SUPPLEMENTAL MATERIAL MATERIAL REGULAR MEETING 3-17-26

SUPPLEMENTAL MATERIAL 3 • Option 4: $60M balance => $53M cost savings benefit + $44.3M balance remaining = $97.3M total benefit A. That is correct. The goal with the modeling was to leverage the 115 balance such that it will level out payments at the lowest level possible for the longest amount of time. Option 4 uses less of the trust, so it can’t level out for as long or as low as the earlier options. Please note that the UAL payments are going to change every year moving forward, so these estimates of lower/ smoothed payments, length of time of smoothing, and savings are the best estimates given today’s situation. Staff intends to bring back updates to the Council periodically, especially when the City experiences larger than expected volatility in the pension situation and/or significant changes to the smoothing objectives. B. Regarding the reading/understanding of the options, this is a correct interpretation. 5. Please clarify in the Appendix slide, at this time we don’t have policy guidance from CalPers that they’re changing the discount rate. They may, of course, but asking if they’ve announced or indicated that they are planning to (and thus agencies should plan accordingly)? A. Slide 34 provides a snapshot of changes set to occur from last fall’s Asset Liability Study where the discount rate was discussed. As shown, there is no change to the discount rate (remains at 6.8%), and we don’t believe there was much support for one during the process, which is good news. The only changes to actuarial assumptions were minimal, 0.2% increases on inflation (2.3% to 2.5%) and wage growth assumptions (2.8% to 3.0%). 6. Given our current contribution / cost for CalPERS at $29M for FY25/26,which we have budgeted for ($31M in FY26/27), and Option 4’s smoothing level suggested level will be $18.7M, this would translate into nearly a $10M annual cash need reductions that would not be needed to go to CalPERS? I’m trying to reconcile this to the slide saying that the average was ~$4.4M. A. As mentioned in the question above, all the analysis excludes Normal Costs (about $9M for FY 2026). The FY 2026 UAL is $20.2M, thus, the new projected smoothing level of $18.7M is $1.5M lower than FY A 2026 levels, and significantly lower than projected levels (as mentioned in the question), $4.4M lower on average during the next 12 years (FY 2027 – FY 2038).