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1/15/2026 <br />3 <br />13 <br />Now … <br />Sluggish investment returns (not <br />meeting assumptions) <br />Assumptions have changed/grown <br />more conservative <br />Discount Rate: 8.25% → 7.00% → 6.80% <br />Inflation rate (prices going up) <br />Mortality rates (people living longer) <br />Shorter, more conservative <br />amortizations <br />Why CalPERS Costs Have Trended Higher <br />Then (late 1990s)… <br />Robust investment returns (10%+) <br />Retirement plans were “Super- <br />Funded” through the late 1990s <br />Earnings on funds were more than <br />adequate to cover retirement costs <br />Super-funded status induced <br />widespread retirement benefits <br />enhancements…. <br />Past funding policies led to <br />contribution holidays and “free” <br />benefit improvements <br />Historical PERS <br />Returns <br />5-Year: 6.6% <br />10-Year: 6.2% <br />20-Year: 6.7% <br />30-Year: 7.7% <br />14 <br />CalPERS Historical Preliminary Investment Returns (Time-Weighted) <br />12.2%11.9% <br />18.8% <br />-2.9% <br />-23.6% <br />11.1% <br />20.7% <br />1.0% <br />12.5% <br />18.4% <br />2.4%0.6% <br />11.2% <br />8.6% <br />6.7%4.7% <br />21.3% <br />-6.1% <br />5.8% <br />9.3% <br />-30.0% <br />-25.0% <br />-20.0% <br />-15.0% <br />-10.0% <br />-5.0% <br />0.0% <br />5.0% <br />10.0% <br />15.0% <br />20.0% <br />25.0% <br />2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 <br />Annual Return Target Discount Rate <br />15 <br />How CalPERS Benefits Get Funded <br />Pre-2008 <br />Investment <br />earnings used to <br />make up a higher <br />percentage of <br />total contributions <br />As investments <br />underperform <br />assumptions, <br />employers must <br />make up the <br />difference, unless <br />the additional <br />costs are <br />negotiated with <br />employees <br />16 <br />City’s CalPERS Retirement Plans <br />2 Main CalPERS plans; Miscellaneous & Safety <br />Miscellaneous: 1,352 covered members; $82M UAL <br />Safety: 285 covered members; $73M UAL <br />PEPRA (effective 2013) helpful to manage long term pension costs for new <br />employees <br />Enacted revised benefit levels for new plan members <br />Higher employee contribution rates mean more normal cost is being paid by the <br />employee <br />However, 98% of current UAL comes from Classic plans and is not impacted <br />by PEPRA <br />17 <br />72.4%67.0%63.0%60.2%53.6%48.8%44.0%39.3%34.6%29.8%25.1%20.4%15.6%10.9%6.2%1.5% <br />27.6%33.0%37.0% <br />39.8% <br />46.4% <br />51.2% <br />56.0%60.7%65.4%70.2%74.9%79.6%84.4%89.1%93.8%98.5% <br />$0 <br />$10 <br />$20 <br />$30 <br />$40 <br />$50 <br />$60 <br />20 <br />1 <br />9 <br />20 <br />2 <br />0 <br />20 <br />2 <br />1 <br />20 <br />2 <br />2 <br />20 <br />2 <br />3 <br />20 <br />2 <br />4 <br />20 <br />2 <br />5 <br />20 <br />2 <br />6 <br />20 <br />2 <br />7 <br />20 <br />2 <br />8 <br />20 <br />2 <br />9 <br />20 <br />3 <br />0 <br />20 <br />3 <br />1 <br />20 <br />3 <br />2 <br />20 <br />3 <br />3 <br />20 <br />3 <br />4 <br />Mi <br />l <br />l <br />i <br />o <br />n <br />s <br />Total Classic Payroll Total PEPRA Payroll <br />Historical & Projected PEPRA Transition <br />Classic vs. PEPRA % of Payroll <br />Source: 2019-2024 payroll data is sourced from the City’s CalPERS Actuarial Valuation <br />Reports. 2025-2034 payroll data is sourced from the CalPERS Pension Outlook Tool. <br />2025-2034 projections assume the PEPRA % continues to grow at a historical average <br />(2020-2024) of approximately 4.7 percentage points per year. <br />Projected <br />II. HISTORICAL AND PROJECTED CALPERS COSTS <br />13 14 <br />15 16 <br />17 18 <br />Docusign Envelope ID: BB80A86F-2853-4F40-B02D-18F5B9DD615F