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8.A. - Page 39 of 104 pension costs. Employees contribute between 8.0 and 18.0 percent of their salary toward their pension benefits, depending on bargaining unit and pension tier. Although these cost-sharing agreements represent important commitments by City employees to help pay for their pension benefits and assist the City in paying the required annual payments to CalPERS, such arrangements do not provide any additional payment toward the City's unfunded liabilities. In September 2017, the City Council approved establishing a Section 115 pension trust account with Public Agency Retirement Services (PARS) to pre -fund the City's pension obligations over time. An initial trust deposit of $10.5 million was made in January 2018, including $8.8 million from the General Fund and $1.7 million from other City funds, as some employees are budgeted in other funds, primarily the water and wastewater utilities. Subsequent contributions of $550,000 of FY 2017/18 operating balance in March 2019, $1.1 million of annual budgeted funds in June 2019, and $10.0 million of FY 2018-19 operating balance in December 2019 were made. In addition, the FY 2019-20 budgeted amount of $1.1 million was contributed to the pension trust account in June 2020. As of the end of August 2020, the investment balance of the pension trust account was $25.5 million. The Ten -Year General Fund Forecast includes General Fund contributions towards the City's pension liability beyond the required annual payment, including additional direct annual payments to CalPERS ranging from $250,000 to $2.5 million, and annual contributions of $500,000 to the City's Section 115 pension trust account through FY 2022/23. Trust proceeds, including investment earnings, will be used in future years to help pay for increased annual pension costs. Increasing the funds invested in the trust, and maintaining those funds over a longer timeframe, will provide greater resources to pay the City's pension costs in the future. The City can anticipate increased pension contribution requirements as a result of anticipated investment losses by CAPERS for the year ending June 30, 2020 due to COVID-19. CAPERS assumes 7 percent annual investment returns in determining the City's annual required pension contributions. However, CAPERS reported a rate of return of 4.7 percent for the fiscal year ended June 30, 2020. The City's annual required contributions will not be impacted by this underperformance until FY 2022/23. Staff has estimated the impact of the 4.7 percent rate of return utilizing the CalPERS pension outlook tool to assist in forecasting the estimated magnitude on the amount of future required contribution amounts. BUDGET MESSAGE %8