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CONTRACT AMENDMENT COST ANALYSIS -VALUATION BASIS: June 30, 2006 SAFETY FIRE PLAN FOR CITY OF PLEASANTON Employer Number: 327 Benefit Description: Section 21548, Pre-Retirement Optional Settlement 2 Death Benefit A plan with assets exactly equal to the plan's accrued liability is simply "on schedule" in funding that plan, and only future employee contributions and future employer normal costs are needed. A plan with assets below the accrued liability is "behind schedule", or is said to have an unfunded /iabi/sty, and must temporarily increase contributions to get back on schedule. A plan with assets in excess of the plan's accrued liability is "ahead of schedule", or is said to have excess assess, and can temporarily reduce future contributions. A plan with assets (AVA) in excess of the total present value of benefits is called super-funded, and neither future employer nor employee contributions are required. Of course, events such as plan amendments and investment or demographic gains or losses can change a plan's condition from year to year. For example, a plan amendment could cause a plan to move all the way from being super-funded to being in an unfunded position. The changes in your plan's accrued liability, unfunded accrued liability, and the funded ratio as of June 30, 2006 due to the plan amendment are shown in the table below. As of June 30, 2006 Current Plan Post-Amendment Entry Age Normal Accrued Liability (AL) $ 111,700,371 $ 111,839,721 Actuarial Value of Assets (AVA) 90,841,578 90,841,578 Unfunded Liability/(Excess Assets) (UAL = AL - $ 20,858,793 $ 20,998,143 AVA) Funded Ratio (AVA / AL) 81.3% 81.2% Change to AL 139,350 Total Employer Contribution Rate 1lVhile the table above gives the changes in the accrued liability and funded status of the plan due to the amendment, there remains the question of what will happen to the employer contribution rate because of the change in plan provisions. CaIPERS policy is to implement rate changes due to plan amendments immediately on the effective date of the change in plan benefits. This change is displayed as the "Change to Total Employer Rate" on the following page. If the contract amendment effective date is on or before June 30, 2008, the change in the employer contribution rate should be added to the employer's current rate. In general, the policy also provides that the change in unfunded liability due to the plan amendment will be separately amortized over a period of 20 years from the effective date of the amendment and all other components of the plan's unfunded liability/excess assets will continue to be amortized separately. However, your actuary may choose to apply different rules to plans with a current employer contribution rate of zero. The pre-amendment excess assets in these plans were sufficient to cover the employer's normal cost for one or more years into the future. A plan amendment will use up some or all of the pre-amendment excess assets. In order to maintain our goal of providing rates that are relatively stable, while taking into account known or expected future events, your actuary may decide to spread any remaining excess assets over a single number of years. This is known as a "fresh start" and will, in no case, be less than 5 years. You may call your actuary to discuss further alternative financing options. If the amendment uses up all excess assets and creates an unfunded liability (i.e., from being ahead of schedule to behind schedule), the total post-amendment unfunded liability may be amortized over 20 years. In no case may the annual contribution with regard to a positive unfunded liability be less than the amount which would be required to amortize that unfunded liability, as a level percent of pay, over 30 years. The table on the following page shows the change in your plan's employer contribution rate due to the plan amendment for fiscal year 2008-2009. November 16, 2007 Page 3