CALPERS Safety and Miscellaneous Employees Plans
Substantially all City employees are eligible to participate in pension plans offered by California Public Employees Retirement System (CALPERS) an agent multiple employer defined benefit pension plan which acts as a common investment and administrative agent for its participating member employers. CALPERS provides retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. The City’s employees participate in the separate Safety (Police and Fire) and Miscellaneous (all other) Employee Plans. Benefit provisions under both Plans are established by State statute and City resolution. Benefits are based on years of credited service, equal to one year of full time employment. Funding contributions for both Plans are determined annually on an actuarial basis as of June 30 by CALPERS; the City must contribute these amounts. The Plans’ provisions and benefits in effect at June 30, 2009, are summarized as follows:
Police Fire Miscellaneous
Benefit vesting schedule 5 years service 5 years service 5 years service
Benefit payments monthly for life monthly for life monthly for life
Retirement age 55 55 55
Monthly benefits, as a % of annual salary 2.4% to 3% 2.4% to 3% 2.0% to 2.5%
Required employee contribution rates 9% 9% 8%
Required employer contribution rates 34.670% 24.845% 12.504%
Effective July 1, 2003, the City adopted the provisions of Internal Revenue Code Section 414(h)(2) on behalf of its miscellaneous and police safety personnel. Base salaries for these employees are grossed up 8%-9% so that employees may pay their own PERS contribution out of pre-tax compensation. The City continues to pick up the tax deferred contributions on behalf of fire safety personnel.
CALPERS determines contribution requirements using a modification of the Entry Age Normal Method. Under this method, the City’s total normal benefit cost for each employee from date of hire to date of retirement is expressed as a level percentage of the related total payroll cost. Normal benefit cost under this Method is the level amount the employer must pay annually to fund an employee’s projected retirement benefit. This level percentage of payroll method is used to amortize any unfunded actuarial liabilities. The actuarial assumptions used to compute contribution requirements are also used to compute the actuarially accrued liability. The City uses the actuarially determined percentages of payroll to calculate and pay contributions to CALPERS. This results in no net pension obligations or unpaid contributions. Annual Pension Costs, representing the payment of all contributions required by CALPERS, for the years ended June 30 as follows:
Police Fire Miscellaneous
2007 $1,519,272 29.05% 23.46% 12.73%
2008 1 ,489,668 31.77% 2 3.72% 12.65%
2009 1,794,369 34.67% 24.85% 12.50%
CALPERS uses the market related value method of valuing the Plan’s assets. An investment rate of return of 7.75% is assumed, including inflation rate at 3.0 %. Annual salary increases are assumed to vary by duration of service. Changes in liability due to plan amendments, changes in actuarial assumptions, or changes in actuarial methods are amortized as a level percentage of payroll on a closed basis over twenty years. Investment gains and losses are accumulated as they are realized and amortized over a rolling thirty year period.
As required by new State law, effective July 1, 2005, the City’s Miscellaneous and Safety Plans were terminated, and the employees in those plans were required by CALPERS to join new Statewide pools. One of the conditions of entry to these pools was that the City true-up any unfunded liabilities in the former Plans, either by paying cash or by increasing its future contribution rates through a Side Fund offered by CALPERS.
The latest available actuarial values of the above State-wide pools (which differs from market value) and funding progress are in the following documents:
Annually, the City's actuary, Dr. John E. Bartel of Bartel & Associates performs an analysis and presents his findings of the above City of Sausalito's Actuarial studies.
The City of Sausalito plan is compared to other cities in Marin County in the following document:
An summary and detailed analysis of the economic efficiencies of defined benefit plans over defined contribution plans was presented by the National Institute on Retirement Security: