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File Number: 15-489 <br />Unfunded Retirement Liabilities <br />With $157 million in Unfunded Liabilities and growing, staff is seeking to achieve council’s <br />goal to place the City on a firm foundation to reach long term financial stability. <br />Over the past 23 years, data leading up to the current status of the City’s pension funds at <br />CalPERS shows how pension contribution rates dramatically decreased and then increased <br />for both Public Safety and Miscellaneous employees in years 1995 - 1999 with a period of <br />declining investment returns during years 1998 - 2002 and began to rise again substantially <br />with an average rate of return of 7.4% which is just under the assumed 7.5% - 7.75% for the <br />past 10 years. <br />California State’s pension reform law, which took effect on January 1, 2013, will likely mitigate <br />PERS liability growth rates. The new law lengthens the retirement age to 62 for Miscellaneous <br />Employees with an employee contribution rate of 6.75% and age 57 for Public Safety <br />Employees with an employee contribution rate of 12.25%. <br />New Pension Challenge and Restructuring Options <br />San Leandro teamed up with Union City and Newark to request some relief from CalPERS in <br />order to minimize a $1.15 million surcharge to Public Safety pension Unfunded Liabilities. <br />With testimony provided by Finance Director David Baum on May 19, 2015, CalPERS offered <br />a reduced payment for Public Safety pensions beginning fiscal year 2015-16 allowing San <br />Leandro the option to pay off the Unfunded Liabilities over the next 15 years rather than the <br />next 30 years which would assume a savings of $24.4 million using a 7.5% discount rate the <br />City would make lower payments over the next 3 years and increasing payments over years 4 <br />- 15. <br />Current Employees’ Pension Retirement Tiers - CalPERS Formulas <br />The following pension tiers seek to reduce the City’s obligations by requiring employees to <br />work longer careers and minimize benefits for newer employees starting employment after <br />May 2010: <br />Misc (Non-sworn) SLCEA, SLMO, Confidential and Unrepresented Employees <br />Tier 1: Employees hired prior to May 6, 2010: <br />·2.5% at age 55 (2% early retirement at age 50, 2.5% max benefit at age 55) <br />Tier 2: Employees hired May 6, 2010 through December 31, 2012: <br />·2% at age 55 (1.426% early retirement at age 50, 2.418% max benefit at age 63) <br />Tier 3: Employees hired January 1, 2013 and after: <br />·2% at age 62 (1% early retirement at age 52, 2.5% max benefit at age 67) <br />Safety (Sworn), SLPMA and SLPOA Employees <br />Tier 1: Employees hired prior to January 1, 2013 <br />·3% at age 50 (no early retirement age, 3% max benefit at age 50) <br />Page 2 City of San Leandro Printed on 9/2/2015