Member Contribution Rates Effective July 2006 P Member Contribution Rates Effective July 2006 May 3, 2006

Syllabus Review Contribution Structure Reasons for Increase Smoothing of Rates

Member Contributions COLA 31873 COLA 31873 BASIC BASIC Supplemental 31627 Supplemental 31627 Proposed Legislation COLA 31873 COLA 31873 Based on Valuation BASIC 31621.5 or .4 BASIC 31639.5 From 37 Act General Safety

Basic – General Members Tier 1 31621.5. … the normal rate of contribution … shall be such as will provide an average annuity at age 60 equal to one 200th of the final compensation of members … BASIC 31621.5

Basic – General Members Tier 2 31621.4. … the normal rate of contribution … shall be such as will provide an average annuity at age 60 equal to one 240th of the final compensation of members … BASIC 31621.4

Basic – General Members

Basic – Safety Members Tier 1 and Tier 2 31639.5. The normal rate of contribution shall be such as will provide an average annuity at age 50 equal to one 200th of the final compensation… BASIC 31639.5

Basic – Safety Members

COLA Contributions 31873. Any increases in contributions shall be shared equally between the county or district and the contributing members … COLA

COL Contributions FCERA Board previously decided that “Any increases in contributions” means contributions for both Normal Cost and Unfunded Actuarial Accrued Liability.

COLA Contributions In 2004 Valuation, Basic rates were increased by 92% for COLA In 2005 Valuation, Basic rates were increased by 132% for COLA COLA

COLA Contributions COLA

Supplemental Contribution …to the extent undistributed earnings are unavailable in the future to make additional contributions on members’ behalf…then the employer and employee contribution rates shall be increased … Supplemental 31627

Supplemental Contribution Lawyers not yet in agreement Look to proposed legislation (AB 2063) for guidance Members electing Tier 2 would not make Supplemental Contributions Supplemental 31627

AB 2063 – General Members …the normal rates of contribution… shall be rates that provide an average annuity at age 55 years equal to the fraction of one 160th of the final compensation … Supplemental 31627

Total Contributions – General Tier 1 Members

Total Contributions – General Tier 2 Members

AB 2063 – Safety Members The normal rates of contribution… shall be rates that will provide an average annuity at age 50 years equal to the fraction of one 160th of the final compensation … Supplemental 31627

Total Contributions – Safety Tier 1 Members

Total Contributions – Safety Tier 2 Members

Reasons for Increase Member Contributions – General Tier 1 Increase of approximately 39% from 2005-2006 smoothed rates Member Contributions – Safety Tier 1 Increase of approximately 21% from 2005-2006 rates

Reasons for Increase

Reasons for Increase

Smoothing of Rates Fiscal Year 2004/2005 Purpose is to limit volatility of member contribution rates April 2004 methodology adopted by Board of Retirement If the total rate from the prior fiscal year had increased by more than 50%, the increase was limited to 50%

Smoothing of Rates Fiscal Year 2005/2006 In April 2005 Retirement Board adopted new rate smoothing methodology If any rate increased by more than 10% from what was paid in the prior year, the increase will be halfway between what was paid the prior year and the new rate as calculated prior to any smoothing

Smoothing of Rates Fiscal Year 2006/2007 At April 19, 2006 meeting, Board asks Actuary to calculate rates based on prior year smoothing methodology

Member Contributions – General Tier 1

Member Contributions – General Tier 2

Member Contributions – Safety Tier 1

Member Contributions – Safety Tier 2

Questions