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6.1.C. - Page 19 • Current employee contributions to Ca1PERS of a fixed percentage of their salaries. These contributions go towards Normal Costs and pay for approximately 13 percent of Benefits paid under Ca1PERS' pension plans). • Agency (that is, employer) contributions to Ca1PERS of (i) the Normal Cost of the pension plan for that year (less the employee contributions amounts), plus (ii) if the pension plan has an Unfunded Liability (as do all of the Cities' pension plans6), the Amortization Cost (that is, the cost of paying off that Unfunded Liability, including both principal and interest, over a period of years). These employer contributions pay for approximately 26 percent of Benefits paid under Ca1PERS' pension plans.' Return on Investment achieved by Ca1PERS from investing the contributions made by employees and Agencies between the time that the contributions are made and the date when Benefits payments come due. Historically, these Returns on Investment have paid for approximately 61 percent of Benefits paid under Ca1PERS' pension plans.8 Ca1PERS determines the contributions that Agencies (that is, employers) must pay to Ca1PERS to cover future Benefits by calculating: (i) Benefits amounts that will have to be paid, based on assumptions that include projected future retirement rates, inflation, wage increases and post-retirement longevity, and (ii) Returns on Investment Ca1PERS expects to earn on employee and Agency contributions. To the extent that projected costs of Benefits increase unexpectedly, or Returns on Investment fall short of projections, pension plans will have Unfunded Liabilities. The Agencies rather than Ca1PERS are responsible for paying down all Unfunded Liabilities through increased contributions and the Agencies bear all the risk of Ca1PERS' projections being wrong.9 Agencies 6 Appendix A. 7 Ca1PERS at a Glance. s Ca1PERS at a Glance. 9 The Economist, Buttonwood's Notebook, The soaring cost of old age, The real problem with pensions, March 7, 2018, <httr)s://www.economist.com/blo2s/buttonwood/2018/03/soaring-cost-old-aee>. Oliveira, Anthony, The Local Challenges of Pension Reform, Bartel Associates, May 24, 2010, p. 4, <http://www.bartel- associates.com/docs/default-source/articles/oliveira a the -challenges -of -pension -reform -1 .pdy. sfvrsn=2>. Andonov, Aleksander, Bauer, Rob, Cremers, Martijn, Pension Fund Asset Allocation and Liability Discount Rates, 2017-2018 San Mateo County Civil Grand Jury 5