained through an asset smoothing technique
where investment gains and losses are partially recognized in the year they are incurred, with the remainder
recognized in subsequent years.
This method helps to dampen large fluctuations in the employer contribution rate.
Amortization Bases
Separate payment schedules for different portions of the Unfunded Liability. The total Unfunded Liability of a
Risk Pool or non-pooled plan can be segregated by "cause,” creating “bases” and each such base will be
separately amortized and paid for over a specific period of time. However, all bases are amortized using
investment and payroll assumptions from the current valuation. This can be likened to a home having a first
mortgage of 24 years remaining payments and a second mortgage that has 10 years remaining payments. Each base or each mortgage note has its own terms (payment period, principal, etc.)
Generally, in an actuarial valuation, the separate bases consist of changes in unfunded liability due to contract
amendments, actuarial assumption changes, actuarial methodology changes, and or gains and losses. Payment
periods are determined by Board policy and vary based on the cause of the change.
Amortization Period
The number of years required to pay off an Amortization Base.
Annual Required Contributions (ARC)
The employer's periodic required annual contributions to a defined benefit pension plan as set forth in GASB
Statement No. 27, calculated in accordance with the plan assumptions. The ARC is determined by multiplying the
employer contribution rate by the payroll reported to CalPERS for the applicable fiscal year. However, if this
contribution is fully prepaid in a lump sum, then the dollar value of the ARC is equal to the Lump Sum
Prepayment.
Classic Member (under PEPRA)
A classic member is a member who joined CalPERS prior to January, 1, 2013 and who is not defined as a new
member under PEPRA. (See definition of new member below)
Discount Rate Assumption
The actuarial assumption that was called “investment return” in earlier CalPERS reports or “actuarial interest
rate” in Section 20014 of the California Public Employees’ Retirement Law (PERL).
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX D SAFETY PLAN OF THE CITY OF NEWPORT BEACH
GLOSSARY OF ACTUARIAL TERMS
D-2
Entry Age
The earliest age at which a plan member begins to accrue benefits under a defined benefit pension plan. In
most cases, this is the age of the member on their date of hire.
Entry Age Normal Cost Method
An actuarial cost method designed to fund a member's total plan benefit over the course of his or her career.
This method is designed to yield a rate expressed as a level percentage of payroll.
(The assumed retirement age less the entry age is the amount of time required to fund a member’s total benefit. Generally, the older a member on the date of hire, the greater the entry age normal cost. This is mainly because
there is less time to earn investment income to fund the future benefits.)
Fresh Start
A Fresh Start is when multiple amortization bases are collapsed to one base and amortized together over a new
funding period.
Funded Status
A measure of how well funded, or how "on track" a plan or risk pool is with respect to assets verses accrued
liabilities. A ratio greater than 100% means the plan or risk pool has more assets than liabilities and a ratio less
than 100% means liabilities are greater than assets. A funded ratio based on the Actuarial Value of Assets
indicates the progress toward fully funding the plan using the actuarial cost methods and assumptions. A funded
ratio based on the Market Value of Assets indicates the short-term solvency of the plan.
GASB 27 Statement No. 27 of the Governmental Accounting Standards Board. The accounting standard governing a state
or local governmental employer’s accounting for pensions.
GASB 68
Statement No. 68 of the Governmental Accounting Standards Board. The accounting standard governing a state
or local governmental employer’s accounting and financial reporting for pensions. GASB 68 replaces GASB 27 effective the first fiscal year beginning after June 15, 2014.
New Member (under PEPRA)
A new member includes an individual who becomes a member of a public retirement system for the
first time on or after January 1, 2013, and who was not a member of another public retirement
system prior to that date, and who is not subject to reciprocity with another public retirement
system.
Normal Cost
The annual cost of service accrual for the upcoming fiscal year for active employees. The normal cost should be
viewed as the long term contribution rate.
Pension Actuary
A business professional that is authorized by the Society of Actuaries, and the American Academy of Actuaries to
perform the calculations necessary to properly fund a pension plan.
PEPRA
The California Public Employees’ Pension Reform Act of 2013
Prepayment Contribution
A payment made by the employer to reduce or eliminate the year’s required employer contribution.
Present Value of Benefits (PVB) The total dollars needed as of the valuation date to fund all benefits earned in the past or expected to be earned
in the future for current members.
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX D SAFETY PLAN OF THE CITY OF NEWPORT BEACH
GLOSSARY OF ACTUARIAL TERMS
D-3
Rolling Amortization Period
An amortization period that remains the same each year, rather than declining.
Superfunded
A condition existing when a plan’s Actuarial Value of Assets exceeds its Present Value of Benefits. Prior to the
passage of PEPRA, when this condition existed on a given valuation date for a given plan, employee
contributions for the rate year covered by that valuation could be waived.
Unfunded Liability
When a plan or pool’s Actuarial Value of Assets is less than its Accrued Liability, the difference is the plan or
pool’s Unfunded Liability. If the Unfunded Liability is positive, the plan or pool will have to pay contributions
exceeding the Normal Cost.
California Public Employees’ Retirement System
Actuarial Office P.O. Box 942701 Sacramento, CA 94229-2701 TTY: (916) 795-3240 (888) 225-7377 phone • (916) 795-2744 fax
www.calpers.ca.gov
October 2013
MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH (CalPERS ID: 1545983430)
Annual Valuation Report as of June 30, 2012
Dear Employer,
As an attachment to this letter, you will find a copy of the June 30, 2012 actuarial valuation
report of your pension plan. Your 2012 actuarial valuation report contains important actuarial
information about your pension plan at CalPERS. Your CalPERS staff actuary, whose signature
appears in the Actuarial Certification Section on page 1, is available to discuss the report with you
after October 31, 2013. Future Contribution Rates
The exhibit below displays the Minimum Employer Contribution Rate for fiscal year 2014-15 and a
projected contribution rate for 2015-16, before any cost sharing. The projected rate for 2015-16
is based on the most recent information available, including an estimate of the investment return
for fiscal year 2012-13, namely 12 percent, and the impact of the new smoothing methods
adopted by the CalPERS Board in April 2013 that will impact employer rates for the first time in
fiscal year 2015-16. For a projection of employer rates beyond 2015-16, please refer to the
“Analysis of Future Investment Return Scenarios” in the “Risk Analysis” section, which includes
rate projections through 2019-20 under a variety of investment return scenarios. Please disregard
any projections that we may have provided you in the past.
Fiscal Year Employer Contribution Rate
2014-15 18.816%
2015-16 20.0% (projected)
Member contributions other than cost sharing, (whether paid by the employer or the employee)
are in addition to the above rates. The employer contribution rates in this report do not
reflect any cost sharing arrangement you may have with your employees. The estimate for 2015-16 also assumes that there are no future contract amendments and no
liability gains or losses (such as larger than expected pay increases, more retirements than
expected, etc.). This is a very important assumption because these gains and losses do occur and
can have a significant impact on your contribution rate. Even for the largest plans, such gains
and losses often cause a change in the employer’s contribution rate of one or two percent of
payroll and may be even larger in some less common instances. These gains and losses cannot
be predicted in advance so the projected employer contribution rates are just estimates. Your
actual rate for 2015-16 will be provided in next year’s report.
MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH (CalPERS ID: 1545983430)
Annual Valuation Report as of June 30, 2012
Page 2
Changes since the Prior Year’s Valuation
On January 1, 2013, the Public Employees’ Pension Reform Act of 2013 (PEPRA) took effect. The
impact of most of the PEPRA changes will first show up in the rates and the benefit provision
listings of the June 30, 2013 valuation for the 2015-16 rates. For more information on PEPRA,
please refer to the CalPERS website.
On April 17, 2013, the CalPERS Board of Administration approved a recommendation to change
the CalPERS amortization and rate smoothing policies. Beginning with the June 30, 2013
valuations that set the 2015-16 rates, CalPERS will no longer use an actuarial value of assets and
will employ an amortization and smoothing policy that will pay for all gains and losses over a
fixed 30-year period with the increases or decreases in the rate spread directly over a 5-year
period. The impact of this new actuarial methodology is reflected in the “Analysis of Future
Investment Return Scenarios” subsection of the “Risk Analysis” section of your report.
A review of the preferred asset allocation mix for CalPERS investment portfolio will be performed
in late 2013, which could influence future discount rates. In addition, CalPERS will review
economic and demographic assumptions, including mortality rate improvements that are likely to
increase employer contribution rates in future years. The “Analysis of Future Investment Return
Scenarios” subsection does not reflect the impact of assumption changes that we expect will
also impact future rates.
Besides the above noted changes, there may also be changes specific to your plan such as
contract amendments and funding changes. Further descriptions of general changes are included in the “Highlights and Executive Summary”
section and in Appendix A, “Actuarial Methods and Assumptions.” The effect of the changes on
your rate is included in the “Reconciliation of Required Employer Contributions.”
We understand that you might have a number of questions about these results. While we are
very interested in discussing these results with your agency, in the interest of allowing us to give
every public agency their results, we ask that you wait until after October 31 to contact us with
actuarial questions. If you have other questions, you may call the Customer Contact Center at
(888)-CalPERS or (888-225-7377).
Sincerely,
ALAN MILLIGAN
Chief Actuary
ACTUARIAL VALUATION
as of June 30, 2012
for the
MISCELLANEOUS PLAN
of the
CITY OF NEWPORT BEACH
(CalPERS ID: 1545983430)
REQUIRED CONTRIBUTIONS
FOR FISCAL YEAR
July 1, 2014 – June 30, 2015
TABLE OF CONTENTS
ACTUARIAL CERTIFICATION 1
HIGHLIGHTS AND EXECUTIVE SUMMARY
Introduction 5
Purpose of the Report 5
Required Employer Contribution 6
Plan’s Funded Status 6
Cost 7
Changes Since the Prior Year’s Valuation 8
Subsequent Events 8
ASSETS
Reconciliation of the Market Value of Assets 11
Development of the Actuarial Value of Assets 11
Asset Allocation 12
CalPERS History of Investment Returns 13
LIABILITIES AND RATES
Development of Accrued and Unfunded Liabilities 17
(Gain) / Loss Analysis 06/30/11 - 06/30/12 18
Schedule of Amortization Bases 19
Reconciliation of Required Employer Contributions 20
Employer Contribution Rate History 21
Funding History 21
RISK ANALYSIS
Volatility Ratios 25
Projected Rates 26
Analysis of Future Investment Return Scenarios 26 Analysis of Discount Rate Sensitivity 27
Hypothetical Termination Liability 28
GASB STATEMENT NO. 27
Information for compliance with GASB Statement No. 27 31
PLAN’S MAJOR BENEFIT PROVISIONS
Plan’s Major Benefit Options 35
APPENDIX A – ACTUARIAL METHODS AND ASSUMPTIONS A1 - A17
APPENDIX B – PRINCIPAL PLAN PROVISIONS B1 - B8
APPENDIX C – PARTICIPANT DATA
Summary of Valuation Data C-1
Active Members C-2
Transferred and Terminated Members C-3
Retired Members and Beneficiaries C-4
APPENDIX D – GLOSSARY OF ACTUARIAL TERMS D1 – D3
(CY) FIN PROCESS CONTROL ID: 410620 (PY) FIN PROCESS CONTROL ID: 392197 REPORT ID: 72068
CALPERS ACTUARIAL VALUATION - June 30, 2012 MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH
CalPERS ID: 1545983430
Page 1
ACTUARIAL CERTIFICATION
To the best of our knowledge, this report is complete and accurate and contains sufficient information to
disclose, fully and fairly, the funded condition of the MISCELLANEOUS PLAN OF THE CITY OF NEWPORT
BEACH. This valuation is based on the member and financial data as of June 30, 2012 provided by the various CalPERS databases and the benefits under this plan with CalPERS as of the date this report was
produced. 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 CalPERS Board of Administration according to provisions set forth in the California Public Employees’
Retirement Law.
The undersigned is an actuary for CalPERS, who is a member of the American Academy of Actuaries and the Society of Actuaries and meets the Qualification Standards of the American Academy of Actuaries to render
the actuarial opinion contained herein.
KERRY J. WORGAN, MAAA, FSA, FCIA
Senior Pension Actuary, CalPERS
HIGHLIGHTS AND EXECUTIVE SUMMARY
x INTRODUCTION
x PURPOSE OF THE REPORT
x REQUIRED EMPLOYER CONTRIBUTION
x PLAN’S FUNDED STATUS
x COST
x CHANGES SINCE THE PRIOR YEAR’S VALUATION
x SUBSEQUENT EVENTS
CALPERS ACTUARIAL VALUATION - June 30, 2012 MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH
CalPERS ID: 1545983430
Page 5
Introduction
This report presents the results of the June 30, 2012 actuarial valuation of the MISCELLANEOUS PLAN OF
THE CITY OF NEWPORT BEACH of the California Public Employees’ Retirement System (CalPERS). This
actuarial valuation sets the fiscal year 2014-15 required employer contribution rates.
On January 1, 2013, the Public Employees’ Pension Reform Act of 2013 (PEPRA) took effect. The impact of
most of the PEPRA changes will first show up in the rates and the benefit provision listings of the June 30,
2013 valuation, which sets the 2015-16 contribution rates. For more information on PEPRA, please refer to the CalPERS website.
On April 17, 2013, the CalPERS Board of Administration approved a recommendation to change the CalPERS
amortization and smoothing policies. Prior to this change, CalPERS employed an amortization and smoothing
policy, which spread investment returns over a 15-year period while experience gains and losses were
amortized over a rolling 30-year period. Effective with the June 30, 2013 valuations, CalPERS will no longer
use an actuarial value of assets and will employ an amortization and smoothing policy that will spread rate increases or decreases over a 5-year period, and will amortize all experience gains and losses over a fixed
30-year period.
The new amortization and smoothing policy will be used for the first time in the June 30, 2013 actuarial
valuations. These valuations will be performed in the fall of 2014 and will set employer contribution rates for
the fiscal year 2015-16.
As stewards of the System, CalPERS must ensure that the pension fund is sustainable over multiple generations. Our strategic plan calls for us to take an integrated view of our assets and liabilities and to take
steps designed to achieve a fully funded plan. A review of the preferred asset allocation mix for CalPERS
investment portfolio will be performed in late 2013, which could influence future discount rates. In addition,
CalPERS will review economic and demographic assumptions, including mortality rate improvements that are
likely to increase employer contribution rates in future years.
Purpose of the Report
The actuarial valuation was prepared by the CalPERS Actuarial Office using data as of June 30, 2012. The
purpose of the report is to:
x Set forth the actuarial assets and accrued liabilities of this plan as of June 30, 2012;
x Determine the required employer contribution rate for the fiscal year July 1, 2014 through June 30, 2015;
x Provide actuarial information as of June 30, 2012 to the CalPERS Board of Administration and other
interested parties, and to;
x Provide pension information as of June 30, 2012 to be used in financial reports subject to Governmental
Accounting Standards Board (GASB) Statement Number 27 for a Single Employer Defined Benefit
Pension Plan.
California Actuarial Advisory Panel Recommendations
This report includes all the basic disclosure elements as described in the Model Disclosure Elements for
Actuarial Valuation Reports recommended in 2011 by the California Actuarial Advisory Panel (CAAP), with
the exception of including the original base amounts of the various components of the unfunded liability in
the Schedule of Amortization Bases shown on page 19.
Additionally, this report includes the following “Enhanced Risk Disclosures” also recommended by the CAAP in the Model Disclosure Elements document:
x A “Deterministic Stress Test,” projecting future results under different investment income
scenarios
x A “Sensitivity Analysis,” showing the impact on current valuation results using a 1% plus or minus
change in the discount rate.
CALPERS ACTUARIAL VALUATION - June 30, 2012 MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH
CalPERS ID: 1545983430
Page 6
The use of this report for any other purposes may be inappropriate. In particular, this report does not
contain information applicable to alternative benefit costs. The employer should contact their actuary before
disseminating any portion of this report for any reason that is not explicitly described above.
Required Employer Contribution
Fiscal Year Fiscal Year
2013-14 2014-15
Actuarially Determined Employer Contributions
1. Contribution in Projected Dollars
a) Total Normal Cost $ 7,118,045 $ 6,901,728
b) Employee Contribution1 3,565,039 3,494,546
c) Employer Normal Cost [(1a) – (1b)] 3,553,006 3,407,182
d) Unfunded Contribution 4,433,469 4,811,881
e) Required Employer Contribution [(1c) + (1d)] $ 7,986,475 $ 8,219,063
Projected Annual Payroll for Contribution Year $ 44,568,564 $ 43,681,821
2. Contribution as a Percentage of Payroll
a) Total Normal Cost 15.971% 15.800%
b) Employee Contribution1 7.999% 8.000%
c) Employer Normal Cost [(2a) – (2b)] 7.972% 7.800%
d) Unfunded Rate 9.948% 11.016%
e) Required Employer Rate [(2c) + (2d)] 17.920% 18.816%
Minimum Employer Contribution Rate2 17.920% 18.816%
Annual Lump Sum Prepayment Option3 $ 6,662,586 $ 7,927,168
1This is the percentage specified in the Public Employees Retirement Law, net of any reduction from the use
of a modified formula or other factors. Employee cost sharing is not shown in this report.
2The Minimum Employer Contribution Rate under PEPRA is the greater of the required employer rate or the
employer normal cost.
3Payment must be received by CalPERS before the first payroll reported to CalPERS of the new fiscal year
and after June 30. If there is contractual cost sharing or other change, this amount will change.
Plan’s Funded Status
June 30, 2011 June 30, 2012
1. Present Value of Projected Benefits $ 338,806,609 $ 351,642,097
2. Entry Age Normal Accrued Liability 287,108,575 302,006,850
3. Actuarial Value of Assets (AVA) 228,755,012 238,869,992
4. Unfunded Liability (AVA Basis) [(2) – (3)] $ 58,353,563 $ 63,136,858
5. Funded Ratio (AVA Basis) [(3) / (2)] 79.7% 79.1%
6. Market Value of Assets (MVA) $ 204,473,260 $ 200,149,332
7. Unfunded Liability (MVA Basis) [(2) – (6)] $ 82,635,315 $ 101,857,518
8. Funded Ratio (MVA Basis) [(6) / (2)] 71.2% 66.3%
Superfunded Status No No
CALPERS ACTUARIAL VALUATION - June 30, 2012 MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH
CalPERS ID: 1545983430
Page 7
Cost
Actuarial Cost Estimates in General
What will this pension plan cost? Unfortunately, there is no simple answer. There are two major reasons for the complexity of the answer. First, actuarial calculations, including the ones in this report, are based on a
number of assumptions about the future. These assumptions can be divided into two categories.
x Demographic assumptions include the percentage of employees that will terminate, die, become
disabled, and retire in each future year.
x Economic assumptions include future salary increases for each active employee, and the
assumption with the greatest impact, future asset returns at CalPERS for each year into the future
until the last dollar is paid to current members of your plan.
While CalPERS has set these assumptions to reflect our best estimate of the real future of your plan, it must
be understood that these assumptions are very long-term predictors and will surely not be realized in any
one year. For example, while the asset earnings at CalPERS have averaged more than the assumed return of
7.5 percent for the past twenty year period ending June 30, 2013, returns for each fiscal year ranged from
negative -24 percent to +21.7 percent.
Second, the very nature of actuarial funding produces the answer to the question of plan cost as the sum of two separate pieces.
x The Normal Cost (i.e., the future annual premiums in the absence of surplus or unfunded liability)
expressed as a percentage of total active payroll.
x The Past Service Cost or Accrued Liability (i.e., the current value of the benefit for all credited past
service of current members) which is expressed as a lump sum dollar amount.
The cost is the sum of a percent of future pay and a lump sum dollar amount (the sum of an apple and an
orange if you will). To communicate the total cost, either the Normal Cost (i.e., future percent of payroll) must be converted to a lump sum dollar amount (in which case the total cost is the present value of
benefits), or the Past Service Cost (i.e., the lump sum) must be converted to a percent of payroll (in which
case the total cost is expressed as the employer’s rate, part of which is permanent and part temporary).
Converting the Past Service Cost lump sum to a percent of payroll requires a specific amortization period,
and the employer rate will vary depending on the amortization period chosen.
CALPERS ACTUARIAL VALUATION - June 30, 2012 MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH
CalPERS ID: 1545983430
Page 8
Changes since the Prior Year’s Valuation
Benefits
The standard actuarial practice at CalPERS is to recognize mandated legislative benefit changes in the first annual valuation following the effective date of the legislation. Voluntary benefit changes by plan
amendment are generally included in the first valuation that is prepared after the amendment becomes
effective even if the valuation date is prior to the effective date of the amendment.
This valuation generally reflects plan changes by amendments effective before the date of the report. Please
refer to Appendix B for a summary of the plan provisions used in this valuation. The effect of any mandated
benefit changes or plan amendments on the unfunded liability is shown in the “(Gain)/Loss Analysis” and the effect on your employer contribution rate is shown in the “Reconciliation of Required Employer
Contributions.” It should be noted that no change in liability or rate is shown for any plan changes, which
were already included in the prior year’s valuation.
Public Employees’ Pension Reform Act of 2013 (PEPRA)
On January 1, 2013, the Public Employees’ Pension Reform Act of 2013 (PEPRA) took effect, requiring that a
public employer’s contribution to a defined benefit plan, in combination with employee contributions to that
defined benefit plan, shall not be less than the normal cost rate. Beginning July 1, 2013, this means that
some plans with surplus will be paying more than they otherwise would. For more information on PEPRA,
please refer to the CalPERS website.
Subsequent Events
Actuarial Methods and Assumptions
On April 17, 2013, the CalPERS Board of Administration approved a recommendation to change the CalPERS
amortization and smoothing policies. Beginning with the June 30, 2013 valuations that set the 2015-16
rates, CalPERS will no longer use an actuarial value of assets and will employ an amortization and rate
smoothing policy that will pay for all gains and losses over a fixed 30-year period with the increases or decreases in the rate spread directly over a 5-year period. The impact of this new actuarial methodology is
reflected in the “Expected Rate Increases” subsection of the “Risk analysis” section of your report.
Not reflected in the “Expected Rate Increases” subsection of the “Risk analysis” section is the impact of assumption changes that we expect will also, impact future rates. A review of the preferred asset allocation
mix for CalPERS investment portfolio will be performed in late 2013, which could influence future discount
rates. In addition, CalPERS will review economic and demographic assumptions, including mortality rate
improvements that are likely to increase employer contribution rates in future years.
ASSETS
x RECONCILIATION OF THE MARKET VALUE OF ASSETS
x DEVELOPMENT OF THE ACTUARIAL VALUE OF ASSETS
x ASSET ALLOCATION
x CALPERS HISTORY OF INVESTMENT RETURNS
CALPERS ACTUARIAL VALUATION - June 30, 2012 MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH
CalPERS ID: 1545983430
Page 11
Reconciliation of the Market Value of Assets
1. Market Value of Assets as of 6/30/11 Including Receivables $ 204,473,260
2. Receivables for Service Buybacks as of 6/30/11 955,767
3. Market Value of Assets as of 6/30/11 203,517,493
4. Employer Contributions 4,658,727
5. Employee Contributions 4,447,369
6. Benefit Payments to Retirees and Beneficiaries (12,847,745)
7. Refunds (178,521)
8. Lump Sum Payments 0
9. Transfers and Miscellaneous Adjustments (887,965)
10. Investment Return (296,771)
11. Market Value of Assets as of 6/30/12 $ 198,412,587
12. Receivables for Service Buybacks as of 6/30/12 1,736,745
13. Market Value of Assets as of 6/30/12 Including Receivables $ 200,149,332
Development of the Actuarial Value of Assets
1. Actuarial Value of Assets as of 6/30/11 Used For Rate Setting Purposes $ 228,755,012
2. Receivables for Service Buybacks as of 6/30/11 955,767
3. Actuarial Value of Assets as of 6/30/11 227,799,245
4. Employer Contributions 4,658,727
5. Employee Contributions 4,447,369
6. Benefit Payments to Retirees and Beneficiaries (12,847,745)
7. Refunds (178,521)
8. Lump Sum Payments 0
9. Transfers and Miscellaneous Adjustments (887,965)
10. Expected Investment Income at 7.5% 16,907,898
11. Expected Actuarial Value of Assets $ 239,899,008
12. Market Value of Assets as of 6/30/12 $ 198,412,587
13. Preliminary Actuarial Value of Assets [(11) + ((12) – (11)) / 15] 237,133,247
14. Maximum Actuarial Value of Assets (120% of (12)) 238,095,104
15. Minimum Actuarial Value of Assets (80% of (12)) 158,730,070
16. Actuarial Value of Assets {Lesser of [(14), Greater of ((13), (15))]} 237,133,247
17. Actuarial Value to Market Value Ratio 119.3%
18. Receivables for Service Buybacks as of 6/30/12 1,736,745
19. Actuarial Value of Assets as of 6/30/12 Used for Rate Setting Purposes $ 238,869,992
CALPERS ACTUARIAL VALUATION - June 30, 2012 MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH
CalPERS ID: 1545983430
Page 12
Asset Allocation
CalPERS adheres to an Asset Allocation Strategy which establishes asset class allocation policy targets and
ranges, and manages those asset class allocations within their policy ranges. CalPERS recognizes that over
90 percent of the variation in investment returns of a well-diversified pool of assets can typically be attributed to asset allocation decisions. In December 2010 the Board approved the policy asset class targets
and ranges listed below. These policy asset allocation targets and ranges are expressed as a percentage of
total assets and were expected to be implemented over a period of one to two years beginning July 1, 2011
and reviewed again in December 2013.
The asset allocation and market value of assets shown below reflect the values of the Public Employees
Retirement Fund (PERF) in its entirety as of June 30, 2012. The assets for CITY OF NEWPORT BEACH MISCELLANEOUS PLAN are part of the Public Employees Retirement Fund (PERF) and are invested
accordingly.
(A)
Asset Class
(B) Market Value
($ Billion)
(C) Policy Target
Allocation
(D) Policy Target
Range
1) Public Equity 113.0 50.0% +/- 7%
2) Private Equity 33.9 14.0% +/- 4%
3) Fixed Income 42.6 17.0% +/- 5%
4) Cash Equivalents 7.5 4.0% +/- 5%
5) Real Assets 24.8 11.0% +/- 3%
6) Inflation Assets 7.0 4.0% +/- 3%
7) Absolute Return Strategy (ARS) 5.1 0.0% N/A
Total Fund $233.9 100.0% N/A
Public Equity
48.3%
Private Equity
14.5%
Income
18.2%
3.2%
Liquidity
Real Assets
10.6%
3.0%
Inflation
ARS
2.2%
Asset Allocation at 6/30/2012
CALPERS ACTUARIAL VALUATION - June 30, 2012MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH
CalPERS ID: 1545983430
Page 13
CalPERS History of Investment Returns
The following is a chart with historical annual returns of the Public Employees Retirement Fund for each
fiscal year ending on June 30. Beginning in 2002, the figures are reported as gross of fees.
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
1
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LIABILITIES AND RATES
x DEVELOPMENT OF ACCRUED AND UNFUNDED LIABILITIES
x (GAIN) / LOSS ANALYSIS 06/30/11 - 06/30/12
x SCHEDULE OF AMORTIZATION BASES
x RECONCILIATION OF REQUIRED EMPLOYER CONTRIBUTIONS
x EMPLOYER CONTRIBUTION RATE HISTORY
x FUNDING HISTORY
CALPERS ACTUARIAL VALUATION - June 30, 2012 MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH
CalPERS ID: 1545983430
Page 17
Development of Accrued and Unfunded Liabilities
1. Present Value of Projected Benefits
a) Active Members $ 175,508,818
b) Transferred Members 10,398,144
c) Terminated Members 10,616,278
d) Members and Beneficiaries Receiving Payments 155,118,857
e) Total $ 351,642,097
2. Present Value of Future Employer Normal Costs $ 23,537,536
3. Present Value of Future Employee Contributions $ 26,097,711
4. Entry Age Normal Accrued Liability
a) Active Members [(1a) - (2) - (3)] $ 125,873,571
b) Transferred Members (1b) 10,398,144
c) Terminated Members (1c) 10,616,278
d) Members and Beneficiaries Receiving Payments (1d) 155,118,857
e) Total $ 302,006,850
5. Actuarial Value of Assets (AVA) $ 238,869,992
6. Unfunded Accrued Liability (AVA Basis) [(4e) – (5)] $ 63,136,858
7. Funded Ratio (AVA Basis) [(5) / (4e)] 79.1%
8. Market Value of Assets (MVA) $ 200,149,332
9. Unfunded Liability (MVA Basis) [(4e) - (8)] $ 101,857,518
10. Funded Ratio (MVA Basis) [(8) / (4e)] 66.3%
CALPERS ACTUARIAL VALUATION - June 30, 2012 MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH
CalPERS ID: 1545983430
Page 18
(Gain) /Loss Analysis 6/30/11 – 6/30/12
To calculate the cost requirements of the plan, assumptions are made about future events that affect the
amount and timing of benefits to be paid and assets to be accumulated. Each year actual experience is compared to the expected experience based on the actuarial assumptions. This results in actuarial gains or
losses, as shown below.
A Total (Gain)/Loss for the Year
1. Unfunded Accrued Liability (UAL) as of 6/30/11 $ 58,353,563 2. Expected Payment on the UAL during 2011/2012 2,796,615
3. Interest through 6/30/12 [.075 x (A1) - ((1.075)½ - 1) x (A2)] 4,273,540
4. Expected UAL before all other changes [(A1) - (A2) + (A3)] 59,830,488
5. Change due to plan changes 0
6. Change due to assumption change 0
7. Expected UAL after all other changes [(A4) + (A5) + (A6)] 59,830,488
8. Actual UAL as of 6/30/12 63,136,858
9. Total (Gain)/Loss for 2011/2012 [(A8) - (A7)] $ 3,306,370
B Contribution (Gain)/Loss for the Year
1. Expected Contribution (Employer and Employee) $ 9,505,636
2. Interest on Expected Contributions 350,017 3. Actual Contributions 9,106,096
4. Interest on Actual Contributions 335,305
5. Expected Contributions with Interest [(B1) + (B2)] 9,855,653
6. Actual Contributions with Interest [(B3) + (B4)] 9,441,401
7. Contribution (Gain)/Loss [(B5) - (B6)] $ 414,252
C Asset (Gain)/Loss for the Year
1. Actuarial Value of Assets as of 6/30/11 Including Receivables $ 228,755,012
2. Receivables as of 6/30/11 955,767
3. Actuarial Value of Assets as of 6/30/11 227,799,245
4. Contributions Received 9,106,096 5. Benefits and Refunds Paid (13,026,266)
6. Transfers and miscellaneous adjustments (887,965)
7. Expected Int. [.075 x (C3) + ((1.075)½ - 1) x ((C4) + (C5) + (C6))] 16,907,898
8. Expected Assets as of 6/30/12 [(C3) + (C4) + (C5) + (C6) + (C7)] 239,899,008
9. Receivables as of 6/30/12 1,736,745
10. Expected Assets Including Receivables 241,635,753 11. Actual Actuarial Value of Assets as of 6/30/12 238,869,992
12. Asset (Gain)/Loss [(C10) - (C11)] $ 2,765,761
D Liability (Gain)/Loss for the Year
1. Total (Gain)/Loss (A9) $ 3,306,370 2. Contribution (Gain)/Loss (B7) 414,252
3. Asset (Gain)/Loss (C12) 2,765,761
4. Liability (Gain)/Loss [(D1) - (D2) - (D3)] $ 126,357
Development of the (Gain)/Loss Balance as of 6/30/12
1. (Gain)/Loss Balance as of 6/30/11 $ 0
2. Payment Made on the Balance during 2011/2012 0
3. Interest through 6/30/12 [.075 x (1) - ((1.075)1/2 - 1) x (2)] 0
4. Scheduled (Gain)/Loss Balance as of 6/30/12 [(1) - (2) + (3)] $ 0
5. (Gain)/Loss for Fiscal Year ending 6/30/12 [(A9) above] 3,306,370
6. Final (Gain)/Loss Balance as of 6/30/12 [(4) + (5)] $ 3,306,370
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CALPERS ACTUARIAL VALUATION - June 30, 2012 MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH
CalPERS ID: 1545983430
Page 20
Reconciliation of Required Employer Contributions
Percentage
of
Projected
Payroll
Estimated $
Based on
Projected
Payroll
1. Contribution for 7/1/13 – 6/30/14 17.920% $ 7,986,475
2. Effect of changes since the prior year annual valuation
a) Effect of unexpected changes in demographics and financial results 0.896% 391,492
b) Effect of plan changes 0.000% 0
c) Effect of changes in Assumptions 0.000% 0
d) Effect of change in payroll - (158,904)
e) Effect of elimination of amortization base 0.000% 0
f) Effect of changes due to Fresh Start 0.000% 0
g) Net effect of the changes above [Sum of (a) through (f)] 0.896% 232,588
3. Contribution for 7/1/14 – 6/30/15 [(1)+(2g)] 18.816% 8,219,063
The contribution actually paid (item 1) may be different if a prepayment of unfunded actuarial liability is made or a plan change became effective after the prior year’s actuarial valuation was performed.
CALPERS ACTUARIAL VALUATION - June 30, 2012 MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH
CalPERS ID: 1545983430
Page 21
Employer Contribution Rate History
The table below provides a recent history of the employer contribution rates for your plan, as determined by the
annual actuarial valuation. It does not account for prepayments or benefit changes made in the middle of the year.
[required_by_valuation] Required By Valuation
Fiscal
Year
Employer
Normal Cost Unfunded Rate
Total Employer
Contribution Rate
2010 - 2011 7.528% 3.298% 10.826%
2011 - 2012 7.747% 6.881% 14.628%
2012 - 2013 7.748% 8.655% 16.403%
2013 - 2014 7.972% 9.948% 17.920%
2014 - 2015 7.800% 11.016% 18.816%
Funding History
The Funding History below shows the recent history of the actuarial accrued liability, the market value of assets,
the actuarial value of assets, funded ratios and the annual covered payroll. The Actuarial Value of Assets is used
to establish funding requirements and the funded ratio on this basis represents the progress toward fully funding
future benefits for current plan participants. The funded ratio based on the Market Value of Assets is an indicator of the short-term solvency of the plan.
[funding_history]
Valuation
Date
Accrued
Liability
Actuarial
Value of
Assets (AVA)
Market Value
of
Assets (MVA)
Funded
Ratio
AVA MVA
Annual
Covered
Payroll
06/30/08 $ 217,377,776 $ 195,954,328 $ 199,721,639 90.1% 91.9% $41,147,617
06/30/09 249,666,420 207,817,811 152,670,408 83.2% 61.1% 42,892,547
06/30/10 269,462,732 218,258,404 171,984,696 81.0% 63.8% 40,587,600
06/30/11 287,108,575 228,755,012 204,473,260 79.7% 71.2% 40,786,550
06/30/12 302,006,850 238,869,992 200,149,332 79.1% 66.3% 39,975,054
RISK ANALYSIS
x VOLATILITY RATIOS
x PROJECTED RATES
x ANALYSIS OF FUTURE INVESTMENT RETURN SCENARIOS
x ANALYSIS OF DISCOUNT RATE SENSITIVITY
x HYPOTHETICAL TERMINATION LIABILITY
CALPERS ACTUARIAL VALUATION - June 30, 2012 MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH
CalPERS ID: 1545983430
Page 25
Volatility Ratios
The actuarial calculations supplied in this communication are based on a number of assumptions about very long-
term demographic and economic behavior. Unless these assumptions (terminations, deaths, disabilities,
retirements, salary growth, and investment return) are exactly realized each year, there will be differences on a year-to-year basis. The year-to-year differences between actual experience and the assumptions are called
actuarial gains and losses and serve to lower or raise the employer’s rates from one year to the next. Therefore,
the rates will inevitably fluctuate, especially due to the ups and downs of investment returns.
Asset Volatility Ratio (AVR)
Plans that have higher asset to payroll ratios produce more volatile employer rates due to investment return. For example, a plan with an asset to payroll ratio of 8 may experience twice the contribution volatility due to
investment return volatility, than a plan with an asset to payroll ratio of 4. Below we have shown your asset
volatility ratio, a measure of the plan’s current rate volatility. It should be noted that this ratio is a measure of the
current situation. It increases over time but generally tends to stabilize as the plan matures.
Liability Volatility Ratio
Plans that have higher liability to payroll ratios produce more volatile employer rates due to investment return and
changes in liability. For example, a plan with a liability to payroll ratio of 8 is expected to have twice the
contribution volatility of a plan with a liability to payroll ratio of 4. The liability volatility ratio is also included in the
table below. It should be noted that this ratio indicates a longer-term potential for contribution volatility and the
asset volatility ratio, described above, will tend to move closer to this ratio as the plan matures.
Rate Volatility As of June 30, 2012
1. Market Value of Assets without Receivables $ 198,412,587
2. Payroll 39,975,054
3. Asset Volatility Ratio (AVR = 1. / 2.) 5.0
4. Accrued Liability $ 302,006,850
5. Liability Volatility Ratio (4. / 2.) 7.6
CALPERS ACTUARIAL VALUATION - June 30, 2012 MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH
CalPERS ID: 1545983430
Page 26
Projected Rates
On April 17, 2013, the CalPERS Board of Administration approved a recommendation to change the CalPERS
amortization and smoothing policies. Beginning with the June 30, 2013 valuations that will set the 2015-16 rates,
CalPERS will employ an amortization and rate smoothing policy that will pay for all gains and losses over a fixed 30-year period with the increases or decreases in the rate spread directly over a 5-year period. The table below
shows projected employer contribution rates (before cost sharing) for the next five Fiscal Years, assuming
CalPERS earns 12% for fiscal year 2012-13 and 7.50 percent every fiscal year thereafter, and
assuming that all other actuarial assumptions will be realized and that no further changes to assumptions,
contributions, benefits, or funding will occur between now and the beginning of the fiscal year 2015-16.
Consequently, these projections do not take into account potential rate increases from likely future
assumption changes. Nor do they take into account the positive impact PEPRA is expected to gradually have on the normal cost.
New Rate Projected Future Employer Contribution Rates
2014-15 2015-16 2016-17 2017-18 2018-19 2019-20
Contribution Rates: 18.816% 20.0% 21.2% 22.4% 23.6% 24.7%
Analysis of Future Investment Return Scenarios
In July 2013, the investment return for fiscal year 2012-13 was announced to be 12.5 percent. Note that this
return is before administrative expenses and also does not reflect final investment return information for real
estate and private equities. The final return information for these two asset classes is expected to be available later
in October. For purposes of projecting future employer rates, we are assuming a 12 percent investment return for
fiscal year 2012-13.
The investment return realized during a fiscal year first affects the contribution rate for the fiscal year 2 years later.
Specifically, the investment return for 2012-13 will first be reflected in the June 30, 2013 actuarial valuation that
will be used to set the 2015-16 employer contribution rates, the 2013-14 investment return will first be reflected in
the June 30, 2014 actuarial valuation that will be used to set the 2016-17 employer contribution rates and so forth.
Based on a 12 percent investment return for fiscal year 2012-13 and the April 17, 2013 CalPERS Board-
approved amortization and rate smoothing method change, and assuming that all other actuarial assumptions will be realized, and that no further changes to assumptions, contributions, benefits, or funding will
occur between now and the beginning of the fiscal year 2015-16, the effect on the 2015-16 Employer Rate is as
follows: (Note that this estimated rate does not reflect additional assumption changes as discussed in the
“Subsequent Events” section.)
Estimated 2015-16 Employer Rate Estimated Increase in Employer Rate between
2014-15 and 2015-16
20.0% 1.2%
As part of this report, a sensitivity analysis was performed to determine the effects of various investment returns
during fiscal years 2013-14, 2014-15 and 2015-16 on the 2016-17, 2017-18 and 2018-19 employer rates. Once
again, the projected rate increases assume that all other actuarial assumptions will be realized and that no further
changes to assumptions, contributions, benefits, or funding will occur.
CALPERS ACTUARIAL VALUATION - June 30, 2012 MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH
CalPERS ID: 1545983430
Page 27
Five different investment return scenarios were selected.
x The first scenario is what one would expect if the markets were to give us a 5th percentile return from
July 1, 2013 through June 30, 2016. The 5th percentile return corresponds to a -4.1 percent return for
each of the 2013-14, 2014-15 and 2015-16 fiscal years.
x The second scenario is what one would expect if the markets were to give us a 25th percentile return
from July 1, 2013 through June 30, 2016. The 25th percentile return corresponds to a 2.6 percent return
for each of the 2013-14, 2014-15 and 2015-16 fiscal years. x The third scenario assumed the return for 2013-14, 2014-15, 2015-16 would be our assumed 7.5 percent investment return which represents about a 49th percentile event.
x The fourth scenario is what one would expect if the markets were to give us a 75th percentile return from
July 1, 2013 through June 30, 2016. The 75th percentile return corresponds to a 11.9 percent return for
each of the 2013-14, 2014-15 and 2015-16 fiscal years.
x Finally, the last scenario is what one would expect if the markets were to give us a 95th percentile return
from July 1, 2013 through June 30, 2016. The 95th percentile return corresponds to a 18.5 percent
return for each of the 2013-14, 2014-15 and 2015-16 fiscal years.
The table below shows the estimated projected contribution rates and the estimated increases for your plan under
the five different scenarios.
2013-16 Investment
Return Scenario
Estimated Employer Rate Estimated Change in Employer Rate
between 2015-16
and 2018-19 2016-17 2017-18 2018-19
-4.1% (5th percentile) 22.1% 24.9% 28.6% 8.6%
2.6% (25th percentile) 21.6% 23.5% 25.8% 5.8%
7.5% 21.2% 22.4% 23.6% 3.6%
11.9%(75th percentile) 20.8% 21.3% 21.4% 1.4%
18.5%(95th percentile) 20.3% 19.7% 18.0% -2.0%
Analysis of Discount Rate Sensitivity
The following analysis looks at the 2014-15 employer contribution rates under two different discount rate
scenarios. Shown below are the employer contribution rates assuming discount rates that are 1 percent lower and
1 percent higher than the current valuation discount rate. This analysis gives an indication of the potential required
employer contribution rates if the PERF were to realize investment returns of 6.50 percent or 8.50 percent over the
long-term.
This type of analysis gives the reader a sense of the long-term risk to the employer contribution rates.
2014-15 Employer Contribution Rate
As of June 30, 2012 6.50% Discount Rate
(-1%) 7.50% Discount Rate
(assumed rate) 8.50% Discount Rate
(+1%)
Employer Normal Cost 11.759% 7.800% 4.799%
Unfunded Rate Payment 17.865% 11.016% 4.231%
Total 29.624% 18.816% 9.030%
CALPERS ACTUARIAL VALUATION - June 30, 2012 MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH
CalPERS ID: 1545983430
Page 28
Hypothetical Termination Liability
Below is an estimate of the financial position of your plan if you had terminated your contract with CalPERS as of
June 30, 2012 using the discount rates shown below. Your plan liability on a termination basis is calculated
differently compared to the plan’s ongoing funding liability. In December 2012, the CalPERS Board adopted a more conservative investment policy and asset allocation strategy for the Terminated Agency Pool. Since the Terminated
Agency Pool has limited funding sources, expected benefit payments are secured by risk-free assets. With this
change, CalPERS increased benefit security for members while limiting its funding risk. This asset allocation has a
lower expected rate of return than the PERF. Consequently, the lower discount rate for the Terminated Agency
pool results in higher liabilities for terminated plans.
In order to terminate your plan, you must first contact our Retirement Services Contract Unit to initiate a
Resolution of Intent to Terminate. The completed Resolution will allow your plan actuary to give you a preliminary
termination valuation with a more up-to-date estimate of your plan liabilities. CalPERS advises you to consult with
your plan actuary before beginning this process.
[estimated_termination_liability]
Valuation
Date
Hypothetical
Termination
Liability1
Market Value
of Assets
(MVA)
Unfunded
Termination
Liability
Termination
Funded
Ratio
Termination
Liability
Discount
Rate2
06/30/11 $ 404,197,103 $204,473,260 $ 199,723,843 50.6% 4.82%
06/30/12 545,690,864 200,149,332 345,541,532 36.7% 2.98%
1 The hypothetical liabilities calculated above include a 7 percent mortality contingency load in accordance with
Board policy. Other actuarial assumptions, such as wage and inflation assumptions, can be found in appendix A.
2 The discount rate assumption used for termination valuations is a weighted average of the 10 and 30-year US
Treasury yields in effect on the valuation date that equal the duration of the pension liabilities. For purposes of this
hypothetical termination liability estimate, the discount rate used, 2.98 percent, is the yield on the 30-year US
Treasury Separate Trading of Registered Interest and Principal of Securities (STRIPS) as of June 30, 2012. In last
year’s report the May 2012 rate of 2.87 percent was inadvertently shown rather than the June rate of 2.98
percent. Please note, as of June 30, 2013 the 30-year STRIPS yield was 3.72 percent.
GASB STATEMENT NO. 27
CALPERS ACTUARIAL VALUATION - June 30, 2012 MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH
CalPERS ID: 1545983430
Page 31
MISCELLANEOUS PLAN of the CITY OF NEWPORT BEACH
Information for Compliance with GASB Statement No. 27
Disclosure under GASB 27 follows. However, note that effective for financial statements for fiscal
years beginning after June 15, 2014, GASB 68 replaces GASB 27. GASB 68 will require additional
reporting. CalPERS is planning to provide GASB 68 disclosure information upon request for an additional fee. We urge you to start discussions with your auditors on how to implement GASB 68.
Under GASB 27, an employer reports an annual pension cost (APC) equal to the annual required contribution
(ARC) plus an adjustment for the cumulative difference between the APC and the employer’s actual plan
contributions for the year. The cumulative difference is called the net pension obligation (NPO). The ARC for the
period July 1, 2013 to June 30, 2014 has been determined by an actuarial valuation of the plan as of June 30,
2012. The unadjusted GASB compliant contribution rate for the indicated period is 18.816 percent of payroll. In
order to calculate the dollar value of the ARC for inclusion in financial statements prepared as of June 30, 2014, this contribution rate, less any employee cost sharing, as modified by any amendments for the year, would be
multiplied by the payroll of covered employees that was actually paid during the period July 1, 2013 to June 30,
2014. The employer and the employer’s auditor are responsible for determining the NPO and the APC.
A summary of principal assumptions and methods used to determine the ARC is shown below.
Retirement Program Valuation Date June 30, 2012
Actuarial Cost Method Entry Age Normal Cost Method
Amortization Method Level Percent of Payroll
Average Remaining Period 22 Years as of the Valuation Date
Asset Valuation Method 15 Year Smoothed Market
Actuarial Assumptions
Discount Rate 7.50% (net of administrative expenses)
Projected Salary Increases 3.30% to 14.20% depending on Age, Service, and type of employment Inflation 2.75%
Payroll Growth 3.00%
Individual Salary Growth A merit scale varying by duration of employment coupled with an assumed
annual inflation growth of 2.75% and an annual production growth of 0.25%.
Initial unfunded liabilities are amortized over a closed period that depends on the plan’s date of entry into
CalPERS. Subsequent plan amendments are amortized as a level percentage of pay over a closed 20-year period.
Gains and losses that occur in the operation of the plan are amortized over a 30-year rolling period, which results in an amortization of about 6 percent of unamortized gains and losses each year. If the plan’s accrued liability
exceeds the actuarial value of plan assets, then the amortization payment on the total unfunded liability may not
be lower than the payment calculated over a 30-year amortization period. More detailed information on
assumptions and methods is provided in Appendix A of this report. Appendix B contains a description of benefits
included in the valuation.
The Schedule of Funding Progress below shows the recent history of the actuarial accrued liability, actuarial value
of assets, their relationship and the relationship of the unfunded actuarial accrued liability to payroll.
Valuation
Date
Accrued
Liability
(a)
Actuarial Value
of Assets (AVA)
(b)
Unfunded
Liability (UL)
(a)-(b)
Funded Ratios Annual
Covered Payroll
(c)
UL As a
% of Payroll
[(a)-(b)]/(c) (AVA)
(b)/(a)
Market
Value
06/30/08 $ 217,377,776 $ 195,954,328 $ 21,423,448 90.1% 91.9% $ 41,147,617 52.1%
06/30/09 249,666,420 207,817,811 41,848,609 83.2% 61.1% 42,892,547 97.6%
06/30/10 269,462,732 218,258,404 51,204,328 81.0% 63.8% 40,587,600 126.2%
06/30/11 287,108,575 228,755,012 58,353,563 79.7% 71.2% 40,786,550 143.1%
06/30/12 302,006,850 238,869,992 63,136,858 79.1% 66.3% 39,975,054 157.9%
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6
APPENDICES
x APPENDIX A – ACTUARIAL METHODS AND ASSUMPTIONS
x APPENDIX B – PRINCIPAL PLAN PROVISIONS
x APPENDIX C – SUMMARY OF PARTICIPANT DATA
x APPENDIX D – GLOSSARY OF ACTUARIAL TERMS
APPENDIX A
ACTUARIAL METHODS AND ASSUMPTIONS
x ACTUARIAL DATA
x ACTUARIAL METHODS
x ACTUARIAL ASSUMPTIONS
x MISCELLANEOUS
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS
A-1
Actuarial Data
As stated in the Actuarial Certification, the data, which serves as the basis of this valuation, has been
obtained from the various CalPERS databases. We have reviewed the valuation data and believe that it is
reasonable and appropriate in aggregate. We are unaware of any potential data issues that would have a
material effect on the results of this valuation, except that data does not always contain the latest salary information for former members now in reciprocal systems and does not recognize the potential for
unusually large salary deviation in certain cases such as elected officials. Therefore, salary information in
these cases may not be accurate. These situations are relatively infrequent, however, and when they do
occur, they generally do not have a material impact on the employer contribution rates.
Actuarial Methods
Funding Method
The actuarial funding method used for the Retirement Program is the Entry Age Normal Cost Method. Under this method, projected benefits are determined for all members and the associated liabilities are spread in a
manner that produces level annual cost as a percent of pay in each year from the age of hire (entry age) to
the assumed retirement age. The cost allocated to the current fiscal year is called the normal cost.
The actuarial accrued liability for active members is then calculated as the portion of the total cost of the
plan allocated to prior years. The actuarial accrued liability for members currently receiving benefits, for
active members beyond the assumed retirement age, and for members entitled to deferred benefits, is equal to the present value of the benefits expected to be paid. No normal costs are applicable for these
participants.
The excess of the total actuarial accrued liability over the actuarial value of plan assets is called the
unfunded actuarial accrued liability. Funding requirements are determined by adding the normal cost and an
amortization of the unfunded liability as a level percentage of assumed future payrolls. All changes in
liability due to plan amendments, changes in actuarial assumptions, or changes in actuarial methodology are amortized separately over a 20-year period. All new gains or losses are tracked and amortized over a rolling
30-year period. If a plan’s accrued liability exceeds the actuarial value of assets, the annual contribution
with respect to the total unfunded liability may not be less than the amount produced by a 30-year
amortization of the unfunded liability.
Additional contributions will be required for any plan or pool if their cash flows hamper adequate funding
progress by preventing the expected funded status on a market value of assets basis to either:
x Increase by at least 15% by June 30, 2043; or
x Reach a level of 75% funded by June 30, 2043
The necessary additional contribution will be obtained by changing the amortization period of the gains and
losses, except for those occurring in the fiscal years 2008-2009, 2009-2010, and 2010-2011 to a period,
which will result in the satisfaction of the above criteria. CalPERS actuaries will reassess the criteria above
when performing each future valuation to determine whether or not additional contributions are necessary.
An exception to the funding rules above is used whenever the application of such rules results in
inconsistencies. In these cases, a “fresh start” approach is used. This simply means that the current
unfunded actuarial liability is projected and amortized over a set number of years. As mentioned above, if
the annual contribution on the total unfunded liability was less than the amount produced by a 30-year
amortization of the unfunded liability, the plan actuary would implement a 30-year fresh start. However, in
the case of a 30-year fresh start, just the unfunded liability not already in the (gain)/loss base (which is
already amortized over 30 years), will go into the new fresh start base. In addition, a fresh start is needed in the following situations:
1) When a positive payment would be required on a negative unfunded actuarial liability (or
conversely a negative payment on a positive unfunded actuarial liability); or
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS
A-2
2) When there are excess assets, rather than an unfunded liability. In this situation, a 30-year fresh start is used, unless a longer fresh start is needed to avoid a negative total rate.
It should be noted that the actuary may choose to use a fresh start under other circumstances. In all cases,
the fresh start period is set by the actuary at what is deemed appropriate; however, the period will not be
less than five years, nor greater than 30 years.
Asset Valuation Method
In order to dampen the effect of short-term market value fluctuations on employer contribution rates, the
following asset smoothing technique is used. First, an Expected Value of Assets is computed by bringing
forward the prior year’s Actuarial Value of Assets and the contributions received and benefits paid during the
year at the assumed actuarial rate of return. The Actuarial Value of Assets is then computed as the
Expected Value of Assets plus one-fifteenth of the difference between the actual Market Value of Assets and
the Expected Value of Assets, as of the valuation date. However, in no case will the Actuarial Value of Assets be less than 80% or greater than 120% of the actual Market Value of Assets.
In June 2009, the CalPERS Board adopted changes to the asset smoothing method in order to phase in over
a three-year period the impact of the negative -24 percent investment loss experienced by CalPERS in fiscal
year 2008-2009. The following changes were adopted:
x Increase the corridor limits for the actuarial value of assets from 80 percent/120 percent of market
value to 60 percent/140 percent of market value on June 30, 2009 x Reduce the corridor limits for the actuarial value of assets to 70 percent/130 percent of market
value on June 30, 2010
x Return to the 80 percent/120 percent of market value corridor limits for the actuarial value of
assets on June 30, 2011 and thereafter
On April 17, 2013, the CalPERS Board of Administration approved a recommendation to change
the CalPERS amortization and rate smoothing policies. Beginning with the June 30, 2013
valuations that set the 2015-16 rates, CalPERS will employ an amortization and smoothing policy that will pay for all gains and losses over a fixed 30-year period with the increases or
decreases in the rate spread directly over a 5-year period. Details of the agenda item can be
found on our website CalPERS On-Line:
http://www.calpers.ca.gov/index.jsp?bc=/about/committee-meetings/archives/pension-201304.xml
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS
A-3
Actuarial Assumptions
Economic Assumptions
Discount Rate
7.5% compounded annually (net of expenses). This assumption is used for all plans.
Termination Liability Discount Rate
The discount rate used for termination valuation is a weighted average of the 10 and 30-year US
Treasury yields in effect on the valuation date that equal the duration of the pension liabilities. For
purposes of this hypothetical termination liability estimate, the discount rate used, 2.98 percent, is
the yield on the 30-year US Treasury Separate Trading of Registered Interest and Principal of
Securities (STRIPS) as of June 30, 2012. Please note, as of June 30, 2013 the 30-year STRIPS yield was 3.72 percent.
Salary Growth
Annual increases vary by category, entry age, and duration of service. A sample of assumed
increases are shown below.
Public Agency Miscellaneous
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1420 0.1240 0.0980
1 0.1190 0.1050 0.0850
2 0.1010 0.0910 0.0750
3 0.0880 0.0800 0.0670
4 0.0780 0.0710 0.0610
5 0.0700 0.0650 0.0560
10 0.0480 0.0460 0.0410
15 0.0430 0.0410 0.0360
20 0.0390 0.0370 0.0330
25 0.0360 0.0360 0.0330
30 0.0360 0.0360 0.0330
Public Agency Fire
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1050 0.1050 0.1020
1 0.0950 0.0940 0.0850
2 0.0870 0.0830 0.0700
3 0.0800 0.0750 0.0600
4 0.0740 0.0680 0.0510
5 0.0690 0.0620 0.0450
10 0.0510 0.0460 0.0350
15 0.0410 0.0390 0.0340
20 0.0370 0.0360 0.0330
25 0.0350 0.0350 0.0330
30 0.0350 0.0350 0.0330
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS
A-4
Salary Growth (continued)
Public Agency Police
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1090 0.1090 0.1090
1 0.0930 0.0930 0.0930
2 0.0810 0.0810 0.0780
3 0.0720 0.0700 0.0640
4 0.0650 0.0610 0.0550
5 0.0590 0.0550 0.0480
10 0.0450 0.0420 0.0340
15 0.0410 0.0390 0.0330
20 0.0370 0.0360 0.0330
25 0.0350 0.0340 0.0330
30 0.0350 0.0340 0.0330
Public Agency County Peace Officers
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1290 0.1290 0.1290
1 0.1090 0.1060 0.1030
2 0.0940 0.0890 0.0840
3 0.0820 0.0770 0.0710
4 0.0730 0.0670 0.0610
5 0.0660 0.0600 0.0530
10 0.0460 0.0420 0.0380
15 0.0410 0.0380 0.0360
20 0.0370 0.0360 0.0340
25 0.0350 0.0340 0.0330
30 0.0350 0.0340 0.0330
Schools
Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40)
0 0.1080 0.0960 0.0820
1 0.0940 0.0850 0.0740
2 0.0840 0.0770 0.0670
3 0.0750 0.0700 0.0620
4 0.0690 0.0640 0.0570
5 0.0630 0.0600 0.0530
10 0.0450 0.0440 0.0410
15 0.0390 0.0380 0.0350 20 0.0360 0.0350 0.0320
25 0.0340 0.0340 0.0320
30 0.0340 0.0340 0.0320
x The Miscellaneous salary scale is used for Local Prosecutors.
x The Police salary scale is used for Other Safety, Local Sheriff, and School Police.
Overall Payroll Growth
3.00 percent compounded annually (used in projecting the payroll over which the unfunded liability
is amortized). This assumption is used for all plans.
Inflation
2.75 percent compounded annually. This assumption is used for all plans.
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS
A-5
Non-valued Potential Additional Liabilities
The potential liability loss for a cost-of-living increase exceeding the 2.75 percent inflation
assumption, and any potential liability loss from future member service purchases are not reflected
in the valuation.
Miscellaneous Loading Factors
Credit for Unused Sick Leave
Total years of service is increased by 1 percent for those plans that have accepted the provision
providing Credit for Unused Sick Leave.
Conversion of Employer Paid Member Contributions (EPMC)
Total years of service is increased by the Employee Contribution Rate for those plans with the
provision providing for the Conversion of Employer Paid Member Contributions (EPMC) during the final compensation period.
Norris Decision (Best Factors)
Employees hired prior to July 1, 1982 have projected benefit amounts increased in order to reflect
the use of “Best Factors” in the calculation of optional benefit forms. This is due to a 1983
Supreme Court decision, known as the Norris decision, which required males and females to be
treated equally in the determination of benefit amounts. Consequently, anyone already employed
at that time is given the best possible conversion factor when optional benefits are determined. No loading is necessary for employees hired after July 1, 1982.
Termination Liability
The termination liabilities include a 7 percent contingency load. This load is for unforeseen
improvements in mortality.
Demographic Assumptions
Pre-Retirement Mortality
Non-Industrial Death Rates vary by age and gender. Industrial Death rates vary by age. See
sample rates in table below. The non-industrial death rates are used for all plans. The industrial
death rates are used for Safety Plans (except for Local Prosecutor safety members where the
corresponding Miscellaneous Plan does not have the Industrial Death Benefit).
Non-Industrial Death Industrial Death (Not Job-Related) (Job-Related)
Age Male Female Male and Female
20 0.00047 0.00016 0.00003
25 0.00050 0.00026 0.00007
30 0.00053 0.00036 0.00010
35 0.00067 0.00046 0.00012
40 0.00087 0.00065 0.00013 45 0.00120 0.00093 0.00014
50 0.00176 0.00126 0.00015
55 0.00260 0.00176 0.00016
60 0.00395 0.00266 0.00017
65 0.00608 0.00419 0.00018
70 0.00914 0.00649 0.00019
75 0.01220 0.00878 0.00020
80 0.01527 0.01108 0.00021
Miscellaneous Plans usually have Industrial Death rates set to zero unless the agency has specifically
contracted for Industrial Death benefits. If so, each Non-Industrial Death rate shown above will be
split into two components; 99 percent will become the Non-Industrial Death rate and 1 percent will
become the Industrial Death rate.
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS
A-6
Post-Retirement Mortality
Rates vary by age, type of retirement and gender. See sample rates in table below. These rates are
used for all plans.
Healthy Recipients
Non-Industrially Disabled Industrially Disabled
(Not Job-Related) (Job-Related)
Age Male Female Male Female Male Female
50 0.00239 0.00125 0.01632 0.01245 0.00443 0.00356
55 0.00474 0.00243 0.01936 0.01580 0.00563 0.00546
60 0.00720 0.00431 0.02293 0.01628 0.00777 0.00798
65 0.01069 0.00775 0.03174 0.01969 0.01388 0.01184
70 0.01675 0.01244 0.03870 0.03019 0.02236 0.01716
75 0.03080 0.02071 0.06001 0.03915 0.03585 0.02665
80 0.05270 0.03749 0.08388 0.05555 0.06926 0.04528 85 0.09775 0.07005 0.14035 0.09577 0.11799 0.08017
90 0.16747 0.12404 0.21554 0.14949 0.16575 0.13775
95 0.25659 0.21556 0.31025 0.23055 0.26108 0.23331
100 0.34551 0.31876 0.45905 0.37662 0.40918 0.35165
105 0.58527 0.56093 0.67923 0.61523 0.64127 0.60135
110 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000
The mortality assumptions are based on mortality rates resulting from the most recent CalPERS Experience Study adopted by the CalPERS Board, first used in the June 30, 2009 valuation. For
purposes of the post-retirement mortality rates, those revised rates include 5 years of projected on-
going mortality improvement using Scale AA published by the Society of Actuaries until June 30, 2010.
There is no margin for future mortality improvement beyond the valuation date. The mortality
assumption will be reviewed with the next experience study expected to be completed for the June 30,
2013 valuation to determine an appropriate margin to be used.
Marital Status
For active members, a percentage who are married upon retirement is assumed according to
member category as shown in the following table.
Member Category Percent Married
Miscellaneous Member 85%
Local Police 90%
Local Fire 90%
Other Local Safety 90%
School Police 90%
Age of Spouse
It is assumed that female spouses are 3 years younger than male spouses are. This assumption is
used for all plans.
Terminated Members
It is assumed that terminated members refund immediately if non-vested. Terminated members
who are vested are assumed to follow the same service retirement pattern as active members but
with a load to reflect the expected higher rates of retirement, especially at lower ages. The following table shows the load factors that are applied to the service retirement assumption for
active members to obtain the service retirement pattern for separated vested members:
Age Load Factor
50 450%
51 250%
52 through 56 200%
57 through 60 150%
61 through 64 125%
65 and above 100% (no change)
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS
A-7
Termination with Refund Rates vary by entry age and service for Miscellaneous Plans. Rates vary by service for Safety Plans.
See sample rates in tables below.
Public Agency Miscellaneous
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45
0 0.1742 0.1674 0.1606 0.1537 0.1468 0.1400
1 0.1545 0.1477 0.1409 0.1339 0.1271 0.1203
2 0.1348 0.1280 0.1212 0.1142 0.1074 0.1006
3 0.1151 0.1083 0.1015 0.0945 0.0877 0.0809
4 0.0954 0.0886 0.0818 0.0748 0.0680 0.0612
5 0.0212 0.0193 0.0174 0.0155 0.0136 0.0116
10 0.0138 0.0121 0.0104 0.0088 0.0071 0.0055
15 0.0060 0.0051 0.0042 0.0032 0.0023 0.0014
20 0.0037 0.0029 0.0021 0.0013 0.0005 0.0001
25 0.0017 0.0011 0.0005 0.0001 0.0001 0.0001
30 0.0005 0.0001 0.0001 0.0001 0.0001 0.0001
35 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001
Public Agency Safety
Duration of Service Fire Police County Peace Officer
0 0.0710 0.1013 0.0997
1 0.0554 0.0636 0.0782
2 0.0398 0.0271 0.0566
3 0.0242 0.0258 0.0437
4 0.0218 0.0245 0.0414
5 0.0029 0.0086 0.0145
10 0.0009 0.0053 0.0089
15 0.0006 0.0027 0.0045
20 0.0005 0.0017 0.0020
25 0.0003 0.0012 0.0009
30 0.0003 0.0009 0.0006
35 0.0003 0.0009 0.0006
The Police Termination and Refund rates are also used for Public Agency Local Prosecutors, Other Safety, Local Sheriff and School Police.
Schools
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45
0 0.1730 0.1627 0.1525 0.1422 0.1319 0.1217
1 0.1585 0.1482 0.1379 0.1277 0.1174 0.1071
2 0.1440 0.1336 0.1234 0.1131 0.1028 0.0926
3 0.1295 0.1192 0.1089 0.0987 0.0884 0.0781
4 0.1149 0.1046 0.0944 0.0841 0.0738 0.0636
5 0.0278 0.0249 0.0221 0.0192 0.0164 0.0135
10 0.0172 0.0147 0.0122 0.0098 0.0074 0.0049
15 0.0115 0.0094 0.0074 0.0053 0.0032 0.0011
20 0.0073 0.0055 0.0038 0.0020 0.0002 0.0002
25 0.0037 0.0023 0.0010 0.0002 0.0002 0.0002
30 0.0015 0.0003 0.0002 0.0002 0.0002 0.0002
35 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS
A-8
Termination with Vested Benefits
Rates vary by entry age and service for Miscellaneous Plans. Rates vary by service for Safety Plans.
See sample rates in tables below.
Public Agency Miscellaneous
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40
5 0.0656 0.0597 0.0537 0.0477 0.0418
10 0.0530 0.0466 0.0403 0.0339 0.0000
15 0.0443 0.0373 0.0305 0.0000 0.0000
20 0.0333 0.0261 0.0000 0.0000 0.0000
25 0.0212 0.0000 0.0000 0.0000 0.0000
30 0.0000 0.0000 0.0000 0.0000 0.0000
35 0.0000 0.0000 0.0000 0.0000 0.0000
Public Agency Safety
Duration of
Service Fire Police
County Peace
Officer
5 0.0162 0.0163 0.0265
10 0.0061 0.0126 0.0204
15 0.0058 0.0082 0.0130
20 0.0053 0.0065 0.0074
25 0.0047 0.0058 0.0043
30 0.0045 0.0056 0.0030
35 0.0000 0.0000 0.0000
x When a member is eligible to retire, the termination with vested benefits probability is set to
zero.
x After termination with vested benefits, a miscellaneous member is assumed to retire at age 59
and a safety member at age 54. x The Police Termination with vested benefits rates are also used for Public Agency Local
Prosecutors, Other Safety, Local Sheriff and School Police.
Schools
Duration of
Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40
5 0.0816 0.0733 0.0649 0.0566 0.0482
10 0.0629 0.0540 0.0450 0.0359 0.0000
15 0.0537 0.0440 0.0344 0.0000 0.0000
20 0.0420 0.0317 0.0000 0.0000 0.0000
25 0.0291 0.0000 0.0000 0.0000 0.0000
30 0.0000 0.0000 0.0000 0.0000 0.0000
35 0.0000 0.0000 0.0000 0.0000 0.0000
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS
A-9
Non-Industrial (Not Job-Related) Disability Rates vary by age and gender for Miscellaneous Plans. Rates vary by age and category for Safety
Plans.
Miscellaneous Fire Police County Peace Officer Schools
Age Male Female Male and Female Male and Female Male and Female Male Female
20 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001
25 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001
30 0.0002 0.0002 0.0001 0.0002 0.0001 0.0002 0.0001
35 0.0006 0.0009 0.0001 0.0003 0.0004 0.0006 0.0004
40 0.0015 0.0016 0.0001 0.0004 0.0007 0.0014 0.0009
45 0.0025 0.0024 0.0002 0.0005 0.0013 0.0028 0.0017
50 0.0033 0.0031 0.0005 0.0008 0.0018 0.0044 0.0030
55 0.0037 0.0031 0.0010 0.0013 0.0010 0.0049 0.0034
60 0.0038 0.0025 0.0015 0.0020 0.0006 0.0043 0.0024
x The Miscellaneous Non-Industrial Disability rates are used for Local Prosecutors. x The Police Non-Industrial Disability rates are also used for Other Safety, Local Sheriff and School Police.
Industrial (Job-Related) Disability
Rates vary by age and category.
Age Fire Police County Peace Officer
20 0.0002 0.0007 0.0003
25 0.0012 0.0032 0.0015
30 0.0025 0.0064 0.0031
35 0.0037 0.0097 0.0046
40 0.0049 0.0129 0.0063
45 0.0061 0.0161 0.0078
50 0.0074 0.0192 0.0101
55 0.0721 0.0668 0.0173
60 0.0721 0.0668 0.0173
x The Police Industrial Disability rates are also used for Local Sheriff and Other Safety.
x Fifty Percent of the Police Industrial Disability rates are used for School Police.
x One Percent of the Police Industrial Disability rates are used for Local Prosecutors.
x Normally, rates are zero for Miscellaneous Plans unless the agency has specifically contracted
for Industrial Disability benefits. If so, each miscellaneous non-industrial disability rate will be
split into two components: 50 percent will become the Non-Industrial Disability rate and 50
percent will become the Industrial Disability rate.
Service Retirement
Retirement rates vary by age, service, and formula, except for the safety ½ @ 55 and 2% @ 55
formulas, where retirement rates vary by age only.
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS
A-10
Service Retirement
Public Agency Miscellaneous 1.5% @ 65
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.008 0.011 0.013 0.015 0.017 0.019
51 0.007 0.010 0.012 0.013 0.015 0.017
52 0.010 0.014 0.017 0.019 0.021 0.024
53 0.008 0.012 0.015 0.017 0.019 0.022
54 0.012 0.016 0.019 0.022 0.025 0.028
55 0.018 0.025 0.031 0.035 0.038 0.043
56 0.015 0.021 0.025 0.029 0.032 0.036
57 0.020 0.028 0.033 0.038 0.043 0.048
58 0.024 0.033 0.040 0.046 0.052 0.058
59 0.028 0.039 0.048 0.054 0.060 0.067
60 0.049 0.069 0.083 0.094 0.105 0.118
61 0.062 0.087 0.106 0.120 0.133 0.150
62 0.104 0.146 0.177 0.200 0.223 0.251
63 0.099 0.139 0.169 0.191 0.213 0.239
64 0.097 0.136 0.165 0.186 0.209 0.233
65 0.140 0.197 0.240 0.271 0.302 0.339
66 0.092 0.130 0.157 0.177 0.198 0.222
67 0.129 0.181 0.220 0.249 0.277 0.311
68 0.092 0.129 0.156 0.177 0.197 0.221
69 0.092 0.130 0.158 0.178 0.199 0.224
70 0.103 0.144 0.175 0.198 0.221 0.248
Public Agency Miscellaneous 2% @ 60
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.011 0.015 0.018 0.021 0.023 0.026
51 0.009 0.013 0.016 0.018 0.020 0.023
52 0.013 0.018 0.022 0.025 0.028 0.031
53 0.011 0.016 0.019 0.022 0.025 0.028
54 0.015 0.021 0.025 0.028 0.032 0.036
55 0.023 0.032 0.039 0.044 0.049 0.055
56 0.019 0.027 0.032 0.037 0.041 0.046
57 0.025 0.035 0.042 0.048 0.054 0.060
58 0.030 0.042 0.051 0.058 0.065 0.073
59 0.035 0.049 0.060 0.068 0.076 0.085
60 0.062 0.087 0.105 0.119 0.133 0.149
61 0.079 0.110 0.134 0.152 0.169 0.190
62 0.132 0.186 0.225 0.255 0.284 0.319
63 0.126 0.178 0.216 0.244 0.272 0.305
64 0.122 0.171 0.207 0.234 0.262 0.293
65 0.173 0.243 0.296 0.334 0.373 0.418
66 0.114 0.160 0.194 0.219 0.245 0.274
67 0.159 0.223 0.271 0.307 0.342 0.384
68 0.113 0.159 0.193 0.218 0.243 0.273
69 0.114 0.161 0.195 0.220 0.246 0.276
70 0.127 0.178 0.216 0.244 0.273 0.306
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS
A-11
Service Retirement
Public Agency Miscellaneous 2% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.015 0.020 0.024 0.029 0.033 0.039
51 0.013 0.016 0.020 0.024 0.027 0.033
52 0.014 0.018 0.022 0.027 0.030 0.036
53 0.017 0.022 0.027 0.032 0.037 0.043
54 0.027 0.034 0.041 0.049 0.056 0.067
55 0.050 0.064 0.078 0.094 0.107 0.127
56 0.045 0.057 0.069 0.083 0.095 0.113
57 0.048 0.061 0.074 0.090 0.102 0.122
58 0.052 0.066 0.080 0.097 0.110 0.131
59 0.060 0.076 0.092 0.111 0.127 0.151
60 0.072 0.092 0.112 0.134 0.153 0.182
61 0.089 0.113 0.137 0.165 0.188 0.224
62 0.128 0.162 0.197 0.237 0.270 0.322
63 0.129 0.164 0.199 0.239 0.273 0.325
64 0.116 0.148 0.180 0.216 0.247 0.294
65 0.174 0.221 0.269 0.323 0.369 0.439
66 0.135 0.171 0.208 0.250 0.285 0.340
67 0.133 0.169 0.206 0.247 0.282 0.336
68 0.118 0.150 0.182 0.219 0.250 0.297
69 0.116 0.147 0.179 0.215 0.246 0.293
70 0.138 0.176 0.214 0.257 0.293 0.349
Public Agency Miscellaneous 2.5% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.026 0.033 0.040 0.048 0.055 0.062
51 0.021 0.026 0.032 0.038 0.043 0.049
52 0.021 0.026 0.032 0.038 0.043 0.049
53 0.026 0.033 0.040 0.048 0.055 0.062
54 0.043 0.054 0.066 0.078 0.089 0.101
55 0.088 0.112 0.136 0.160 0.184 0.208
56 0.055 0.070 0.085 0.100 0.115 0.130
57 0.061 0.077 0.094 0.110 0.127 0.143
58 0.072 0.091 0.111 0.130 0.150 0.169
59 0.083 0.105 0.128 0.150 0.173 0.195
60 0.088 0.112 0.136 0.160 0.184 0.208
61 0.083 0.105 0.128 0.150 0.173 0.195
62 0.121 0.154 0.187 0.220 0.253 0.286
63 0.105 0.133 0.162 0.190 0.219 0.247
64 0.105 0.133 0.162 0.190 0.219 0.247
65 0.143 0.182 0.221 0.260 0.299 0.338
66 0.105 0.133 0.162 0.190 0.219 0.247
67 0.105 0.133 0.162 0.190 0.219 0.247
68 0.105 0.133 0.162 0.190 0.219 0.247
69 0.105 0.133 0.162 0.190 0.219 0.247
70 0.125 0.160 0.194 0.228 0.262 0.296
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS
A-12
Service Retirement
Public Agency Miscellaneous 2.7% @ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.028 0.035 0.043 0.050 0.058 0.065
51 0.022 0.028 0.034 0.040 0.046 0.052
52 0.022 0.028 0.034 0.040 0.046 0.052
53 0.028 0.035 0.043 0.050 0.058 0.065
54 0.044 0.056 0.068 0.080 0.092 0.104
55 0.091 0.116 0.140 0.165 0.190 0.215
56 0.061 0.077 0.094 0.110 0.127 0.143
57 0.063 0.081 0.098 0.115 0.132 0.150
58 0.074 0.095 0.115 0.135 0.155 0.176
59 0.083 0.105 0.128 0.150 0.173 0.195
60 0.088 0.112 0.136 0.160 0.184 0.208
61 0.085 0.109 0.132 0.155 0.178 0.202
62 0.124 0.158 0.191 0.225 0.259 0.293
63 0.107 0.137 0.166 0.195 0.224 0.254
64 0.107 0.137 0.166 0.195 0.224 0.254
65 0.146 0.186 0.225 0.265 0.305 0.345
66 0.107 0.137 0.166 0.195 0.224 0.254
67 0.107 0.137 0.166 0.195 0.224 0.254
68 0.107 0.137 0.166 0.195 0.224 0.254
69 0.107 0.137 0.166 0.195 0.224 0.254
70 0.129 0.164 0.199 0.234 0.269 0.304
Public Agency Miscellaneous 3% @ 60
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.026 0.033 0.040 0.048 0.055 0.062
51 0.021 0.026 0.032 0.038 0.043 0.049
52 0.019 0.025 0.030 0.035 0.040 0.046
53 0.025 0.032 0.038 0.045 0.052 0.059
54 0.039 0.049 0.060 0.070 0.081 0.091
55 0.083 0.105 0.128 0.150 0.173 0.195
56 0.055 0.070 0.085 0.100 0.115 0.130
57 0.061 0.077 0.094 0.110 0.127 0.143
58 0.072 0.091 0.111 0.130 0.150 0.169
59 0.080 0.102 0.123 0.145 0.167 0.189
60 0.094 0.119 0.145 0.170 0.196 0.221
61 0.088 0.112 0.136 0.160 0.184 0.208
62 0.127 0.161 0.196 0.230 0.265 0.299
63 0.110 0.140 0.170 0.200 0.230 0.260
64 0.110 0.140 0.170 0.200 0.230 0.260
65 0.149 0.189 0.230 0.270 0.311 0.351
66 0.110 0.140 0.170 0.200 0.230 0.260
67 0.110 0.140 0.170 0.200 0.230 0.260
68 0.110 0.140 0.170 0.200 0.230 0.260
69 0.110 0.140 0.170 0.200 0.230 0.260
70 0.132 0.168 0.204 0.240 0.276 0.312
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS
A-13
Service Retirement
Public Agency Fire ½ @ 55 and 2% @ 55
Age 50
51
52
53
54
55
Rate 0.01588
0.00000
0.03442
0.01990
0.04132
0.07513
Age 56
57
58
59
60
Rate 0.11079
0.00000
0.09499
0.04409
1.00000
Public Agency Police ½ @ 55 and 2% @ 55
Age
50 51
52
53
54
55
Rate
0.02552 0.00000
0.01637
0.02717
0.00949
0.16674
Age
56 57
58
59
60
Rate
0.06921 0.05113
0.07241
0.07043
1.00000
Public Agency Police 2%@ 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.014 0.014 0.014 0.014 0.025 0.045
51 0.012 0.012 0.012 0.012 0.023 0.040
52 0.026 0.026 0.026 0.026 0.048 0.086
53 0.052 0.052 0.052 0.052 0.096 0.171
54 0.070 0.070 0.070 0.070 0.128 0.227
55 0.090 0.090 0.090 0.090 0.165 0.293
56 0.064 0.064 0.064 0.064 0.117 0.208
57 0.071 0.071 0.071 0.071 0.130 0.232
58 0.063 0.063 0.063 0.063 0.115 0.205
59 0.140 0.140 0.140 0.140 0.174 0.254
60 0.140 0.140 0.140 0.140 0.172 0.251
61 0.140 0.140 0.140 0.140 0.172 0.251
62 0.140 0.140 0.140 0.140 0.172 0.251
63 0.140 0.140 0.140 0.140 0.172 0.251
64 0.140 0.140 0.140 0.140 0.172 0.251
65 1.000 1.000 1.000 1.000 1.000 1.000
x These rates also apply to Local Prosecutors, Local Sheriff, School Police and Other Safety.
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS
A-14
Service Retirement
Public Agency Fire 2%@50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.007 0.007 0.007 0.007 0.010 0.015
51 0.008 0.008 0.008 0.008 0.013 0.019
52 0.017 0.017 0.017 0.017 0.027 0.040
53 0.047 0.047 0.047 0.047 0.072 0.107
54 0.064 0.064 0.064 0.064 0.098 0.147
55 0.087 0.087 0.087 0.087 0.134 0.200
56 0.078 0.078 0.078 0.078 0.120 0.180
57 0.090 0.090 0.090 0.090 0.139 0.208
58 0.079 0.079 0.079 0.079 0.122 0.182
59 0.073 0.073 0.073 0.073 0.112 0.168
60 0.114 0.114 0.114 0.114 0.175 0.262
61 0.114 0.114 0.114 0.114 0.175 0.262
62 0.114 0.114 0.114 0.114 0.175 0.262
63 0.114 0.114 0.114 0.114 0.175 0.262
64 0.114 0.114 0.114 0.114 0.175 0.262
65 1.000 1.000 1.000 1.000 1.000 1.000
Public Agency Police 3%@ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.019 0.019 0.019 0.019 0.040 0.060
51 0.024 0.024 0.024 0.024 0.049 0.074
52 0.024 0.024 0.024 0.024 0.051 0.077
53 0.059 0.059 0.059 0.059 0.121 0.183
54 0.069 0.069 0.069 0.069 0.142 0.215
55 0.116 0.116 0.116 0.116 0.240 0.363
56 0.076 0.076 0.076 0.076 0.156 0.236
57 0.058 0.058 0.058 0.058 0.120 0.181
58 0.076 0.076 0.076 0.076 0.157 0.237
59 0.094 0.094 0.094 0.094 0.193 0.292
60 0.141 0.141 0.141 0.141 0.290 0.438
61 0.094 0.094 0.094 0.094 0.193 0.292
62 0.118 0.118 0.118 0.118 0.241 0.365
63 0.094 0.094 0.094 0.094 0.193 0.292
64 0.094 0.094 0.094 0.094 0.193 0.292
65 1.000 1.000 1.000 1.000 1.000 1.000
x These rates also apply to Local Prosecutors, Local Sheriff, School Police and Other Safety.
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS
A-15
Service Retirement
Public Agency Fire 3%@55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.012 0.012 0.012 0.018 0.028 0.033
51 0.008 0.008 0.008 0.012 0.019 0.022
52 0.018 0.018 0.018 0.027 0.042 0.050
53 0.043 0.043 0.043 0.062 0.098 0.114
54 0.057 0.057 0.057 0.083 0.131 0.152
55 0.092 0.092 0.092 0.134 0.211 0.246
56 0.081 0.081 0.081 0.118 0.187 0.218
57 0.100 0.100 0.100 0.146 0.230 0.268
58 0.081 0.081 0.081 0.119 0.187 0.219
59 0.078 0.078 0.078 0.113 0.178 0.208
60 0.117 0.117 0.117 0.170 0.267 0.312
61 0.078 0.078 0.078 0.113 0.178 0.208
62 0.098 0.098 0.098 0.141 0.223 0.260
63 0.078 0.078 0.078 0.113 0.178 0.208
64 0.078 0.078 0.078 0.113 0.178 0.208
65 1.000 1.000 1.000 1.000 1.000 1.000
Public Agency Police 3%@ 50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.070 0.070 0.070 0.131 0.193 0.249
51 0.050 0.050 0.050 0.095 0.139 0.180
52 0.061 0.061 0.061 0.116 0.171 0.220
53 0.069 0.069 0.069 0.130 0.192 0.247
54 0.071 0.071 0.071 0.134 0.197 0.255
55 0.090 0.090 0.090 0.170 0.250 0.322
56 0.069 0.069 0.069 0.130 0.191 0.247
57 0.080 0.080 0.080 0.152 0.223 0.288
58 0.087 0.087 0.087 0.164 0.242 0.312
59 0.090 0.090 0.090 0.170 0.251 0.323
60 0.135 0.135 0.135 0.255 0.377 0.485
61 0.090 0.090 0.090 0.170 0.251 0.323
62 0.113 0.113 0.113 0.213 0.314 0.404
63 0.090 0.090 0.090 0.170 0.251 0.323
64 0.090 0.090 0.090 0.170 0.251 0.323
65 1.000 1.000 1.000 1.000 1.000 1.000
x These rates also apply to Local Prosecutors, Local Sheriff, School Police and Other Safety.
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS
A-16
Service Retirement
Public Agency Fire 3%@50
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.034 0.034 0.034 0.048 0.068 0.080
51 0.046 0.046 0.046 0.065 0.092 0.109
52 0.069 0.069 0.069 0.097 0.138 0.163
53 0.084 0.084 0.084 0.117 0.166 0.197
54 0.103 0.103 0.103 0.143 0.204 0.241
55 0.127 0.127 0.127 0.177 0.252 0.298
56 0.121 0.121 0.121 0.169 0.241 0.285
57 0.101 0.101 0.101 0.141 0.201 0.238
58 0.118 0.118 0.118 0.165 0.235 0.279
59 0.100 0.100 0.100 0.140 0.199 0.236
60 0.150 0.150 0.150 0.210 0.299 0.354
61 0.100 0.100 0.100 0.140 0.199 0.236
62 0.125 0.125 0.125 0.175 0.249 0.295
63 0.100 0.100 0.100 0.140 0.199 0.236
64 0.100 0.100 0.100 0.140 0.199 0.236
65 1.000 1.000 1.000 1.000 1.000 1.000
Schools 2%@ 55
Duration of Service
Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years
50 0.005 0.009 0.013 0.015 0.016 0.018
51 0.005 0.010 0.014 0.017 0.019 0.021
52 0.006 0.012 0.017 0.020 0.022 0.025
53 0.007 0.014 0.019 0.023 0.026 0.029
54 0.012 0.024 0.033 0.039 0.044 0.049
55 0.024 0.048 0.067 0.079 0.088 0.099
56 0.020 0.039 0.055 0.065 0.072 0.081
57 0.021 0.042 0.059 0.070 0.078 0.087
58 0.025 0.050 0.070 0.083 0.092 0.103
59 0.029 0.057 0.080 0.095 0.105 0.118
60 0.037 0.073 0.102 0.121 0.134 0.150
61 0.046 0.090 0.126 0.149 0.166 0.186
62 0.076 0.151 0.212 0.250 0.278 0.311
63 0.069 0.136 0.191 0.225 0.251 0.281
64 0.067 0.133 0.185 0.219 0.244 0.273
65 0.091 0.180 0.251 0.297 0.331 0.370
66 0.072 0.143 0.200 0.237 0.264 0.295
67 0.067 0.132 0.185 0.218 0.243 0.272
68 0.060 0.118 0.165 0.195 0.217 0.243
69 0.067 0.133 0.187 0.220 0.246 0.275
70 0.066 0.131 0.183 0.216 0.241 0.270
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS
A-17
Miscellaneous
Superfunded Status
Prior to enactment of the Public Employees’ Pension Reform Act (PEPRA) that became effective January 1,
2013, a plan in superfunded status (actuarial value of assets exceeding present value of benefits) would normally pay a zero employer contribution rate while also being permitted to use its superfunded assets to
pay its employees’ normal member contributions.
However, Section 7522.52(a) of PEPRA states, “In any fiscal year a public employer’s contribution to a
defined benefit plan, in combination with employee contributions to that defined benefit plan, shall not be
less than the total normal cost rate…” This means that not only must employers pay their employer normal
cost regardless of plan surplus, but also, employers may no longer use superfunded assets to pay employee normal member contributions.
Internal Revenue Code Section 415
The limitations on benefits imposed by Internal Revenue Code Section 415 are taken into account in this
valuation. Each year the impact of any changes in this limitation since the prior valuation is included and
amortized as part of the actuarial gain or loss base. This results in lower contributions for those employers contributing to the Replacement Benefit Fund and protects CalPERS from prefunding expected benefits in
excess of limits imposed by federal tax law.
Internal Revenue Code Section 401(a)(17)
The limitations on compensation imposed by Internal Revenue Code Section 401(a)(17) are taken into
account in this valuation. Each year, the impact of any changes in the compensation limitation since the
prior valuation is included and amortized as part of the actuarial gain or loss base.
PEPRA Assumptions
The Public Employees’ Pension Reform Act of 2013 (PEPRA) mandated new benefit formulas and new
member contributions for new members (as defined by PEPRA) hired after January 1, 2013. For non-pooled
plans, these new members will first be reflected in the June 30, 2013 non-pooled plan valuations. New
members in pooled plans will first be reflected in the new Miscellaneous and Safety risk pools created by the CalPERS Board in November 2012 in response to the passage of PEPRA, also beginning with the June 30,
2013 valuation. Different assumptions for these new PEPRA members will be disclosed in the 2013
valuation.
APPENDIX B
PRINCIPAL PLAN PROVISIONS
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX B MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH
PRINCIPAL PLAN PROVISIONS
B-1
The following is a description of the principal plan provisions used in calculating costs and liabilities. We have indicated whether a plan provision is standard or optional. Standard benefits are applicable to all members while
optional benefits vary among employers. Optional benefits that apply to a single period of time, such as Golden
Handshakes, have not been included. Many of the statements in this summary are general in nature, and are
intended to provide an easily understood summary of the complex Public Employees’ Retirement Law. The law itself
governs in all situations.
PEPRA Benefit Changes
The Public Employees’ Pension Reform Act of 2013 (PEPRA) requires new benefits and member contributions for new
members as defined by PEPRA, that are hired after January 1, 2013. For non-pooled plans, these members will first
be reflected in June 30, 2013 non-pooled plan valuations. Members in pooled plans will be reflected in the new
Miscellaneous and Safety risk pools created by the CalPERS Board in November 2012 in response to the passage of
PEPRA, beginning with the June 30, 2013 valuation.
Service Retirement
Eligibility
A classic CalPERS member becomes eligible for Service Retirement upon attainment of age 50 with at least 5 years of
credited service (total service across all CalPERS employers, and with certain other Retirement Systems with which
CalPERS has reciprocity agreements). For employees hired into a plan with the 1.5% at 65 formula, eligibility for
service retirement is age 55 with at least 5 years of service.
Benefit
The Service Retirement benefit is a monthly allowance equal to the product of the benefit factor, years of service,
and final compensation.
x The benefit factor depends on the benefit formula specified in your agency’s contract. The table below shows
the factors for each of the available formulas. Factors vary by the member’s age at retirement. Listed are the
factors for retirement at whole year ages:
Miscellaneous Plan Formulas
Retirement Age 1.5% at 65 2% at 60 2% at 55 2.5% at 55 2.7% at 55 3% at 60
50 0.5000% 1.092% 1.426% 2.0% 2.0% 2.0%
51 0.5667% 1.156% 1.522% 2.1% 2.14% 2.1%
52 0.6334% 1.224% 1.628% 2.2% 2.28% 2.2%
53 0.7000% 1.296% 1.742% 2.3% 2.42% 2.3%
54 0.7667% 1.376% 1.866% 2.4% 2.56% 2.4%
55 0.8334% 1.460% 2.0% 2.5% 2.7% 2.5%
56 0.9000% 1.552% 2.052% 2.5% 2.7% 2.6%
57 0.9667% 1.650% 2.104% 2.5% 2.7% 2.7%
58 1.0334% 1.758% 2.156% 2.5% 2.7% 2.8%
59 1.1000% 1.874% 2.210% 2.5% 2.7% 2.9%
60 1.1667% 2.0% 2.262% 2.5% 2.7% 3.0%
61 1.2334% 2.134% 2.314% 2.5% 2.7% 3.0%
62 1.3000% 2.272% 2.366% 2.5% 2.7% 3.0%
63 1.3667% 2.418% 2.418% 2.5% 2.7% 3.0%
64 1.4334% 2.418% 2.418% 2.5% 2.7% 3.0%
65 & Up 1.5000% 2.418% 2.418% 2.5% 2.7% 3.0%
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX B MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH
PRINCIPAL PLAN PROVISIONS
B-2
Safety Plan Formulas
Retirement
Age ½ at 55 * 2% at 55 2% at 50 3% at 55 3% at 50
50 1.783% 1.426% 2.0% 2.40% 3.0%
51 1.903% 1.522% 2.14% 2.52% 3.0%
52 2.035% 1.628% 2.28% 2.64% 3.0%
53 2.178% 1.742% 2.42% 2.76% 3.0%
54 2.333% 1.866% 2.56% 2.88% 3.0%
55 & Up 2.5% 2.0% 2.7% 3.0% 3.0%
* For this formula, the benefit factor also varies by entry age. The factors shown are for members with an entry age of 35 or greater. If entry age is less than 35, then the age 55 benefit factor is 50% divided by the difference between
age 55 and entry age. The benefit factor for ages prior to age 55 is the same proportion of the age 55 benefit factor
as in the above table.
x The years of service is the amount credited by CalPERS to a member while he or she is employed in this group
(or for other periods that are recognized under the employer’s contract with CalPERS). For a member who has
earned service with multiple CalPERS employers, the benefit from each employer is calculated separately
according to each employer’s contract, and then added together for the total allowance. An agency may contract for an optional benefit where any unused sick leave accumulated at the time of retirement will be converted to
credited service at a rate of 0.004 years of service for each day of sick leave.
x The final compensation is the monthly average of the member’s highest 36 or 12 consecutive months’ full-time
equivalent monthly pay (no matter which CalPERS employer paid this compensation). The standard benefit is 36
months. Employers have the option of providing a final compensation equal to the highest 12 consecutive
months. Final compensation must be defined by the highest 36 consecutive months’ pay under the 1.5% at 65 formula.
x Employees must be covered by Social Security with the 1.5% at 65 formula. Social Security is optional for all
other benefit formulas. For employees covered by Social Security, the Modified formula is the standard benefit.
Under this type of formula, the final compensation is offset by $133.33 (or by one third if the final compensation
is less than $400). Employers may contract for the Full benefit with Social Security that will eliminate the offset
applicable to the final compensation. For employees not covered by Social Security, the Full benefit is paid with
no offsets. Auxiliary organizations of the CSUC system may elect reduced contribution rates, in which case the offset is $317 if members are not covered by Social Security or $513 if members are covered by Social Security.
x The Miscellaneous Service Retirement benefit is not capped. The Safety Service Retirement benefit is capped at
90 percent of final compensation.
Vested Deferred Retirement
Eligibility for Deferred Status
A CalPERS member becomes eligible for a deferred vested retirement benefit when he or she leaves employment,
keeps his or her contribution account balance on deposit with CalPERS, and has earned at least 5 years of credited
service (total service across all CalPERS employers, and with certain other Retirement Systems with which CalPERS
has reciprocity agreements).
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX B MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH
PRINCIPAL PLAN PROVISIONS
B-3
Eligibility to Start Receiving Benefits The CalPERS member becomes eligible to receive the deferred retirement benefit upon satisfying the eligibility
requirements for Deferred Status and upon attainment of age 50 (55 for employees hired into a 1.5% @ 65 plan).
Benefit
The vested deferred retirement benefit is the same as the Service Retirement benefit, where the benefit factor is
based on the member’s age at allowance commencement. For members who have earned service with multiple
CalPERS employers, the benefit from each employer is calculated separately according to each employer’s contract,
and then added together for the total allowance.
Non-Industrial (Non-Job Related) Disability Retirement
Eligibility
A CalPERS member is eligible for Non-Industrial Disability Retirement if he or she becomes disabled and has at least 5 years of credited service (total service across all CalPERS employers, and with certain other Retirement Systems
with which CalPERS has reciprocity agreements). There is no special age requirement. Disabled means the member is
unable to perform his or her job because of an illness or injury, which is expected to be permanent or to last
indefinitely. The illness or injury does not have to be job related. A CalPERS member must be actively employed by
any CalPERS employer at the time of disability in order to be eligible for this benefit.
Standard Benefit
The standard Non-Industrial Disability Retirement benefit is a monthly allowance equal to 1.8 percent of final compensation, multiplied by service, which is determined as follows:
x Service is CalPERS credited service, for members with less than 10 years of service or greater than 18.518 years
of service; or
x Service is CalPERS credited service plus the additional number of years that the member would have worked
until age 60, for members with at least 10 years but not more than 18.518 years of service. The maximum
benefit in this case is 33 1/3 percent of Final Compensation.
Improved Benefit
Employers have the option of providing the improved Non-Industrial Disability Retirement benefit. This benefit
provides a monthly allowance equal to 30% of final compensation for the first 5 years of service, plus 1% for each
additional year of service to a maximum of 50% of final compensation.
Members who are eligible for a larger service retirement benefit may choose to receive that benefit in lieu of a disability benefit. Members eligible to retire, and who have attained the normal retirement age determined by their
service retirement benefit formula, will receive the same dollar amount for disability retirement as that payable for
service retirement. For members who have earned service with multiple CalPERS employers, the benefit attributed to
each employer is the total disability allowance multiplied by the ratio of service with a particular employer to the total
CalPERS service.
Industrial (Job Related) Disability Retirement
All safety members have this benefit. For miscellaneous members, employers have the option of providing this
benefit. An employer may choose to provide the Increased benefit option or the Improved benefit option.
Eligibility An employee is eligible for Industrial Disability Retirement if he or she becomes disabled while working, where
disabled means the member is unable to perform the duties of the job because of a work-related illness or injury,
which is, expected to be permanent or to last indefinitely. A CalPERS member who has left active employment within
this group is not eligible for this benefit, except to the extent described below.
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX B MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH
PRINCIPAL PLAN PROVISIONS
B-4
Standard Benefit
The standard Industrial Disability Retirement benefit is a monthly allowance equal to 50 percent of final
compensation.
Increased Benefit (75 percent of Final Compensation)
The increased Industrial Disability Retirement benefit is a monthly allowance equal to 75 percent final compensation
for total disability.
Improved Benefit (50 percent to 90 percent of Final Compensation)
The improved Industrial Disability Retirement benefit is a monthly allowance equal to the Workman’s Compensation
Appeals Board permanent disability rate percentage (if 50 percent or greater, with a maximum of 90 percent) times
the final compensation.
For a CalPERS member not actively employed in this group who became disabled while employed by some other CalPERS employer, the benefit is a return of accumulated member contributions with respect to employment in this
group. With the standard or increased benefit, a member may also choose to receive the annuitization of the
accumulated member contributions.
If a member is eligible for Service Retirement and if the Service Retirement benefit is more than the Industrial
Disability Retirement benefit, the member may choose to receive the larger benefit.
Post-Retirement Death Benefit
Standard Lump Sum Payment
Upon the death of a retiree, a one-time lump sum payment of $500 will be made to the retiree’s designated
survivor(s), or to the retiree’s estate.
Improved Lump Sum Payment
Employers have the option of providing an improved lump sum death benefit of $600, $2,000, $3,000, $4,000 or
$5,000.
Form of Payment for Retirement Allowance
Standard Form of Payment
Generally, the retirement allowance is paid to the retiree in the form of an annuity for as long as he or she is alive.
The retiree may choose to provide for a portion of his or her allowance to be paid to any designated beneficiary after
the retiree’s death. CalPERS provides for a variety of such benefit options, which the retiree pays for by taking a
reduction in his or her retirement allowance. Such reduction takes into account the amount to be provided to the beneficiary and the probable duration of payments (based on the ages of the member and beneficiary) made
subsequent to the member’s death.
Improved Form of Payment (Post Retirement Survivor Allowance)
Employers have the option to contract for the post retirement survivor allowance.
For retirement allowances with respect to service subject to the modified formula, 25 percent of the retirement
allowance will automatically be continued to certain statutory beneficiaries upon the death of the retiree, without a reduction in the retiree’s allowance. For retirement allowances with respect to service subject to the full or
supplemental formula, 50 percent of the retirement allowance will automatically be continued to certain statutory
beneficiaries upon the death of the retiree, without a reduction in the retiree’s allowance. This additional benefit is
often referred to as post retirement survivor allowance (PRSA) or simply as survivor continuance.
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX B MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH
PRINCIPAL PLAN PROVISIONS
B-5
In other words, 25 percent or 50 percent of the allowance, the continuance portion, is paid to the retiree for as long as he or she is alive, and that same amount is continued to the retiree’s spouse (or if no eligible spouse, to
unmarried children until they attain age 18; or, if no eligible children, to a qualifying dependent parent) for the rest
of his or her lifetime. This benefit will not be discontinued in the event the spouse remarries.
The remaining 75 percent or 50 percent of the retirement allowance, which may be referred to as the option portion
of the benefit, is paid to the retiree as an annuity for as long as he or she is alive. Or, the retiree may choose to
provide for some of this option portion to be paid to any designated beneficiary after the retiree’s death. Benefit
options applicable to the option portion are the same as those offered with the standard form. The reduction is calculated in the same manner but is applied only to the option portion.
Pre-Retirement Death Benefits
Basic Death Benefit
This is a standard benefit.
Eligibility
An employee’s beneficiary (or estate) may receive the Basic Death benefit if the member dies while actively
employed. A CalPERS member must be actively employed with the CalPERS employer providing this benefit to be eligible for this benefit. A member’s survivor who is eligible for any other pre-retirement death benefit may choose to
receive that death benefit instead of this Basic Death benefit.
Benefit
The Basic Death Benefit is a lump sum in the amount of the member’s accumulated contributions, where interest is
currently credited at 7.5 percent per year, plus a lump sum in the amount of one month's salary for each completed
year of current service, up to a maximum of six months' salary. For purposes of this benefit, one month's salary is defined as the member's average monthly full-time rate of compensation during the 12 months preceding death.
1957 Survivor Benefit
This is a standard benefit.
Eligibility
An employee’s eligible survivor(s) may receive the 1957 Survivor benefit if the member dies while actively employed,
has attained at least age 50, and has at least 5 years of credited service (total service across all CalPERS employers
and with certain other Retirement Systems with which CalPERS has reciprocity agreements). A CalPERS member must be actively employed with the CalPERS employer providing this benefit to be eligible for this benefit. An eligible
survivor means the surviving spouse to whom the member was married at least one year before death or, if there is
no eligible spouse, to the member's unmarried children under age 18. A member’s survivor who is eligible for any
other pre-retirement death benefit may choose to receive that death benefit instead of this 1957 Survivor benefit.
Benefit
The 1957 Survivor benefit is a monthly allowance equal to one-half of the unmodified Service Retirement benefit that
the member would have been entitled to receive if the member had retired on the date of his or her death. If the benefit is payable to the spouse, the benefit is discontinued upon the death of the spouse. If the benefit is payable to
a dependent child, the benefit will be discontinued upon death or attainment of age 18, unless the child is disabled.
The total amount paid will be at least equal to the Basic Death benefit.
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX B MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH
PRINCIPAL PLAN PROVISIONS
B-6
Optional Settlement 2W Death Benefit
This is an optional benefit.
Eligibility
An employee’s eligible survivor may receive the Optional Settlement 2W Death benefit if the member dies while actively employed, has attained at least age 50, and has at least 5 years of credited service (total service across all
CalPERS employers and with certain other Retirement Systems with which CalPERS has reciprocity agreements). A
CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An
eligible survivor means the surviving spouse to whom the member was married at least one year before death. A
member’s survivor who is eligible for any other pre-retirement death benefit may choose to receive that death benefit
instead of this Optional Settlement 2W Death benefit.
Benefit The Optional Settlement 2W Death benefit is a monthly allowance equal to the Service Retirement benefit that the
member would have received had the member retired on the date of his or her death and elected Optional
Settlement 2W. (A retiree who elects Optional Settlement 2W receives an allowance that has been reduced so that it
will continue to be paid after his or her death to a surviving beneficiary.) The allowance is payable as long as the
surviving spouse lives, at which time it is continued to any unmarried children under age 18, if applicable. The total
amount paid will be at least equal to the Basic Death Benefit.
Special Death Benefit
This is a standard benefit for safety members. An employer may elect to provide this benefit for miscellaneous
members.
Eligibility
An employee’s eligible survivor(s) may receive the Special Death benefit if the member dies while actively employed
and the death is job-related. A CalPERS member who is no longer actively employed with any CalPERS employer is
not eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married prior to the onset of the injury or illness that resulted in death. If there is no eligible spouse, an eligible survivor means the
member's unmarried children under age 22. An eligible survivor who chooses to receive this benefit will not receive
any other death benefit.
Benefit
The Special Death benefit is a monthly allowance equal to 50% of final compensation, and will be increased
whenever the compensation paid to active employees is increased but ceasing to increase when the member would
have attained age 50. The allowance is payable to the surviving spouse until death at which time the allowance is continued to any unmarried children under age 22. There is a guarantee that the total amount paid will at least equal
the Basic Death Benefit.
If the member’s death is the result of an accident or injury caused by external violence or physical force incurred in
the performance of the member’s duty, and there are eligible surviving children (eligible means unmarried children
under age 22) in addition to an eligible spouse, then an additional monthly allowance is paid equal to the
following:
x if 1 eligible child: 12.5% of final compensation
x if 2 eligible children: 20.0% of final compensation
x if 3 or more eligible children: 25.0% of final compensation
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX B MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH
PRINCIPAL PLAN PROVISIONS
B-7
Alternate Death Benefit for Local Fire Members
This is an optional benefit available only to local fire members.
Eligibility
An employee’s eligible survivor(s) may receive the Alternate Death benefit in lieu of the Basic Death Benefit or the 1957 Survivor Benefit if the member dies while actively employed and has at least 20 years of total CalPERS service.
A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An
eligible survivor means the surviving spouse to whom the member was married prior to the onset of the injury or
illness that resulted in death. If there is no eligible spouse, an eligible survivor means the member's unmarried
children under age 18.
Benefit
The Alternate Death benefit is a monthly allowance equal to the Service Retirement benefit that the member would have received had the member retired on the date of his or her death and elected Optional Settlement 2W. (A retiree
who elects Optional Settlement 2W receives an allowance that has been reduced so that it will continue to be paid
after his or her death to a surviving beneficiary.) If the member has not yet attained age 50, the benefit is equal to
that which would be payable if the member had retired at age 50, based on service credited at the time of death.
The allowance is payable as long as the surviving spouse lives, at which time it is continued to any unmarried
children under age 18, if applicable. The total amount paid will be at least equal to the Basic Death Benefit.
Cost-of-Living Adjustments (COLA)
Standard Benefit
Beginning the second calendar year after the year of retirement, retirement and survivor allowances will be annually
adjusted on a compound basis by 2 percent.
Improved Benefit
Employers have the option of providing any of these improved cost-of-living adjustments by contracting for any one
of these Class 1 optional benefits. An improved COLA is not available in conjunction with the 1.5% at 65 formula.
Beginning the second calendar year after the year of retirement, retirement and survivor allowances will be annually
adjusted on a compound basis by either 3 percent, 4 percent or 5 percent. However, the cumulative adjustment may
not be greater than the cumulative change in the Consumer Price Index since the date of retirement.
Purchasing Power Protection Allowance (PPPA)
Retirement and survivor allowances are protected against inflation by PPPA. PPPA benefits are cost-of-living
adjustments that are intended to maintain an individual’s allowance at 80 percent of the initial allowance at
retirement adjusted for inflation since retirement. The PPPA benefit will be coordinated with other cost-of-living
adjustments provided under the plan.
Employee Contributions
Each employee contributes toward his or her retirement based upon the retirement formula. The standard employee
contribution is as described below.
The percent contributed below the monthly compensation breakpoint is 0 percent. The monthly compensation breakpoint is $0 for full and supplemental formula members and $133.33 for
employees covered by the modified formula.
The percent contributed above the monthly compensation breakpoint depends upon the benefit formula, as
shown in the table below.
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX B MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH
PRINCIPAL PLAN PROVISIONS
B-8
Benefit Formula Percent Contributed above the
Breakpoint
Miscellaneous, 1.5% at 65 2%
Miscellaneous, 2% at 60 7%
Miscellaneous, 2% at 55 7%
Miscellaneous, 2.5% at 55 8%
Miscellaneous, 2.7% at 55 8%
Miscellaneous, 3% at 60 8%
Safety, 1/2 at 55 Varies by entry age
Safety, 2% at 55 7%
Safety, 2% at 50 9%
Safety, 3% at 55 9%
Safety, 3% at 50 9%
The employer may choose to “pick-up” these contributions for the employees (Employer Paid Member Contributions
or EPMC). An employer may also include Employee Cost Sharing in the contract, where employees contribute an
additional percentage of compensation based on any optional benefit for which a contract amendment was made on or after January 1, 1979.
Auxiliary organizations of the CSUC system may elect reduced contribution rates, in which case the offset is $317 and
the contribution rate is 6 percent if members are not covered by Social Security. If members are covered by Social
Security, the offset is $513 and the contribution rate is 5 percent.
Refund of Employee Contributions
If the member’s service with the employer ends, and if the member does not satisfy the eligibility conditions for any of the retirement benefits above, the member may elect to receive a refund of his or her employee contributions,
which are credited annually with 6 percent interest.
1959 Survivor Benefit
This is a pre-retirement death benefit available only to members not covered by Social Security. Any agency joining
CalPERS subsequent to 1993 was required to provide this benefit if the members were not covered by Social
Security. The benefit is optional for agencies joining CalPERS prior to 1994. Levels 1, 2 and 3 are now closed. Any
new agency or any agency wishing to add this benefit or increase the current level must choose the 4th or Indexed
Level.
This benefit is not included in the results presented in this valuation. More information on this benefit is available on the CalPERS website at www.calpers.ca.gov.
APPENDIX C
PARTICIPANT DATA
x SUMMARY OF VALUATION DATA
x ACTIVE MEMBERS
x TRANSFERRED AND TERMINATED MEMBERS
x RETIRED MEMBERS AND BENEFICIARIES
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX C
MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH
PARTICIPANT DATA
C-1
Summary of Valuation Data
June 30, 2011 June 30, 2012
1. Active Members
a) Counts 562 541
b) Average Attained Age 43.45 43.71
c) Average Entry Age to Rate Plan 31.98 31.79
d) Average Years of Service 11.47 11.92
e) Average Annual Covered Pay $ 72,574 $ 73,891
f) Annual Covered Payroll 40,786,550 39,975,054
g) Projected Annual Payroll for Contribution Year 44,568,564 43,681,821
h) Present Value of Future Payroll 336,000,462 326,240,290
2. Transferred Members
a) Counts 232 225
b) Average Attained Age 43.48 43.66
c) Average Years of Service 2.55 2.59
d) Average Annual Covered Pay $ 98,236 $ 96,538
3. Terminated Members
a) Counts 262 281
b) Average Attained Age 42.75 42.89
c) Average Years of Service 3.06 3.11
d) Average Annual Covered Pay $ 43,852 $ 55,883
4. Retired Members and Beneficiaries
a) Counts 497 523
b) Average Attained Age 68.56 68.53
c) Average Annual Benefits $ 24,741 $ 25,368
5. Active to Retired Ratio [(1a) / (4a)] 1.13 1.03
Counts of members included in the valuation are counts of the records processed by the valuation. Multiple
records may exist for those who have service in more than one valuation group. This does not result in double counting of liabilities.
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX C
MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH
PARTICIPANT DATA
C-2
Active Members
Counts of members included in the valuation are counts of the records processed by the valuation. Multiple records
may exist for those who have service in more than one valuation group. This does not result in double counting of
liabilities.
Distribution of Active Members by Age and Service
Years of Service at Valuation Date
Attained
Age 0-4 5-9 10-14 15-19 20-25 25+ Total
15-24 19 0 0 0 0 0 19
25-29 38 21 0 0 0 0 59
30-34 29 34 13 0 0 0 76
35-39 6 21 17 2 2 0 48
40-44 14 16 20 7 11 1 69
45-49 11 21 17 15 25 7 96
50-54 11 16 10 15 17 19 88
55-59 7 10 10 6 6 13 52
60-64 4 3 4 3 6 4 24
65 and over 3 2 0 2 2 1 10
All Ages 142 144 91 50 69 45 541
Distribution of Average Annual Salaries by Age and Service
Years of Service at Valuation Date
Attained
Age 0-4 5-9 10-14 15-19 20-25 25+ Average
15-24 $30,034 $0 $0 $0 $0 $0 $30,034
25-29 42,212 60,191 0 0 0 0 48,611
30-34 67,745 69,591 73,259 0 0 0 69,514
35-39 66,773 84,690 70,375 80,470 96,032 0 77,677
40-44 86,003 73,589 75,723 98,895 90,557 156,206 83,196
45-49 82,958 81,642 87,833 80,147 90,650 78,045 84,739
50-54 103,358 73,988 76,575 77,296 84,285 82,124 82,263
55-59 95,524 57,753 84,920 100,055 77,096 83,203 81,537
60-64 73,709 58,867 75,765 72,329 70,803 81,488 72,594
65 and over 16,722 26,999 0 55,834 51,632 108,844 42,794
All Ages $62,022 $71,475 $77,741 $82,877 $85,187 $83,985 $73,891
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX C
MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH
PARTICIPANT DATA
C-3
Transferred and Terminated Members
Distribution of Transfers to Other CalPERS Plans by Age and Service
Years of Service at Valuation Date
Attained
Age 0-4 5-9 10-14 15-19 20-25 25+ Total
Average
Salary
15-24 4 0 0 0 0 0 4 $72,872
25-29 26 1 0 0 0 0 27 76,087
30-34 31 1 0 0 0 0 32 96,829
35-39 19 2 0 0 0 0 21 93,827
40-44 26 4 1 1 0 0 32 99,480
45-49 34 5 0 1 0 0 40 114,375
50-54 25 4 0 0 0 0 29 105,480
55-59 14 2 3 0 1 1 21 90,514
60-64 9 2 1 0 0 0 12 87,058
65 and over 4 1 2 0 0 0 7 77,637
All Ages 192 22 7 2 1 1 225 96,538
Distribution of Terminated Participants with Funds on Deposit by Age and Service
Years of Service at Valuation Date
Attained Age 0-4 5-9 10-14 15-19 20-25 25+ Total Average Salary
15-24 5 0 0 0 0 0 5 $30,713
25-29 27 1 0 0 0 0 28 43,534
30-34 42 5 1 0 0 0 48 52,600
35-39 29 6 0 1 0 0 36 62,911
40-44 32 9 0 0 0 0 41 63,465
45-49 30 8 2 4 0 3 47 70,021
50-54 23 5 5 0 1 0 34 50,721
55-59 21 3 3 0 0 0 27 42,840
60-64 9 2 1 0 0 0 12 56,705
65 and over 3 0 0 0 0 0 3 28,769
All Ages 221 39 12 5 1 3 281 55,883
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX C
MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH
PARTICIPANT DATA
C-4
Retired Members and Beneficiaries
Distribution of Retirees and Beneficiaries by Age and Retirement Type*
Attained
Age
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Total
Under 30 0 0 0 0 0 1 1
30-34 0 0 1 0 0 0 1
35-39 0 0 0 0 0 0 0
40-44 0 2 1 0 0 0 3
45-49 0 2 4 0 1 0 7
50-54 24 3 2 1 0 2 32
55-59 66 5 5 1 0 2 79
60-64 86 6 0 0 0 3 95
65-69 90 4 0 0 0 4 98
70-74 57 4 0 0 0 5 66
75-79 46 1 0 0 0 2 49
80-84 36 0 0 0 0 7 43
85 and Over 37 0 0 0 0 12 49
All Ages 442 27 13 2 1 38 523
Distribution of Average Annual Amounts for Retirees and Beneficiaries by Age
and Retirement Type*
Attained
Age
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Average
Under 30 $0 $0 $0 $0 $0 $3,836 $3,836
30-34 0 0 817 0 0 0 817
35-39 0 0 0 0 0 0 0
40-44 0 22,354 224 0 0 0 14,977
45-49 0 24,155 207 0 153 0 7,041
50-54 25,404 13,799 552 2,168 0 1,685 20,554
55-59 36,458 10,410 1,269 3,831 0 14,199 31,606
60-64 33,525 13,500 0 0 0 9,491 31,501
65-69 26,549 16,433 0 0 0 13,558 25,606
70-74 26,755 10,705 0 0 0 31,005 26,104
75-79 20,837 18,719 0 0 0 34,308 21,344
80-84 23,344 0 0 0 0 11,260 21,377
85 and Over 15,816 0 0 0 0 19,907 16,818
All Ages $27,596 $14,620 $716 $3,000 $153 $17,359 $25,368
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX C
MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH
PARTICIPANT DATA
C-5
Retired Members and Beneficiaries (continued)
Distribution of Retirees and Beneficiaries by Years Retired and Retirement Type*
Years
Retired
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Total
Under 5 Yrs 158 3 4 1 0 11 177
5-9 113 2 5 1 0 8 129
10-14 54 4 1 0 0 7 66
15-19 61 13 2 0 1 6 83
20-24 27 3 1 0 0 2 33
25-29 15 2 0 0 0 3 20
30 and Over 14 0 0 0 0 1 15
All Years 442 27 13 2 1 38 523
Distribution of Average Annual Amounts for Retirees and Beneficiaries by Years Retired and
Retirement Type*
Years
Retired
Service
Retirement
Non-
Industrial
Disability
Industrial
Disability
Non-
Industrial
Death
Industrial
Death
Death
After
Retirement Average
Under 5 Yrs $37,084 $24,325 $1,585 $2,168 $0 $20,225 $34,821
5-9 25,494 18,780 440 3,831 0 24,637 24,198
10-14 25,764 13,457 158 0 0 15,329 23,523
15-19 22,500 11,897 120 0 153 11,060 19,204
20-24 18,934 17,699 374 0 0 17,766 18,188
25-29 5,441 11,305 0 0 0 7,260 6,300
30 and Over 7,207 0 0 0 0 9,109 7,334
All Years $27,596 $14,620 $716 $3,000 $153 $17,359 $25,368
* Counts of members do not include alternate payees receiving benefits while the member is still working.
Therefore, the total counts may not match information on page 25 of the report. Multiple records may exist for
those who have service in more than one coverage group. This does not result in double counting of liabilities.
APPENDIX D
GLOSSARY OF ACTUARIAL TERMS
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX D MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH
GLOSSARY OF ACTUARIAL TERMS
D-1
Glossary of Actuarial Terms
Accrued Liability (also called Actuarial Accrued Liability or Entry Age Normal Accrued Liability)
The total dollars needed as of the valuation date to fund all benefits earned in the past for current members.
Actuarial Assumptions
Assumptions made about certain events that will affect pension costs. Assumptions generally can be broken
down into two categories: demographic and economic. Demographic assumptions include such things as
mortality, disability and retirement rates. Economic assumptions include discount rate, salary growth and
inflation.
Actuarial Methods
Procedures employed by actuaries to achieve certain funding goals of a pension plan. Actuarial methods include funding method, setting the length of time to fund the Accrued Liability and determining the Actuarial Value of
Assets.
Actuarial Valuation
The determination, as of a valuation date, of the Normal Cost, Accrued liability, Actuarial Value of Assets and
related actuarial present values for a pension plan. These valuations are performed annually or when an
employer is contemplating a change to their plan provisions.
Actuarial Value of Assets
The Actuarial Value of Assets used for funding purposes is obtained through an asset smoothing technique
where investment gains and losses are partially recognized in the year they are incurred, with the remainder
recognized in subsequent years.
This method helps to dampen large fluctuations in the employer contribution rate.
Amortization Bases
Separate payment schedules for different portions of the Unfunded Liability. The total Unfunded Liability of a
Risk Pool or non-pooled plan can be segregated by "cause,” creating “bases” and each such base will be
separately amortized and paid for over a specific period of time. However, all bases are amortized using
investment and payroll assumptions from the current valuation. This can be likened to a home having a first
mortgage of 24 years remaining payments and a second mortgage that has 10 years remaining payments. Each base or each mortgage note has its own terms (payment period, principal, etc.)
Generally, in an actuarial valuation, the separate bases consist of changes in unfunded liability due to contract
amendments, actuarial assumption changes, actuarial methodology changes, and or gains and losses. Payment
periods are determined by Board policy and vary based on the cause of the change.
Amortization Period
The number of years required to pay off an Amortization Base.
Annual Required Contributions (ARC)
The employer's periodic required annual contributions to a defined benefit pension plan as set forth in GASB
Statement No. 27, calculated in accordance with the plan assumptions. The ARC is determined by multiplying the
employer contribution rate by the payroll reported to CalPERS for the applicable fiscal year. However, if this
contribution is fully prepaid in a lump sum, then the dollar value of the ARC is equal to the Lump Sum
Prepayment.
Classic Member (under PEPRA)
A classic member is a member who joined CalPERS prior to January, 1, 2013 and who is not defined as a new
member under PEPRA. (See definition of new member below)
Discount Rate Assumption
The actuarial assumption that was called “investment return” in earlier CalPERS reports or “actuarial interest
rate” in Section 20014 of the California Public Employees’ Retirement Law (PERL).
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX D MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH
GLOSSARY OF ACTUARIAL TERMS
D-2
Entry Age
The earliest age at which a plan member begins to accrue benefits under a defined benefit pension plan. In
most cases, this is the age of the member on their date of hire.
Entry Age Normal Cost Method
An actuarial cost method designed to fund a member's total plan benefit over the course of his or her career.
This method is designed to yield a rate expressed as a level percentage of payroll.
(The assumed retirement age less the entry age is the amount of time required to fund a member’s total benefit. Generally, the older a member on the date of hire, the greater the entry age normal cost. This is mainly because
there is less time to earn investment income to fund the future benefits.)
Fresh Start
A Fresh Start is when multiple amortization bases are collapsed to one base and amortized together over a new
funding period.
Funded Status
A measure of how well funded, or how "on track" a plan or risk pool is with respect to assets verses accrued
liabilities. A ratio greater than 100% means the plan or risk pool has more assets than liabilities and a ratio less
than 100% means liabilities are greater than assets. A funded ratio based on the Actuarial Value of Assets
indicates the progress toward fully funding the plan using the actuarial cost methods and assumptions. A funded
ratio based on the Market Value of Assets indicates the short-term solvency of the plan.
GASB 27 Statement No. 27 of the Governmental Accounting Standards Board. The accounting standard governing a state
or local governmental employer’s accounting for pensions.
GASB 68
Statement No. 68 of the Governmental Accounting Standards Board. The accounting standard governing a state
or local governmental employer’s accounting and financial reporting for pensions. GASB 68 replaces GASB 27 effective the first fiscal year beginning after June 15, 2014.
New Member (under PEPRA)
A new member includes an individual who becomes a member of a public retirement system for the
first time on or after January 1, 2013, and who was not a member of another public retirement
system prior to that date, and who is not subject to reciprocity with another public retirement
system.
Normal Cost
The annual cost of service accrual for the upcoming fiscal year for active employees. The normal cost should be
viewed as the long term contribution rate.
Pension Actuary
A business professional that is authorized by the Society of Actuaries, and the American Academy of Actuaries to
perform the calculations necessary to properly fund a pension plan.
PEPRA
The California Public Employees’ Pension Reform Act of 2013
Prepayment Contribution
A payment made by the employer to reduce or eliminate the year’s required employer contribution.
Present Value of Benefits (PVB) The total dollars needed as of the valuation date to fund all benefits earned in the past or expected to be earned
in the future for current members.
CALPERS ACTUARIAL VALUATION – June 30, 2012 APPENDIX D MISCELLANEOUS PLAN OF THE CITY OF NEWPORT BEACH
GLOSSARY OF ACTUARIAL TERMS
D-3
Rolling Amortization Period
An amortization period that remains the same each year, rather than declining.
Superfunded
A condition existing when a plan’s Actuarial Value of Assets exceeds its Present Value of Benefits. Prior to the
passage of PEPRA, when this condition existed on a given valuation date for a given plan, employee
contributions for the rate year covered by that valuation could be waived.
Unfunded Liability
When a plan or pool’s Actuarial Value of Assets is less than its Accrued Liability, the difference is the plan or
pool’s Unfunded Liability. If the Unfunded Liability is positive, the plan or pool will have to pay contributions
exceeding the Normal Cost.
Quarterly
Financial Report
city of newport beach | finance department
newportbeachca.gov | 949.644.3127
quarter ending june 30, 2013
EXECUTIVE SUMMARY
Newport Beach continues to be a stable, prosperous, and financially secure municipality due to its
strong underlying tax base, governance, and disciplined fiscal decisions. In FY 12/13, City management
continued to focus on the City Council’s priorities including responsible, yet difficult, spending decisions,
adherence to a 15-Point Fiscal Sustainability Plan, and strong revenue monitoring, analysis, and reporting.
As a result, the sum total of all available and discretionary reserves total over $130 million as of the end of
FY 12/13.
The City of Newport Beach Finance Department prepares quarterly financial reports for the City Council
to review the status of revenues and expenditures for the City’s most active funds. This report contains
information for the fourth quarter of the fiscal year, which is the period between April 1, 2013, and
June 30, 2013.
The City’s major General Fund revenue categories performed above its projected levels for this year due
to the improving economy and the receipt of certain one-time revenues. Expenditures performed within
expected levels and ended the year with an unexpended balance. This report also provides a year-
end status of some of the City’s major reserves. The recovering economy and the Council’s guidance
in recent years provided the opportunity to maintain reserve levels that are in furtherance of the City’s
policies, goals, and priorities. The continued health of key reserves lays the groundwork for additional
community infrastructure investment and a stronger City government.
2
Economic Overview
Throughout the fiscal year, the yield on two-year treasury notes remained under 0.35%. The policy
of the Federal Reserve (Fed) has been to keep short-term rates at record lows until unemployment
reaches 6.5% and inflation is under 2.0%. Comments from Fed Chairman Ben Bernanke at a
congressional hearing in May indicated the Fed could begin reducing bond purchases in 2014.
These statements, coupled with the recent market rally in equities, have made bonds lose its appeal
to prospective bond buyers thereby driving yields up in recent months. This caused fixed income
portfolios to decline in value during May and June as interest rates rose across the yield curve.
While the higher interest rate environment temporarily lowers the market value of the portfolio, it also
signifies that new investments may result in higher yields than the previous fiscal year.
Consumer confidence increased in June for
a third consecutive month. The Conference
Board Consumer Confidence Index stood at
81.4 in June, up from 74.3 in May. According
to Lynn Franco, Director of Economic
Indicators at The Conference Board,
consumer confidence is “now at its highest
level since January 2008.” Households’
propensity to keep spending suggests the
economy should strengthen later in 2013
after powering through strong headwinds.
Consumer spending, which accounts for
more than two-thirds of the total demand
in the U.S., was the overwhelming driver of
growth early this year.
California’s economic picture is brighter than
that of the national economy. This is due
largely to the demand for California goods,
such as computers and other technology,
according to the recently released UCLA Anderson Forecast. California outperformed the U.S. in the
rate of payroll jobs growth in the 12-month period that ended in April 2013. Only Utah has added jobs
faster than California. California’s job growth has been spread across several industries, including
leisure and hospitality and white-collar jobs in the professional and business services sector. The UCLA
forecast projects that California’s unemployment rate will drop to 8.8% by the end of this year and fall
to 7.7% by the end of 2014. The pace of job growth is expected to speed up to 2.2% in 2015, further
pushing down the jobless rate to 6.8% by the end of that year.
Orange County’s economy is expanding, and the near-term outlook “warrants growing optimism,”
according to the midyear update of the Los Angeles County Economic Development Corporation’s
(LAEDC) 2013-2014 Economic Forecast and Industry Outlook released in July. Over the first half of 2013,
the county’s economic expansion has continued to outpace that of both the nation and the state.
The county’s unemployment rate, which peaked at 9.5% in 2010, and fell as low as 5.5% in May, is
one of the lowest rates in California as reported by the State Employment Development Department.
The LAEDC predicts that this trend will continue, with the unemployment rate averaging 5.5% this
year before falling to 5.2% in 2014. In addition, the Cal State Fullerton’s Southern California Leading
Indicator, which forecasts economic activity three to six months out, rose to 109.74 for the first quarter
of the year, up 3.5% over the same time last year.
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
1 Mo 3 Mo 6 Mo 1 Yr 2 Yr 3 Yr 5 Yr
Yi
e
l
d
Three Month Change in Treasury Yield Curve
April
May
June Av
e
r
a
g
e
D
u
r
a
t
i
o
n
Steepening Yield
Curve
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
1 Mo 3 Mo 6 Mo 1 Yr 2 Yr 3 Yr 5 Yr
Yi
e
l
d
Three Month Change in Treasury Yield Curve
April
May
June Av
e
r
a
g
e
D
u
r
a
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i
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Steepening Yield
Curve
Note: As we prepare this QFR, we are cognizant of threats on the horizon outside of this 4th Quarter,
These include the Sequester, the possibility of the federal government not passing a budget, and the
approach of the federal government’s debt ceiling limit. These issues may have significant impact on
the local, state, and national economy.
3
Quarterly Financial Report
The General Fund’s top three revenue sources (Property Tax, Sales Tax, and Transient Occupancy
Taxes) account for approximately 73.4% of General Fund revenues and finished the fiscal year $5.4
million or 4.5% higher than projected and just under $13 million, or 11.5% higher than the previous year.
This increase is largely due to a generally improving economy, higher property tax valuations within the
City, and a greater level of travel and tourism within the region.
PROPERTY TAX
Property tax is the top source of revenue for the City of Newport Beach, representing almost half
(48%) of all General Fund revenues. Sales data demonstrates the sustained climb in market values
throughout the residential communities of Newport Beach. As the chart below indicates, the median
sales price in Newport Beach has shown a rise between June Q2 2012 and June Q2 2013. The number
of sales between the same periods has decreased slightly, but has increased sharply from the previous
quarter. Local agents say the same factors that have propelled the market since the start of the year
were at work in the last quarter: low mortgage interest rates, strong demand, stiff competition from
cash-paying investors, and relatively few homes for sale.
Strong Underlying Tax Base
0
100
200
300
400
500
Sales
S
a
l
e
s
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
200
3
Q
1
200
3
Q
2
200
3
Q
3
200
3
Q
4
200
4
Q
1
200
4
Q
2
200
4
Q
3
200
4
Q
4
200
5
Q
1
200
5
Q
2
200
5
Q
3
200
5
Q
4
200
6
Q
1
200
6
Q
2
200
6
Q
3
200
6
Q
4
200
7
Q
1
200
7
Q
2
200
7
Q
3
200
7
Q
4
200
8
Q
1
200
8
Q
2
200
8
Q
3
200
8
Q
4
200
9
Q
1
200
9
Q
2
200
9
Q
3
200
9
Q
4
201
0
Q
1
201
0
Q
2
201
0
Q
3
201
0
Q
4
201
1
Q
1
201
1
Q
2
201
1
Q
3
201
1
Q
4
201
2
Q
1
201
2
Q
2
201
2
Q
3
201
2
Q
4
201
3
Q
1
201
3
Q
2
Median Price
Period
Me
d
i
a
n
S
a
l
e
s
P
r
i
c
e
City of Newport Beach Home Sales History
Single Family Residential Full Value Sales (01/01/2003 – 06/30/2013)
Property tax collections finished the fiscal year nearly $10.1 million or 14%, higher than the previous
fiscal year. This is due to increases in assessed property values and a one-time $5.4 million payment
resulting from the State’s recent actions to dissolve redevelopment areas. Newport Beach posted
Orange County’s highest increase in assessed property values at 5.2% and came in second in total
local assessed value at $42.3 billion for fiscal year FY13/14. Excluding the one-time $5.4 million payment,
property tax collections finished the year $4.6 million higher than the previous fiscal year, yet remain
below the median price peak realized in 2007.
Source: HdL Companies
4
SALES TAXES
Sales Tax revenue continues to trend
upwards, finishing $1.2 million or 4.6%
higher than the prior fiscal year.
While much improved, sales tax receipts
remain approximately $328,000 below
the pre-recession levels of FY 06/07. The
City’s sales tax base is generated from a
relatively diverse business community and
is not dependent on any one merchant
or industry. The largest segment, “Autos
and Transportation,” accounts for
approximately 31% of total sales tax; the
next largest segment “General Consumer
Goods” accounts for approximately 27%
of total sales tax; and the third largest
segment “Restaurants and Hotels”
accounts for approximately 24% of
total sales tax revenue. The Autos and
Transportation, General Consumer Goods,
and Restaurant and Hotels categories
posted increases of 0.3%, 0.7%, and 5.7%
respectively over the prior year.
Sales Taxes
Amended
Budget
2012/13
YTD Actual
2012/13
Prior Year YTD
Actual 2011/12
Inc/Dec
from PY
Percent
Realized
2012/13
Sales and Use Tax $21,102,543 $20,764,205 $20,107,596 3.27% 98%
Property Tax in Lieu of Sales Tax 7,078,517 7,078,517 6,523,492 8.51% 100%
TOTAL $28,181,060 $27,842,722 $26,631,088 4.55% 99%
Property Taxes
Amended
Budget
2012/13
YTD Actual
2012/13
Prior Year YTD
Actual 2011/12
Inc/Dec
from PY
Percent
Realized
Budget
2012/13
Secured $61,424,455 $61,541,104 $58,551,933 5.11% 100%
Unsecured 2,266,203 2,291,127 2,457,246 -6.76% 101%
Prior Year Penalties & Interest 1,200,000 1,208,469 1,275,360 -5.24% 101%
Supplemental 1 600,000 879,359 403,890 117.72% 147%
In Lieu of VLF 6,965,878 7,019,219 6,775,936 3.59% 101%
RDA Dissolution 2 2,756,357 6,184,099 219,795 2713.57% 224%
All Other 1,846,545 2,486,275 1,862,088 33.52% 135%
TOTAL $77,059,438 $81,609,652 $71,546,249 14.07% 106%
2 2012-13 actual includes a one-time $5.4 million receipt resulting from the State's dissolution of redevelopment areas.
1 During fiscal year 2011-2012 the County Assessors’ Office was unable to deliver the Supplemental Roll information to the Treasurer Tax Collector
as planned due to a system conversion. The shortfall was recovered in fiscal year 2012-2013 resulting in the 117.72% increase from the prior year.
Property Taxes
Amended
Budget
2012/13
YTD Actual
2012/13
Prior Year YTD
Actual 2011/12
Inc/Dec
from PY
Percent
Realized
Budget
2012/13
Secured $61,424,455 $61,541,104 $58,551,933 5.11% 100%
Unsecured 2,266,203 2,291,127 2,457,246 -6.76% 101%
Prior Year Penalties & Interest 1,200,000 1,208,469 1,275,360 -5.24% 101%
Supplemental 1 600,000 879,359 403,890 117.72% 147%
In Lieu of VLF 6,965,878 7,019,219 6,775,936 3.59% 101%
RDA Dissolution 2 2,756,357 6,184,099 219,795 2713.57% 224%
All Other 1,846,545 2,486,275 1,862,088 33.52% 135%
TOTAL $77,059,438 $81,609,652 $71,546,249 14.07% 106%
2 2012-13 actual includes a one-time $5.4 million receipt resulting from the State's dissolution of redevelopment areas.
1 During fiscal year 2011-2012 the County Assessors’ Office was unable to deliver the Supplemental Roll information to the Treasurer Tax Collector
as planned due to a system conversion. The shortfall was recovered in fiscal year 2012-2013 resulting in the 117.72% increase from the prior year.
2Q13 Percent of Total
31%
Autosand
Transportation
27%
General
Consumer
Goods
24%
Restaurants
and
Hotels
6%
BusinessandIndustry 6%
Fuel and
ServiceStations
5%
FoodandDrugs
1%
Building
andConstruction
Source: HdL Companies
Property Taxes
Percent of Total for 2nd Quarter
Sales Taxes
5
TRANSIENT OCCUPANCY TAXES
Transient Occupancy Tax (TOT) collections increased $1.7 million or 11.5% over the prior year. This is
the net result of a $205,000 increase in residential transient tax collections and a $1.5 million increase
in hotel transient tax collections. Of the City’s larger hotels, the Pelican Hill Resort, all three Marriott
branded accommodations, and the Fairmont Hotel generated the largest increases to transient tax
collections. All but three of the City’s 20 hotels and inns experienced an increase in TOT revenue over
the prior year.
Excluding Pelican Hill Resort remittances, which opened at the height of the recession, TOT revenues
have exceeded the pre-recession levels of FY 06/07 by $479,000.
Transient Occupancy Taxes
Amended
Budget
2012/13
YTD Actual
2012/13
Prior Year YTD
Actual 2011/12
Inc/Dec
from PY
Percent
Realized
2012/13
Transient Occupancy Taxes $15,311,500 $16,500,285 $14,798,191 11.50% 108%
Occupancy Rates Rising in Orange County Hotels
According to the industry research firm PKF Consulting, hotels in Orange County saw a surge in
bookings this spring, with occupancy rates at 77.6 percent in April, up from 74.1 percent a year ago.
Costa Mesa had the fewest rooms available, with an April occupancy rate of 81.1 percent, up from
74 percent in April 2012. Anaheim, which has seen a resurgence in visitors since Disney California
Adventure’s new Cars Land opened in June, was second with 79.2 percent of the city’s hotel
rooms occupied – an increase from 75.2 percent last year. Orange County’s most expensive hotels
were particularly busy in April, marking a comeback after suffering steep drops in visitors during the
recession. Occupancy in hotels with rooms costing more than $200 a night jumped to 82.8 percent in
April, from 71.3 percent a year ago.
Source: Orange County Register, June 25, 2013
Transient Occupancy Taxes
6
City Reserves
The City accumulates financial reserves to provide stability and flexibility to respond to unexpected
adversity and/or opportunities. The recovering economy and the Council’s guidance in recent years
provide us with the opportunity to maintain reserve levels that are in furtherance of the City’s policies,
goals, and priorities. The continued health of the following key reserves lays the groundwork for even
greater community infrastructure investment and a stronger City government.
A PRODUCT OF DISCIPLINED FISCAL POLICY AND A FINANCIALLY PROSPEROUS COMMUNITY
General Fund expenditures increased $7.6
million, or 5.8%, from the prior year and were $5
million, or 3.4%, less than the FY 12/13 Amended
Budget. Increased expenditures from the
prior year were the result of negotiated salary
increases, increased benefit and pension
costs, a greater level of spending on capital
improvements, and higher maintenance and
operation costs. Transfers out of the General
Fund increased from the prior year largely as
the result of dedicating over $13 million to the
Facilities Financial Planning Reserve to provide
for community serving facilities such as Marina
Park, Sunset Ridge Park, Lifeguard Headquarters,
and the Corona del Mar Fire Station. The
remaining $11.6 million transferred out to other
funds was in support of IT strategic investments,
maintaining City equipment, tidelands, and
other City operations.
The combination of actual revenues receipts
being 4.6% higher and expenditures being 3.4%
lower than the amended budget has resulted in
a $2.6 million, or 3.2%, increase in General Fund
Balance.
GENERAL FUND COMPARATIVE INCOME STATEMENT
The City’s General Fund is the primary fund
used to account for the City’s general purpose
revenues such as sales, property, utility users,
and transient occupancy taxes. General Fund
revenues typically pay for citywide services
such as public safety, community development,
recreation, libraries, and parks. The General
Fund is distinguished from Special Revenue
Funds in that the latter are used to account for
revenues that have restricted uses (e.g. gas tax
funds that must be used for street maintenance
or repair). The General Fund Comparative
Income Statement presents information that
allows readers to compare actual revenues and
expenditures and any surplus or deficit for the
fiscal years ending June 30, 2012, and June 30,
2013. The City Council establishes a balanced
budget (expenditures must equal revenues) at
the beginning of every fiscal year.
General Fund revenue receipts increased $14.4
million, or 9.2%, from the prior year and were
$7.4 million, or 4.6%, higher than the FY 12/13
Amended Budget, due to growth in the City’s
top 3 revenue sources, particularly property tax
revenue and the receipt of one-time revenues
(see property tax discussion on previous page).
7
Preliminary &
Unaudited $%
2012 2013 Change Change
General Fund Revenues:
Property Taxes 71,546,249$81,609,652$10,063,403$14.07%
Sales Taxes 20,107,597 20,764,172 656,575 3.27%
Sales Taxes In Lieu 6,523,492 7,078,517 555,025 8.51%
TOT Taxes 14,798,191 16,500,284 1,702,093 11.50%
All other Revenues 43,124,928 44,562,319 1,437,391 3.33%
Total Revenues 156,100,457 170,514,943 14,414,486 9.23%
General Fund Expenditures:
General Government 11,817,861 12,469,327 651,466 5.51%
Public Safety 67,415,971 72,528,459 5,112,488 7.58%
Public Works 25,953,473 27,593,393 1,639,920 6.32%
Community Development 8,798,193 8,789,710 (8,483)-0.10%
Community Services 17,731,921 17,288,213 (443,708)-2.50%
Capital outlay 3,827,132 5,208,775 1,381,643 36.10%
Debt Service 979,590 -(979,590)-100.00%
Total Expenditures 136,524,141 143,877,876 7,353,735 5.80%
Income before transfers & other sources 19,576,316 26,637,067 7,060,751 36.07%
Other Financing Sources (Uses)
Transfers in 4,842,263 80,000 (4,762,263)-98.35%
Transfers out (7,395,066) (24,130,021) (16,734,955)226.30%
Total other financing sources (uses)(2,552,803) (24,050,021) (21,497,218)121.74%
Net Change in Fund Balance 17,023,513 2,587,046 (14,436,467)-84.80%
Fund Balance, beginning 62,768,845 79,792,358 17,023,513 27.12%
Fund Balance, ending 79,792,358$82,379,404$2,587,046$3.24%
General Fund Comparative Income StatementGeneral Fund Comparative Income Statement
8
GENERAL FUND RESERVES
This section provides balances of the
City’s General Fund Reserves at the end of FY 12/13. This information is useful in
assessing the City’s net resources available for spending at the end of the fiscal
year. Contributions to the reserve are established by prudent fiscal policies and
as part of the annual budget process, or as conditions change. As of the end of the
FY 12/13, the City’s General Fund Reserves
total $82.4 million. The non-spendable,
restricted, and committed categories of
fund balance are for resources that are
not in spendable form or are legally or
contractually required to remain intact.
The assigned portion of fund balance
includes amounts that are constrained
by the City’s intent to be used for specific
purposes. The authority to modify or
create new assignments is delegated to
the City Manager, who has designated
funds in furtherance of Council priorities
to improve community serving facilities such
as Marian Bergeson pool improvements,
airport environmental impact report, Spyglass
Park playground equipment, concrete alley
replacements in Newport Heights, and other
significant facility improvements. These are
merely designations, and will require City Council
consent and approval to expend the funds.
Additionally, assignments are also designated for
capital project reappropriations from the prior
year in support of basic infrastructure projects
throughout the City, technology enhancements
to serve the community faster and with greater
efficiency, and protecting the budget from
potentially higher CalPERS pension contribution
requirements. Finally, the City Manager has set-
aside appropriations for Council priorities and for
future strategic initiatives to enhance the long-term financial well-being of the City. These future
appropriations will be subject to City Council consideration and approval as these initiatives
are further developed in the coming year.
Audited
Preliminary &
Unaudited
2012 2013 Change
Non-spendable 7,706,708$9,919,486$2,212,778$
Restricted 2,263,049 3,392,444 1,129,395
Committed
Contingency Reserve 21,582,798 22,134,775 551,977
Recreation Reserves 521,447 618,680 97,233
Parking Reserves 297,612 363,043 65,431
Cable Franchise 1,514,574 300,039 (1,214,535)
Other Miscellaneous 5,904,672 4,954,874 (949,798)
Subtotal Committed 29,821,103 28,371,411 (1,449,692)
Assigned
Capital Reappropriations 603,167 1,843,417 1,240,250
PERS Rate Reserve 5,000,000 5,000,000 -
Council Priorities 5,538,677 3,000,000 (2,538,677)
Additional Transfer to FFP 5,043,503 -(5,043,503)
Strategic Technology Investments 3,000,000 1,000,000 (2,000,000)
Future Appropriations -9,282,613 9,282,613
Other 246,118 -(246,118)
Subtotal Assigned 19,431,465 20,126,030 694,565
Unassigned (Appropriations Reserve)20,570,033 20,570,033 -
General Fund Balance 79,792,358$82,379,404$2,587,046$
* Includes required annual General Fund transfer of $4,676,143 and a one time transfer of $8,543,503 from the General Fund
General Fund Reserves
General Fund Reserves
9
Quarterly Financial Report
FACILITIES FINANCIAL PLANNING RESERVE
The City continued its financial commitment
to the Facilities Financial Planning Reserve
(FFPR) in FY 12/13 by allocating significant
resources for the following projects that will
begin in the coming year: Marina Park, Sunset
Ridge Park, Lifeguard Headquarters and the
Corona del Mar Fire Station. Council Policy
F-23, Facilities Financial Planning Program
(FFP), approved in August 2009, established
a long-term facilities financing plan for the
replacement of all General Fund-supported
facilities. The City’s FFPR was established to
fund the replacement of critical City facilities
such as, but not limited to, the Civic Center
and Police Department buildings, fire stations,
library branches, parks, community centers,
and other facility improvement projects. The
FFP provides a consistent, level funding plan to
minimize negative impacts on the General Fund
in any given year. Overall, the FFPR balance
is decreasing $6.4 million from the prior fiscal
year. This change is the net result of various increases and decreases to both revenues and
expenditures. Revenues are decreasing due largely to a one-time developer contribution in
FY 11/12 and a sustained drop in interest rates resulting from the low interest rate environment.
These revenue decreases are largely offset with $10.2 million of transfers in from the General
and Equipment Maintenance funds and a reclassification of Park-in-Lieu fees to the FFPR.
Expenditures increased $13 million from the prior year due to costs associated with the final
construction phase of the Civic Center and the acquisition of property at 1499 Monrovia in
western Newport Beach.
Audited
Preliminary &
Unaudited
2012 2013 Change
Beginning Balance July 1,25,625,644$33,149,725$7,524,081$
Revenues
Transfer In 5,057,585 15,219,646 *10,162,061
Interest Income 343,797 50,608 (293,189)
Park in Lieu Fees -2,817,395 2,817,395
Developer Contributions 13,545,000 35,000 (13,510,000)
Total Revenues 18,946,382 18,122,649 (823,733)
Expenditures -
2010 Civic Center COPs Debt Service Contribution (8,191,020) (6,757,506) 1,433,514
Civic Center Construction (3,231,281) (13,452,240) (10,220,959)
Other Major Facilities -(4,310,374) (4,310,374)
Total Expenditures (11,422,301) (24,520,120) (13,097,819)
Ending Balance June 30,33,149,725$26,752,254$(6,397,471)$
Facilities Financing Plan (FFP) Fund
Comparative Income Statement
* Includes required annual General Fund transfer of $4,676,143, and one time transfers of $8,543,503 from the
General Fund and $2,000,000 from the Equipment fund.
Facilities Financial Planning Reserve
10
OTHER STRATEGIC RESERVES
The City has set-aside strategic reserves
to normalize departmental budgeting for
programs that have life-cycles greater than
one year, act as a strategic savings plan for
long-term assets and liabilities, and enable
appropriate distribution of city-wide costs to
individual departments. Overall, these reserves
are increasing $1.4 million from the prior fiscal
year. This net change is the result of various
increases and decreases. The City established
a Facilities Maintenance Plan Reserve in FY
12/13 to cover the annual maintenance costs
of the City’s aging facilities. The Insurance
Reserve is decreasing $2.4 million when
compared to FY 11/12 to cover insurance
claims and a shortfall in the Compensated
Absences Fund (CAF). The balance in CAF
is increasing to a level that will facilitate
smoothing of the accumulated leave bank.
The Equipment Maintenance Reserve (EMR) is
decreasing $3.2 million largely due to transfers
out to the IT Equipment and Facilities Financial
Planning Reserve Funds. The EMR exceeded
its targeted funding balance and therefore
had sufficient surplus to transfer out. The IT
Equipment Fund Reserve is increasing $5.4
million due to aforementioned transfer in from
the EMR and the receipt of proceeds from
the now defunct Airborne Law Enforcement
program.
Preliminary &
Unaudited
2012 2013 Change
Facilities Maintenance Plan -$995,156$995,156$
Insurance Reserve 23,419,321 21,062,647 (2,356,674)
Compensated Absences 1,723,667 2,242,118 518,451
Equipment Maintenance 21,652,397 18,431,462 (3,220,935)
IT Equipment Fund 1,707,008 7,145,485 5,438,477
Total 48,502,393$49,876,868$1,374,475$
OTHER STRATEGIC RESERVES
In summary, the City’s ability to set aside resources
for future projects, acquisitions, and other
allowable purposes is the result of maintaining
a focus on the City Council’s priorities, including
responsible, yet difficult, spending decisions,
adherence to a 15 – Point Fiscal Sustainability
Plan, strong revenue monitoring, analysis, and
reporting. The City’s reserve funds provide a
mechanism for legally saving money to finance
all or part of future infrastructure, equipment,
and other requirements and provide a degree
of financial stability. During both strong and
uncertain economic times, reserve funds provide
the City with a welcomed budgetary option that
can help mitigate the need to cut services. At the
end of FY 12/13, the sum total of all available and
discretionary reserves total over $130 million.
Preliminary & Unaudited
2013
General Fund 69,067,474$
Facilities 12,180,527
Other Strategic Reserves 48,881,712
Total Available 130,129,713$
*Excludes non-spendable and restricted reserve funds.
Reserve Summary*
RESERVES SUMMARY
RESERVES SUMMARY*
DRAFT | 1
Quarterly Financial Report (Q1 FY 2013-14 – July 1 – September 30, 2013) DRAFT
Executive Summary
The City of Newport Beach Finance Department prepares quarterly financial reports for the City Council to review the status of revenues and expenditures for the City’s funds. This quarterly financial report contains information on resources and expenditures for
the first quarter of the fiscal year, which is the period between July 1, 2013, and
September 30, 2013. Revenue categories are likely to perform at their projected levels
for this year. Economic growth is expected to increase at a slow but steady pace over the next few years. Newport Beach has several attributes that have historically supported strong economic growth and financial sustainability.
Overall, Newport Beach continues to be a stable, prosperous, and financially secure
municipality through the first quarter of fiscal year (FY) 2013-14. This is due to its strong underlying tax base, governance, and disciplined fiscal decisions. Going forward these core strengths will provide a firm base for continuing expansion. In summary, we
maintain a cautiously optimistic outlook for the near term and we will periodically
reassess our assumptions as conditions change throughout the year.
This report concludes with a summary of where pension contribution rates are headed as the result of the recent CalPERS actuarial valuation. We anticipate that the
improving economy, the City’s ongoing efforts to reduce the size of the workforce,
working collaboratively with employees to recalibrate the compensation structure and
sharing in the costs of pension obligations, and enacting alternative pension tiers will lay the groundwork for a stronger City government in the coming years.
Economic Update
A recent report by the U.S. Commerce Department indicated that the economy slowed in the first quarter of the fiscal year (July-September 2013), even before the budget battles in Washington. Many forecasters now expect the economy will maintain a slow
expansion at a pa ce of about 2% or less. The latest data could weigh on F ederal
Reserve policy makers, who have sought to spur business and consumer investment by
purchasing $85 billion a m onth in bonds to lower interest rates. Fed officials are contemplating when to reduce the monthly purchases, but they're not expected to take action until later in 2014 at the earliest given the economy's recent disappointing
performance. Economic growth of 2% per year has continued to leave resources—
capital and labor—unused since the beginning of the recovery in the middle of 2009.
This presents a classic “chicken-egg problem” in the U.S. economy where households don't want to spend until they see real gains in income and firms don't want to hire and invest until they see a pickup in spending. Economists predict that idle capital and labor
won’t be left unused forever and the economy will grow in the next few years. While the
timing of the national economic recovery is uncertain, California’s economy is expected
to pick up gradually in 2014 and 2015, according to a recent forecast by Cal State Fullerton (CSUF) economists.
DRAFT | 2
The CSUF economists found that Southern California’s outlook are somewhat brighter
than the nation as a whole. They predict a 1.6% average rise in payroll jobs in the six-
county Southern California region this year, the same growth rate as the nation overall.
During 2014 and 2015, they estimate, job growth will rise to 2.3% in Southern California and more than the projected 1.7% in the nation as a whole. Orange County's median single-family home price remains at least 15% below its 2006 peak, at the height of the
real estate bubble. But the forecast concludes that a rapid price rise over the past year
“bodes well for future consumer spending.” The economists predict “a tempering in
housing price appreciation” due to uncertainty over mortgage interest rates and the overall economy. But that will by no means amount to a reversal of the upward trend, they said. As with the national economy, many Orange County businesses are delaying
hiring and i nvestment because of concerns about whether Congress and the
administration can agree on a budget and how long the Federal Reserve will continue
its bond-buying stimulus. “The fundamentals of the economy are getting stronger, but political uncertainty is putting households and businesses in a h olding pattern,” economists added.
Top “3” Revenues
The General Fund’s top three revenue sources (Property Tax, Sales Tax, and Transient Occupancy Taxes) account for 74.46% of General Fund revenues. Certain revenues
lag during the first quarter as they are received in large part during December and April
of each fiscal year. Therefore, first quarter results are not indicative of annual
performance. With 25% of the year complete, General Fund revenues are at 12.54% of budget. Due to the tax remittance calendar, this is a normal trend for this time of year.
Property Tax
Overall, the City has received $2.4 million, or 3.12%, of its budgeted property taxes through the end of the first quarter. This is normal for this time of the year and first quarter results are not indicative of budget performance at year end. Secured property
taxes are recorded as they are remitted, in large part, during December and April of
each year. The City realized a 5.85% and 5.20% year-over-year increase in its property
tax charge and assessed valuation, respectively, and will most likely meet its budget projections if delinquencies do not exceed 3.05%.
DRAFT | 3
Newport Beach posted Orange County’s highest increase in assessed property values
at 5.2% and came in second in total local assessed value at $42.3 billion for fiscal year
FY 2013-14. The number of home sales in Newport Beach decreased in September
due to less inventory and rising mortgage rates. However, there continues to be a sustained climb in the median home price, which is very close to the height of the market peak in 2007.
Sales Tax
Businesses collecting sales and use taxes periodically remit the amount collected to the State Board of Equalization (BOE). To compensate for the lag time between the sales
period and the time the tax is remitted to the City, each quarter the BOE advances 90%
of the net sales tax collections for the same quarter of the prior year. The City has
received $1.6 million, or 5.15%, of its budgeted sales taxes through the end of the first
quarter. The amount of sales realized in the first quarter represents one advance
Property Taxes
Amended
Budget
2013/14
YTD Actual
2013/14
Percent
Realized
Budget
2013/14
Prior Year
YTD Actual
2012/13
Inc/Dec
from PY
Secured $63,881,434 $0 0.00%$0 **
Unsecured 2,266,203 1,590,010 70.16% 1,487,854 6.87%
Prior Year Penalties & Interest 1,200,000 272,457 22.70% 343,570 -20.70%
Supplemental 600,000 297,724 49.62% 95,383 212.14%
In Lieu of VLF 7,166,788 31,402 0.44% 10,995 185.60%
RDA Dissolution 600,000 - 0.00%- **
All Other 1,846,545 226,837 12.28% 144,953 56.49%
TOTAL $77,560,970 $2,418,430 3.12% $2,082,756 16.12%
DRAFT | 4
payment from the BOE. As with property taxes, first quarter sales tax results are not indicative of budget performance at year end.
Transient Occupancy Taxes
The City has received $4.3 million, or 26.06%, of its budgeted Transient Occupancy
Taxes (TOT) through the end of the first quarter. Transient Occupancy Taxes (TOT)
collections have increased $643,261 or 17.76% year-over-year. This increase is due to
increases in occupancy rates in 17 of the City’s 20 hotels, motels, cottages, and resorts and a generally improving travel and tourism business sector.
The three hotels (Resort at Pelican Hill, Marriot Hotel, and Island Hotel) with the highest
TOT payments accounted for 50% of total TOT revenue. TOT receipts for these hotels
increased 12.2, 12.3, and 14.6%, respectively, over the prior year. A good portion of the
City’s TOT growth in recent years is attributable to the Resort at Pelican Hill in the
Newport Coast, which recently captured first place in the Conde Nast Traveler magazine's Reader's Choice list of 2013 Best Southern California Resort Hotels. The
magazine's readers ranked the Montage Laguna Beach in second place.
Sales Taxes
Amended
Budget
2013/14
YTD Actual
2013/14
Percent
Realized
Budget
2013/14
Prior Year
YTD Actual
2012/13
Inc/Dec
from PY
Sales and Use Tax $22,247,340 $1,553,600 6.98% $1,455,000 6.78%
Property Tax in Lieu of Sales Tax 7,919,248 - 0.00%- **
TOTAL $30,166,588 $1,553,600 5.15% $1,455,000 6.78%
Amended
Budget
2013/14
YTD Actual
2013/14
Percent
Realized
Budget
2013/14
Prior Year
YTD
Actual
2012/13
Inc/Dec
from PY
Transient Occupancy Taxes $16,363,510 $4,264,418 26.06% $3,621,157 17.76%
DRAFT | 5
Management and Expenditure Trends
The charts below compare actual first quarter expenditures for all funds since fiscal year
2008. Expenditure Trends – All Funds
The first quarter FY 2013-14 salaries
and benefits expenditure category is slightly higher than the prior year due to expensing the cost of Other Post-
Employment Benefits (OPEB) monthly
beginning in FY 2013-14 as opposed to
expensing the total cost at year-end. Expenditures for maintenance and operation are slightly higher than the
prior year due to the escalating costs of
supplies, materials, and c ontractual
services. When compared to this same time last year, capital improvement expenditures are lower due to the varying nature of spend cycles for large construction
projects from year-to-year.
Salaries and Overtime Comparison
The chart to the left compares how first
quarter salary and overtime
expenditures have changed over time since FY 2007-08. FY 2013-14 expenditures are generally consistent
with the prior year and slightly higher
due to negotiated salary increases.
Overtime expenditures have remained generally flat while full-time positions have declined since fiscal year 2009-10
(see chart below).
DRAFT | 6
Full Time Positions Trend
The City has been proactive in
restructuring and making strategic cuts in department operations, striving to evolve into a s marter, faster, smaller local
government, even while adding police
officers. The adopted FY 2013-14
balanced budget includes a net reduction of 16 full-time positions and 14 full-time equivalent (FTE) part-time positions.
Many of the staff reductions were
achieved via a V oluntary Separation
Incentive Plan (VSIP). The chart to the right depicts the City’s ongoing progress towards reducing full-time positions to
mitigate the impact of rising pension costs.
Other Financial News – Where Are Future Pension Contribution Rates Headed?
Like other municipalities, the City of Newport Beach compensates employees for their
service using three distinct elements, including salaries and wages, benefits provided
during active service (for example, health care for active employees), and benefits provided following the completion of active service (retirement income and in some cases health care stipends). The City contributes to the California Public Employees
Retirement System (CalPERS), a public employee defined benefit pension plan.
CalPERS acts as a common investment and administrative agent for participating public
entities within the State of California and provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. Local government pensions are pre-funded, as opposed to pay-as-you-
go retirement systems like Social Security. In pay-as-you-go systems, contributions
from current employees are used to pay benefits for current retirees. In pre-funded
systems, the employer and employee make contributions into a pension trust each year, over the course of an employee’s working life. That money is invested and earnings on these funds are re-invested. B y the time the employee reaches retirement, the
accumulated assets in the trust are available to pay benefits. CalPERS investment
earnings have historically provided approximately 66% of all pension benefits.
DRAFT | 7
Significant Changes in the Pension Playing Field
Recent months have seen significant changes in how Cal-PERS operates the pension
system for the City’s employees. These changes make year-to-year comparisons of
rates, unfunded liability, and related data of very limited value. We will summarize
some of the changes below, and advise the Council and others of this comparison challenge.
1 - Changes to PERS’ Asset Smoothing Methodology
The objective of a retirement system is to accumulate sufficient assets during the active service life of the employee to pay the benefits over the remainder of the employee’s
life. To meet this objective, a pension plan should receive contributions in accordance
with an actuarially based funding policy. The actuarially determined pension funding
plan determines exactly how much the employer and employee should contribute each
year to ensure that the benefits being earned will be securely funded in a systematic fashion.
Actuaries assign a market-related value to a plan’s assets in order to determine
contribution requirements. This value is called the “smoothed value” of assets. In order
to minimize short term, year-to-year contribution rate fluctuations, actuarial policies typically require the plan’s investment gains and losses to be spread, or “smoothed,”
over a period of time. The objectives of rate smoothing are to track the market value of
assets over time and smooth out short-term fluctuations in market values.
On April 17, 2013, the CalPERS Board of Administration approved a recommendation to change the CalPERS amortization and smoothing policies. Prior to this change,
CalPERS employed an amortization and s moothing policy that spread investment
returns over a 15-year period while experience gains and losses (see explanation of the
experience study below) were amortized over a rolling 30-year period. Effective with
DRAFT | 8
the June 30, 2013 valuations, CalPERS will no longer use an actuarial value of assets and will employ an amortization and smoothing policy that will spread rate increases or
decreases over a 5-year period, and will amortize all experience gains and losses over
a fixed 30-year period. The new amortization and smoothing policy will be used for the
first time in the June 30, 2013 actuarial valuations. These valuations will be performed in the fall of 2014 and will set employer contribution rates for the fiscal year 2015-16.
The example chart below is for illustrative purposes only and is not reflective of the
City’s unfunded pension obligation. It demonstrates how the change in the rate
smoothing methodology on a sample amortization base of $100,000 will result in higher employer contributions in the near term, but a faster plan funded status over the long run.
Source: CalPERS
Over time, the new methodology is designed to improve funding levels and help reduce
the overall funding level risk. The median employer contribution rate over the next four
years is expected to be higher as well. But in the long-term, better funded levels should result in lower employer contributions.
2 - CalPERS Experience Study
Work is currently underway on the latest CalPERS experience study, which compares the actual experience within the retirement system (termination rates, morality rates,
rates of salary increase, and discount rate) against current actuarial assumptions. This
study is performed every four years and, given the current trends (i.e. people living
longer), the study will likely suggest that higher contribution requirements will be
necessary. T he CalPERS board is scheduled to adopt potential new actuarial
Unfunded Pension Liability
DRAFT | 9
assumptions in February of 2014. If changes are made, the impact will be phased in beginning with the FY 2015-16 rates.
3 - Public Employees’ Pension Reform Act of 2013 (PEPRA)
The State of California enacted the Public Employee Pension Reform Act of 2013 (PEPRA) that took effect on January 1, 2013, will create lower benefits for employees
that are new to the CalPERS retirement system. This will be a third tier of benefits for
some City employees, as the City already implemented a second tier pension plan that
will ultimately result in lower pension benefits with a higher age at retirement and greater contributions from employees for their pension costs. Among the PEPRA provisions, the most significant pension reform measures impacting the City are:
reduced retirement formula and increased retirement ages, a c ost sharing of 50%
annual “normal cost” by all members, anti-spiking provisions, and pe nsionable
compensation and limitations. This provision is not required until January 2018 - yet the City’s miscellaneous and safety units already exceed this requirement. The impact of most of the PEPRA changes will first show up in the rates and benefit provision listing of
the June 30, 2013 actuarial valuation, which sets the FY 2015-16 contribution rates.
The provisions of PEPRA will take many years to have a meaningful impact on the
accrued pension liability. Latest CalPERS Actuarial Valuation
The primary purpose of a valuation is to enable decision makers to determine how
much employers and employees should contribute to the plan during a single upcoming year. The “date of value” for an actuarial valuation reflects one date in time – and in our case, more than 16 months in arrears. Actions taken between the date of value and the
valuation – such as additional pension contributions, limited cost-of-living adjustments,
new pension tiers, outsourcing, and more – are not taken into account in the valuation.
Recall that public employees typically contribute a fixed percentage of their salaries to a defined benefit plan. Annual changes in contribution rates generally affect only the
employer contribution. Usually there is a lag between the valuation date and the date
new contribution rates begin. For example, the June 30, 2011 actuarial valuation was
used to set contribution rates for the 2003-14 fiscal year, starting July 1, 2013. Based on the recent actuarial valuation (used to set contribution rates for 2014-15) the funded status of our pension plans on a market value basis was at 66.3% for the Miscellaneous
Plan and 59.3% for the Safety Plan as of June 30, 2012.
Also on June 30, 2012, the combined unfunded liability was approximately $275 million on a market value basis. This number, while relevant to rate setting for one year, is already well out of date. As we discuss, PERS’ rate of return for the fiscal year ending
June 30, 2012 was less than 1%. But six months later, by the end of Calendar Year
2012, it had earned 13.3%. And by June 30, 2013, PERS had earned 12.5% between
the period of July 1, 2012 and June 30, 2013.
DRAFT | 10
Investment earnings affect how much of future benefit payments can be funded by investment income rather than by contributions. If lower investment earnings occur,
future contributions must increase to make up the expected difference. As can be seen
from the chart below, the significant drop in the CalPERS investment returns from
21.7% to 0.14% between FY 2010-11 and FY 2011-12 means that current assets well underperformed during the actuarial period. The decrease in funded status is largely due to the 0.14% investment return booked from July 1, 2011 to June 30, 2012.
Source: CalPERS
Investment earning, payroll growth, changes in discount rate, demographics, and other
financial results have caused a widening variance between the market value of PERS
assets and the actuarial accrued liabilities. As can be seen from the chart below, the funded ratio of all CalPERS assets has decreased to 70% in 2012 from 74% in the year
prior.
Source: CalPERS
DRAFT | 11
What this Means for Newport Beach
The often-fluctuating unfunded liability (with a date of value of June 30, 2012) given to our City is important for rate setting, but isn’t a full picture of the City’s future or its recent actions on pension reform. As noted, the actuarial and the unfunded liability
have yet to fully incorporate the City’s efforts to:
• Reduce the City’s overall position count through outsourcing and other means, going from 833 positions to 736, thus reducing liabilities.
• Increase employee contributions to pension payments, including having employees pay a portion of what is traditionally the “employer’s share” of the cost.
• Eliminate the “Employer Paid Member Contribution” or “EPMC” which, when EPMC was included, had the effect of increasing pension costs; and
• Establishing 2nd and 3rd Tiers for new hires and transfers, with less-generous pension benefits, later retirement ages, and additional employee contributions.
The City recently won an award from the Orange County Taxpayers Association for its
pension reform efforts as outlined above.
It is anticipated that the combined impact of changes to actuarial methodologies,
forthcoming changes resulting from the latest experience study, and fluctuations in
investment earnings will further increase our employer contribution rates in the near
term. The table below projects the approximate future required employer contributions
and year-over-year changes through FY 2019-20. These amounts are based on the most recent information available, including an estimate of the investment return for FY
2012-13, namely 12%, the impact of the new smoothing methods, an assumed discount
rate of 7.5%, inflation rate of 2.75%, and an estimated payroll growth of 3% annually.
Importantly, these amounts do not reflect any of the City’s current or future potential
cost sharing agreements with the various bargaining groups. Therefore, these projected contributions are primarily meant to provide the reader with an or der of
magnitude for the anticipated changes.
DRAFT | 12
City of Newport Beach Estimated Employer CalPERS
Contributions 2014-15 through 2019-20
There are Memorandums of Understanding (MOU) between the City and several
bargaining units that will be expiring on June 30, 2014. Additionally, a classification and compensation study is expected to conclude soon. Both will impact the total payroll and
the level of employee pension cost sharing. S taff will further refine the estimated
employer CalPERS contributions over the next year and report back to the Finance
Committee as new information becomes available.
Conclusion
The City has made significant progress over the past 24 months to address pension
issues now rather than pushing the problem onto future generations. This hasn’t always
been popular, an example being recent decisions to outsource more City services.
Combined with outsourcing, the City has reached agreement with employee associations to reduce benefits creating a 2nd lower tier where employees contribute as
much as 9% of their salary to the existing pension obligation. Additionally, in April 2013,
the City Council adopted a plan to accelerate payments towards the unfunded liability
thus paying it down over a fixed and shorter time period avoiding potentially $100 million
of interest expense over the next 30 years. The FY 2013-14 balanced budget included a net reduction of 16 full-time positions and 14 full-time equivalent (FTE) part-time
positions. Many of the staff reductions were achieved via a V oluntary Separation
Incentive Plan (VSIP) in which 21 employees participated.
We anticipate that the improving economy and the City’s ongoing efforts to strategically
outsource as well as working collaboratively with employees to recalibrate the compensation structure and share in the costs of pension obligations will lay the
groundwork for a stronger City government in the coming years.
Fiscal Year
Employer
Contribution
Annual
Change
FY 2014-15 $22,055,226
FY 2015-16 23,946,797 1,891,571
FY 2016-17 25,946,636 1,999,839
FY 2017-18 28,044,914 2,098,277
FY 2018-19 30,210,758 2,165,845
FY 2019-20 32,466,701 2,255,942
Six-Year Total $162,671,032 $10,411,475
CITY OF NEWPORT BEACH
FINANCE COMMITTEE STAFF REPORT
Agenda Item No. 5C
November 18, 2013
TO: HONORABLE CHAIRMAN AND MEMBERS OF THE COMMITTEE
FROM: FINANCE DEPARTMENT
Dan Matusiewicz, Finance Director
(949) 644-3123 or DanM@NewportBeachCA.gov
SUBJECT: BUDGET PROCESS STRATEGY AND ROADMAP
SUMMARY:
Staff will seek guidance and input from the Committee regarding budget process
strategies prior to the preparation of the FY 2014-15 annual budget. In consideration of current revenue performance trends and anticipated expenditures, staff will also provide the Committee with preliminary (high-level) budget assumptions for FY 2014-15.
DISCUSSION:
The Finance Department assists the City Manager by providing budget and fiscal planning, analysis and management services to enhance service delivery to City of
Newport Beach residents, business owners, and visitors. The City’s budget is the tool by
which the organization translates its strategy into action. As the foundation for all strategic
and management decisions, the Office of Management and Budget provides oversight and management of the City’s budget with a focus on c ommunication, accuracy and transparency.
New Budget Software
Staff is in the process of implementing new budget software which will bring more structure and efficiency to the budgeting process. The new software “CityVision” by PowerPlan Corporation is designed mostly for public sector clients and the benefits
include:
• Role-based security across the organization controls the data with which each user can work
• Intuitive layout provides a user friendly environment, easy to navigate, with access to
data essential for making informed decisions
• Reporting and trend analysis functions provide an efficient and informative tool for
department and program management and include online access
FY 2014-15 Budget Strategies November 18, 2013
Page 2
• Detailed notes and itemized lists support budget entries and justification
• Automatic consolidation of details facilitates data review across the organization
Department training starts on Wednesday, November 20th.
Selection and implementation of a new Enterprise Resource Planning (ERP) program
continues. A s part of the implementation process, departments will be as ked to
inventory and define the programs that they provide. Program cost information will then
be developed that will provide policymakers additional information to assist them in
evaluating and strategizing the allocation of funds during budget development in future years.
Budget Calendar
We will be preparing a mid-fiscal-year 2013-14 budget update in January. The update
may include recommended revenue budget adjustments. The target date for Council
review of those recommendations is the February 25, 2014, Council meeting.
The Proposed Budget Calendar for FY 2014-15 is attached (Attachment A). We’ve
moved up the budget development and production dates in order to provide the printed
budget information to Council earlier than in prior years. Our target distribution is on
Wednesday, April 23, 2014.
Citizen Engagement
The City currently invites citizen participation in the budget process when the proposed
budget is presented to the Finance Committee and to City Council during designated
Study Sessions annually each May. The community can apply for financial support by
applying for special event sponsorship, and Arts Commission, Human Services, and Council Discretionary grants. The City Council is also receptive to community requests
and needs for funding outside of the annual budget process. For example, when
community members and cycling advocates initiated fund raising efforts last fall to
augment the City’s bicycle safety improvement projects, the City Council authorized a
Bike Safety Improvement Fund.
Other engagement tools are available to us as well, depending upon Council desires.
FY 2014-15 Budget Strategies November 18, 2013
Page 3 A First Look at Fiscal Year 2014-15
General Fund Revenue Estimates
General Fund revenues finished the year at $170.5 million in FY 2012-13, an increase
of 5.94% over the prior year. The top three individual revenue sources, Property Taxes,
Sales Taxes, and Transient Occupancy Tax (TOT), represent approximately 74% of all General Fund Revenues.
Property tax collections finished the year nearly $10.1 million or 14%, higher than the
previous fiscal year. This is due to increases in assessed property values and a one-
time $5.4 million payment resulting from the dissolution of redevelopment in the county. Newport Beach posted Orange County’s highest increase in assessed property values
at 5.2% and came in second in total local assessed value at $42.3 billion for fiscal year
2013-14. There is also a generally improving economy resulting in higher sales tax
receipts and a greater level of travel and tourism within the region.
Chart 1: Historical and Projected Growth of General Fund Revenue FY 08-09 to FY 14-15
The General Fund’s top three revenue sources are performing relatively better than all
other General Fund revenue sources (see black line in Chart 1 above) and are expected
to continue their climb into positive territory in FY 2014-15. Overall, we are projecting
2013-14 General Fund revenues at $169.4 million and 20 14-15 revenues at $171.6
million.
FY 2014-15 Budget Strategies November 18, 2013
Page 4
Property Taxes Property tax is the top source of revenue for the City of Newport Beach, representing almost half of all General Fund revenues. Consistent and vigorous demand for coastal
property has allowed the City to enjoy long-term growth trends with its number one
revenue source. In the six years since the great recession, assessed valuation
increased an average of 2.21% percent. While property tax growth rates have fallen sharply during the Great Recession, the City has experienced positive AV growth during each of the past 16 years. This positive growth occurred while many other cities
experienced large decreases in their AV during the depths of the recession.
Chart 2: Assessed Property Valuation in Newport Beach FY 08-09 to FY 13-14
Housing demand within Orange County is increasing, as are housing prices, and new
housing construction activity and commercial development are projected to continue growing in 2014-15. As can be seen from the blue shaded bars in Chart 1 above, we project property tax revenue of $78.4 million in 2013-14 and $79.8 million in 2014-15.
The City’s secured and uns ecured property tax receipts combined for 2013-14 is
projected to be $66.18 million or 3.68% over 2012-13. This estimate was derived by the latest 2013-14 Newport Beach property tax ledger or “levy” obtained from the County with an assumed collection rate of 97%. Although the housing market continues to
gradually improve, our projections remain conservative for 2014-15, estimating $67.5
million in secured and unsecured property tax.
Sales Tax Consumer spending drives nearly 70 percent of economic activity and this is no less
true in Newport Beach. Newport Beach features a well-diversified array of sales tax
FY 2014-15 Budget Strategies November 18, 2013
Page 5 generating businesses. With over 14,000 businesses actively licensed in the city, increased employment is fueling increased spending activity. The chart below depicts the growth of sales tax revenue in Newport Beach since 2000-01. Since 2009-10, sales
tax in Newport Beach has grown approximately 19.4%. Inversely, unemployment has
decreased in Orange County from 9.5% to 6.2% during the same period. The inverse
relationship between employment and sales tax is clearly evident throughout the thirteen year period.
Chart 3: Newport Beach Sales Tax ($000) and Percent Unemployment
The trend towards lower unemployment, greater income, and higher sales tax resulting
from car and retail sales will most likely result in higher sales tax revenue for Newport Beach during the forecast period. The forecast conservatively predicts no change in
sales tax from what was originally budgeted for 2013-14, $30.2 million, and only a slight
increase for 2014-15.
Transient Occupancy Tax (TOT) Newport Beach features two impressive five star hotels, excellent affordable hotels,
numerous beach cottage rentals, world-class shopping, and restaurants that generated
a combined $16.5 million in transient occupancy tax revenues in 2012-13. Tourism is an
integral part of commerce in the City which has a s ummer population in excess of
100,000 compared to a permanent population of 86,436.
TOT revenue is estimated to continue increasing in FY 14 due largely to higher
occupancy in city hotels, motels, cottages and resorts and a g enerally improving travel
and tourism business sector. The City has received 18%, or $643,000, higher TOT in the
first quarter of FY 13-14 quarter when compared to the same time last year. Based on the prior three-year collection trend through the first quarter of the fiscal year, we
estimate TOT in the amount of $18.3 million in 2013-14. This will represent a 10.7%
increase over the prior year. We conservatively estimate no change in 2014-15, as we
are uncertain as to the whether and how long this trend will continue.
FY 2014-15 Budget Strategies November 18, 2013
Page 6
General Fund Expenditures The Fiscal Year 2013-14 budget emphasized public safety, community serving facilities and basic infrastructure, reducing the cost of personnel through staff reduction and
increased pension contributions from employees, and t echnology enhancements. In
keeping with Council’s past approach, in Fiscal Year 2014-15, the City Manager intends
to continue to emphasize public safety, community serving facilities and bas ic infrastructure, and reducing personnel costs by continuing to identify internal efficiencies and services suitable for contracting.
Salary and Benefits
Salary and bene fits are the largest component of the City’s operating budget. Memorandums of Understanding (MOU) between the City and several bargaining units will or may expire at June 30, 2014: F irefighters Association, Fire Management
Association, Police Association, Lifeguard Management Association, and the Association
of Newport Beach Ocean Lifeguards (Part-time). It is unlikely that negotiations with these
units will be completed in time to include funding in the Fiscal Year 2014-15 Proposed Budget.
The following MOUs include known increases that will be included in the Fiscal Year
2014-15 Proposed Budget:
Bargaining Unit Cost of Living Adjustment (COLA) Cafeteria Allowance Pension Contribution
City Employees,
Employees League,
and Professional &
Technical
Association
1%-2% effective
January 2015¹
$100 per month
effective January
2015
Additional 1.45%
employee
contribution
effective June 30,
2014
Police Management 1%-2.5% effective
July 2014²
¹Exact percentage of January 2015 COLA is tied to the October 2014 Consumer Price Index. ²Exact percentage of July 2014 COLA is tied to the March 2014 Consumer Price Index.
The City is currently in negotiations with the recently re-formed Part-time Employees Association of Newport Beach.
Another event that may impact the Fiscal Year 2014-15 budget is the implementation of
the Classification and Compensation Study. Once Council approves the study, we will
work hard to incorporate any necessary changes in the budget development process.
FY 2014-15 Budget Strategies November 18, 2013
Page 7 Pension The Fiscal Year 2014-15 PERS Contribution rates were recently made available via the annual CalPERS Actuarial Valuation as indicated in the tables below.
Miscellaneous FY2013-14 FY 2014-15 FY 2015-16
Total Contribution 25.920% 26.816% 28.0% projected
City Contribution¹ 15.550% 15.916% 16.65%
Employee Contribution 9.45%² 10.9% 12.35%
¹ Employer contribution rate net of employee cost sharing agreements
2. Police Miscellaneous employees are contributing 8%.
Safety FY2013-14 FY 2014-15 FY 2015-16
Total Contribution 49.677% 53.522% 55.7% projected
City Contribution¹ 40.677% 44.522% 46.70%
Employee Contribution 9.0%² 9.0%3 9.0%3
¹ Employer contribution rate net of employee cost sharing agreements.
2 Police Association employees are contributing 6.25%, Firefighters Association employees are contributing 7%, and Police Management employees are contributing 12.802%.
3Police Management will continue to contribute 12.802%.
The primary purpose of a valuation is to enable decision makers to determine how much
employers and employees should contribute to the plan during the upcoming year. Public employees typically contribute a fixed percentage of their salaries to a defined benefit
plan. Annual changes in contribution rates generally affect only the employer contribution.
Usually there is a lag between the valuation date and the date new contribution rates
begin. For example, the June 30, 2011 actuarial valuation was used to set contribution
rates for the 2003-14 fiscal year, starting July 1, 2013. Based on our June 30, 2012, actuarial valuation (used to set contribution rates for 2014-15) the funded status of our
pension plans on a market value basis has decreased from 71.2% to 66.3% for the
Miscellaneous Plan and f rom 64.8% to 59.3% for the Safety Plan. T he combined
unfunded liability totals approximately $275 m illion on a market value basis. A new
amortization basis, adopted by PERS, will increase rates sharply over the next five years to deal with the growing unfunded liability. The silver lining is that the plan will stabilize
and become better funded over time.
The reasons for these increases are generally:
• Changes in the earnings assumptions by Cal-PERS for its investments;
• Changes in assumptions regarding retiree lifespan and health; and
• Changes in Cal-PERS rules regarding how long unfunded liability will be amortized.
By FY 2015-16, PERS projects that the retirement costs for each police officer, firefighter
and lifeguard will be near ly 56 c ents for every dollar in pensionable salary these
individuals earn. Police officers, for example, may soon pay about 12 of those 56 cents, or about 21% of the total cost of their pensions. The City’s goal for “pension cost pickup”
FY 2014-15 Budget Strategies November 18, 2013
Page 8 in the past has been a full 50% of each position’s pension cost, or 28 cents of every dollar in pensionable salary.
Conclusion
Newport Beach continues to be a stable, prosperous, and financially secure municipality
due to its strong underlying tax base, governance, and disciplined fiscal decisions. The City’s major General Fund revenue categories performed above their projected levels this past fiscal year due to the improving economy and the receipt of certain one-time
revenues. Expenditures performed within expected levels and ended the year with an
unexpended balance. The recovering economy and the Council’s guidance in recent
years provide us with the opportunity to maintain reserve levels that are in furtherance of the City’s policies, goals, and priorities. The continued health of key reserves will lay the groundwork for additional community infrastructure investment and a stronger City
government in FY 2014-15. We look forward to the Finance Committee’s input
regarding budget process strategies prior to the preparation of the FY 2014-15 annual
budget.
Prepared by: Submitted by:
/s/Susan Giangrande
/s/Dan Matusiewicz
Susan Giangrande Dan Matusiewicz
Budget Manager Finance Director
Attachments: Proposed Budget Calendar Fiscal Year 2014-15
FY 2014-15 Budget Strategies November 18, 2013
Page 9 Proposed Budget Calendar Fiscal Year 2014-15
November 20, 2013 Finance Revenue budget training for departments.
December 13, 2013 Departments FY 2014-15 Preliminary Revenue Estimates are due.
February 7, 2014 Departments Expenditure budgets must be completed.
February 21, 2014 Departments Submit final Performance Plan pages to Finance
Department for assembly and publication.
March 3-7, 2014 City Manager Budget conferences with Departments.
March 13, 2014 Finance Meet with City Manager to discuss departmental
budgets.
March 28, 2014 City Manager Last day to make changes to Proposed Budget
documents.
April 2014 Finance
Public Works Prepare and print Proposed Budget documents.
April 23, 2014 City Manager Submit Proposed Budget to City Council.
April 28, 2014 Council Finance
Committee Review of Proposed Budget.
May 13, 2014 City Council First budget review with staff at Study Session.
May 27, 2014 City Council Second budget review with staff at Study Session. Set
date for public hearing on budget.
June 10, 2014 City Council Public Hearing and Adoption of FY 2014-15 Budget and
GANN Limit.
July 1, 2014 Beginning of FY 2014-15.
August 7, 2014 Finance Target distribution of final budget documents.