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this new plan design was implemented for department directors, management and confidential employee groups. 4. Adjustments to CaIPERS Employee Contributions Like many California cities, Pleasanton participates in the California Public Employee Retirement System (CaIPERS). Pleasanton does not participate in the Social Security retirement system or provide other pension type benefits such as contributions to 401 K plans. Unlike Social Security, which is a pay -as- you -go program, CaIPERS is a funded pension program whereby payments into the system fluctuate based on CaIPERS actuarial assumptions needed to meet pension costs in the long term. Also, unlike Social Security, which is governed by Congress, CaIPERS is governed by a 13- member Board of Administration. Large cities and counties such as San Francisco, Los Angeles, Alameda and Contra Costa, operate their own individual pension programs. Recently, based generally on a reflection of lower than expected returns on investment in 2008, actuarial assumptions related to retiree life expectancy, and the availability of enhanced benefit packages authorized by State Senate Bill 400 in 1999 (which both lowered the age and increased the amount of pension benefits), CaIPERS adjusted its financial projections requiring increased employer contributions from its member agencies. Exhibit F illustrates these historical percentages and projected increases for the coming three fiscal years. It should be noted that in years when CaIPERS rates were down significantly, the City tried to maintain a level budget by "prefunding" reserves elsewhere (including the City's Replacement Plan and Retiree Medical, for example). Then in years when PERS rates were above normal, the City temporarily reduced contributions to these areas to meet the CaIPERS costs. This 'smoothing' of expenditure ups and downs over multiple years helped the City meet the objectives of its financial policies, by helping us balance budgets and reminding us to distinguish between temporary and permanent budget reductions and increases - a system not commonly used by other municipalities. This latter matter is important because while CaIPERS payments are currently at historic highs, ongoing reform at the State and local level over the next several years, along with long -term economic gains (albeit slowly), will result in payment reductions in the future and these savings will need to be managed in a way that best meets the City's financial interests. Meeting future CaIPERS cost increases requires a strong and systematic focus to address this matter. To this end, we have pursued the following: On a broad level, the City Manager participated in a two county working group which issued a proposal calling for statewide pension reform, including a two -tier retirement system of pension benefits, promoting increased employee contributions to the program and calling for statewide reform by the CaIPERS Board of Administration (Exhibit E). It also encourages changes to individual retirement benefits on a city by city basis, including the systematic increase of employee contributions into the system and the implementation of 2 -tier retirement system which would roll back pension formulas to Page 7 of 9