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6.1.C. - Page 24
<br />was 30 years,31 but an Agency could elect a shorter Amortization Period.32 Like home loan
<br />repayment terms, the longer the Amortization Period, the lower the annual payment, but the
<br />larger the accrued interest costs. Examples of the cost of accrued interest to four of the Cities
<br />over different Amortization Periods are given in Table No. 5.
<br />Public Employees Pension Reform Act of 2013 (PEPRA).
<br />In response to soaring public pension Unfunded Liabilities, the California Legislature adopted
<br />the California Public Employees Pension Reform Act of 2013 (PEPRA), which imposed
<br />significant reductions on state and local government pension benefits, primarily for employees
<br />hired after January 1, 2013 (referred to as "New Members"). Employees hired prior to that date
<br />are termed "Classic Members."33 Classic Members who change public employers retain their
<br />"Classic" status. 34 Thus, to date, the impact of PEPRA on public pension liabilities has been
<br />small .3' However, it will increase over time as Classic Members retire and are replaced by New
<br />Members.
<br />Some of the most important changes mandated by PEPRA include:
<br />• Reduced pension benefit formulas for New Members. For New Member employees with
<br />Miscellaneous Plans, PEPRA requires a "2 percent at age 62" benefit formula, that is, a
<br />New Member retiring at age 62 is entitled to a pension equal to his number of years of
<br />"League of California Cities, CaIPERS Board Reduces Amortization Policy, February 14, 2018,
<br /><httos://www. cacitie s. orc/ToD/News/News-Articles/2018/February/CalPERS-Board-Reduces-Amortization-
<br />Policy>. Lowe, Stephanie and Rogers, Frances, CalPERS Reduces Amortization Period with Impacts to Employer
<br />Contribution Rates, California Public Agency Labor & Employment Blog, Liebert Cassidy Whitmore), March 1,
<br />2018, <httos://www.calr)ublica2encvlaboremDlovmentblo2.com/retirement/calDers-reduces-amortization-r)eriod-
<br />with-impacts-to-emolover-contribution-rates/>. CalPERS Actuarial Office, Finance and Administration Committee,
<br />Agenda Item 7a, Amortization Policy (Second Reading), February 13, 2018,
<br /><httos://www.calr)ers.ca.2ov/docs/board-agendas/201802/financeadmin/item-7a-00 a.pdf>.Jacobius, Arleen,
<br />CalPERS shortens amortization period to 20 years, Pensions & Investments, February 14, 2018,
<br /><htt-o://www.i)ionline.com/article/20180214/ONLINE/I80219934/calpers-shortens-amortization-period-to-20-
<br />e�.
<br />32 Interviews by Grand Jury. However, if an Agency selects a shorter Amortization Period, CalPERS does not permit
<br />it to reverse that election later. Interviews by Grand Jury.
<br />33 CalPERS, Summary of Public Employees Pension Reform Act of 2013 and Related Changes to Public Employees'
<br />Retirement Law, November 27, 2012, pp. 1-2, <htto://www.counties.or2/sites/main/files/file-
<br />attachments/calpers summarv.pdf>.
<br />34 Ibid. CalPERS, A Guide to CaIPERS: When You Change Retirement Systems, p. 3,
<br /><httos://www.caloers.ca. cov/docs/forms-publications/chance-retirement-systems.i)df>.
<br />31 League of California Cities, 2018 Retirement System Sustainability Study, pp. 2 and 5. Hutchings, Dane, Closing
<br />the Pension Funding Gap, League of California Cities, slide 4,
<br /><httos://www. Qoo2le.com/url?sa=t&rct=i &a=&esrc=s&source=web&cd=1 &cad=ria&uact=8&ved=OahUKEw_i4wY
<br />nchL7bAhUPJ3 wKHea PC W 0OF ccpMAA&url=httos%3 A%2F%2Fwww. cacities. orc%2FResources -
<br />Documents%2FPolicv-Advocacv-S ection%2FHot-Issues%2FRetirement-Svstem-
<br />Sustainability%2FPension Gap Public.aspx&us2=AOvVaw2CO2vB9pPOI9v n zbeA38>. Redwood City, Report
<br />— FY 2017-18 Mid -Year Budget Study Session and Proposed Process for Development of the FY 2018-19 Budget,
<br />February 26, 2018, p. 10, <httos://www.redwoodcitv.or2/home/showdocument?id=14650>.
<br />2017-2018 San Mateo County Civil Grand Jury 10
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