California Public Employees’ Retirement System OPEB Pre-funding through CalPERS Ken Marzion Assistant Executive Officer

1. California Public Employees’ Retirement System • OPEB Pre-funding through CalPERS • Ken Marzion • Assistant Executive Officer • Actuarial and Employer Services

2. Discussion Overview • New law • Why pre-fund? • What is CalPERS providing? • Trust fund elements • Summary

3. New Law AB 554 allows ALL California government agencies to participate in the California Employers’ Retiree Benefits Trust, the CalPERS OPEB fund. • Became law on Jan 1, 2008 • Permissive legislation – agencies elect to join

4. Why Pre-fund OPEB Liabilities • Pre-funding minimizes future cost impacts • Agencies that pre-fund use higher discount rate: lower liabilities and ARC • Investment returns pay 75% of CalPERS pension benefits • Bond rating agencies expect an OPEB plan

5. State of California Valuation Results* * Relies on CalPERS OPEB Actuarial Assumption Model ARC based on 30 year amortization

6. CalPERS Investment Performance

7. California Employers’ Retiree Benefit Trust Fund

8. California Employers’ Retiree Benefit Trust Fund

9. Contracting Process Time

10. Why Pre-fund OPEB Liabilities? • Pre-funding minimizes future cost impacts • Agencies that pre-fund use higher discount rate: lower liabilities and ARC • Investment returns pay 75% of CalPERS pension benefits • Bond rating agencies expect an OPEB plan

11. Questions? Contact the CalPERS CERBT program: E-mail to core4u@calpers.ca.gov

12. Employer Advisory Group • City of Sunnyvale • County of Riverside • County of Santa Clara • CSU Chancellor's Office • Las Virgenes Municipal Water District • Los Angeles County Office of Education • Northern California Special Districts Insurance Authority • Orange County Schools • Sacramento County Schools • San Bernardino County Schools • San Ramon Valley Unified School District • 20th District Agricultural Association • Administrative Office of the Courts • Bay Area Rapid Transit • City of Brea • City of Costa Mesa • City of Fremont • City of Glendale • City of Hermosa Beach • City of Lincoln • City of Mission Viejo • City of Sacramento • City of San Mateo • City of Santa Ana • City of South Pasadena

13. CalPERS IT Project • Project to develop a new pension and health information system (turned on in late 2009) • Improves Employers’ and Members’ ability to interact with CalPERS over the Internet • Provides faster more reliable cost effective service • Requires employer business process changes

14. Project Benefits • Improved functionality for reporting, correcting and monitoring data • Faster posting of information • Immediate upfront notification of errors for correction • Easier ability to make adjustments via self-service • Ability to submit information 24/7

15. Project Benefits • Expanded self service functionality on the web • Anytime access to information • Request contract amendment valuations • Perform contract amendment process • Track status of various requests (i.e. contract amendment process) • Receive notifications regarding changes to your employees and retirees

16. Project Benefits • Expanded set of functionality on the Web • Retirement planning tools using current data • Anytime access to view contributions, service, service purchase payments • Make service credit purchase elections • Monitor status of requests

17. Project Benefits • More accurate benefit payments at inception • Online form processing reducing dependence on paper • Proactive notifications to retirees of health care coverage changes

18. Timeline December 2007 – Data sheet for budget preparation May 2008 – Communicate specific changes necessary to interact with CalPERS (e.g. file formats) October 2008 – Conduct demonstrations and present implementation plan at CalPERS Educational Forum Winter and Spring 2009 – testing Summer and Fall 2009 – training Fall 2009 – implementation