Pension Advisory Review Committee

2022
Annual Report

March 1, 2022
TABLE OF CONTENTS
Executive Summary ................................................................................................................................................ 3
Highlights ................................................................................................................................................................3
FY 22/23 Budgetary Impact ....................................................................................................................................3
Additional Discretionary Payment (ADP) ...............................................................................................................4
Annual Pre-Payment...............................................................................................................................................4
CalPERS ...................................................................................................................................................................4
Conclusion ..............................................................................................................................................................4
Recommendations ................................................................................................................................................. 4
Status of the County’s Miscellaneous and Safety Plans – Combined .......................................................... 5
Investment Returns................................................................................................................................................. 5
Funded Status ......................................................................................................................................................... 6
Employer Contribution Rate Outlook ................................................................................................................ 7
Employer Contribution Rate Outlook (continued) .......................................................................................... 8
Miscellaneous Rates ...............................................................................................................................................8
Safety Rates ......................................................................................................................................................... 11
Pension Obligation Bonds (POBs) .................................................................................................................... 15
Series 2005 A ....................................................................................................................................................... 15
Series 2020 .......................................................................................................................................................... 15
Section 115 Pension Trusts ................................................................................................................................ 16
Status of 2016 Section 115 Pension Trust ........................................................................................................... 16
Status of 2020 Section 115 Pension Trust ........................................................................................................... 16
Other Post-Employment Benefits (OPEB) ....................................................................................................... 17
Status of OPEB ..................................................................................................................................................... 18
Part-Time and Temporary Employees’ Retirement Plan .............................................................................. 19
Status of Part-time and Temporary Employees’ Retirement Plan ...................................................................... 19
Special District Plans ............................................................................................................................................ 19
Highlights ............................................................................................................................................................. 20
Management of Pension and Other Liabilities............................................................................................... 22
Summary.............................................................................................................................................................. 23
Attachments ........................................................................................................................................................... 23

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EXECUTIVE SUMMARY
In accordance with Board of Supervisors Policy B-25, this annual report contains detailed information about the
County’s Miscellaneous and Safety defined benefit pension plans administered by the California Public Employees’
Retirement System (CalPERS) as well as other areas, with independent analysis provided by Bartel Associates, LLC,
(see Attachment 1) AON, and Fieldman, Rolapp & Associates. Included are the most recent CalPERS annual
valuation reports (Attachments 2 & 3).
A few updates to the format have been made to further assist the reader with a better understanding of activity
since last year. New tables with the most current information as well as graphs vs. prior year have been added
for year-over-year comparison, and a brief highlights section below.
Highlights – for the reporting period ended June 30, 2020 there is a:
 5.4% combined increase in CalPERS funded status from 71% to 76.4%
 $13.9 million additional investment in Section 115 Pension Trust from Series 2020 POBs savings (1)
 $143 million first full-year net estimated gain on Series 2020 POBs (2)
 $536 million combined decrease in CalPERS unfunded actuarial accrued liability (UAAL)
 $1.1 billion combined increase in the CalPERS market value of assets (MVA)
This report also addresses other areas including status on the:
 Series 2005 A and Series 2020 Pension Obligation Bonds (POBs) (2)
 Combined POB proceeds net estimated gain of $370 million ($210 million YoY increase)
 Section 115 Trusts (3)
 $56 million in combined Pension Trust balances ($25.8 million YoY increase)
 $73 million OPEB Trust balance ($20 million YoY increase)
 Other Post-Employment Benefits (OPEB) (Attachment 4) (3)
 47% funded status (9% YoY increase)
 Part-time and Temporary Employees’ Retirement Plan (Attachment 5) (4)
 82% funded status (4% YoY increase)
 Special District Plans found in the latter portion of this report
FY 22/23 Budgetary Impact – The total year-over-year rate increase for FY 22/23 as a percentage of payroll
for the Miscellaneous and Safety Plans, which includes CalPERS rates, POBs debt service, and OPEB contributions
is shown below:
Year-over-Year Increase
For the fiscal year FY 21/22 FY 22/23
Miscellaneous Plan 2.20% 1.82%
Safety Plan 1.62% 1.59%
Although lesser than FY 21/22, the nominal rate increases for FY 22/23 are an additional payroll expense to the
budgets across all County departments.
The modest decline in the rate of growth is primarily due to two factors attributable to CalPERS: (1) a reduction
in the normal cost of the plans, and (2) the unfunded liability payment is reduced due to the payoff of certain
amortization bases (separate payment schedules) from the proceeds of the Series 2020 Pension Obligation Bonds.
(1) First full-year savings attributable to the issuance of Series 2020 POBs for the period ended 6/30/21. Includes investment earnings of $840,000.
(2) Projected as of the next POBs interest payment due date, 2/15/22. Source: Attachment 1, Slide #65 & #68. County of Riverside - CalPERS Miscellaneous
and Safety Plans. Independent Actuarial Report - 6/30/20 Valuation, Bartel Associates, LLC. Last year net estimated gain was $13.5 million. Year-to-
year performance will vary based on CalPERS’ investment return.
(3) Actual, as of June 30, 2021.
(4) Actual, as of July 1, 2021.

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Additional Discretionary Payment (ADP) - At its January 20, 2022 meeting, PARC recommended making an
ADP to CalPERS in the amount of $2,344,574 to eliminate negative amortization. Funded by recurring bi-weekly
payroll contributions into the Liability Management Fund, this payment was made on January 27, 2022 and will
save nearly $800,000 in interest. Negative amortization occurs if the minimum UAAL payment were split between
interest and principal, the principal portion would be negative. In this case, the minimum required contribution
is less than interest on the UAAL. This ADP is in addition to the annual UAAL pre-payment as shown below.

Annual Pre-Payment – For FY 22/23, CalPERS will offer an early payment discount of 3.3% on the $213 million
unfunded liability portion due for the fiscal year, thereby reducing the total amount owed by over $7 million.
This is in lieu of periodic payments that coincide with payroll disbursements.
In order to fund the initial payment, the County typically includes a substantial portion of the pre-payment amount
as part of the annual Tax and Revenue Anticipation Notes (TRANs) cash flow financing. The other alternative
would be to borrow internally by drawing down General Fund cash. The TRAN financing typically carries a lower
cost. A final recommendation regarding the pre-payment will be made in conjunction with the FY 22/23 TRANs.
CalPERS - recent news of interest:
 July 12, 2021 – CalPERS reports investment returns of 21.3% for FY 20/21, triggering a reduction in the
discount rate to 6.8% under the Funding Risk Mitigation policy approved in 2015.
 November 15, 2021 – After nearly a year long review of the Asset Liability Management process, CalPERS
Board selects new asset allocation mix for the investment portfolio which includes adding 5% leverage;
takes effect July 2022. Discount rate to remain unchanged at 6.8% impacting contribution rates beginning
in FY 23/24.
 December 28, 2021 – CalPERS surpasses $500 billion in assets.
Conclusion - In a break from prior years, nominally increasing employer contribution rates are now projected
for the next two fiscal years, decreasing thereafter through FY 27/28, with modest increases peaking in the early
2030’s as unfunded liability is being paid down. In addition, the funded status is showing significant
improvement, an indicator of overall pension health (see graph on page 5).
If the projections are realized, the middle part of this decade may present opportunities for further accumulation
of assets in the Section 115 Pension and OPEB Trusts, as well as additional discretionary payments to CalPERS
allowing for further progress in the paydown of unfunded liability. This will be tempered by year-to-year
financial market performance, especially given the current backdrop of the U.S economy. With the Federal
Reserve preparing to combat rising inflation through elimination of open-market bond purchases, as well as short-
term rate increases, reduced liquidity should dampen demand for equities. This will likely mean that CalPERS’
investment returns are not as robust in the near future.
Staff and PARC will keep the Board updated with strategic options in the future in the management of the County’s
pension and related liabilities.

RECOMMENDATIONS
1. Receive and file the 2022 PARC Annual Report.
2. Direct staff and PARC to report back with any additional updates or recommendations on the County’s pension
plans, Other Post-Employment Benefits (OPEB), any other item as noted in Board Policy B-25 including pension
debt reduction strategies.
3. Direct staff to review the annual CalPERS unfunded liability pre-payment for FY 22/23 and to have such
recommendations presented in conjunction with either the approval of the annual Tax and Revenue
Anticipation Notes (TRANs) cash flow financing, or, with the FY 22/23 budget.

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STATUS OF THE COUNTY’S MISCELLANEOUS AND SAFETY PLANS – COMBINED
For the annual valuation report ended June 30, 2020, the $1.1 billion increase in MVA, $536 million decrease in
UAAL, and, corresponding 5.4% increase in funded status to 76.4% (1) with CalPERS is due to a combination of
the deposit of the 2020 POB proceeds, and CalPERS’ investment performance. There is an offset to the
corresponding debt owed to bondholders as shown in the net Funded Status, albeit at a substantially lower
interest cost.
Actual Projected
For the annual valuation report ended 6/30 2019 2020 2021 2022
Total actuarial accrued liability (AAL) $12.46 $13.03 $14.12 $14.88
Total market value of assets (MVA) $8.84 $9.96 $12.08 $12.90
Total unfunded actuarial accrued liability (UAAL) $3.62 $3.08 $2.04 $1.98
Funded Status – gross 71.0% 76.4% (1) 85.6% 86.7%
Funded Status – net 69.0% 69.2% (2)
79.3% 81.2%
(1) Does not include POBs. Miscellaneous Plan is 75%, Safety Plan is 79.4%.
(2) Includes POBs. Miscellaneous Plan is 69%, Safety Plan is 69.7%.
Dollars in billions.

For the annual valuation report ending June 30, 2021, the substantial projected gain in MVA, drop in UAAL and
increase in funded status is the result of the 21.3% investment return earned by CalPERS. Reflected in these
figures are the first full-year earnings on the 2020 POBs proceeds invested with CalPERS, estimated at $151
million.
The CalPERS valuation reports have a one-year lag. For the period ending June 30, 2021, Bartel & Associates rolls
forward the report with actual investment performance data as published by CalPERS. For the period ending June
30, 2022, the projection is based on CalPERS’ 7% assumed rate of return. This will be further updated after the
close of the fiscal year when the next report is produced.

INVESTMENT RETURNS
The primary driver of the rate formula is CalPERS’ investment performance. Actuarial and demographic
assumptions impact the rate, but far less than performance. Poor investment performance following the 2008 -
2009 financial crisis significantly increased the County’s unfunded liability, driving up the required payments.
Likewise, strong investment performance such as CalPERS’ 21.3% return for the period ended June 30, 2021 (the
highest level in over twenty years) is projected to have a substantial positive impact on the County’s MVA, UAAL
and funded status which will show up in next years’ annual valuation report and 2023 PARC Annual Report. Per
CalPERS, there will be a five-year phase-in of the FY 20/21 investment return. The graph below (page 6) illustrates
the 20-year historical annual returns each fiscal year ending June 30.

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Source: CalPERS Annual Valuation Report as of June 30, 2020.

FUNDED STATUS
The current trajectory as shown below suggests achievement of the 80% funded status (a stated level in Board
Policy B-25), on a gross basis, in the near term. The trajectory is the same on a net basis as POB debt service
declines every single year through final maturity in 2038. Based upon these projections, the Plans would reach
100% funding in 2040, while maintaining a very strong funding position until that point.

Source: Attachment 1, Slide #60. County of Riverside - CalPERS Miscellaneous and Safety Plans.
Independent Actuarial Report - 6/30/20 Valuation, Bartel Associates, LLC.
50th percentile assumes CalPERS earns 7% through 6/30/23, 6.80% beginning 7/1/23 and gradually declining to 6% within twenty years.
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EMPLOYER CONTRIBUTION RATE OUTLOOK
The FY 22/23 employer contribution rate as a percent of pay for the Miscellaneous Plan is 28.00% (a 0.40%
increase from prior year), while the Safety Plan is 47.2% (a 1.00% increase from prior year) as shown in the table
below. Note the significant projected reduction in rates vs. the prior PARC Report for the period FY 22/23 – FY
31/32.
Graphical representation of these rates for both plans follow on pages 9 - 14.

__________Miscellaneous Plan__________ __________Safety Plan__________

Difference Difference
Change from Change from
from 2021 from 2021
FY Rate (1) prior FY Rate (2) prior FY
PARC Report PARC Report
(+/-) (+/-)
projection projection
17/18 19.40% (3) 0.30% N/A 30.30% (3) 1.50% N/A
18/19 21.20% (3) 1.80% N/A 33.70% (3) 3.40% N/A
19/20 23.9% (3) 2.70% N/A 39.7% (3) 6.00% N/A
20/21 26.3% (3) 2.40% 0.00% 43.4% (3) 3.70% 0.00%
21/22 27.6% (3) 1.30% 0.00% 46.2 % (3) 2.80% 0.00%
22/23 28.00% 0.40% -1.00% 47.20% 1.00% -1.30%
23/24 28.10% 0.10% -2.00% 47.10% -0.10% -3.10%
24/25 26.70% -1.40% -3.60% 45.00% -2.10% -6.30%
25/26 25.00% -1.70% -5.10% 43.00% -2.00% -8.90%
26/27 24.70% -0.30% -6.20% 42.40% -0.60% -11.10%
27/28 24.10% -0.60% -7.30% 41.60% -0.80% -12.80%
28/29 25.00% 0.90% -6.80% 43.30% 1.70% -11.60%
29/30 25.80% 0.80% -6.70% 44.60% 1.30% -11.70%
30/31 26.80% 1.00% -6.40% 46.10% 1.50% -11.40%
31/32 27.30% 0.50% -5.50% 47.90% 1.80% -9.50%
32/33 28.00% 0.70% N/A 49.00% 1.10% N/A

(1) Includes Miscellaneous Plan POBs debt service which ranges from 2.3% to 5.0% of the total rate from FY 21/22 to FY 32/33.
(2) Includes Safety Plan POBs debt service which ranges from 7.1% to 10.9% of the total rate from FY 21/22 to FY 32/33.
(3) Actual rates shown for FY 17/18 through FY 22/23.

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EMPLOYER CONTRIBUTION RATE OUTLOOK (continued)
For the Miscellaneous and Safety plans, the following pages show a comparison of the most recent valuation
report, 2020 vs. prior year 2019 for:
 projected employer contribution rates expressed as a percentage with the three components that
comprise the total amount (POBs debt service, normal cost and unfunded liability), over the next decade
 projected employer contribution rates with a longer-term view of thirty years
 projected employer contributions expressed in dollars over the next decade
In all instances of comparisons vs. prior year, there is substantial change in the trajectory of projected
contributions. The strong investment return of 21.3% by CalPERS in FY 20/21, as well as the $716 million infusion
from 2020 POB proceeds are having a positive impact. As shown on page 14, for the period of FY 22/23 through
FY 31/32, the cumulative Miscellaneous and Safety payments are projected to decrease by $1.06 billion.
The projections of CalPERS rates going forward are based upon Bartel Associates’ model which incorporates the
expected return, a less than expected return, and an above average return. In all of the 2020 contribution rate
charts, 50th percentile (bold green line) assumes CalPERS earns 7% through 6/30/23, 6.80% (which is the new
discount rate) beginning 7/1/23, and gradually declines to 6% within twenty years. All include both 2005 and 2020
POB proceeds invested with CalPERS, as well as the POBs associated debt service. Note, that even with very poor
investment returns (represented in the 25th percentile on pages 10 & 13) the projected rates exhibit a long-term
decline which begins in the early 2030’s. These long-term projections reflect the increasing impact of the changes
made to the benefit formulas in the last decade, as more of the employee population becomes subject to Tier III
Public Employees’ Pension Reform Act (PEPRA).
In analyzing the trends, it is helpful to focus on the three components of the rate: debt service on the POBs, the
normal cost, and the UAAL payment. The POB debt service is derived from a fixed schedule and shows declines
over the period with final maturities of 2035 and 2038 reflected in the thirty-year projection. Debt service of both
series of bonds is also incorporated in the charts on pages 9 & 12. The normal cost is relatively constant with
modest declines reflecting the transition to a greater number of lower benefit Tier III employees. Currently, the
UAAL reflects scheduled payments to amortize net losses (which are a combination of investment gains and
losses), and any demographic changes which resulted in a gain or loss. At the end of each year, CalPERS ‘trues
up” it actual versus projected performance, and books gains or losses which are then amortized over time.
Miscellaneous Rates
Short-term - Over the decade the employer rate is projected to average 26.3% with a low of 24.1% in 2028, and
a peak of 28% in 2032 (as shown on page 9). Comparing the current year with last year’s rates, the difference is
in the much lower projected UAAL cost, which is primarily attributable to the substantial excess investment return
realized in FY 20/21.
Long-term - In looking at the long-term forecast as shown on page 10, we see a substantial drop in rates beginning
thirteen years out under all three return scenarios. Even under the 25th percentile (poor performance scenario),
rates peak at approximately 39.4% in 2034 and then decline thereafter to reach approximately 28.5% in 2045.
This is due to three factors. The first is the final repayments of POBs in 2035 and 2038. The second is the
amortization (paydown) of the exiting UAAL schedules over the next thirty years. In the poor performance
scenario, the old UAAL is replaced by a new UAAL to reflect future CalPERS investment underperformance. The
third is the ultimate retirement of the higher cost Tier I employees and their replacement with much lower cost
Tier III employees. For the expected return scenario (50th percentile), the rate will be relatively flat until 2035 at
which point, they begin a rapid decline until stabilizing in 2042. At that point, the rate is comprised of only the
normal cost of approximately 10% since all of the POBs have been retired, and the UAAL has been fully amortized.

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 Miscellaneous Plan – 2020 (as of February 2022)

Source: Attachment 1, Slide #31. County of Riverside - CalPERS Miscellaneous and Safety Plans
Independent Actuarial Report - 6/30/20 Valuation, Bartel Associates, LLC.

Miscellaneous Plan – 2019 (as of February 2022)

Source: Slide #31. County of Riverside - CalPERS Miscellaneous and Safety Plans
CalPERS Actuarial Issues - 6/30/19 Valuation, Bartel Associates, LLC. December 23, 2020.

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 Miscellaneous Plan – 2020 (as of February 2022)

Source: Attachment 1, Slide #30. County of Riverside - CalPERS Miscellaneous and Safety Plans
Independent Actuarial Report - 6/30/20 Valuation, Bartel Associates, LLC.

Miscellaneous Plan – 2019 (as of February 2022)

Source: Slide #30. County of Riverside - CalPERS Miscellaneous and Safety Plans
CalPERS Actuarial Issues - 6/30/19 Valuation, Bartel Associates, LLC. December 23, 2020.

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Safety Rates
Short-term – As shown on page 12, over the next decade, Safety rates exhibit a similar pattern to Miscellaneous
rates. While averaging close to the current rate of 47.2%, Safety rates are projected to dip a little later than
Miscellaneous to a low of 41.6%, and then increase slightly over the current rate prior to trending down again in
the long-term. In comparing the year-over-year projections, as seen in the two charts which follow, the major
difference is in the UAL payment. Instead of peaking at 29.2% in 2033 (as shown in the red line - bottom chart),
the UAAL peaks at 21.6%. The difference in UAL impact is greater for Safety than Miscellaneous in part because
the amount of the Series 2020 POB proceeds allocated to Safety was a much greater percentage of the Plan. It
is important to note here that a greater share of the Safety Plan costs are borne as a Net County Cost, and so it
will be particularly helpful when any projected savings do materialize.
Long-term - As shown on page 13, longer term Safety rates show the same downward trend as the Miscellaneous
Plan under all performance scenarios, although coming from a higher peak. As is the case with Miscellaneous,
even in the poor performance (25th percentile) scenario, after rates peak in 2033, they begin a steady decline
returning to the current rate of approximately 43% in 2044 and continuing to fall thereafter.

Under the expected performance (50th percentile) rates peak at 47.9% in 2032 and fall steadily to under 20%
(less than half of the current rate) in 2041, due to the same factors discussed above regarding the Miscellaneous
Plan.

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 Safety Plan – 2020 (as of February 2022)

Source: Attachment 1, Slide #53. County of Riverside - CalPERS Miscellaneous and Safety Plans
Independent Actuarial Report - 6/30/20 Valuation, Bartel Associates, LLC.

Safety Plan – 2019 (as of February 2022)

Source: Slide #53. County of Riverside - CalPERS Miscellaneous and Safety Plans
CalPERS Actuarial Issues - 6/30/19 Valuation, Bartel Associates, LLC. December 23, 2020.

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 Safety Plan – 2020 (as of February 2022)

Source: Attachment 1, Slide #31. County of Riverside - CalPERS Miscellaneous and Safety Plans
Independent Actuarial Report - 6/30/20 Valuation, Preliminary Results, Bartel Associates, LLC.

Safety Plan – 2019 (as of February 2022)

Source: Slide #53. County of Riverside - CalPERS Miscellaneous and Safety Plans
CalPERS Actuarial Issues - 6/30/19 Valuation, Bartel Associates, LLC. December 23, 2020.

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 Combined – 2020 (as of February 2022)

Source: Attachment 1, Slide #57. County of Riverside - CalPERS Miscellaneous and Safety Plans
Independent Actuarial Report - 6/30/20 Valuation, Preliminary Results, Bartel Associates, LLC.

Combined – 2019 (as of February 2022)

Source: Slide #57. County of Riverside - CalPERS Miscellaneous and Safety Plans
CalPERS Actuarial Issues - 6/30/19 Valuation, Bartel Associates, LLC. December 23, 2020.

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PENSION OBLIGATION BONDS (POBs)
Series 2005 A – In February 2005, the County issued its Series 2005 A POBs in the principal amount of $400
million to lock in an all-in borrowing cost of 4.91%, refinancing its prior unfunded liability, which was then carrying
a 7.5% rate (a spread of 2.59%). At the same time, the County converted its repayment schedule from a rolling
thirty-year amortization to a fixed amortization of thirty and twenty-five years for the Miscellaneous and Safety
Plans. This further reduces interest cost as a result of paying down the debt faster. Upon deposit of the bond
proceeds with CalPERS, the County’s rate on that portion of its liability was reduced and replaced by the lower
amount of the bond’s debt service.
The POBs still maintain a relatively low break-even rate of 4.91% versus CalPERS’ current rate of 7%, (a spread
of 2.09%). Even if CalPERS were to earn a rate slightly below the POBs rate for the remaining term to maturity of
2035, the County can still expect to show net estimated gains.
Bartel Associates analysis is projecting that as of February 15, 2022 (2) there will be $227.1 million in net
estimated gains as a result of the sale of the bonds, with an outstanding balance owed of $160.5 million.
Series 2020 – In April 2020, the efforts to reduce interest cost on a portion of the unfunded liability continued
with the Board of Supervisors authorizing a second POB issuance in the amount of $720 million at an all-in
borrowing cost of 3.53%. The bond proceeds ($716 million, net of the cost of issuance) were used to refund up
to approximately 20% of the total unfunded liability, split between the Miscellaneous and Safety Plans.
The County prepaid $371.5 million to CalPERS for deposit to the Miscellaneous Plan, and, $344.2 million for the
Safety Plan which reflected a discount for prepayment of the selected bases. These bond proceeds served as a
one-time additional discretionary payment into the plans. To be clear, the $716 million that was owed to CalPERS
is now owed to bondholders, albeit at a much-reduced rate, generating the savings which per Board direction is
now flowing into the 2020 Section 115 Pension Trust (discussed below).
This series of POBs has an even lower break-even rate of 3.53% vs. CalPERS’ interest cost on the unfunded
liability of 7% (a spread of 3.47%). This results in payment reductions (savings) of nearly $231 million through
2038. To capture the savings through the eighteen-year life of the POBs, a dedicated Section 115 Pension Trust
account was established.
Bartel Associates analysis is projecting that as of February 15, 2022 (2) there will be $143 million in net estimated
gains as a result of the sale of the bonds, with an outstanding balance owed of $659.5 million.
Shown in the table below are estimated gains through February 15, 2022 on both series of POBs which includes
the next interest payments.
Status of POBs Projected
Estimated gains through 2/15/22 Series 2005A Series 2020 Total
CalPERS investment earnings on POB proceeds (1) $500.7 $187.5 $688.2
POB payments (2) $270.5 $40.4 $310.9
Cost of issuance $3.1 $4.1 $7.2
Net estimated gains $227.1 $143.0 $370.1
(1) Accumulated earnings since issuance based on actual CalPERS investment return for each year.
(2) Includes POB interest payments to date.
Dollars in millions.

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SECTION 115 PENSION TRUSTS
The first Section 115 Pension Trust was established in 2016 to help the County independently mitigate CalPERS’
contribution rate volatility and act as a buffer in the future for budgeting purposes as funds accumulate.
Excess funds from the Liability Management Fund (LMF) and the Other Post-Employment Benefits (OPEB) Trust
were placed in the Section 115 Pension Trust to fund the initial deposit. Additionally, funds collected as a result
of the difference between CalPERS’ multi-year projected payroll, based on actuarial assumptions, and, the
County’s actual payroll, are restricted and invested in the County Treasurer’s Pooled Investment Fund (TPIF).
Funds are then dollar-cost averaged from the TPIF and placed into the Trust.
The second Section 115 Pension Trust, as mentioned above, was established with the 2020 POBs. The Trusts are
administered by Public Agency Retirement Services (PARS), with HighMark Capital Management serving as
investment manager. The current investment strategy is Moderate Index PLUS (Active) which has an approximate
52% equity/48% fixed income allocation mix.
Unlike assets in the CalPERS defined benefit plans, funds in the Trust can be managed in a manner consistent with
a risk profile of the County’s choosing in a combination of equity investments, fixed income and cash.

Status of 2016 Section 115 Pension Trust

For the investment report period ended 6/30 2020 2021
Account balance $29.92 $41.82
Total accumulated investment earnings to date $3.80 $10.80
Annual rate of return 4.48% 19.93%
Annualized rate of return since inception (1) 6.20% 9.00%
(1) Inception date November 2016.
Dollars in millions.

Status of 2020 Section 115 Pension Trust

For the investment report period ended 6/30 2021
Account balance $13.95
Total accumulated investment earnings to date $0.84
Annual rate of return N/A
Annualized rate of return since inception (1) 14.39%
(1) Inception date October 2020.
Dollars in millions.

Over time these assets will become more significant as they accumulate in the account and cannot be used for
any other purposes except for making additional discretionary payments directly to CalPERS to pay down a portion
of the unfunded liability, or for reimbursing the County for CalPERS contributions. Within five years there will be
more than $100 million in contributions made to the 2016 and 2020 Trust accounts combined, and within ten
years, more than $175 million.
These Trusts have the potential to provide two significant benefits to the County. The first is the accumulation
of assets to pay down the liability with CalPERS. The second is to serve as a “rate stabilization fund” in the
event of a dramatic increase in CalPERS rates. Should the long-term projections come to fruition with employer
rates peaking in the next decade, the County could accumulate a much larger balance by capturing a portion of
the decline and deposit additional funds into the Trusts. This could allow for faster amortization of the County’s
unfunded liability. On the other hand, should CalPERS’ long-term performance come close to projections, full
funding could be reached within twenty years.

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A downside to full funding is that under current rules the County would be required to make its full required
payment, albeit at a fraction of the current rate. In such a case, funds in the 115 Trusts could be drawn upon to
make a portion of the required payment, mitigating the impact of excess funding.

OTHER POST-EMPLOYMENT BENEFITS (OPEB)

Background – OPEB are benefits other than pensions provided to retired employees. In the County’s case, this
is a monthly contribution to retirees for health care. The Governmental Accounting Standards Board (GASB)
Statement No. 45, released in 2004, substantially modified the reporting requirements for OPEB provided by state
and local governments.
In summary, GASB 45 dictated that the present value of these benefits should be quantified and reported in the
Supplementary Information section of County’s Annual Comprehensive Financial Report (ACFR). This reporting
requirement did not trigger a funding requirement. Per GASB 45, the County’s liability is comprised of two
components; the present value of the amount payable for retirees and the amount attributable to the “implicit
subsidy.” The implicit subsidy is defined as the difference between the true cost of coverage for the retiree
medical plan and the actual rate paid. Such a difference arises if retirees and active employees are in the same
rate class.
The County’s Response – The initial calculation of the County’s retirement health liability was $390 million as
of January 1, 2005. Upon the recommendation of PARC, the County took two steps to reduce this liability over
time. The first step was to establish an OPEB Trust in 2007 which reduced the actual and nominal liability. The
second step was to virtually eliminate the implicit subsidy by revamping the County’s healthcare rate structure to
separate pre-Medicare retirees from active employees.
GASB 75 – In June 2015, GASB released Statement No. 75, which was initially effective for the fiscal year ending
June 30, 2018. GASB 75 addresses accounting and financial reporting issues by government employers, previously
covered by GASB 45. Per GASB 75, employers are now required to disclose the total OPEB liability on the balance
sheet (Statement of Net Position) alongside its other long-term liabilities (i.e., bond debt, lease obligations,
pension liabilities, etc.). This change now highlights the liability.
The Move to CalPERS Health Plans – In 2019 the County embarked upon a multi-year process to restructure
its health care offerings with an eye towards controlling costs and providing a fuller range of plan options for
employees and retirees alike. The OPEB impacts of the move to CalPERS include a return of the implicit subsidy
which did not exist under the County’s own rate structure as an increase of the actual benefit paid to certain
retirees, and a greater number of retirees now purchasing their insurance through the County since the offerings
are more attractive.
Under CalPERS health plans, retirees receive the benefit of the implicit subsidy prior to age 65 by paying premiums
that are developed by blending active and retiree costs. For example, in 2022 under the Blue Shield Access Plus
option, the estimated true cost for an age 60 retiree is $1,023 per month, while the required premium is only $780
per month. This had the effect of bringing the implicit subsidy back into the equation.
In aggregate those savings would largely offset the implicit subsidy. Based on the AON - County of Riverside
Actuarial Valuation Report Postretirement Benefits Plan as of June 30, 2021 (Attachment 4, page ii), the value of
that benefit to employees is $115.8 million (actuarial accrued liability, or AAL). Nevertheless, inclusion of implicit
subsidy in the total net OPEB liability without any offset is specifically required.
An additional financial implication of transferring to the CalPERS health plans is the requirement under the Public
Employees’ Medical and Hospital Care Act (PEMHCA) to provide a minimum monthly contribution for retiree
health premiums, currently $149 (which increases annually with medical CPI). This requirement has an effect of
increasing the monthly benefit and the cost to the County for those employees whose negotiated or non-
represented benefit is less than $149. The monthly amount is either $149 or $256 and is based on the employee’s
representation at the time of retirement.

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This increase in the monthly cost to provide the benefit is currently paid by departments on a pay-as-you-go basis
and increases the OPEB liability. In addition to the PEMHCA effect, the County is expecting higher participation
rates in its plans by retirees which will increase the expected and actual payout for those enrolled in a health plan.
To the extent retirees have better options, such as paid spousal coverage from another employer, they receive no
monthly benefit from the County and no liability is recorded.
In contrast to the CalPERS defined benefit pension plan liability, there is no direct connection between the implicit
subsidy portion of the OPEB liability and the County’s cost of providing the retiree healthcare benefit, thus the
County does not directly pay for the implicit subsidy. It is for this reason that many employers have chosen not
to fund this portion of their liability since it is not owed to retirees unlike the monthly benefit payment.
Recognizing this, the Board adopted Policy B-25, Section III (A) Other Post-Employment Benefits (OPEB) which
states, “the County seeks to maintain a minimum funding level of 80% in its OPEB plan, excluding any implicit
subsidy liability.” There could be some advantages to taking steps to funding a portion of the implicit subsidy in
the future; staff and PARC will monitor the issue and bring any recommendations to the Board.

Status of OPEB
For the annual valuation report period ended 6/30 2020 2021
AAL - excluding implicit subsidy (1) $139 $144
Smoothed value of plan assets (MVA) (2) $53 $68
Total unfunded actuarial accrued liability (UAAL) $86 $76
Funded Status (3) 38.20% 47.20%
Market value of plan assets $53 $73
Annual net rate of return 5.48% 19.60%
Annualized net rate of return inception to date (4) 6.31% 7.53%
(1) Total AAL is the retiree health care liability comprised of the retiree benefit amount and
implicit subsidy. Implicit subsidy is the difference between the true cost of coverage for the
retiree medical plan and the actual rate paid.
(2) Asset smoothing recognizes market gains and losses gradually overs several years.
(3) Funded status is calculated by dividing the smoothed value of plan assets by AAL (excluding
implicit subsidy). Source of (1) and (2) above: Attachment #4, page iv. Actuarial Valuation
Report - County of Riverside Postretirement Benefits Plan as of June 30, 2021 – AON.
(4) Inception date November 2007.
Dollars in millions.

County staff requested a review from AON of a multi-year plan to achieve an 80% funded status for the retiree
benefit portion of the OPEB liability. The current actuarial schedule projects 80%, excluding implicit subsidy,
would be reached in 2025 (two years earlier than projected in the 2021 PARC Annual Report) if approximately
$16.9 million were to be charged to departments for FY 22/23, the same as FY 21/22. As a percentage of payroll,
this amounts to approximately 1.1%.
At its December 16, 2021 meeting, PARC unanimously approved the recommendation to continue to stay on
target with the aforementioned amount.

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PART-TIME AND TEMPORARY EMPLOYEES’ RETIREMENT PLAN
Background – The County of Riverside established the Part-Time and Temporary Employees’ Retirement Plan
(TAP), April 1, 1999, to provide retirement benefits to eligible employees as a substitute for benefits under Social
Security, as allowed under Omnibus Budget Reconciliation Act of 1990 (OBRA ’90). The Plan is an IRS Section
401(a) defined benefit plan. The Plan actuary calculates the minimum recommended employer contribution rate
through preparation of an actuarial valuation report. Participants are required to contribute 3.75% of their
compensation to the Plan.
As of September 1, 2010, the investments have been managed in a balanced account strategy with an expected
rate of return of 6%. Overall, the Plan’s funded status improved and net pension liability decreased from 2020
primarily due to the very favorable investment return of 30.81% in FY 20-21, vs. 6% assumed.

Status of Part-time and Temporary Employees’ Retirement Plan

For the annual valuation report period ended 7/1 2020 2021
Total actuarial accrued liability (AAL) $58.5 $64.9
Smoothed value of plan assets (MVA) (1) $45.4 $52.9
Total unfunded actuarial accrued liability (UAAL) $13.1 $12.0
Funded Status (2) 77.7% 81.5%
Market value of plan assets $45.4 $61.4
Annual net rate of return 3.72% 30.81%
Annualized net rate of return inception to date (3) 6.02% 8.11%
(1) Asset smoothing recognizes market gains and losses gradually overs several years.
(2) Source: Attachment #5, page ii. Actuarial Valuation Report - County of Riverside Part-time
and Temporary Employees’ Retirement Plan as of July 1, 2021 – AON
(3) Inception date September 2010.
Dollars in millions.

Although AON projects an 87.2% funded status by June 30, 2022, at its December 16, 2021 meeting, PARC
unanimously approved the recommendation to continue to stay on target with the current year employer rate
of approximately 5.58% as a percentage of payroll for FY 22/23, the same as FY 21/22.

SPECIAL DISTRICT PLANS

The County’s Regional Park and Open-Space District and Waste Resources Management District participate in
what CalPERS refers to as the Risk Pool, designed to accommodate smaller employers whose size is not enough
to develop individual actuarial assumptions with participation occurring if a rate plan has less than 100 active
members on any valuation date. The process involves combining assets and liabilities across employers to produce
large, risk sharing pools that reduce or eliminate large fluctuations in an employer’s retirement contribution rate
caused by unexpected demographic events.
Although the desired 80% minimum funded status for the Special Districts are not specifically mentioned in Board
Policy B-25, as is the case with the County’s defined benefit pension plans, that is a prudent target for them (see
below additional information for each District). Similar to the County’s Miscellaneous and Safety Plans, additional
discretionary payments would be required to increase the funded status, thereby having budgetary impacts on
the Districts (Parks and Flood), as well as the Department of Waste Resources, that may, or may not be feasible
at this time.

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Highlights – for the reporting period ended June 30, 2020:
 Riverside County Regional Park and Open-Space District
 71.9% funded status Tier I (1.6% YoY increase)
 96.6% funded status Tier II (6.7% YoY increase)
 96.7% funded status Tier III (6.7% YoY increase)
 Riverside County Flood Control and Water Conservation District
 65.9% funded status (2.2% YoY increase)
 Riverside County Waste Resources Management District
 68.5% funded status (1.6% YoY decrease)
The Riverside County Regional Park and Open-Space District has three rate plans. As of the annual valuation
report(s) for June 30, 2020, the funded status of Tier I was 71.9%, Tier II was 96.6%, and Tier III was 96.7% (see
tables below for additional details).
Status of Tier I
For the annual valuation report ended 6/30 2019 2020
Total actuarial accrued liability (AAL) $46.9 $48.2
Total market value of assets (MVA) $34.5 $34.6
Total unfunded accrued liability (UAAL) $12.4 $13.6
Funded Status 73.5% 71.9%
Dollars in millions.

Status of Tier II
For the annual valuation report ended 6/30 2019 2020
Total actuarial accrued liability (AAL) $398,743 $459,277
Total market value of assets (MVA) $358,502 $443,835
Total unfunded accrued liability (UAAL) $40,241 $15,442
Funded Status 89.9% 96.6%

Status of Tier III

For the annual valuation report ended 6/30 2019 2020
Total actuarial accrued liability (AAL) $1.40 $1.85
Total market value of assets (MVA) $1.30 $1.78
Total unfunded accrued liability (UAAL) $0.14 $0.07
Funded Status 90.0% 96.7%
Dollars in millions.

To date, the District remains cautious as the pandemic continues to present uncertainty, however, does anticipate
improvements in realized revenues as school tours and events increase in 2022. Starting in FY 22/23, the District
plans to make additional discretionary payments of $200,000 to address its Tier I funding status, which is below
80%. In addition, it will continue making the annual UAAL prepayment option for all three tiers, thereby receiving
an early payment discount from CalPERS.

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The Riverside County Flood Control and Water Conservation District’s annual valuation report for June 30,
2020, shows a funded status of 65.9% (see table below for additional details).
Status of Riverside County Flood Control and Water Conservation District
For the annual valuation report ended 6/30 2019 2020
Total actuarial accrued liability (AAL) $213.9 $220.7
Total market value of assets (MVA) $136.3 $145.4
Total unfunded accrued liability (UAAL) $77.6 $75.3
Funded Status 63.7% 65.9%
Dollars in millions.

The District has developed a long-term plan that includes making additional discretionary payments to CalPERS in
an effort to bring the funded status at or above 80% by fiscal year 2025, assuming all other factors remain
constant. An additional discretionary payment of $6.7 million was paid in FY 19/20, which allowed for the 2.2%
increase in funded status as reflected on the June 30, 2020 valuation report. An additional discretionary
payment of $12.6 million was paid in FY 20/21. According to CalPERS, this payment will be reflected in the June
30, 2021 valuation report when the District is projected to reach a funded status of 72.6% (an increase of 6.7%
from the June 30, 2020 valuation report). The District intends to continue making additional discretionary
payments based on its ongoing assessment of its fiscal outlook for future years. The District will also continue
making the annual UAAL prepayment option, thereby receiving an early payment discount from CalPERS.
The Riverside County Waste Resources Management District was dissolved in 1998, with the exception of
existing employees at that time electing to maintain their District status. All new hires or transfers are designated
as County employees; no new District employees have been added since 1998. The District’s annual valuation
report for June 30, 2020, shows a funded status of 68.5% (see table below for additional details).
Status of Riverside County Waste Resources Management District
For the annual valuation report ended 6/30 2019 2020
Total actuarial accrued liability (AAL) $53.4 $54.5
Total market value of assets (MVA) $37.5 $37.3
Total unfunded accrued liability (UAAL) $15.9 $17.2
Funded Status 70.1% 68.5%
Dollars in millions.

The District has developed a long-term plan that includes making additional discretionary payments to CalPERS in
an effort to bring the funded status at or above 80% by fiscal year 2025, assuming all other factors remain
constant.
An additional discretionary payment of $3.3 million was paid in FY 20/21. According to CalPERS, this payment
will be reflected in the June 30, 2021 valuation report when the District is projected to reach a funded status of
78% (an increase of 9.5% from the June 30, 2020 valuation report). The District intends to continue making
additional discretionary payments based on its ongoing assessment of its fiscal outlook for future years. The
District will also continue making the annual UAAL prepayment option, thereby receiving an early payment
discount from CalPERS.

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MANAGEMENT OF PENSION AND OTHER LIABILITIES
County’s Response - Several steps have been taken to address the management of its liabilities over the last
two decades:
 In 2003 the Pension Advisory Review Committee (PARC) was formed to guide policy decisions regarding
retirement benefits.

 In 2004 PARC first recommended taking advantage of CalPERS’ early payment discount in lieu of periodic
payments.

 In 2005 the County issued $400 million in POBs reducing the all-in true interest cost to 4.91%, increased
its funding status and created the Liability Management Fund (LMF), whereby some of the excess savings
has been sent to CalPERS to reduce the unfunded liability. The current practice has been to send a portion
of the savings to the Section 115 Pension Trust, and that will continue.

 In 2007 in an effort to reduce its OPEB liability over time, the County established its Section 115 OPEB
Trust with the California Public Employers’ Retirement Benefit Trust (CERBT) with CalPERS.

 In 2012, the County took the lead in initiating pension reform with its bargaining units in advance of any
action by the state. As a result of collective bargaining, employees agreed to pay their own member
contributions eliminating the Employer Paid Member Contribution (EPMC). Additionally, Tier II was
implemented with a lower benefit formula, which became effective on August 24, 2012.

Percentage
Earliest Number of (%) of PEPRA Final
Retirement Employee Effective
County Plan Retirement Actives Employees Compensation Compensation
Formula Contribution Date
Age 6/30/2021 in each Tier Limits (1) Period
6/30/2021

Miscellaneous 3.0% at 60 8.00% 50 8,527 48% N/A 12 months 7/11/2002

Tier I
Safety 3.0% at 50 9.00% 50 2,143 62% N/A 12 months 6/28/2001

Miscellaneous 2.0% at 60 7.00% 50 664 4% N/A 36 months 8/24/2012

Tier II
Safety 2.0% at 50 9.00% 50 149 4% N/A 36 months 8/24/2012

Miscellaneous 2.0% at 62 7.25% 52 8,537 48% $134,974 36 months 1/1/2013

Tier III - PEPRA
Safety 2.7% at 57 12.50% 50 1,162 34% $161,969 36 months 1/1/2013

(1) 2022 Compensation Limits are indexed annually.

The passage of Assembly Bill 340 on September 12, 2012 created the Public Employees’ Pension Reform Act
(PEPRA), implementing a new lower retirement benefit formula (Tier III), which became effective January 1, 2013.
Since that time, there have not been any significant updates on the pension reform front worthy of note.
In September 2020, however, the Governor signed into law Assembly Bill 2967 which prevents cities and counties
from excluding groups of employees from CalPERS defined benefit pension plans when they are offered for other
groups, thereby effectively blocking the ability to offer a hybrid style or deferred compensation only plan.

Staff and PARC continue to monitor any developments in this area and will bring any items of significance that
would lead to cost reduction to the Board’s attention on a timely basis.

 In February 2020 the Board approved agenda Item 3.15, Pension Debt Reduction Strategies. Two actions
have occurred since that time, as seen below:

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  In April 2020 the Board authorized a second POB issuance of $720 million, reducing the all-in true
interest cost to 3.53%, vs. the 7% that would have been paid to CalPERS on the unfunded liability
portion.

Per Board direction, the resulting payment reductions (savings) of nearly $231 million through 2038,
are being captured through the eighteen-year life of the POBs in a dedicated Section 115 Pension
Trust account. For the period ended June 30, 2021, $13.1 million in first-year 2020 POB savings earned
14.39% for a total of $840,000, resulting in an ending balance of $13.9 million.

 In December 2020, the Board of Supervisors approved agenda Item 3.1, amending and restating the
agreement for services between the Western Riverside County Regional Conservation Authority (RCA)
and the County of Riverside.

Effective January 1, 2021, the Riverside County Transportation Commission began to provide the
staffing and management agency role for RCA. As a result, a lump sum payment of $3.9 million was
received from RCA as a pro-rata share of their unfunded pension liability obligation as well as any
amounts owed for OPEB and the Replacement Benefit Plan. The payoff of $2.6 million for the
unfunded liability portion was made to CalPERS on January 20, 2021.

Summary - Staff and PARC will continue to look for strategic options for managing its long-term costs of the
County’s pensions and related liabilities. Based upon several factors, the long-term pension outlook is favorable,
with sharp increases in pension rates experienced over the past decade projected to moderate. This will be
tempered, however, by year-to-year financial market performance. The funded status of the County’s
Miscellaneous and Safety Plans with CalPERS is projected to be more than 80% by this time next year, an
indicator of overall pension health.

ATTACHMENTS
1. County of Riverside - CalPERS Miscellaneous and Safety Plans
Independent Actuarial Report - 6/30/20 Valuation, Bartel Associates, LLC.
2. CalPERS - Miscellaneous Plan - County of Riverside Annual Valuation Report as of June 30, 2020
3. CalPERS - Safety Plan - County of Riverside Annual Valuation Report as of June 30, 2020
4. Actuarial Valuation Report - County of Riverside Postretirement Benefits Plan as of June 30, 2021 - AON
5. Actuarial Valuation Report - County of Riverside Part-time and Temporary Employees’ Retirement Plan as of
July 1, 2021 – AON

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