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CaIPERS Investment Return <br />+Return Discount Rate <br />----Linear (Return) <br />3No <br />` =- <br />at <br />A <br />2°. <br />rrn c of <br />n <br />2� 1n <br />A o <br />N •-1 3° <br />20'51e <br />ni <br />eti '^ N <br />rn <br />M <br />la/o <br />— <br />--- <br />IL 00 <br />o; <br />m <br />o% <br />m <br />c <br />r <br />ni <br />rri <br />-10% <br />- <br />N tG <br />n <br />-20% <br />— <br />c <br />-30%- <br />92 94 <br />96 98 00 02 04 06 08 <br />10 12 <br />14 16 18 <br />Employer Normal Cost and Unfunded Accrued <br />Liability Payments as % of Payroll <br />Safety Plan • • • • • • • Safety+POB+loan — — — Misc Plan <br />120% <br />100% <br />a Side <br />i. 80% <br />a <br />c 60% <br />40% <br />20% <br />0% <br />94 97 00 03 06 0912 1518 2124 27 30 33 36 39 42 45 48 <br />Fun <br />PEPRA=Public Employees Pension Reform Act of <br />2013; reduced retirement benefits for new hires <br />Significance: <br />Greatest impact on the level of <br />CaIPERS' normal cost pension rates <br />and level of unfunded liability <br />• Context: <br />Discount rate has dropped from <br />8.75% to 7.0% over 27 years <br />In Nov-2016 Wilshire Associates, a <br />key CaIPERS investment advisor, <br />predicted a 6.2% return over the <br />next decade <br />Lower rates remain a risk in the <br />future <br />Z> <br />• Forecast starts with 2017 CaIPERS <br />valuation (updated annually) <br />• Includes planned rate increases due to <br />phase -in of CaIPERS rate structure changes <br />• Rates would be higher without Pension <br />Obligation Bond (paid $18M of $24M total <br />special contribution in FY12); ultimate <br />success depends on CaIPERS investment <br />returns <br />• PEPRA savings as new employees receive <br />lower benefits, and amortizations of <br />unfunded liability paid off <br />• Normal costs are all that remain after <br />unfunded liability is paid off <br />• Assumes 7%discount rate <br />zs <br />