Comprehensive Annual Financial Report - City of Santa Monica

CITY OF SANTA MONICA, CALIFORNIA
Notes to Basic Financial Statements, Continued
For the fiscal year ended June 30, 2008
(16) EMPLOYEE BENEFIT PROGRAMS
Santa Monica Public Employees’ Retirement Plan
The City’s defined benefit pension plan, Santa Monica Public Employees’ Retirement Plan (Plan)
provides retirement and disability benefits, annual cost-of living adjustments, and death benefits to plan
members and beneficiaries. The Plan is part of the Public Agency portion of the California Public
Employees Retirement System (CalPERS), an agent multiple-employer plan administered by CalPERS,
which acts as a common investment and administrative agent for participating public employers within
the State of California. State statutes within the Public Employees’ Retirement Law establish a menu of
benefit provisions as well as other requirements. The City selects optional benefit provisions from the
benefit menu by contract with CalPERS and adopts those benefits through City ordinance. CalPERS
issues a separate comprehensive annual financial report available from the CalPERS Executive Office,
400 Q Street, Sacramento, California 95811.
Plan Description
All full-time employees of the City and part-time employees who have worked over 1,000 hours during
a fiscal year are eligible to participate in the Plan. The City is authorized by statute to establish and
amend all plan provisions. Related benefits vest after five years of service. Upon five years of service,
employees who retire at or after age 50 are entitled to receive an annual retirement benefit.
The defined pension benefit is payable monthly for life, in an amount that varies, from 2.4% at age 50 to
a maximum of 3% at age 55 for fire safety employees, 3% at age 50 for police safety employees and 2%
at age 50 to a maximum of 2.7% at age 55 for miscellaneous employees, of the employee’s single
highest year’s salary for each year of credited service. The Plan also provides death and disability
benefits.
Funding Policy
Active full-time members in the Plan are required to contribute 8% for miscellaneous employees and
9% for safety employees of their annual covered salary. The City makes such employee contributions
on their behalf and for their account. The City is required to contribute the actuarially determined
remaining amounts necessary to fund the benefits for its members. The actuarial methods and
assumptions used are those adopted by the CalPERS Board of Administration. CalPERS prepares
separate actuarial valuations for miscellaneous, fire safety and police safety members. The required
employer contribution rate for the fiscal year ended June 30, 2008 was 15.765% for miscellaneous
members; 32.822% for police safety members and 21.557% for fire safety members. The contribution
requirements of the plan members are established by State statute and the employer contribution rate is
established and may be amended by CalPERS. The miscellaneous members do reimburse the City for
the cost of an enhanced benefit at a rate of 6.7%.
Annual Pension Cost
For the fiscal year ended June 30, 2008, the City’s annual pension cost and actual contributions were
$24,767,790. The City also contributed $12,689,485 on behalf of employees. Employees directly
contributed $276,893. Total contributions were $37,734,168. The required contribution for the fiscal
year ended June 30, 2008 was determined as part of the June 30, 2005 actuarial valuation using the entry
age normal actuarial cost method with the contributions determined as a percentage of payroll. The
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