Many of you may be dealing with requests from your public safety members to implement 3% at 50 PERS retirement. As you know, the actuarial valuations are difficult to understand and in some cases, manipulated by valuing plan assets differently. As Chair of the CSMFO Debt, Retirement and Treasury Committee, I believe it is important that we share experiences with each other so that we can fully understand this matter. In this regard, I thought I would pass along to you the following. The City of Tracy has both Police and Fire. Our Fire contract expired 12/31/99 and we successfully negotiated a new 3 year contract in February 2000. The new contract does not call for 3% at 50. Our police contract expires 6/30/00 and we are beginning negotiations with the police unit. The police have already requested a 3% at 50 valuation and we were provided a copy. The valuation received from PERS is entitled "3% @ 50 Formula for police only". Note that is says for police only however, do not be mislead. The valuation concluded that the EMPLOYER rate would go from 7.071% to 13.705% or an increase of 6.634%. The cost of this benefit increase as many of you know, has been made to look less expensive because PERS increases the valuation of plan assets from 90% to 95%. However, we had already done a plan amendment (called for by the last contract) effective 1/1/00 for both police and fire. This triggered a previous valuation from 90% to 95%. So we had already received the 95% when the 3% at 50 valuation was done. Thus, the cost increase of 6.634% was not influenced by increased market valuation of plan assets. Still, the cost estimate seemed low. Keep reading. The kicker here is the 6.634% is the cost increase to all of public safety (police and fire) even though the 3% at 50 benefit under this actuarial estimate would only be extended to police. Thus, the cost of this benefit for police only is not 6.634% even though the PERS valuation states so. For us to figure the true cost for police only, one must multiply the 6.634% times the total for public safety (police and fire) PERS salaries and then divide this cost by only the police PERS salaries. Remember, only police would be receiving the 3% at 50 benefit but all of public safety PERS rates would pay for it at the 6.634% increase in PERS employer rate. Thus, the true cost for police only is really about double 6.634%. (the exact amount I believe has to be calculated by PERS because police and fire personnel have different age factors. We have a few more firefighters than police officers because we provide fire services to a fire district which contracts with the city for labor). So the lesson of this example, is that even though PERS labeled the actuarial valuation as "for police only", the 6.634% increase in cost is not for police only. Now I get to go explain this to our police unit. Be Careful out there when dealing with these valuations. Know what you are looking at and by all means call your Actuarial Consultant at PERS to fully understand the valuation.
