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CITY OF SAN LEANDRO
<br />NOTES TO BASIC FINANCIAL STATEMENTS
<br />For The Year Ended June 30, 2022
<br />NOTE 14 – PENSION PLAN (Continued)
<br />The $10,532,119 and $9,552,942 for Miscellaneous and Safety, respectively, will be reported as deferred
<br />outflows of resources related to contributions subsequent to the measurement date and will be recognized
<br />as a reduction of the net pension liability in the year ended June 30, 2023. Other amounts reported as
<br />deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as
<br />pension expense as follows:
<br />Miscellaneous Safety
<br />Plan Plan Total
<br />Year Ended Annual Annual Annual
<br />June 30 Amortization Amortization Amortization
<br />2023 (5,065,712)$ (6,170,146)$ (11,235,858)$
<br />2024 (5,455,042) (7,197,542) (12,652,584)
<br />2025 (5,815,571) (9,057,977) (14,873,548)
<br />2026 (6,679,915) (11,220,190) (17,900,105)
<br />(23,016,240)$ (33,645,855)$ (56,662,095)$
<br />F.Section 115 Pension Trust Fund
<br />In June 2021, the City established a Section 115 irrevocable trust with the Public Agency Retirement
<br />Services (PARS). During fiscal year ended June 30, 2022, the City contributed $6,500,000 into the trust.
<br />G.Reduction in CalPERS Discount Rate
<br />On July 12, 2021, CalPERS reported a preliminary 21.3% net return on investments for fiscal year 2020-
<br />21. Based on the thresholds specified in CalPERS Funding Risk Mitigation policy approved by the
<br />CalPERS Board in 2015, the excess return of 14.3% prescribes a reduction in investment volatility that
<br />corresponds to a reduction in the discount rate used for funding purposes of 0.20%, from 7.00% to
<br />6.80%. Since CalPERS was in the final stages of the four-year Asset Liability Management (ALM)
<br />cycle, the CalPERS Board elected to defer any changes to the asset allocation until the ALM process
<br />concluded, and the board could make its final decision on the asset allocation in November 2021.
<br />On November 17, 2021, the board adopted a new strategic asset allocation. The new asset allocation
<br />along with the new capital market assumptions, economic assumptions and administrative expense
<br />assumption support a discount rate of 6.90% (net of investment expense, but without a reduction for
<br />administrative expense) for financial reporting purposes. This includes a reduction in the price inflation
<br />assumption from 2.50% to 2.30% as recommended in the November 2021 CalPERS Experience Study
<br />and Review of Actuarial Assumptions. This study also recommended modifications to retirement rates,
<br />termination rates, mortality rates and rates of salary increases that were adopted by the CalPERS Board.
<br />These new assumptions will be reflected in the CalPERS GASB 68 accounting valuation reports for the
<br />June 30, 2022, measurement date.
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