I thought this e-mail went out last week or so.....just found out nobody got it. I probably goofed up the address. However, I think the following will be of use to all of you who are dealing with trying to figure out the true cost of 3%@50. Let me know if it helps.
I know this issue is a daunting one, and the responses you are getting back from CalPERS are confusing. When evaluating what the total cost of a 3%@50 plan is, our consulting actuary has advised that you should think of the 3%@50 (or any other benefit improvement) in 3 separate pieces: 1. increase in NORMAL cost rate: The contribution rate is made up of 2 pieces -- the Normal cost (which is the ongoing cost of a benefit) -- plus/minus a rate to amortize any surplus/unfunded liability over time (which varies from year to year depending on gains/losses). The Normal cost rate is the permanent increase into the future. 2. Increase in Actuarial Liability -- this is the amount that gets paid off over time and represents the true cost of the benefit in dollars. 3. short-term cash flow savings brought about by asset valuation method change -- this is the portion that some like to refer to as "funny money", and represents the effects of applying a one-time 95% valuation to the plan assets, instead of the 90% valuation. When you break 3%@50 down into the above 3 items, then the City can decide how to negotiate using them. MAIN POINT: The COST of 3%@50 is NOT the short-term contribution impact that CalPERS shows in their special valuation study. You need all 3 pieces to make a good decision. Hope this helps.
Thanks to all of you who responded to my question about whether or not your City is considering going to a 3% @ 50 PERS retirement option for safety employees. I have attached a file containing all of the responses I received. Bret Plumlee, Director of Finance City of El Segundo 310-607-2240 <<Summary of Responses to PERS 3% at 50.doc>>
Summary of Responses to PERS 3% at 50.doc
