RES 08175 - Laserfiche WebLink

CONTRACT AMENDMENT COST ANALYSIS - VAWATION t'iASIS: Tuna 30, 2006 SAFETY FIRE PLAN FOR CITY OF PLEASANTON Employer Number. 327 eanaifit Desoiption: Section 21546, Pro-Retirement Optlonal Settlement 2 Dasth senaAt 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 accn~ed liability is "behind schedule", or is said to have an unhinde~d //adi//ty, and must temporarily inuease contributions to get bads on schedule. A plan with assets in excess of the plan's acwed liability Is "ahead of schedule ; or is said to have e~rness asses, and can temporarily reduce future contributions. A plan with assets (AVA) in excess of the total present value of benefits is called super~lunded, and neither future employer nor employee conMbutions are required. Of course, events such as plan amendments and investment or demographic gains or losses can d>ange 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 positlon. The changes in your plan's accrued liability, unfunded accrued liability, and the funded ratio as of ]use 30, 2006 due to the plan amendment are shown in the table below. As of ]use 30, 200!6 Current Plan Post-Amendment Entry Age Normal Accrued Liability (AL) # 111,700,371 # 111,839,721 Actuarial Value of Assab (AVA) 90,841,578 90,841,578 UMunded Liability/(Excess Asseb) (UAL = AL - # 20,858,793 # 20,998,143 AVA) Funded Rath (AVA / AL) 81.396 81.296 Change bo AL 139,350 Total Employer Contribution Rate 1Nhiie 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 tv 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 folowing page. It the contract amendment effective date is on or before June 30, 2008, the dwnge in the employer contribution rate should be added bo the employer's current rate. In general, the polky 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 ab other components of the plan's unfunded liability/excess assets will aorrtinue to be amortized separately. However, your ad~ary may droose to appy different rules tq plans with a arrest employer contribution robe of zero. The pre-amendment excess assets in these plans were suflldent to cover the employ~a'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 bo maintain our goal of providing rates that are relatively stable, while taking into account known or e~cpected future events, your actuary may deride to spread any remaining excess assets over a single number of years. This is known as a "fresh start" and will, 1n no case, be less than 5 years. You may call your actuary to discuss further alternative flnandng 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