City's Annual PERS payments
The current year’s payments towards the City’s unfunded CalPERS pension liabilities total approximately $3.75 million. Funding for these payments is included in the City’s operating budget, spread across a number of funds, including the General Fund.
PERS Unfunded Liability Overview
The City’s unfunded liability is approximately $56.6 million. (latest valuation 6/30/18)
The City’s unfunded liabilities and the payments required to pay off those liabilities are calculated by CalPERS’ actuarial staff. These calculations are made annually and can change the amount of the City’s unfunded liabilities based on a number of factors, including variances from expected results relative to investment returns and employee demographics, as well as any changes in the assumptions that CalPERS uses to make their calculations.
Over the last couple of years, CalPERS has phased in the reduction in their investment return assumption, taking it from 7.5% to 7.0%. This change has resulted in the significant increases in the City’s unfunded liabilities in recent years, in spite of the fact that the City has been making its required payments on its unfunded liabilities. This change in investment return assumption is also a primary factor in the projected increases in future contributions that will be required to pay off the City’s unfunded pension liabilities
The most recent valuations show the unfunded liabilities for the City's miscellaneous plan paid off by June 30, 2043 and the safety plan payoff is June 30, 2045. The City makes additional payments of at least $100,000 annually to CalPERS to pay down the unfunded liability sooner. Since 2010, the City Council has authorized over $2.8 million in additional payments to reduce its unfunded liability. These payments have been in addition to the City’s required annual pension contributions.
In 2012, the City adopted a tiered pension system with different pension contributions and retirement formulas based on hire date. The City has a plan for miscellaneous employees and another plan for safety employees. Miscellaneous employees pay 8% towards their retirement pan (maximum amount set for employee contributions set by PERS) and safety employees pay 9% (maximum amount of employee contribution set by PERS is 12%).
Termination of the City’s contract with CalPERS would require the payment of a termination fee to guarantee the payment of pension obligations that have already accrued. This fee would be several times the current unfunded pension liability.($56.6 million)