FUNDING:  CalPERS funding is generated from three primary sources: (1) investment returns on their existing funds, (2) employer contributions, and (3) employee contributions.

SAFETY AND MISCELLANEOUS:  Public safety (Police and Fire) have a pension rate structure that is separate from other employee types (aka “miscellaneous”).  As such, costing is provided separately for the two groups.

PEPRA:  In 2013, the State instituted legislation that set limits on the amount and types of pensions that public agencies could offer new employees and standardized how much employees and employers are expected to contribute. The intent was to reduce costs over time and streamline administration as more employees become “PEPRA” status. Those employed before the legislation went into effect and who have either retired or maintained employment with no more than a six-month break in service are considered “Classic” status.  The savings are realized as Classic employees retire and new PEPRA employees are hired, which is expected to take 20+ years.

DISCOUNT RATE: This is the rate of return that CalPERS expects to generate on its assets each year. In the past, this rate has been as high as 8.75%.  In recent years, CalPERS has been lowering this assumption which means that more money has to be generated for the fund from employer and employee contributions.  Currently, the discount rate is 7.0%, but many experts believe it should be decreased to 6.0%.

Normal Rate and UAL:  In the past, CalPERS provided employers a percentage rate of total payroll that they were expected to contribute. Recently, CalPERS has broken their billings into two separate payments due.  The “normal rate” is the percentage of payroll that must be contributed to meet the cost of the current year for existing employees. The unfunded actuarial liability (UAL) is a flat dollar amount owed to PERS that covers cost increases for prior employees, changes in the discount rate, and poor portfolio performance. As of August 2017, the City of Walnut Creek’s UAL for FY 18-19 is $6.75 million, increasing to $9.98 million for FY 19-20.  Future discount rate reductions will increase the total UAL amount due.