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CITY OF <br />F NEWPORT REACH <br />City Council Staff Report <br />November 25, 2014 <br />Agenda Item No. 27 <br />TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL <br />FROM: Dan Matusiewicz, Finance Director — (949) 644 -3123, <br /> <br />PREPARED BY: Dan Matusiewicz, Finance Director <br />PHONE: (949) 644 -3123 <br />TITLE: CalPERS Pension Plan Update and Payment Alternative Recommendation <br />ABSTRACT: <br />On November 17, 2014, the Finance Committee met and received an update on the latest CalPERS <br />actuarial valuation, reviewed an analysis of alternative payment options and made a recommendation to <br />City Council to employ a "fresh start" to reset the amortization schedule of both City CaIPERS plans to a <br />19 -year amortization schedule. If approved, the fresh start would increase required contributions effective <br />fiscal year 2015 -16. <br />RECOMMENDATION: <br />Authorize the Finance Director to instruct CalPERs to employ a "fresh start" resetting the amortization of <br />the City's unfunded pension liability to 19 years for both the Safety and Miscellaneous pension plans. <br />FUNDING REQUIREMENTS: <br />There would be no immediate funding requirement in fiscal year 2014 -15 but expect the required funding <br />contribution will increase approximately $6.6 million in fiscal year 2015 -16 and a total of approximately $23 <br />million over the next five fiscal years as indicated in the incremental payment projection in Attachment A of <br />this report. <br />DISCUSSION: <br />Background: <br />The City of Newport Beach's pensions are pre- funded, as opposed to pay -as- you -go retirement systems <br />like Social Security. In pre- funded systems, the employer and employee make contributions into a <br />pension trust each year, over the course of an employee's working life. That money is invested and <br />earnings on these funds are re- invested. By the time the employee reaches retirement, the accumulated <br />assets in the trust are available to pay benefits. The objective of course, is to accumulate sufficient assets <br />to pay the benefits over the remainder of the employee's life. To meet this objective, a pension plan should <br />receive contributions in accordance with an actuarially based funding policy. The actuarially determinedP7 -1 <br />