02 ATTACHMENTS - Laserfiche WebLink

CONTRACT AMENDMENT COST ANALYSIS -VALUATION BASIS: )une 30, 2006 SAFETY FIRE PLAN FOR CITY OF PLEASANTON Employer Number: 327 Benefit Description: Section 21548, Pre-Retirement Optional Settlement 2 Death Benefit When a plan is amended, liability changes but assets do not. In addition, the desired state is to be 100% funded (i.e., to bring assets to equal accrued liability). Therefore, we disclose the ratio of accrued liability to payroll rather than assets to payroll as a measure of the plan's potential future rate volatility. The higher the ratio, the more volatile the future rate may be. The table below contains these measures of potential future rate volatility. As of ]une 30, 2006 Current Plan Post-Amendment Accrued Liability $ 111,700,371 $ 111,839,721 Payroll 12,203,017 12,203,017 Volatility Index 9.2 9.2 It should also be noted that these ratios tend to stabilize as the plan matures. That is, alt plans with no past service start their lives with zero assets and zero accrued liability -and so asset to payroll ratio and liability to payroll ratio of zero. However, as time goes by these ratios begin to rise and then tend to stabilize at some constant amount as the plan matures. Higher benefit levels and earlier expected retirements produce higher constant future ratios. For example, our miscellaneous plans have average ratios that range from 2.6% for 2% @ 60 plans to 5.1% for 2.7% @ 55 plans. For safety plans; the ratios range from 5.2% for 2% @ 55 plans to 9.3% for 3% @ 50 plans. Present Value of Projected Benefits The table below shows the change in the total present value of benefits for the proposed plan amendment. The present value of benefits represents the total dollars needed today to fund all future benefits for current members of the plan (i.e., without regard to future employees). The difference between this amount and current plan assets must be paid by future employee and employer contributions. As such, the change in the present value of benefits due to the plan amendment represents the "cost" of the plan amendment. However, for plans with excess assets some or all of this "cost" may already be covered by current excess assets. As of ]une 30, 2006 Current Plan Post-Amendment Total Assets at Market Value (MVA) Actuarial Value of Assets (AVA) AVA /MVA Present Value of Projected Benefits (PVB) Actuarial Value of Assets (AVA) Present Value of Future Employer and Employee Contributions (PVB -AVA) Change to PVB $ 96,351,146 90,841,578 94.3% 137,674,616 90.841.578 46,833,038 96,351,146 90,841,578 94.3% 137,904,146 90.841 j578 47,062,568 229,530 Accrued Liability It is not required, nor necessarily desirable, to have accumulated assets sufficient to cover the total present value of benefits until every member has left employment. Instead, the actuarial funding process calculates a regular contribution schedule of employee contributions and employer contributions (called normal costs) which are designed to accumulate with interest to equal the total present value of benefits by the time every member has left employment. As of each June 30, the actuary calculates the "desirable" level of plan assets as of that point in time by subtracting the present value of scheduled future employee contributions and future employer normal costs from the total present value of benefits. The resulting "desirable" level of assets is called the accrued /iabi/ity. November 16, 2007 Page 2