CAL FIRE LOCAL 2881 v. CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM

Appellants’ Request for Judicial Notice

Cal.April 23, 2018

SUPREME COURT FILED APR 23 2018 Jorge Navarrete Clerk No. $239958 IN THE SUPREME COURT OF THE STATE OF CALIFORNIA Deputy CAL FIRE LOCAL 2881 (formerly known as CDFFirefighters), et al. Petitioners and Appellants, Vv. CALIFORNIA PUBLIC EMPLOYEES’ RETIREMENT SYSTEM (CalPERS) Defendant and Respondent, and THE STATE OF CALIFORNIA, Intervener and Respondent. On Review From The Court Of Appeal For the First Appellate District, Division Three, Civil No. A142793 After An Appeal From the Superior Court For The State of California, County of Alameda, Case Number RG12661622, Hon. Evelio Grillo, Presiding Judge MOTION FOR JUDICIAL NOTICE; DECLARATION OF YONATANL. MOSKOWITZ Filed Concurrently with PETITIONERS AND APPELLANTS’ CONSOLIDATED ANSWER TO AMICI CURIAE MESSING ADAM & JASMINE LLP Gary M.Messing, Bar No. 75363 gary@mayjlabor.com *Gregg McLean Adam, Bar No. 203436 gregg@majlabor.com Jason H Jasmine, Bar No. 215757 jason@majlabor.com Yonatan L. Moskowitz, Bar No. 306717 yonatan@miajlabor.com ~ 235 Montgomery St., Suite 828 San Francisco, California 94104 Telephone: 415.266.1800 Facsimile: 415.266.1128 Attorneysfor Petitioners and Appellants CAL FIRE Local 2881, etal. No. 8239958 IN THE SUPREME COURT OF THE STATE OF CALIFORNIA CAL FIRE LOCAL2881 (formerly known as CDFFirefighters), ef al. Petitioners and Appellants, V. CALIFORNIA PUBLIC EMPLOYEES’ RETIREMENT SYSTEM (CalPERS) Defendant and Respondent, and THE STATE OF CALIFORNIA, Intervener and Respondent. On Review From The Court Of Appeal For the First Appellate District, Division Three, Civil No. A142793 After AnAppeal From the Superior Court For The State of California, County of Alameda, Case Number RG12661622, Hon. Evelio Grillo, Presiding Judge MOTION FOR JUDICIAL NOTICE; DECLARATION OF YONATANL. MOSKOWITZ Filed Concurrently with PETITIONERS AND APPELLANTS’ CONSOLIDATED ANSWER TO AMICI CURIAE MESSING ADAM & JASMINE LLP Gary M. Messing, Bar No. 75363 gary@majlabor.com *Gregg McLean Adam,Bar No. 203436 gregg@majlabor.com Jason H Jasmine, Bar No. 215757 jason@majlabor.com Yonatan L. Moskowitz, Bar No. 306717 yonatan@majlabor.com ~ 235 MontgomerySt., Suite 828 San Francisco, California 94104 Telephone: 415.266.1800 _ Facsimile: 415.266.1128 Attorneysfor Petitioners and Appellants CAL FIRE Local 2881, etal. MOTION FOR JUDICIAL NOTICE UnderCalifornia Rule of Court 8.252, subd. (a)(2)(A), (B), and (D) and Evidence Code section 452, subd. (c), (d), (g) and (h) and section 459, Petitioners and Appellants CAL FIRE LOCAL 2881, et al. (“Petitioners”) movethis Court to take judicial notice of the documents identified below. The following documents are attached to the Declaration of Yonatan L. Moskowitz pursuant to California Rule of Court Rule 8.252, subd. (a)(3): A. A true and correct copy of the CalPERS Publication,called “A Solid Foundation for the Future,” dated December 31, 2017, and available at <>; B. A true and correct copy of the Petition for Hearing in the case Allen v. City ofLong Beach (1955) 45 Cal.2d 128, Civil Nos. 19866 and 19867, filed on February 11, 1955; C. A true and correct excerpt from a publication of Little Hoover Commission,called “Better Regulation: Improving California’s Rulemaking Process,” dated October 2011, and available at <>; D. A true and correct copy of section 3.28.710 of the San Jose ~ Municipal Code; E. A true and correct copy of a publication of the Federal Reserve Bank of Minneapolis called “CPI Calculator Information,” and available at <>; F. A true and correct copy of a publication by CalPERScalled “Miscellaneous Plan of the Metropolitan Water District of Southern California,” dated July 2017, and available at <>; G. A true and correct copy of a CalPERSpublicationtitled “CalPERS Economic Impactsin California,” dated July 2017; H. A true and correct copyof a publication of the United States Census Bureau called “Quick Facts, California,” and available at <>; I. A true and correct copy of a documentobtained from WKYT News,purporting to be a Verified Complaint from the case Kentucky ex. rel. Beshear v. Bevin (Franklin Co., April 11, 2018) No. 18-CI-00379 whichis available at <>; J. A true and correct copy of the Stipulation to Submit Cause without Oral Argumentin the case Allen v. City ofLong Beach (1955) 45 Cal.2d 128, Civil Nos. 19866 and 19867, and filed on April 27, 1955. Petitioners’ Motion for Judicial Notice is based on this notice, the attached Memorandum of Points and Authorities, the accompanying Declaration of Yonatan L. Moskowitz, the accompanying exhibits, and the Answerto Amici Curiae. Respectfully submitted, DATED: April 23, 2018 MESSING ADAM & JASMINE LLP » WL Gey M. Mes#ing egg McLean Adam Jason H Jasmine Yonatan L. Moskowitz Attorneys for Petitioners and Appellants CAL FIRE Local 2881, et al. MEMORANDUM OF POINTS AND AUTHORITIES Petitioners move this Court to take judicial notice of the documents identified in the above Request for Judicial Notice which supportthe Petitioners’ request forrelief. Judicial notice is the appropriate procedure to bring these documentsto the Court's attention. (Cal. Evid. Code § 459, subd.(a); Rules of Court, Rule 8.252, subd. (a)(2).) All of these documents are necessary for Petitioners to respond to arguments raised by amiciin their filings. Amici’s briefs raise novel arguments relying on documents, statistics, and facts that were notin the record prior to amicus’ filings, and therefore Petitioners have sought out these documents in order to bolster their response. Noneof these documents were submitted to the trial court or the court of appeal below. California Evidence Codesection 452, subd. (c) provides that judicial notice may be taken of “. . . Official acts of the legislative, executive, and judicial departments of the United States and of anystate of the United States.”It also provides that judicial notice may be taken of any document published,recorded,or filed by any executive department. (See also Serrano v. Priest (1971) 5 Cal.3d 584, 591; Wolfe v. State Farm Fire & Casualty Ins. Co. (1996) 46 Cal. App.4th 554, 567 FN.16; Hogenv. Valley Hosp. (1980) 147 Cal.App.3d 119, 125.) “Official acts” include reports, records, files, and notices maintained by local governments, including counties. (Cruz v. County ofLos Angeles (1985) 173 Cal.App.3d 1131, 1134.) California Evidence Codesection 452, subd. (d) providesthat judicial notice may betaken of “[r]ecords of (1) any court of this state or (2) any court of record of the United States or of any state of the United States.” California Evidence Code section 452, subd. (g) provides that judicial notice may be taken of “[f]acts and propositions that are of such common knowledge within the territorial jurisdiction of the court that they cannot reasonably be the subject of dispute.” California Evidence Code section 452, subd. (h) provides that judicial notice may be taken of “[f]Jacts and propositions that are of such common knowledge within the territorial jurisdiction of the court that they cannot reasonably be the subject of dispute.” Appendices A, F, and G include documents published by Respondent CalPERSaspart of its execution of its executive function, and therefore are proper subjects for judicial notice under Evidence Code section 452, subd.(c). AppendicesB,I, and J are filings in court cases before boththis Court and a court in the Commonwealth of Kentucky, and therefore are proper subjects for judicial notice under California Evidence Code section 452, subd. (d). | Appendix C is a publication of the Little Hoover Commission of the State Governmentof California, which is also a proper subject for notice under California Evidence Code section 452, subd. (c) and (d). Appendix D is an excerpt from the municipal code ofthe City of San Jose, and therefore is a proper subject for judicial notice under California Evidence Codesection 452, subd.(c). Appendix is a publication of the Federal Reserve (which is within the United States federal government’s executive branch), and states information that is of a sufficiently general knowledge that it cannot be subject to challenge, and is therefore a proper subject for judicial notice under Evidence Code § 452, subd. (c) and (g). . | Appendix H is a publication of the United States Census Bureau (which is within the United States federal government’s executive branch), and states information that is not reasonably subject to dispute and whichis capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.It is therefore a proper subject for judicial notice under Evidence Code § 452, subd. (c) and (h). Based on the foregoing reasons and authorities, Petitioners respectfully request that the Court grant their Motion for Judicial Notice. Respectfully submitted, DATED: April 23, 2018 MESSING ADAM & JASMINE LLP fe M.Messing regg McLean Adam Jason H Jasmine ~ Yonatan L. Moskowitz Attorneys for Petitioners and Appellants CAL FIRE Local 2881, et al. < DECLARATION OF YONATAN L. MOSKOWITZ I, Yonatan L. Moskowitz, declare as follows: 1. T am an attorney at law duly licensedto practice before all of the courts of the State of California. I represent Petitioners and Appellants CAL FIRE LOCAL2881, et al. (“Petitioners”) in this action. I have personal knowledge of the matters set forth below. 2. Exhibit A to this Motionis a true and correct copy of the CalPERSPublication, called “A Solid Foundation for the Future”, dated December 31, 2017, which I accessed at <>; 3. Exhibits B and J to this Motion are true and correct copiés of the Petition for Hearing in the case Allen v. City ofLong Beach (1955) 45 Cal.2d 128, Civil Nos. 19866 and 19867, filed on February 11, 1955 and the Stipulation to Submit Cause without Oral Argumentin the case Allen v. City ofLong Beach (1955) 45 Cal.2d 128, Civil Nos. 19866 and 19867, filed on April 27, 1955, which I received from the California State Archives upon my request; - 4. Exhibit C to this Motionis a true and correct excerpt from a publication of Little Hoover Commission, called “Better Regulation: Improving California’s Rulemaking Process,” dated October 2011, which I accessed at < 75 5. Exhibit D to this Motionis a true and correct copy of section | 3.28.710 of the San Jose Municipal Code, which I accessed on April 20, 2018 at https://library.municode.com/ca/san_jose/codes/code_of_ordinances?nodel d=TIT3PE_JIREPLCH3.281975FEEMREPLPT6MECO_3.28.710NOR ACOET; 6. Exhibit E to this Motionis a true and correct copy of a publication of the Federal Reserve Bank of Minneapolis called “CPI Calculator Information,” which I accessed at <>; 7. Exhibit F to this Motion is a true and correct copy of a publication by CalPERScalled “Miscellaneous Plan of the Metropolitan Water District of Southern California,” dated July 2017, which I accessed at <>. 8. Exhibit G to this Motion is a true and correct copy ofa publication by CalPERStitled “CalPERS Economic Impacts in California,” dated July 2017, which I requested from CalPERS (web@calpers.ca.gov) and received by e-mail; 9. Exhibit H to this Motion is a true and correct copy of the website Quick Facts, California, published by the United States Census Bureau, which I accessed at https://www.census.gov/quickfacts/CA. 10. Exhibit I to this Motionis a true and correct copy of a documentobtained from WKYT News, purporting to be a Verified Complaint from the case Kentucky ex. rel. Beshear v. Bevin (Franklin Co., April 11, 2018) No. 18-CI-00379 which I accessed at <>. I declare underpenalty of perjury underthe laws ofthe State of California that the foregoing is true and correct. Executed this 23rd day of April 2018 at San Francisco, California YeMostwitz 00049627-2 EXHIBIT A >. CalPERS A Sotrd Foundation for the Future Acting on the discountrate, asset allocation, and amortization, CalPERS has built a solid path forward for the long-term future of the fund. Wehaveprovidedretirement security for California’s public employees for more than 85 years. Through good times and bad, CalPERS has been a strong,reliable presence in our members’lives. Our $21 billion in angual benefit paymentshelp fuel economic activity across the Golden State. How We've Strengthened the Fund Over the past few years, we've adopted strong measuresto ensure the long-term future of the CalPERS fund so that we can pay the benefits our members have earned after a career in public service. Lower Discount Rate New Asset Allocation Shorter Amortization Lowered the discountrate from Adopted new strategic asset Shortened the amortization 7.5% to 7% overthree years allocation effective July 1, 2018 period for employers to pay their (assumedrateof return) unfundedliability 50% Global Equity 15% 28% Fixed Income mys ~e 100% 13% Real Assetsg 20 yrs. ee” _ 8% Private Equity wensTy [ =0 1% Liquidity significant long-term savings Our MembersTell Our Story They dependon us to help them achieve a eS rr e measureoffinancial security in retirement il paid in pension benefits after a career dedicated to public service. » - annually (FY 2016-17) We partner with 2,945 employers to provide ten nn nn finiteness pent eee se cae average monthly allowance ' for all retirees include public employees from across California, sei sa ee nen pension benefits for retirees and their beneficiaries on behalf of the state, public agencies, school districts, and special districts. Our members including peace officers, firefighters, secretaries, . . . ... g hly allcustodians, bus drivers, and their beneficiaries. o §3 18? formambersretianewn ™ ' FY 2016-17 ., Ofallservice retirees 64% receive monthly allowance 9 lew than $3,000 only earn pensions greater than 3% $100,000,typically city leaders, 0 physicians, and university employees 38% School members 1.9 million members 31% Public Agency members 31% State members Investing for the Long Term Ourbottom line is strong and getting stronger. The numbers that measure a pension plan's health have been on the rise, and recent investment returns and 0 0 cash flow improvementsonly strengthen our position. 6 3% [|0% Every dollar we save by reducing our operating or investments costs, or by developing simples, more efficient processes, is another dollar we can invest Funded Status Funded Status toward our members’ benefits. 2095-16 December 31, 2017 Total Fund Cash Flowsare Improving 60 bil — ge B60 Total Contributions and Investment Income $50 bi) as : s4Obi wae—T = Benefit Payments” $30 bit * Does not include othercosts such as refunds and administrative costs of retirementand investment-based costs $20 bil L ! \ i i ! l i ! t { ! i i ! \ i ] l 2017-18 2019-20 2021-22 2023-24 2025-26 2027-28 2029-3 2031-32 2033-34 2035-36 2037-38 2039-40 1.5-2% reduction in overhead costs each of the next 5 fiscal years $350billion in assets as of December31, 2017 lo./% investmentreturns me 800+10 reduction in calendar year 2017; 11.2% in FY 2016-17 ™ in external managers $170 million savings in reducing investment expenses in FY 2015-16 $47 billion increasein assets in calendar year 2017 Xv 2 o n a o Retirement Security Across the Decades We openedourdoorsin 1932 in the middle of the Great Depression,after California voters approved creating a plan to provideretirement secigity to the state’s public employees. Over the decades we have faced challenges and made tough decisions in the best interest of our membersand the fund. Historica Factors Impact Funded Status (1993-2018) | - Fundedratio (%) af ___j aso 128% 11%> bec 312017 140% + gga | 4 $so0e 120% = £4008 100% 80% F 7 $3008Actuarial liabilities ($) 60% A ‘ $200B ssets 40% |- ) 70% $100B | 1993-2000 on : 2007-2009 Increasedlife | Strong economy SB400| | AB6I6 Great Recession expectancies| tonal | Additional | / $6billion ; PEPRA law | from State : Discount Discount : Steps to rate lowered : rate lowered : strengthen : Dot.com crash | 8.25% + 7.75% | 775% > 715% | the Fund : It will take time to increase our funded status, but lowering the discountrate, adopting a new Strategic asset allocation, and shortening amortization period, as well as improving efficiency and reducing operational costs,will strengthen the sustainability of the CalPERS fund for decades to come. df». CalPERS www.calpers.ca.gov EXHIBIT B | ORIGINAL suoCuvts Nos LA22894 19866 and 19867 T A 9289% In the Supreme Court of the State of California 2d Civil No. 19866. MANNING T. ALLEN, et ai, Plaintiffs and Appellants, US. cITy OF LONG BEACH, a municipal corporation, ef al., Defendanis and Respondents. 2d Civil No. 19867. ELWIN L. ALGER, ef al, Plaintiffs and Appeliants, Us. CITY OF LONG BEACH, a municipal corporation, et al, , Defendants and Respondgnts. Z9 86 T P U B OO R6 T “S ON TI AI D A N Z APPEAL FROM SUPERIOR COURT OF LOS ANGELES COUNTY. HON. PAUL NOURSE, JUDGE. PETITION FOR HEARING. Top Ey ALBERT D. WHITE, 320 Pine Avenue, . Long Beach 12, California, * NOWLAND M. REID, 106 East Ocean Boulevard, Long Beach 2, California, Attorneys for Plaintiffs ond Appellants, Monning T. Allen, et al, KENNETH SPERRY, 110 Pine Avenue, Leng Beach 2, California, Atiorney for Plamtiffs cud Appellants, Elwin L, Alger, et al. Parker & Son, Inc. Law Printers, Los Angeles. Phone MA. 6-9171. J- 3° SS DECIDEDUNig TOPICAL INDEX PAGE Questions presented Zz Point One. A hearing is necessary to secure uniformity of decision 14 A. The opinion of the District Court of Appeal herein is in conflict with the decisions of this court and other deci- sions of the District Courts of Appeal of this state... 14 Point Two. A hearing is necessary for the settlement of im- portant questions of law 41 Conclusion 42 Appendix. Opinion of the District Court of Appeal........App. p. 1 i M T A B L E O F A U T H O R I T I E S C I T E D C a s e s P A G E Ac co un ti ng Co rp . of A m e r i c a y. St at e B o a r d of Ac co un ta nc y, 34 Ca l. 2d 18 6, 20 8 Po 2d O 8 4 31 A d a m s et al . v. Ci ty o f L o n g B e a c h , 1 0 1 Ca l. A p p . 2 d 1 5 . 0 0 0 . 4, 2 9 A l e x a n d e r et al . v. Ci ty o f L o n g B e a c h , 1 2 6 A . C. A . 54 4, 2 7 3 P. 2d 68 5. .. 6, 17 , 29 , 41 , 4 2 Al le n et al . v. Ci ty of L o n g Be ac h, 10 1 Ca l. A p p . 2 d 15 , 22 4 P. 2d 79 2. .. 24 Al st ot t v. Ci ty of L o n g Be ac h, 10 4 Ca l. A p p . 2d 44 1, 23 1 P, 2d 4 9 8 37 B a k e n u s et ux . v. Ci ty of Se at tl e, et al ., Su pe r. Ct . Ac t. N o . 4 6 7 4 8 8 . 3 9 Ba rk er Br os , v. Ci ty of An ge le s, 10 Ca l. 2 d 60 3, 7 6 P. 2 d 9 7 . . . 30 Ba uq ui er , In re , 88 Ca l. 30 2, 2 6 Pa c. 17 B o c c e c e c e e e e . 28 Ca ss er ly v. Ci ty of Oa kl an d, 6 Ca l. 2 d 64 , 56 P. 2d 2 3 7 . 0 0 . 3, 6, 12 , 14 , 19 Ci ty of L o n g B e a c h v, Le nt z, et al ., 2 7 Ca l. 2 d 89 0, 16 5 P. 2 d 67 7 23 , 29 , 30 , 39 C l a r k e v. Ir el an d, et al ., 1 2 2 M o n t . 24 6, 1 9 9 P . 2 4 9 6 5 . . . 3 5 C o m b s e t al . v. C i t y of L o n g B e a c h , 1 2 6 A . C A . 54 2, 2 7 2 P L 2d 88 0 6, 17 , 41 D e l M a r C a n n i n g C o . v. P a y n e et af ., 2 9 Ca l. 2 d 38 0, 1 7 5 P. 2 d 23 1 De ni o v. Ci ty of Hu nt in gt on Be ac h, 74 Ca l. A p p . 2 d 42 4, 16 8 P. 2d 78 5 4 0 E n g l a n d v. Ci ty of L o n g B e a c h , 2 7 Ca l. 2 d 34 3, 1 6 3 P. 2 d 86 5. .. 2 9 En gl is h v. Ci ty of L o n g Be ac h, 12 6 A. C. A , 53 5, 27 2 P: 2d B F Bo ec ec es ec ee ce ec ce es te ne nc en ne se ce s- 3, 6, 7, 10 , 11 , 15 , 17 , 18 , 19 , 41 , 4 2 F u h r m a n v. A m e r i c a n Na t. Bl dg . & L o a n As sn ., 12 6 Ca l. A p p . 20 2, 1 4 P. 2 d 6 0 1 31 2 8 G o o d w i n vy. Fi re me n’ s Re li ef a n d Pe ns io n Fu nd , 72 Ca l . A p p . 2d 44 5, 16 4 P. 24 51 2 ww 35 ii , PA GE Go rd on , Es ta te of , 14 2 Ca l. 12 5, 75 Pa c. 6 7 2 . . . 2 8 - Ha rr is on et al . v. Ci ty of L o n g Be ac h, 12 6 A. C. A. 54 3, 27 3 P. 2 d 37 . 6, 17 , 29 , 4 1 Hi bb ar d, et al . v. St at e ex re l. W a r d , 65 O h i o St . 57 4, 64 N . E . 1 0 9 31 In di an a ex re l. A n d e r s o n v. Br an d, 30 3 U. S. 95 , 82 L. Ed . 6 8 5 . 2 5 Is la is Co ., L t d . v. M a t h e s o n , 3 Ca l. 2 d 64 7, 4 5 P . 2 d 3 2 6 . . . 2 5 K e r n v. Ci ty of L o n g Be ac h, 2 9 Ca l. 2 d 84 8, 17 9 P. 2 d 79 9. .. so se ne es en ce en se en eu ea sn ee ac se ev en en en ta su ne ec an er cc s 8 , 12 , 20 , 27 , 29 , 30 , 32 , 39 , 41 Kl en ch v. B o a r d of Pe ns io n F u n d Co mm is si on er s, 7 9 Ca l. A p p . 17 1, 2 4 9 P a c . 46 . 15 Kn ig ht v. Bo ar d, et c. Em pl oy ee s’ Re ti re me nt , 32 Ca l. 2d 40 0, 19 6 P, 2 d 54 7 35 K n o x v. Wo lf e, 73 C a k A p p . 2 d 49 4, 16 7 P. 2 d 3 . 4 0 Ko tt a, E x pa rt e, 18 7 Ca l. 27 , 2 0 0 Pa c. D S F e e ee et ee re ee re ne en .. 3G L o s An ge le s Tr ac ti on Co . v. Wi ls hi re , 13 5 Ca l. 6 5 4 . 0 0 0 0 32 M o b l e y et c. Co . v. Bo rd en , 12 9 O h i o Se . 37 5, 19 5 N. © . 6 9 7 . . . 32 M o r d e c a i v. B o a r d of Su pe rv is or s, 1 9 3 G e . 43 4, 1 9 2 P a c . 40 .. .. .. 31 Ol we ll , et al . v. H o p k i n s , et al ., 2 8 Ca l. 2 d 14 7, 1 6 8 P. 2 d 97 2. .. 4 0 P a b s t v. F i n m a n d , 1 9 0 Ca l. 12 4, 2 1 1 P a c . 1 1 . . . re se ve es ee n c os se nn en ee ne 2 8 P a c k e r v. B o a r d o f R e t i r e m e n t , 3 5 Ca l. 2 d 2 1 2 , 2 1 7 P. 2 d 66 0 8, 20 , 25 , 26 , 27 , 41 , 4 2 Pr ic e v. Si xt h Di st ri ct Ag ri cu lt ur al As s' n, 20 1 Ca l. 50 2, 25 8 Pa c. 58 7 40 ‘R ol ap p, et al . v. Fe de ra l Bl dg . & L o a n As sn ., 11 Ca l. A p p . 2 d 33 7, 5 3 P . 2 d 9 7 4 . . . 4 0 S a n Fr an ci sc o v . Li ve rp oo l a n d L o n d o n an d Gl ob e In su ra nc e Co ., 74 Ca l. 11 3, 15 Pa c, 3 8 0 e e e e e 36 Sh ea lo r v. Ci ty of Lo di , 23 Ca l. 2 d 64 7, 14 5 P. 2 a 5 7 4 . 0 . . 36 S h o r e v. S h o r e , 4 3 A . C. 6 9 7 on e. 4 0 Si ec k v. Ha ll , 13 9 Ca l, A p p . 27 9, 3 4 P. 2 d 8 4 4 0 3 2 Sk ag gs v. Ci ty of L o s An ge le s, 4 3 A. C. 50 3, 27 5 P. 2 d 9 0 . 30 t w . P A G E So ar es v. Ci ty of Sa nt a Ma ri a, 38 Ca l, A p p . 2 d 21 5, 10 0 P. 2d 11 08 3 0 Te rr y v. Ci ty of Be rk el ey , 41 Ca l. 2 d 69 8, 2 6 3 P. 2 a 8 3 3 . 6 , 15 , 30 T o d h u n t e r v. S m i t h , 2 1 9 Ca l, 69 0, 2 8 P. 2 d 9 1 6 . 0 4 0 W a l l a c e v. C i t y of F r e s n o , 4 2 Ca l. 2 d 18 0, 2 6 5 P. 2 d 8 8 4 . . . co ne sn ce sn ee ce ae te ne vs tn ee sn ce su es 2, 3, 7, 8, 17 , 18 , 20 , 25 , 27 , 29 , 37 , 41 , 4 2 S t a t u t e s Ca li fo rn ia Co ns ti tu ti on , A r t . T V , Se c. 2 2 a 3 6 Ca li fo rn ia Co ns ti tu ti on , Ar t. X I , Se c. 1 5 . . . 3 , 14 , 30 , 36 , 4 2 G o v e r n m e n t Co de , Se c. 2 0 1 2 2 0 0 0 c e c e e c e c e 12 G o v e r n m e n t C o d e , Se c. 2 0 1 3 1 ar et ee se ne ee se cs en es ts es ev as eu su ne av ta sc ue sn ee ce ee oe 12 , 3 5 G o v e r n m e n t C o d e , Se c, 2 0 1 3 2 0 0 . c c e e t e e c e e ta wl Z, $ 5 G o v e r n m e n t Co de , Se c, 2 0 2 3 0 . . . prs acc nne ceu eee nse nee ne 12 , 35 G o v e r n m e n t C o d e , Se c, 2 0 4 5 7 3 3 G o v e r n m e n t C o d e , Se c. 2 0 4 5 8 3 3 G o v e r n m e n t C o d e , Se c. 20 45 9. 3 4 G o v e r n m e n t Co de , Se c, 20 36 5 se sy es nt nn at es er co ma es nt er ni ne ta ra te ue ni cc ss oe ee es 12 , 35 G o v e r n m e n t C o d e , Se cs . 2 0 4 5 7 - 2 0 4 6 1 5 ee ce ec es es cc ce cs se ee te ne ee ee ee ee e c . 3 6 G o v e r n m e n t C o d e , Se cs , 2 1 0 2 0 - 2 1 1 0 3 n e e ee ee cc ee ec en te ee ee ee en n. 3 5 G o v e r n m e n t C o d e , Se cs . 2 1 2 5 0 - 2 1 2 6 3 e e c t 3 5 G o v e r n m e n t Co de , Se cs . 2 1 3 3 0 - 2 1 3 3 5 c c c e e e 35 L a b o r Co de , Se c. 48 50 . 34 L o n g B e a c h C i t y Ch ar te r, Se c, 1 8 7 . 4 , 5, 6, 11 , 13 , 14 , 16 , 17 , 2 3 24 , 30 , 31 , 32 , 33 , 34 , 35 , 39 L o n g B e a c h Ci ty Ch ar te r, Se c. 1 8 7 . 2 5 , 7, 11 , 12 , 13 , 20 , 21 , 23 24 , 25 , 29 , 32 , 33 , #4 , 35 , 3 6 L o n g B e a c h Ci ty Ch ar te r, Se c. 1 8 7 . 2 . ) ee cc ec cc es ec ee ee cn se se ss oe ee s, L o n g B e a c h Ci ty Ch ar te r, Se c. V B 7 ( 3 ) o n e ee ce ce en ee e e e . P r o b a t e C o d e , Se c. 4 0 1 S t a t u t e s of 19 31 , p. 27 80 .. . T E x r e o o x s 1 Re st at em en t of L a w of Co nt ra ct s, Se c. 4 5 . 0 We bs te r' s Co ll eg ia te Di ct io na ry (S th Ed .) In th e S u p r e m e Co ur t of th e St at e of Ca li fo rn ia 2d Ci vi l No . 19 86 6. M A N N I N G T. A L L E N , e ¢ el ., Pl ai nt if fs a n d Ap pe ll an ts , vs , C I T Y O F L O N G B E A C H , a m u n i c i p a l co rp or at io n, ef aL , D e f e n d a n t s a n d R e s p o n d e n t s . 2d Ci vi l No . 19 86 7, E L W I N L. A L G E R , e t al , Pl ai nt if fs a n d Ap pe ll an ts , U s . C I T Y O F L O N G B E A C H , a mu ni ci pa l co rg ar at io n, ef al ., D e f e n d a n t s a n d R e s p o n d e n t s . P E T I T I O N F O R H E A R I N G . T o th e H o n o r a b l e C h i e f Ju st ic e a n d As so ci at e Ju st ic es of th e S u p r e m e Co ur t: Pl ai nt if fs a n d ap pe ll an ts in th e ab ov e- en ti tl ed ca us es he re by re sp ec tf ul ly pe ti ti on th is H o n o r a b l e C o u r t fo r a he ar in g af te r th e de ci si on of th e Di st ri ct C o u r t of Ap pe al , S e c o n d Ap pe ll at e Di st ri ct , Di vi si on 1, u p o n th e g r o u n d th at su ch he ar in g is ne ce ss ar y to se cu re un if or mi ty of de ci si on , a n d li ke wi se fo r th e se tt le me nt of im po rt an t qu es ti on s of la w. T h e de ci si on w a s fi le d J a n u a r y 3, 19 55 , a n d is re po rt ed at 13 0 A . C. A . 72 , 2 7 8 P. 2 d 46 6. Pl ai nt if fs a n d ap pe ll an ts ’ pe ti ti on fo r re he ar in g, in w h i c h at te nt io n w a s ca ll ed to th e fa ct th at ma te ri al fa ct s w e r e om it te d f r o m a n d in co rr ec tl y st at ed in th e op in io n, th at th e op in io n w a s ba se d u p o n a n ap pa re nt mi sa pp re - he ns io n of on e of th e pr in ci pa l le ga l is su es pr es en te d, a n d 2 . th at su bs ta nt ia l le ga l is su es pr es en te d b y th e br ie fs w e r e no t co ns id er ed b y th e op in io n, w a s de ni ed wi th ou t op in - io n u n d e r da te of J a n u a r y 26 , 19 55 , Q u e s t i o n s P r e s e n t e d . Pr es en te d fo r de ci si on in th is ma tt er is th e qu es ti on of w h e t h e r or no t a mu ni ci pa l co rp or at io n m a y b y ch ar te r a m e n d m e n t su bs ta nt ia ll y r e d u c e th e r e t i r e m e n t be ne fi ts or ig in al ly of fe re d as a n i n d u c e m e n t to ob ta in th e se rv ic es of th e ac ti ve me mb er s o f it s Po li ce a n d Fi re D e p a r t m e n t s af te r su ch em pl oy ee s h a v e al re ad y se rv ed f r o m si x to ei gh te en ye ar s, wi th ou t vi ol at in g th e co nt ra ct a n d d u e - p r o c e s s cl au se s o f t h e S t a t e a n d F e d e r a l Co ns ti tu ti on s, w h e r e th e on ly ap pa re nt pu rp os e of su ch mo di fi ca ti on is to re du ce th e Ci ty ’s ex is ti ng co nt ra ct ua l ob li ga ti on s u n d e r th e ex is ti ng pe ns io n sy st em , wi th ou t of fe ri ng a n y co rr e- sp on di ng ad va nt ag es of a n y ki nd , a n d w h e r e th e pr ac ti ca l ef fe ct of su ch a mo di fi ca ti on te nd s to de fe at ra th er th an ‘t o p r o m o t e th e le gi ti ma te ob je ct s of th e pe ns io n sy st em . A n o t h e r im po rt an t qu es ti on pr es en te d (b ut in co rr ec tl y st at ed in th e op in io n) is w h e t h e r th e su bs ti tu ti on of a “f ix ed ” m o n t h l y pe ns io n ba se d u p o n th e pa st ea rn in gs of th e em pl oy ee , fo r a “f lu ct ua ti ng ” re ti re me nt pe ns io n m e a s - ur ed by th e p a y cu rr en tl y pr ov id ed fo r th e r a n k or po si - ti on pr ev io us ly he ld b y th e em pl oy ee at th e ti me of re ti re - me nt , w h i c h w a s ex pr es sl y de si gn ed to ke ep hi s fu tu re re ti re me nt be ne fi ts ad ju st ed to th e c h a n g i n g va lu e of th e do ll ar a n d th e c u r r e n t co st o f li vi ng , co ns ti tu te s a “ r e a s o n - ab le mo di fi ca ti on ” wi th in t h e p u r v i e w of th e pr in ci pl es re ce nt ly a n n o u n c e d b y th is co ur t in th e ca se of Wa ll ac e v. Ci ty of Fr es no , 4 2 Ca l. 2 d 18 0, 2 6 5 P. 2 d 88 4, w h e r e i n it is st at ed th at a “c it y ha s n o m o r e ri gh t to ad op t a n a m e n d m e n t w h i c h do es no t c o m e wi th in th e pu rp os es of j u th e ru le pe rm it ti ng mo di fi ca ti on s th an a pr iv at e in su r- an ce ca rr ie r w o u l d h a v e to c h a n g e a n an nu it y po li cy ,” a n d th at th e “p er mi ss ib le sc op e” of su ch mo di fi ca ti on s is li mi te d to c h a n g e s w h i c h a r e a i m e d a t k e e p i n g t h e p e n s i o n sy st em ad ju st ed “t o ch an gi ng co nd it io ns an d at th e sa me ti me ma in ta in th e in te gr it y of th e s y s t e m a n d ca rr y ou t it s be ne fi ci en t po li cy .” H e r e th e ap pa re nt pu rp os e of th e c h a n g e w h i c h ha s b e e n ap pr ov ed b y th e op in io n of th e Di st ri ct C o u r t of A p p e a l is pr ec is el y th e op po si te of th e “p er mi ss ib le ” pu rp os es of su ch mo di fi ca ti on s as ou t- li ne d b y th is co ur t in th e Wa ll ac e ca se , be ca us e it el im i- n a t e s a p r o v i s i o n th at w a s e x p r e s s l y d e s i g n e d to k e e p t h e m o n t h l y re ti re me nt be ne fi ts ad ju st ed to c h a n g i n g e c o n o m i c co nd it io ns (C as se rl y v. Ci ty of Oa kl an d, 6 Ca l. 2 d 64 , 56 P. 2d 23 7) , an d su bs ti tu te s th er ef or a fi xe d mo nt hl y p a y m e n t w h i c h m a y or m a y no t be ad eq ua te in te rm s of pu rc ha si ng p o w e r to su pp ly th e ba si c e c o n o m i c ne ed s of “ — ~ ~ - . th e pe ns io ne r, de pe nd en t so le ly u p o n fu tu re ec on om ic co nd it io ns . O n th is qu es ti on th e co nc lu si on s of th e tr ia l j u d g e a n d of th e Di st ri ct C o u r t of A p p e a l he re in , as w e wi ll sh ow , ar e di am et ri ca ll y op po se d to th e co nc lu si on s of th e s a m e tr ia l ju dg e a n d Di vi si on 3 of th e s a m e Di st ri ct C o u r t of Ap pe al , in th e ca se of En gl is h v. Ci ty of L o n g Be ac h, 12 6 A . C. A. 53 5, 2 7 2 P. 2 d 87 5, w h i c h in vo lv ed th e co ns ti tu ti on al it y of th e s a m e c h a r t e r se ct io n. Li ke wi se pr es en te d b y th e br ie fs , bu t no t di sc us se d in th e op in io n, is th e q u e s t i o n of w h e t h e r o r n o t th e C i t y m a y le vy a sp ec ia l ta x u p o n th e sa la ri es of ap pr ox im at el y on e- ha lf of th e m e m b e r s of an ex is ti ng pe ns io n sy st em , a n d us e it to li qu id at e th e Ci ty ’s ex is ti ng ge ne ra l ob li ga - ti on to re ti re d m e m b e r s of th e s a m e sy st em , . w it ho ut vi ol at in g th e pr ov is io ns of Ar ti cl e XI , Se ct io n 15 , of th e Ca li fo rn ia Co ns ti tu ti on , a n d th e eq ua l pr ot ec ti on cl au se s 4 of th e St at e a n d Fe de ra l Co ns ti tu ti on s. In th e s a m e ca te - g o r y is th e qu es ti on of w h e t h e r or no t a f o r m e r de cl ar a- to ry j u d g m e n t b e t w e e n th e s a m e pa rt ie s b y w h i c h it w a s e x p r e s s l y d e t e r m i n e d t h a t t h e d e f e n d a n t ci ty w a s u n d e r a co nt ra ct ua l ob li ga ti on to p a y de fi ni te re ti re me nt be ne fi ts to ea ch pl ai nt if f u p o n hi s ce mp le ti ng 2 5 or m o r e ye ar s o f se rv ic e, th at t h e r i g h t o f e a c h pl ai nt if f to m a t u r e a n d re ce iv e su ch re ti re me nt be ne fi ts w a s a ve st ed co nt ra ct ua l ri gh t wi th in th e pr ot ec ti on of th e co nt ra ct a n d du e- pr oc es s cl au se s of th e St at e a n d Fe de ra l Co ns ti tu ti on s, a n d th at th e de fe nd an t Ci ty ’s co nt en ti on th at pl ai nt if fs ’ pe ns io n ri gh ts w e r e su bj ec t to f u r t h e r r e d u c t i o n a n d m o d i f i c a t i o n b y fu tu re ch ar te r a m e n d m e n t w a s in va li d, is re s ad ju di ca ta o f a n y of th e is su es pr es en te d in th e ca se s at ba r. U n d e r th e pr ov is io ns of Se ct io n 18 7 of th e L o n g B e a c h Ci ty Ch ar te r, as co ns tr ue d by th e fi na l de cl ar at or y ju dg - m e n t of th e Su pe ri or Co ur t, en te re d Ju ly 6, 19 49 , in th e ca se of A d a m s et al . v. Ci ty of L o n g Be ac h, Su pe ri or C o u r t Ac ti on N o . L B C - 1 4 1 3 0 , 10 1 Ca l. A p p . 2 d 15 , 2 d Ci vi l N o . 17 54 4, in w h i c h al l of th e pr es en t pa rt ie s w e r e pl ai nt if fs a n d de fe nd an ts , re sp ec ti ve ly , th e Ci ty w a s u n d e r a c o n t r a c t u a l ob li ga ti on to p a y e a c h pl ai nt if f, u p o n th e co mp le ti on of 25 or m o r e ye ar s of se rv ic e in it s Po li ce or Fi re D e p a r t m e n t , a re ti re me nt pe ns io n eq ua l to “f if ty pe r ce nt ( 5 0 % ) of th e an nu al sa la ry of th e r a n k or po si - ‘t io n he ld b y su ch m e m b e r on e ye ar pr io r to th e da te of re ti re me nt ,” pa ya bl e in eq ua l m o n t h l y in st al lm en ts . B y it s de ci si on in th at ca se , th e tr ia l c o u r t d e t e r m i n e d th at th es e s a m e pl ai nt if fs h a d vo lu nt ar il y su bm it te d to ce rt ai n sa la ry de du ct io ns a n d h a d re fr ai ne d f r o m ac ce pt in g ot he r: hi gh er -p ay in g e m p l o y m e n t op po rt un it ie s d p r i n g th e te n ye ar s w h i c h pr ec ed ed th e en tr y of sa id j u d g m e n t in re - H a n c e u p o n th e be li ef th at th ey w e r e ea rn in g th e ri gh t — s — to re ee tv e th e sp ec if ic re ti re me nt , di sa bi li ty a n d de at h be ne - fi ts of fe re d b y sa id ch ar te r se ct io n, a n d de cr ee d th at u p o n co mp le ti on of th e re qu ir ed n u m b e r of ye ar s of se rv ic e, sa id pl ai nt if fs “w il l b e en ti tl ed to re ce iv e, a n d it wi ll b e th e d u t y of de fe nd an ts to p a y or ca us e to be pa id to t h e m f r o m th e Ci ty T r e a s u r y of th e Ci ty of L o n g B e a c h in eq ua l m o n t h l y in st al lm en ts a n an nu al pe ns io n in a n a m o u n t eq ua l to on e- ha lf or m o r e of th e sa la ry at ta ch ed to th e r a n k he ld b y su ch pl ai nt if f or pl ai nt if fs on e ye ar pr io r to th e da te of th ei r re sp ec ti ve re ti re me nt s, in ac co rd an ce wi th th e f o r m u l a a n d in th e m a n n e r a n d fo r th e t e r m pr es cr ib ed b y Se ct io n 18 7, su bd iv is io n (2 ) of sa id ch ar te r pr io r to it s pu rp or te d re pe al * * *. ” [C lk . Tr . Al ge r, p. 7 . B y th e s a m e j u d g m e n t it w a s de te rm in ed th at al l of th e co nt en ti on s w h i c h w e r e u r g e d b y th e de fe nd an t Ci ty in it s a n s w e r a n d cr os s- co mp la in t, w h i c h in cl ud ed th e sp ec if ic co nt en ti on th at pl ai nt if fs ’ ri gh ts w e r e su bj ec t to fu rt he r m o d i f i c a t i o n at th e i n s t a n c e o f th e el ec to ra te , w e r e in va li d. Th is po rt io n of th e j u d g m e n t w a s af fi rm ed o n ap pe al , th e on ly mo di fi ca ti on be in g to el im in at e th e ri gh t of ea ch pl ai nt if f to in cr ea se hi s pe ns io n be ne fi ts b y se rv in g lo ng er th an th e m i n i m u m pe ri od of se rv ic e re qu ir ed to en ti tl e h i m to re ce iv e a pe ns io n eq ua l to 5 0 % of th e sa la ry at - ta ch ed to th e r a n k he ld b y h i m fo r a pe ri od of on e ye ar pr io r to re ti re me nt . (S ee A p p . Op . Br . pp . 10 to 13 .) B y th e pr ov is io ns of Se ct io n 18 7. 2, th e co ns ti tu ti on al it y of w h i c h is ch al le ng ed b y th e in st an t pr oc ee di ng in de - cl ar at or y re li ef , th e ch ar te r fr am er s so ug ht to su bs ti tu te a fi xe d or “f ro ze n” m o n t h l y p a y m e n t fo r th e fl uc tu at in g pe ns io n pr ev io us ly pr ov id ed b y Se ct io n 18 7, w h i c h la tt er pr ov is io n, as po in te d ou t b y th is co ur t “i s ad mi ra bl y su it ed to ac co mp li sh ju st ic e fo r re ti re d of fi ce rs , as we ll as fo r th e ci ty ” be ca us e a “p en si on m e a s u r e d b y th e p a y— — b — of of fi ce rs of si mi la r r a n k ” ke ep s th e cu rr en t m o n t h l y pa y- m e n t s ad ju st ed to th e c h a n g i n g va lu e of th e do ll ar a n d th e cu rr en t co st of li vi ng , (C as se rl y v. Ci ty of Oa kl an d, 6 Ca l. 2d 64 , 56 P. 2d 23 7; Te rr y v, Ci ty of Be rk el ey , 41 Ca l. 2 d 69 8, 2 6 3 P. 2 4 8 3 3 . ) I n it s O p i n i o n in t h e c a s e at ba r, ho we ve r, th e Di st ri ct C o u r t of A p p e a l er ro ne - ou sl y st at es th e qu es ti on Pr es en te d b y th is c h a n g e as be - in g: “ A n d do es th e m e t h o d of c o m p u t i n g th es e pe ns io ns o n th e a v e r a g e sa la ri es f o r th e la st fi ve ye ar s, in st ea d o f th e la st ye ar , c o m e wi th in th e s a m e sc op e? ” (A ll ud in g to th e ru le of re as on ab le mo di fi ca ti on .) E l s e w h e r e in th e Op in io n, t h e c o u r t St at ed , “ b e f o r e th e a m e n d m e n t th is a m o u n t w a s c o m p u t e d u p o n th e em pl oy ee ’s sa la ry fo r th e la st ye ar on ly of hi s se rv ic e. ” (P . 74 .) A s po in te d ou t in ou r pe ti ti on fo r re he ar in g, th e fo re go in g st at em en t of th e qu es ti on is st ri ct ly er ro ne ou s be ca us e, pr io r to 19 51 , th e pr ov is io ns of Se ct io n 18 7 re qu ir ed th e p a y m e n t of a fl uc tu at in g m o n t h l y pe ns io n m e a s u r e d b y ‘t he sa la ry c u r r e n t l y p r o v i d e d f o r t h e po si ti on p r e v i o u s l y he ld b y th e re ti re d em pl oy ee fo r on e ye ar or m o r e pr io r to hi s re ti re me nt (c f. Ca ss er ly v. Ci ty of Oa kl an d, su pr a) , a n d th is po rt io n of th e ch al le ng ed a m e n d m e n t as ap pl ie d to ‘r et ir ed m e m b e r s a n d th ei r de pe nd en ts w a s sp ec if ic al ly he ld to be un co ns ti tu ti on al a n d vo id b y Di vi si on 3 of th e s a m e co ur t in th e ca se s of H a r r i s o n et al . v. Ci ty of L o n g Be ac h, 12 6 A . C. A. 54 3, 2 7 3 P. 2 4 37 ; C o m b s et al . wv. Ci ty of L o n g B e a c h , 1 2 6 A . C . A . 54 2, 2 7 2 P . 2 4 8 8 0 ; A l e x a n d e r et al . v. C i t y o f L o n g B e a c h , 1 2 6 A . C. A . 54 4, 2 7 3 P. 2 d 68 5; a n d En gl is h v. Ci ty of L o n g Be ac h, 12 6 A . C. A . 93 5, 27 2 P. 2d 87 5 (p et it io n fo r he ar in g un an im ou sl y de ni ed by th is co ur t u n d e r da te o f S e p t e m b e r 2, 19 54 ), In fa ct , in th e En gl is h ca se , th e co ur t he ld th at th e su b- st it ut io n of th e fi xe d m o n t h l y p a y m e n t fo r th e fi uc tu at in g Pe ns io n pr ov id ed b y Se ct io n 18 7, as at te mp te d b y su b- — ~ 7 — di vi si on (b ) of Se ct io n 18 7. 2 w a s un co ns ti tu ti on al an d vo id as ap pl ie d to th e d a u g h t e r of a po li ce of fi ce r w h o s e se rv ic e- co nn ec te d de at h oc cu rr ed be fo re J u n e 5, 19 51 , bu t w h o s e ri gh t to re ce iv e th e pe ns io n be ne fi ts di d no t fu ll y ma tu re un ti l af te r th e ef fe ct iv e da te of th e a m e n d m e n t u p o n th e re ma rr ia ge of he r m o t h e r in S e p t e m b e r of 19 51 . In re sp on se to th e Ci ty ’s co nt en ti on th at th e fi xe d pe ns io n pr ov id ed b y Se ct io n 18 7. 2 m i g h t ev en tu al ly p r o v e to be m o r e va lu ab le to th e pe ns io ne r th an th e fl uc tu at in g pe n- si on p r o v i d e d b y S e c t i o n 18 7, d e p e n d i n g u p o n f u t u r e ec o- n o m i c de ve lo pm en ts , th e co ur t, af te r al lu di ng to th e ho ld - in g of th is co ur t in th e re ce nt ca se of Wa ll ac e v. Ci ty of F r e s n o , 4 2 Ca l. 2 d 18 0, 2 6 5 P. 2 4 8 8 4 , at p a g e 8 7 8 o f t h e Pa ci fi c Re po rt er sa id : “P en si on er s ne ed th ei r m o n e y as it fa ll s du e a n d ca nn ot be re qu ir ed to e x c h a n g e it fo r th e pr om is e th at if th ey li ve lo ng e n o u g h th ey m a y po ss ib ly ge t it ba ck .” . W e t h e r e f o r e h a v e th e a n o m a l o u s si tu at io n w h e r e t w o di - vi si on s of th e Di st ri ct C o u r t of A p p e a l h a v e ar ri ve d at op po si te co nc lu si on s wi th re sp ec t to co ns ti tu ti on al it y of th e s a m e c h a r t e r a m e n d m e n t . I n fa ct , t h e s a m e tr ia l ju dg e w h o re nd er ed th e de ci si on in th e ca se s at ba r o n F e b r u a r y 10 , 19 53 , c a m e to th e op po si te co nc lu si on wi th re sp ec t tc th e re as on ab le ne ss of th e mo di fi ca ti on in so fa t as it a t t e m p t s to su bs ti tu te a fi xe d m o n t h l y p a y m e n t fo r th e fl uc tu at in g pe ns io n m e a s u r e d b y th e sa la ry cu rr en tl y pr ov id ed fo r th e r a n k pr ev io us ly he ld , in hi s la te r m e m o - r a n d u m op in io n in th e E n g l i s h ca se , w h i c h w a s fi le d J u n e 4, 19 53 . In co nc lu di ng th at th e c h a n g e br ou gh t ab ou t b y Se ct io n 18 7. 2 w a s “n ot ba se d u p o n re as on bu t is ir ra ti on al a n d ar bi tr ar y” a n d he nc e, th at it di d no t fa ll wi th in th e sc op e' of th e pu rp os es fo r w h i c h th e p o w e r to m o d i f y ha s 8 be en im pl ie d as de te rm in ed b y th is co ur t in th e ca se s of K e r n v. Ci ty of L o n g Be ac h, 2 9 Ca l. 2 d 84 8, 17 9 P. 2 d 7 9 9 ; P a c k e r v. B o a r d o f R e t i r e m e n t , 3 5 Ca l. 2 d 21 2, 2 1 7 P. 2 d 66 0; a n d W a l l a c e v. Ci ty of Fr es no , su pr a, J u d g e N o u r s e ob se rv ed : “* * * Tf th e de ci si on of th e S u p r e m e C o u r t in .t he K e r n ca se is ap pl ic ab le he re a n d de ci si ve of th e qu es ti on he re , th en as I re ad ‘t ha t de ci si on , a c h a n g e in pe ns io ns m u s t no t on ly le av e a su bs ta nt ia l pe ns io n bu t th e c h a n g e m u s t be re as on ab le . W h i l e it m a y n o t b e sa id h e r e th at t h e p e n s i o n fi xe d u n d e r 18 7. 2 is no t su bs ta nt ia l, it is ap pa re nt th at th e c h a n g e is no t ba se d u p o n re as on bu t is ir ra ti on al a n d ar bi - tr ar y. “ T h e S u p r e m e C o u r t in th e K e r n a n d P a c k e r ca se s as si gn ed as th e re as on fo r it s de ci si on th at th e ci ty m u s t ne ce ss ar il y re ta in th e p o w e r to c h a n g e th e m o u n t of pe ns io ns pa ya bl e, th e fo ll ow in g: ‘T he ru le Pe rm it ti ng mo di fi ca ti on of pe ns io ns is a ne te ss ar y on e si nc e p e n s i o n s y s t e m s m u s t b e k e p t fl ex ib le to p e r m i t ad ju st me nt s in ac co rd wi th c h a n g i n g co nd it io ns a n d re ta in th e in te gr it y of th e sy st em a n d ca rr y ou t it s be ne fi ci en t po li cy .’ ( K e r n wv. Ci ty of L o n g Be ac h, pp . 85 4- 85 5. ) ‘ A di ff er en t ru li ng , in fa ct , w o u l d re - m o v e a co ns id er ab le a m o u n t of th e fl ex ib il it y ne ce s- sa ry fo r op er at io n of pe ns io n sy st em s be ca us e it w o u l d m e a n th at pr ov is io ns be ne fi ti ng a n y th ir d pe rs on s w o u l d be fr oz en in th e l a w wi th re sp ec t to al l em pl oy ee s th en in se rv ic e a n d th at th es e in te re st s co ul d no t be r e m o v e d re ga rd le ss of w h e t h e r th e e m - pl oy ee w a s gi ve n ot he r pe ns io n be ne fi ts w h i c h m i g h t be of gr ea te r va lu e to hi m th an th e on e so ug ht to be el im in at ed . Th us , al th ou gh al l pe ns io n ri gh ts ar e ea rn ed b y th e e m p l o y e e a n d ar e a pa rt of hi s c o m - pe ns at io n, th e ru le u r g e d b y pe ti ti on er co ul d op er at e to th e di sa dv an ta ge of th e e m p l o y e e b y m a k i n g it « — 9 im po ss ib le or im pr ac ti ca bl e fo r th e g o v e r n m e n t a l b o d y to su bs ti tu te a n e w sy st em de si gn ed to m e e t ch an g- in g co nd it io ns w h i c h w o u l d fu rn is h a gr ea te r to ta l be ne fi t to th e e m p l o y e e th an he fo rm er ly ha d. ’ (P ac ke r v. Ci ty of L o n g Be ac h, pp . 21 7- 21 8. ) “S ec ti on 18 7, su bd iv is io n 4, in ef fe ct at th e ti me of En gl is h’ s de at h, di d pr ov id e a m e t h o d b y w h i c h pe ns io ns w o u l d no t be fr oz en a n d t h r o u g h w h i c h t h e pe ns io n pa ya bl e w o u l d fl uc tu at e wi th c h a n g i n g ec o- n o m i c co nd it io ns . B y S e c t i o n 18 7. 2, h o w e v e r , t h e C i t y s e e k s n o t to m e e t a n y c h a n g i n g e c o n o m i c c o n - di ti on s bu t to fr ee ze pe ns io ns at a fi xe d su rn a n d ir - re sp ec ti ve of w h e t h e r or no t at th e ti me of th e de at h of a n em pl oy ee li vi ng co st s a n d w a g e s ar e ri si ng or fa ll in g, wi th th e re su lt th at in a pe ri od of ri si ng co st s su ch as th e pr es en t, th e pe ns io ns b e c o m e in ad e- qu at e a n d di sp ro po rt io na te to sa la ri es fi xe d fo r ac ti ve em pl oy ee s a n d th e co st of li vi ng , wh il e in ti me of a de pr es si on or a de fl at io na ry e c o n o m i c pe ri od th e pe n- si on w o u l d st il l be di sp ro po rt io na te to sa la ri es a n d li vi ng co st s a n g w o u l d pl ac e a n e c o n o m i c bu rd en u p o n th e ci ty . “ T h e pu rp os e of Se ct io n 18 7. 2 co ul d no t h a v e be en to m e e t a n y c h a n g i n g co nd it io n bu t ra th er to fr ee ze a n ex is ti ng co nd it io n. T h e r e is n o pe ns io n f u n d to be pr ot ec te d a n d th e ci ty do es no t as se rt a n d co ul d no t a s s e r t th at th at w a s th e re as on fo r th e en ac t- m e n t of th e se ct io n. “T t s e e m s ev id en t to m e th at in or de r to be re as on - ab le , a n ac t of th e ci ty al te ri ng th e pe ns io n ri gh ts of on e en ti tl ed to a pe ns io n, th e ac t of t h e ci ty m u s t c o n f o r m to a n d fa ll wi th in th e sc op e of th e re as on s as si gn ed b y th e S u p r e m e C o u r t fo r ho ld in g th at th e p o w e r to al te r ex is te d. If th is is no t tr ue th en th e ci ty mi gh t, in ti me of ri si ng li vi ng co st s, a m e n d it s eeUNUNeo — 1 9 — ch ar te r so as to pr ov id e fo r fi xe d pa ym en ts , a n d w h e n th e e c o n o m i c cy cl e c h a n g e d ag ai n al te r it s ch ar te r so as to de cr ea se th e pe ns io ns th er eo fo re fi xe d, or if th e p o w e r of th e ci ty is no t so li mi te d th en th e ci ty m i g h t gr an t a l u m p s u m p a y m e n t in li en of al l m o n t h l y pa ym en ts t o ac cr ue , so lo ng 'a s th e l u m p s u m w a s su bs ta nt ia l t h o u g h no t pr op or ti on at e to th e va lu e of th e m o n t h l y an nu it ie s th er et of or e gr an te d. ” Cu ri ou sl y en ou gh , th e de ci si on of Di vi si on 3 in th e En gl is h ca se , su pr a, w a s no t ev en m e n t i o n e d in th e op in - io n in th e ca se s at ba r, al th ou gh sp ec if ic re fe re nc e th er et o w a s m a d e in th e br ie fs , ( A p p . Re p. Br . pp . 4 to 6. ) In di sp os in g of es se nt ia ll y th e s a m e qu es ti on , th e op in io n of th e Di st ri ct C o u r t of A p p e a l in th e ca se s at ba r at p a g e 78 st at es : “ T h e m e t h o d of co mp ut at io n of pl ai nt if fs ’ pe ns io ns o n th e fi ve -y ea r av er ag e is al so wi th in th e p o w e r of th e mu ni ci pa li ty . “W he th er th ey wi ll lo se or ga in wi ll d e p e n d u p o n e c o n o m i c co nd it io ns w h e n th ey re - ti re . Sa la ri es f o l l o w o u r n a t i o n a l e c o n o m y , a n d n o on e ta n lo ok in to th e fu tu re a n d sa y w h e t h e r th ey wi ll g o u p or g o d o w n . Th is pa rt of th e a m e n d m e n t is as m u c h a n ad ju st me nt to c h a n g i n g co nd it io ns as w a s th e ol d sy st em , fl uc tu at in g ye ar b y ye ar .” T h e fo re go in g ob se rv at io n se em in gl y ig no re s th e ob vi - vo iu s fa ct th at th e ve ry pu rp os e of th e fl uc tu at in g pe ns io n is to ke ep th e m o n t h l y p a y m e n t s ad ju st ed to th e ev er - c h a n g i n g va lu e of th e do ll ar , a n d th e cu rr en t co st of li vi ng , a n d th er eb y el im in at es a de fi ni te h a z a r d to bo th th e pe ns io ne r a n d th e Ci ty w h i c h th e co ur t re co gn iz ed w h e n it sa id th at , “ n o on e ca n lo ok in to th e fu tu re a n d sa y w h e t h e r th ey (s al ar ie s) wi ll g o u p or g o d o w n . ” In ot he r wo rd s, th e pr in ci pa l va lu e of th e fl uc tu at in g pe ns io n w h i c h w a s p r o m i s e d to th e in st an t pl ai nt if fs w h e n th ey — [ ] — 4 ac ce pt ed e m p l o y m e n t w a s th e as su ra nc e th at th ey w o u l d be pa id a m o n t h l y re ti re me nt be ne fi t th at w o u l d be ad e- qu at e in te rm s of pu rc ha si ng po we r t o sa ti sf y th ei r ba si c e c o n o m i c ne ed s af te r th ey h a d b e c o m e to o ol d to re nd er fu rt he r ef fe ct iv e se rv ic e. A s ob se rv ed by Di vi si on 3 of th e s a m e co ur t in th e En gl is h ca se , th e av er ag e pe ns io ne r n e e d s hi s “ m o n e y as it fa ll s d u e ’ ; h e c a n il l a f f o r d t o " g a m b l e ” o n fu tu re e c o n o m i c co nd it io ns . H e n c e , th e f u n d a m e n t a l qu es ti on pr es en te d in th e ca se at b a r is w h e t h e r th e de fe nd an t Ci ty m a y un il at er al ly co mp el th e Pr os pe ct iv e pe ns io ne r to e x c h a n g e hi s pa rt ia ll y ea rn ed ri gh t to re ce iv e a fl uc tu at in g re ti re me nt pe ns io n w h i c h w a s sp ec if ic al ly de si gn ed to ke ep hi s m o n t h l y p a y m e n t s ad - ju st ed to fu tu re e c o n o m i c co nd it io ns , fo r a pr om is e to p a y a fi xe d m o n t h l y pe ns io n w h i c h m a y or m a y no t be ad eq ua te in te rm s of pu rc ha si ng p o w e r to sa ti sf y hi s ba si c e c o n o m i c ne ed s, d e p e n d i n g so le ly u p o n fu tu re ec on om ic co nd it io ns . F u r t h e r m o r e , it s h o u l d b e n o t e d th at it is n o t t h e “ e c o n o m i c co nd it io ns ” w h i c h pr ev ai l at th e ti me th at pl ai n- ti ff s “r et ir e” w h i c h wi ll de te rm in e “ w h e t h e r th ey wi ll lo se or ga in ” b y th e a m e n d m e n t , bu t ra th er th e ec on om ic co nd it io ns w h i c h pr ev ai l th ro ug ho ut th e pe ri od of th ei r na tu ra l li ve s fo ll ow in g th ei r re ti re me nt w h i c h wi ll de - te rm in e th is fa ct or . It is c o m m o n k n o w l e d g e th at th e pu rc ha si ng p o w e r of th e do ll ar in te rm s of ne ce ss ar ie s of li fe ha s de cr ea se d ap pr ox im at el y 5 0 % du ri ng th e pa st si xt ee n ye ar s. T o th e w i d o w or re ti re d em pl oy ee w h o is de pe nd en t u p o n a “f ix ed ” m o n t h l y be ne fi t su ch as th at pr ov id ed b y Se ct io n 18 7. 2, a re al ha rd sh ip ha s re su lt ed . W e c a n on ly ju dg e th e fu tu re b y th e pa st . T h e re ti re - m e n t pe ns io n pr ov id ed b y Se ct io n 18 7 el im in at ed th is de fi - ni te h a z a r d b y pr ov id in g m o n t h l y be ne fi ts m e a s u r e d b y | i — 1 2 — th e cu rr en t sa la ry of em pl oy ee s of th e sa me ra nk . If , on th e ot he r ha nd , th e va lu e of th e do ll ar is in cr ea se d a n d cu rr en t sa la ri es ar e ad ju st ed d o w n w a r d , th e re ti re d e m - pl oy ee is no t in ju re d be ca us e th e co st of li vi ng wi ll h a v e c o m e d o w n ac co rd in gl y. (C as se rl y v, Ci ty of Oa kl an d, su pr a. ) In su ch a n ev en tu al it y, ho we ve r, th e ac ti ve e m - pl oy ee , u n d e r th e t e r m s of Se ct io n 18 7. 2, . w o u l d be c o m - pe ll ed to re ti re th e m o m e n t h e b e c o m e s el ig ib le in o r d e r to pr ev en t hi s fi xe d pe ns io n f r o m de cr ea si ng in va lu e, re - ga rd le ss of hi s na tu ra l in cl in at io n to co nt in ue in th e se ry - ic e of th e Ci ty . H e n c e , th e su bs ti tu ti on of th e fi xe d pe n- si on ba se d u p o n pa st av er ag e ea rn in gs pr ov id es a n in - ce nt iv e fo r th e p r e m a t u r e re ti re me nt of co mp et en t e m - Pl oy ee s, w h i c h is co nt ra ry to th e p r i m a r y ob je ct iv e of th e pe ns io n sy st em , na me ly , to at tr ac t a n d re ta in th e se rv ic es o f c o m p e t e n t e m p l o y e e s , ( K e r n vu . C i t y o f L o n g Be ac h, su pr a. ) In ad di ti on to th is , th e a m e n d m e n t pr ov id es . fo r th e ta ki ng of 1 0 % f r o m th e m o n t h l y sa la ry of ea ch pl ai nt if f un ti l he is el ig ib le fo r re ti re me nt , an d th e us e th er eo f to p a y th e Ci ty ’s ex is ti ng ob li ga ti on s to re ti re d em pl oy ee s. Th is m o n e y is no t re qu ir ed to be se t as id e or ac cu mu la te d S0 as to cr ea te a n y ki nd of a re se rv e f o r th e p a y m e n t of f u t u r e p e n s i o n s , as u n d e r th e S t a t e R e t i r e m e n t S y s t e m (G ov t. Co de , Se cs . 20 12 2, 20 13 1, 20 13 2, 20 23 0, 20 56 5, et c. ), bu t m a y be al l us ed as i t is de du ct ed , fo r th e p a y m e n t of pe ns io ns al re ad y gr an te d. T h e on ly ci rc um st an ce u n d e r w h i c h th e e m p l o y e e is en ti tl ed to a n y re fu nd of hi s o w n c o m p u l s o r y sa la ry co nt ri bu ti on s is th e te rm in at io n of hi s e m p l o y m e n t be fo re h e b e c o m e s el ig ib le fo r re ti re me nt . If h e s h o u l d di e th e d a y af te r h e re ti re s, a n d fa il s to le av e a w i d o w or ot he r de pe nd en t w h o qu al if ie s fo r th e de pe nd - en t’ s pe ns io n, th e Ci ty is u n d e r n o ob li ga ti on of a n y ki nd — - 1 3 — i to re tu rn a n y po rt io n of th e sa la ry de du ct io ns pr ov id ed fo r by Se ct io n 18 7. 2. A s an al yz ed by th e tr ia l co ur t in it s m e m o r a n d u m op in io n: “T t is se lf -e vi de nt th at th e re su lt of th e op er at io n of Se ct io n 18 7. 2 is to m a k e a re du ct io n in th e pe n- si on s to w h i c h pl ai nt if fs ar e en ti tl ed . It is se lf -e vi - de nt th at th is re du ct io n is no t un if or m, ” [C lk . Tr . Al ge r, p. 78 , Hn es 5 to 8. ] “B oi le d d o w n , th e al te ra ti on s ef fe ct ed in th e pl ai n- ti ff s’ ri gh ts u n d e r Se ct io n 18 7. 2 a m o u n t to th is : th e re ti re me nt p a y as to s o m e of th ep la in ti ff s is cu t ap - pr ox im at el y 4 0 % , as to ot he rs it is cu t in a m u c h le ss er am ou nt . Pl ai nt if fs w h o h a d a lo ng pe ri od of e m p l o y m e n t at th e ti me of th e en ac tm en t of th e se ct io n re ce iv e a gr ea te r pe ns io n th an th os e of le ss er p e r i o d s o f e m p l o y m e n t , th e di ff er en ce in a m o u n t o f pe ns io ns de cr ea si ng as do es th e le ng th of ti me w h i c h th e em pl oy ee m u s t se rv e in or de r to re ti re af te r th e en ac tm en t of th e se ct io n; th e pe ns io n ri gh ts on ce gr an te d ar e fi xe d in a m o u n t ra th er th an fl uc tu at in g wi th th e co st of li vi ng . (I as su me t h a t sa la ri es wi ll in cr ea se a n d de cr ea se in ac co rd an ce wi th th e co st of li vi ng .) ” [C lk . Tr . Al ge r, p. 80 , li ne s 9 to 20 .] It is al so se lf -e vi de nt th at if th e m e m b e r sh ou ld di e af te r re ti re me nt , bu t be fo re re ce iv in g b y w a y of m o n t h l y re ti re me nt be ne fi ts a n a m o u n t eq ua l to hi s ac cu mu la te d sa la ry de du ct io ns , hi s pa rt ia ll y ea rn ed re ti re me nt pe ns io n as or ig in al ly pr ov id ed b y Ch ar te r, Se ct io n 18 7 wi ll h a v e be en en ti re ly el im in at ed as th e re su lt of Se ct io n 18 7. 2. H e n c e , th e f u n d a m e n t a l qu es ti on pr es en te d b y th is ph as e of th e a m e n d m e n t is w h e t h e r th e Ci ty m a y b y ch ar te r a m e n d m e n t su bs ta nt ia ll y re du ce th es e pa rt ia ll y ea rn ed re - ti re me nt be ne fi ts (i n s o m e in st an ce s as m u c h as 4 0 % ) wi th ou t th e co ns en t of it s e m p l o y e e a n d wi th ou t of fe ri ng — [ 4 — a n y co rr es po nd in g be ne fi ts of a n y sa rt , wi th ou t vi ol at in g th e co nt ra ct a n d du e- pr oc es s cl au se s of th e St at e a n d Fe de ra l Co ns ti tu ti on s, or th e Pr ov is io ns of Ar ti cl e XI , Se ct io n 15 of th e Ca li fo rn ia Co ns ti tu ti on , w h i c h ex pr es sl y pr oh ib it s th e ta ki ng of pr iv at e pr op er ty fo r th e pu rp os e o f p a y i n g m u n i c i p a l ob li ga ti on s. T o d a t e n o c a s e h a s he en di sc ov er ed in th is st at e w h i c h di sc us se s or el ab or at es u p o n th e m e a n i n g a n d ef fe ct of Ar ti cl e XI , Se ct io n 15 of th e Ca li fo rn ia Co ns ti tu ti on . P O I N T O N E . A H e a r i n g Is N e c e s s a r y to S e c u r e U n i f o r m i t y of De ci si on . A . T h e O p i n i o n of th e Di st ri ct C o u r t of A p p e a l H e r e i n Is in Co nf li ct W i t h th e D e c i s i o n s of T h i s C o u r t a n d O t h e r D e c i s i o n s of th e Di st ri ct C o u r t s of A p p e a l of T h i s St at e. A t th e ou ts et it is ap pa re nt th at in co ns tr ui ng Se ct io n 18 7 of th e L o n g B e a c h Ci ty Ch ar te r, w h i c h m a d e pr o- vi si on fo r th e p a y m e n t of re ti re me nt be ne fi ts eq ua l to a ce rt ai n pe rc en ta ge of “t he an nu al sa la ry at ta ch ed to th e r a n k or po si ti on he ld b y h i m in su ch d e p a r t m e n t on e ye ar pr io r to th e da te of hi s re ti re me nt ” as pr ov id in g fo r th e: p a y m e n t of a “f ix ed ”? pe ns io n “ c o m p u t e d u p o n th e em pl oy ee ’s sa la ry fo r th e la st ye ar on ly of he r se rv ic e” [p . 74 ] th e op in io n of th e Di st ri ct C o u r t of A p p e a l is in di re ct co nf li ct wi th th e fo ll ow in g de ci si on s, al l of w h i c h ho ld th at id en ti ca l l a n g u a g e re qu ir es t h e p a y m e n t of a fl uc tu at in g pe ns io n w h i c h in cr ea se s or de cr ea se s w i t h th e Sa la ri es of th e ac ti ve em pl oy ee s. (C as se rl y y. Ci ty of — ] 5 — Oa kl an d, 6 Ca l. 2d 64 , 56 P. 2d 23 7; Te rr y uv. Ci ty of Be rk el ey , 41 Ca l. 2 d 69 8, 2 6 3 P. 2 d 83 3; K l e n c h v. B o a r d of P e n s i o n F u n d Co mm is si on er s, 79 Ca l. A p p . 17 1, 2 4 9 Pa c. 46 , an d En gl is h v. Ci ty of L o n g Be ac h, 12 6 A . C . A. 53 5, 2 7 2 P. 2 d 8 7 5 (h ea ri ng de ni ed b y th is co ur t. ) I n th e r e c e n t ca se o f T e r r y v. C i t y o f B e r k e l e y , s u p r a , th is co ur t at pa ge 8 3 4 of th e Pa ci fi c Re po rt er sa id : “ T h e pl ai nt if f re li es u p o n Ca ss er ly v. Ci ty of O a k - la nd , 19 36 , 6 Ca l. 2 d 64 , 5 6 P. 2 d 23 7, wh er ei n a pr o- vi si on of th e ch ar te r of th e Ci ty of O a k l a n d pr ov id ed th at a pe ns io n sh ou ld be ‘e qu al to on e- ha lf of th e sa la ry at ta ch ed to th e r a n k he ld ’ at th e da te of re - ti re me nt . T h e co ur t he ld th at th is pr ov is io n pr o- ui de d fo r a fl uc tu at in g pe ns io n, w h i c h in cr ea se d. or de cr ea se d as th e sa la ri es pa id to ac ti ve em pl oy ee s in - cr ea se d or de cr ea se d. ” (I ta li cs ou rs .) In En gl is h v. Ci ty of L o n g Be ac h, su pr a, wh ic h, as w e h a v e s h o w n , in vo lv ed th e co ns ti tu ti on al it y of th e s a m e ch ar te r se ct io n, th e co ur t at p a g e 8 7 6 of th e Pa ci fi c R e - po rt er sa id : ‘P et it io ne rs ’ ri gh t to a pe ns io n w h i c h ve st ed in t h e m u p o n th e de at h of M r . En gl is h w a s no t li mi te d to 5 0 pe r ce nt of th e a m o u n t of sa la ry as of th e ti me of de at h bu t fo ll ow ed a n y ch an ge s th at m i g h t be m a d e in th e sa la ry a t t a c h e d to th e r a n k of pa tr ol ma n. Ca ss er ly v. Ci ty of Oa kl an d, 6 Ca l. 2 4 64 , 56 P. 2 d 23 7; T e r r y v. Ci ty of Be rk el ey , 41 Ca l. 2 d 69 8, 2 6 3 P. 2 d 83 3. T h e sa la ry of a p a t r o l m a n w h i c h w a s $ 3 0 5 pe r m o n t h f r o m Ap ri l 11 , 1 9 5 0 to Ju ly 1, 19 51 , w a s in cr ea se d to $ 3 3 5 pe r m o n t h f r o m Ju ly 1, 19 51 to Ju ly 18 , 19 51 , $ 3 5 5 pe r m o n t h f r o m Ju ly 18 , 19 51 to Ju ly 1, 19 52 , an d, fr om Ju ly 1, 19 52 to da te , to $ 3 7 0 pe r m o n t h . ” In co ns tr ui ng th e s a m e ch ar te r se ct io n, th e Di st ri ct C o u r t of A p p e a l in it s op in io n in th e ca se at ba r at p a g e 74 sa id : “T h e pa rt s of th is n e w se ct io n pe rt in en t to th is in qu ir y at e as fo ll ow s: “ ( a ) T h a t th e a m o u n t to be pa id to ea ch pe rs on re ce iv in g a pe ns io n a f t e r th e ef fe ct iv e da te of th e se ct io n sh al l be c o m p u t e d u p o n th e av er ag e sa la ry ea rn ed b y h i m du ri ng fi ve ye ar s im me di at el y pr ec ed - in g hi s re ti re me nt . “ B e f o r e th e a m e n d m e n t th is a m o u n t w a s c o m p u t e d u p o n th e em pl oy ee 's sa la ry fo r th e la st ye ar on ly of ha s se rv ic e. ” (I ta li cs ou rs .) A g a i n at p a g e 7 7 of it s op in io n, th e co ur t in ou tl in in g th e p r o b l e m s p r e s e n t e d , sa id : “* * * A n d do es th e me th od of co mp ut in g th es e pe ns io ns o n th e av er ag e sa la ri es fo r th e la st fi ve ye ar s, in st ea d of th e la st ye ar , co me wi th in th e sa me sc op e? ” T h e s a m e mi si nt er pr et at io n is ev id en ce d b y th e fo ll ow - i n g s t a t e m e n t o f th e c o u r t at p a g e 7 8 o f it s o p i n i o n : “ T h e m e t h o d of co mp ut at io n of pl ai mt if fs ’ pe ns io ns o n th e fi ve -y ea r av er ag e is al so wi th in th e p o w e r of th e mu ni ci pa li ty . W h e t h e r th ey wi ll lo se or ga in wi ll d e p e n d u p o n ec on om ic co nd it io ns w h e n th ey re - ti re .” It is th us ap pa re nt th at th ro ug ho ut it s op in io n, th e Di s- tr ic t C o u r t of A p p e a l co ns tr ue d Se ct io n 18 7 of th e L o n g B e a c h Ci ty Ch ar te r as pr ov id in g fo r th e p a y m e n t of a fi xe d pe ns io n ba se d u p o n th e “e mp lo ye e’ s sa la ry fo r th e la st ye ar on ly of hi s se rv ic e, ” a n d no t a fl uc tu at in g pe n- si on as co nt en de d fo r b y pl ai nt if fs a n d ap pe ll an ts , a n d in fa ct , as ad mi tt ed by th e Ci ty in it s br ie fs , Th is fa ct w a s —l 7- — sp ec if ic al ly ca ll ed to th e at te nt io n of th e Di st ri ct C o u r t of A p p e a l in ou r pe ti ti on fo r re he ar in g, at p a g e 9 to 11 . In af fi rm in g th e j u d g m e n t of th e tr ia l co ur t, w h e r e i n it w a s de te rm in ed th at “p la in ti ff s a n d ea ch of th em , u p o n b e c o m i n g el ig ib le f o r r e t i r e m e n t ” wi l! o n l y b e en ti tl ed to re ce iv e a fi xe d m o n t h l y pe ns io n “e qu al to fi ft y pe r ce nt ( 5 0 % ) of th e av er ag e m o n t h l y sa la ry ea rn ed b y ea ch of sa id pl ai nt if fs du ri ng th e la st fi ve (5 ) ye ar s i m m e d i - at el y p r e c e d i n g t h e d a t e o f th ei r re sp ec ti ve r e t i r e m e n t s ” in st ea d of th e fl uc tu at in g re ti re me nt be ne fi ts w h i c h w e r e of fe re d by Se ct io n 18 7 of th e ch ar te r at al l ti me s si nc e 19 25 , th e op in io n is in co nf li ct wi th th e pr in ci pl es an - n o u n c e d b y th is c o u r t in th e r e c e n t ca se of W a l l a c e v. Ci ty of Fr es no , 4 2 Ca l. 2 d 18 0, 2 6 5 P. 2 d 88 4, a n d is sq ua re ly in co nf li ct wi th th e ho ld in g of Di vi si on 3 of th e s a m e Di st ri ct C o u r t of A p p e a l in th e ca se s of En gl is h vu. Ci ty of L o n g Be ac h, su pr a, Co mb s, et al . v. Ci ty of L o n g Be ac h, su pr a, Al ex an de r, et al . v. Ci ty of L o n g B e a c h , s u p r a , a n d H a r r i s o n , et al . v. C i t y o f L o n g B e a c h , su pr a, w h e r e i n it w a s he ld th at th e s a m e ch ar te r a m e n d - m e n t w a s un co ns ti tu ti on al in so fa r as it at te mp te d to su b- st it ut e a “f ix ed ’’ pe ns io n fo r th e “f lu ct ua ti ng ” pe ns io n or ig in al ly pr ov id ed fo r b y Se ct io n 18 7, as ap pl ie d to s o m e 3 0 0 m e m b e r s of th e s a m e sy st em w h o w e r e fo rt un at e en ou gh to ha ve re ti re d or ha ve be co me el ig ib le fo r re - ti re me nt , pr io r to J u n e 5, 19 51 . If th is pa rt ic ul ar c h a n g e is un re as on ab le as ap pl ie d to Ch er yl En gl is h, th e da ug ht er of a po li ce of fi ce r w h o s u c c u m b e d to a se rv ic e- co nn ec te d in ju ry pr io r to J u n e 5, 19 51 , bu t w h o s e i m m e d i a t e ri gh t to re ce iv e th e pe ns io n di d no t ac cr ue un ti l th e re ma rr ia ge of he r m o t h e r in S e p t e m b e r of 19 51 , it is di ff ic ul t to un - de rs ta nd w h y it sh ou ld be de cl ar ed to be re as on ab le a s to th e in st an t pl ai nt if fs w h o w e r e ac tu at ed to un de rt ak e — 1 g — e m p l o y m e n t w i t h th e Ci ty b y th e s a m e st at ut or y of fe r. Tr ue , Of fi ce r En gl is h h a d co mp le te d hi s co nt ra ct of e m - pl oy me nt wi th th e Ci ty (i ns of ar as he w a s ab le ) pr io r to J u n e 5, 19 51 , bu t th e “r ea so na bl en es s” of th e mo di fi ca - ti on as a p p l i e d to e x i s t i n g e m p l o y e e s as p o i n t e d o u t b y th is co ur t in th e W a l l a c e ca se , tu rn s u p o n th e qu es ti on of w h e t h e r or no t it s ap pa re nt pu rp os e w a s to ke ep : th e sy st em ad ju st ed to “ c h a n g i n g co nd it io ns a n d at th e s a m e ti me ma in ta in th e in te gr it y of th e sy st em a n d ca rr y ou t it s be ne fi ce nt po li cy .” (4 2 Ca l. 2 d at p. 18 4. ) C a n it be sa id th at th e el im in at io n of th e “f lu ct ua ti ng ” pe ns io n w h i c h w a s ex pr es sl y de si gn ed to ke ep th e m o n t h l y re ti re - m e n t be ne fi ts ad ju st ed to c h a n g i n g ec on om ic . co nd it io ns , a n d th e su bs ti tu ti on th er ef or of a “f ix ed ” m o n t h l y pa y- me nt , ba se d so le ly u p o n pa st ea rn in gs , w h i c h m a y or m a y no t be ad eq ua te .i n te rm s of fu tu re pu rc ha si ng p o w e r to su pp ly th e ba si c e c o n o m i c ne ed s of th e Pe ns io ne r, c o m e s wi th in th e sc op e of th e Pu rp os es as ab ov e st at ed b y th is co ur t? W e s u b m i t th at it do es no t fo r th e s a m e re as on s w h i c h la te r co mp el le d th e sa me t r i a l ju dg e to c o m e to th e op po si te co nc lu si on in th e En gl is h ca se , n a m e l y : “* * 9% B y Se ct io n 18 7. 2, ho we ve r, th e Ci ty se ek s no t to m e e t a n y c h a n g i n g ec on om ic co nd it io ns bu t to fr ee ze pe ns io ns at a fi xe d s u m a n d ir re sp ec ti ve of w h e t h e r or no t at th e ti me of th e de at h of a n em pl oy ee li vi ng co st s a n d w a g e s ar e ri si ng o r fa ll - in g, wi th th e re su lt th at in a pe ri od of ri si ng co st s su ch as th e pr es en t, th e pe ns io ns b e c o m e in ad eq ua te a n d di sp ro po rt io na te to sa la ri es fi xe d fo r ac ti ve e m - pl oy ee s a n d th e co st of li vi ng , wh il e in ti me of a de - pr es si on or a de fl at io na ry ec on om ic pe ri od th e pe ns io n w o u l d st il l be di sp ro po rt io na te to ’ s al ar ie s a n d li vi ng co st s a n d w o u l d pl ac e a n e c o n o m i c b u r d e n up on . th e ci ty . —— ] Q a “ T h e pu rp os e of Se ct io n 18 7. 2 co ul d no t h a v e be en to me et an y ch an gi ng co nd it io n bu t ra th er to fr ee ze a n ex is ti ng co nd it io n. T h e r e is n o pe ns io n f u n d to be pr ot ec te d. an d th e ci ty d o e s no t as se rt a n d co ul d n o t as se rt th at t h a t w a s t h e r e a s o n f o r t h e en ac t- m e n t of th e se ct io n. ” ( A p p . Op . Br . pp . 3 8 t o 39 .) A l t h o u g h it m a y be m o r e di ff ic ul t fo r th e co ur t’ to ap pr ec ia te th e pr ac ti ca l ef fe ct of a c h a n g e f r o m a “f lu ct u- at in g’ to a “f ix ed ” pe ns io n at th is ti me , be ca us e th e a m o u n t of th e fi xe d pe ns io n ca nn ot be de te rm in ed un ti l th e ti me of re ti re me nt , a n d th e a d e q u a c y th er eo f in te rm s of fu tu re pu rc ha si ng p o w e r is de pe nd en t u p o n th e co n- di ti on s w h i c h pr ev ai l t h r o u g h o u t th e re ma in de r of th e na tu ra l li fe of th e pe ns io ne r a n d hi s de pe nd en ts , th e un - de rl yi ng pr in ci pl e is th e sa me . T h e fl uc tu at in g pe ns io n m e a s u r e d b y th e cu rr en t sa la ry of th e r a n k is sp ec if ic al ly de si gn ed to ke ep th e m o n t h l y p a y m e n t s ad ju st ed at ai l ti me s to th e c h a n g i n g va lu e of th e do ll ar a n d th e cu rr en t co st of li vi ng ; it is fa ir to th e Ci ty as we ll as to th e pe ns io ne r (C as se rl y v. Ci ty of Oa kl an d, su pr a) ; it in - su re s th e pe ns io ne r ag ai ns t a co nd it io n of p e n u r y or w a n t th ro ug ho ut th e r e m a i n d e r of hi s li fe b y pr ov id in g a m o n t h l y s u m th at is ad eq ua te to su pp ly hi s ba si c ec o- n o m i c ne ed s; it el im in at es th e “ g a m b l e ” th at he ca n il l af fo rd to ta ke (E ng li sh v. Ci ty of L o n g Be ac h; su pr a’ ). T h e fi xe d pe ns io n, o n t h e o t h e r h a n d , t e n d s to d e f e a t ra th er th an to in su re th e su cc es sf ul op er at io n of th e pe n- si on sy st em b y m a k i n g th e a d e q u a c y of th e pe ns io n pa y- m e n t s d e p e n d so le ly u p o n th e un ce rt ai nt y of fu tu re . ec o- n o m i c co nd it io ns , a n d in a d d i t i o n th er et o, it p r o v i d e s a de fi ni te in ce nt iv e fo r th e p r e m a t u r e re ti re me nt of c o m p e - te nt em pl oy ee s, 1. ¢. , in ti me s of a de fl at io na ry cy cl e, al l em pl oy ee s w h o ar e el ig ib le to re ti re wi ll be co mp el le d to 2 0 d o so in or de r to pr ev en t a re du ct io n of th ei r re ti re me nt be ne fi ts w h i c h ar e ba se d u p o n pa st ea rn in gs . A t th e s a m e ti me a fi xe d pe ns io n pl ac es a n un re as on ab le ec on om ic bu r- d e n u p o n t h e Ci ty , n o t o n l y b y c o m p e l l i n g it to p a y a la rg er pe ns io n, bu t to p a y re ti re me nt pe ns io ns to m a n y co mp et en t em pl oy ee s w h o w o u l d ot he rw is e be wi ll in g to co nt in ue in th e se rv ic e of th e Ci ty . ‘ T h e Di st ri ct C o u r t of A p p e a l re co gn iz ed th e gu id in g pr in ci pl es w h i c h w e r e a n n o u n c e d b y th is co ur t in th e Wa ll ac e ca se w h e n it st at ed at p a g e 7 7 of it s op in io n: “R ea so na bl e mo di fi ca ti on s m a y be m a d e b y go v- e r n m e n t a l a g e n c i e s w h e n n e c e s s a r y to k e e p p e n s i o n sy st em s ad ju st ed to c h a n g i n g co nd it io ns , to ma in ta in th e in te gr it y of su ch sy st em s, a n d to ca rr y ou t th ei r be ne fi t (b en ef ic en t) po li cy . (C it in g au th or it ie s. ) “ T h e pe rm is si bl e sc op e of su ch ch an ge s sh ou ld be to sa fe gu ar d pe ns io n sy st em s, ad ju st th em to ch an gi ng co nd it io ns , a n d to ca rr y ou t th ei r po li cy .” (C it in g Wa ll ac e v. Ci ty of Fr es no , su pr a. ) T h e co ur t fa il ed , ho we ve r, as w e h a v e s h o w n to ap pl y th e fo re go in g pr in ci pl es in an al yz in g th e ob vi ou s pu rp os e a n d ef fe ct of th e ch an ge s br ou gh t ab ou t by Se ct io n 18 7. 2. T h e co nf li ct b e t w e e n th e op in io n of th e Di st ri ct C o u r t of A p p e a l he re in a n d th e pr in ci pl es a n n o u n c e d by th is co ur t in th e ci te d ca se s of K e r n vu. Ci ty of L o n g Be ac h, su pr a, P a c k e r v. B o a r d o f R e t i r e m e n t , s u p r a , a n d W a l l a c e v. Ci ty of Fr es no , su pr a, is ev en m o r e ap pa re nt w h e n w e co ns id er th at po rt io n of Se ct io n 18 7. 2 w h i c h pr ov id es fo r th e ar bi tr ar y de du ct io n of 1 0 % f r o m th e sa la ry of ea ch pl ai nt if f un ti l he is el ig ib le fo r re ti re me nt a n d th e us e th er eo f to li qu id at e th e Ci ty ’s ex is ti ng ob li ga ti on s to re - nargankei — 2 j — ti re d m e m b e r s of th e sy st em . T h e pe rt in en t pr ov is io ns of Se ct io n 18 7. 2 ar e as fo ll ow s: “( c) T h e r e is he re by cr ea te d a f u n d to be k n o w n as th e ‘P ol ic e a n d F i r e P e n s i o n F u n d , ’ f o r th e p u r - po se of m e e t i n g th e p a y m e n t of pe ns io ns , th e ri gh t to w h i c h pe ns io ns b e c a m e ve st ed b y re as on of th e pr ov is io ns of Se ct io n 18 7 of th is Ch ar te r pr io r to th e re pe al th er eo f by th e ad op ti on of Se ct io n 18 7. 1 he re of . Sa id f u n d sh al l be a co nt in ui ng f u n d a n d sh al l no t be su bj ec t to tr an sf er at th e cl os e of th e fi sc al ye ar . T h e Ci ty Co un ci l m a y , f r o m ti me to ti me , ap pr op ri at e or tr an sf er m o n e y to sa id fu nd . Al l d e d u c t i o n s f r o m th e sa la ri es o f ce rt ai n m e m b e r s o f th e Po li ce a n d Fi re D e p a r t m e n t s re qu ir ed to be m a d e b y th is se ct io n sh al l be pl ac ed in sa id fu nd . T h e m o n e y in sa id f u n d sh al l be us ed on ly fo r th e p a y m e n t of su ch pe ns io ns as ar e re fe rr ed to in th is se ct io n, or th e pa ym en t, wi th in te re st of a m o u n t s de du ct ed f r o m sa la ri es of m e m b e r s of sa id de pa rt me nt s, as he re in pr ov id ed . x * * * x oe * * “ ( d ) T e n pe r ce nt ( 1 0 % ) of th e sa la ry of ea ch pe rs on , w h o is a m e m b e r of th e Po li ce or Fi re D e - p a r t m e n t o n th e ef fe ct iv e da te of th is se ct io n a n d w h o ha s ce rt ai n ve st ed ri gh ts b y re as on of th e pr ov is io ns of Se ct io n 18 7 of th is Ch ar te r pr io r to th e re pe al th er eo f b y th e ad op ti on of Se ct io n 18 7. 1 he re of , sh al l be de du ct ed f r o m su ch sa la ry a n d pa id se mi -m on th ly in to th e ‘P ol ic e a n d Fi re P e n s i o n Fu nd ,’ un ti l su ch m e m b e r ha s co mp le te d th e n u m b e r of ye ar s of se rv ic e re qu ir ed fo r hi s el ig ib il it y fo r re ti re me nt . A n a m o u n t eq ua l to al l a m o u n t s so de du ct ed sh al ! be pa id to su ch pe rs on tt po n hi s ce as in g to be a m e m b e r of ei th er of sa id de pa rt me nt s b y re as on of re si gn at io n or di sc ha rg e pr io r to su ch pe rs on ’s h a v i n g co mp le te d th e n u m b e r of ye ar s of se rv ic e re qu ir ed fo r hi s el ig ib il it y fo r re - 2 9 . ti re me nt . N o m e m b e r ab se nt b y re as on of or de re d mi li ta ry se rv ic e sh al l be pa id th e am ou nt of hi s de - du ct io ns . * * * Tn th e ev en t a n y pe rs on , f r o m w h o s e s a l a r y d e d u c t i o n s h a v e b e e n m a d e p u r s u a n t to th is se ct io n, di es b e f o r e re ti re me nt , s u c h a m o u n t s sh al l be pa id to hi s es ta te or de si gn at ed be ne fi ci ar y; pr o- vi de d, ho we ve r, n o p a y m e n t w h a t e v e r sh al l be m a d e in th e ev en t a n y pe rs on : sh al l be el ig ib le to be gr an te d a p e n s i o n b y r e a s o n o f s u c h de at h. T h e r e sh al l b e a d d e d to th e to ta l a m o u n t pa ya bl e b y th e Ci ty , re pr e- se nt in g sa id de du ct io ns , at th e ti me of p a y m e n t th er eo f, ac cr ue d in te re st th er eo n, c o m p o u n d e d an - nu al ly , at th e ra te of t w o a n d on e- ha lf pe r ce nt ( 2 1 4 % ) p e r a n n u m . ” A s pr ev io us ly po in te d ou t u n d e r ou r di sc us si on of “Q ue st io ns Pr es en te d, ” th e pr ac ti ca l re su lt of th e fo re - go in g pr ov is io ns as co ns tr ue d by th e tr ia l co ur t, “i s to m a k e a re du ct io n in th e pe ns io ns to w h i c h pl ai nt if fs ar e en ti tl ed ,” w h i c h in s o m e in st an ce s a m o u n t s to as m u c h as 4 0 % , by co mp el li ng th e em pl oy ee to “l oa n” to th e Ci ty a n a m o u n t eq ua l to ap pr ox im at el y 4 0 % of th e ac tu ar ia l eq ui va le nt of hi s re ti re me nt pe ns io n at th e ti me he b e c o m e s el ig ib le fo r re ti re me nt . A s po in te d ou t b y th e tr ia l co ur t in it s m e m o r a n d u m op in io n, th e pl ai nt if fs Ne tt le ho rs t a n d Cr an da ll w o u l d h a v e to p a y in to th e pe ns io n sy st em ap - pr ox im at el y $9 ,0 00 .0 0 ap ie ce pr io r to b e c o m i n g el ig ib le fo r re ti re me nt , at w h i c h ti me th e ac tu ar ia l eq ui va le nt of th ei r re ti re me nt pe ns io ns w o u l d be $3 4, 51 3. 00 a n d $3 5, 16 5. 00 , re sp ec ti ve ly , w h e r e a s th e pl ai nt if f S h o r t m a n w o u l d ha ve to co nt ri bu te $1 0, 43 7. 00 fo r a re ti re me nt pe ns io n ha vi ng a po te nt ia l va lu e of so me $2 5, 00 0. 00 [C lk . Tr . Al ge r p. 82 , li ne 5, to p. 83 , li ne 19 ,] T h e tr ia l co ur t’ s il lu st ra ti on s we re , of co ur se , ba se d u p o n th e as su mp ti on th at ea ch pa rt y pl ai nt if f w o u l d li ve to m a t u r e hi s pe ns io n a n d li ke wi se 2 3 th at he w o u l d li ve to th e n o r m a l ex pe ct an cy fo ll ow in g hi s re ti re me nt . If , o n th e ot he r ha nd , th e em pl oy ee sh ou ld di e a f e w da ys fo ll ow in g hi s re ti re me nt wi th ou t le av in g a w i d o w o r d e p e n d e n t w h o c o u l d q u a l i f y f o r th e pe ns io n, hi s sa la ry de du ct io ns w o u l d h a v e be en en ti re ly fo rf ei te d, si nc e th er e is n o pr ov is io n fo r r e p a y m e n t of th e sa me . It is o n l y in t h e e v e n t th at hi s se rv ic e is t e r m i n a t e d b e f o r e re ti re me nt th at th e sa la ry de du ct io ns ar e re qu ir ed to be re pa id . Ne it he r c a n it be su cc es sf ul ly co nt en de d th at th e fo re go in g pr ov is io ns w e r e in te nd ed as es ta bl is hi ng a re - se rv e fo r th e p a y m e n t of pe ns io ns be ca us e th e se ct io n co n- ta in s n o s u c h pr ov is io n. A l l s u m s th at a r e p a i d in to t h e p e n s i o n f u n d , i n c l u d i n g t h e s a l a r y d e d u c t i o n s , a r e r e q u i r e d to be us ed “f or th e pu rp os e of m e e t i n g th e p a y m e n t of pe ns io ns , th e ri gh t to w h i c h pe ns io ns b e c a m e ve st ed b y re as on of th e pr ov is io ns of Se ct io n 1 8 7 of th is Ch ar te r pr io r to th e re pe al th er eo f b y th e ad op ti on of Se ct io n 18 7. 1 he re of .” Fo ll ow in g th e ab or ti ve re pe al of Se ct io n 18 7 b y th e ad op ti on of Se ct io n 18 7. 1, th is co ur t he ld sp ec if ic al ly th at th e Ci ty al on e w a s ob li ga te d to ap pr op ri at e a n d m a k e av ai la bl e “s uf fi ci en t fu nd s to p a y al l pe ns io ns du e a n d w h i c h m a y b e c o m e du e in th e fu tu re ” u n d e r th e te rm s of sa id Se ct io n 18 7, a n d th at “t he pe ns io n p a y m e n t s di re ct ed to be m a d e by su b- di vi si on (2 ) of Se ct io n 1 8 7 of th e Ch ar te r, as a m e n d e d in 19 25 a n d 19 31 , St . 19 25 , p. 13 33 , S t 19 31 , p. 27 85 , co ns ti tu te ge ne ra l ob li ga ti on s of th e ci ty a n d ar e no t li mi te d in th e m a n n e r u r g e d by th e ci ty .” (C it y of L o n g B e a c h v. Le nt z, et . al ., 2 7 Ca l. 2 d 89 0, 16 5 P, 2 d 67 7. ) 2 4 Th is w a s a n ac ti on in de cl ar at or y re li ef br ou gh t b y th e Ci ty fo r th e ex pr es s pu rp os e of de te rm in in g it s ob li ga ti on s wi th re sp ec t to th e p a y m e n t of th e pe ns io ns pr ov id ed b y Se ct io n 18 7, fo ll ow in g it s pu rp or te d re pe al in 19 45 . B y th e te rm s of th e de cl ar at or y j u d g m e n t w h i c h w a s af fi rm ed o n ap pe al , it w a s ex pr es sl y de te rm in ed , “t ha t u n d e r a n d b y vi rt ue of th e te rm s of Se ct io n 18 7, a n d 18 7. 1 of th e ci ty ch ar te r of sa id ci ty th e pl ai nt if f, Ci ty of L o n g Be ac h, is ob li ga te d to p a y at on ce th e pe ns io n p a y m e n t s w h i c h h a v e he re to fo re a c c r u e d a n d to p a y in fu ll t h e v a r i o u s p e n s i o n s p r o - v i d e d f o r b y sa id se ct io ns in r e g u l a r m o n t h l y in - st al lm en ts as th ey ac cr ue or b e c o m e pa ya bl e to th e va ri ou s pe rs on s n a m é d in sa id a m e n d e d co mp la in t; a n d th at sa id de fe nd an ts a n d pe rs on s so n a m e d ar e en ti tl ed to re ce iv e a n d to be pa id f r o m th e tr ea su ry of sa id ci ty in re gu la r m o n t h l y in st al lm en ts al l s u m s w h i c h h a v e he re to fo re or w h i c h m a y he re af te r ac cr ue or b e c o m e pa ya bl e to t h e m in ac co rd an ce wi th th e t e r m s of sa id ch ar te r se ct io ns .” [C lk . Tr . L. A. N o . 19 48 5, p. 36 , li ne 24 , to p. 37 , li ne il .j I n th e la te r c a s e o f A l l e n et al . v. C i t y o f L o n g B e a c h , 10 1 Ca l. A p p . 2 d 15 , 2 2 4 P. 2 d 79 2, in w h i c h al l of th e pr es en t pa rt ie s pl ai nt if f w e r e li ke wi se pl ai nt if fs a n d th e de fe nd an t Ci ty w a s a pa rt y de fe nd an t, th e co ur t fu rt he r de te rm in ed th at , “t he de fe nd an t ci ty au di to r is no t au - th or iz ed or re qu ir ed to m a k e a n y * * * de du ct io ns f r o m th e sa la ri es of a n y of th e pl ai nt if fs as pr ev io us ly re qu ir ed b y su bd iv is io n (6 ) of Se ct io n 18 7. ” [ C l k Tr . p. 49 , li ne s 13 to 20 ; 2 n d Ci vi l N o . 17 54 4. ] It is th us ap pa re nt th at th e pr ac ti ca l pu rp os e a n d ef fe ct of th e 1 0 % sa la ry de du ct io n pr ov id ed fo r b y Se ct io n 18 7. 2 w a s to ta ke th e pr op er ty of th e in st an t pl ai nt if fs an d us e it to li qu id at e th e Ci ty ’s ge ne ra l ob li ga ti on to th e m o r e th an — ~ 2 5 — 3 0 0 re ti re d m e m b e r s of th e ex is ti ng pe ns io n sy st em . U n - le ss th e co nd it io na l ri gh t to th e r e p a y m e n t of pl ai nt if fs ’ o w n sa la ry de du ct io ns is to be co ns id er ed a n ad va nt ag e, it is f u r t h e r a p p a r e n t th at th e c h a n g e t h u s b r o u g h t a b o u t b y Se ct io n 18 7. 2 w a s de si gn ed so le ly fo r th e be ne fi t of th e Ci ty a n d th at n o a d v a n t a g e to th e em pl oy ee w a s co n- te mp la te d. Ce rt ai nl y th e c h a n g e do es no t m e e t th e li mi - ta ti on s pr es cr ib ed b y th is co ur t in th e P a c k e r a n d Wa ll ac e ca se s, w h e n it st at ed th at a “c it y h a s n o m o r e ri gh t to ad op t a n a m e n d m e n t w h i c h do es no t c o m e wi th in th e p u r p o s e s o f th e ru le p e r m i t t i n g m o d i f i c a t i o n s t h a n a pr i- va te in su ra nc e ca rr ie r w o u l d h a v e to c h a n g e a n an nu it y po li cy ,” a n d th at th e pu rp os e of th e ru le is to pe rm it th e ci ty to “ m a k e re as on ab le mo di fi ca ti on s of pe ns io ns , pr io r to re ti re me nt , fo r th e pu rp os e of ke ep in g th e pe ns io n sy st em fl ex ib le to pe rm it ad ju st me nt s in ac co rd wi th c h a n g i n g co nd it io ns a n d af th e s a m e ti me ma tn ta in th e in te gr it y of th e sy st em a n d ca rr y ou t it s be ne fi ce nt po li cy ? (4 2 Ca l. 2 d at pp . 18 3 a n d 18 4; it al ic s ad de d. ) In ot he r wo rd s, th e ‘i mp li ed qu al if ic at io n” of p o w e r to m a k e su ch re as on ab le mo di fi ca ti on s is a n ex ce pt io n to th e ge ne ra l ru le w h i c h pr oh ib it s th e pa ss ag e of a n y la w w h i c h im - pa ir s th e ob li ga ti on of a co nt ra ct . (/ sl ai s Co ., Lt d. v. M a t h e s o n , 3 Ca l. 2 d 64 7, 45 P. 2 d 32 6; In di an a e x re l. ‘A nd er so n v. B r a n d , 3 0 3 U . S. 95 , 8 2 L. Ed . 68 5; a n d ca se s ci te d at pp . 3 0 to 33 of A p p . Op . Br .) F r o m th e st an dp oi nt of th e co ns ti tu ti on al m a n d a t e w h i c h pr oh ib it s th e i m p a i r m e n t of co nt ra ct ua l ob li ga ti on s, th er e is n o re al di ff er en ce b e t w e e n th e “p ie ce me al ’’ de st ru ct io n of a co nt ra ct un de r th e gu is e of “r ea so na bl e mo di fi ca ti on ” w h i c h ta ke s a w a y as m u c h as 4 0 % of th e va lu e of a co nt ra ct ua l ri gh t, a n d th e to ta l el im in at io n of al l pe ns io n be ne fi ts pu rs ua nt to a co nd it io n su bs eq ue nt as w a s at - te mp te d in th e Wa ll ac e ca se . I n or de r to c o m e wi th in — 2 § — th e b o u n d s of “r ea so na bl e mo di fi ca ti on ,” th e c h a n g e m u s t Ma in ta in “t he in te gr it y of th e sy st em ” a n d th is , w e su b- mi t, ca n on ly be d o n e b y of fe ri ng co rr es po nd in g ad va n- ta ge s to th e em pl oy ee w h e r e th e be ne fi ts or ig in al ly of fe re d h a v e be en su bs ta nt ia ll y re du ce d as pl ai nl y de mo ns tr at ed b y th e re as on in g of th is co ur t in th e ca se of P a c k e r v. B o a r d of Re ti re me nt , su pr a. In fa ct , th e ra ti on al e of th e op in io n in th e P a c k e r ca se m a k e s it cl ea r th at in or de r fo r a mo di fi ca ti on of a n ex is ti ng pe ns io n sy st em to b e c o n s i d e r e d r e a s o n a b l e as it ap pl ie d to ex is ti ng : e m - pl oy ee s, th e a m e n d m e n t m u s t p r o v i d e su bs ta nt ia ll y t h e S a m e ne t be ne fi ts as or ig in al ly he ld ou t to th e em pl oy ee . H e r e th e co ur t w a s co nc er ne d wi th th e ef fe ct of a 19 41 a m e n d m e n t to th e C o u n t y P e a c e Of fi ce rs ’ Re ti re me nt L a w , as Or ig in al ly en ac te d in 19 31 , w h i c h h a d th e ef fe ct of el im in at in g th e w i d o w ’ s ri gh t to a de at h be ne fi t w h e r e th e pe ac e of fi ce r di ed af te r re ti re me nt f r o m ca us es w h i c h w e r e n o t se rv ic e- co nn ec te d. T h e a m e n d m e n t in q u s t i o n br ou gh t ab ou t se ve ra l ot he r mo di fi ca ti on s w h i c h in cr ea se d th e ne t be ne fi ts pa ya bl e to th e m e m b e r s of th e sy st em . In or de r fo r. th e w i d o w to ‘o bt ai n a pe ns io n, he r h u s b a n d h a v i n g di ed o f n a t u r a l c a u s e s in 1 9 4 7 , s h e c o n t e n d e d th at sh e h a d a se pa ra te a n d di st in ct co nt ra ct ua l ri gh t w h i c h w a s ve st ed in na tu re . In an al yz in g th e si tu at io n th us pr es en te d th is co ur t w a s ca re fu l to po in t ou t th at n o co n- tr ac tu al re la ti on sh ip as su ch ex is te d b e t w e e n th e w i d o w a n d th e co un ty a n d th at he r pe ns io n ri gh ts w e r e m e r e l y a po rt io n of he r hu sb an d’ s co mp en sa ti on . In de te rm in in g th at th e st at ut e u n d e r co ns id er at io n di d no t ex ce ed “t he b o u n d s of re as on ab le mo di fi ca ti on ,” th is co ur t at p a g e 6 6 4 of th e Pa ci fi c Re po rt er sa id : : ‘ K R Ok A c o m p a r i s o n of th e st at ut es s h o w s th at u n d e r ce rt ai n ci rc um st an ce s th e 19 41 ’ l a w w o u l d gi ve co un ty pe ac e of fi ce rs a n d th ei r fa mi li es gr ea te r ibaa 8 — 2 7 — . be ne fi ts t h a n th ey h a d be fo re ; a n d th e ch an ge s, co n- si de re d as a w h o l e , d i d n o t e x c e e d th e b o u n d s o f a re as on ab le mo di fi ca ti on . * * ¥* “ T h e ba si c co nd it io ns u n d e r w h i c h a co un ty pe ac e of fi ce r co ul d ob ta in a pe ns io n we re su bs ta nt ia ll y u n ch an ge d. B o t h be fo re a n d af te r 19 41 he co ul d re ti re a n d re ce iv e p a y m e n t s a m o u n t i n g to ha lf hi s te rm in al sa la ry , no t ex ce ed in g $ 1 5 0 pe r mo nt h, if hi s re ti re - m e n t w a s d u e to a se rv ic e- co nn ec te d di sa bi li ty or if he h a d se rv ed fo r 2 0 ye ar s a n d re ac he d th e re qu ir ed ag e. ( R e t i r e m e n t L a w , § § 1 1 , 1 2 . ) * * * “ B e c a u s e of th e na tu re of th e ch an ge s m a d e in 19 41 it w o u l d be di ff ic ul t, if no t im po ss ib le , to de - te rm in e wh et he r, as to a n em pl oy ee st il l on ac ti ve du ty , th e to ta l va lu e of al l pe ns io n ri gh ts , co ns id er ed to ge th er , h a d be en re du ce d an d, if so , to w h a t m o n e - ta ry ex te nt .” (I ta li cs ad de d. ) It is th us ap pa re nt th at th e tr ue ba si s of th e ho ld in g of th is co ur t in th e P a c k e r ca se w a s it s ul ti ma te co nc lu - si on th at “t he to ta l va lu e of al l pe ns io n ri gh ts , co ns id - er ed to ge th er ” as th ey re la te d to th e ex is ti ng em pl oy ee s, w e r e su bs ta nt ia ll y th e s a m e as th ey w e r e be fo re th e mo di fi ca ti on . T h i s co nc ep t w a s e m p h a s i z e d b y th is co ur t in th e Wa ll ac e ca se wh en i t st at ed at p a g e 18 3: “* * * Tt is , of co ur se , tr ue th at w h e n a ci ty or ig in al ly se ts u p it s pe ns io n sy st em it ha s a Ta th er w i d e la ti tu de in pr es cr ib in g th e te rm s a n d co nd it io ns fo r re ti re me nt , a n d it m a y ad op t re st ri ct io ns th at w o u l d be co ns id er ed un re as on ab le im pa ir me nt s of th e co nt ra ct if su bs eq ue nt ly i m p o s e d u p o n em pl oy ee s w h o h a v e se rv ed u n d e r th e pe ns io n pl an .” Un le ss th e te rm s “r ea so na bl e a n d su bs ta nt ia l” as us ed b y th is co ur t in th e K e r n , P a c k e r a n d Wa ll ac e ca se s w e r e in te nd ed to re la te ba ck to th e be ne fi ts as or ig in al ly p r o m - — 2 3 8 — is ed , it is ob vi ou s th at th e pr in ci pl es th er ei n a n n o u n c e d ar e me an in gl es s a n d cl ea rl y at va ri an ce wi th se tt le d pr in - ci pl es o f c o n t r a c t a n d co ns ti tu ti on al la w. T h e w o r d “ r e a - so na bl e” is a re la ti ve t e r m w h i c h m u s t ta ke it s m e a n i n g f r o m th e ci rc um st an ce s u n d e r w h i c h it is us ed (P ab st v. F i n m a n d , 19 0 Ca l. 12 4, 21 1 Pa c. 11 ), a n d th e s a m e is tr ue of th e w o r d “s ub st an ti al .” ( F u h r m a n uv. A m e r i c a n Na t. Bl dg . & L o a n As sn ., 12 6 Ca l. A p p . 20 2, 14 P. 2 a 60 1. ) T h i s co nc lu si on is fu rt he r ma ni fe st f r o m th e co ur t’ s ad mo ni ti on th at on e of th e p r i m a r y re qu is it es of su ch a mo di fi ca ti on m u s t be to “m ai nt ai n th e in te gr it y of th e sy st em .” T h e w o r d “i nt eg ri ty ” is de fi ne d in W e b - st er ’s Co ll eg ia te Di ct io na ry , 5t h Ed it io n, as m e a n i n g : “( 1) St at e or qu al it y of be in g co mp le te , un di vi de d, or un br ok en ; en ti re ty . (2 ) U n i m p a i r e d st at e; * * *, (3 ) M o r a l so un dn es s; ho ne st y; up ri gh tn es s. ” T h e s a m e t e r m as us ed in P r o b a t e Co de , Se ct io n 40 1, ha s be en d e fi ne d b y th is co ur t as m e a n i n g : ‘“ So un de ne ss of m o r a l pr in ci pl e a n d ch ar ac te r, as s h o w n b y a pe rs on ’s de al in g wi th ot he rs , in m a k i n g a n d p e r f o r m a n c e of co nt ra ct s, in fi de li ty or ho ne st y in th e di sc ha rg e of tr us ts . In sh or t, it is us ed as a s y n o n y m fo r pr ob it y, ho ne st y a n d up ri gh t- ne ss in bu si ne ss re la ti on s wi th ot he rs ,” (I n re Ba uq ui er , 8 8 Ca l. 30 2, 30 7, 2 6 Pa c. 17 8, 53 2; Es ta te of G o r d o n , 14 2 Ca l. 12 5, 13 1, 75 Pa c. 67 2. ) H o w ca n it be sa id th at th e in te gr it y of th e Ci ty ’s ex is ti ng co nt ra ct ua l ob li ga ti on to th e pr es en t pl ai nt if fs ha s be en ma in ta in ed by a m o d i - fi ca ti on w h i c h ad mi tt ed ly ha s th e pr ac ti ca l ‘e ff ec t of re - du ci ng th ei r pa rt ia ll y ea rn ed re ti re me nt be ne fi ts b y as m u c h as 4 0 % , wi th ou t a n y pr et en se at a d d i n g a n y co r- re sp on di ng ad va nt ag es , a n d w h i c h dt th e s a m e ti me st b- je ct s t h e m to th e ha za rd s of fu tu re in se cu ri ty b y el im in at - in g th ei r ri gh t to re ce iv e a fl uc tu at in g pe ns io n th at w a s au to ma ti ca ll y ge ar ed to fu tu re ec on om ic co nd it io ns . A s — 2 9 . - ob se rv ed b y th is co ur t at p a g e 1 8 6 of it s op in io n in th e Wa ll ac e ca se , “i t w o u l d s e e m ob vi ou s th at th e ci ty sh ou ld no t be pe rm it te d to u r g e o n e de tr im en t to of fs et an ot he r. ” T h e on ly re as on s su gg es te d in th e op in io n of th e Di s- tr ic t C o u r t of A p p e a l as w a r r a n t i n g th e ch an ge s br ou gh t ab ou t b y Se ct io n 18 7. 2 ar e th at , “ W h e n th e ci ty se t u p it s pe ns io n sy st em in th e be gi nn in g it fa il ed to re qu ir e re as on ab le co nt ri bu ti on s f r o m th e be ne fi ci ar ie s of th e sy st em ,’ a n d “t ha t to re qu ir e pe ns io n sy st em s to be su p- p o r t e d in t o o g r e a t a m o u n t f r o m t a x e s o f mu ni ci pa li ti es , o r o t h e r g o v e r n m e n t a l ag en ci es , wi ll in th e l o n g r u n d e s t r o y th e p e n s i o n s y s t e m s t h e m s e l v e s . ” I n o t h e r w o r d s , th e th eo ry s e e m s to be th at be ca us e th e Ci ty fa il ed to re qu ir e w h a t th e co ur t d e e m e d to be “r ea so na bl e co n- tr ib ut io ns ” f r o m th e m e m b e r s of it s Po li ce a n d Fi re D e - pa rt me nt s fo r th e pa st 2 6 ye ar s, du ri ng w h i c h ti me m o r e th an 3 0 0 m e m b e r s a n d th ei r de pe nd en ts ha ve be en gr an te d pe ns io ns , w h i c h h a v e be en he ld to be ge ne ra l ob li ga ti on s of th e Ci ty ( E n g l a n d vu. Ci ty of L o n g Be ac h, 2 7 Ca l. 2 d 34 3, 16 3 P. 2 d 86 5; Ci ty of L o n g B e a c h v. Le nt z, su pr a; A l e x a n d e r et al . v. Ci ty o f L o n g Be ac h, su pr a; a n d H a r r i s o n v. Ci ty of L o n g Be ac h, su pr a) a n d du ri ng w h i c h ti me th e pe ns io n sy st em ha s be en en ti re ly re pe al ed in so fa r as it re la te d to m e m b e r s e m p l o y e d af te r M a r c h 29 , 19 45 , th e Ci ty m a y n o w si ng le ou t s o m e 2 2 8 em pl oy ee s w h o h a v e be en he ld to h a v e a ve st ed co nt ra ct ua l ri gh t to ea rn a n d re ce iv e th e be ne fi ts of fe re d b y th e ol d sy st em ( K e r n v. Ci ty of L o n g Be ac h, su pr a; A d a m s v. Ci ty of L o n g Be ac h, 10 1 Ca l. A p p . 2 d 15 , 2 2 4 P. 2 d 7 9 2 ) a n d sa dd le t h e m wi th a n ar bi tr ar y ta x eq ua l to 1 0 % of th ei r Sa la ri es to he lp de fr ay th e Ci ty ’s ex is ti ng pe ns io n ob li - ga ti on s. T h e ne xt re su lt of th is pr ov is io n is to ta ke th e pr op er ty of th es e pl ai nt if fs a n d us e it t o li qu id at e th e — 3 0 — Ci ty ’s ex is ti ng ob li ga ti on s to th e m e m b e r s w h o h a v e al - re ad y re ti re d, w h i c h is di re ct ly in co nt ra ve nt io n wi th th e m a n d a t e of Ar ti cl e XI , Se ct io n 15 of th e Ca li fo rn ia C o n - st it ut io n. T h e un fa ir ne ss of th is ar bi tr ar y ta x f r o m th e st an dp oi nt . of th e eq ua l pr ot ec ti on cl au se s of th e St at e a n d Fe de ra l Co ns ti tu ti on s w h i c h re qu ir e th e eq ua l di st ri - bu ti on of th e ta x bu rd en , is ma ni fe st . (S oa re s v. Ci ty of S a n t a M a r i a , 3 8 Ca l. A p p . 2 d 21 5, 10 0 P. 2 d 11 08 ; B a r k e r B r o s . vu. Ci ty of L o s An ge le s, 10 Ca l. 2 d 60 3, 7 6 P. 2 d 97 ; a n d th e ca se s ci te d at p. 57 of A p p . O p . Br .) T h e re as on in g of th e co ur t in th is re sp ec t li ke wi se ov er - lo ok s t w o f u n d a m e n t a l pr in ci pl es w h i c h h a v e be en cl ea rl y de fi ne d b y th is co ur t, na me ly , (1 ) th at th e re ti re me nt , de at h a n d di sa bi li ty be ne fi ts w h i c h b e c o m e pa ya bl e u n d e r a ch ar te r pr ov is io n su ch as Se ct io n 18 7, ar e no t gr at ui ti es , bu t “a re in ef fe ct de fe rr ed co mp en sa ti on ,” w h i c h is ac tu al ly ea rn ed b y th e e m p l o y e e as .“ an in te gr al pa rt ” of hi s c o m - pe ns at io n fo r se rv ic es re nd er ed ( K e r n v. Ci ty of L o n g Be ac h, su pr a; T e r r y v. Ci ty of Be rk el ey , su pr a; S k a g g s v. Ci ty of L o s An ge le s, 43 A . C. 50 3, 2 7 5 P. 2 d 9) an d, (2 ) th at th e ob li ga ti on to p a y th es e pe ns io ns ha s be en he ld to be a ge ne ra l ob li ga ti on o n th e pa rt of th e Ci ty ju st as m u c h as it s ob li ga ti on to p a y th e cu rr en t sa la ri es of it s em pl oy ee s. ( K e r n v. Ci ty of L o n g Be ac h, su pr a; Ci ty of L o n g B e a c h v. Le nt z, su pr a. ) Si nc e th e p r i m a r y pu rp os e of a n y pe ns io n sy st em is to be ne fi t th e Ci ty as a w h o l e , t. 2. , to at tr ac t a n d re ta in th e se rv ic es o f c o m p e - te nt pe rs on s, a n d th e ta x b u r d e n fo r mu ni ci pa l pu rp os es m u s t be eq ua ll y di st ri bu te d, th er e is n o le ga l. ba si s fo r le vy in g a sp ec ia l ta x u p o n a f e w em pl oy ee s w h o m a y or m a y no t ev en tu al ly be ne fi t f r o m th e sy st em , to he lp de . fr ay th e Ci ty ’s ge ne ra l ob li ga ti on s th er eu nd er . A s po in te d ou t b y th e co ur t in th e ca se of H i b b a r d , et al . v. St at e e x — 3 1 — ‘r el . W a r d , 65 O h i o St . 57 4, 6 4 N . E. 10 9, w h i c h is sq ua re ly in po in t u p o n th is qu es ti on : “* * * M o n e y ta ke n f r o m th e te ac he rs b y vi rt ue of th is st at ut e is ei th er ta xa ti on fo r th e pu bl ic g o o d or it is th e ta ki ng of m o n e y f r o m on e pe rs on fo r th e be ne fi t of an ot he r, co nt ra ry to th e wi ll of su ch pe rs on f r o m w h o m it is ta ke n, a n d wi th ou t hi s co ns en t. * * * Co nt ra ct s w e r e m a d e wi th th e te ac he rs to p a y t h e m a ce rt ai n sa la ry , a n d f r o m th at sa la ry a s a g r e e d to b e p a i d 1 p e r ce nt . w a s d e d u c t e d a n d de vo te d to th is pu rp os e. A te ac he r’ s sa la ry is hi s pr op er ty . H e ha s a ri gh t, u n d e r th e co ns ti tu ti on , to us e th at sa la ry fo r hi s o w n be ne fi t or fo r th e be ne fi t. o f th e ot he rs , as h e se es fi t. If h e t h i n k s it be st to pr ov id e fo r ol d ag e, he m a y d o so ; bu t, if he pr ef er s to sp en d hi s m o n e y as he ea rn si t , it i s hi s ri gh t u n d e r th e co ns ti tu ti on , to d o th at .” T h e pr in ci pl es st at ed in th e fo re go in g de ci si on w h i c h is qu ot ed at le ng th at pa ge s 53 to 56 of ou r op en in g br ie f, ar e fu ll y su pp or te d by th e de ci si on s of th is co ur t in th e ca se s of M o r d e c a i v. B o a r d of Su pe rv is or s, 18 3 Ca l. 43 4, 19 2 Pa c. 40 ; A c c o u n t i n g Co rp . of A m e r i c a v. St at e B o a r d of Ac co un ta nc y, 3 4 Ca l. 2 d 18 6, 2 0 8 P. 2 d 08 4: D e l M a r C a n n i n g Co . v. P a y n e et al ., 2 9 Ca l. 2 d 38 0, 17 5 P. 2 d 23 1, a n d ot he r ca se s ci te d at p a g e 57 of ap pe ll an ts ’ op en - in g br ie f. Fu rt he rm or e, th e a s s u m p t i o n th at th e Ci ty fa il ed in th e be gi nn in g “t o re qu ir e re as on ab le co nt ri bu ti on s f r o m th e be ne fi ci ar ie s of th e sy st em ” is u n f o u n d e d a n d ov er - lo ok s th e fa ct th at th es e pl ai nt if fs of fe re d to pr ov e th at th ey re fr ai ne d f r o m ac ce pt in g ot he r hi gh er -p ay in g e m - p l o y m e n t op po rt un it ie s in or de r to ea rn th ei r ve st ed co n- tr ac tu al ri gh t to re ce iv e th e sp ec if ic re ti re me nt be ne fi ts of fe re d b y Se ct io n 18 7, a n d em ph as iz es th e pr ej ud ic ia l 3 2 ef fe ct of th e tr ia l co ur t’ s ru li ng u p o n th e ma te ri al it y of th is ev id en ce . (S ee A p p . Op . Br . pp . 79 to 88 .) W h e r e , as he re , th e Ci ty , by of fe ri ng to p a y ce rt ai n Sp ec if ic re - t i r e m e n t be ne fi ts , h a s b e e n ab le to s e c u r e th e se rv ic es o f th es e pl ai nt if fs fo r pe ri od s u p to 19 ye ar s at m u c h lo we r sa la ri es th an th ey w e r e of fe re d el se wh er e, it se em s ra th er ap pa re nt th at th e Ci ty ha s al re ad y re ce iv ed a “r ea so na bl e c o n t r i b u t i o n ” f r o m t h e m , 7. ¢. , in ad di ti on to th e 2 % s a l a r y de du ct io n to w h i c h th ey co ns en te d b y ac ce pt in g em pl oy - m e n t wi th k n o w l e d g e of th e te rm s of th e st at ut e, th ey h a v e m a d e va lu ab le co nt ri bu ti on s in th e f o r m of se rv ic es t e n d e r e d in c o n n e c t i o n w i t h h i g h l y h a z a r d o u s o c c u p a t i o n s at lo we r sa la ri es th an th ey w o u l d ot he rw is e h a v e ag re ed to . N o w th at th e Ci ty ha s re ce iv ed th e va lu e of th es e se rv ic es , it is t a n t a m o u n t to th e pe rp et ra ti on of a fr au d to c o m p e l t h e m to co nt ri bu te 1 0 % of th ei r sa la ri es to th e Ci ty , o r fo rf ei t th ei r pa rt ia ll y e a r n e d r e t i r e m e n t be ne fi ts . ( K e r n vu, Ci ty of L o n g Be ac h, su pr a; L o s A n g e l e s Tr ac - ti on Co . v. Wi ls hi re , 13 5 Ca l. 65 4; M o b l e y et c. Co . v. B o r d e n , 12 9 O h i o St . 37 5, 19 5 N . E, 69 7; Si ec k v. Ha ll , 13 9 Ca l. Ap p. 27 9, 34 P. 2d 84 4: Re st at em en t of th e L a w of Co nt ra ct s, Vo l. I, Se c. 45 ; a n d ot he r au th or it ie s ci te d at pp . 81 to 87 of Ap p. Op . Br .) Tt h a s al so b e e n s u g g e s t e d b y t h e r e s p o n d e n t C i t y th at th e ar bi tr ar y 1 0 % sa la ry de du ct io n pr ov id ed b y Se ct io n 18 7. 2 w a s ne ce ss ar y in or de r to eq ua li ze th e cu rr en t sa l- ar ie s o f th e in st an t pl ai nt if fs w i t h t h o s e o f ce rt ai n o t h e r em pl oy ee s of th e Po li ce a n d Fi re D e p a r t m e n t s w h o w e r e ap po in te d af te r th e re pe al of Se ct io n 18 7, a n d f r o m w h o m si mi la r sa la ry de du ct io ns ar e re qu ir ed u n d e r th e pr ov i- si on s o f th e S t a t e R e t i r e m e n t S y s t e m , to w h i c h t h e y h a v e re ce nt ly b e c o m e pa rt ie s. T h e Di st ri ct C o u r t of A p p e a l in it s op in io n li ke wi se m a k e s th e ob se rv at io n th at , “S ec - k ‘ ‘ — 3 3 — — ti on 18 7. 2 co nt ai ns su bs ta nt ia ll y th e s a m e pr ov is io ns as in th e St at e Re ti re me nt Sy st em .” W e su bm it th at th e fo re go in g st at em en t is en ti re ly in ac cu ra te , a n d th at a n an al ys is of th e pr ov is io ns of th e St at e Re ti re me nt S y s t e m as co mp ar ed to th e re ti re me nt sy st em pr ov id ed by Se ct io n 1 8 7 of th e L o n g B e a c h Ci ty Ch ar te r, in cl ud in g th e pr o- vi si on s of Se ct io n 18 7. 2, wi ll re ve al th at th e t w o sy st em s a r e en ti re ly di ff er en t. Li ke wi se th e re la ti on sh ip b e t w e e n th e in st an t pl ai nt if fs a n d th e de fe nd an t Ci ty is en ti re ly di ff er en t f r o m th e re - la ti on sh ip w h i c h cu rr en tl y ex is ts be tw ee n th e Ci ty a n d th os e m e m b e r s of it s Po li ce a n d Fi re D e p a r t m e n t s w h o ac ce pt ed e m p l o y m e n t af te r M a r c h 29 , 19 45 . T h e in st an t pl ai nt if fs ac ce pt ed e m p l o y m e n t wi th th e Ci ty u p o n th e u n d e r s t a n d i n g th at t h e y w o u l d b e p a i d , . i n ad di ti on to th ei r c u r r e n t sa la ri es , ce rt ai n sp ec if ic r e t i r e m e n t be ne fi ts u p o n th e co mp le ti on of a gi ve n n u m b e r of ye ar s of se rv - ic e, a n d th at th ei r co nt ri bu ti on s to th e re ti re me nt f u n d w o u l d be a fl at 2 % of th ei r sa la ry . (S ta ts . 19 31 , p. 27 80 .) O n e th e ot he r ha nd , th os e em pl oy ee s w h o ac ce pt ed e m - pl oy me nt in th e Po li ce an d Fi re De pa rt me nt s af te r M a r c h 29 , 19 45 , di d so wi th th e k n o w l e d g e th at Se ct io n 18 7 h a d b e e n r e p e a l e d a n d t h a t n o p e n s i o n be ne fi ts o f a n y k i n d w e r e be in g of fe re d to th em . B e f o r e th ey b e c a m e m e m b e r s of t h e St at e Re ti re me nt S y s t e m a n el ec ti on w a s he ld , at w h i c h th ey w e r e gi ve n th e op po rt un it y of in di ca ti ng th ei r de si re to jo in or no t to jo in b y a se cr et ba ll ot . B e f o r e th ey vo te d th ey w e r e gi ve n a sc he du le of th e ra te s w h i c h th ey m u s t co nt ri bu te if th ey el ec te d to jo in th e sy st em , a n d w e r e to ld th at th es e ra te s co ul d be ad ju st ed f r o m ti me to ti me , ba se d u p o n th e re su lt s of a n ac tu ar ia l su r- ve y of th e co st of op er at in g th e sy st em . (G ov t. Co de , Se cs . 20 45 7 an d 20 45 8. ) Fu rt he rm or e, it sh ou ld be no te d th at Se ct io n 2 0 4 5 9 of th e s a m e C o d e pr ov id es th at “i f th e pu bl ic a g e n c y ha s a n ex is ti ng lo ca l re ti re me nt , pe ns io n or an nu it y f u n d or sy st em , a n d th e pr op os ed co nt ra ct is to m a k e al l or pa rt of th e m e m b e r s of th e lo ca l s y s t e m m e m b e r s . of th is sy st em , th e em pl oy ee s vo ti ng sh al l be li mi te d to ac ti ve m e m b e r s of th e lo ca l sy st em vo ti ng as a un it , a n d a t w o - t h i r d s v o t e o f a p p r o v a l b y s u c h e m - p l o y e e s is n e c e s s a r y . ” T h u s , if w e a s s u m e f o r th e p u r - Po se of a r g u m e n t , th at th e pe ns io n be ne fi ts pr ov id ed b y Se ct io n 18 7. 2 ar e in a n y w i s e si mi la r to th os e pr ov id ed fo r u n d e r th e St at e Re ti re me nt Sy st em , th e ne t ef fe ct of th e. ch ar te r a m e n d m e n t u n d e r co ns id er at io n w o u l d be to co mp el th e in st an t pl ai nt if f to b e c o m e pa rt ie s to th e St at e Re ti re me nt S y s t e m wi th ou t af fo rd in g t h e m th e ri gh t o f el ec ti on as sp ec if ic al ly p r o v i d e d b y th e G o v e r n m e n t Co de . Un de r th e pr ov is io ns of Se ct io n 18 7. 2, n o ch oi ce w h a t e v e r w a s gi ve n to th e in st an t pl ai nt if fs . T h e 1 0 % as se ss me nt is no t on ly co mp ul so ry , bu t it is fi ve ti me s th e a m o u n t w h i c h th e em pl oy ee im pl ie dl y co ns en te d sh ou ld be de du ct ed f r o m hi s sa la ry at th e ti me he ac ce pt ed e m - pl oy me nt . F u r t h e r m o r e , th e be ne fi ts pa ya bl e. to po li ce - m e n a n d fi re me n w h o ar e m e m b e r s of th e S t a t e Re ti re - m e n t S y s t e m ar e su bs ta nt ia ll y di ff er en t f r o m th os e pa y- ab le to th e in st an t pl ai nt if fs un de r th ei r co nt ra ct wi th t h e Ci ty w h i c h w a s en te re d in to pu rs ua nt to th e te rm s of Se ct io n 1 8 7 of th e Ch ar te r as a m e n d e d in 19 31 . F o r ex - am pl e, a po li ce ma n or fi re ma n w h o is a m e m b e r of th e St at e Em pl oy ee s’ Re ti re me nt S y s t e m is en ti tl ed to re ce iv e hi s fu ll sa la ry fo r no t to ex ce ed on e ye ar fo ll ow in g a se rv ic e- co nn ec te d di as ib il it y ( L a b o r Co de , Se c. 48 50 ), w h e r e as th e di sa bi li ty be ne fi ts pa ya bl e b y Se ct io n 18 7, su bd iv is io n (3 ) a m o u n t to on ly 5 0 % of th e sa la ry . at - ' ta ch ed to th e ra nk he ld b y su ch in ju re d po li ce ma n or fi re - ma n. Li ke wi se , a m e m b e r of th e St at e Re ti re me nt Sy s- — 3 5 — te m re ce iv es ce rt ai n of f- th e- jo b di sa bi li ty be ne fi ts wh ic h ar e no t pr ov id ed fo r b y Se ct io ns 18 7 o r 18 7. 2. (G ov t. Co de , Se cs . 2 1 0 2 0 to 21 10 3. ) T h e be ne fi ts pa ya bl e to th e m e m b e r s of th e St at e R e t i r e m e n t S y s t e m ar e pa ya bl e fr om a tr us t fu nd wh ic h is re qu ir ed to be ke pt ac tu ar ia ll y s o u n d at al l ti me s, a n d th e m e m b e r is a d v i s e d in a d v a n c e th at hi s co nt ri bu ti on s m a y be ad ju st ed pe ri od ic al ly fo r th is pu rp os e, w h e r e a s th e p a y m e n t s re qu ir ed to be m a d e b y Se ct io n 18 7 ar e ge ne ra l ob li ga ti on s of th e Ci ty . (C it y ‘o f L o n g B e a c h v. Le nt z, su pr a. ) U n d e r th e pr ov is io ns of Se ct io ns 18 7 a n d 18 7. 2 of th e Ci ty Ch ar te r, th e e m - pl oy ee ha s n o ve st ed in te re st in th e sa la ry de du ct io ns w h i c h ar e re qu ir ed to be m a d e f r o m hi s sa la ry w h e r e a s un de r th e St at e Re ti re me nt S y s t e m a se pa ra te ac co un t is r e q u i r e d to b e k e p t of t h e c o n t r i b u t i o n s o f e a c h m e m b e r , a n d hi s ri gh t or th at of hi s de si gn at ed be ne fi ci ar y to re - ce iv e th e ac tu ar ia l eq ui va le nt of hi s ac cu mu la te d co nt ri bu - ti on s is ne ve r lo st . (S ee G o o d w i n v. Fi re me n’ s Re li ef a n d P e n s i o n F u n d , 72 Ca l. A p p . 2 d 44 5, 16 4 P. 2 d 51 2: Go vt . Co de , Se cs . 20 13 1, 20 13 2, 20 23 0, 2 1 2 5 0 to 21 26 3, 2 1 3 3 0 to 21 33 5. ) T h e re ti re me nt be ne fi ts pa ya bl e u n d e r th e St at e Re ti re me nt S y s t e m ar e ba se d so le ly u p o n ac tu ar ia l pr in ci pl es , w h e r e a s th os e pr ov id ed b y Se ct io n 18 7. 2 ar e ba se d so le ly u p o n a ce rt ai n pe rc en ta ge of av er ag e pa st ea rn in gs . (G ov t. Co de , Se cs . 2 1 2 5 0 to 21 26 3. ) T h e sa la ry de du ct io ns pr ov id ed fo r by th e St at e Re ti re me nt S y s t e m ar e ju st if ie d u p o n th e th eo ry th at b y co ns en ti ng to jo in th e sy st em , th e e m p l o y e e im pl ie dl y, if no t ex - pr es sl y, co ns en ts th er et o ( K n i g h t v. B o a r d , et c. Em pl oy ee s’ R e t i r e m e n t , 3 2 Ca l. 2 d 4 0 0 , 1 9 6 P. 2 d 5 4 7 ; C l a r k e v. Ir el an d, et al ., 12 2 M o n t . 24 6, 19 9 P. 2 d 96 5) , w h e r e a s th e c o m p u l s o r y na tu re of th e 1 0 % ta x pr ov id ed fo r b y Se ct io n 18 7. 2 ha s al l of th e at tr ib ut es of a ta x. ( S a n Fr an ci sc o v. Li ve rp oo l an d L o n d o n an d Gl ob e In su ra nc e c — 3 6 — Co ., 7 4 Ca l. 11 3, 15 Pa c. 38 0; Sh ea lo r v. Ci ty of Lo di , 2 3 Ca l. 2 d 64 7, 14 5 P. 2 4 57 4; E x pa rt e Ko tt a, 1 8 7 Ca l. 27 , 2 0 0 Pa c. 95 7. ) Fu rt he rm or e, it sh ou ld be no te d th at th e St at e Re ti re me nt Sy st em an d th e sa la ry de du ct io ns th er ei n pr ov id ed fo r h a v e be en ex pr es sl y au th or iz ed b y th e p r o v i s i o n s o f Ar ti cl e I V , S e c t i o n 2 2 a o f t h e C a l i f o r n i a Co ns ti tu ti on , w h e r e a s n o si mi la r p o w e r ha s be en de le - ga te d to ch ar te re d mu ni ci pa li ti es by th e pr ov is io ns of Ar ti cl e X I of th e Co ns ti tu ti on , a n d he nc e, th e ri gh t to re qu ir e de du ct io ns f r o m th e sa la ri es of it s em pl oy ee s to su pp or t a lo ca l re ti re me nt sy st em ca n on ly be ju st if ie d u p o n th e th eo ry th at th e em pl oy ee im pl ie dl y co ns en ts to su ch de du ct io n b y th e ac ce pt an ce of e m p l o y m e n t wi th k n o w l e d g e of th e sp ec if ic ch ar te r pr ov is io ns . Fu rt he r- m o r e , it s h o u l d b e n o t e d t h a t u n d e r th e e x p r e s s p r o v i s i o n s of th e G o v e r n m e n t Co de , a n y a m e n d m e n t of th e co nt ra ct b e t w e e n a lo ca l co nt ra ct in g a g e n c y a n d th e St at e Re ti re - m e n t S y s t e m w h i c h ha s th e ef fe ct of in cr ea si ng th e co n- tr ib ut io ns of it s em pl oy ee s or de cr ea si ng th e be ne fi ts pa y- ab le , m u s t be a p p r o v e d b y a ma jo ri ty vo te of th e em pl oy ee s af fe ct ed . (G ov t. Co de , Se cs . 20 45 7 to 20 46 1. 5. ) E v e n if it w e r e to be a s s u m e d fo r th e pu rp os e of ar gu - m e n t th at th e pr ov is io ns of th e ch al le ng ed ch ar te r se ct io n w o u l d in th e fu tu re te nd to eq ua li ze th e pe ns io n be ne fi ts re ce iv ed b y ap pe ll an ts w i t h th os e pr ov id ed fo r re ce nt ly e m - pl oy ed m e m b e r s of th e Po li ce a n d F i r e D e p a r t m e n t s w h o a r e n o w u n d e r th e St at e Re ti re me nt Sy st em , ap pe ll an ts su bm it th at th is fa ct pr ov id es n o ba si s fo r ma te ri al ly re - du ci ng th e ve st ed co nt ra ct ua l ti gh ts w h i c h ap pe ll an ts h a d ad mi tt ed ly ea rn ed at th e ti me Se ct io n 18 7. 2 w a s ad op te d. In fa ct , th e pr em is e w h i c h un de rl ie s th is co nt en ti on is co nt ra ry to ou r co ns ti tu ti on al f o r m of go ve rn me nt , a n d w o u l d pe rm it th e ta ki ng of va lu ab le pr op er ty ri gh ts a w a y — 3 7 — f r o m th os e w h o h a v e al re ad y ea rn ed t h e m me re ly to eq ua li ze th ei r fm an ci al co nd it io n wi th th at of ot he r pe r- so ns w h o h a d no t ea rn ed su ch ve st ed co nt ra ct ua l ri gh ts . A s ob se rv ed b y th e Di st ri ct C o u r t of A p p e a l in th e ca se of Al st ot t v. Ci ty of L o n g Be ac h, 10 4 Ca l. A p p . 2 d 44 1, 23 1 P. 2 d 49 8: “* * * w e th in k it w o u l d h a v e be en ar bi tr ar y a n d u n r e a s o n a b l e to r e d u c e th e ri gh ts of th e ol de r em pl oy ee s to th os e of th e y o u n g e r cl as s, or to el ev at e th e la tt er to a hi gh er st at us w h i c h th ey h a d no t ea rn ed .” (2 31 P. 2 d at p. 50 1. ) N o th eo ry of co nt ra ct l a w al lo ws th e Ci ty of L e n g B e a c h to al te r th e t e r m s of it s co nt ra ct wi th ap pe ll an ts m e r e l y b e c a u s e it h a s e n t e r e d in to a di ff er en t a n d le ss on er ou s co nt ra ct wi th a n en ti re ly di ff er en t g r o u p of ci ty em pl oy ee s at a la te r da te . N o ca se in th is st at e de al in g wi th th e re du ct io n of co ns ti tu ti on al ly ve st ed co nt ra ct ua l pe ns io n be ne fi ts ha s ev er . su gg es te d th at pa rt ia ll y ea rn ed re ti re me nt be ne fi ts m a y be su bs ta nt ia ll y re du ce d fo r th e pu rp os e of eq ua li zi ng th e ex is ti ng ve st ed ri gh ts of on e g r o u p wi th th at of a su bs eq ue nt ly hi re d g r o u p of e m - p l o y e e s w h o vo lu nt ar il y el ec te d to c o m e u n d e r a n en ti re ly di ff er en t p e n s i o n s y s t e m . O n th e c o n t r a r y th e l a n g u a g e o f th is co ur t in th e W a l l a c e ca se cl ea rl y im pl ie s th at co n- di ti on s w h i c h m i g h t be pr op er ly in cl ud ed in a pe ns io n sy st em pr io r to e m p l o y m e n t , co ul d no t be co ns ti tu ti on al ly in se rt ed af te r e m p l o y m e n t ha s c o m m e n c e d , vi z. : ‘x ok %* Tt is , of co ur se , tr ue th at w h e n a ci ty or ig in al ly se ts u p it s pe ns io n sy st em it ha s a ra th er w i d e la ti tu de in pr es cr ib in g th e te rm s a n d co nd it io ns of re ti re me nt , a n d it m a y ad op t re st ri ct io ns th at w o u l d be co ns id er ed un re as on ab le im pa ir me nt s of th e co n- tr ac t if su bs eq ue nt ly im po se d u p o n em pl oy ee s w h o — 3 8 — h a v e se rv ed u n d e r th e Pe ns io n pl an ,” (4 2 Ca l. 2 d at p. 18 3. ) Li ke wi se of in te re st in th is co nn ec ti on ar e th e fo ll ow - in g r e m a r k s of th e H o n o r a b l e M a l c o l m Do ug la s, J u d g e o f t h e S u p e r i o r C o u r t o f K i n g C o u n t y in th e S t a t e o f W a s h i n g t o n , in de te rm in in g a s o m e w h a t si mi la r p r o b l e m in a ca se of fi rs t im pr es si on in th at st at e: ” W h e n a po li ce ma n, or a n y ot he r mu ni ci pa l or St at e or Fe de ra l em pl oy ee , or m e m b e r of th e a r m e d se rv ic es , m a k e s g o v e r n m e n t se rv ic e o r mi li ta ry se rv - ic e hi s ca re er , ce rt ai nl y on e of th e gr ea t in du ce me nt s is th e re ti re me nt pr iv il eg e th at go es wi th it . Un ti l ve ry re ce nt de ca de s th er e w e r e no t M a n y re ti re rn en t Sy st em s ou ts id e of th e A r m y a n d N a v y a n d go ve rn - t e n t se rv ic e, bu t in th e la st qu ar te r of a ce nt ur y, of co ur se , re ti re me nt sy st em s h a v e be en ex te nd ed to al - m o s t ev er y li ne of bu si ne ss . N o w w h e n on e ta ke s a po si ti on as a ci ty fi re ma n or a ci ty po li ce ma n, or as a m e m b e r of th e ju di ci ar y of th e St at e, or as a n of fi ce r in th e A r m y , a n d pa ys in to a f u n d fo r th e pu rp os e of pr ov id in g se cu ri ty w h e n th e d a y of re - ‘t ir em en t co me s, th at pr iv il eg e of re ti re me nt is ob vi - ou sl y on e of th e gr ea t in du ce me nt s th at ta ke s hi m in to su ch se rv ic e. A n d I th in k it is fa ir to ob se rv e th at it is a ve ry su bs ta nt ia l in du ce me nt . I th in k m a n y a m a n w o u l d no t ac ce pt e m p l o y m e n t as a po li ce ma n or as a fi re ma n, or as a ju dg e, un le ss he k n e w th at in ad di ti on to th e m o n t h l y sa la ry he d r a w s d u r i n g hi s ac tu al se rv ic e, w h e n h e c o m p l e t e s a ce r- ta in n u m b e r of ye ar s of se rv ic e a n d pa ys in to a fu nd hi s ol d ag e wi ll be pr ov id ed . fo r by at le as t 3 su bs ta nt ia l pe ns io n. . “ H o w ca n it be sa id th at w h e n he do es th at , a n d fu rn is he s th at se rv ic e an d ma ke s th os e pa ym en ts ac - — 3 0 — co rd in g to th e t e r m s of th e l a w th en ex is ti ng , th at th e le gi sl at ur e or a n y ot he r mu ni ci pa l b o d y ca n c o m e al on g at a la te r ti me a n d su bs ta nt ia ll y re du ce a n d im pa ir th os e ri gh ts wi th ou t r u n n i n g sq ua re ly in to th e co ns ti tu ti on al pr oh ib it io n ag ai ns t th e st at e im - p a i r i n g t h e ob li ga ti on o f c o n t r a c t s ? ” ’ A f t e r al lu di ng to th e ca se of K e r n v. Ci ty of L o n g Be ac h, su pr a, a n d th e fa ct th at th e ca se co nt ai ns di ct um w h i c h is in co ns is te nt wi th th e ul ti ma te ho ld in g of th e ‘c ou rt , J u d g e D o u g l a s co nt in ue d: “h ok ok Tf y o u ca n’ t ta ke a w a y a pe ns io n en - ti re ly , ce rt ai nl y y o u ca n’ t ta ke a w a y a th ir d of it fo r th e s a m e re as on s. T h e i m p a i r m e n t is su bs ta nt ia l w h e n y o u ta ke a w a y a th ir d of it , as ha s be en d o n e in th e ca se be fo re th is co ur t. I wo ul dn 't g o so fa r as to sa y th at a ci ty , or th e le gi sl at ur e, ca nn ot pa tc h . u p a de fe ct iv e pe ns io n l a w a n d m a k e ne ce ss ar y mo di - fi ca ti on s to m a k e it a w o r k a b l e sy st em as lo ng as t h e r e is n o t a su bs ta nt ia l mo di fi ca ti on , b u t w h e n t h e r e is a s u b s t a n t i a l m o d i f i c a t i o n d o w n w a r d , th er e is a su bs ta nt ia l i m p a i r m e n t of a co nt ra ct ua l ri gh t. A n d th at th e ci ty m a y no t do .” ( B a k e n u s et u x . v. T h e Ci ty of Se at tl e, et al ., Su pe ri or C o u r t Ac ti on N o . 46 74 88 , or al op in io n o n d e m u r r e r re nd er ed A u g u s t 18 , 19 54 .) In ho ld in g th at th e f o r m e r j u d g m e n t in th e de cl ar at or y re li ef a c t i o n b e t w e e n th e s a m e pa rt ie s, w h i c h h a d f o r it s ex pr es s pu rp os e a de te rm in at io n of th e na tu re a n d ex te nt ’ of th e ve st ed co nt ra ct ua l ri gh ts w h i c h h a d be en ac qu ir ed b y pl ai nt if fs as th e re su lt of th ei r h a v i n g ac ce pt ed e m - pl oy me nt in re li an ce u p o n th e sp ec if ic be ne fi ts of fe re d b y Se ct io n 18 7, w a s no t re s ad ju di ca ta of th e s a m e is su es as pr es en te d in th e ca se at ba r, th e op in io n of th e Di st ri ct — A H _ Co ur t of Ap pe al he re in is li ke wi se co nt ra ry to th e pr in - ci pl es an no un ce d in th e fo ll ow in g de ci si on s. Ro la pp , et al . v. Fe de ra l Bl dg . & L o a n As sn ., 11 Ca l. Ap p. 2d 33 7, 53 P. 2d 97 4: K n o x v. W o l f e , 7 3 Ca l. A p p . 2 d 4 9 4 , 1 6 7 P. 2 d 3; Ol we ll , et al . v. H o p k i n s , et al ., 2 8 Ca l. 2 d 14 7, 1 6 8 P. 2 d 97 2; Pr ic e v. Si xt h Di st ri ct Ag ri cu lt ur al As s' n, 20 1 Ca l. 50 2, 2 5 8 Pa c. 58 7; S h o r e v. Sh or e, 43 A . C. 69 7; D e n i o v. Ci ty of H u n t i n g t o n Be ac h, 7 4 Ca l. A p p . 2 d 4 2 4 , 1 6 8 P. 2 d 7 8 5 ; To dh un te r v. Sm it h, 21 9 Ca l. 69 0, 28 P. 2d 91 6. T h e s e ca se s de fi ni te ly ho ld th at th e co ur t m a y in a n ac ti on in de cl ar at or y re li ef de ci de th e pr es en t as we ll as th e fu tu re ri gh ts of th e pa rt ie s un de r a n ex is ti ng co n- tr ac tu al re la ti on sh ip , th at th e do ct ri ne of re s ad ju di ca ta ap pl ie s as we ll to th e de te rm in at io n of qu es ti on s of l a w as it d o e s to q u e s t i o n s of fa ct , a n d th at a n e r r o n e o u s de ci si on w i t h re sp ec t to a pa rt ic ul ar is su e is ju st ie e/ bi nd - in g u p o n th e pa rt ie s as a va li d on e. In th e f o r m e r pr oc ee di ng in de cl ar at or y re li ef , th e de fe nd an t ci ty , as w e h a v e s h o w n , sp ec if ic al ly p r e s e n t e d th e c o n t e n t i o n th at pl ai n- ti ff s’ ex is ti ng co nt ra ct ua l ri gh ts w e r e su bj ec t to fu rt he r re du ct io n a n d mo di fi ca ti on at th e h a n d s of th e el ec to ra te a n d th e tr ia l co ur t de te rm in ed th at th is co nt en ti on w a s in va li d. It f u r t h e r d e c r e e d th at pl ai nt if fs w e r e en ti tl ed to ce rt ai n sp ec if ic be ne fi ts u p o n co mp le ti ng th e re qu ir ed n u m b e r of ye ar s of se rv ic e, a n d th es e po rt io ns of th e de - ci si on w e r e af fi rm ed u p o n ap pe al . (S ee A p p . Op . Br . pp . 60 -7 8. ) W e th er ef or e su bm it th at bo th th e tr ia l co ur t a n d th e Di st ri ct C o u r t of A p p e a l er re d in co nc lu di ng th at th e f o r m e r de cl ar at or y j u d g m e n t w a s no t re s ad ju di ca ta of th e is su es pr es en te d in th e ca se s at ba r. — 4 ] — P O I N T T W O . A H e a r i n g Is Ne ce ss ar y fo r th e Se tt le me nt of I m - po rt an t Qu es ti on s of L a w . , F r o m t h e p r e c e d i n g d i s c u s s i o n it is a p p a r e n t th at th e in st an t ca se pr es en ts a n u m b e r of qu es ti on s w h i c h ar e of vi ta l im po rt an ce to th ou sa nd s of pu bl ic em pl oy ee s th ro ug ho ut th is st at e, a n d w h i c h h a v e no t as ye t be en de - te rm in ed b y th is co ur t. It is c o m m o n k n o w l e d g e th at Pr ac ti ca ll y ev er y mu ni ci pa li ty of a n y si ze in th is st at e ha s es ta bl is he d s o m e so rt of a re ti re me nt sy st em in or de r to at tr ac t a n d re ta in th e se rv ic es o f c o m p e t e n t e m p l o y e e s . Th is i s pa rt ic ul ar ly tr ue wi th re sp ec t to th e ha za rd ou s oc cu pa ti on of po li ce me n a n d fi re me n, T o da te th e “p er mi ss ib le sc op e” of mo di fi ca ti on s w h i c h m a y be m a d e b y a mu ni ci pa li ty in a n ex is ti ng pe ns io n sy st em as ap pl ie d to em pl oy ee s w h o h a v e ac ce pt ed em pl oy - m e n t in re li an ce u p o n a st at ut e w h i c h of fe rs de fi ni te re - ti re me nt be ne fi ts , wi th ou t im pa ir in g th e ob li ga ti on s of it s co nt ra ct , h a s o n l y b e e n c o n s i d e r e d b y th is c o u r t in t w o ca se s, n a m e l y , P a c k e r v. B o a r d o f R e t i r e m e n t , su pr a, a n d W a l l a c e v. C i t y o f F r e s n o , s u p r a . I n th e ca se o f K e r n v. Ci ty of L o n g Be ac h, su pr a, th is co ur t a n n o u n c e d b y w a y of co ns tr uc ti ve di ct um ce rt ai n pr in ci pl es w h i c h h a v e ob vi ou sl y be en mi sc on st ru ed b y m a n y tr ia l co ur ts t h r o u g h o u t th is st at e a n d th e Di st ri ct Co ur ts of Ap pe al , as ev id en ce d b y th e co nf li ct in g de ci si on s a n d op in io ns of th e tr ia l co ur t in th e ca se at ba r a n d th e ca se s of En gl is h v. Ci ty of L o n g Be ac h, su pr a, Ha rr is on , et al . v. Ci ty of L o n g Be ac h, su pr a; C o m b s , et al . v. Ci ty of L o n g Be ac h, su pr a, a n d Al ex an de r, et al . v, Ci ty of L o n g Be ac h, su pr a. T o da te th e qu es ti on of w h e t h e r or no t th er e ca n be a su bs ta nt ia l re du ct io n of re ti re me nt be ne fi ts wi th ou t of fe r- in g a n y co rr es po nd in g ad va nt ag es ha s ne ve r be en sq ua re ly —42— decided by this court, although the principles announced by it in the Wallace case would indicate that it would be considered an “unreasonable impairment.’’ Likewise, the question of whether or not a fixed pension based on past earnings can be substituted for a fluctuating pension, which was specifically designed to keep the monthly bene- fits adjusted to the changing value of the dollar and the current cost of living, has never been decided by this court. The proper construction to be placed upon Article XI, Section 15, of the California Constitution, which expressly prohibits the taking of private property and the use thereof for the payment of municipal obligetions, has never been before any court of appellate jurisdiction in this state. In view of the manifest importance of the foregoing questions, it is submitted that a hearing should be granted by this court, if for no other reason. Conclusion. In view of the apparent conflict which exists between the opinion of the District Court of Appeal herein, and the decision of Division 3 of the same court in the English case, as well as the principles announced by this court in the Wallace and Packer cases, and of the importance of the questions herein presented, it is submitted that a hearing should be granted by this Honorable Court. Respectfully submitted, Apert D. Waite and Now.tanp M. Rem, Attorneys for Plaintiffs and Appellants, M.anning T. Allen, et al. KENNETH Sprrry, Aitorney for Plaintiffs and Appellants, Elwin L. Alger, et al. re Dc ni te ne en me s od aa ne ab ia . APPENDIX. Opinion of the District Court of Appeal. [Civ. No. 19866. Second Dist., Div. One. Jan. 3, 1955.] Manning T. Allen et al., Plaintiffs and Appellants, v. City of Long Beach et al., Defendants and Appellants. [Civ. No. 19867. Second Dist. Div. One. Jan 3, 1955.] Elwin L. Alger e¢ al., Plaintiffs and Appellants, v. City of Long Beach e¢ al., Defendants and Appellants. Appeals from portions of judgments of the Superior Court of Los Angeles County. Paul Nourse, Judge. Af- firmed. Actions for declaratory relief. Judgments holding part of city pension plan valid and other part invalid, affirmed. Albert D. White, Nowland M. Reid and Kenneth Sperry for Plaintiffs and Appellants. Walhfred Jacobson and Irving M. Smith, City Attor- neys, and Clifford E. Hayes, Deputy City Attorney, for Defendants and Appellants. Drapeau, J—The same legal issues are presented by the two above-entitled actions for declaratory relief. By stipulation they were consolidated for trial in the superior court, and were. briefed and argued together on appeal. So but one opinion has been prepared, which is, of course, applicable to each case. The plaintiffs in one case are all members of the police force of the city of Long Beach, the plaintiffs in the other case are all members of the fire department of the said city. Each of them has a vested right to a pension under the provisions of section 187 of the freeholders’ charter ih M7 — 2 - — of th e ci ty . (S ee K e r n v. Ci ty of L o n g Be ac h, 2 9 Ca l. 2 d 8 4 8 [1 79 P. 2 4 79 9] ; Pa la sk e v. Ci ty of L o n g Be ac h, 93 Ca l. Ap p. 2d 12 0 [2 08 P. 24 76 4] ; an d Al le n v. Ci ty of L o n g Be ac h, 10 1 Ca l. A p p . 2 d 15 [2 24 P, 2 4 79 2] .) S e c t i o n 1 8 7 w a s e n a c t e d in 1 9 2 5 . It w a s h e l d th at p e n - si on ri gh ts u n d e r th e se ct io n w e r e a n ob li ga ti on of th e ci ty , w h e t h e r or no t f u n d s w e r e av ai la bl e in th e pe ns io n fu nd . ( E n g l a n d v. Ci ty of L o n g Be ac h, 2 7 Ca l. 2 d 3 4 3 [1 63 P. 2 d 86 5] .) In 1 9 4 4 se ct io n 18 7. 1 w a s en ac te d, ef fe ct iv e M a r c h 29 , 19 45 . T h i s se ct io n r e p e a l e d se ct io n 18 7, a n d al l p e n s i o n ti gh ts t h e r e u n d e r , w i t h a s a v i n g cl au se ap pl ic ab le o n l y to th os e w h o h a d se rv ed t w e n t y ye ar s pr io r to th e ef fe ct iv e da te of th e a m e n d m e n t . T h i s se ct io n w a s h e l d u n c o n s t i t u t i o n a l a n d v o i d as to ci ty em pl oy ee s w h o c o m m e n c e d w o r k af te r th e ad op ti on of se ct io n 18 7. ( K e r n v. Ci ty of L o n g Be ac h, s u p r a . ) In th at ca se ou r S u p r e m e C o u r t sa id (a t p. 85 6) th at th e e m p l o y e e s o f t h e ci ty o f L o n g B e a c h h a d “ a v e s t e d p e n s i o n ri gh t a n d th at re sp on de nt ci ty , b y co mp le te ly re pe al in g al l pe ns io n pr ov is io ns , ha s at te mp te d to im pa ir it s co nt ra ct ua l ob li ga ti on s. Th is it m a y no t co ns ti tu ti on al ly d o . 2 N o w th e co ur ts of Ca li fo rn ia ar e ag ai n ca ll ed u p o n to ’ co ns tr ue th e ri gh ts of th e ci ty of L o n g B e a c h a n d th es e s a m e em pl oy ee s in an ot he r a m e n d m e n t to th e ci ty ch ar te r, ef fe ct iv e J u n e 5, 19 51 , se ct io n 18 7. 2. T h e pa rt s of th is n e w se ct io n pe rt in en t to th is in qu ir y ar e as fo ll ow s: (a ) T h a t th e a m o u n t to be pa id to ea ch pe rs on re ce iv - m g a pe ns io n af te r th e ef fe ct iv e da te of th e se ct io n sh al l be c o m p u t e d u p o n th e av er ag e sa la ry ea rn ed b y h i m du ri ng fi ve ye ar s im me di at el y pr ec ed in g hi s re ti re me nt . — j 3 — Be fo re th e a m e n d m e n t th is a m o u n t w a s c o m p u t e d u p o n th e em pl oy ee ’s sa la ry fo r th e la st ye ar on ly of hi s se rv ic e. (b ) Es ta bl is hi ng a pe ns io n fu nd , ou t of w h i c h al l ci ty pe ns io ns wi ll be pa id , in to w h i c h th e ci ty wi ll p a y b y ap - pr op ri at io n m o n e y to ke ep th e f u n d so lv en t, a n d in to w h i c h al so . ea ch em pl oy ee sh al l p a y 1 0 pe r ce nt of hi s sa la ry , de du ct ed se mi mo nt hl y, Or ig in al ly n o co nt ri bu ti on s w e r e re qu ir ed . La te r o n 2 pe r ce nt w a s de du ct ed f r o m sa la ri es fo r th e pe ns io n fu nd . (c ) T h a t u p o n th e t e r m i n a t i o n o f se rv ic e o f a n y e m - pl oy ee be fo re th e ef fe ct iv e da te of hi s re ti re me nt , he sh al l be pa id ba ck al l of th e de du ct io ns f r o m hi s sa la ry , to ge th er wi th in te re st th er eo n at th e ra te of 21 4 pe r ce nt c o m p o u n d e d an nu al ly . (d ) T h a t a n y e m p l o y e e ab se nt f r o m hi s e m p l o y m e n t b y re as on of mi li ta ry se rv ic e sh al l p a y to th e ci ty u p o n hi s r e t u r n th e a m o u n t of m o n e y th at w o u l d h a v e b e e n d e d u c t e d f r o m hi s sa la ry h a d he no t he en so ab se nt . Se ct io n 18 7. 2 co nt ai ns su bs ta nt ia ll y th e s a m e pr ov is io ns as in th e st at e re ti re me nt sy st em . T h u s it ap pe ar s th at th es e pl ai nt if fs ar e be ne fi ci ar ie s of w h a t m i g h t be t e r m e d a bo bt ai le d pe ns io n sy st em . F o r th ey w e r e al l e m p l o y e d af te r se ct io n 18 7 w e n t in to ef fe ct in 19 25 , a n d be fo re it w a s re pe al ed in 19 45 . M e m b e r s of th e po li ce a n d fi re de pa rt me nt s e m p l o y e d af te r 1 9 4 5 ar e gi ve n pe ns io n ri gh ts u n d e r th e st at e re ti re me nt sy s- te m, th e ci ty h a v i n g co nt ra ct ed wi th th at sy st em , as pe r- mi tt ed b y la w. Pl ai nt if fs at ta ck th e n e w ch ar te r se ct io n be ca us e th ey as se rt th at al l of th ei r pe ns io n ri gh ts as se t fo rt h im se c- ti on 18 7 we re fi na ll y ad ju di ca te d in Al le n v. Ci ty of — 4 — . l o n g Be ac h, su pr a, 10 1 Ca l. A p p . 2 d 15 , a n d in Pa la sk e v. Ci ty of L o n g Be ac h, su pr a, 9 3 Ca l. A p p . 2 d 12 0; th at th e ci ty do es no t h a v e th e p o w e r to m o d i f y a n y of sa id ri gh ts b y a m e n d m e n t t o it s ch ar te r; th at th es e ti gh ts ar e pa rt a n d pa rc el of ac o n t r a c t b e t w e e n ea ch pl ai nt if f a n d th e ci ty , co nt in ui ng , a n d pr ot ec te d un de r co ns ti tu ti on al la w, I n su pp or t of th es e as se rt io ns pl ai nt if fs re ly u p o n se c- ti on s 11 a n d 2 1 o f ar ti cl e I, a n d se ct io n 15 of ar ti cl e X I o f th e C o n s t i t u t i o n o f th e S t a t e o f Ca li fo rn ia , a n d se ct io n 1 0 o f ar ti cl e I o f t h e C o n s t i t u t i o n o f th e U n i t e d St at es , a n d th e ca se s st at ed . Ce rt ai n of th e pl ai nt if fs al so at ta ck th at pa rt of th e n e w ch ar te r a m e n d m e n t , wi th re sp ec t to p a y m e n t s re qu ir ed : to be m a d e b y em pl oy ee s re tu rn in g f r o m mi li ta ry se rv ic e. Pl ai nt if fs co nt en d th at se ct io n 18 7. 2 su bs ta nt ia ll y al te rs th e ci ty ’s ex is ti ng co nt ra ct ua l ob li ga ti on to th em , in th at th e pr ov is io n fo r de du ct in g 10 pe r ce nt of th ei r Sa la ri es in ef fe ct re du ce d by m o r e th an 4 0 pe r ce nt re ti re me nt , de at h, a n d di sa bi li ty be ne fi ts th at w o u l d ot he rw is e ha ve be en pa ya bl e to th em . T h e y sa y th at , ac co rd in g to th e te st im on y of an ac tu ar y ca ll ed b y th e ci ty , th e pr ac ti ca l ef fe ct of th e 10 pe r ce nt de du ct io n is to co mp el e a c h o f t h e m to p a y ap pr ox im at el y on e- ha lf of th e ul ti mh te co st to th e ci ty of th ei r pe ns io n pl an . T h e y sa y al so : “ s u b - di vi si on (2 ) of Se ct io n 18 7. 2 w o u l d c h a n g e th e ba si s of th e re ti re me nt pe ns io n f r o m a n a m o u n t w h i c h fi uc tu at es i n ac co rd an ce wi th th e sa la ry cu rr en tl y at ta ch ed to th e “r an k he ld at th e ti me of re ti re me nt to a fi xe d pe ns io n ba se d u p o n ‘t he ap pl ic ab le pe rc en ta ge of th e av er ag e m o n t h l y sa la ry du ri ng th e fi ve ye ar s im me di at el y pr ec ed - in g th e re ti re me nt or de at h of th e pe rs on w h o s e se rv ic e — 5 — fo rm ed th e ba si s of su ch ri gh t to a pe ns io n. ’” A n d th at : “T t ca nn ot be ga in sa id th at th e ri gh t to re ce iv e a pe ns io n w h i c h fl uc tu at es wi th th e sa la ry cu rr en tl y at ta ch ed to th e t a n k he ld at th e ti me of de at h or re ti re me nt is a va lu ab le ri gh t, be ca us e th is f o r m u l a te nd s to ad ju st th e pe ns io n be ne fi ts to th e cu rr en t va lu e of th e do ll ar .” S o pl ai nt if fs ar gu e th at th e a m e n d m e n t is un co ns ti tu - ti on al as im pa ir in g th e ob li ga ti on of th e ci ty ’s ex is ti ng c o n t r a c t w i t h t h e m ; f u r t h e r m o r e , th at it p r o v i d e s f o r a n ar bi tr ar y as se ss me nt of ta x, co nt ra ry to th e du e- pr oc es s a n d eq ua l- pr ot ec ti on cl au se s of ou r st at e a n d fe de ra l C o n - st it ut io ns , as we ll as ar ti cl e X I , se ct io n 15 of th e Ca li fo rn ia Co ns ti tu ti on , w h i c h pr oh ib it s ta ki ng pr iv at e pr op er ty to p a y mu ni ci pa l ob li ga ti on s. T h e su pe ri or co ur t f o u n d th at .s ec ti on 18 7. 2 is co ns ti - tu ti on al an d- va li d; th at th e pr ov is io ns of th e se ct io n se t fo rt h a re as on ab le a n d su bs ta nt ia l pe ns io n pl an , ex ce pt - in g on ly th e on e pr ov is io n re la ti ve to em pl oy ee s re tu rn - in g fr om mi li ta ry se rv ic e. T h e co ur t fo un d th at th at pr ov is io n w a s un re as on ab le a n d in va li d. Pl ai nt if fs ap pe al f r o m th at po rt io n of th e j u d g m e n t th at fo ll ow ed , ad ve rs e to t h e m ; a n d th e ci ty ap pe al s f r o m th at po rt io n of th e j u d g m e n t ad ve rs e toi t . In a n ab le a n d we ll co ns id er ed m e m o r a n d u m of op in io n th e tr ia l j u d g e po in ts ou t th at th e ca se s re li ed u p o n b y pl ai nt if fs ar e no t so le ly de te rm in at iv e of th e is su es he re ; th at th e pe ns io n ri gh ts of th es e em pl oy ee s m u s t be co n- st ru ed in th e li gh t of al l th e de ci si on s of th e S u p r e m e ‘C ou rt a n d of th e Di st ri ct C o u r t of A p p e a l af fe ct in g th ei r ri gh ts u n d e r se ct io n 18 7 of th e ci ty ch ar te r, a n d af fe ct in g ri gh ts of ot he rs u n d e r li ke pr ov is io ns in ot he r la ws . — h - — Th et r i a l ju dg e sa ys in hi s Op in io n: “I n th e ca se s of K e r n vy. Ci ty of L o n g Be ac h, 29 Ca l. 2 d 8 4 8 [1 79 P. 24 79 9] , a n d P a c k e r y. Re ti re me nt Bo ar d, 35 Ca l. 2 d 2 1 2 [2 17 P. 2 4 66 0] , th e S u p r e m e C o u r t ha s un eq ui vo ca ll y he ld th at wh il e th e Ti gh t to a pe ns io n is a co nt ra ct ua l on e w h i c h ve st s u p o n e m p l o y m e n t a n d ca nn ot be de st ro ye d, it is ne ve rt he le ss no t a Ti gh t to a pe ns io n in a n y ce rt ai n a m o u n t o r a n y ce rt ai n t e r m s b u t o n l y a ri gh t to a ‘s ub st an ti al or re as on ab le pe ns io n’ a n d th at th is ri gh t, th at i s , th e ri gh t to a ‘s ub st an ti al or re as on ab le pe n- si on , i s su bj ec t to th e im pl ie d qu al if ic at io ns th at .t he go v- er ni ng b o d y (i n th is ca se , th e el ec to ra te of L o n g B e a c h ) m a y m a k e re as on ab le mo di fi ca ti on s a n d ch an ge s in th e sy st em a n d th at ‘t he a m o u n t , te rm s a n d co nd it io ns of th e be ne fi ts m a y be al te re d, ’ ” Th is co ur t ag re es wi th th is re as on in g, a n d wi th th e tr ia l co ur t’ s fi nd in g th at th e ch an ge s in th e pe ns io n ri gh t of pl ai nt if fs m a d e b y th e n e w se ct io n le ft t h e m wi th a .s ub st an ti al a n d re as on ab le pe ns io n pl an . Th ec i t y of L o n g B e a c h w a s e m p o w e r e d to m a k e th e ch an ge s, a n d wi th th e on e ex ce pt io n, n o n e of th e c h a n g e s tr en ch ed u p o n a n y co n- st it ut io na l ri gh t of pl ai nt if fs . Re as on ab le mo di fi ca ti on s m a y be m a d e b y g o v e r n m e n t a l ag en ci es w h e n ne ce ss ar y to ke ep pe ns io n sy st em s ad ju st ed to c h a n g i n g co nd it io ns , to ma in ta in th e in te gr it y of su ch sy st em s, a n d to ca rr y ou t th ei r be ne fi t po li cy . ( T e r r y v. Ci ty of Be rk el ey , 41 Ca l. 2 d 6 9 8 [2 63 P. 2 d 83 3] ; P a c k e r v. B o a r d of Re ti re me nt , 35 Ca l. 2 d 2 1 2 [ 2 1 7 P. 2 d 66 0] ; K e r n v. Ci ty of L o n g Be ac h, su pr a, 2 9 Ca l. 2 4 8 4 8 ; R u s t a d v. Ci ty of L o n g Be ac h, 12 2 Ca l, A p p . 2 d 10 6 [2 64 P. 2 d 9 5 5 ] ; Al ls to t v. Ci ty of L o n g Be ac h, 10 4 Ca l. A p p . 2d 44 1 [2 31 P. 2 4 49 8] .) 7 T h e pe rm is si bl e sc op e of su ch ch an ge s sh ou ld be to sa fe - g u a r d pe ns io n sy st em s, ad ju st t h e m to c h a n g i n g co nd i- ti on s, a n d to ca rr y ou t th ei r po li cy . (W al la ce v. Ci ty of Fr es no , 4 2 Ca l. 2 d 18 0 [2 65 P. 2 d 88 4] .) S o w e c o m e to gr ip s w i t h th e pr in ci pa l qu es ti on s in th is ca se : D o e s th e re qu ir em en t th at pl ai nt if fs p a y 10 pe r ce nt of th ei r sa la ri es in to th e pe ns io n f u n d c o m e wi th in th e pe rm is si bl e sc op e of th e p o w e r to c h a n g e or m o d i f y p e n s i o n s y s t e m s b y g o v e r n m e n t a l a g e n c i e s ? A n d d o e s th e m e t h o d of c o m p u t i n g th es e pe ns io ns o n th e av er ag e sa l- ar ie s f o r t h e la st fi ve y e a r s , i n s t e a d o f th e la st ye ar , c o m e wi th in th e s a m e sc op e? A p p l y i n g th e pr in ci pl es st at ed in th e ca se s co mp el s th e co nc lu si on th at th e c h a n g e s in pl ai nt if fs ’ pe ns io n sy st em m a d e by se ct io n 18 7. 2 (w it h th e on e ex ce pt io n st at ed ) ar e wi th in th e pe rm is si bl e sc op e of su ch ch an ge s as de fi ne d b y th e co ur ts of th is st at e. It is un fo rt un at e th at th e pl ai nt if fs in th es e t w o ca se s ha ve h a d so m u c h li ti ga ti on wi th th ei r em pl oy er . It is un fo rt un at e to o th at w h e n th e ci ty se t u p it s pe ns io n sy st em in th e be gi nn in g it fa il ed to re qu ir e re as on ab le co nt ri bu ti on s f r o m th e be ne fi ci ar ie s of th e sy st em , a n d th en at te mp te d to de pr iv e t h e m of th ei r pe ns io n ri gh ts al to ge th er . W h e t h e r pl ai nt if fs or th e ci ty ar e re sp on si bl e fo r th e li ti ga ti on is be si de th e po in t. T h e d u t y of ou r co ur ts is to de te rm in e w h e t h e r or no t th e ch ar te r a m e n d m e n t go es b e y o n d th e b o u n d s of re as on ab le mo di fi ca ti on of th e pe n- si on sy st em . In th is an al ys is it b e c o m e s ap pa re nt th at to re qu ir e pe ns io n sy st em s to be su pp or te d in to o gr ea t a m o u n t f r o m ta xe s of mu ni ci pa li ti es , or ot he r go ve rn - me nt al ag en ci es , wi ll in th e lo ng r u n de st ro y th e sy st em s th em se lv es . F o r in th e lo ng r u n th e ta x b u r d e n u p o n Pot eey a R e su cc ee di ng ge ne ra ti on s m a y we ll b e c o m e so on er ou s th at th e pe op le wi ll fi nd a w a y to di sc on ti nu e su ch ov er - we ig ht ed pe ns io n sy st em en ti re ly . A n d it is bu t fa ir a n d ri gh t th at al l th e be ne fi ci ar ie s of pe ns io ns sy st em s sh ou ld p a y s o m e fa ir sh ar e of th e co st of th e be ne fi ts of w h i c h th ey ar e as su re d. N o w th e ci ty pa ys in ex ce ss of $6 50 ,- 0 0 0 a ye ar to pe ns io ne rs u n d e r pl ai nt if fs ’ sy st em , a n d un - d e r t h e c h a l l e n g e d a m e n d m e n t t h o s e n o t y e t p e n s i o n e d p a y ap pr ox im at el y $ 1 1 0 , 0 0 0 a ye ar . Pl ai nt if fs ’ a r g u m e n t th at if th is j u d g m e n t is af fi rm ed th ey ca n be sa dd le d ne xt ye ar wi th a 2 0 or 30 pe r ce nt de du ct io n, a n d so on , in cr ea si ng un ti l al l th ei r ri gh ts ar e w i p e d ou t la ck s su bs ta nc e. F o r a n y in cr ea se in de du c- ti on s m u s t s t a n d o r fa ll w i t h th e te st o f r e a s o n a b l e n e s s as u s e d in t h e ca se s. T h e m e t h o d o f co mp ut at io n of pl ai nt if fs ’ pe ns io ns o n th e fi ve -y ea r av er ag e is al so wi th in th e p o w e r of th e m u - ni ci pa li ty . W h e t h e r th ey wi ll lo se or ga in wi ll de pe nd u p o n ec on om ic co nd it io ns w h e n th ey re ti re . Sa la ri es . fo l- l o w ou r na ti on al e c o n o m y , a n d n o on e ca n lo ok in to th e fu tu re a n d sa y wh et he rt h e y wi ll g o u p or g o d o w n . Th is pa rt of th e a m e n d m e n t is as m u c h a n ad ju st me nt to ch an g- i n g co nd it io ns as w a s t h e o l d s y s t e m , fl uc tu at in g y e a r b y ye ar . U p o n th e s a m e re as on in g, a n d ap pl yi ng th e sa me l e g a l pr in ci pl es , th is co ur t ha s co nc lu de d th at th er e w a s n o er ro r in fi nd in g th at th e is su es in th is ca se w e r e no t re s ad ju di ca ta , or in re je ct in g ev id en ce th at pl ai nt if fs h a d re fr ai ne d f r o m ac ce pt in g ot he r hi gh er pa yi ng em pl oy - m e n t in th e be li ef th at th ey w e r e ea rn in g th e- ri gh t to re - ce iv e th e sp ec if ic re ti re me nt be ne fi ts pr ov id ed be fo re th e ad op ti on of se ct io n 18 7. 2. T h e ri gh t of th e el ec to ra te of th e ci ty o f L o n g B e a c h to m a k e re as on ab le mo di fi ca ti on s — g — in it s pe ns io n sy st em w a s no t, a n d co ul d no t h a v e be en a n is su e in th e ca se s u p o n w h i c h pl ai nt if fs g r o u n d th ei r c l a i m s of r e s ad ju di ca ta . Fi na ll y th is co ur t ag re es w i t h th e ex ce pt io n m a d e b y th e tr ia l co ur t re la ti ve to em pl oy ee s in mi li ta ry se rv ic e. T h i s q u e s t i o n is d e t e r m i n e d b y se ct io n 3 9 5 . 1 o t t h e Mi li - ta ry a n d V e t e r a n s Co de . Th is se ct io n pr ov id es th at a n em pl oy ee re tu rn in g to hi s e m p l o y m e n t in a n y go ve rn - me nt al a g e n c y af te r mi li ta ry se rv ic e “s ha ll be en ti tl ed to pa rt ic ip at e in in su ra nc e pu rs ua nt to es ta bl is he d ru le s a n d pr ac ti ce s in ef fe ct at th e t i m e su ch of fi ce r or e m p l o y e e le ft hi s of fi ce or po si ti on to jo in th e a r m e d fo rc es of th e U n i t e d St at es .” T h i s ex ce pt io n is un re as on ab le , as th e w o r d is us ed in Ca li fo rn ia ca se s h a v i n g to d o wi th th is su bj ec t, w h e n th e di sp ar it y in th e co mp en sa ti on or di na ri ly pa id in th e a r m e d fo rc es wi th th at pa id in ci vi l se rv ic e is co ns id er ed . O n e di sc ha rg ed af te r s o m e ti me in th e a r m e d fo rc es co ul d lo se al l of hi s pe ns io n ri gh ts as a ci vi l se rv an t, d u e to co nd i- ti on s b e y o n d hi s co nt ro l. It is do ub tf ul w h e t h e r m e n re - tu rn in g f r o m a n y ex te nd ed mi li ta ry se rv ic e w o u l d be fi na nc ia ll y ab le to m a k e u p ar re ar s of un pa id de du ct io ns re qu ir ed fo r re in st at em en t in a ci vi l pe ns io n sy st em . T h e j u d g m e n t s ar e, a n d ea ch of t h e m is , af fi rm ed . Al l of th e pa rt ie s sh al l p a y th ei r o w n co st s. D o r a n , A c t i n g P. J. , a n d M o s k , J. pr o te m. ,* co nc ur re d. *A ss ig ne d b y C h a i r m a n of Ju di ci al Co un ci l. AFFIDAVIT OF SERVICE BY MAIL | IN THE SUPREME COURT . OF THE STATE OF CALIFORNIA Pd Pratik /- LAL. top, Mal (GhLA.ioyLL; i) / S$. 2feng oS Sher LF/_ aebea rerLtsatel 7 vo « : | STATE oF CALIFORNIA . County or LosAncrtes 5S s fySoeteal1bees fatc, being first duly sworn, deposes and says: That this affiant is a citizen of the United.States of America, a resident of the County of Los Angeles, over the age of eighteen years, not a party to the within andabove entitled action; . . . woe -that this affiant is making this service for Ctta me Met LoDpdrebel, who > the attorney... for the tpttile sate. in this action; that this affiant is of the firm of Parker & Son, Ing240East Fourth Street, who are the printers and agents in this matter for said attorney....., and have their offices in the City of Los Angeles, State of California, That on the...42.02day o sercreeceteceteantctenccea Sexless Ectettys! utp. eneeghl (Leehe Neneeeenenareece!on the xe: ct Z. ¢Z.._...in this action, by placing a true copy thereof in an envelope addressed to the attorney......0f record for said_w.i.. RetBIpwtrcvcabse eee -_ at the busingjs/residenceaddress7 said attorney......, as follows: Acctatnic Pentes Pct ce oa ° / . ie fsf “ a and also served a-true copy on County Clerk of -County, at the county seat of said county, by then sealing said envelope... and depositing the same, with postage thereon fully prepaid, in the United States Post Office at Los Angeles, California. That there is delivery service by United States mail at the place...... so addressed or there is fom& fom AI5 meg AH Subscribed and sworn to before me this...0¢day of.eches i . - ceLt a LE8hd Garbitte FO (AWfefte: ee ty x i Marcuerrre F, Crrpps, « ~ Notary Public,i and for the County of Los Angeles, State of California. My Commission Expires January 3, 1956. Received copy of the wishin for the judge who tried the case this.26.day of Iebruary, A. D, 1935, Harotp J. Ostiy, County Clerk, Received three copies of the within for the Clerk of the District Court of Appeal thisy7% day of February, A. D. 1955, a Deputy. ed Service of the within and receipt of a copy thereof is hereby admitted this.2%.day of February, A. D. 1955, 2-11-5535 a r t b b e a n n M e A h O I m a t i c e u m b e r oe EXHIBIT C INTRODUCTION Introduction n conversations with local and regional business leaders and economic development specialists in late 2009 as part of the Commission’s study of state-level economic developmentactivities, the Commission heard repeatedly about California’s regulatory environment and the need for greater clarity and consistency in how regulations were developed. After the Commission issued its 2010 report, Making Up For Lost Ground: Creating A Governor’s Office of Economic Development, and the subsequent opening of the Governor’s Office of Economic Development, the Commission continued to explore concerns about the state’s regulatory development process. The Commission heard that while most businesses and public entities covered by regulations recognize regulations as essential to a fair, safe and stable society, manyfelt that California’s regulatory process was inconsistent, often unbalanced and lacked transparency and accountability. These factors have undermined confidence in the system. Often when regulated entities complain about regulation, what they really mean is a statute that they find particularly onerous. That is a matter beyond the scope of this study. At other times, however,it is the regulation and the process that developed it that they object to. At the regulatory level, department staff, as well as regulated and unregulated stakeholders, often struggle to find regulatory solutionsto legislation that lacks focus. The Commission also heard complaints about the overlap of state, federal and local regulations, and the difficulty business owners had in planning expansions and investments becauseof it. “It would be nice to know at the start what the rules are instead of being hit with surprises all along the process,” Casey Houweling, who expanded his sustainable tomato and cucumbergreen house operations in Oxnard, told the Commission. ! The State Water Resources Control Board may have one set of conditions, while the nine regional boards may impose conditions of their own, butat least all are state entities. Navigating the process can be equally daunting for air quality regulations as the California Air Resources Board is a state agency, though local air boards, with their LITTLE HOOVER COMMISSION own priorities are not. Their goals, however, are to improve measureable benefits for the public good. The Study Process The Commission embarked on this study in June 2010 to see what changes could be made in the regulatory process to improve transparency and accountability, consistency and predictability. In a bipartisan request, Senate Minority Leader Robert Dutton and AssemblymemberFelipe Fuentes in July 2010 asked the Commission to focus specifically on how regulatory agencies developed and used economic assessments in developing new rules. A copyofthis requestis included in Appendix D. The Commission also had been encouraged to take up the topic by the California State Board of Food and Agriculture, which expressed concern that growers and ranchers faced layers of state, federal and local regulations that sometimes conflict. The canclu¢ions and recommendations in this report are based on written and oral testimony presented in two public hearings and a public advisory committee meeting, all held in Sacramento, as well as extensive interviews and staff research. The Commission held the first hearing on October 28, 2010, to learn about the landscape of economic analysis in the development of regulations and to hear from regulated groups, including representatives from the building and agriculture industries. The Commission also heard from economists from the City and County of San Francisco and the State of Arizona abouttheir regulatory review practices. The second hearing, on January 27, 2011, focused on different approaches to economic analysis, the state’s regulatory oversight practices and how two agencies used economic analysis in developing proposed regulations. The Commission also heard from an owner of a Fresno transportation firm who had been affected by diesel particulate regulations. Hearing witnessesarelisted in Appendix A. On August 26, 2011, the Commission held an advisory committee meeting to learn more about the concerns and perspectives of non- regulated stakeholders, specifically environmental groups and labor representatives, about the use of economic impact analysis in the development of regulations. Participants in this meeting are listed in Appendix B. INTRODUCTION Throughoutthe study, Commission staff received valuable input through extensive interviews and meetings with experts in economic analysis, the rulemaking process and regulatory review practices at the city, state and federal levels. The process involved interviews with current and former state employees who have been involved in the process both at the rulemaking level and at the review and oversight level. Their input was important and invaluable. The research processalso relied on interviews with outside economists, many of them academics, who had participated in California’s regulatory process and could provide informed and independentperspectives. Though the Commission greatly benefited from the contributions of all who shared their expertise, the findings and recommendations in this report are the Commission’s own. Hearing agendas, written testimony submitted electronically for each of the hearings, as well as this report are available online at the Commission’s Web site, www.lhc.ca.gov. The Commission hearings are archived on the California Channel, accessible at www.calchannel.com. EXHIBIT D 3.28.710 - Normal Rate of Contribution - Determination. A. For non-Tier 2 members: Except as provided under Section 3.28.200.4.1 and 3.28.200.A.2., the normal rate of contribution required of members shall be such that, based on interest and mortality tables and other relevant actuarial data, the total amount of normal contributions which will be required of members underthe provisions of this Chapter will be sufficient to pay, when due, three- elevenths (3/11) of the amount of all pensions, allowances and other benefits which are and will become payable under this System on account or because of current service rendered on or after July 1, 1975; provided and excepting, however, that if and when, from time to time, the members’ normal rate of contribution is hereafter amended or changed, the newrate shall not include any amount designed to thereafter recover from members or return to members the difference between the amount of normal contributions theretofore actually required to be paid by members and any greater or lesser amount which, because of amendments hereafter made to this System or as a result of experience under this System, said members should have theretofore been requiredto pay in order to make their normal contributions equal three-elevenths (3/11) of the abovementioned pensions, allowances and other benefits which areor will become payable on account or because of current service rendered on or after July 1, 1975, and before the effective date of the new rate. Notwithstanding the foregoing, members subject to this subsection A shall be responsible for any additional contributions described in Section 3.28.200, to the extent applicable to such member. For Tier 2 members: Except as provided under 3.28.200.B, the normalrate of contribution required of Tier 2 members shall be such that, based oninterest and mortality tables and other relevant actuarial data, the total amount of normal contributions which will be required of members under the provisions of this Chapterwill be sufficient to pay, when due, half of the amount ofall pensions, allowances and other benefits which are and will become payable underthis System on account or because of service rendered by Tier 2 members, including any amount designed to recover from members the difference between the amount of normalcontributions theretofore actually required to be paid by members and any greater amount which, because of amendments hereafter madeto this System or as a result of experience under this System, said members should have theretofore been required to pay in order to make their normal contributions half of the cost of the abovementioned pensions, allowances and other benefits which areor will become payable to such Tier 2 members on or after September30, 2012. There shall be no offset to normal cost contribution rates in the event Plan funding exceeds one hundred percent (100%). Both the City and employees shall always makethe full annual required Plan contributions as calculated by the Retirement Board actuaries which will be in compliance with applicable laws andwill ensure the qualified status under the Internal Revenue Code. (Prior code § 2904.1251; Ords. 29120, 29904, 30017.) EXHIBIT E CPI Calculator Information | Federal Reserve Bank of Minneapolis FEDERAL RESERVE BANK of MINNEAPOLIS About the Fed Banking Supervision Economic Research Regional Economy Community & Education Page 1 of 2 HOME CAREERS CONTACT | Search News & Events Publications Home > Community and Education > Financia! and Economic Education > CPI Calculator Information Student Essay Contest federalreserveeducation.org CPI Calculator information Past Events CPI CalculatorInformation Whatis a dollar worth? The ConsumerPrice Index (CPI) is a measure ofthe average changein prices overtime in a market basket of goods and services. The Bureau of LaborStatistics releases CPI data monthly. * Consumer Price Index and Inflation Rates, 1913- + ConsumerPrice Index and Inflation Rates (Estimate), 1800- * CPI calculator * App information Howthe CPI is used to make these calculations What would anitem or service purchasedin 2017 be worth in 19?? dollars? Example: The CPIis used to calculate how prices have changed overthe years. Let's say you have $7 in your pocket to purchase some goods and services today. How much money would you have needed in 1950 to buy the same amountof goods and services? The CPI for 1950 = 24.1 The CPI for 2017 = 244.73* Usethe following formula to compute the calculation: 1950 Price = 2017 Price x (1950 CPI / 2017 CPI*) $0.69 = $7.00 x (24.1 / 244.7) Whatwould an item or service purchased in 197? be worth in 2017 dollars? Example: Let's say your parents told you that in 1950 a movie cost 25 cents. How could youtell if movies have increasedin price faster or slower than most goods and services? To convert that price into today's dollars, use the CPi. The CPI for 1950 = 24.1 The CPI for 2017 = 244,7* A movie in 1950 = $0.25 Use the following formula to compute the calculation: 2017 Price = 1950 Price x (2017 CPI* / 1950 CPI) $2.54 = $0.25 x (244.7 / 24.1) A full-price movie at a Minneapolis theater costs between $7.00 and $11.00. Lookslike movies have increasedin price faster than most other goods andservices. *An estimate for 2017 is based on the changein the CPI from third quarter 2016 to third quarter 2017. Latest Content from the Minneapolis Fed Food-sysiem initiatives promote heallh and wealth in North Minneapolis 208 Community Dividend New Northside market offers fresh food Community Dividend U.S. inequality:It's worse than we thought Eine The Region Looking ahead for the Twin Ports @£22 ledgazetie Neel Kashkari at Howard University Symposium on TooBig to Fail President's Speeches Connect MinneapolisFed on Twitter Minneapolis Fed on Facebook RSS Feeds https://www.minneapolisfed.org/community/financial-and-economic-education/cpi-calcula... 4/23/2018 “ B A R S U N T C A R B S . CPI Calculator Information | Federal Reserve Bank of Minneapolis Page 2 of 2 Minneapolis Fed Other Federal Reserve System Sites Aboutthe Fed Privacy Board of Governors — KansasCity Banking Supervision Disclaimer Atlanta New York Economic Research Accessibility Boston Phifadelphia Regional Economy Glossary Chicago Richmond Community Careers Cleveland San Francisco News & Events Contact Us Dallas St. Louis Publications https://www.minneapolisfed.org/community/financial-and-economic-education/cpi-calcula... 4/23/2018 EXHIBIT F California Public Employees’ Retirement System Actuarial Office P.O. Box 942701 \\ Wy, Sacramento, CA 94229-2701 KX LA, TTY: (916) 795-3240 CalPERS (888) 225-7377 phone - (916) 795-2744 fax www.calpers.ca.gov July 2017 MISCELLANEOUSPLAN OF THE METROPOLITAN WATERDISTRICT OF SOUTHERN CALIFORNIA (CalPERS ID: 4104962804) Annual Valuation Report as of June 30, 2016 Dear Employer, As an attachment to this letter, you will find a copy of the June 30, 2016 actuarial valuation report of your pension plan. Your 2016 actuarial valuation report contains important actuarial information about your pension plan at CalPERS. Your CalPERSstaff actuary, whose signature appears in the “Actuarial Certification” section on page 1, is available to discuss the report with you after August 31, 2017. Required Contributions The exhibit below displays the minimum required employer contributions and the Employee PEPRA Rate for Fiscal Year 2018-19 along with estimates of the required contributions for Fiscal Years 2019-20 and 2020-21. Member contributions other than cost sharing (whether paid by the employer or the employee) are in addition to the results shown below. The required employer contributions in this report do not reflect any cost sharing arrangement you may have with your employees. Fiscal Year Employer Normal Employer Amortization of Employee Cost Rate Unfunded AccruedLiability PEPRA Rate 2018-19 8.273% $39,554,600 6.00% Projected Results 2019-20 8.7% $47,539,000 7BD 2020-21 97% $53,336,000 7BD The actual investment return for Fiscal Year 2016-17 was not known at the time this report was prepared. The projections above assume the investment return for that year would be 7.375 percent. If the actual investment return for Fiscal year 2016-17 differs from 7.375 percent, the actual contribution requirements for the projected years will differ from those shown above. Moreover, the projected results for Fiscal Years 2019-20 and 2020-21 also assume that there are no future plan changes, no further changes in assumptions other than those recently approved, and no liability gains or losses. Such changes can have a significant impact on required contributions. Since they cannot be predicted in advance, the projected employer results shown above are estimates. The actual required employer contributions for Fiscal year 2019-20 will be provided in next year’s report. For additional details regarding the assumptions and methods used for these projections please refer to the “Projected Employer Contributions”in the “Highlights and Executive Summary”section. The required contributions shown aboveinclude a Normal Cost componentexpressed as a percentage of payroll and a payment toward Unfunded AccruedLiability expressed as a dollar amount. Actual contributions for Fiscal Year 2018-19 and all future years will be collected on that basis. For illustrative total contribution requirements expressed as percentagesof payroll, please see pages 4 and 5ofthe report. The “Risk Analysis” section of the valuation report on page 21 also contains estimated employer contributions in future years undera variety of investment return scenarios. MISCELLANEOUS PLAN OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA (CalPERS ID: 4104962804) Annual Valuation Report as of June 30, 2016 Page 2 Changessince the Prior Year's Valuation On December 21, 2016, the CalPERS Board of Administration lowered the discount rate from 7.50 percent to 7.00 percent using a three year phase-in beginning with the June 30, 2016 actuarial valuations. The minimum employer contributions for Fiscal Year 2018-19 determined in this valuation were calculated using a discount rate of 7.375 percent. The projected employer contributions on Page 5 are calculated assuming that the discount rate will be lowered to 7.25 percent next year and to 7.00 percent the following year as adopted by the Board. Beginning with Fiscal Year 2017-18 CalPERS began collecting employer contributions toward the plan’s unfunded liability as dollar amounts instead of the prior method of a contribution rate. This change addresses potential funding issues that could arise from a declining payroll or reduction in the number of active members in the plan. Funding the unfunded liability as a percentage of payroll could lead to the underfunding of the plans. Due to stakeholder feedback regarding internal needs for total contributions expressed as a percentage of payroll, the reports have been modified to include such results in the contribution projection on page 5. These results are provided for information purposesonly. Contributions toward the unfundedliability will continue to be collected as dollar amounts. The CalPERS Board of Administration adopted a Risk Mitigation Policy which is designed to reduce funding risk over time. This Policy has been temporarily suspended during the period over which the discountrate is being lowered. More details on the Risk Mitigation Policy can be found on our website. Besides the above noted changes, there may also be changes specific to the plan such as contract amendments and funding changes. Further descriptions of general changes are included in the “Highlights and Executive Summary” section and in Appendix A, “Actuarial Methods and Assumptions.” The effects of the changes on. the required contributions are included in the “Reconciliation of Required Employer Contributions”section, We understand that you might have a number of questions about these results. While we are very interested in discussing these results with your agency, in the interest of allowing us to give every public agency their results, we ask that you wait until after August 31 to contact us with actuarial questions. If you have other questions, you may call the Customer Contact Center at (888)-CalPERS or (888-225-7377). Sincerely, SCOTT TERANDO Chief Actuary Ay. CalPERS ACTUARIAL VALUATION as of June 30, 2016 for the MISCELLANEOUS PLAN of the METROPOLITAN WATERDISTRICT OF SOUTHERN CALIFORNIA (CalPERS ID: 4104962804) (Rate Plan ID: 84) REQUIRED CONTRIBUTIONS FOR FISCAL YEAR July 1, 2018 — June 30, 2019 TABLE OF CONTENTS ACTUARIAL CERTIFICATION HIGHLIGHTS AND EXECUTIVE SUMMARY Introduction Purpose of the Report Required Contributions Plan’s Funded Status Projected Employer Contributions Cost ChangesSince the Prior Year’s Valuation Subsequent Events ASSETS Reconciliation of the Market Value of Assets Asset Allocation CalPERS History of Investment Returns LIABILITIES AND CONTRIBUTIONS Developmentof Accrued and UnfundedLiabilities (Gain) / Loss Analysis 06/30/15 - 06/30/16 Schedule of Amortization Bases 30-Year Amortization Schedule and Alternatives Reconciliation of Required Employer Contributions Employer Contribution History Funding History RISK ANALYSIS Analysis of Future Investment Return Scenarios Analysis of Discount Rate Sensitivity Volatility Ratios Hypothetical Termination Liability PLAN’S MAJOR BENEFIT PROVISIONS Plan‘s Major Benefit Options APPENDIX A — ACTUARIAL METHODS AND ASSUMPTIONS Actuarial Data Actuarial Methods Actuarial Assumptions Miscellaneous APPENDIX B — PRINCIPAL PLAN PROVISIONS APPENDIX C — PARTICIPANT DATA Summary of Valuation Data Active Members Transferred and Terminated Members Retired Members and Beneficiaries APPENDIX D — DEVELOPMENTOF PEPRA MEMBER CONTRIBUTION RATE APPENDIX E — GLOSSARY OF ACTUARIAL TERMS N S N D O U B W W w 10 11 13 14 15 16 18 19 19 21 23 24 26 A-1 A-3 A-21 B-1 C-1 C3 c-4 D-1 (CY) FIN PROCESS CONTROL ID: 499778 (PY) FIN PROCESS CONTROLID: 481335 REPORTID: 104921 CALPERS ACTUARIAL VALUATION - June 30, 2016 MISCELLANEOUS PLAN OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA CalPERS ID: 4104962804 ACTUARIAL CERTIFICATION To the best of our knowledge, this report is complete and accurate and contains sufficient information to disclose, fully and fairly, the funded condition of the MISCELLANEOUS PLAN OF THE METROPOLITAN WATERDISTRICT OF SOUTHERN CALIFORNIA.This valuation is based on the memberand financial data as of June 30, 2016 provided by the various CalPERS databases and the benefits underthis plan with CalPERS as of the date this report was produced. It is our opinion that the valuation has been performed in accordance with generally accepted actuarial principles, in accordance with standards of practice prescribed by the Actuarial Standards Board, and that the assumptions and methods are internally consistent and reasonable for this plan, as prescribed by the CalPERS Board of Administration according to provisions set forth in the California Public Employees’ Retirement Law. The undersigned is an actuary for CalPERS, a member of the American Academy of Actuaries and the Society of Actuaries and meets the Qualification Standards of the American Academyof Actuaries to render the actuarial opinions contained herein. BARBARA J. WARE, FSA, MAAA Enrolled Actuary Senior Pension Actuary, CalPERS Page 1 ws ’BRE BME Se & ad Ti rc INTRODUCTION PURPOSE OF THE REPORT REQUIRED CONTRIBUTIONS PLAN’S FUNDED STATUS PROJECTED EMPLOYER CONTRIBUTIONS COST CHANGES SINCE THE PRIOR YEAR’S VALUATION SUBSEQUENT EVENTS CALPERS ACTUARIAL VALUATION - June 30, 2016 MISCELLANEOUS PLAN OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA CalPERS ID: 4104962804 introduction This report presents the results of the June 30, 2016 actuarial valuation of the MISCELLANEOUS PLAN OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA of the California Public Employees’ Retirement System (CalPERS). This actuarial valuation sets the required employer contributions for Fiscal Year 2018-19. Purpose of the Report The actuarial valuation was prepared by the CalPERS Actuarial Office using data as of June 30, 2016. The purposeof the reportis to: * Set forth the assets and accruedliabilities of this plan as of June 30, 2016; * Determine the required employer contributionsfor the fiscal year July 1, 2018 through June 30, 2019; * Provide actuarial information as of June 30, 2016 to the CalPERS Board of Administration and other interested parties. The pension funding information presented in this report should not be used in financial reports subject to Governmental Accounting Standards Board (GASB) Statement No. 68 for an Agent Employer Defined Benefit Pension Plan. A separate accounting valuation report for such purposes is available from CalPERS and details for ordering are available on our website. The measurements shown in this actuarial valuation may not be applicable for other purposes. The employer should contact their actuary before disseminating any portion of this report for any reason thatis not explicitly described above. Future actuarial measurements maydiffer significantly from the current measurements presented in this report due to such factors as the following: plan experience differing from that anticipated by the economic or demographic assumptions; changes in economic or demographic assumptions; changes in actuarial policies; and changesin plan provisionsor applicable law. California Actuarial Advisory Panel Recommendations This report includes all the basic disclosure elements as described in the Model Disclosure Elements for Actuarial Valuation Reports recommended in 2011 by the California Actuarial Advisory Panel (CAAP), with the exception of including the original base amounts of the various components of the unfunded fiability in the Schedule of Amortization Bases shown on page 15. Additionally, this report includes the following “Enhanced Risk Disclosures” also recommended by the CAAP in the Model Disclosure Elements document: « A “Deterministic Stress Test,” projecting future results under different investment income scenarios * ASensitivity Analysis,” showing the impact on current valuation results using alternative discount rates of 6.0 percent, 7.0 percent and 8.0 percent. Page 3 CALPERS ACTUARIAL VALUATION - June 30, 2016 MISCELLANEOUS PLAN OF THE METROPOLITAN WATERDISTRICT OF SOUTHERN CALIFORNIA CalPERS ID: 4104962804 Required Contributions Fiscal Year Required Employer Contribution 2018-19 Employer Normal Cost Rate 8.273% Plus Either 1) Monthly Employer Dollar UAL Payment $ 3,296,217 Or 2) Annual UAL Prepayment Option $ 38,172,043 Required PEPRA MemberContribution Rate 6.00% The total minimum required employer contribution is the sum of the Plan’s Employer Normal Cost Rate (expressed as a percentage ofpayroll) plus the Employer Unfunded Accrued Liability (UAL) Contribution Amount (billed monthly in dollars). Only the UAL portion of the employer contribution can be prepaid (which must be receivedin full no later than July 31). Plan Normal Cost contributions will be made as part of the payroll reporting Process. If there is contractual cost sharing or other change, this amountwill change. §20572 of the Public Employees’ Retirement Law assesses interest at an annual rate of 10 percent if a contracting agencyfails to remit the required contributions when due. For additional detail regarding the determination of the required contribution for PEPRA members, see Appendix D. Required member contributions for Classic members can be found in Appendix B. m Fiscal Year Fiscal Year 2017-18 2018-19 NormalCost Contribution as a Percentageof Payroll Total Normal Cost 14.781% 15.163% Employee Contribution! 6.928% 6.890% Employer Normal Cost 7.853% 8.273% Projected Annual Payrolt for Contribution Year $ 216,562,734 $ 223,495,119 Estimated Employer Contributions Based On Projected Payroll Total Normal Cost $ 32,010,138 $ 33,888,565 Employee Contribution! 15,003,466 15,398,814 Employer Normal Cost 17,006,672 18,489,751 UnfundedLiability Contribution 32,560,150 39,554,600 %of Projected Payroll (illustrative only) 15.035% 17.698% Estimated Total Employer Contribution $ 49,566,822 $ 58,044,351 % of Projected Payroll (iflustrative only) 22.888% 25.971% For classic members, this is the percentage specified in the Public Employees Retirement Law, net of any reduction from the use of a modified formula or other factors. For PEPRA members, the member contribution rate is based on 50 percent of the normal cost. A development of PEPRA membercontribution rates can be found in Appendix D. Employee cost sharing is not shownin this report. Page 4 CALPERS ACTUARIAL VALUATION - June 30, 2016 MISCELLANEOUS PLAN OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA CalPERS ID: 4104962804 Plan’s Funded Status June 30, 2015 June 30, 2016 1. Present Value of Projected Benefits $ 2,253,262,133 $ 2,372,280,758 2. Entry Age Normal AccruedLiability 2,060,838,792 2,166,285,855 3. Market Value of Assets (MVA) $ 1,556,550,472 $ 1,523,692,793 4. Unfunded Accrued Liability (UAL) [(2) - (3)] $ 504,288,320 $ 642,593,062 5. Funded Ratio [(3) / (2)] 75.5% 70.3% This measureof funded status is an assessment of the need for future employer contributions based on the selected actuarial cost method used to fund the plan. The UAL is the present value of future employer contributionsfor service that has already been earned and is in addition to future normal cost contributions for active members. For a measure of funded status that is appropriate for assessing the sufficiency of plan assets to coverestimated terminationliabilities, please see “Hypothetical Termination Liability” in the “Risk Analysis” section. Projected Employer Contributions The table below shows the required and projected employer contributions (before cost sharing) for the next six fiscal years. Projected results reflect the adopted changes to the discount rate described in Appendix A, “Actuarial Methods and Assumptions.” The projections also assume that all actuarial assumptions will be realized and that no further changes to assumptions, contributions, benefits, or funding will occur during the projection period. The projected normal cost percentages in the projections below do notreflect that the normalcostwill decline over time as new employeesare hired into PEPRA or other lower cost benefit tiers. Required Projected Future Employer Contributions Contribution (Assumes7.375%Return for Fiscal Year 2016-17) Fiscal Year 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 Normal Cost % 8.273% 8.7% 9.7% 9.7% 9.7% 9.7% 9.7% UAL Payment 39,554,600 47,539,000 53,336,000 60,805,000 67,424,000 71,915,000 75,759,000 a ajroa0 70 OF 26.0% 29.4% 32.2% 34.6% 36.5% 37.4% 38.1% Projected Payroll 223,495,119 230,199,973 237,105,972 244,219,152| 251,545,727 259,092, 099| 266,864,861 *Illustrative only and based on the projected payroll shown. Changesin the UAL due to actuarial gains or losses as well as changesin actuarial assumptions or methods are amortized using a 5-year ramp up. For more information, please see “Amortization of the Unfunded Actuarial Accrued Liability” under “Actuarial Methods” in Appendix A. This method phases in the impact of unanticipated changes in UAL over a 5-year period and attempts to minimize employer cost volatility from year to year. As a result of this methodology, dramatic changes in the required employer contributions in any one yeararelesslikely. However, required contributions can change gradually and significantly over the next five years. In years where there is a large increase in UAL the relatively small amortization payments during the ramp up period could result in a funded ratio that is projected to decrease initially while the contribution impact of the increase in the UAL is phased in. Due to the adopted changesin the discount rate for the next two valuations in combination with the 5-year phase-in ramp, the increases in the required contributions are expected to continue for seven years from Fiscal Year 2018-19 through Fiscal Year 2024-25. For projected contributions under alternate investment return scenarios, please see the “Analysis of Future Investment Return Scenarios” in the “Risk Analysis” section. Page 5 CALPERS ACTUARIAL VALUATION - June 30, 2016 MISCELLANEOUS PLAN OF THE METROPOLITAN WATERDISTRICT OF SOUTHERN CALIFORNIA CalPERS ID: 4104962804 Cost Actuarial Cost Estimates in General Whatis the cost of the pension plan? Contributions to fund the pension plan are comprised of two components: * The NormalCost, expressed as a percentageoftotal active payroll. e The Amortization of the Unfunded Accrued Liability (UAL), expressed as a dollar amount. For fiscal years prior to FY 2017-18, the Amortizations of UAL component was expressed as percentage of total active payroll. Starting with FY 2017-18, the Amortization of UAL component will be expressed as a dollar amountand will be invoiced on a monthly basis. There will be an option to prepay this amount during July of eachfiscal year. The Normal Cost componentwill continue to be expressed as a percentage of active payroll with employer and employee contributions payable as part of the regular payroll reporting process. The determination of both components requires complex actuarial calculations. The calculations are based on a set of actuarial assumptions which can be divided into two categories: « Demographic assumptions (which includes mortality rates, retirement rates, employment termination rates, disability rates) e Economic assumptions (whichincludes future investment earnings, inflation, salary growth rates) These assumptionsreflect CalPERS best estimate of the future experience of the plan and are long term in nature. We ‘recognize that all the assumptions will not be realized in any given year. For example, the investment earnings at CalPERS have averaged 7.0 percent over the 20 years ending June 30, 2016, yet individual fiscal year returns have ranged from -24 percent to +21.7 percent. In addition, CalPERS reviews all the actuarial assumptions on an ongoing basis by conducting in depth experience studies every four years. Page 6 CALPERS ACTUARIAL VALUATION - June 30, 2016 MISCELLANEOUS PLAN OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA CalPERS ID: 4104962804 Changes since the Prior Year’s Valuation Benefits The standard actuarial practice at CalPERS is to recognize mandated legislative benefit changes in thefirst annual valuation following the effective date of the legislation. Voluntary benefit changes by plan amendment are generally included in the first valuation that is prepared after the amendment becomes effective, even if the valuation date is prior to the effective date of the amendment. This valuation generally reflects plan changes by amendments effective before the date of the report. Please refer to the “Plan's Major Benefit Options” and Appendix B for a summary of the plan provisions used in this valuation. The effect of any mandated benefit changes or plan amendments on the unfunded liability is shown in the “(Gain)/Loss Analysis” and the effect on the employer contribution is shown in the “Reconciliation of Required Employer Contributions.” It should be noted that no change in liability or contribution is shown for any plan changes which were alreadyincluded in the prior year’s valuation. Actuarial Methods and Assumptions On December 21, 2016, the CalPERS Board of Administration lowered the discount rate from 7.50 percent to 7.00 percent using a three year phase-in beginning with the June 30, 2016 actuarial valuations. The minimum employer contributions for Fiscal Year 2018-19 determined in this valuation were calculated using a discount rate of 7.375 percent. The projected employer contributions on Page 5 are calculated assuming that the discount rate will be lowered to 7.25 percent next year and 7.00 percent the following year as adopted by the Board. The decision to reduce the discount rate was primarily based on reduced capital market assumptions provided by external investment consultants and CalPERS investmentstaff. The specific decision adopted by the Board reflected recommendations from CalPERS staff and additional input from employer and employee stakeholder groups. Based on the investmentallocation adopted by the Board and capital market assumptions, the reduced discount rate assumption provides a more realistic assumption for the long term investment return of the fund. Notwithstanding the Board's decision to phase into a 7.0 percent discount rate, subsequent analysis of the expected investment return of CalPERS assets or changes to the investmentallocation may result in a change to this three year discount rate schedule. A comprehensive analysis of all actuarial assumptions and methodsincluding the discount rate will be conducted in 2017. Subsequent Events The contribution requirements determined in this actuarial valuation report are based on demographic and financial information as of June 30, 2016. Changes in the value of assets subsequent to that date are not reflected. Declines in asset values will increase the required contribution, while investment returns above the assumedrate of return will decrease the actuarial cost of the plan. This actuarial valuation report reflects statutory changes, regulatory changes and CalPERS Board actions through January 2017. Any subsequent changesor actions are not reflected. Page 7 ASSETS e RECONCILIATION OF THE MARKET VALUE OF ASSETS e ASSET ALLOCATION ¢ CALPERS HISTORY OF INVESTMENT RETURNS CALPERS ACTUARIAL VALUATION- June 30, 2016 MISCELLANEOUS PLAN OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA CalPERS ID: 4104962804 Reconciliation of the Market Value of Assets 2 CP A O N A M D A w W N e Market Value of Assets as of 6/30/15 including Receivables Change in Receivables for Service Buybacks Employer Contributions Employee Contributions Benefit Payments to Retirees and Beneficiaries Refunds Lump Sum Payments Transfers and Miscellaneous Adjustments Net Investment Return Market Value of Assets as of 6/30/16 including Receivables $ $ 1,556,550,472 (625,420) 38,396,861 14,344,411 (91,667,827) (733,628) 0 1,164,332 6,263,592 1,523,692,793 Page 9 CALPERS ACTUARIAL VALUATION - June 30, 2016 MISCELLANEOUS PLAN OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA CalPERS ID: 4104962804 Asset Allocation CalPERS adheres to an Asset Allocation Strategy which establishes asset class allocation policy targets and ranges, and manages those assetclassallocations within their policy ranges. CalPERS Investment Belief No. 6 recognizes that strategic asset allocation is the dominant determinant of portfolio risk and return. On February 19, 2014, the CalPERS Board of Administration adopted changes to the current asset allocation as shownin the Policy Target Allocation below expressed as a percentage oftotal assets. The assetallocation and market value of assets shown below reflect the values of the Public Employees’ Retirement Fund (PERF) in its entirety as of June 30, 2016. The assets for METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA MISCELLANEOUS PLAN are part of the PERF and are invested accordingly. (B) (C) (A) Market Value Policy Target Asset Class ($ Billion) Allocation Public Equity 153.1 51.0% Private Equity 26.4 10.0% Global Fixed Income _ 59.9 20.0% Liquidity 4.5 1.0% Real Assets 31.8 12.0% Inflation Sensitive Assets 17.8 6.0% Other 1.6 0.0% Total Fund $295.1 100.0% Asset Allocation at 6/30/2016 Inflation Other 6.0% 05% Real Assets 10.8% Liquidity 1.5% Global Equity 51.9% Global Fixed Income 20.3% Private Equity 9.0% Page 10 CALPERS ACTUARIAL VALUATION- June 30, 2016 MISCELLANEOUS PLAN OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA CalPERS ID: 4104962804 CaiPERS History of Investment Returns Thefollowing is a chart with the 20-year historical annual returnsof the Public Employees Retirement Fund for each fiscal year ending on June 30. Beginning in 2002, the figures are reported as grossoffees. 25.0% S L O e h 5 ° 6 T Y T 6 T M L T Z 20.0% + 15.0% 4 10.0% +4 5.0% - | I “4 :0.0% + -5.0% + * S Z T % 5 ' O T wo | 7 98 99 00 Ga Ge % 9 ' O T ) E L T 03 04 O05 % 8 ' TT % E L E T ) % E ' E T M A L T 06 07 a Y T % 3 ° 0 15 -10.0% + E E %E '9 - -15.0% + -20.0% + BOVE -25.0% The table below showshistorical geometric mean annual returns of the Public Employees Retirement Fund for various time periods ending on June 30, 2016, (figures are reported as gross of fees). The geometric mean rate of return is the average rate per period compounded over multiple periods. It should be recognized that in any given yearthe rate of return is volatile. The portfolio has an expected volatility of 11.8 percent per year based on the most recent Asset Liability Modelling study. The volatility is a measure of the risk of the portfolio expressed in the standard deviation of the fund’s total return distribution, expressed as a percentage. Consequently, when looking at investment returns, it is more instructive to look at returns over longer time horizons. History of CalPERS Geometric Mean Rates of Return and Volatilities 1 year 5 year 10 year 20 year 30 year Geometric Return 0.6% 6.6% 5.0% 7.0% 8.2% Volatility = 8.1% 14.0% 11.8% 10.1% Page 11 DEVELOPMENT OF ACCRUED AND UNFUNDEDLIABILITIES (GAIN) / LOSS ANALYSIS 06/30/15 - 06/30/16 SCHEDULE OF AMORTIZATION BASES 30-YEAR AMORTIZATION SCHEDULES AND ALTERNATIVES RECONCILIATION OF REQUIRED EMPLOYER CONTRIBUTIONS EMPLOYER CONTRIBUTION HISTGRY FUNDING HISTORY CALPERS ACTUARIAL VALUATION - June 30, 2016 MISCELLANEOUS PLAN OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA CalPERS ID: 4104962804 Development of Accrued and Unfunded Liabilities a . Present Value of Projected Benefits a) Active Members b) Transferred Members c) Terminated Members d) Members and Beneficiaries Receiving Payments e) Total Present Value of Future Employer Normal Costs Present Value of Future Employee Contributions Entry Age Normal Accrued Liability a) Active Members [(1a) - (2) - (3)] b) Transferred Members (1b) c) Terminated Members (1c) d) Members and Beneficiaries Receiving Payments (1d) e) Total Market Value of Assets (MVA) Unfunded Accrued Liability (UAL) [(4e) - (5)] Funded Ratio [(5) / (4e)] t A t A June 30, 2015 June 30, 2016 1,147,558,599 1,188,656,823 25,904,694 25,287,374 23,336,374 24,492,732 1,056,462,466 1,133,843,829 2,253,262,133 2,372,280,758 99,894,041 110,091,418 92,529,300 95,903,485 955,135,258 982,661,920 25,904,694 25,287,374 23,336,374 24,492,732 1,056,462,466 1,133,843,829 2,060,838,792 2,166,285,855 1,556,550,472 1,523,692,793 504,288,320 642,593,062 75.5% 70.3% Page 13 CALPERS ACTUARIAL VALUATION - June 30, 2016 MISCELLANEOUS PLAN OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA CalPERS ID: 4104962804 (Gain)/Loss Analysis 6/30/15 — 6/30/16 To calculate the cost requirements of the plan, assumptions are made about future events that affect the amount and timing of benefits to be paid and assets to be accumulated. Each year, actual experience is compared to the expected experience based on the actuarial assumptions. This results in actuarial gains or losses, as shown below. 1. Total (Gain)/Loss for the Year a) Unfunded Accrued Liability (UAL) as of 6/30/15 $ 504,288,320 b) Expected Payment on the UAL during 2015-16 24,401,837 c) Interest through 6/30/16 [.075 x (1a) - ((1.075)” - 1) x (1b)] 36,923,098 d) Expected UAL before all other changes [(1a) - (1b) + (1ic)] 516,809,581 e) Change due to plan changes 0 f) Change due to assumption change 31,213,949 g) Expected UALafterall other changes [(1d) + (1e) + (1f)] 548,023,530 h) Actual UAL as of 6/30/16 642,593,062 i) Total (Gain)/Loss for 2015-16 [(1h) - (1g)] $ 94,569,532 2. Contribution (Gain)/Loss for the Year a) Expected Contribution (Employer and Employee) $ 54,433,612 b) Interest on Expected Contributions 2,004,358 c) Actual Contributions 52,741,272 d) Interest on Actual Contributions 1,942,043 e) Expected Contributions with Interest [(2a) + (2b)] 56,437,970 f) Actual Contributions with Interest [(2c) + (2d)] 54,683,315 g) Contribution (Gain)/Loss [(2e) - (2f)] $ 1,754,655 3. Asset (Gain)/Loss for the Year a) Market Value of Assets as of 6/30/15 $ 1,556,550,472 b) Prior Fiscal Year Receivables (4,903,336) c) Current Fiscal Year Receivables 4,277,916 d) Contributions Received 52,741,272 e) Benefits and Refunds Paid (92,401,455) f) Transfers and Miscellaneous Adjustments 1,164,332 g) ExpectedInt. [.075 x (3a + 3b) + ((1.075)” - 1) x ((3d) + (3e) + (3f))] 114,956,038 h) Expected Assets as of 6/30/16 [(3a) + (3b) + (3c) + (3d) + (3e) + (3f) + (3g)] 1,632,385,239 i) Market Value of Assets as of 6/30/16 1,523,692,793 }j) Asset (Gain)/Loss [(3h)- (3i)] $ 108,692,446 4. Liability (Gain)/Loss for the Year a) Total (Gain)/Loss(1i) $ 94,569,532 b) Contribution (Gain)/Loss (2g) 1,754,655 c) Asset (Gain)/Loss (3j) 108,692,446 d) Liability (Gain)/Loss [(4a) - (4b) - (4c)] $ (15,877,569) Page 14 C A L P E R S A C T U A R I A L V A L U A T I O N - J u n e 30 , 2 0 1 6 M I S C E L L A N E O U S P L A N O F T H E M E T R O P O L I T A N W A T E R D I S T R I C T O F S O U T H E R N C A L I F O R N I A C a l P E R S ID : 4 1 0 4 9 6 2 8 0 4 S c h e d u l e o f A m o r t i z a t i o n B a s e s Th er e is a tw o- ye ar la g be tw ee n th e va lu at io n da te an d th e st ar t of th e co nt ri bu ti on fi sc al ye ar . * T h e as se ts ,l ia bi li ti es , a n d f u n d e d st at us of th e pl an ar e m e a s u r e d as of th e va lu at io n da te : J u n e 30 , 20 16 . e T h e re qu ir ed e m p l o y e r co nt ri bu ti on s d e t e r m i n e d b y th e va lu at io n ar e fo r th e fi sc al y e a r be gi nn in g t w o ye ar s af te r th e va lu at io n da te : Fi sc al Y e a r 2 0 1 8 - 1 9 . Th is t w o - y e a r la g is n e c e s s a r y d u e to th e a m o u n t o f ti me n e e d e d to ex tr ac t a n d te st th e m e m b e r s h i p a n d fi na nc ia l da ta , a n d th e n e e d to pr ov id e pu bl ic ag en ci es wi th th ei r re qu ir ed e m p l o y e r co nt ri bu ti on we ll in a d v a n c e of th e st ar t of th ef i s c a l ye ar . T h e U n f u n d e d A c c r u e d Li ab il it y ( U A L ) is u s e d to d e t e r m i n e th e e m p l o y e r co nt ri bu ti on a n d th er ef or e mu st b e ro ll ed f o r w a r d t w o ye ar s f r o m th e va lu at io n da te to th e fi rs t d a y of th e f i s c a l y e a r fo r w h i c h th e co nt ri bu ti on is be in g de te rm in ed . T h e UA L i s ro ll ed f o r w a r d e a c h y e a r b y su bt ra ct in g th e e x p e c t e d p a y m e n t o n th e UA Lf o r th e fi sc al ye ar a n d ad ju st in g fo r in te re st . T h e e x p e c t e d p a y m e n t o n th e UA Lf o r a fi sc al ye ar is eq ua l to th e E x p e c t e d E m p l o y e r Co nt ri bu ti on fo r th e fi sc al y e a r m i n u s th e E x p e c t e d N o r m a l C o s t fo r th e ye ar . T h e E m p l o y e r Co nt ri bu ti on fo r th e f i r s t fi sc al ye ar is d e t e r m i n e d b y th e ac tu ar ia l va lu at io n t w o ye ar s a g o an d t h e co nt ri bu ti on fo r th e s e c o n d ye ar is f r o m th e ac tu ar ia l va lu at io n o n e y e a r ag o. T h e N o r m a l C o s t R a t e fo r e a c h of th e tw of i s c a l ye ar s is a s s u m e d to b e th e s a m e as th e ra te d e t e r m i n e d by th e cu rr en t va lu at io n. Al l e x p e c t e d do ll ar a m o u n t s ar e d e t e r m i n e d b y mu lt ip ly in g th e ra te b y th e e x p e c t e d pa yr ol l fo r th e ap pl ic ab le fi sc al ye ar , b a s e d o n pa yr ol l as of th e va lu at io n da te . A m o r t i - D a t e z a t i o n E s t a b l i s h e d P e r i o d 06 /3 0/ 03 7 06 /3 0/ 04 8 06 /3 0/ 09 13 0 6 / 3 0 / 0 9 2 3 0 6 / 3 0 / 1 0 2 4 0 6 / 3 0 / 1 1 1 5 0 6 / 3 0 / 1 1 2 5 06 /3 0/ 12 26 06 /3 0/ 12 26 06 /3 0/ 13 27 06 /3 0/ 14 18 06 /3 0/ 14 28 06 /3 0/ 15 29 0 6 / 3 0 / 1 6 2 0 06 /3 0/ 16 30 E x p e c t e d P a y m e n t 2 0 1 6 - 1 7 $5 ,6 91 ,7 14 $( 52 7, 26 8) $4 ,1 88 ,1 43 $3 ,5 84 ,9 10 $1 ,1 90 ,3 06 $3 ,0 80 ,8 39 $7 15 ,7 24 $1 10 ,0 86 $3 ,5 81 ,7 94 $6 ,2 39 ,9 70 $1 ,7 94 ,5 22 $( 2, 03 3, 06 1) $( 37 7, 03 1) $( 91 6, 39 5) $1 64 ,8 38 $ 2 6 , 4 8 9 , 0 9 1 E x p e c t e d P a y m e n t 2 0 1 7 - 1 8 $5 ,8 62 ,4 65 $( 54 3, 08 6) $4 ,3 13 ,7 87 $3 ,6 92 ,4 57 $1 ,2 26 ,0 15 $3 ,1 73 ,2 64 $7 37 ,1 96 $1 13 ,3 89 $3 ,6 89 ,2 47 $9 ,6 40 ,7 54 $3 ,6 96 ,7 15 $( 4, 18 8, 10 5) B a l a n c e 6 / 3 0 / 1 6 $4 1, 89 2, 87 7 $( 4, 22 6, 95 1) $4 5, 68 7, 39 8 $ 5 4 , 2 3 9 , 2 1 0 $ 1 8 , 4 0 3 , 3 3 0 $3 6, 67 1, 75 7 $ 1 1 , 2 9 2 , 9 0 6 $ 1 , 7 7 0 , 4 4 3 $5 7, 60 3, 43 8 $2 28 ,3 76 ,3 81 $9 4, 21 2, 07 0 $( 14 4, 54 7, 15 4) $ 7 5 , 4 3 3 , 8 7 4 $3 1, 21 3, 94 9 $9 4, 56 9, 53 4 $ 6 4 2 , 5 9 3 , 0 6 2 B a l a n c e 6 / 3 0 / 1 7 $ 3 9 , 0 8 4 , 6 1 4 $ ( 3 , 9 9 2 , 3 2 3 ) $ 4 4 , 7 1 7 , 0 1 0 $ 5 4 , 5 2 4 , 6 0 0 $ 1 8 , 5 2 7 , 1 5 8 $ 3 6 , 1 8 3 , 8 7 5 $ 1 1 , 3 8 4 , 1 1 1 $ 1 , 7 8 6 , 9 4 0 $ 5 8 , 1 4 0 , 1 6 8 $ 2 3 8 , 7 5 3 , 1 6 3 $ 9 9 , 3 0 0 , 6 9 2 $ ( 1 5 3 , 1 0 0 , 8 1 0 ) $ 8 1 , 3 8 7 , 8 0 9 $ 1 , 1 4 6 , 0 5 2 $ 3 4 , 4 6 5 , 5 6 4 $ ( 9 4 3 , 8 8 7 ) $ 1 0 1 , 3 7 3 , 2 2 9 $ 0 $ 6 6 2 , 5 3 5 , 7 9 9 $ 3 1 , 6 1 6 , 2 6 3 R e a s o n f o r B a s e A S S U M P T I O N C H A N G E M E T H O D C H A N G E A S S U M P T I O N C H A N G E S P E C I A L ( G A I N ) / L O S S S P E C I A L ( G A I N ) / L O S S A S S U M P T I O N C H A N G E S P E C I A L ( G A I N ) / L O S S P A Y M E N T ( G A I N ) } / L O S S ( G A I N ) / L O S S ( G A I N ) / L O S S A S S U M P T I O N C H A N G E ( G A I N } / L O S S ( G A I N ) / L O S S A S S U M P T I O N C H A N G E ( G A I N ) / L O S S T O T A L B a l a n c e 6 / 3 0 / 1 8 $ 3 5 , 8 9 2 , 3 0 6 $ ( 3 , 7 2 4 , 0 0 1 ) $ 4 3 , 5 4 4 , 8 6 1 $ 5 4 , 7 1 9 , 5 9 4 $ 1 8 , 6 2 3 , 1 1 6 $ 3 5 , 5 6 4 , 2 3 9 $ 1 1 , 4 5 9 , 7 9 3 $ 1 , 8 0 1 , 2 3 1 $ 5 8 , 6 0 5 , 1 3 7 $ 2 4 6 , 3 7 1 , 2 7 6 $ 1 0 2 , 7 9 3 , 5 1 2 $ ( 1 6 0 , 0 5 2 , 2 0 0 ) $ 8 6 , 2 0 2 , 5 9 9 $ 3 7 , 9 8 5 , 4 7 3 $ 1 0 8 , 8 4 9 , 5 0 5 $ 6 7 8 , 6 3 6 , 4 4 1 S c h e d u l e d P a y m e n t f o r 2 0 1 8 - 1 9 $5 ,9 98 ,6 13 $( 55 5, 43 3) $4 ,4 01 ,4 23 $3 ,7 51 ,3 13 $1 ,2 45 ,0 69 $3 ,2 34 ,7 75 $7 48 ,3 66 $1 15 ,0 64 $3 ,7 43 ,7 31 $1 3, 04 7, 95 2 $5 ,6 48 ,4 15 $( 6, 37 2, 71 4) $2 ,3 23 ,3 38 $7 15 ,9 77 $1 ,5 08 ,7 11 $ 3 9 , 5 5 4 , 6 0 0 P a g e 15 CALPERS ACTUARIAL VALUATION - June 30, 2016 MISCELLANEOUS PLAN OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA CalPERSID: 4104962804 30-Year Amortization Schedule and Alternatives The amortization schedule on the previous page shows the minimum contributions required according to CalPERS amortization policy. There has been considerable interest from many agencies in paying off these unfunded accrued liabilities sooner and the possible savings in doing so. As a result, we have provided alternate amortization schedules to help analyze the current amortization schedule and illustrate the advantagesof accelerating unfunded liability payments. Shown onthe following page are future year amortization payments based on 1) the current amortization schedulereflecting the individual bases and remaining periods shown on the previous page, and 2) alternate “fresh start” amortization schedules using two sample periods that would both result in interest savings relative to the current amortization schedule. Note that the payments under each alternate scenario increase by 3 percent per year. The schedules do not reflect the impact of adopted discount rate changesthat will become effective beyond June 30, 2016. Therefore, future amortization paymentsdisplayed in the Current Amortization Schedule on the following page will not match projected amortization payments shown in connection with Projected Employer Contributions provided elsewherein this report. The Current Amortization Schedule typically contains individual bases that are both positive and negative. Positive bases result from plan changes, assumption changesorplan experience that result in increases to unfunded liability. Negative bases result from plan changes, assumption changes or plan experience that result in decreases to unfunded liability. The combination of positive and negative bases within an amortization schedule can result in unusual or problematic circumstances in future years such as: * A positive total unfundedliability with a negative total payment, « Anegative total unfundedliability with a positive total payment, or ¢ Total payments that completely amortize the unfunded liability over a very short period of time In any year where one of the above scenarios occurs, the actuary will consider corrective action such as replacing the existing unfunded liability bases with a single “fresh start” base and amortizing it over a reasonable period. The Current Amortization Schedule on the following page may appear to show that, based on the current amortization bases, one of the above scenarios will occur at some point in the future. It is impossible to know today whether such a scenario will in fact arise since there will be additional bases added to the amortization schedule in each future year. Should such a scenario arise in any future year, the actuary will take appropriate action based on quidelines in the CalPERS amortization policy. For purposes ofthis display, total payments include any negative payments. Therefore, the amount of estimated savings may be understated to the extent that negative payments appearin the current schedule. Page 16 CALPERS ACTUARIAL VALUATION - June 30, 2016 MISCELLANEOUS PLAN OF THE METROPOLITAN WATERDISTRICT OF SOUTHERN CALIFORNIA CalPERS ID: 4104962804 30-Year Amortization Schedule and Alternatives Current Amortization Alternate Schedules 20 Year Amortization 15 Year Amortization Schedule* Date Balance Payment Balance Payment Balance Payment 6/30/2018 678,636,441 39,554,600 678,636,441 50,729,765 678,636,441 61,725,946 6/30/2019 687,698,647 47,340,356 676,118,728 52,251,658 664,724,275 63,577,724 6/30/2020 689,361,440 52,097,017 671,838,319 53,819,207 647,867,239 65,485,056 6/30/2021 686,217,921 57,360,288 665,617,905 55,433,784 627,790,583 67,449,608 6/30/2022 677,388,667 61,585,003 657,265,681 57,096,797 604,197,567 69,473,096 6/30/2023 663,530,525 63,432,552 646,574,234 58,809,701 576,767,790 71,557,289 6/30/2024 646,735,881 65,335,528 633,319,349 60,573,992 545,155,386 73,704,007 6/30/2025 626,730,729 59,918,060 617,258,724 62,391,212 508,987,096 75,915,128 6/30/2026 610,863,883 62,419,206 598,130,591 64,262,948 467,860,190 78,192,581 6/30/2027 591,235,121 64,291,781 575,652,228 66,190,837 421,340,234 80,538,359 6/30/2028 568,218,339 66,220,535 549,518,372 68,176,562 368,958,691 82,954,510 6/30/2029 541,505,460 68,207,151 519,399,497 70,221,858 310,210,348 85,443,145 6/30/2030 510,763,934 70,253,366 484,939,980 72,328,514 244,550,544 88,006,439 6/30/2031 475,634,896 65,897,331 445,756,116 74,498,370 171,392,194 90,646,632 6/30/2032 442,428,898 65,026,338 401,433,997 76,733,321 90,102,597 93,366,031 6/30/2033 407,676,495 59,004,105 351,527,223 79,035,320 6/30/2034 376,601,457 56,603,946 295,554,448 81,406,380 6/30/2035 345,721,726 54,006,673 232,996,743 83,848,571 6/30/2036 315,255,957 51,202,623 163,294,763 86,364,029 6/30/2037 285,448,949 51,483,232 85,845,696 88,954,949 6/30/2038 253,152,902 51,734,595 6/30/2039 218,214,553 53,286,633 6/30/2040 179,091,250 54,885,231 6/30/2041 135,426,106 42,690,435 6/30/2042 101,177,137 39,127,365 6/30/2043 68,094,429 33,919,799 6/30/2044 37,968,051 18,402,974 6/30/2045 21,698,683 10,496,106 6/30/2046 =12,422,695 9,561,457 6/30/2047 3,431,104 3,555,376 Totals 1,498,899,662 1,363,127,775 1,148,035,551 Interest Paid 820,263,221 684,491,334 469,399,110 Estimated Savings 135,771,887 350,864,111 * This schedule does not reflect the impact of adopted discount rate changes that will become effective beyond June 30, 2016. For Projected Employer Contributions, please see Page 5. Page 17 CALPERS ACTUARIAL VALUATION - June 30, 2016 MISCELLANEOUS PLAN OF THE METROPOLITAN WATERDISTRICT OF SOUTHERN CALIFORNIA CalPERS ID: 4104962804 Reconciliation of Required Employer Contributions Normal Cost (%of Payroll) 1. For Period 7/1/17 — 6/30/18 a) Employer Normal Cost 7.853% b) Employee Contribution 6.928% c) Total Normal Cost 14.781% 2. Changessince the prior year annualvaluation a) Effect of changes in demographicsresults (0.053%) b) Effect of plan changes 0.000% c) Effect of changes in assumptions 0.435% d) Net effect of the changes above [sum of (a) through (c)] 0.382% 3. For Period 7/1/18 — 6/30/19 a) Employer Normal Cost 8.273% b) Employee Contribution 6.890% c) Total Normal Cost 15.163% Employer Normal Cost Change [(3a) — (1a)] 0.420% Employee Contribution Change [(3b) — (1b)] (0.038%) UnfundedLiability Contribution ($) 1. For Period 7/1/17 — 6/30/18 32,560,150 2. Changessince the prior year annual valuation a) Effect of (gain)/loss during prior year’ 1,508,711 b) Effect of plan changes 0 c) Effect of changes in assumptions” 715,977 d) Changesto prior year amortization payments? 4,769,762 e) Effect of changes due to Fresh Start 0 f) Effect of elimination of amortization base 0 g) Neteffect of the changes above [sum of (a) through (f)] 6,994,450 3. For Period 7/1/18 — 6/30/19 [(1)+(2g)]} 39,554,600 M The unfunded liability contribution for the (gain)/loss during the year prior to the valuation date is 20 percent of the “full” annual requirement due to the 5-year ramp. Increases to this amount that occur during the ramp period will be includedin line d) in future years. N The unfundedliability contribution for the change in assumptions is 20 percent of the “full” annual requirement due to the 5-year ramp.Increases to this amount that occur during the ramp period will be included in line d) in future years. w Includes changes due to 5-year ramp, payroll growth assumption, and re-amortization under new discount rate. The amounts shownfor the period 7/1/17 — 6/30/18 may be differentif a prepayment of unfunded actuarial liability is made or a plan change becameeffective after the prior year’s actuarial valuation was performed. Page 18 CALPERS ACTUARIAL VALUATION - June 30, 2016 MISCELLANEOUS PLAN OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA CalPERS ID: 4104962804 Employer Contribution History The table below provides a recenthistory of the required employer contributions for the plan, as determined by the annual actuarial valuation. It does not account for prepayments or benefit changes made during a fiscal year. Required By Valuation Funding History Fiscal Employer UnfundedLiability Year Normal Cost Unfunded Rate Payment($) 2013 - 14 7.614% 8.692% N/A 2014-15 7.551% 10.098% N/A 2015 - 16 7.830% 11.908% N/A 2016 - 17 7.841% 12.906% N/A 2017 - 18 7.853% N/A 32,560,150 2018 - 19 8.273% N/A 39,554,600 The table below showsthe recent history of the actuarial accrued liability, the market value of assets, the funded ratio and the annual covered payroll. Market Value Annual Valuation Accrued of Assets Unfunded Funded Covered Date Liability (MVA) Liability Ratio Payroll 06/30/11 $ 1,674,273,673 $ 1,257,198,566 $ 417,075,107 75.1% $ 190,711,171 06/30/12 1,730,939,013 1,227,131,908 503,807,105 70.9% 184,657,361 06/30/13 1,804,537,241 1,355,885,365 448,651,876 75.1% 184,561,428 06/30/14 1,983,273,573 1,560,047,879 423,225,694 78.7% 195,830,068 06/30/15 2,060,838,792 1,556,550,472 504,288,320 75.5% 198,185,580 06/30/16 2,166,285,855 1,523,692,793 642,593,062 70.3% 204,529,694 Page 19 RISK ANALYSIS * ANALYSIS OF FUTURE INVESTMENT RETURN SCENARIOS e ANALYSIS OF DISCOUNT RATE SENSITIVITY e VOLATILITY RATIOS ¢ HYPOTHETICAL TERMINATIONLIABILITY CALPERS ACTUARIAL VALUATION- June 30, 2016 MISCELLANEOUS PLAN OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA CalPERS ID: 4104962804 Analysis of Future Investment Return Scenarios Analysis was performed to determine the effects of various future investment returns on required employer contributions. The projections below provide a range of results based onfive investment return scenarios assumed to occur during the next four fiscal years (2016-17, 2017-18, 2018-19 and 2019-20). The projections also assume that all other actuarial assumptions will be realized and that no further changesto assumptions, contributions, benefits, or funding will occur. Each ofthe five investment return scenarios assumes a return of 7.375 percent for fiscal year 2016-17. For fiscal years 2017-18, 2018-19, and 2019-20 each scenario assumes an alternate fixed annual return. The fixed return assumptions for the five scenarios are -3.0 percent, 3.0 percent, 7.0 percent (7.25 percent for 2017-18), 11.0 percent and 17.0 percent. The alternate investment returns were chosen based on stochastic analysis of possible future investment returns over the four year period ending June 30, 2020. Using the expected returns and volatility of the asset classes in which the funds are invested, we produced ten thousand stochastic outcomes for this period. We then selected annual returns that approximate the 5", 25, 50", 75", and 95" percentiles for these outcomes. For example, of all of the 4-year outcomes generated in the stochastic analysis, approximately 25 percent of them had an average annualreturn of 3.0 percentorless. Required contributions outside of this range are also possible. In particular, while it is unlikely that investment returns will average less than -3.0 percent or greater than 17.0 percent over this four year period, the possibility of a single investment return less than -3.0 percent or greater than 17.0 percent in any given yearis much greater. Assumed Annual Return From Projected Employer Contributions 2017-18 through 2019-20 2019-20 2020-21 2021-22 2022-23 ormal Cost 8.7% 9.7% 9.7% 9.7% $55,789,000 UAL Contribution _ $47,539,000 $68,136,000 | $82,096,000 “Normal Cost 8.7% ~9.7% 9.7% UAL Contribution $47,539,000| __$ $73,640,000 ssumed DiscountRate Normal Cost 8.7% 9.7% |__$47,539,000 | _$53,336,000 9.7% $52,438,000 8.7% $47,539 000 ~ Normal Cost ~ ~ 8.7% 9.7% UAL Contribution $47,539,000 $51,001,000 $53,270,000 | $52,032,000 Given the temporary suspensionof the Risk Mitigation Policy during the period over which the discount rate assumption is being phased down to 7.0 percent, the projections above were performed without reflection of any possible impact of this Policy for Fiscal Years 2019-20 and 2020-21. The projected normal cost percentages do notreflect that the normal cost will decline over time as new employeesare hired into PEPRA or other jower cost benefit tiers. Page 21 CALPERS ACTUARIAL VALUATION - June 30, 2016 MISCELLANEOUS PLAN OF THE METROPOLITAN WATERDISTRICT OF SOUTHERN CALIFORNIA CalPERS ID: 4104962804 Analysis of Discount Rate Sensitivity Shown below are various valuation results as of June 30, 2016 assuming alternate discount rates. Results are shown using the current discount rate of 7.375 percent as well as alternate discount rates of 6.0 percent, 7.0 percent, and 8.0 percent. The alternate rate of 7.0 percent was selected since the Board has adopted this rate as the final discount rate at the end of the three year phase-in of the reduction in this assumption. The rates of 6.0 percent and 8.0 percent were selected since theyillustrate the impact of a 1 percent increase or decrease to the 7.0 percent assumption. This analysis shows the potential plan impacts if the PERF were to realize investment returns of 6.0 percent, 7.0 percent, or 8.0 percent over the long- term. This type ofanalysis gives the reader a sense of the long-term risk to required contributions. For a measure of funded status that is appropriate for assessing the sufficiency of plan assets to cover estimated terminationliabilities, please see “Hypothetical Termination Liability” in the “Risk Analysis” section. Sensitivity Analysis Plan’s Accrued Unfunded Funded As of June 30, 2016 NormalCost Liability AccruedLiability Status 7.375%(current discount rate) 15.163% $2,166,285,855 $642,593062 70.3% 6.0% 21.192% $2,561,341,674 $1,037,648,881 59.5% 7.0% 16.571% $2,264,268,315 $740,575,522 67.3% 8.0% 13.135% $2,016,983,420 $493,290,627 75.5% Page 22 CALPERS ACTUARIAL VALUATION - June 30, 2016 MISCELLANEOUS PLAN OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA CalPERS ID: 4104962804 Volatility Ratios The actuarial calculations supplied in this communication are based on a number of assumptions about long-term demographic and economic behavior. Unless these assumptions (terminations, deaths, disabilities, retirements, salary growth, and investment return) are exactly realized each year, there will be differences on a year-to-year basis. The year-to-year differences between actual experience and the assumptions are called actuarial gains and losses and serve to lower or raise required employer contributions from one year to the next. Therefore, employer contributions will inevitably fluctuate, especially due to the ups and downs of investmentreturns. AssetVolatility Ratio (AVR) Plans that have higher asset-to-payroll ratios experience more volatile employer contributions (as a percentage of payroll) due to investment return. For example, a plan with an asset-to-payroll ratio of 8 may experience twice the contribution volatility due to investment return volatility than a plan with an asset-to- payroll ratio of 4. Shown below is the asset volatility ratio, a measure of the plan’s current volatility. It should be noted that this ratio is a measure of the current situation. It increases over time but generally tendsto stabilize as the plan matures. Liability Volatility Ratio (LVR) Plans that have higher liability-to-payroll ratios experience more volatile employer contributions (as a percentage of payroll) due to investment return and changesin liability. For example, a plan with a liability- to-payroll ratio of 8 is expected to have twice the contribution volatility of a plan with liability-to-payroll ratio of 4. Theliability volatility ratio is also included in the table below. It should be noted that this ratio indicates a longer-term potential for contribution volatility. The asset volatility ratio, described above, will tend to movecloser to theliability volatility ratio as the plan matures. Since the liability volatility ratio is a long-term measure, it is shown below at the current discount rate (7.375 percent) as well as the discount rate the Board has adopted to determine the contribution requirement in the June 30, 2018 actuarial valuation (7.00 percent). Contribution Volatility As of June 30, 2016 1. Market Value of Assets without Receivables $ 1,519,414,877 2. Payroll 204,529,694 3. Asset Volatility Ratio (AVR) [(1) / ( 2)] 7.4 4. Accrued Liability (7.375% discount rate) $ 2,166,285,855 5. Liability Volatility Ratio (LVR) [(4) / (2)] 10.6 6. AccruedLiability (7.00% discount rate) 2,264,268,315 7. Projected Liability Volatility Ratio [(6) / (2)] 11.1 Page 23 CALPERS ACTUARIAL VALUATION- June 30, 2016 MISCELLANEOUS PLAN OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA CalPERS ID: 4104962804 Hypothetical Termination Liability The hypothetical termination tiability is an estimate of the financial position of the plan had the contract with CalPERS been terminated as of June 30, 2016. The plan liability on a termination basis is calculated differently compared to the plan‘s ongoing funding liability. For this hypothetical! termination liability calculation, both compensation and service are frozen as of the valuation date and no future pay increases or service accruals are assumed. This measure of funded status is not appropriate for assessing the need for future employer contributions in the case of an ongoing plan, that is, for an employer that continues to provide CalPERS retirement benefits to active employees. A more conservative investment policy and asset allocation strategy was adopted by the CalPERS Board for the Terminated Agency Pool. The Terminated Agency Pool haslimited funding sources since no future employer contributions will be made. Therefore, expected benefit payments are secured byrisk-free assets and benefit security for members is increased while limiting the funding risk. However, this asset allocation has a lower expected rate of return than the PERF and consequently, a lower discount rate assumption. The lowerdiscountrate for the Terminated Agency Poolresults in higherliabilities for terminated plans. The effective termination discount rate will depend on actual market rates of return for risk-free securities on the date of termination. As market discount rates are variable the table below shows a range for the hypothetical termination liability based on the lowest and highest interest rates observed during an approximate 2-year period centered around the valuation date. Hypothetical Unfunded Hypothetical Unfunded Market Termination Funded = Termination Termination Funded Termination Value of Liability? Status Liability Liability? Status Liability Assets (MVA) @ 1.75% @ 1.75% @ 3.00% @ 3.00% $1,523,692,793 $3,943,970,307 38.6% — $2,420,277,514 $3,418,782,475 44.6% $1,895,089,682 * The hypothetical liabilities calculated above include a 7 percent mortality contingency load in accordance with Board policy. Other actuarial assumptions can be found in Appendix A. * The current discount rate assumption used for termination valuationsis a weighted average of the 10-year and 30-year U.S. Treasury yields where the weights are based on matching asset and liability durations as of the termination date. The discount rates used in the table are based on 20-year Treasury bonds, rounded to the nearest quarter percentage point, which is a good proxy for most plans. The 20-year Treasury yield was 1.75 percent on June 30, 2016, and was 2.75 percent on January 31, 2017. In order to terminate the plan, you mustfirst contact our Retirement Services Contract Unit to initiate a Resolution of Intent to Terminate. The completed Resolution will allow the plan actuary to give you a preliminary termination valuation with a more up-to-date estimate of the plan liabilities. CalPERS advises you to consult with the plan actuary before beginning this process. Page 24 ae SNOISIAOUdLIASNSGYOrviS.NWId % C A L P E R S A C T U A R I A L V A L U A T I O N — Ju ne 30 , 20 16 M I S C E L L A N E O U S P L A N O F T H E M E T R O P O L I T A N W A T E R D I S T R I C T O F S O U T H E R N C A L I F O R N I A C a l P E R S ID : 4 1 0 4 9 6 2 8 0 4 P l a n ’ s M a j o r B e n e f i t O p t i o n s S h o w n b e l o w is a s u m m a r y of th e m a j o r op ti on al be ne fi ts fo r w h i c h y o u r a g e n c y h a s co nt ra ct ed fo r th is pl an . A de sc ri pt io n of pr in ci pa l st an da rd a n d op ti on al pl an pr ov is io ns is in A p p e n d i x B of th is re po rt . C o n t r a c t P a c k a g e Ac ti ve Ac ti ve M i s c M i s c B e n e f i t P r o v i s i o n Be ne fi t F o r m u l a 2 . 0 % @ 5 5 2 . 0 % @ 5 5 So ci al Se cu ri ty C o v e r a g e N o N o Fu ll /M od if ie d Fu ll Fu ll E m p l o y e e Co nt ri bu ti on R a t e 7 . 0 0 % 7 . 0 0 % Fi na l A v e r a g e C o m p e n s a t i o n Pe ri od O n e Y e a r O n e Y e a r Si ck L e a v e Cr ed it Y e s Y e s No n- In du st ri al Di sa bi li ty I m p r o v e d I m p r o v e d In du st ri al Di sa bi li ty N o N o Pr e- Re ti re me nt D e a t h Be ne fi ts Op ti on al S e t t l e m e n t 2 w Y e s Y e s 1 9 5 9 Su rv iv or Be ne fi t Le ve l Le ve l 4 Le ve l 4 Sp ec ia l N o N o Al te rn at e (f ir ef ig ht er s) N o N o Po st -R et ir em en t D e a t h Be ne fi ts L u m p S u m $ 5 0 0 $ 5 0 0 Su rv iv or A l l o w a n c e ( P R S A ) Y e s Y e s C O L A 2 % 2 % Active Misc 2.0% @ 62 No Full 6.00% Three Year Yes Improved No Yes Level 4 No No $500 Yes 2% Re ce iv in g M i s c $5 00 Ye s 2 % P a g e 2 6 APPENDICES ¢ APPENDIX A - ACTUARIAL METHODS AND ASSUMPTIONS ¢ APPENDIX B - PRINCIPAL PLAN PROVISIONS ¢ APPENDIX C - PARTICIPANT DATA e APPENDIX D - DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION RATES e APPENDIX E - GLOSSARY OF ACTUARIAL TERMS APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS « ACTUARIAL DATA e ACTUARIAL METHODS ACTUARIAL ASSUMPTIONS MISCELLANEOUS CALPERS ACTUARIAL VALUATION— June 30, 2016 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS Actuarial Data As stated in the Actuarial Certification, the data which serves as the basis of this valuation has been obtained from the various CalPERS databases. We have reviewed the valuation data and believe thatit is reasonable and appropriate in aggregate. We are unaware of any potential data issues that would have a material effect on the results of this valuation, except that data does not always contain the latest salary information for former members now in reciprocal systems and does not recognize the potential for unusually large salary deviation in certain cases such as elected officials. Therefore, salary information in these cases may not be accurate. These situations are relatively infrequent, however, and when they do occur, they generally do not have a material impact on the required employer contributions. Actuarial Methods Actuarial Cost Method The actuaria! cost method used is the Entry Age Normal Cost Method. Underthis method, projected benefits are determined for all members and the associated liabilities are spread in a manner that produces level annual cost as a percentage of pay in each year from the member's entry age to their assumed retirement age on the valuation date. The cost allocated to the currentfiscal year is called the normalcost. The actuarial accrued liability for active members is then calculated as the portion of the total cost of the plan allocated to prior years. The actuarial accrued liability for members currently receiving benefits and for members entitled to deferred benefits is equal to the present value of the benefits expected to be paid. No normalcosts are applicable for these participants. Amortization of Unfunded Actuarial Accrued Liability The excess ofthe total actuarial accruedliability over the market value of plan assetsis called the unfunded actuarial accruedliability (UAL). Funding requirements are determined by adding the normal cost and an amortization payment toward the unfundedliability. The unfunded liability is amortized as a “level percent of pay”. Commencing with the June 30, 2013 valuation, all new gains or losses are amortized over a fixed 30-year period with a 5-year ramp up at the beginning and a 5-year ramp down at the end of the amortization period. All changes in liability due to plan amendments (other than golden handshakes) are amortized over a 20-year period with no ramp. Changesin actuarial assumptions or changesin actuarial methodology are amortized over a 20-year period with a 5-year ramp up at the beginning and a 5-year ramp downat the end of the amortization period. Changes in unfunded accrued liability due to a Golden Handshakewill be amortized over a period of five years. The 5-year ramp up means that the payments in the first four years of the amortization period are 20 percent, 40 percent, 60 percent and 80 percent of the “full” payment which begins in year five. The 5-year ramp down meansthat the reverse is true in the final four years of the amortization period. Exceptions for Inconsistencies: An exception to the amortization rules above is used whenevertheir application results in inconsistencies. In these cases, a “fresh start” approach is used. This means that the current unfunded actuarial liability is projected and amortized over a set number of years. For example, a fresh start is needed in the following situations: 1) When a positive payment would be required on a negative unfunded actuarial liability (or conversely a negative payment on a positive unfunded actuarial liability); or 2) When there are excess assets, rather than an unfundedliability. In this situation, a 30-year fresh start is used. It should be noted that the actuary may determine that a fresh start is necessary under other circumstances. In all cases of a fresh start, the period is set by the actuary at what is deemed appropriate; however, the period will not be greater than 30 years. A-1 CALPERS ACTUARIAL VALUATION — June 30, 2016 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS Exceptions for Inactive Plans: The following exceptions apply to plansclassified as Inactive. These plans have no active members and no expectation to have active membersin the future. ¢ Amortization of the unfundedliability is on a “level dollar” basis rather than a “level percent of pay” basis. For amortization layers which utilize a ramp up and ramp down,the “ultimate” paymentis constant. « Actuarial judgment will be used to shorten amortization periods for Inactive plans with existing periods that are deemed too long given the duration ofthe liability. The specific demographics of the plan will be used to determineif shorter periods may be more appropriate. Asset Valuation Method It is the policy of the CalPERS Board of Administration to use professionally accepted amortization methods to eliminate a surplus or an unfunded accrued liability in a manner that maintains benefit security for the members of the System while minimizing substantial variations in required employer contributions. On April 17, 2013, the CalPERS Board of Administration approved a recommendation to change the CalPERS amortization and rate smoothing policies. Beginning with the June 30, 2013 valuations that set the employer contribution for Fiscal Year 2015-16, CalPERS employs a policy that amortizesall gains and losses over a fixed 30-year period. The increase or decrease in the rate is then spread directly over a 5-year period. This method is referred to as “direct rate smoothing.” CalPERS no longer uses an actuarial value of assets and only uses the market value of assets. The direct rate smoothing method is equivalent to a method using a 5 year asset smoothing period with no actuarial value of asset corridor and a 25-year amortization period for gains and losses. PEPRA NormalCost Rate Methodology Per Government Code Section 7522.30(b) the “normal cost rate” shall mean the annual actuarially determined normal cost for the plan of retirement benefits provided to the new member and shail be established based on actuarial assumptions used to determine the liabilities and costs as part of the annual actuarial valuation. The plan of retirement benefits shall include any elements that would impact the actuarial determination of the normal cost, including, but not limited to, the retirement formula,eligibility and vesting criteria, ancillary benefit provisions, and any automatic cost-of-living adjustments as determined by the public retirement system. Each non-pooled plan is considered to be stable with a sufficiently large demographic of actives. It is preferable to determine normal cost using a large active population ongoing so that this rate remains relatively stable. The total PEPRA normal cost will be calculated using all active members within a non- pooled plan until the number of members covered under the PEPRA formula meets either: 1. 50 percent of the active population, or 2. 25 percent of the active population and 100 or more PEPRA members Once either of the conditions above are met for a non-pooled plan, the total PEPRA normal cost will be based on the active PEPRA population in the plan. Accordingly, the total normal cost will be funded equally between employer and employee based on the demographicsof the employees of that employer. A-2 CALPERS ACTUARIAL VALUATION — June 30, 2016 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS Actuarial Assumptions In 2014, CalPERS completed a 2-yearassetliability management study incorporating actuarial assumptions and strategic asset allocation. On February 19, 2014, the CalPERS Board of Administration adopted relatively modest changes to the asset allocation that reduced the expected volatility of returns. The adopted asset allocation was expected to have a long-term blended return that continued to support a discount rate assumption of 7.5 percent at that time. The Board also approved several changes to the demographic assumptions that more closely aligned with actual experience. The most significant of these is mortality improvement to acknowledge the greaterlife expectancies we are seeing in our membership and expected continued improvements. These new actuarial assumptions were first used in the June 30, 2014 valuation to set the Fiscal Year 2016-17 contribution for public agency employers. On December21, 2016, the CalPERS Board of Administration lowered the discount rate from 7.50 percent to 7.00 percent using a three year phase-in beginning with the June 30, 2016 actuarial valuations. The minimum employer contributions for Fiscal Year 2018-19 determined in this valuation were calculated using a discount rate of 7.375 percent. The projected employer contributions on Page 5 are calculated assuming that the discount rate will be lowered to 7.25 percent next year and 7.00 percent the following year as adopted by the Board. The decision to reduce the discount rate was primarily based on reduced capital market assumptions provided by external investment consultants and CalPERS investment staff. The specific decision adopted by the Board reflected recommendations from CalPERS staff and additional input from employer and employee stakeholder groups. Based on the investmentallocation adopted by the Board and capital market assumptions, the reduced discount rate schedule provides a morerealistic assumption for the long term investmentreturn of the fund. Notwithstanding the Board's decision to phase into a 7.0 percentdiscount rate, subsequent analysis of the expected investment return of CalPERS assets or changes to the investment allocation may result in a changeto this three year discount rate schedule. A comprehensive analysis of all actuarial assumptions and methodsincluding the discountrate will be conducted in 2017. For more details and additional rationale for the selection of the actuarial assumptions, please refer to the CalPERS Experience Study and Review of Actuarial Assumptions report from January 2014 that can be found on the CalPERS website under: “Forms and Publications”. Click on “View All” and search for Experience Study. All actuarial assumptions (except the discount rates used for the hypothetical terminationliability) represent an estimate of future experience rather than observations of the estimates inherentin market data. Economic Assumptions Discount Rate The prescribed discount rate assumption adopted by the Board on December 21, 2016 is 7.375 percent compounded annually (net of investment and administrative expenses) as of 6/30/2016. The Board also prescribed that the assumed discount rate will reduce to 7.25 percent compounded annually (net of expenses) as of 6/30/2017, and 7.0 percent compounded annually (net of expenses) as of 6/30/2018. These further changes to the discount rate assumption are not reflected in the determination of required contributions determined in this report for Fiscal Year 2018-19. Termination Liability Discount Rate The current discount rate assumption used for termination valuationsis a weighted average of the 10-year and 30-year U.S. Treasury yields where the weights are based on matching asset and liability durations as of the termination date. The hypothetical termination liabilities in this report are calculated using an observed range of market interest rates. This range is based on the lowest and highest 20-year Treasury bond observed during an approximate 2-year period centered around the valuation date. The 20-year Treasury bond has a similar duration to most plan liabilities and serves as a good proxy for the termination discount rate. The 20-year Treasury yield was 1.75 percent on June 30, 2016. A-3 CALPERS ACTUARIAL VALUATION — June 30, 2016 ACTUARIAL METHODS AND ASSUMPTIONS APPENDIX A Salary Growth Annual increases vary by category, entry age, and duration of service. A sample of assumed increases are shown below. Duration of Service Duration of Service Duration of Service (Entry Age 20) Public Agency Miscellaneous (Entry Age 20) (Entry Age 30) (Entry Age 40) 0.1220 0.0990 0.0860 0.0770 0.0700 0.0640 0.0460 0.0420 0.0390 0.0370 0.0350 0.1160 0.0940 0.0810 0.0720 0.0650 0.0600 0.0430 0.0400 0.0380 0.0360 0.0340 Public AgencyFire (Entry Age 20) 0.2000 0.1490 0.1200 0.0980 0.0820 0.0690 0.0470 0.0440 0.0420 0.0400 0.0380 0.1980 0.1460 0.1160 0.0940 0.0780 0.0640 0.0460 0.0420 0.0390 0.0370 0.0360 Public Agency Police 0.1500 0.1160 0.0950 0.0810 0.0700 0.0610 0.0450 0.0450 0.0450 0.0450 0.0450 (Entry Age 30) (Entry Age 40) 0.1470 0.1120 0.0920 0.0780 0.0670 0.0580 0.0430 0.0430 0.0430 0.0430 0.0430 0.1020 0.0830 0.0710 0.0630 0.0570 0.0520 0.0390 0.0360 0.0340 0.0330 0.0320 (Entry Age 30) (Entry Age 40) 0.1680 0.1250 0.0990 0.0810 0.0670 0.0550 0.0420 0.0390 0.0360 0.0340 0.0340 0.1310 0.1010 0.0830 0.0700 0.0600 0.0520 0.0370 0.0370 0.0370 0.0370 0.0370 A-4 CALPERS ACTUARIAL VALUATION —~ June 30, 2016 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS Salary Growth(continued) Public Agency County Peace Officers Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40) 0 0.1770 0.1670 0.1500 1 0.1340 0.1260 0.1140 2 0.1080 0.1030 0.0940 3 0.0900 0.0860 0.0790 4 0.0760 0.0730 0.0670 5 0.0650 0.0620 0.0580 10 0.0470 0.0450 0.0410 15 0.0460 0.0450 0.0390 20 0.0460 0.0450 0.0380 25 0.0460 0.0450 0.0380 30 0.0460 0.0440 0.0380 Schools Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40) 0 0.0900 0.0880 0.0820 1 0.0780 0.0750 0.0700 2 0.0700 0.0680 0.0630 3 0.0650 0.0630 0.0580 4 0.0610 0.0590 0.0540 5 0.0580 0.0560 0.0510 10 0.0460 0.0450 0.0410 15 0.0420 0.0410 0.0380 20 0.0390 0.0380 0.0350 25 0.0370 0.0350 0.0330 30 0.0350 0.0330 0.0310 e The Miscellaneoussalary scale is used for Local Prosecutors. * The Police salary scale is used for Other Safety, Local Sheriff, and SchoolPolice. Overall Payroll Growth 3.00 percent compounded annually (used in projecting the payroll over which the unfunded liability is amortized). This assumptionis used for all plans with active members. Inflation 2.75 percent compounded annually. Non-valued Potential AdditionalLiabilities The potential liability loss for a cost-of-living increase exceeding the 2.75 percent inflation assumption, and any potential liability loss from future member service purchases are not reflected in the valuation. Miscellaneous Loading Factors Credit for Unused Sick Leave Total years of service is increased by 1 percent for those plans that have accepted the provision providing Credit for Unused Sick Leave. A-5 CALPERS ACTUARIAL VALUATION — June 30, 2016 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS Conversion of Employer Paid Member Contributions (EPMC) Total years of service is increased by the Employee Contribution Rate for those plans with the provision providing for the Conversion of Employer Paid Member Contributions (EPMC) during the final compensation period. Norris Decision (Best Factors) Employees hired prior to July 1, 1982 have projected benefit amounts increased in order to reflect the use of “Best Factors” in the calculation of optional benefit forms. This is due to a 1983 Supreme Court decision, known as the Norris decision, which required males and females to be treated equally in the determination of benefit amounts. Consequently, anyone already employed at that time is given the best possible conversion factor when optional benefits are determined. No loading is necessary for employeeshired after July 1, 1982. Termination Liability The terminationliabilities include a 7 percent contingency load. This load is for unforeseen improvements in mortality. DemographicAssumptions Pre-Retirement Mortality Non-industrial death rates vary by age and gender. Industrial death rates vary by age. See sample rates in table below. The non-industrial death rates are used forall plans. The industrial death rates are used for safety plans (except for Local Prosecutor safety members where the corresponding miscellaneous plan does not have the Industrial Death Benefit). Non-Industrial Death Industrial Death (Not Job-Related) (Job-Related) Age Male Female Male and Female 20 0.00031 0.00020 0.00003 25 0.00040 0.00023 0.00007 30 0.00049 0.00025 0.00010 35 0.00057 0.00035 0.00012 40 0.00075 0.00050 0.00013 45 0.00106 0.00071 0.00014 50 0.00155 0.00100 0.00015 55 0.00228 0.00138 0.00016 60 0.00308 0.00182 0.00017 65 0.00400 0.00257 0.00018 70 0.00524 0.00367 0.00019 75 0.00713 0.00526 0.00020 80 0.00990 0.00814 0.00021 Miscellaneous plans usually have industrial death rates set to zero unless the agency has specifically contracted for industrial death benefits. If so, each non-industrial death rate shown abovewill be split into two components; 99 percent will become the non-industrial death rate and 1 percent will becometheindustrial death rate. A-6 CALPERS ACTUARIAL VALUATION -— June 30, 2016 ACTUARIAL METHODS AND ASSUMPTIONS APPENDIX A Post-Retirement Mortality Rates vary by age, type ofretirement, and gender. See sample rates in table below. These rates are used for all plans. Age 50 55 60 65 70 75 80 85 90 95 100 105 110 Healthy Recipients Non-Industrially Disabled Industrially Disabled (Not Job-Related) (Job-Related) Male Female Male Female Male Female 0.00501 0.00466 0.01680 0.01158 0.00501 0.00466 0.00599 0.00416 0.01973 0.01149 0.00599 0.00416 0.00710 0.00436 0.02289 0.01235 0.00754 0.00518 0.00829 0.00588 0.02451 0.01607 0.01122 0.00838 0.01305 0.00993 0.02875 0.02211 0.01635 0.01395 0.02205 0.01722 0.03990 0.03037 0.02834 0.02319 0.03899 0.02902 0.06083 0.04725 0.04899 0.03910 0.06969 0.05243 0.09731 0.07762 0.07679 0.06251 0.12974 0.09887 0.14804 0.12890 0.12974 0.09887 0.22444 0.18489 0.22444 0.21746 0.22444 0.18489 0.32536 0.30017 0.32536 0.30017 0.32536 0.30017 0.58527 0.56093 0.58527 0.56093 0.58527 0.56093 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 The post-retirement mortality rates above include 20 years of projected on-going mortality improvement using Scale BB published by the Society of Actuaries. Marital Status For active members, a percentage who are married upon retirement is assumed according to member category as shownin thefollowing table. Percent Married Member Category Miscellaneous Member Local Police Local Fire Other Local Safety SchoolPolice Age of Spouse It is assumed that female spouses are 3 years younger than male spouses. This assumption is used forall plans. Terminated Members It is assumed that terminated members refund immediately if non-vested. Terminated members whoare vested are assumedto follow the same service retirement pattern as active members but with a load to reflect the expected higher rates of retirement, especially at lower ages. The following table shows the load factors that are applied to the service retirement assumption for active members to obtain the service retirement pattern for separated vested members: 85% 90% 90% 90% 90% Age Load Factor Miscellaneous Load Factor Safety 50 190% 310% 51 110% 190% 52 110% 105% 53 through 54 100% 105% 55 100% 140% 56 and above Termination with Refund Rates vary by entry age andservice for miscellaneous pians. Rates vary by service for safety plans. See sample rates in tables below. 100%(no change) 100%(no change) A-7 CALPERS ACTUARIAL VALUATION — June 30, 2016 ACTUARIAL METHODS AND ASSUMPTIONS APPENDIX A Public Agency Miscellaneous Duration of Service Entry Age 20 Entry Age 25 Entry Age 30_—Entry Age 35 Entry Age 40_—_—s Entry Age 45 0 0.1742 0.1674 0.1606 0.1537 0.1468 0.1400 1 0.1545 0.1477 0.1409 0.1339 0.1271 0.1203 2 0.1348 0.1280 0.1212 0.1142 0.1074 0.1006 3 0.1151 0.1083 0.1015 0.0945 0.0877 0.0809 4 0.0954 0.0886 0.0818 0.0748 0.0680 0.0612 5 0.0212 0.0193 0.0174 0.0155 0.0136 0.0116 10 0.0138 0.0121 0.0104 0.0088 0.0071 0.0055 15 0.0060 0.0051 0.0042 0.0032 0.0023 0.0014 20 0.0037 0.0029 0.0021 0.0013 0.0005 0.0001 25 0.0017 0.0011 0.0005 0.0001 0.0001 0.0001 30 0.0005 0.0001 0.0001 0.0001 0.0001 0.0001 35 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001 Public Agency Safety Duration of Service Fire Police County Peace Officer 0 0.0710 0.1013 0.0997 1 0.0554 0.0636 0.0782 2 0.0398 0.0271 0.0566 3 0.0242 0.0258 0.0437 4 0.0218 0.0245 0.0414 5 0.0029 0.0086 0.0145 10 0.0009 0.0053 0.0089 15 0.0006 0.0027 0.0045 20 0.0005 0.0017 0.0020 25 0.0003 0.0012 0.0009 30 0.0003 0.0009 0.0006 35 0.0003 0.0009 0.0006 The police termination and refund rates are also used for Public Agency Local Prosecutors, Other Safety, Local Sheriff, and School Police. Schools Duration of Service Entry Age 20 Entry Age 25 Entry Age 30_— Entry Age 35 Entry Age 40 _—_—_ Entry Age 45 0 0.1730 0.1627 0.1525 0.1422 0.1319 0.1217 1 0.1585 0.1482 0.1379 0.1277 0.1174 0.1071 2 0.1440 0.1336 0.1234 0.1131 0.1028 0.0926 3 0.1295 0.1192 0.1089 0.0987 0.0884 0.0781 4 0.1149 0.1046 0.0944 0.0841 0.0738 0.0636 5 0.0278 0.0249 0.0221 0.0192 0.0164 0.0135 10 0.0172 0.0147 0.0122 0.0098 0.0074 0.0049 15 0.0115 0.0094 0.0074 0.0053 0.0032 0.0011 20 0.0073 0.0055 0.0038 0.0020 0.0002 0.0002 25 0.0037 0.0023 0.0010 0.0002 0.0002 0.0002 30 0.0015 0.0003 0.0002 0.0002 0.0002 0.0002 35 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 A-8 CALPERS ACTUARIAL VALUATION — June 30, 2016 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS Termination with Vested Benefits Rates vary by entry age and service for miscellaneous plans. Rates vary by service for safety plans. See sample rates in tables below. Public Agency Miscellaneous Duration of Service Entry Age 20 Entry Age 25. Entry Age 30 Entry Age 35 Entry Age 40 5 0.0656 0.0597 0.0537 0.0477 0.0418 10 0.0530 0.0466 0.0403 0.0339 0.0000 15 0.0443 0.0373 0.0305 0.0000 0.0000 20 0.0333 0.0261 0.0000 0.0000 0.0000 25 0.0212 0.0000 0.0000 0.0000 0.0000 30 0.0000 0.0000 0.0000 0.0000 0.0000 35 0.0000 0.0000 0.0000 0.0000 0.0000 Public Agency Safety Duration of County Peace Service Fire Police Officer 5 0.0162 0.0163 0.0265 10 0.0061 0.0126 0.0204 15 0.0058 0.0082 0.0130 20 0.0053 0.0065 0.0074 25 0.0047 0.0058 0.0043 30 0.0045 0.0056 0.0030 35 0.0000 0.0000 0.0000 ¢ When a memberis eligible to retire, the termination with vested benefits probability is set to zero. « After termination with vested benefits, a miscellaneous member is assumed to retire at age 59 and a safety memberat age 54. ¢ The Police termination with vested benefits rates are also used for Public Agency Local Prosecutors, Other Safety, Local Sheriff, and SchoolPolice. Schools Duration of Service Entry Age 20. Entry Age 25. Entry Age 30 Entry Age 35 Entry Age 40 5 0.0816 0.0733 0.0649 0.0566 0.0482 10 0.0629 0.0540 0.0450 0.0359 0.0000 15 0.0537 0.0440 0.0344 0.0000 0.0000 20 0.0420 0.0317 0.0000 0.0000 0.0000 25 0.0291 0.0000 0.0000 0.0000 0.0000 30 0.0000 0.0000 0.0000 0.0000 0.0000 35 0.0000 0.0000 0.0000 0.0000 0.0000 A-9 CALPERS ACTUARIAL VALUATION — June 30, 2016 ACTUARIAL METHODS AND ASSUMPTIONS APPENDIX A Age 20 25 30 35 40 45 50 55 60 Non-Industrial (Not Job-Related) Disability Rates vary by age and genderfor miscellaneousplans. Rates vary by age and category for safety plans. Miscellaneous Fire Police County Peace Officer Schools Male Female Male and Female Male and Female Male and Female Male Female 0.0002 0.0001 0.0001 0.0001 0.0001 0.0003 0.0003 0.0002 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001 0.0002 0.0002 0.0001 0.0002 0.0001 0.0001 0.0002 0.0005 0.0008 0.0001 0.0003 0.0004 0.0005 0.0004 0.0012 0.0016 0.0001 0.0004 0.0007 0.0015 0.0010 0.0019 0.0022 0.0002 0.0005 0.0013 0.0030 0.0019 0.0021 0.0023 0.0005 0.0008 0.0018 0.0039 0.0024 0.0022 0.0018 0.0010 0.0013 0.0010 0.0036 0.0021 0.0022 0.0014 0.0015 0.0020 0.0006 0.0031 0.0014 e The miscellaneous non-industrial disability rates are used for Local Prosecutors. e The police non-industrial disability rates are also used for Other Safety, Local Sheriff, and School Police. Industrial (Job-Related) Disability Rates vary by age and category. Age Fire Police County Peace Officer 20 0.0001 0.0000 0.0004 25 0.0003 0.0017 0.0013 30 0.0007 0.0048 0.0025 35 0.0016 0.0079 0.0037 40 0.0030 0.0110 0.0051 45 0.0053 0.0141 0.0067 50 0.0277 0.0185 0.0092 55 0.0409 0.0479 0.0151 60 0.0583 0.0602 0.0174 Thepolice industrial disability rates are also used for Local Sheriff and Other Safety. Fifty percent of the police industrial disability rates are used for School Police. Onepercentof the police industrial disability rates are used for Local Prosecutors. Normally, rates are zero for miscellaneous plans unless the agency has specifically contracted for industrial disability benefits. If so, each miscellaneous non-industrial disability rate will be split into two components: 50 percent will become the non-industrial disability rate and 50 percent will become the industrial disability rate. Service Retirement Retirementrates vary by age, service, and formula, except for the safety /2 @ 55 and 2% @ 55 formulas, where retirement rates vary by age only. A-10 CALPERS ACTUARIAL VALUATION — June 30, 2016 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS Service Retirement Public Agency Miscellaneous 1.5% @ 65 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.008 0.011 0.013 0.015 0.017 0.019 51 0.007 0.010 0.012 0.013 0.015 0.017 52 0.010 0.014 0.017 0.019 0.021 0.024 53 0.008 0.012 0.015 0.017 0.019 0.022 54 0.012 0.016 0.019 0.022 0.025 0.028 55 0.018 0.025 0.031 0.035 0.038 0.043 56 0.015 0.021 0.025 0.029 0.032 0.036 57 0.020 0.028 0.033 0.038 0.043 0.048 58 0.024 0.033 0.040 0.046 0.052 0.058 59 0.028 0.039 0.048 0.054 0.060 0.067 60 0.049 0.069 0.083 0.094 0.105 0.118 61 0.062 0.087 0.106 0.120 0.133 0.150 62 0.104 0.146 0.177 0.200 0.223 0.251 63 0.099 0.139 0.169 0.191 0.213 0.239 64 0.097 0.136 0.165 0.186 0.209 0.233 65 0.140 0.197 0.240 0.271 0.302 0.339 66 0.092 0.130 0,157 0.177 0.198 0.222 67 0.129 0.181 0.220 0.249 0.277 0.311 68 0.092 0.129 0.156 0.177 0.197 0.221 69 0.092 0.130 0.158 0.178 0.199 0.224 70 0.103 0.144 0.175 0.198 0.221 0.248 Public Agency Miscellaneous 2%@ 60 Duration of Service Age 5 Years 10 Years 15 Years 20Years 25 Years 30 Years 50 0.010 0.013 0.015 0.018 0.019 0.021 51 0.009 0.011 0.014 0.016 0.017 0.019 52 0.011 0.014 0.017 0.020 0.022 0.024 53 0.010 0.012 0.015 0.017 0.020 0.021 54 0.015 0.019 0.023 0.025 0.029 0.031 55 0.022 0.029 0.035 0.040 0.045 0.049 56 0.018 0.024 0.028 0.033 0.036 0.040 57 0.024 0.032 0.038 0.043 0.049 0.053 58 0.027 0.036 0.043 0.049 0.055 0.061 59 0.033 0.044 0.054 0.061 0.068 0.076 60 0.056 0.077 0.092 0.105 0.117 0.130 61 0.071 0.097 0.118 0.134 0.149 0.166 62 0.117 0.164 0.198 0.224 0.250 0.280 63 0.122 0.171 0.207 0.234 0.261 0.292 64 0.114 0.159 0.193 0.218 0.244 0.271 65 0.150 0.209 0.255 0.287 0.321 0.358 66 0.114 0.158 0.192 0.217 0.243 0.270 67 0.141 0.196 0.238 0.270 0.301 0.337 68 0.103 0.143 0.174 0.196 0.219 0.245 69 0.109 0.153 0.185 0.209 0.234 0.261 70 0.117 0.162 0.197 0.222 0.248 0.277 A-11 CALPERS ACTUARIAL VALUATION — June 30, 2016 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS Service Retirement Public Agency Miscellaneous 2% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.014 0.018 0.021 0.025 0.027 0.031 51 0.012 0.014 0.017 0.020 0.021 0.025 52 0.013 0.017 0.019 0.023 0.025 0.028 53 0.015 0.020 0.023 0.027 0.030 0.034 54 0.026 0.033 0.038 0.045 0.051 0.059 55 0.048 0.061 0.074 0.088 0.100 0.117 56 0.042 0.053 0.063 0.075 0.085 0.100 57 0.044 0.056 0.067 0.081 0.091 0.107 58 0.049 0.062 0.074 0.089 0.100 0.118 59 0.057 0.072 0.086 0.103 0.118 0.138 60 0.067 0.086 0.103 0.123 0.139 0.164 61 0.081 0.103 0.124 0.148 0.168 0.199 62 0,116 0.147 0.178 0.214 0.243 0.288 63 0.114 0.144 0.174 0.208 0.237 0.281 64 0,108 0.138 0.166 0.199 0.227 0.268 65 0.155 0.197 0.238 0.285 0.325 0.386 66 0.132 0.168 0.203 0.243 0.276 0.328 67 0.122 0.155 0.189 0.225 0.256 0.304 68 0.111 0.141 0.170 0.204 0.232 0.274 69 0.114 0.144 0.174 0.209 0.238 0.282 70 0.130 0.165 0.200 0.240 0.272 0.323 Public Agency Miscellaneous 2.5% @ 55 Duration of Service Age 2 Years 10Years 15 Years 20Years 25 Years 30 Years 50 0.004 0.009 0.019 0.029 0.049 0.094 51 0.004 0.009 0.019 0.029 0.049 0.094 52 0.004 0.009 0.020 0.030 0.050 0.095 53 0.008 0.014 0.025 0.036 0.058 0.104 54 0.024 0.034 0.050 0.066 0.091 0.142 55 0.066 0.088 0.115 0.142 0.179 0.241 56 0.042 0.057 0.078 0.098 0.128 0.184 57 0.041 0.057 0.077 0.097 0.128 0.183 58 0.045 0.061 0.083 0.104 0.136 0.192 59 0.055 0.074 0.098 0.123 0.157 0.216 60 0.066 0.088 0.115 0.142 0.179 0.241 61 0.072 0.095 0.124 0.153 0.191 0.255 62 0.099 0.130 0.166 0.202 0.248 0.319 63 0.092 0.121 0.155 0.189 0.233 0.302 64 0.091 0.119 0.153 0.187 0.231 0.299 65 0.122 0.160 0.202 0.245 0.297 0.374 66 0.138 0.179 0.226 0.272 0.329 0.411 67 0.114 0.149 0.189 0.229 0.279 0.354 68 0.100 0.131 0.168 0.204 0.250 0.322 69 0.114 0.149 0.189 0.229 0.279 0.354 70 0.127 0.165 0.209 0.253 0.306 0.385 CALPERS ACTUARIAL VALUATION — June 30, 2016 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS Service Retirement Public Agency Miscellaneous 2.7% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20Years 25 Years 30 Years 50 0.004 0.009 0.014 0.035 0.055 0.095 51 0.002 0.006 0.011 0.030 0.050 0.090 52 0.006 0.012 0.017 0.038 0.059 0.099 53 0.010 0.017 0.024 0.046 0.068 0.110 54 0.032 0.044 0.057 0.085 0.113 0.160 55 0.076 0.101 0.125 0.165 0.205 0.265 56 0.055 0.074 0.093 0.127 0.160 0.214 57 0.050 0.068 0.086 0.118 0.151 0.204 58 0.055 0.074 0.093 0.127 0.161 0.215 59 0.061 0.082 0.102 0.138 0.174 0.229 60 0.069 0.093 0.116 0.154 0.192 0.250 61 0.086 0.113 0.141 0.183 0.225 0.288 62 0.105 0.138 0.171 0.218 0.266 0.334 63 0.103 0.135 0.167 0.215 0.262 0.329 64 0.109 0.143 0.177 0.226 0.275 0.344 65 0.134 0.174 0.215 0.270 0.326 0.401 66 0.147 0.191 0.235 0.294 0.354 0.433 67 0.121 0.158 0.196 0.248 0.300 0.372 68 0.113 0.147 0.182 0.232 0.282 0.352 69 0.117 0.153 0.189 0.240 0.291 0.362 70 0.141 0.183 0.226 0.283 0.341 0.418 Public Agency Miscellaneous 3%@ 60 Duration of Service Age 5 Years 10 Years 15 Years 20Years 25 Years 30 Years 50 0.012 0.018 0.024 0.039 0.040 0.091 51 0.009 0.014 0.019 0.034 0.034 0.084 52 0.014 0.020 0.026 0.043 0.044 0.096 53 0.016 0.023 0.031 0.048 0.050 0.102 54 0.026 0.036 0.045 0.065 0.070 0.125 55 0.043 0.057 0.072 0.096 0.105 0.165 56 0.042 0.056 0.070 0.094 0.103 0.162 57 0.049 0.065 0.082 0.108 0.119 0.180 58 0.057 0.076 0.094 0.122 0.136 0.199 59 0.076 0.100 0.123 0.157 0.175 0.244 60 0.114 0.148 0.182 0.226 0.255 0.334 61 0.095 0.123 0.152 0.190 0.214 0.288 62 0.133 0.172 0.211 0.260 0.294 0.378 63 0.129 0.166 0.204 0.252 0.285 0.368 64 0.143 0.185 0.226 0.278 0.315 0.401 65 0.202 0.260 0.318 0.386 0.439 0.542 66 0.177 0.228 0.279 0.340 0.386 0.482 67 0.151 0.194 0.238 0.292 0.331 0.420 68 0.139 0.179 0.220 0.270 0.306 0.391 69 0.190 0.245 0.299 0.364 0.414 0.513 70 0.140 0.182 0.223 0.274 0.310 0.396 A-13 CALPERS ACTUARIAL VALUATION — June 30, 2016 ACTUARIAL METHODS AND ASSUMPTIONS APPENDIX A Service Retirement Public Agency Miscellaneous 2%@ 62 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.000 0.000 0.000 0.000 0.000 0.000 51 0.000 0.000 0.000 0.000 0.000 0.000 52 0.010 0.013 0.016 0.019 0.022 0.024 53 0.013 0.017 0.020 0.024 0.027 0.031 54 0.021 0.027 0.033 0.039 0.045 0.050 55 0.044 0.056 0.068 0.080 0.092 0.104 56 0.030 0.039 0.047 0.055 0.063 0.072 57 0.036 0.046 0.056 0.066 0.076 0.086 58 0.046 0.059 0.072 0.085 0.097 0.110 59 0.058 0.074 0.089 0.105 0.121 0.137 60 0.062 0.078 0.095 0.112 0.129 0.146 61 0.062 0.079 0.096 0.113 0.129 0.146 62 0.097 0.123 0.150 0.176 0.202 0.229 63 0.089 0.113 0.137 0.162 0.186 0.210 64 0.094 0.120 0.145 0.171 0.197 0.222 65 0.129 0.164 0.199 0.234 0.269 0.304 66 0.105 0.133 0.162 0.190 0.219 0.247 67 0.105 0.133 0.162 0.190 0.219 0.247 68 0.105 0.133 0.162 0.190 0.219 0.247 69 0.105 0.133 0.162 0.190 0.219 0.247 70 0.125 0.160 0.194 0.228 0.262 0.296 Service Retirement Public AgencyFire 1/2 @ 55 and 2% @ 55 Age Rate Age Rate 50 0.0159 56 0.1108 51 0.0000 57 0.0000 52 0.0344 58 0.0950 53 0.0199 59 0.0441 54 0.0413 60 1.00000 55 0.0751 Public Agency Police 2 @ 55 and 2% @ 55 Age Rate Age Rate 50 0.0255 56 0.0692 51 0.0000 57 0.0511 52 0.0164 58 0.0724 53 0.0272 59 0.0704 54 0.0095 60 1.0000 55 0.1667 A-14 CALPERS ACTUARIAL VALUATION ~— June 30, 2016 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS Service Retirement Public Agency Police 2% @ 50 Duration of Service Age 5 Years 10 Years 15 Years 20Years 25 Years 30 Years 50 0.005 0.005 0.005 0.005 0.017 0.089 51 0.005 0.005 0.005 0.005 0.017 0.087 52 0.018 0.018 0.018 0.018 0.042 0.132 53 0.044 0.044 0.044 0.044 0.090 0.217 54 0.065 0.065 0.065 0.065 0.126 0.283 55 0.086 0.086 0.086 0.086 0.166 0.354 56 0.067 0.067 0.067 0.067 0.130 0.289 57 0.066 0.066 0.066 0.066 0.129 0.288 58 0.066 0.066 0.066 0.066 0.129 0.288 59 0.139 0.139 0.139 0.139 0.176 0.312 60 0.123 0.123 0.123 0.123 0.153 0.278 61 0.110 0.110 0.110 0.110 0.138 0.256 62 0.130 0.130 0.130 0.130 0.162 0.291 63 0.130 0.130 0.130 0.130 0.162 0.291 64 0.130 0.130 0.130 0.130 0.162 0.291 65 1.000 1.000 1.000 1.000 1.000 1.000 e Theserates also apply to Local Prosecutors, Local Sheriff, School Police, and Other Safety. Service Retirement Public Agency Fire 2% @ 50 Duration of Service Age 5 Years 10 Years 15 Years 20Years 25 Years 30 Years 50 0.009 0.009 0.009 0.009 0.013 0.020 51 0.013 0.013 0.013 0.013 0.020 0.029 52 0.018 0.018 0.018 0.018 0.028 0.042 53 0.052 0.052 0.052 0.052 0.079 0.119 54 0.067 0.067 0.067 0.067 0.103 0.154 55 0.089 0.089 0.089 0.089 0.136 0.204 56 0.083 0.083 0.083 0.083 0.127 0.190 57 0.082 0.082 0.082 0.082 0.126 0.189 58 0.088 0.088 0.088 0.088 0.136 0.204 59 0.074. 0.074 0.074 0.074 0.113 0.170 60 0.100 0.100 0.100 0.100 0,154 0.230 61 0.072 0.072 0.072 0.072 0.110 0.165 62 0.099 0.099 0.099 0.099 0.152 0.228 63 0.114 0.114 0.114 0.114 0.175 0.262 64 0.114 0.114 0.114 0.114 0.175 0.262 65 1.000 1.000 1.000 1.000 1.000 1.000 A-15 CALPERS ACTUARIAL VALUATION — June 30, 2016 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS Service Retirement Public Agency Police 3% @ 55 Duration of Service Age 5 Years 10Years 15 Years 20Years 25 Years 30 Years 50 0.004 0.004 0.004 0.004 0.015 0.086 51 0.014 0.014 0.014 0.014 0.034 0.114 52 0.026 0.026 0.026 0.026 0.060 0.154 53 0.038 0.038 0.038 0.038 0.083 0.188 54 0.071 0.071 0.071 0.071 0.151 0.292 55 0.061 0.061 0.061 0.061 0.131 0.261 56 0.072 0.072 0.072 0.072 0.153 0.295 57 0.065 0.065 0.065 0.065 0.140 0.273 58 0.066 0.066 0.066 0.066 0.142 0.277 59 0.118 0.118 0.118 0.118 0.247 0.437 60 0.065 0.065 0.065 0.065 0.138 0.272 61 0.084 0.084 0.084 0.084 0.178 0.332 62 0.108 0.108 0.108 0.108 0.226 0.405 63 0.084 0.084 0.084 0.084 0.178 0.332 64 0.084 0.084 0.084 0.084 0.178 0.332 65 1.000 1.000 1.000 1.000 1.000 1.000 * These rates also apply to Local Prosecutors, Local Sheriff, School Police, and Other Safety. Service Retirement Public Agency Fire 3% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20Years 25 Years 30 Years 50 0.001 0.001 0.001 0.006 0.016 0.069 51 0.002 0.002 0.002 0.006 0.018 0.071 52 0.012 0.012 0.012 0.021 0.040 0.098 53 0.032 0.032 0.032 0.049 0.085 0.149 54 0.057 0.057 0.057 0.087 0.144 0.217 55 0.073 0.073 0.073 0.109 0.179 0.259 56 0.064 0.064 0.064 0.097 0.161 0.238 57 0.063 0.063 0.063 0.095 0.157 0.233 58 0.065 0.065 0.065 0.099 0.163 0.241 59 0.088 0.088 0.088 0.131 0.213 0.299 60 0.105 0.105 0.105 0.155 0.251 0.344 61 0.118 0.118 0.118 0.175 0.282 0.380 62 0.087 0.087 0.087 0.128 0.210 0.295 63 0.067 0.067 0.067 0.100 0.165 0.243 64 0.067 0.067 0.067 0.100 0.165 0.243 65 1.000 1.000 1.000 1.000 1.000 1.000 A-16 CALPERS ACTUARIAL VALUATION - June 30, 2016 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS Service Retirement Public Agency Police 3% @ 50 Duration of Service Age 5 Years 10 Years 15 Years 20Years 25 Years 30 Years 50 0.050 0.050 0.050 0.099 0.240 0.314 51 0.034 0.034 0.034 0.072 0.198 0.260 52 0.033 0.033 0.033 0.071 0.198 0.259 53 0.039 0.039 0.039 0.080 0.212 0.277 54 0.045 0.045 0.045 0.092 0.229 0.300 55 0.052 0.052 0.052 0.105 0.248 0.323 56 0.042 0.042 0.042 0.087 0.221 0.289 57 0.043 0.043 0.043 0.088 0.223 0.292 58 0.054 0.054 0.054 0.109 0.255 0.333 59 0.054 0.054 0.054 0.108 0.253 0.330 60 0.060 0.060 0.060 0.121 0.272 0.355 61 0.048 0.048 0.048 0.098 0.238 0.311 62 0.061 0.061 0.061 0.122 0.274 0.357 63 0.057 0.057 0.057 0.115 0.263 0.343 64 0.069 0.069 0.069 0.137 0.296 0.385 65 1.000 1.000 1.000 1.000 1.000 1.000 ¢ These rates also apply to Local Prosecutors, Local Sheriff, School Police, and Other Safety. Service Retirement Public Agency Fire 3%@ 50 Duration of Service Age 5 Years 10 Years 15 Years 20Years 25 Years 30 Years 50 0.020 0.020 0.020 0.040 0.130 0.192 51 0.008 0.008 0.008 0.023 0.107 0.164 52 0.023 0.023 0.023 0.043 0.136 0.198 53 0.023 0.023 0.023 0.043 0.135 0.198 54 0.027 0.027 0.027 0.048 0.143 0.207 55 0.043 0.043 0.043 0.070 0.174 0.244 56 0.053 0.053 0.053 0.085 0.196 0.269 57 0.054 0.054 0.054 0.086 0,197 0.271 58 0.052 0.052 0.052 0.084 0.193 0.268 59 0.075 0.075 0.075 0.116 0.239 0.321 60 0.065 0.065 0.065 0.102 0.219 0.298 61 0.076 0.076 0.076 0.117 0.241 0.324 62 0.068 0.068 0.068 0.106 0.224 0.304 63 0.027 0.027 0.027 0.049 0.143 0.208 64 0.094 0.094 0.094 0.143 0.277 0.366 65 1.000 1.000 1.000 1.000 1.000 1.000 CALPERS ACTUARIAL VALUATION — June 30, 2016 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS Service Retirement Public Agency Police 2% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.011 0.011 0.011 0.011 0.020 0.036 51 0.009 0.009 0.009 0.009 0.016 0.028 52 0.018 0.018 0.018 0.018 0.034 0.060 53 0.037 0.037 0.037 0.037 0.067 0.119 54 0.049 0.049 0.049 0.049 0.089 0.159 55 0.063 0.063 0.063 0.063 0.115 0.205 56 0.045 0.045 0.045 0.045 0.082 0.146 57 0.064 0.064 0.064 0.064 0.117 0.209 58 0.047 0.047 0.047 0.047 0.086 0.154 59 0.105 0.105 0.105 0.105 0.130 0.191 60 0.105 0.105 0.105 0.105 0.129 0.188 61 0.105 0.105 0.105 0.105 0.129 0.188 62 0.105 0.105 0.105 0.105 0.129 0.188 63 0.105 0.105 0.105 0.105 0.129 0.188 64 0.105 0.105 0.105 0.105 0.129 0.188 65 1.000 1.000 1.000 1.000 1.000 1.000 ¢ Theserates also apply to Local Prosecutors, Local Sheriff, School Police, and OtherSafety. Service Retirement Public Agency Fire 2% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20Years 25 Years 30 Years 50 0.005 0.005 0.005 0.005 0.008 0.012 51 0.006 0.006 0.006 0.006 0.009 0.013 52 0.012 0.012 0.012 0.012 0.019 0.028 53 0.033 0.033 0.033 0.033 0.050 0.075 54 0.045 0.045 0.045 0.045 0.069 0.103 55 0.061 0.061 0.061 0.061 0.094 0.140 56 0.055 0.055 0.055 0.055 0.084 0.126 57 0.081 0.081 0.081 0.081 0.125 0.187 58 0.059 0.059 0.059 0.059 0.091 0.137 59 0.055 0.055 0.055 0.055 0.084 0.126 60 0.085 0.085 0.085 0.085 0.131 0.196 61 0.085 0.085 0.085 0.085 0.131 0.196 62 0.085 0.085 0.085 0.085 0.131 0.196 63 0.085 0.085 0.085 0.085 0.131 0.196 64 0.085 0.085 0.085 0.085 0.131 0.196 65 1.000 1.000 1.000 1.000 1.000 1.000 A-18 CALPERS ACTUARIAL VALUATION — June 30, 2016 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS Service Retirement Public Agency Police 2.5% @ 57 Duration of Service Age 5 Years 10Years 15 Years 20Years 25 Years 30 Years 50 0.014 0.014 0.014 0.014 0.025 0.045 51 0.012 0.012 0.012 0.012 0.021 0.038 52 0.025 0.025 0.025 0.025 0.046 0.081 53 0.047 0.047 0.047 0.047 . 0.086 0.154 54 0.063 0.063 0.063 0.063 0.115 0.205 55 0.076 0.076 0.076 0.076 0.140 0.249 56 0.054 0.054 0.054 0.054 0.099 0.177 57 0.071 0.071 0.071 0.071 0.130 0.232 58 0.057 0.057 0.057 0.057 0.103 0.184 59 0.126 0.126 0.126 0.126 0.156 0.229 60 0.126 0.126 0.126 0.126 0.155 0.226 61 0.126 0.126 0.126 0.126 0.155 0.226 62 0.126 0.126 0.126 0.126 0.155 0.226 63 0.126 0.126 0.126 0.126 0.155 0.226 64 0.126 0.126 0.126 0.126 0.155 0.226 65 1.000 1.000 1.000 1.000 1.000 1.000 e These rates also apply to Local Prosecutors, Local Sheriff, School Police, and Other Safety. Service Retirement Public AgencyFire 2.5% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.007 0.007 0.007 0.007 0.010 0.015 51 0.008 0.008 0.008 0.008 0.012 0.018 52 0.016 0.016 0.016 0.016 0.025 0.038 53 0.042 0.042 0.042 0.042 0.064 0.096 54 0.057 0.057 0.057 0.057 0.088 0.132 55 0.074 0.074 0.074 0.074 0.114 0.170 56 0.066 0.066 0.066 0.066 0.102 0.153 57 0.090 0.090 0.090 0.090 0.139 0.208 58 0.071 0.071 0.071 0.071 0.110 0.164 59 0.066 0.066 0.066 0.066 0.101 0.151 60 0.102 0.102 0.102 0.102 0.157 0.235 61 0.102 0.102 0.102 0.102 0.157 0.236 62 0.102 0.102 0.102 0.102 0.157 0.236 63 0.102 0.102 0.102 0.102 0.157 0.236 64 0.102 0.102 0.102 0.102 0.157 0.236 65 1.000 1.000 1.000 1.000 1.000 1.000 A-19 CALPERS ACTUARIAL VALUATION — June 30, 2016 ACTUARIAL METHODS AND ASSUMPTIONS APPENDIX A Service Retirement Public Agency Police 2.7% @ 57 Duration of Service Age 5 Years 10Years 15 Years 20Years 25 Years 30 Years 50 0.0138 0.0138 0.0138 0.0138 0.0253 0.0451 51 0.0123 0.0123 0.0123 0.0123 0.0226 0.0402 52 0.0249 0.0249 0.0249 0.0249 0.0456 0.0812 53 0.0497 0.0497 0.0497 0.0497 0.0909 0.1621 54 0.0662 0.0662 0.0662 0.0662 0.1211 0.2160 55 0.0854 0.0854 0.0854 0.0854 0.1563 0.2785 56 0.0606 0.0606 0.0606 0.0606 0.1108 0.1975 57 0.0711 0.0711 0.0711 0.0711 0.1300 0.2318 58 0.0628 0.0628 0.0628 0.0628 0.1149 0.2049 59 0.1396 0.1396 0.1396 0.1396 0.1735 0.2544 60 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506 61 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506 62 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506 63 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506 64 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506 65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 * These rates also apply to Local Prosecutors, Local Sheriff, School Police, and Other Safety. Service Retirement Public Agency Fire 2.7% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20Years 25 Years 30 Years 50 0.0065 0.0065 0.0065 0.0065 0.0101 0.0151 51 0.0081 0.0081 0.0081 0.0081 0.0125 0.0187 52 0.0164 0.0164 0.0164 0.0164 0.0254 0.0380 53 0.0442 0.0442 0.0442 0.0442 0.0680 0.1018 54 0.0606 0.0606 0.0606 0.0606 0.0934 0.1397 55 0.0825 0.0825 0.0825 0.0825 0.1269 0.1900 56 0.0740 0.0740 0.0740 0.0740 0.1140 0.1706 57 0.0901 0.0901 0.0901 0.0901 0.1387 0.2077 58 0.0790 0.0790 0.0790 0.0790 0.1217 0.1821 59 0.0729 0.0729 0.0729 0.0729 0.1123 0.1681 60 0.1135 0.1135 0.1135 0.1135 0.1747 0.2615 61 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618 62 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618 63 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618 64 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618 65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 A-20 CALPERS ACTUARIAL VALUATION — June 30, 2016 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS Service Retirement Schools 2% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20Years 25 Years 30 Years 50 0.005 0.009 0.013 0.015 0.016 0.018 51 0.005 0.010 0.014 0.017 0.019 0.021 52 0.006 0.012 0.017 0.020 0.022 0.025 53 0.007 0.014 0.019 0.023 0.026 0.029 54 0.012 0.024 0.033 0.039 0.044 0.049 55 0.024 0.048 0.067 0.079 0.088 0.099 56 0.020 0.039 0.055 0.065 0.072 0.081 57 0.021 0.042 0.059 0.070 0.078 0.087 58 0.025 0.050 0.070 0.083 0.092 0.103 59 0.029 0.057 0.080 0.095 0.105 0.118 60 0.037 0.073 0.102 0.121 0.134 0.150 61 0.046 0.090 0.126 0.149 0.166 0.186 62 0.076 0.151 0.212 0.250 0.278 0.311 63 0.069 0.136 0.191 0.225 0.251 0.281 64 0.067 0.133 0.185 0.219 0.244 0.273 65 0.091 0.180 0.251 0.297 0.331 0.370 66 0.072 0.143 0.200 0.237 0.264 0.295 67 0.067 0.132 0.185 0.218 0.243 0.272 68 0.060 0.118 0.165 0.195 0.217 0.243 69 0.067 0.133 0.187 0.220 0.246 0.275 70 0.066 0.131 0.183 0.216 0.241 0.270 Miscellaneous Internal Revenue Code Section 415 Thelimitations on benefits imposed by Internal Revenue Code Section 415 are taken into account in this valuation. Each year the impact of any changesin this limitation since the prior valuation is included and amortized as part of the actuarial gain or loss base. This results in lower contributions for those employers contributing to the Replacement Benefit Fund and protects CalPERS from prefunding expected benefits in excess oflimits imposed by federal tax law. Internal Revenue Code Section 401(a)(17) The limitations on compensation imposed by Internal Revenue Code Section 401(a)(17) are taken into account in this valuation. Each year, the impact of any changesin the compensation limitation since the prior valuation is included and amortized as part of the actuarial gain or loss base. The compensationlimit for classic members for the 2016 calendar year is $265,000. A-21 APPENDIX B PRINCIPAL PLAN PROVISIONS CALPERS ACTUARIAL VALUATION — June 30, 2016 APPENDIX B MISCELLANEOUS PLAN OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA PRINCIPAL PLAN PROVISIONS The following is a description of the principal plan provisions used in calculating costs and liabilities. We have indicated whether a plan provision is standard or optional. Standard benefits are applicable to all members while optional benefits vary among employers. Optional benefits that apply to a single period of time, such as Golden Handshakes, have not been included. Many of the statements in this summary are general in nature, and are intended to provide an easily understood summary of the Public Employees’ Retirement Law. The law itself governs in all situations. Service Retirement Eligibility A classicCalPERS member or PEPRA Safety member becomeseligible for Service Retirement upon attainment of age 50 with at least 5 years of credited service (total service across all CalPERS employers, and with certain other retirement systems with which CalPERS hasreciprocity agreements). For employees hired into a plan with the 1.5 percent at 65 formula,eligibility for service retirement is age 55 with at least 5 years of service. PEPRA miscellaneous members becomeeligible for service retirement upon attainment of age 52 with at least 5 years of service. Benefit The service retirement benefit is a monthly allowance equal to the product of the benefit factor, years ofservice, and final compensation. « The benefit factor depends on the benefit formula specified in your agency’s contract. The table below shows the factors for each of the available formulas. Factors vary by the member's age at retirement. Listed are the factors for retirement at whole year ages: Miscellaneous Plan Formulas Retirement = 1.5%at 2% at60 2% at55 2.5%at 2.7%at 3%at 60 PEPRA Age 65 55 55 2% at 62 50 0.5000% 1.092% 1.426% 2.000% 2,000% 2.000% N/A 51 0.5667% 1.156% 1.522% 2.100% 2.140% 2.100% N/A 52 0.6334% 1.224% 1.628% 2.200% 2.280% 2.200% 1.000% 53 0.7000% 1.296% 1.742% 2.300% 2.420% 2.300% 1.100% 54 0.7667% 1.376% 1.866% 2.400% 2.560% 2.400% 1.200% 55 0.8334% 1.460% 2,000% 2.500% 2.700% 2.500% 1.300% 56 0.9000% 1.552% 2.052% 2.500% 2.700% 2.600% 1.400% 57 0.9667% 1.650% 2.104% 2.500% 2.700% 2.700% 1.500% 58 1.0334% 1.758% 2.156% 2.500% 2.700% 2.800% 1.600% 59 1.1000% 1.874% 2.210% 2.500% 2.700% 2.900% 1.700% 60 1.1667% 2.000% 2.262% 2.500% 2.700% 3.000% 1.800% 61 1.2334% 2.134% 2.314% 2.500% 2.700% 3.000% 1.900% 62 1.3000% 2.272% 2.366% 2.500% 2.700% 3.000% 2.000% 63 1.3667% 2.418% 2.418% 2.500% 2.700% 3.000% 2.100% 64 1.4334% 2.418% 2.418% 2.500% 2.700% 3.000% 2.200% 65 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.300% 66 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.400% 67 &up 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.500% B-1 CALPERS ACTUARIAL VALUATION — June 30, 2016 APPENDIX B MISCELLANEOUS PLAN OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA PRINCIPAL PLAN PROVISIONS Safety Plan Formulas Ree Y2 at 55 * 2% at 55 2% at 50 3%at 55 3%at 50 50 1.783% 1.426% 2.000% 2.400% 3.000% 51 1.903% 1.522% 2.140% 2.520% 3.000% 52 2.035% 1.628% 2.280% 2.640% 3.000% 53 2.178% 1.742% 2.420% 2.760% 3.000% 54 2.333% 1.866% 2.560% 2.880% 3.000% 55 & Up 2.500% 2.000% 2.700% 3.000% 3.000% * For this formula, the benefit factor also varies by entry age. The factors shown are for members with an entry age of 35 or greater. If entry age is less than 35, then the age 55 benefit factor is 50 percent divided by the difference between age 55 and entry age. The benefit factor for ages prior to age 55 is the same proportion of the age 55 benefit factor as in the above table. PEPRA Safety Plan Formulas Retirement Age 2%at 57 2.5% at 57 2.7%at 57 50 1.426% 2.000% 2.000% 51 1.508% 2.071% 2.100% 52 1.590% 2.143% 2.200% 53 1.672% 2.214% 2.300% 54 1.754% 2.286% 2.400% 55 1.836% 2.357% 2.500% 56 1.918% 2.429% 2.600% 57 & Up 2.000% 2.500% 2.700% « The years ofservice is the amount credited by CalPERS to a memberwhile he or she is employed in this group (or for other periods that are recognized under the employer's contract with CalPERS). For a member who has earned service with multiple CalPERS employers, the benefit from each employer is calculated separately according to each employer’s contract, and then added together for the total allowance. An agency may contract for an optional benefit where any unused sick leave accumulated at the timeof retirementwill be converted to credited service at a rate of 0.004 years of service for each dayofsick leave. « The final compensation is the monthly average of the member's highest 36 or 12 consecutive months’full-time equivalent monthly pay (no matter which CalPERS employer paid this compensation). The standard benefit is 36 months. Employers had the option ofproviding a final compensation equal to the highest 12 consecutive months for classic plans only. Final compensation must be defined by the highest 36 consecutive months’ pay under the 1.5% at 65 formula. PEPRA members have a cap on the annual salary that can be used to calculate final compensation for all new members based on the Social Security contribution and benefit base. For employees that participate in Social Security this cap is $118,775 for 2016 and for those employees that do not participate in Social Security the cap for 2016 is $142,530. Adjustments to the caps are permitted annually based on changes to the CPI for all urban consumers. e Employees must be covered by Social Security with the 1.5% at 65 formula. Social Security is optional for all other benefit formulas. For employees covered by Social Security, the modified formula is the standard benefit. Underthis type of formula, the final compensation is offset by $133.33 (or by onethird if the final compensation is less than $400). Employers may contract for the full benefit with Social Security that will eliminate the offset applicable to the final compensation. For employees not covered bySocial Security, the full benefit is paid with B-2 CALPERS ACTUARIAL VALUATION — June 30, 2016 APPENDIX B MISCELLANEOUS PLAN OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA PRINCIPAL PLAN PROVISIONS no offsets. Auxiliary organizations of the CSUC system may elect reduced contribution rates, in which case the offset is $317 if members are not covered by Social Security or $513 if members are covered by Social Security. * The miscellaneous and PEPRA safety service retirement benefit is not capped. The classic Safety service retirement benefit is capped at 90 percentof final compensation. Vested Deferred Retirement Eligibility for Deferred Status A CalPERS member becomeseligible for a deferred vested retirement benefit when he or she leaves employment, keeps his or her contribution account balance on deposit with CalPERS, and has earned at least 5 years of credited service (total service across all CalPERS employers, and with certain other retirement systems with which CalPERS has reciprocity agreements). Eligibility to Start Receiving Benefits The CalPERSclassic members and PEPRA safety members becomeeligible to receive the deferred retirement benefit upon satisfying the eligibility requirements for deferred status and upon attainment of age 50 (55 for employees hired into a 1.5% @ 65 plan). PEPRA miscellaneous members becomeeligible to receive the deferred retirement benefit uponsatisfying the eligibility requirements for deferred status and upon attainmentof age 52. Benefit The vested deferred retirement benefit is the same as the service retirement benefit, where the benefit factor is based on the member’s age at allowance commencement. For members who have earned service with multiple CalPERS employers, the benefit from each employeris calculated separately according to each employer’s contract, and then added together for the total allowance. Non-Industrial (Non-Job Related) Disability Retirement Eligibility A CalPERS memberis eligible for Non-Industrial Disability Retirement if he or she becomes disabled and has at least 5 years of credited service (total service across all CalPERS employers, and with certain other retirement systems with which CalPERS hasreciprocity agreements). There is no special age requirement. Disabled means the memberis unable to perform his or her job because of an illness or injury, which is expected to be permanent or to last indefinitely. The illness or injury does not have to be job related. A CalPERS member must be actively employed by any CalPERS employerat the time of disability in order to be eligible for this benefit. Standard Benefit The standard Non-Industrial Disability Retirement benefit is a monthly allowance equal to 1.8 percent of final compensation, multiplied by service, which is determined as follows: * Service is CalPERScredited service, for members with less than 10 years of service or greater than 18.518 years of service; or * Service is CalPERS credited service plus the additional number of years that the member would have worked until age 60, for members with at least 10 years but not more than 18.518 years of service. The maximum benefit in this case is 33 1/3 percent of final compensation. CALPERS ACTUARIAL VALUATION — June 30, 2016 APPENDIX B MISCELLANEOUSPLAN OF THE METROPOLITAN WATERDISTRICT OF SOUTHERN CALIFORNIA PRINCIPAL PLAN PROVISIONS Improved Benefit Employers have the option of providing the improved Non-Industrial Disability Retirement benefit. This benefit provides a monthly allowance equal to 30 percentof final compensationforthefirst 5 years of service, plus 1 percent for each additional year of service to a maximum of 50 percentoffinal compensation. Members who are eligible for a larger service retirement benefit may choose to receive that benefit in lieu of a disability benefit. Members eligible to retire, and who have attained the normal retirement age determined by their service retirement benefit formula, will receive the same dollar amount for disability retirement as that payable for service retirement. For members who have earned service with multiple CalPERS employers, the benefit attributed to each employeris the total disability allowance multiplied by the ratio of service with a particular employer to the total CalPERSservice. industrial (Job Related) Disability Retirement All safety members have this benefit. For miscellaneous members, employers have the option of providing this benefit. An employer may chooseto provide the increased benefit option or the improved benefit option. Eligibility An employee is eligible for Industrial Disability Retirement if he or she becomes disabled while working, where disabled means the memberis unable to perform the duties of the job because of a work-relatedillness or injury, which is expected to be permanentorto last indefinitely. A CalPERS member whohasleft active employment within this groupis not eligible for this benefit, except to the extent described below. Standard Benefit The standard Industrial Disability Retirement benefit is a monthly allowance equal to 50 percent of final compensation. Increased Benefit (75 percent of Final Compensation) The increased Industrial Disability Retirement benefit is a monthly allowance equal to 75 percentfinal compensation for total disability. Improved Benefit (50 percent to 90 percentof Final Compensation) The improved Industrial Disability Retirement benefit is a monthly allowance equal to the Workman’s Compensation Appeals Board permanentdisability rate percentage (if 50 percent or greater, with a maximum of 90 percent) times the final compensation. For a CalPERS membernot actively employed in this group who became disabled while employed by some other CalPERS employer, the benefit is a return of accumulated member contributions with respect to employmentin this group. With the standard or increased benefit, a member may also choose to receive the annuitization of the accumulated membercontributions. If a memberis eligible for service retirement and if the service retirement benefit is more than the industrial disability retirement benefit, the member may choose to receive the larger benefit. B-4 CALPERS ACTUARIAL VALUATION — June 30, 2016 APPENDIX B MISCELLANEOUS PLAN OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA PRINCIPAL PLAN PROVISIONS Post-Retirement Death Benefit Standard Lump Sum Payment Upon the death of a retiree, a one-time lump sum payment of $500 will be made to the retiree’s designated survivor(s), or to the retiree’s estate. Improved Lump Sum Payment Employers have the option of providing an improved lump sum death benefit of $600, $2,000, $3,000, $4,000 or $5,000. Form of Payment for Retirement Allowance Standard Form of Payment Generally, the retirement allowanceis paid to the retiree in the form of an annuity for as long as he orsheis alive. The retiree may chooseto provide for a portion of his or her allowance to be paid to any designated beneficiary after the retiree’s death. CalPERS provides for a variety of such benefit options, which the retiree pays for by taking a reduction in his or her retirement allowance. Such reduction takes into account the amount to be provided to the beneficiary and the probable duration of payments (based on the ages of the member and beneficiary) made subsequent to the member's death. Improved Form of Payment (Post-RetirementSurvivor Allowance) Employers have the option to contract for the post-retirement survivor allowance. For retirement allowances with respect to service subject to the modified formula, 25 percent of the retirement allowance will automatically be continued to certain statutory beneficiaries upon the death of the retiree, without a reduction in the retiree’s allowance. For retirement allowances with respect to service subject to the full or supplemental formula, 50 percent of the retirement allowance will automatically be continued to certain statutory beneficiaries upon the death of the retiree, without a reduction in the retiree’s allowance. This additional benefit is referred to as post-retirement survivor allowance (PRSA)or simply as survivor continuance. In other words, 25 percent or 50 percent of the allowance, the continuance portion, is paid to the retiree for as long as he or she is alive, and that same amount is continued to the retiree’s spouse (or if no eligible spouse, to unmarried child(ren) until they attain age 18; or, if no eligible child(ren), to a qualifying dependent parent) for the rest of his or herlifetime. This benefit will not be discontinued in the event the spouse remarries. The remaining 75 percent or 50 percent ofthe retirement allowance, which may bereferred to as the option portion of the benefit, is paid to the retiree as an annuity for as long as he orsheis alive. Or, the retiree may choose to provide for some of this option portion to be paid to any designated beneficiary after the retiree’s death. Benefit options applicable to the option portion are the same as those offered with the standard form. The reduction is calculated in the same mannerbutis applied only to the option portion. CALPERS ACTUARIAL VALUATION — June 30, 2016 APPENDIX B MISCELLANEOUSPLAN OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA PRINCIPAL PLAN PROVISIONS Pre-Retirement Death Benefits Basic Death Benefit This is a standard benefit. Eligibility An employee’s beneficiary (or estate) may receive the basic death benefit if the member dies while actively employed. A CalPERS member must be actively employed with the CalPERS employer providing this benefit to be eligible for this benefit. A member’s survivor whois eligible for any other pre-retirement death benefit may choose to receive that death benefit instead of this basic death benefit. Benefit The basic death benefit is a tump sum in the amount of the member’s accumulated contributions, where interest is currently credited at 7.5 percent per year, plus a lump sum in the amount of one month's salary for each completed year of current service, up to a maximum ofsix months' salary. For purposes of this benefit, one month's salary is defined as the member's average monthly full-time rate of compensation during the 12 months preceding death. 1957 Survivor Benefit This is a standard benefit. Eligibility An employee's efigible survivor(s) may receive the 1957 Survivor benefit if the member dies while actively employed, has attained at least age 50 for classic and safety PEPRA members and age 52 for miscellaneous PEPRA members, and has at least 5 years of credited service (total service across all CalPERS employers and with certain other retirement systems with which CalPERS hasreciprocity agreements). A CalPERS member must be actively employed with the CalPERS employer providing this benefit to be eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married at least one year before death or, if there is no eligible spouse, to the member's unmarried child(ren) under age 18. A member's survivor whois eligible for any other pre-retirement death benefit may choose to receive that death benefit instead of this 1957 Survivor benefit. Benefit The 1957 Survivor benefit is a monthly allowance equal to one-half of the unmodified service retirement benefit that the member would have been entitled to receive if the member hadretired on the date of his or her death. If the benefit is payable to the spouse, the benefit is discontinued upon the death of the spouse. If the benefit is payable to dependentchild(ren), the benefit will be discontinued upon death or attainment of age 18, unless the child(ren)is disabled. The total amountpaid will be at least equal to the basic death benefit. CALPERS ACTUARIAL VALUATION — June 30, 2016 APPENDIX B MISCELLANEOUSPLAN OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA PRINCIPAL PLAN PROVISIONS Optional Settlement 2W Death Benefit This is an optional benefit. Eligibility An employee's eligible survivor may receive the Optional Settlement 2W Death benefit if the member dies while actively employed, has attained at least age 50 for classic and safety PEPRA members and age 52 for miscellaneous PEPRA members, and has at least 5 years of credited service (total service across all CalPERS employers and with certain other retirement systems with which CalPERS has reciprocity agreements). A CalPERS member whois no longer actively employed with any CalPERS employer is not eligible for this benefit. An efigible survivor means the surviving spouse to whom the member was married at least one year before death. A member's survivor whois eligible for any other pre-retirement death benefit may choose to receive that death benefit instead of this Optional Settlement 2W Death benefit. Benefit The Optional Settlement 2W Death benefit is a monthly allowance equal to the service retirement benefit that the member would have received had the member retired on the date of his or her death and elected Optional Settlement 2W.(A retiree who elects Optional Settlement 2W receives an allowance that has been reduced so thatit will continue to be paid after his or her death to a surviving beneficiary.) The allowance is payable as long as the surviving spouselives, at which time it is continued to any unmarried child(ren) under age 18,if applicable. The total amountpaid will be at least equal to the basic death benefit. Special Death Benefit This is a standard benefit for safety members. An employer may elect to provide this benefit for miscellaneous members, Eligibility An employee's efigible survivor(s) may receive the special death benefit if the member dies while actively employed and the death is job-related. A CalPERS member who is no longer actively employed with any CalPERS employeris not eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married prior to the onset of the injury orillness that resulted in death. If there is no eligible spouse, an eligible survivor means the member's unmarried child(ren) under age 22. Aneligible survivor who chooses to receive this benefit will not receive any other death benefit. Benefit The special death benefit is a monthly allowance equal to 50 percent offinal compensation, and will be increased whenever the compensation paid to active employeesis increased but ceasing to increase when the member would have attained age 50. The allowance is payable to the surviving spouse until death at which time the allowance is continued to any unmarried child(ren) under age 22. There is a guarantee that the total amount paid will at least equal the basic death benefit. If the member's death is the result of an accident or injury caused by external violence or physical force incurred in the performance of the member's duty, and there are eligible surviving child(ren) (eligible means unmarried child(ren) under age 22) in addition to an eligible spouse, then an additional monthly allowanceis paid equal to the following: e — if 1 eligible child: 12.5 percentoffinal compensation e if 2 eligible children: 20.0 percentof final compensation ¢ if 3 or moreeligible children: 25.0 percent of final compensation B-7 CALPERS ACTUARIAL VALUATION — June 30, 2016 APPENDIX B MISCELLANEOUS PLAN OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA PRINCIPAL PLAN PROVISIONS Alternate Death Benefit for Local Fire Members This is an optional benefit available only to local fire members. Eligibility An employee's e/igible survivor(s) may receive the alternate death benefit in lieu of the basic death benefit or the 1957 Survivor benefit if the member dies while actively employed and has at least 20 years of total CalPERS service. A CalPERS memberwhois no longer actively employed with any CalPERS employeris not eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married prior to the onset of the injury or illness that resulted in death. If there is no eligible spouse, an eligible survivor means the member's unmarried child(ren) under age 18. Benefit The Alternate Death benefit is a monthly allowance equal to the service retirement benefit that the member would have received had the memberretired on the date of his or her death and elected Optional Settlement 2W.(A retiree whoelects Optional Settlement 2W receives an allowance that has been reduced so thatit will continue to be paid after his or her death to a surviving beneficiary.) If the member has not yet attained age 50, the benefit is equal to that which would be payable if the member had retired at age 50, based on service credited at the time of death. The allowance is payable as long as the surviving spouse lives, at which time it is continued to any unmarried child(ren) under age 18,if applicable. The total amountpaid will be at least equal to the basic death benefit. Cost-of-Living Adjustments (COLA) Standard Benefit Retirement and survivor allowances are adjusted each year in May for cost of living, beginning the second calendar year after the year of retirement. The standard cost-of-living adjustment (COLA) is 2 percent. Annual adjustments are calculated byfirst determining the lesser of 1) 2 percent compounded from the end of the year of retirement or 2) actual rate of inflation. The resulting increase is divided by the total increase provided in prior years. For any particular year, the COLA adjustment may beless than 2 percent (whentherate ofinflation is low), may be greater than the rate of inflation (when the rate of inflation is low after several years of high inflation) or may even be greater than 2 percent (when inflation is high after several years of low inflation). Improved Benefit Employers have the option of providing a COLA of 3 percent, 4 percent, or 5 percent, determined in the same manneras described above for the standard 2 percent COLA. An improved COLA is notavailable with the 1.5% at 65 formula. Purchasing Power Protection Allowance (PPPA) Retirement and survivor allowances are protected against inflation by PPPA. PPPA benefits are cost-of-living adjustments that are intended to maintain an individual’s allowance at 80 percent of the initial allowance at retirement adjusted for inflation since retirement. The PPPA benefit will be coordinated with other cost-of-living adjustments provided underthe plan. B-8 CALPERS ACTUARIAL VALUATION- June 30, 2016 APPENDIX B MISCELLANEOUS PLAN OF THE METROPOLITAN WATERDISTRICT OF SOUTHERN CALIFORNIA PRINCIPAL PLAN PROVISIONS Employee Contributions Each empioyee contributes toward his or her retirement based uponthe retirement formula. The standard employee contribution is as described below. e The percent contributed below the monthly compensation breakpoint is 0 percent. e The monthly compensation breakpoint is $0 for full and supplemental formula members and $133.33 for employees covered by the modified formula. e The percent contributed above the monthly compensation breakpoint depends upon the benefit formula, as shownin the table below. Benefit Formula Percent Contributed above the Breakpoint Miscellaneous, 1.5%at 65 2% Miscellaneous, 2% at 60 7% Miscellaneous, 2%at 55 7% Miscellaneous, 2.5% at 55 8% Miscellaneous, 2.7%at 55 8% Miscellaneous, 3% at 60 8% Miscellaneous, 2% at 62 50%of the Total Normal Cost Miscellaneous, 1.5%at 65 50%of the Total Normal Cost Safety, 1/2 at 55 Varies by entry age Safety, 2% at 55 7% Safety, 2% at 50 9% Safety, 3%at 55 9% Safety, 3% at 50 9% Safety, 2% at 57 50%of the Total Normal Cost Safety, 2.5%at 57 50%of the Total Normal Cost Safety, 2.7% at 57 50%of the Total Normal Cost The employer may choose to “pick-up” these contributions for classic members (Employer Paid Member Contributions or EPMC). EPMCis prohibited for new PEPRA members. An employer mayalso include Employee Cost Sharing in the contract, where employees agree to share the cost of the employer contribution. These contributions are paid in addition to the membercontribution. Auxiliary organizations of the CSUC system may elect reduced contribution rates, in which case the offset is $317 and the contribution rate is 6 percent if members are not covered by Social Security. If members are covered by Social Security, the offset is $513 and the contribution rate is 5 percent. Refund of Employee Contributions If the member's service with the employer ends, and if the member does not satisfy the eligibility conditions for any of the retirement benefits above, the member may elect to receive a refund of his or her employee contributions, which are credited with 6 percent interest compounded annually. B-9 CALPERS ACTUARIAL VALUATION — June 30, 2016 APPENDIX B MISCELLANEOUS PLAN OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA PRINCIPAL PLAN PROVISIONS 1959 Survivor Benefit This is a pre-retirement death benefit available only to members not covered by Social Security. Any agency joining CalPERS subsequent to 1993 is required to provide this benefit if the members are not covered by Social Security. The benefit is optional for agencies joining CalPERSprior to 1994. Levels 1, 2 and 3 are now closed. Any new agency or any agency wishing to addthis benefit or increase the current level may only choose the 4" or Indexed Level. This benefit is not included in the results presented in this valuation. More information on this benefit is available on the CalPERS website at www.calpers.ca.gov. B-10 APPENDIX C PARTICIPANT DATA SUMMARYOF VALUATION DATA ACTIVE MEMBERS TRANSFERRED AND TERMINATED MEMBERS RETIRED MEMBERS AND BENEFICIARIES CALPERS ACTUARIAL VALUATION — June 30, 2016 APPENDIX C MISCELLANEOUS PLAN OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA PARTICIPANT DATA Summary of Valuation Data June 30, 2015 June 30, 2016 1. Active Members a) Counts 1,767 1,782 b) Average Attained Age 49.88 49.49 c) Average Entry Age to Rate Plan 33.07 33.19 d) Average Years of Service 16.81 16.30 e) Average Annual Covered Pay $ 112,159 $ 114,775 f) Annual Covered Payroll 198,185,580 204,529,694 g) Projected Annual Payroll for Contribution Year 216,562,734 223,495,119 h) Present Value of Future Payroll 1,341,176,199 1,400,832,034 2. Transferred Members a) Counts 198 190 b) Average Attained Age 51.17 51.62 c) Average Years of Service . 4.59 4.55 d) Average Annual Covered Pay $ 101,941 $ 105,102 3. Terminated Members a) Counts 780 759 b) Average Attained Age 50.84 51.06 c) Average Years of Service 3.07 3.04 d) Average Annual Covered Pay $ 49,172 $ 50,024 4. Retired Members and Beneficiaries a) Counts 1,976 2,040 b) Average Attained Age 71.07 71.19 c) Average Annual Benefits $ 44,905 $ 46,428 5. Active to Retired Ratio [(1a) / (4a)] 0.89 0.87 Counts of membersincluded in the valuation are counts of the records processed by the valuation. Multiple records may exist for those who have service in more than one valuation group. This does not result in double counting ofliabilities. Average Annual Benefits represents benefit amounts payable by this plan only. Some members may have service with another agency and would therefore have a larger total benefit than would be included as part of the average shownhere. C-1 CALPERS ACTUARIAL VALUATION — June 30, 2016 APPENDIX C MISCELLANEOUS PLAN OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA PARTICIPANT DATA Active Members Counts of membersincluded in the valuation are counts of the records processed by the valuation. Multiple records may exist for those who have service in more than one valuation group. This does not result in double counting of liabilities. Distribution of Active Members by Age and Service Years of Service at Valuation Date Attained _Age 0-4 5-9 10-14 15-19 20-25 25+ Total 15-24 19 0 0 0 0 0 19 25-29 65 9 0 0 0 0 74 30-34 83 36 11 2 0 0 132 35-39 80 40 28 12 3 0 163 40-44 54 49 34 17 21 4 179 45-49 43 43 40 29 37 42 234 50-54 31 28 45 49 64 121 338 55-59 23 30 35 34 51 181 354 60-64 8 12 27 20 33 110 210 65 and over 2 2 8 9 26 32 79 All Ages 408 249 228 172 235 490 1,782 Distribution of Average Annual Salaries by Age and Service Years of Service at Valuation Date Attained Age 0-4 5-9 10-14 15-19 20-25 25+ Average 15-24 $69,470 $0 $0 $0 $0 $0 $69,470 25-29 62,254 84,064 0 0 0 0 64,907 30-34 72,638 97,221 107,349 97,095 0 0 82,606 35-39 85,112 100,945 108,195 106,313 112,852 0 95,034 40-44 93,073 105,491 112,706 114,021 128,240 105,626 106,597 45-49 90,568 108,329 118,297 130,340 127,908 137,729 117,870 50-54 99,489 121,399 120,543 131,473 135,908 134,499 128,173 55-59 103,139 102,874 107,916 130,301 130,234 138,971 128,422 60-64 123,639 104,430 120,814 113,035 129,481 133,557 127,281 65 and over 115,315 181,765 142,887 140,428 113,842 121,122 124,518 All Ages $82,845 $105,316 $115,705 $125,495 $129,094 $135,107 $114,775 C-2 CALPERS ACTUARIAL VALUATION — June 30, 2016 APPENDIX C MISCELLANEOUSPLAN OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA PARTICIPANT DATA Transferred and Terminated Members Distribution of Transfers to Other CalPERS Plans by Age, Service, and average Salary Years of Service at Valuation Date Attained Average Age 0-4 5-9 10-14 15-19 20-25 25+ Total Salary 15-24 0 0 0 0 0 0 0 $0 25-29 0 0 0 0 0 0 0 0 30-34 1 0 0 0 0 6 89,077 35-39 10 1 0 0 0 0 11 86,193 40-44 18 3 0 0 0 0 21 97,019 45-49 28 10 3 3 2 0 46 118,741 50-54 26 8 3 4 0 0 41 96,368 55-59 21 8 5 2 0 0 36 110,142 60-64 16 0 2 2 0 23 109,970 65 and over 6 0 0 0 0 0 6 90,312 All Ages 130 34 11 11 4 0 190 105,102 Distribution of Terminated Participants with Funds on Deposit by Age, Service, and average Salary Years of Service at Valuation Date Attained Average Age __ 0-4 5-9 10-14 15-19 20-25 25+ Total Salary 15-24 0 0 0 0 0 0 0 $0 25-29 6 0 0 0 0 6 59,596 30-34 18 0 0 0 0 20 58,575 35-39 54 2 0 0 0 58 36,743 40-44 116 12 0 0 0 0 128 39,175 45-49 102 26 7 0 1 1 137 53,422 50-54 90 30 14 6 2 1 143 55,694 55-59 87 22 7 1 0 0 117 57,103 60-64 84 10 5 1 0 0 100 49,289 65 and over 49 1 0 0 0 50 48,005 All Ages 606 105 35 8 3 2 759 50,024 C3 CALPERS ACTUARIAL VALUATION — June 30, 2016 APPENDIX C MISCELLANEOUSPLAN OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA PARTICIPANT DATA Retired Members and Beneficiaries Distribution of Retirees and Beneficiaries by Age and Retirement Type* Non- Non- Death Attained Service Industrial Industrial Industrial Industrial After Age __ Retirement Disability Disability Death Death Retirement Total Under 30 0 0 0 0 0 3 3 30-34 0 0 0 0 0 1 1 35-39 0 0 0 0 0 2 2 40-44 0 1 0 0 0 1 2 45-49 0 3 0 0 0 4 7 50-54 23 6 0 2 0 8 39 55-59 146 20 0 3 0 10 179 60-64 285 27 2 7 0 23 344 65-69 366 17 0 2 0 41 426 70-74 296 22 0 3 0 49 370 75-79 193 19 3 1 0 47 263 80-84 137 10 0 0 0 49 196 85 and Over 104 3 0 3 0 98 208 All Ages 1550 128 5 21 0 336 2,040 Distribution of Average Annual Disbursements to Retirees and Beneficiaries by Age and Retirement Type* Non- Non- Death Attained Service Industrial Industrial Industrial Industrial After Age Retirement _ Disability Disability Death Death Retirement Average Under 30 $0 $0 $0 $0 $0 $7,511 $7,511 30-34 0 0 0 0 0 17,262 17,262 35-39 0 0 0 0 0 35,141 35,141 40-44 0 28,198 0 0 0 15,457 21,828 45-49 0 42,503 0 0 0 22,003 30,789 50-54 36,351 30,327 0 26,798 0 12,558 30,054 55-59 52,587 29,662 0 25,161 0 23,733 47,954 60-64 56,803 28,268 646 47,840 0 48,397 53,493 65-69 55,033 27,812 0 33,384 0 34,400 51,859 70-74 52,799 32,641 0 50,513 0 38,208 49,650 75-79 45,998 29,353 1,782 6,738 0 41,812 43,393 80-84 43,469 23,755 0 0 0 30,514 39,224 85 and Over 38,880 23,009 0 8,037 0 25,380 31,846 All Ages $51,193 $29,292 $1,327 $33,958 $0 $32,425 $46,428 C-4 CALPERS ACTUARIAL VALUATION — June 30, 2016 APPENDIX C MISCELLANEOUS PLAN OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA PARTICIPANT DATA Retired Members and Beneficiaries (continued) Distribution of Retirees and Beneficiaries by Years Retired and Retirement Type* Non- Non- Death Years Service Industrial Industrial Industrial Industrial After Retired Retirement _ Disability Disability Death Death Retirement Total Under 5 Yrs 460 9 1 5 0 112 587 5-9 349 14 0 1 0 86 450 10-14 282 27 1 4 0 65 379 15-19 223 33 0 5 0 28 289 20-24 156 23 2 4 0 27 212 25-29 57 14 1 0 0 12 84 30 and Over 23 8 0 2 0 6 39 All Years 1550 128 5 21 0 336 2,040 Distribution of Average Annual Disbursements to Retirees and Beneficiaries by Years Retired and Retirement Type* Non- Non- Death Years Service Industrial Industrial Industrial Industrial After Retired Retirement Disability _ Disability Death Death Retirement Average Under 5 Yrs $60,590 $29,542 $3,251 $48,461 $0 $37,497 $55,506 5-9 52,453 35,181 0 25,106 0 31,872 47,922 10-14 50,681 29,305 502 32,497 0 33,394 45,869 15-19 45,365 27,349 0 34,412 0 28,380 41,473 20-24 39,492 33,487 1,048 33,475 0 26,376 36,694 25-29 38,838 27,239 789 0 0 16,791 33,302 30 and Over 16,919 18,203 0 4,880 0 12,509 15,887 All Years $51,193 $29,292 $1,327 $33,958 $0 $32,425 $46,428 * Counts of members do not include alternate payees receiving benefits while the memberis. still working. Therefore, the total counts may not match information on page 25 of the report. Multiple records may exist for those who have service in more than one coverage group. This does notresult in double counting of liabilities. C-5 APPENDIX D DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION RATES CALPERS ACTUARIAL VALUATION — June 30, 2016 MISCELLANEOUSPLAN OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA PARTICIPANT DATA APPENDIX D Development of PEPRA Members Contribution Rates The table below shows the determination of the Member contribution rates based on 50 percent of the Total Normal Cost for each respective plan on June 30, 2016. Assembly Bill (AB) 340 created PEPRA that implemented new benefit formulas and a final compensation period as well as new contribution requirements for new employees. In accordance with Section Code 7522.30(b), “new members ... shall have an initial contribution rate of at least 50 percent of the normal cost rate.” The normal cost for the plan is dependent on the benefit levels, actuarial assumptions and demographicsof the plan particularly the entry age into the plan. Should the total normal cost of the plan change by one percent or more from the base total normal cost established for the plan, the new memberrate shall be 50 percent of the new normal cost rounded to the nearest quarter percent. Basis for Current Rate Rates Effective July 1, 2018 Total Total Raee Plan Normal Member Normal Change Noange Member Cost Cost ate 26046 Miscellaneous PEPRA 11.817% 6.000% 12.087% 0.270% No 6.000% For a description of the methods used to determine the Total Normal Cost for this purpose, please see the “PEPRA Normal Cost Rate Methodology”section in Appendix A. D-1 APPENDIX E GLOSSARY OF ACTUARIAL TERMS CALPERS ACTUARIAL VALUATION — June 30, 2016 APPENDIX E MISCELLANEOUS PLAN OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA GLOSSARY OF ACTUARIAL TERMS Glossary of Actuarial Terms AccruedLiability (a/so called ActuarialAccrued Liability or EntryAge Normal Accrued Liability) Thetotal dollars needed as of the valuation date to fund all benefits earned in the past for current members. Actuarial Assumptions Assumptions made about certain events that will affect pension costs. Assumptions generally can be broken down into two categories: demographic and economic. Demographic assumptions include such things as mortality, disability and retirement rates. Economic assumptions include discount rate, salary growth and inflation. Actuarial Methods Procedures employed by actuaries to achieve certain funding goals of a pension plan. Actuarial methods include funding method, setting the length of time to fund the Accrued Liability and determining the Value of Assets. Actuarial Valuation The determination, as of a valuation date of the Normal Cost, Accrued liability, and related actuarial present values for a pension plan. These valuations are performed annually or when an employer is contemplating a change to their plan provisions. Amortization Bases Separate payment schedules for different portions of the Unfunded Liability. The total Unfunded Liability of a Risk Pool or non-pooled plan can be segregated by "cause,” creating “bases” and each such base will be separately amortized and paid for over a specific period of time. However, all bases are amortized using investment and payroll assumptions from the current valuation. This can be likened to a home having a first mortgage of 24 years remaining payments and a second mortgage that has 10 years remaining payments. Each base or each mortgagenotehas its own terms (payment period, principal, etc.) Generally, in an actuarial valuation, the separate bases consist of changesin unfunded liability due to contract amendments, actuarial assumption changes, actuarial methodology changes, and/or gains andlosses. Payment periods are determined by Board policy and vary based on the cause of the change. Amortization Period The number of years required to pay off an Amortization Base. Classic Member (under PEPRA) A classic member is a member who joined CalPERS prior to January, 1, 2013 and whois not defined as a new member under PEPRA.(See definition of new member below) Discount Rate Assumption The actuarial assumption that was called “investment return” in earlier CalPERS reports or “actuarial interest rate” in Section 20014 of the California Public Employees’ Retirement Law (PERL). Entry Age The earliest age at which a plan member begins to accrue benefits under a defined benefit pension plan. In most cases, this is the age of the memberon their date ofhire. Entry Age Normal Cost Method An actuarial cost method designed to fund a member's total plan benefit over the course of his or her career. This method is designed to yield a rate expressed as a level percentage of payroll. (The assumedretirement age less the entry age is the amountoftime required to fund a member's total benefit, Generally, the older a member on the date of hire, the greater the entry age normal cost. This is mainly because thereis less time to earn investment income to fund the future benefits.) E-1 CALPERS ACTUARIAL VALUATION — June 30, 2016 APPENDIX E MISCELLANEOUS PLAN OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA GLOSSARY OF ACTUARIAL TERMS Fresh Start A Fresh Start is when multiple amortization bases are collapsed to one base and amortized together over a new funding period. Funded Status A measure of how well funded, or how "on track” a plan orrisk poo! is with respect to assets versus accrued liabilities. A ratio greater than 100 percent meanstheplanor risk pool has moreassets than liabilities and a ratio less than 100 percent meansliabilities are greater than assets. GASB 68 Statement No. 68 of the Governmental Accounting Standards Board. The accounting standard governing a state or local governmental employer's accounting and financial reporting for pensions. GASB 68 replaces GASB 27 effective the first fiscal year beginning after June 15, 2014. New Member (under PEPRA) A new memberincludes an individual who becomes a memberof a public retirement system for the first time on or after January 1, 2013, and who was not a memberof another public retirement system prior to that date, and whois not subject to reciprocity with another public retirement system. Normal Cost The annual cost of service accrual for the upcomingfiscal year for active employees. The normal cost should be viewed as the long term contribution rate. Pension Actuary A business professional that is authorized by the Society of Actuaries, and the American Academyof Actuaries to perform the calculations necessary to properly fund a pension plan. PEPRA The California Public Employees’ Pension Reform Act of 2013 Prepayment Contribution A payment made by the employer to reduce or eliminate the year’s required employer contribution. Present Value of Benefits (PVB) The total dollars needed as of the valuation date to fund all benefits earned in the past or expected to be earned in the future for current members. Unfunded AccruedLiability (UAL) When a plan or pootl’s Value of Assets is less than its Accrued Liability, the difference is the plan or pool's Unfunded Accrued Liability (or unfunded liability). If the unfunded liability is positive, the plan or pool will have to pay contributions exceeding the Normal Cost. E-2 EXHIBIT G CalPERS Economic Impacts In California July 2017 Ttiis study reflects impacts for the fiscal year ending June 30, 2016.y I #». CalPERS CalPERS benefit payments and investments in California are essential to the state’s economy, Benefit Impacts Investment Impacts $20.9 billion $27.3 billion Economic activity generated CalPERS investments from CalPERS benefit in California payments $850.6 million 145,000 Taxes generated from California jobs supported by CalPERS benefit payments CalPERSreal estate portfolio ssoe 7 nace 15page / Page i> $17 billion 59% Supports California’s California private equity real estate sector investments in high minority areas page 8 nage 16 CalPERS Economic impacts in California, 2016 Contents Introduction23 Economic Structure of California.2.4 statewide Impact of CalPERS Benefit Payments... 6G Tax Revenue 7 Revenues byIndustry. 8 Jobs Supported by Industry. 200 0. Cee GB Regionallmpacts o0.10 Overview of CalPERS Investments in California... 0. 13 Jobs Supported by CalPERS Investments... 00000 ..B CalPERS California Initiative. ivi OUMEMALYvi introduction The California Public Employees’ Retirement System (CalPERS) is the nation’s largest defined benefit public pension fund, providing retirement benefit services to more than 1.8 million members. As of June 30, 2016, CalPERS provided ongoing monthly retirement benefit payments(benefit payments) to 650,943retirees, beneficiaries, and survivors (benefit recipients). Roughly 85 percent of these benefit recipients resided in California. Defined benefit plans, such as CalPERS, not only provide benefits, but also contribute substantially to the local economy. This study focuses on CalPERS benefit recipients residing in California and estimates the economic impacts of CalPERS benefit payments. Over the past two fiscal years, CalPERS faced unstable financial markets, a maturing workforce,rising retiree population, and longer life expectancies. As of June 30, 2016, CalPERS’ investment portfolio totaled $295.11 billion, a decreaseof 2.3 percent from the previous year.’ Despite these challenges, CalPERS continues to stimulate the California economy by providing benefit payments to more than 562,000 benefit recipients in California and investing $27.3 billion throughout the state (as of June 30, 2016). This moneyprovides several ancillary benefits throughout the State's economy. CalPERS recently conducted economic impact analyses to estimate the economic impactof CalPERS benefit payments on income, employment, and investmentsin fiscal year (FY) 2015-16.? This document summarizes findings from the analyses. Economic Structure of California According to the International Monetary Fund (IMF), California's economy was equivalentto the sixth largest in the world in 2015. When comparing the growth rate across nations, California's economygrew at a rate of 4.5 percent from 2015 to 2016, which was greater than China (the 2nd largest economy).? Top 10 National and State Gross Domestic Product (GDP) Levels and Growth Rates, 2015 GDP.in billions” US** 15,523 3.2% China 1008 3.6% Japan 4123 70% Germany 38 33% United Kingdom 2,849 31% California*** 2,458 4.5% France 2,422 1.8% India 2,09) 9.5%. aly 1,816 1.8% “GDPin current dollars ““ U.S. GDP excludes California 1,773 *™* California GDP data from the U.S. Bureau of Economic Analysis (BEA). May 2017. Source: Report for Selected Country Groups and Subjects. World Economic Outlook. IMF. April 2016. CalPERS Economic impacts in California, 2016 As reported by the U.S. Bureau of LaborStatistics (BLS), in 2015, California's economy generated more than $2.4 trillion in economic activity and supported more than 22.6 million jobs. California’s labor force increased by 3.1 percent during the 2015 calendar year, averaging an unemploymentrate of 6.2 percent, which ts 2.7 percentage points lower thanit was in 2013. Snapshotof California’s Economy in 2015 Economic Structure of California Gross Domestic Product (GDP)... 0.02... $2,458,092,270,147 GDPperCapita. $62,795 Population... 39,144,820 Employment... 0.000.000.0000 0000000000, 22,625,287 Average Worker Compensation ................... $58,172 Source: IMPLAN Group, LLC, IMPLAN System Despite this growth, the state continues to experience regional differences in economic recovery. Employment growth across California counties varies by the labor force size. The BLS found that of California’s 58 counties, 27 hada labor force exceeding 750,000 workers as of December 2015. Overall, these 27 counties accountedfor 93.1 percent of total employmentwithin the state. Except for Kern County (-0.8 percent), employmentin each of these counties increased. Riverside and San Francisco counties experienced the largest employment growth of 4.6 percent and 4.9 percent, respectively.> Whenconsidering unemployment, two out of the 27 largest labor force counties had double-digit unemploymentrates. Tulare County had the highest unemployment rate among the selected counties (11.7 percent) and ranked third amongall 58 countiesin California. Imperial County had the highest unemploymentrate (24.0 percent) across all counties ¢ CalPERS Economic impactsin Cailfornia, 2016 ea s E m p l o y m e n t G r o w t h Ra te California's 27 Largest Labor Force Counties, 2015 Employment Growth Rate <= Unemployment Rate a } e y J u s W A O | d W w a u p Source: County Employment and Wagesin California - Fourth Quarter 2015: Western Information Office. U.S. Bureau of LaborStatistics. statewide Impact of CalPERS Benefit Payments CalPERS benefit recipients provide a steady infusion of economic activity in California. Direct benefit payments represent an injection of income into the local economy,stimulating the economy through consumption, generating additional tax revenue, and supporting local jobs. In addition, CalPERS benefit payments provide a reliable income stream that playsa vital role in stabilizing the local economy during economic downturns. The economyand benefit payments changeat different rates, thus the relationship is dynamic and the economic impact of benefit payments depends on the relative rates of change. This study uses a static input-output model to estimate the economic impacts of CalPERS benefit payments. Input-output models provide a “snapshotin time” of how the economyis structured. They do not provide information on why the structure changed and whateffect any change may have had on the aggregate economy Asa result, the estimated impacts representfixed economic conditions and assumptions. Consequently, year-to-year comparisons of CalPERS economic impact studies are inappropriate because assumptions change and the economyis notstatic. $370 million Property taxes generated from CalPERS benefit payments $481 million Sales tax revenue from CalPERS benefit payments in FY 2015-16, CalPERS paid $17.4 billion in benefits to 562,239 California benefit recipients; $20.3 billion was paid to all benefit recipients. IMPLAN estimates the $17.4 billion benefits paid supported nearly 129,000 jobs throughout California and generated more than $20 billion of economic activity across the state. CalPERS Benefit Recipient Population and Benefit Payments Benefit Recipient Summary California AIP Numberof benefit recipients 562,239 650,943 Average annual allowance $30,990 $31,219 Annual retirement benefit payments $17.4 billion $20.3 billion Source: my{CalPERSretirement benefit data, includes PERS, LRS, JRS, and IRS Il (FY 2015-16) Estimated Impacts of CalPERS Benefit Paymentsin California Economic impact®. 0.00... $20,982,500,882 Sales tax generated... 0...$480,914,681 Property tax generated ........0...2..0..., $369,741,356 Employment supported ......0.0.0.0.......0..., 128,969 Source: Derived by IMPLAN using my|CalPERSretirementbenefit data (FY 2015-16) Tax Revenue CalPERS benefit recipients generate sales tax revenue when they consume goods and services. CalPERS benefit recipients also provide a steady stream of property tax revenue, whichis vital to California's local communities. In FY 2015-16, IMPLAN estimates that CalPERS benefit recipients generated nearly $481 million in sales tax revenue and $370 million in property tax revenue. CalPERS Economic im S17 billion Real estate revenue generated from CalPERS benefit payments kevenues by Industry CalPERS benefit recipients generate business revenuein many industry sectors. In FY 2015-16, benefit payments generated the greatest economic impact in terms of revenues in the imputedrental activity for the owner-occupied dwellings sector. This sector captures the average rental income homeowners would receiveif they rented their dwelling. Additionaily, CalPERS benefit payments generated revenue totals of more than: * $17 billion in the real estate market * $1.3 billion for hospitals and physician offices Top Ten Industry Sectors With Estimated Revenue Generated by CalPERS Benefit Payments Top 10 industry Sectors Revenues Owner-occupied dwellings $1,800,507,932 ' Real estate $1,717,160,889 Wholesale trade $1,055,631,822 Hospitals $723,971,679 ee SuetTinancral investment $557,309,648 | 4 Offices of physicians $552,226.07 Jae Limited-service restaurants $501,347,966 Religious organizations $473,819 884 fag Feeleeesantion $467,076,/75 ie Wireless telecommunications $459,616,571 Bg carriers (except satellite) Source: Derived by IMPLAN using my|CalPERSretirement benefit data (FY 2015-16) CalPERS Economic impacts in California, 7016 8 Jobs Supported by Industry CalPERS benefit payments supported an estimated 128,969 jobs spanning many industries throughoutthestate. In FY 2015-16, the single job sector mostaffected by benefit payments was real estate. However, when combining similarly defined industry sectors, CalPERS benefit payments supported: * 11,696 restaurant related sector jobs (9.1 percentoftotal jobs supported) * 7,952 hospitals and physician offices jobs (6.2 percent of total jobs supported) * 7,446 retail related industry jobs (5.8 percentoftotal jobs supported) Top Ten Industry Sectors with the Estimated Numberof Jobs Supported by CalPERS Benefit Payments Realestate... 7,388 Full-service restaurants 2.0.0. 0000000,0..-0--00.0. 6,12] Limited-service restaurants... 0.000.000.0000 5,575 Individual and family services... 0.0.0 000000.0.200.. 4,260 Hospitals.ee 4,046 Wholesaletrade...3,984 Offices of physicians... ee,3,906 128,969 Retail - General merchandise stores... ............... 3,801 Jobs supported by CalPERS Retail - Food and beverage stores ...........,........ 3,645 benefit payments Other financial investmentactivities... 2...3,070 Source: Derived by IMPLAN using CalPERSretirement benefit data (FY 2015-16) CalPERS Economic impacts in California, 2016 $2.2 billion Economic impact in Los Angeles County from CalPERS benefit payments Regional Impacts CalPERS benefit payments provide an infusion of economic stimulus throughout California; however, the overall impact of the benefit payments is not geographically uniform. Counties with larger Gross Regional Products (GRP) and concentrations of CalPERS benefit recipients tend to generate larger dollar economic impacts, while counties with smaller GRPs generate smaller dollar economic impacts. Los Angeles County had the largest economy at $663.23billion GRP. the largest percentage of CalPERS benefit recipients, and the largest economic impact from CalPERSbenefit payments at $2.2 billion. Sacramento County experienced the second largest economic impact from CalPERS benefit payments at $1.97 billion. Thoughtheselarger regions may experience greater total economic impact from CalPERS benefit payments, the relative economic impact may be less than those in smaller economies. Total Economic Impacts of CalPERS Benefit Payments by Region Percent of CalPERS Benefit Gross Regional Economic Recipient Product Impacts Region County Population Cin billions) Cin billions) Los Angeles 13.7 $663.23 $2.20 Orange 6.0 $237.17 £1.29 Southern California / Riverside 6.6 $73.13 $1.14 San Bernardino 5.5 $76.65 $0.85 Central Valley Sacramento 10.0 $79.52 $1.97 Santa Clara 39 $243.89 $0.59 San Francisco 0.8 $143.12 $0.12 Bay Area San Mateo 14 $93.68 $0.21 Marin 0.6 $20.96 $0.11 Eastern Sierra Calaveras 0.4 $1.02 $0.05 Northern Shasta 1.3 $6.15 $0.24 Source: Derived by IMPLAN using my|CalPERSretirement benefit data (FY 2015-16) VW Economic impact of CalPERS benefit payments is greater in smaller economies On a per capita basis, counties with large GRPs tend to mitigate the economic impact of CalPERS benefit payments because the payments represent a smaller share of the county’s overall economy. Understanding the relative nature of these estimated economic impactsis important becauseit illustrates which regions will have an actual boost in their economy. Though Los Angeles and Sacramento counties have large GRPs, and the largest benefit recipient population and benefit payments,the relative impact of CalPERS benefit payments are more moderate when compared to smaller economies. For example, Calaveras County’s GRP represents 0.4 percent of California's economy (ranked 49th outofall 58 counties). However, the average benefit payments make up a larger share of Calaveras County's economy, making the relative economic impact significantly greater than Los Angeles County. Moreover, the weighted economic impact per CalPERS benefit recipient to GRP per capita suggests that the economic impact of each additional benefit dollar increased GRP per capita by $1.02 in Calaveras County, compared to $0.44 in Los Angeles. Relative Economic Impact of CalPERS Benefit Payments by County Percent of CalPERS Economic fmpacts Benefit Economic Gross Regional per Benefit Recipient Impacts Product per Recipient relative County Population — Gin billions) Capita to GRP per Capita Calaveras 0.4 $0.05 $22,834 $1.02 Riverside 6.6 $114 $30,972 $0.99 Shasta 1.3 $0.24 $34,259 $0.93 San Bernardino 5.5 $0.85 $36,018 £0.76 Sacramento 10.0 $1.97 $52,966 $0.66 Orange 6.0 $1.29 $74,823 $0.52 Los Angeles 13.7 $2.20 $65,213 $0.44 Marin 0.6 $0.11 $80,234 $0.39 Santa Clara 39 $0.59 $127,155 $0.21 San Mateo 1.4 $0.21 $122,441 $0.21 San Francisco 0.8 $0.12 $165,489 £0.17 Source: Derived by IMPLAN using my|CalPERSretirement benefit data (FY 2015-16) CalPERS Economic impacts in California, 2016 in CalPERS benefit recipier's generate iportant econom.c smpacts throughout the state. | hese benefits are particularly important r regionswath less robust ecoremies, such a5 Caleveras, Revorside, and Shasts counties, Recisienes slituiate the economy n these vagions hy consurring goods and services which oxrerwise ray not have been consumed Weighted Econamic Impactsof CalPERS Benefit Payments by County Economic Impact BE 2 Calaveras Riverside Shasta Counties with highest economic stimulus from, CalPERSbenefits co Dio HAFAN sg enyCaBRS eatemont noni dake CY 25156) res, 20 w eric impact $273billion CalPERSinvestments in California Overviewof CalPERS Investments in California CalPERSinvesls in Californie becouse of ts v brant and diverse ecanurry, As cf iune 30, 2016, he CalPFRS investment portfolio totaled $245.1 billion lavestnients s- Californ'a accountec fer approximately 9.3 percent, ar $27.3 bilion, ef CalPERS’ porcfolia? CalPERS! investmort objective is to achieve an aparopsr ate sisk-adusted retrs create additional ancilery on investinent. Investments in Calilarnrs, homens benefits These berelits: nclure snvest¢nerts, ans supported, cially benslicialimoaces, CalPERS California Investments by Asset Class Dollars Imvestartin CA Seba Laiies? a 313.3a ane Chidsnedincome oso, Peteay wa som Rea Estale — $8. - Infrastructure 30.35 23% Asofone 36.2086 Tae Brant ef Bot i CAements the tai "CA ait othe tat!aof each as, Jobs Supported by CalPERS Investments Local job suapor® is av importa ancilarybevehiLof CalPRS Caviforsia twvestments {CaPERS invests ir Calfornia companies, whickprcvide the indinect benefil 0! supporting Calforia vectcers whe stimuletethe economy, These workers crealee cone nicactivity.n their ‘oval ecmrruunitesby purchasing gncds andl serviens However, the role thal CalPFRS’ capital plays in sustamiegthe aclivitios of 9 public company differs suostantialy froma privale company or pro,ect. Specifically, Cal€RS is oar of chousands cf capital providers tn oublc companias, with an incirect connection to tre eclivtios of these busiresces Ass are pre total jobs figuresfo Ce PLRS!putmarkets andprivate markels. nted separately cnthe following pees, recognizing, he ckfforent pill CalPERS provides and emplayrenit cu lationship setwscet ceswenie impacts Public Markets ‘emp oy moré thanore million Californians. Twenty-tivw percent oF shesefiforaia jobssupported by CalPERS public compan.es' facilities are located in Cakiornia, which s “igne: [han companies with headquerters outsicle of California (only four percere of toeir facilities are ated in the stale}. Many of these public campanies. suchas Google, Agple, a ard Disney, are iconle California, Percentage ofGlobal Equity Investment by CompanySize sso0emptats 88% 101-900 employees 26% Cemolovees 18% CaIPERS globa: fixec incurne invessmerts inckde $78 =llioninvested iirectly 1 21 Calforriia-headquarterec’ companies w sha.t the assistance of external third-party ‘nyestinent managers, hese companies are larger in compatisos: to companies n other asset classes, with a mecian size of approximately 73,006 ‘cmp oyees. Cambined, these compares erployan es! mated 268,090 war . CalPERS .California Public Employees Produced by CalPERS Office of Communications Retirement System & Stakeholder Relations with CalPERS Retirement Research and Planning Division www.calpers.ca.gov July 2077.08.10 EXHIBIT H U.S. Census Bureau QuickFacts: California CUnited States” Berea QuickFacts California QuickFacts provides statistics for all states and counties, and for cities and towns with a population of 5,000 or more. Table pore (ALL TOPICS 7bo pet California Page | of 3 Population estimates, July 1, 2017, (V2017) 39,536,653 A Peorte Population Population estimates, July 1, 2017, (V2017) 39,536,653 Population estimates, July 1, 2016, (V2016) 39,250,017 Population estimates base, April 1, 2010, (¥2017) 37,254,518 Population estimates base, April 1, 2010, (¥2016) 37,254,522 Population, percent change - April 1, 2010 (estimates base) to July 1, 2017, (V2017) 6.1% Population, percent change- April 1, 2010 (estimates base) to July 1, 2016, (V2016) 5.4% Populalion, Census, April 1, 2010 37,253,956 Age and Sex Persons under5 years, percent & 6.3% Persons under 18 years, percent & 23.2% Persons65 years and over, percent & 13.6% Female persons, percent & 50.3% Race and Hispanic Origin White alone, percent (a) 72.7% Black or African American alone, percent (a) 65% AmericanIndian and Alaska Native alone, percent (a) a 17% Asian alone, percent (a) & 14.8% Native Hawaiian and OtherPacific islander alone, percent (a) 405% Two or More Races, percent & 3.8% Hispanic or Latino, percent (b} & 38.9% White alone, not Hispanic or Latino, percent 4 37.7% Population Characteristics Veterans, 2012-2016 1,720,635 Foreign born persons, percent, 2012-2016 27.0% Housing Housing units, July 1, 2016, (V2016) 14,060.525 Owner-occupied housing unit rate, 2012-2016 54.1% Medianvalue of owner-occupied housing units, 2012-2016 $409,300 Median setected monthly ownercosts -with a mortgage, 2012-2016 $2,157 Medianselected monthly ownercosts -without a mortgage, 2012-2016 $517 Mediangrossrent, 2012-2016 $1,297 Building permits, 2016 102,350 Families & Living Arrangements Households, 2012-2016 12,807,387 Persons per household, 2012-2016 2.95 Living in same house +t year ago, percentof persons age 1 year+, 2012-2016 85.7% Languageotherthan English spoken at home, percentof persons age 5 years+, 2012-2016 44.0% Education High school graduate or higher, percentof persons age 25 years+, 2012-2016 82.1% Bachelor's degree or higher, percent of persons age 25 years+, 2012-2016 32.0% Health With a disability, under age 65 years, percent, 2012-2016 6.8% Personswithout health insurance, under age 65 years, percent 4 8.3% https://www.census.gov/quickfacts/CA Is this page helpful? *a 4 a Yes OG No 4/20/2018 U.S. Census Bureau QuickFacts: California Page 2 of 3 Economy In civilian laborforce, total, percent of population age 16 years+, 2012-2016 63.0% In civilian laborforce, female, percent of population age 16 years+, 2012-2016 57.1% Total accommodation and food services sales, 2012 ($1,000) (c) 90,830,372 Tota! heaith care and social assistance receipts/revenue, 2012 ($1,000) (c) 248,953,592 Total manufacturers shipments, 2012 ($1,000) (c) 512,303,164 Total merchant wholesaler sales, 2012 ($1,000) (c} 666,652,186 Totalretail sales, 2012 ($1,000) (c) 481,800,461 Total retail sales per capita, 2012 (c) $12,665 Transportation Meantraveltime to work (minutes), workers age 16 years+, 2012-2016 28.4 Income & Poverty Median household income {in 2016 doliars), 2012-2016 $63,783 Percapita incomein past 12 months (in 2016 dollars), 2012-2016 $31,458 Persons in poverty, percent & 14.3% kg BUSINESSES Businesses Total employer establishments, 2016 922,477! Total employment, 2016 14,600,349" Total annual payroll, 2016 ($1,000) 886,643,923! Total employment, percent change, 2015-2016 1.9%! Totai nonemployer establishments, 2015 3,206,958 All firms, 2012 3,548,449 Men-ownedfirms, 2012 1,852,580 Women-ownedfirms, 2012 1,320,085 Minority-ownedfirms, 2012 1,619,857 Nonminority-owned firms, 2042 1,819,107 Veteran-ownedfirms, 2012 252,377 Nonveteran-ownedfirms, 2012 3,176,341 @® GEOGRAPHY Geography Population per square mile, 2010 239.1 Landarea in square miles, 2010 155,779.22 FIPS Code 06 Yes KN No https://www.census.gov/quickfacts/CA 4/20/2018 U.S. Census Bureau QuickFacts: California Page 3 of 3 Value Notes 4. Includes data notdistributed by county. & Estimates are not comparable to other geographic levels due to methodologydifferences that may exist betweendifferent data sources. Someestimates presented here come from sample data, and thus have sampling errors that may render some apparentdifferences between geographiesstatistically indistinguishable. Click the Quleft of each row in TABLEview to learn about sampling error. The vintage year (e.g., V2017) refers to the final year of the series (2010 thru 2017). Different vintage years of estimates are not comparable. Fact Notes {a) _Includes personsreporting only one race (b) Hispanics maybeof anyrace, so also are included in applicable race calegories (c} Economic Census - Puerto Rico data are not comparable to U.S. Economic Censusdata Value Flags - Either no or too few sample observations were available to compute an estimate, or a ratio of medians cannotbe calculaled becauseoneor both of the medianestimatesfallsin ttinterval of an open endeddistribution, D Suppressedto avoid disclosure of confidential information F Fewerthan 25firms FN Footnote onthis item in place of data NA Notavailable $ Suppressed; does not meetpublication standards x Not applicable Zz Value greater than zero but less than half unit of measure shown QuickFacts data are derived from: Population Estimates, American Community Survey, Census of Poputation and Housing, Current Population Survey, Smail Area Health Insurance Estimates, SmPoverty Estimates, State and County Housing Unit Estimates, County BusinessPatterns, NonemployerStatistics, Economic Census, Survey of Business Owners, Building Permits. _ Is this page helpful? * gy Yes oO No https://www.census.gov/quickfacts/CA 4/20/2018 Ee EXHIBIT I COMMONWEALTH OF KENTUCKY FRANKLIN CIRCUIT COURT DIVISION CIVIL ACTION NO.18-CI- COMMONWEALTH OF KENTUCKY ex rel. ANDY BESHEAR, ATTORNEY GENERAL and KENTUCKY EDUCATION ASSOCIATION and KENTUCKY STATE LODGE FRATERNAL ORDER OF POLICE PLAINTIFFS V. VERIFIED COMPLAINT FOR A DECLARATION OF RIGHTS, A TEMPORARY INJUNCTION, AND A PERMANENT INJUNCTION MATTHEWG.BEVIN,in his official capacity as Governorofthe Commonwealth of Kentucky SERVE: Office of the Attorney General 700 Capitol Avenue, Suite 118 Frankfort, Kentucky 40601 and BERTRAM ROBERTSTIVERS,II, in his official capacity as President of the Kentucky Senate SERVE: 702 Capitol Avenue Annex Room 236 Frankfort, Kentucky 40601 David Byerman, Director Legislative Research Commission 700 Capitol Avenue, Room 300 Frankfort, Kentucky 40601-3449 and DAVID W. OSBORNE,in his official capacity as Speaker Pro Tempore of the Kentucky House of Representatives 7 6 6 3 F S B 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 3 B : 0 0 0 0 0 1 of 0 0 0 0 4 9 e e n s SERVE: 702 Capitol Avenue Annex Room 332C Frankfort, Kentucky 40601 David Byerman, Director Legislative Research Commission 700 Capitol Avenue, Room 300 Frankfort, Kentucky 40601-3449 and BOARD OF TRUSTEES OF THE TEACHERS’ RETIREMENT SYSTEM OF THE STATE OF KENTUCKY SERVE: Office of the Attorney General 700 Capitol Avenue, Suite 118 Frankfort, Kentucky 40601 and BOARD OF TRUSTEES OF THE KENTUCKY DEFENDANTS RETIREMENT SYSTEMS SERVE: Office of the Attorney General 700 Capitol Avenue, Suite 118 Frankfort, Kentucky 40601 Seite edie doko kabaeak Come nowthe Plaintiffs, Commonwealth of Kentucky, ex rel. Andy Beshear, Attorney General, Kentucky Education Association (“KEA”), and the Kentucky State Lodge Fraternal Order of Police (“Kentucky State FOP Lodge”), by and through counsel, and bring this action for a declaration of rights, a temporary injunction, and a permanentinjunction against the Defendants, Matthew Griswold Bevin,in his official capacity as Governor ofthe Commonwealth of Kentucky (“Governor Bevin”), Bertram Robert Stivers, II, in his official capacity as President of the Kentucky Senate (“Senator Stivers”), David W. Osborne, in his official capacity as Speaker Pro Tempore of the Kentucky House of Representatives (“Representative Osborne”), the Board of 7 6 6 3 F 9 B 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 3 B : 0 0 0 0 0 2 of 0 0 0 0 4 9 Trustees of the Kentucky Teachers Retirement System (“KTRS”), and the Board of Trustees of the Kentucky Retirement Systems (“KRS”). INTRODUCTION March 29, 2018 was the 57th day of the 2018 Kentucky Legislative Session. Bythis time, a “pension reform”bill ~ Senate Bill 1 — had been introducedin the Senate, but had failed to secure the necessary votes to pass that single chamber and lay dormantafter being returned to committee. Strong public opposition led the sponsor of SB 1 to declare the bill was “onlife support,” and the President of the Senate stated that there was“little hope” the bill would pass. Then,just after 2:00 p.m. on March 29, the Kentucky Houseof Representativescalled for a recess, so that its Committee on State Government could meet. The unannounced meeting was not held in the legislative hearing rooms, but instead in a small conference room. Claiming the space wastoo small, the public — including the hundredsofteachers rallying outside — was excluded. At that time, the Committee called Senate Bill 151 (“SB 151”), an 11-page bill relating to sewer services. The Committee immediately amended SB 151, strippingall language about sewers. The bill suddenly became a massive 291-page overhaul of Kentucky’s public pension systems. The Chair, Representative Jerry T. Miller, announced the Committee would vote onthebill during the meeting, even though most committee membershad not seen, muchless read, the 291-page “surprise”bill. Nor had any actuarial analysis been prepared, as required by KRS 6.350, which is necessary to determineif the bill will work, i.e., would the bill save moneyor cost the Commonwealth the additional $3 plusbillion that has since been reported. The Committee allowed no public testimony, excluding any say for the public employees whose pensions were 7 6 6 3 F 9 B 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 6 C 3 C 8 9 B 3 B : 0 0 0 0 0 3 of 0 0 0 0 4 9 being cut. And the Committee did not make a single copy ofthe bill available to the public during the meeting to allow Kentucky citizens to know whattheir “public servants” were doing. Just minutes after the bill passed the committee on a purely partisan vote, it was called on the floor ofthe full House, where the new SB 151 receiveditsfirst public reading. Onceagain, state representatives were forced to vote on the bill without readingit, without public testimony, and without an actuarial analysis. The vote also occurredin violation of Section 46 of the Kentucky Constitution, which required the “new”bill — and not someprior sewer version — to receive three readingson three different days. Only 49 of the 100 state representatives voted for the bill, with 46 voting against and 5 not voting. The Speaker Pro Temporeofthe Housesigned thebill, instead of the Speaker himself'as required by Section 56 of the Kentucky Constitution. SB 151 then movedto the Senate, which likewise rushed it through passage late into the night, avoiding the same hearings and public participation that had defeated its own attemptsat cutting pensions for public employees. Governor Bevin signed the bill into law on April 10, 2018. As passed, the new SB 151 substantially alters and ultimately reduces the retirement benefits of the over 200,000 active members ofthe pension systems, imcluding teachers, police officers, and firefighters. In doing so,it breaks the “inviolable” contract that the Commonwealth made with its public employees under KRS 21.480, KRS 61.692, KRS 78.852, and KRS 161.714. Under those laws, the legislature promised Kentucky’s public employeesthat, in exchange for their decades of public service, they would be guaranteedcertain retirement benefits. By enacting SB 151, Governor Bevin and the General Assembly have substantially impaired and broken that contract, in violation of the Kentucky Constitution andstate statute. 7 6 6 3 F 9 B 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 8 3 8 : 0 0 0 0 0 4 of 0 0 0 0 4 9 The process under which SB 151 was passed also violates numerous provisions of both the Kentucky Constitution and state statute. These laws were designed to prevent the exact trickery and exclusion of the public that the General Assembly exhibited on March 29. Each of these violations — including violations of Sections 2, 46, and 56ofthe Kentucky Constitution and KRS6.350 and 6.955 — invalidate SB 151. Kentucky’s employees andthe people they servewill suffer irreparable injury if SB 151 is allowed to take effect. Already, the Governor’s threats to strip retirement benefits from public employeeshaveled to record retirementsof teachers, state troopers, and other public servants. If SB 151 is allowedto take effect, hundreds — and perhaps thousands— of additional public employeeswill retire, leading to both an education andpublic safety crisis. Indeed, the mere passage of SB 151 resulted in the closure of 27 schooldistricts the very next day and the following Mondaybecauseteachers have begun to take their sick days as a direct consequence of SB 151’s eliminationoftheir ability to use such days to calculate their retirement eligibility. Plaintiffs therefore respectfully request that the Court enter an order declaring SB 151 unconstitutional and enjoining Governor Bevin, the Board of Trustees of KTRS,and the Board of Trustees of KRS from enforcingit. NATURE OF ACTION 1. This Verified Complaint for a Declaration of Rights, a Temporary Injunction, and a PermanentInjunction is governed by the Kentucky Declaratory Judgment Act, KRS 418.010, et seq., and Kentucky Rules of Civil Procedure (“CR’’) 57 and 65. 2. KRS418.040 provides this Court with authority to “make a binding declaration of rights, whether or not consequential relief is or could be asked” when a controversy exists. An 7 6 6 3 F 9 8 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 8 3 B : 0 0 0 0 0 5 of 0 0 0 0 4 9 E A R e a e A y actual and justiciable controversy regarding violations of the Kentucky Constitution and state laws clearly exists in this action. 3. CR 65 permits this Court to issue a preliminary injunction and, in a final judgment, a permanentinjunction, which mayrestrict or mandatorily direct the doing of an act. 4. The Attorney General requests an expedited review pursuant to KRS 418.050 and CR 57. SB 151 unconstitutionally eliminates benefits promised to public employees, causing them immediate harm. Moreover, hundreds of public employees have already announcedtheir intention to retire — a significant increase overthe historical average — in responseto the introduction of pension “reform.” Absent immediaterelief, SB 151 will force more teachers, law enforcementofficers,firefighters, and other crucial public employees to choose between continued employmentorthe reductionor loss of benefits that were guaranteed to them bystate law and the Kentucky Constitution. For these reasons,this justiciable controversy presents an immediate concern that the Court should promptly resolve. PARTIES 5. Plaintiff, Andy Beshear,is the duly elected Attorney General of the Commonwealth of Kentucky, a constitutional office pursuant to Sections 91, 92, and 93 ofthe Kentucky Constitution. Pursuant to KRS 15.020, Attorney General Beshear is the chief law officer of the Commonwealth and all of its departments, commissions, agencies, and political subdivisions. Attorney General Beshearis duly authorized bythe Kentucky Constitution, statutes and the common law,including his parens patriae authority, to enforce Kentucky law. As Attorney General, he has the authority to bring actions for injunctive andotherrelief to enforce the Kentucky Constitution and the Commonwealth’s statutes and regulations, including the 7 6 6 3 F 9 B 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 3 B : 0 0 0 0 0 6 of 0 0 0 0 4 9 authority to bring an action against the Governorand otherstate agencies for injunctiverelief. See Ky. CONST. § 91; KRS 15.020. 6. Plaintiff, KEA,is a not-for-profit corporation organized underthe laws of Kentucky. KEAis a voluntary membership association comprised ofstudent, active andretired teachers and active and retired education support professionals. KEA advocates for the professional welfare of itsmembers. All active and retired members of KEA participate in or are annuitants of KTRS or CERS. 7. Plaintiff, Kentucky State FOP Lodge,is a fraternal organization composed of current andretired law enforcementofficers, as well as local and regional lodges throughoutthe Commonwealth. It is dedicated to, amongotherthings, bettering the conditions under whichits individual membersserve, and generally promoting the rights and welfare of law enforcement officers. Its membersinclude both current and retired participants in the state and county retirement systems. 8. Defendant, Matthew Griswold Bevin,is the duly elected Governorofthe Commonwealth of Kentucky, a constitutional office. The Governoris the Chief Magistrate of the Commonwealth, pursuant to Section 69 of the Kentucky Constitution, and he is charged by Section 81 of the Constitution with taking care that the laws of the Commonwealth be“faithfully executed.” Moreover, Governor Bevin controls the Board of Trustees of KRS through his power to appointten of its members, as well as the Secretary of the Personnel Cabinet. KRS 61.645(1)(a), (e). Governor Bevin also exercises influence over the Board of Trustees of KTRS through his powerto appoint two of its members andthe chief state school officer. KRS 7 6 6 3 F 9 B 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 3 B : 0 0 0 0 0 7 of 0 0 0 0 4 9 A b b L e 161.250(1)(b)(3). Further, Governor Bevin has stated that he believes he has “absolute authority” to reorganize any state board pursuant to KRS 12.028.! 9. Defendant, Bertram Robert Stivers,II, is the President ofthe Kentucky Senate, a constitutional office. At all relevant times, Senator Stivers was the presiding officer ofthe Kentucky Senate. 10. Defendant, David W. Osborne, is the Speaker Pro Tempore of the Kentucky House of Representatives. 11. Defendant, Board of Trustees of the Teachers’ Retirement Systemofthe State of Kentucky,is responsible for the general administration and management of KTRS. KRS 161.250(1)(a). KTRSis an independent agency and instrumentality of the Commonwealth with the powersandprivileges of a corporation and the purposeofproviding retirement allowances for teachers and their beneficiaries and survivors. KRS 161.230. The Board’s membership consists of the chief state school officer and the State Treasurer as ex officio members, two trustees appointed by the Governor, four elected teachertrustees, two elected lay trustees, and an elected retired teachertrustee. KRS 161.250(1)(b). 12. Defendant, Board of Trustees of the Kentucky Retirement Systems, is responsible for the general administration and managementof the Kentucky Employees Retirement System (“KERS”), the County Employees Retirement System (““CERS”), and the Kentucky State Police Retirement System (“SPRS”). KRS 61.645. The Board of Trustees of KRS consists of seventeen members: the Secretary of the Personnel Cabinet, three trustees elected by the members of CERS,onetrustee elected by members of SPRS, twotrustees elected by members of ' Jack Brammer, Bevin Says He Has “Absolute Authority” to DisbandAny State Board, Lexington Herald-Leader,June 21, 2016 (available at http://www.kentucky.com/news/politics- government/article85085272.html) (last visited Apr. 2, 2018). 8 7 6 6 3 F 9 B 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 3 B : 0 0 0 0 0 8 of 0 0 0 0 4 9 KERS,andten trustees appointed by the Governor. KRS 61.645(1). The Board ofTrustees of KRShas the powers and privileges of a corporation, which it exercises to oversee KERS, CERS, and SPRS. JURISDICTION AND VENUE 13. An actual, justiciable controversy exists, and this Court has subject matter jurisdiction overthis action pursuant to KRS 418.040, KRS 23A.010, CR 57, and CR 65. 14. Venueis appropriate in this Court pursuant to KRS 452.405, because the primary offices of the Attorney General and the Defendants are located in Frankfort, Franklin County, Kentucky. Furthermore,this action generally relates to violations of Kentucky law, which were either determined or accomplished in Frankfort, Franklin County, Kentucky. Additionally,this action generally relates to violations of the Kentucky Constitution that occurred in Frankfort, Franklin County, Kentucky. 15. Pursuant to KRS 418.040, ef seq., this Court may properly exercise in personam jurisdiction over the Defendants. Because Senator Stivers and Representative Osborneare named as defendantsin their official capacities, the Court may exercise in personam jurisdiction over the General Assembly. FACTUAL BACKGROUND The General Assembly Attaches Pension Reform to a SewageBill 16. On February 15, 2018, SB 151 was introduced in the Senate as “an act relating to the local provision of wastewater services.” The nine-page bill was referred to the Senate Committee on Natural Resources & Energy Committee the next day. 7 6 6 3 F 9 B 8 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 3 9 B 3 B : 0 0 0 0 0 9 of 0 0 0 0 4 9 a t a s e M e r a l H s 17. On March 12, 2018, SB 151 was taken from that committee, givenitsfirst constitutionally mandated reading on the floor of the Senate, and returned to that committee. For this reading, the content of SB 151 dealt only with sewer services. 18. On March 13, 2018, SB 151 was again taken from the Senate Committee on Natural Resources & Energy, given its second constitutionally mandated reading, and then returned to the committee. For this second reading, the content of SB 151 dealt only with sewer services. 19. On March 14, 2018, the Senate Committee on Natural Resources & Energy reported SB 151 favorably, with a Committee Substitute. Again, the hearing andvote dealt with SB 151 as an 11-pagebill dealing with sewer services. 20. On March 16, 2018, SB 151 received another reading onthefloor ofthe Senate, and passed 36-0. The vote was in favor of the contentof the bill, which dealt exclusively with sewerservices. 21. Thus, duringits first, second, and third readingsonthe floor of the Senate, SB 151 was “an actrelating to the local provision of wastewaterservices.” It did not contain any provisionsrelating to the state pension system. 22. On March 19, 2018, SB 151 was received in the House of Representatives and sent to the House Committee on Committees. 23. On March 20, 2018, SB 151, as it then existed exclusively as a sewerbill, was taken from the Committee on Committees, given its constitutionally mandatedfirst reading on the Housefloor, and returned to the Committee on Committees, which posted SB 151 to the House Committee on State Government. 10 7 6 6 3 F 9 B 6 - C 2 E 8 - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 3 B : 0 0 0 0 1 0 of 0 0 0 0 4 9 24. On March 21, 2018, SB 151 was taken from the House Committee on State Government, given its constitutionally mandated second reading on the Housefloor — again, exclusively as a sewerbill — and returned to the same committee. 25. At the time ofbothits first and second readingsin the House of Representatives, SB 151 was “anactrelating to the local provision of wastewaterservices.” It did not contain any provisionsrelating to the state pension system. 26. Just after 2:00 p.m. on March 29, 2018, the House of Representatives recessed so that the House Committee on State Government could meet. The previously unannounced meeting was held in a small conference room and the public was excluded. At that time, the Committee called SB 151, which wasstill an 11-pagebill relating to sewerservices. 27. House Committee Substitute 1 to SB 151 was then introduced. The Substitute stripped all provisions of the wastewater treatmentbill and replaced it with pension reform provisions. 28. The new SB 151 completely overhauled the public pension system and, asset forth more fully below,it unconstitutionally breached the inviolable contract that the Commonwealth made with its public employees, including its teachers andpoliceofficers. 29. The House Committee on State Governmentrefused to hear testimony from the public concerning SB 151. 30. During the Committee meeting, Representative Jim Wayne objected to holding a vote on SB 151 becausenoactuarial analysis was provided to the members of the Committee or attached to the bill, in violation of KRS 6.350. 31. The Chair of the House Committee on State Government, Representative Jerry T. Miller, overruled Representative Wayne’s objection, and called for a vote on SB 151 shortly 1] 7 6 6 3 F 9 B 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 3 B : 0 0 0 0 1 1 of 0 0 0 0 4 9 after it was distributed to Committee members, thereby ensuring that the Committee members did not havetime to read SB 151 inits entirety. 32. The Committee on State Government then reported the bill favorably to the House. Only then wasthetitle amended by a vote of the Committee, changing it from “an act relating to the local provision of wastewater services”to “an act relating to retirement.” 33. The new SB 15] was immediately reported to the House of Representatives, all on the evening of March 29, 2018. It then receivedits first reading on the floor of the House of Representatives in its new form,as “an act relating to retirement.” 34. Again, Representative Wayneobjected to the passage of SB 151 without an actuarial analysis. The Speaker Pro Tempore of the House, Representative Osborne,ruled that it waslegal to pass SB 151 without such an analysis. Representative Rocky Adkins appealedthis ruling of the Chair, but the ruling was upheld by a vote of 58-33. 35. The House of Representatives then passed SB 151 by a vote of 49-46. Representative Osborne, whois the Speaker Pro Tempore of the House of Representatives, then signed the bill on the line labeled “Speaker-House of Representatives.” 36. Also during the evening of March 29, 2018, SB 151 wasreceived in the Senate. The Senate then voted to concur in the House Committee Substitute and the amendmentto the title. The Senate then passed the bill by a vote of 22-15. 37. SB 151 never received a reading in the Senateafter the title and contents of the bill were completely changed, eliminating the provisionsrelating to wastewater treatment and replacing them wholesale with provisionsrelating to public pensions. 38. Thus, in a matter of mere hours, SB 151 was completely transformed fromits original subject matter, reported out of the House State Government Committee, approved bythe 12 7 6 6 3 F 9 B 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 3 B : 0 0 0 0 1 2 of 0 0 0 0 4 9 House of Representatives, and approved by the Senate in the dark of night ~ all before any stakeholders had the opportunity even to read the 291-page bill, much less commentonit. 39. Section 46 of the Kentucky Constitution provides,in relevant part, that “Te]very bill shall be read at length on three different days in each House, but the second andthird readings may be dispensed with by a majority ofall the memberselected to the House in which the bill is pending.” 40. Novote wastaken in either the House of Representatives or the Senate with regard to SB 151 to suspend the constitutional requirementthat a bill receive three separate readings on three separate days in each Housepriorto passage. 4l. SB 151 never received a reading in the Senate in the form in which it was passed ~- that is, as an act relating to retirement, as opposed to an act relating to wastewatertreatment. 42. Moreover, Representative Osborne signed SB 151 onthe line for the signature of the “Speaker-House of Representatives.” 43. Section 56 of the Kentucky Constitution provides, in pertinent part, that “[n]o bill shall becomea law until the same shall have been signed bythe presiding officer of each ofthe two Housesin opensession.” 44. Under Kentucky law, the Speaker of the Houseis the presiding officerof the House of Representatives. 45. Representative Osborneis not the Speaker of the House of Representatives, as that position is vacant until filled pursuant to Section 34 of the Kentucky Constitution. 46. In addition, SB 151 wasreported out of the House State Government Committee without an actuarialanalysis. 13 7 6 6 3 F 9 8 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 3 B : 0 0 0 0 1 3 of 0 0 0 0 4 9 w e oo “ A e 47. KRS6.350, a duly enactedstatute, providesthat nobill affecting pensions may be reported out of Committee unless accompaniedby an actuarial analysis. 48. To date, no actuarial analysis has been performed on SB 151. Instead, a purportedactuarial analysis was later addedto thebill on the Legislative Research Commission (“LRC”) website as an obvious attempt to paperover the fact that SB 151 was passed in violation of the law,because the actuarial analysis was never provided to membersofthe House Committee on State Government. 49. Specifically, the purported actuarial analysis cametoo late because it was added to the LRC website after the House Committee on State Government had already reported SB 151. Moreover, the purported actuarial analysis failed to accountfor the provisions of SB 151 as amended, claiming that it was the same as SB | even though numerous provisions between the twobills differed that affected the financial impact of SB 151. In addition, the purported actuarial analysis was provided only by auditors for KRS, and did not contain any analysis of the effects of SB 151 on KTRS. 50. SB 151 was also voted on by both the House of Representatives and the Senate even thoughit was not accompanied bya fiscal note, and even though neither of those bodies voted by a two-thirds majority to waive the fiscal note requirement. S51. | KRS 6.955 specifically prohibits both chambers of the General Assembly from voting on a bill that “relates to any aspect of local governmentor any service provided thereby” unless the bill is accompaniedbya fiscal note, the contents of which are described in KRS 6.965, or unless the chamberofthe General Assembly votes, by a two-thirds majority, to waive the fiscal note requirement. 14 7 6 6 3 F 9 B 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 3 B : 0 0 0 0 1 4 of 0 0 0 0 4 9 52. Governor Bevin signed SB 151 into law on April 10, 2018. SB 151 Breaks the Commonwealth’s Inviolable Contract 53. The General Assembly promised Kentucky’s public employeesthat, in exchange for their public service, they would be guaranteedcertain retirement benefits. This promise was made in the form of a contract, which was passed into law. See KRS 21.480; KRS 61.692: KRS 78.852; KRS 161.714. The statutes the General Assembly passed declared this contractto be “inviolable,” meaning the General Assembly couldnotlater breakit. 54. Kentucky’s public employees have upheld their end of the bargain by rendering services for the benefit of the people of the Commonwealth. 55. The new SB 151 made substantial and material changes to the benefits that had been promisedto participants in the KTRS, KERS, SPRS, and CERS public pension systems. 56. By enacting and enforcing SB 151, Defendants have materially breached and substantially impaired the inviolable contracts between the Commonwealth and public employees, as set forth below. Kentucky Teachers Retirement System 57. The General Assembly created an inviolable contract with public educators under KRSChapter 161. The contract protects benefits provided between KRS 161.220 and KRS 161.710. See KRS 161.714. 58. SB | amends KRS161.623, which is within the inviolable contract. In doing so, it unlawfully and materially reduces, alters, or impairs pension benefits due to KTRS members. * The signed SB 151 is available at http://apps.sos.ky.gov/Executive/Journal/execjournalimages/2018- Reg-SB-0151-2470.pdf. 15 7 6 6 3 F 9 B 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 3 B : 0 0 0 0 1 5 of 0 0 0 0 4 9 59. Specifically, the inviolable contract does not cap the amount of accruedsick leave that teachers whostarted before July 1, 2008, may convert to additional service credit for purposes of their retirement. See KRS 161.623. 60. Moreover, the inviolable contract currently caps the amountof accrued sick leave that teachers whostarted on or after July 1, 2008, may convert to additional service credit for purposesof their retirement at 300 days. See KRS 161.623(8). 61. Section 74 of SB 151 caps the amountofaccrued sick leave that members may convert to the amount accrued as of December 31, 2018. This limitation materially alters and impairs the rights and benefits due to employees, and therefore violates the inviolable contract. Kentucky Employees Retirement System 62. The KERSpensionrights and benefits are located at KRS Chapter 61, with the inviolable contract found in KRS 61.510-61.705. See KRS 61.692. 63. SB 1 amendsorrepeals these very statutes, thereby unlawfully and materially reducing, altering, or impairing pension benefits due to KERS members, as set forth more fully below. 64. The inviolable contract allows lump-sum paymentsfor compensatory time to be included in the creditable compensation ofTier I nonhazardous employees. See KRS 61.510. Section 14 of SB 151 expressly excludes lump-sum payments from creditable compensation for non-hazardous, Tier I employees,retiring after July 1, 2023. This exclusion materially alters and impairs the ultimate calculation of KERS members’ retirement allowances, and therefore violates the inviolable contract. 65. Undertheinviolable contract, uniform and equipmentallowances may be included in KERS members’ creditable compensation. See KRS 61.510. Section 14 of SB 15] 16 7 6 6 3 F 9 B 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 3 B : 0 0 0 0 1 6 of 0 0 0 0 4 9 expressly excludes such allowances as well as undefined “other expense allowances,” paid on or after January 1, 2019, from creditable compensation. This exclusion materially alters and impairs the ultimate calculation of KERS members’ retirementallowances, and therefore violates the inviolable contract. 66. The inviolable contract guarantees KERS Tier I members may use accumulated, unusedsick leave to determineretirementeligibility. See KRS 61.546. Section 16 of SB 151 prohibits KERS Tier I employees from using sick leave service credit for retirement eligibility, if they retire on or after January 1, 2023. Because this prohibition materially impairs the rights and benefits due to members, it violates the inviolable contract. 67. The inviolable contract does not require deductionsin any amount from KERS Tier I members’ creditable compensation for hospital and medical insurance. See KRS 61.702(2)(b). Section 30 of SB 151 requires an employer of a KERS Tier I member employed after July 1, 2003 to deduct up to 1% of the member’s creditable compensation for purposes of hospital and medical insurance under the plan. Because this provision alters and impairs the ultimate calculation of KERS members’ retirement allowances,it violates the inviolable contract. 68. — The inviolable contract requires Tier I hazardous employees’ final compensation be calculated using the creditable compensation from the three (3) fiscal years the employee was paid the highest average monthlyrate. It requires the highestfive (5) fiscal years for Tier I nonhazardous employees. See KRS 61.510. In either case, the inviolable contract does not require that the fiscal years used for calculation be complete fiscal years. Id. Section 14 of SB 151 requires, after January 1, 2019, that Tier I hazardous employees’ final compensation be calculated using the creditable compensationfrom their highest three (3) completefiscal years, and that the highest five (5) complete fiscal years be used to calculate for Tier I nonhazardous 17 7 6 6 3 F 9 B R 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 3 B : 0 0 0 0 1 7 of 0 0 0 0 4 9 h e M * R R M A S I R E Ss e employees’ final compensation. Because SB 151 alters and impairsthe final compensation calculation guaranteed to hazardous and nonhazardousTier I employees,it violates the inviolable contract. 69. KERSTierI and Tier II employees who optedinto the current hybrid cash balance plan are guaranteed an annualinterest credit of at least 4%. See KRS 61.597. Section 19 of SB 151 removesthis guarantee, and instead guaranteesa return of 0%. Becausethis change materially impairsthe rights of these employees, it violates the inviolable contract. Kentucky State Police Retirement System 70. The SPRSpensionrights and benefits are located at KRS Chapter 16, with the inviolable contract found in KRS 16.510-16.645. See KRS 16.652. 71. SB 151 amendsorrepeals these verystatutes, thereby unlawfully and materially reducing, altering, or impairing pension benefits due to SPRS members. | 72. The inviolable contract guarantees SPRS Tier I members may use accumulated, unusedsick leave to determine retirementeligibility. See KRS 16.645; KRS 61.546. Section 16 of SB 151 prohibits SPRS Tier I employees from using sick leave service credit for retirement eligibility, if they retire on or after January 1, 2019. This prohibition materially impairsrights and benefits due to members,and therefore violates the inviolable contract. 73. The inviolable contract does not include deductions in any amount from SPRS Tier [ members’ creditable compensation for hospital and medical insurance. See KRS 16.645 ; KRS 61.702(2)(b). Section 30 of SB 151 requires an employer of a SPRSTier I member, employedafter July 1, 2003, to deduct up to 1% of the member’s creditable compensation for purposes ofhospital and medical insurance under the plan. Because this provision alters and 18 7 6 6 3 F 9 B 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 3 B : 0 0 0 0 1 8 of 0 0 0 0 4 9 impairs the ultimate calculation of SPRS members’ retirementallowances,it violates the inviolable contract. County Employees Retirement System 74, The CERSpensionrights and benefits are located at KRS Chapter 78, with the inviolable contract found in KRS 78.510-78.852. See KRS 78.852. 75. SB 151 amendsorrepeals these very statutes, thereby unlawfully and materially reducing, altering, or impairing pension benefits due to CERS members. 76. The inviolable contract allows lump-sum payments for compensatory time to be included in the creditable compensation of Tier I nonhazardous employees. See KRS 78.510. Section 15 of SB 151 expressly excludes lump-sum payments fromcreditable compensation for non-hazardous, Tier I employees,retiring after July 1, 2023. This exclusion materially alters and impairs the ultimate calculation of CERS members’ retirement allowances andtherefore violates the inviolable contract. 77. Underprior law, uniform and equipmentallowances may be included in CERS members’ creditable compensation. See KRS 78.510. Section 15 of SB 151 expressly excludes uniform and equipment allowances as well as undefined “other expense allowances,” paid on or after January 1, 2019, from creditable compensation. This exclusion materially alters and impairs the ultimate calculation of CERS members’ retirement allowances, and therefore violates the inviolable contract. 78. The inviolable contract guarantees CERS members may use accumulated, unused sick leave to determineretirementeligibility. See KRS 78.616. Section 17 of SB 151 prohibits CERSemployees from using sick leave service credit for retirementeligibility, if they retire on 19 7 6 6 3 F 9 B 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 3 B : 0 0 0 0 1 9 of 0 0 0 0 4 9 A R s “e e e or after January |, 2023. This prohibition materially impairs rights and benefits guaranteed to CERS members, and therefore violates the inviolable contract. 79, Theinviolable contract does not include deductions, in any amount, from CERS Tier I members’ creditable compensation for hospital and medical insurance. See KRS 78.545; KRS 61.702(2)(b). Section 30 of SB 151 requires an employer of a CERSTier I member, employedafter July 1, 2003, to deduct up to 1% of the member’s creditable compensation for purposes ofhospital and medical insurance underthe plan. Asthis provision alters and impairs the ultimate calculation of CERS members’ retirement allowances,it violates the inviolable contract. 80. The inviolable contract requires CERS Tier I hazardous employees’ final compensation to be calculated using the creditable compensation from the three (3) fiscal years the employee waspaid the highest average monthly rate. It requires the highest five (5) years for CERSTier Inonhazardous employees. See KRS 78.510. In either case, the inviolable contract does not require that the fiscal years used for calculation be completefiscal years. Id. Section 15 of SB 151 requires, after January 1, 2019, that CERS Tier I hazardous employees’ final compensation becalculated using the creditable compensation from their highest three (3) complete fiscal years, and that the highest five (5) complete fiscal years be used to calculate CERSTier I nonhazardous employees’ final compensation. Because this provision alters and impairs the ultimate calculation of CERS members’ retirement allowances,it violates the inviolable contract. 81. CERSTier J and Tier II employees who opted into the current hybrid cash balance plan are guaranteed an annual interest credit of at least 4%. See KRS 61.597; KRS 78.545. Section 19 of SB 151 removesthis guarantee, and instead guarantees a return of 20 7 6 6 3 F 9 B 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 3 B : 0 0 0 0 2 0 of 0 0 0 0 4 9 0%. Because this change materially impairsthe rights of these employees,it violates the inviolable contract. SB 151 Violates the Kentucky Constitution 82. Byletters dated February 28, 2018 and March6, 2018, the Attorney General notified all members of the General Assembly and the public that the pension bills it was considering — then SB 1 and its Committee Substitute — violated the inviolable contract in 21 ways. 83. Thoseletters therefore put the General Assembly and the public on notice that SB 1, if passed, would breachthe inviolable contract and therefore violate the Kentucky Constitution. 84. Specifically, the letters explained that a substantial impairment of the contract would violated Section 19 of the Kentucky Constitution, which prohibits the enactment of “any law impairing the obligation of contracts.” 85. SB 151 contains 15 of the violations of the inviolable contract identified in the Attorney General’s letters. Nevertheless, the General Assembly passed SB 151 and Governor Bevin signedit into law. 86. Moreover, the General Assembly declined to enact or even consider measuresthat would provide revenue dedicated to fundingthe retirement systems. 87. SB 151 is therefore not reasonable or necessary to serve an important public purpose. 88. Because SB 151 substantially impairs the contractual benefits guaranteed to Kentucky’s public employees, and because Defendants cannot show that SB 151 is reasonable 21 7 6 6 3 F 9 B 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 3 B : 0 0 0 0 2 1 of 0 0 0 0 4 9 AS G O I E S R A om cr t t e and necessary to serve an important public purpose, SB 151 violates Section 19 ofthe Kentucky Constitution. 89, Moreover, SB 151 obligates the Commonwealth to pay more towardthe state pension systems than under current law, rather than create a savings. Specifically, SB 151 will cost $3.3 billion in debt for state pension systems and $1.7 billion in debt for local pension systems over the next 35 years. See Affidavit of Jason Bailey, § 22, attached as Exhibit A. The Public Has Suffered and Will Suffer Irreparable Injury Absent a Permanent Injunction 90. As a direct result of Defendants’ efforts to abrogate public employees’ rights to the promised retirement benefits, record numbers of public employees haveretired rather than be subjected to an unlawful reduction in benefits. 91. Forinstance, in September 2017, after Governor Bevin introduced his plan to dismantle the public pension systems, the numberofstate and local government employees who retired surged 37% over the same month in the previous year.’ 92. KTRSsaw an even greater increase in the numberofteacher retirees—a jump of 64% following Governor Bevin’s pension proposal.* 93. The unprecedented waveofretirements has continuedto the present, andit will only accelerate now that SB 151 has been signed into law. Defendants’actions haveleft public employees whoareeligible to retire with an impossible choice: retire now,or lose the pension > John Cheves, September Retirements Surge as Kentucky Lawmakers Consider Pension Overhaul, Lexington Herald-Leader, Sept. 6, 2017 (available at http://www.kentucky.com/news/politics- government/article 171567482html) (last visited Apr. 3, 2018). “Tom Loftus, Kentucky Pension Crisis: More Public Employees Are Retiring As Governor Bevin Works on Reform, Courier-Journal, Oct. 10, 2017 (available at https://www.courier- journal.com/story/news/politics/2017/10/1 0/kentucky-pension-crisis-retirements-surge-bevin-works- reform/749214001/) (last visited Apr. 3, 2018). 22 7 6 6 3 F 9 R 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 3 B : 0 0 0 0 2 2 of 0 0 0 0 4 9 benefits you were promised. The Commonwealth is harmedby the early retirement of thousands of capable teachers andother public servants who would prefer to remain working, but must retire to protect the pension benefits on which they andtheir families depend. Moreover, the retirement systems themselves are hurt by these early retirements, which cause each annuitantto be paid benefits longer than actuarially projected and cut short the anticipated employer and employee contributionsto the system. See Affidavit of Stephanie Winkler, § 12, attached hereto as Exhibit B. The enactment of SB 151 makesthis harm imminent. 94. Moreover, because SB 151 removesteachers’ ability to use sick days for retirementeligibility after the end of the current year, teachers have begunto usetheir sick days now. 95. The result of teachers using sick days has already become apparent. Already, on March 30, 2018, 27 school districts were forced to cancel school because teachers called in sick, to the detriment of the schoolchildren and their parents. 96. In light of the foregoing, Defendants’ actions to impair the inviolable contracts between public employees and the Commonwealth violate Section 19 of the Kentucky Constitution. CLAIMS CountI Declaratory Judgment Violation of Section 19 of the Kentucky Constitution 97. Plaintiffs incorporate by reference each and everyallegation previously set forth in this Complaintas if fully set forth herein. 98. Section 19 of the Kentucky Constitution similarly providesthat “[n]o ex post facto law, nor any law impairing the obligation of contracts, shall be enacted.” 23 7 6 6 3 F 9 B 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 3 B : 0 0 0 0 2 3 of 0 0 0 0 4 9 99. SB 151 substantially impairs the inviolable contract between the Commonwealth and its public employeesestablished in KRS 21.480, KRS 61.692, KRS 78.852, and KRS 161.714 by reducing the benefits provided to those employees. 100. SB 151 therefore violates Section 19 of the Kentucky Constitution. Count II Declaratory Judgment Violation of Section 46 of the Kentucky Constitution 101. Plaintiffs incorporate by reference each and everyallegation previously set forth in this Complaintasif fully set forth herein. 102. Section 46 of the Kentucky Constitution provides, in relevant part, that “[e]very bill shall be read at length on three different days in each House,butthe second andthird readings may be dispensed with by a majority ofall the memberselected to the House in which the bill is pending.” 103. SB 151, as passed, received only one reading in the House of Representatives. 104. The House of Representatives did not vote, “by a majority ofall the members elected to the Housein whichthebill is pending,” to dispense with the second andthird readings of SB 151, as passed. 105. SB 151, as passed, did not receive any readings in the Senate. 106. SB 151 therefore violates Section 46 of the Kentucky Constitution. CountHI Declaratory Judgment Violation of Section 56 of the Kentucky Constitution 107. Plaintiffs incorporate by reference each andevery allegation previously set forth in this Complaintasif fully set forth herein. 24 7 6 6 3 F 9 B 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 3 B : 0 0 0 0 2 4 of 0 0 0 0 4 9 108. Section 56 of the Kentucky Constitution provides, in pertinent part, that “[n]o bill shall become a law until the same shall have been signed by the presiding officer of each of the two Housesin opensession.” 109. Under Kentucky law, the Speaker of the Houseis the presiding officer of the House of Representatives. 110. SB 151 was signed by Representative Osborne, whois not the Speakerof the House. 111. SB 151 therefore wasnotproperly signed bythe presiding officer of the House of Representatives, in violation of Section 56 of the Kentucky Constitution. Count IV Declaratory Judgment Violation of Section 13 of the Kentucky Constitution 112. Plaintiffs incorporate by reference each andeveryallegation previously set forth in this Complaintasif fully set forth herein. 113. Section 13 of the Kentucky Constitution provides, in relevant part, that “[nJor shall any man’s property be taken or applied to public use without the consent ofhis representatives, and without just compensation being previously madeto him.” 114. SB 151 deprives public employees oftheir contractual rights to certain retirement benefits, as set forth above. 115. SB 151 does not provide public employees with any compensation in exchange for depriving them of their contractualrights. 116. The contractual rights deprived by SB 151 are the property of the public employees. 117. SB 151 therefore violates Section 13 of the Kentucky Constitution. 25 7 6 6 3 F 9 B 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 8 3 B : 0 0 0 0 2 5 of 0 0 0 0 4 9 Count V Declaratory Judgment Violation of KRS 6.350 118. Plaintiffs incorporate by reference each and every allegation previously set forth in this Complaint as if fully set forth herein. 119. KRS6.350 provides, in relevantpart: “A bill which would increase or decrease the benefits or increase or decrease participationin the benefits or change the actuarial accrued hability of any state-administered retirement system shall not be reported from a legislative committee of either house of the General Assembly for consideration by the full membership of that house unless thebill is accompanied by anactuarial analysis.” KRS 6.350(1). 120. Asintroduced to the House Committee on State Government on March 29, 2018, SB 151 will decreasethe benefits providedto the participants of KTRS, KERS, SPRS, and CERS,each of whichis a state-administered retirement system. 121. The House Committee on State Governmentreported SB 151 to the floorofthe House of Representatives without an actuarial analysis. 122. SB 151 wastherefore passed in violation of KRS 6.350(1). Count VI Declaratory Judgment Violation of KRS 6.955 123. Plaintiffs incorporate by reference each andeveryallegation previously set forth in this Complaint asif fully set forth herein. 124. KRS6.955 provides, in relevantpart: “No bill or resolution whichrelates to any aspect of local governmentor anyservice providedthereby shall be voted on by either chamber of the General Assembly unlessa fiscal note has been prepared andattached to the bill pursuant to KRS 6.960, exceptthat, if in the chamber in whichthebill is being considered, two-thirds 26 7 6 6 3 F 9 B 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 3 B : 0 0 0 0 2 6 of 0 0 0 0 4 9 (2/3) of the memberselected vote to waivethefiscal note requirement, no note shall be required. Thefiscal note waivershall be certified by the clerk of the chamberin whichthebill is being considered, and suchcertification shall be attachedto thebill. Although waived in one chamber, a fiscal note shall be required whenthebill goes to the other chamber unless a majority of the memberselected to such chambervote to waivethefiscal note requirement.” KRS 6.955(1). 125. SB 151 affects local government becauseit creates, alters, or amendsprovisions of law requiring local governments to contribute to the pensionsoftheir employees. 126. Both the House of Representatives and the Senate passed SB 151 without including a fiscal note, and withouta vote by two-thirds (2/3) of the members of either chamber to waive the fiscal note requirement. 127. SB 151 wastherefore passedin violation of KRS 6.955. Count VIT Declaratory Judgment Violation of Section 2 of the Kentucky Constitution 128. Plaintiffs incorporate by reference each andeveryallegation previously set forth in this Complaintasif fully set forth herein. 129. Section 2 of the Kentucky Constitution provides, “[a]bsolute and arbitrary power overthe lives, liberty and property of freemen exists nowhere in a republic, not even in the largest majority.” 130. SB 151 waspassedin a procedurethat violated constitutional and statutory requirements, andit deprives public employees oftheir constitutional and statutory rights. 131. The passage of SB 151 therefore violates the rights of the people of the Commonwealth to be free from the exercise of arbitrary powerovertheir lives, liberty, and property, in violation of Section 2 of the Kentucky Constitution. 27 7 6 6 3 F 9 B 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 3 9 B 3 B : 0 0 0 0 2 7 of 0 0 0 0 4 9 H B G 8 So R E : Count VII Injunctive Relief Against Governor Bevin (All Plaintiffs) 132. Plaintiffs incorporate by reference each andevery allegation previously set forth in this Complaintasif fully set forth herein. 133. Plaintiffs are entitled to relief in the form of injunctiverelief, both temporary and permanent, restraining and enjoining Governor Bevin andhis agents, attorneys, and any other person in active concert or participation with him, from enforcingor complying with SB 151, or in any way unconstitutionally reducing or eliminating the retirement benefits provided to public employees underthe inviolable contracts. 134. By reducingretirement benefits beginning July 1, 2018, SB 151 forces public employees to choose betweenretiring immediately or losing retirement benefits they had previously been promisedin an inviolable contract. 135. Moreover, by causing public employeesto retire, SB 151 inflicts harm on the Commonwealth, whichwill be deprivedofthe services provided by essential, experienced public employees. 136. SB 151 therefore threatens imminent harm to the public and public employees by violating the Kentucky Constitution’s prohibition on the impairmentofcontracts. 137. By reason ofthe actions and violations described above, KTRS, KERS, SPRS, and CERSparticipants, as well as the citizens of the Commonwealth, suffered immediate and irreparable injury and will continue to so suffer unless Governor Bevin is immediately restrained and permanently enjoined from enforcing SB 151, or in any way unconstitutionally reducing or eliminating the retirement benefits provided to public employees underthe inviolable contracts. 28 7 6 6 3 F 9 B 6 - C 2 E B - 4 9 E 5 - B D 2 4 - E 3 2 8 C 3 C 8 9 B 8 3 B : 0 0 0 0 2 8 of 0 0 0 0 4 9 138. Plaintiffs have no adequate remedy at law or otherwise to address this injury, save in a court of equity. 139. Nocourt has refused a previousapplication for a restraining order or Injunction in this matter. Count IX Injunctive Relief Against Board of Trustees of KTRS (Commonwealth and KEA) 140. Plaintiffs incorporate by reference each and everyallegation previously set forth in this Complaintas if fully set forth herein. 141. Plaintiffs are entitled to relief in the form of injunctiverelief, both temporary and permanent, restraining and enjoining the Board of Trustees of KTRSandits agents, attorneys, and any otherpersonin active concert or participation with it, from enforcing or complying with SB 151, or in any way unconstitutionally reducing or eliminating the retirement benefits provided to public school employees underthe inviolable contracts. 142. By reducing retirement benefits beginning July 1, 2018, SB 151 forces public employees to choose between retiring immediately or losing retirement benefits they had previously been promisedin an inviolable contract. 143. Moreover, by causing public employees to retire, SB 151 inflicts harm on the public, who will be deprived ofthe services provided by essential public employees. 144. SB 151 therefore threatens imminent harm to the public and public employees by violating Kentucky’s prohibition on the impairmentof contracts. 145. By reasonofthe actions andviolations described above, KTRS participants, as well as the citizens of the Commonwealth, suffered immediate and irreparable injury and will continue to so suffer unless the Board of Trustees of KTRSis immediately restrained and 29 7 6 6 3 F 9 8 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 8 3 B : 0 0 6 0 2 9 of 0 0 0 0 4 9 permanently enjoined from enforcing or complying with SB 151, or in any way unconstitutionally reducing or eliminating the retirement benefits provided to public employees under the inviolable contracts. 146. Plaintiffs have no adequate remedyat law or otherwise to addressthis injury, save in a court of equity. 147. Nocourt hasrefused a previous application for a restraining order or injunction in this matter. Count X Injunctive Relief Against Board of Trustees of KRS (Commonwealth and Kentucky State FOP Lodge) 148. Plaintiffs incorporate by reference each and every allegation previously set forth in this Complaintasif fully set forth herein. 149. Plaintiffs are entitled to relief in the form ofinjunctive relief, both temporary and permanent, restraining and enjoining the Board of Trustees of KRSandits agents, attorneys, and any other person in active concert or participation with him, from enforcing or complying with SB 151, or in any way unconstitutionally reducing or eliminating the retirement benefits provided to public employees under the inviolable contracts. 150. By reducing retirement benefits beginning July 1, 2018, SB 151 forces public employees to choose betweenretiring immediately or losing retirement benefits they had previously been promised in an inviolable contract. 151. Moreover, by causing public employeesto retire, SB 151 inflicts harm on the public, who will be deprived ofthe services provided by essential, experienced public employees. 30 7 6 6 3 F 9 B 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 3 B : 0 0 0 0 3 6 of 0 0 0 0 4 9 152. SB 151 therefore threatens imminent harm to the public and public employees by violating the Kentucky Constitution’s prohibition on the impairmentofcontracts. 153. By reasonof the actions and violations described above, KERS, SPRS, and CERS participants, as well as the citizens of the Commonwealth, suffered immediate and irreparable injury and will continueto so suffer unless the Board of Trustees of KRSis immediately restrained and permanently enjoined from enforcing or complying with SB 151, or in any way unconstitutionally reducing or eliminating the retirement benefits provided to public employees underthe inviolable contracts. 154. Plaintiffs have no adequate remedy at law or otherwise to address this injury, save in a court of equity. 155. No court has refused a previousapplication for a restraining order or injunction in this matter. 156. Plaintiffs are entitled to further relief as may be shownbythe evidence and legal authority that may be presented in this proceeding. Plaintiffs reserve the right to amendthis Complaint, as necessary, to request any furtherrelief to which theyare entitled. WHEREFORE,Plaintiffs demand judgment against Defendants as set forth in the prayerforrelief, below. PRAYERFOR RELIEF WHEREFORE,Plaintiffs demand as follows: I. That this Court issue a declaration and order that: A. SB 151 breachesthe inviolable contract between the Commonwealth andits public employees. B. SB 151 violates Section 2 of the Kentucky Constitution. 31 7 6 6 3 F 9 B 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 3 B : 0 0 0 0 3 1 of 0 0 0 0 4 9 I. TH. IV. C. SB 151 violates Section 13 of the Kentucky Constitution. D. SB 151 violates Section 19 of the Kentucky Constitution. E. SB 151 was passed in violation of Section 46 of the Kentucky Constitution. F. SB 151 waspassed in violation of Section 56 of the Kentucky Constitution. G. SB 151 waspassedin violation of KRS 6.350. H. SB 151 was passed in violation of KRS 6.955. Thatthe Court issue a restraining order, temporary injunction, and permanent injunction, restraining and enjoining GovernorBevin andall his agents, attorneys, representatives, and any otherpersons in active concert or participation with him from enforcing SB 151 or in any way reducingoreliminating the retirement benefits provided to public employees undertheinviolable contracts. That the Court issue a restraining order, temporary injunction, and permanent injunction,restraining and enjoining the Board of Trustees of KTRSandallits agents, attorneys, representatives, and any other persons in active concert or participation with it from enforcing SB 151 or in any way reducing or eliminating the retirement benefits provided to public employees underthe inviolable contract. That the Court issue a restraining order, temporary injunction, and permanent injunction, restraining and enjoining the Board of Trustees of KRS and all its agents, attorneys, representatives, and any otherpersons in active concert or participation with it from enforcing SB 151 or in any way reducing or eliminating the retirement benefits provided to public employees underthe inviolable contract. 32 7 6 6 3 F 9 B 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 3 B : 0 0 0 0 3 2 of 0 0 0 0 4 9 V. That Plaintiffs be awarded anyandall otherrelief to which they are is entitled, including attorneys’ fees and costs. 33 7 6 6 3 F 9 B 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 3 B : 0 0 0 0 3 3 of 0 0 0 0 4 9 DATE: April 11, 2018 34 Respectfully Submitted, ANDY BESHEAR ATTORNEY GENERAL /s/Andy Beshear J. Michael Brown (jmichael.brown@ky.gov) Deputy Attorney General La Tasha Buckner(latasha.buckner@ky.gov) Assistant Deputy Attorney General S. Travis Mayo(travis.mayo@ky.gov) Executive Director, Office of Civil and Environmental Law MarcG.Farris (marc.farris@ky.gov) Samuel Flynn (samuel.flynn@ky.gov) Assistant Attorneys General Office of the Attorney General 700 Capitol Avenue Capitol Building, Suite 118 Frankfort, Kentucky 40601 (502) 696-5300 (502) 564-8310 FAX Counselfor PlaintiffCommonwealth of Kentucky, ex rel. Andy Beshear, Attorney General /s/ Jeffrey S. Walther, by permission Jeffrey S. Walther (jwalther@wegmfirm.com) Walther, Gay & Mack, PLC 163 East Main Street, Suite 200 Lexington, Kentucky 40588 (859) 225-4714 Counselfor Plaintiff Kentucky Education Association /s/ David Leightty, by permission David Leightty (dleightty@earthlink.net) Priddy, Cutler, Naake & Meade PLLC 2303 River Road, Suite 300 Louisville, Kentucky 40206 (502) 632-5292 Counselfor Plaintiff Kentucky FOP Lodge 7 6 6 3 F 9 B 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 3 B : 0 0 0 0 3 4 of 0 0 0 0 4 9 VERIFICATION I, J. MICHAEL BROWN,Deputy Attorney General, upon being duly sworn, do hereby swearthat I have read the foregoing Verified Complaint for a Declaration of Rights, a Temporary Injunction, and a Permanent Injunction and the factual allegations set out therein arc true and correct to the best ofmy knowledgeandbelief. COMMONWEALTH OF KENTUCKY } ) COUNTY OF FRANKLIN ) Subscribed, sworn to and acknowledged before mebythis | day of ber \ , 2018, by J. Michael Brown. Cee Loft ] ABIGAIL R. HARTGENotary Public 4 NOTARY PUBLIC 4 State Al Large, Kentucky . My Commission Ex iras MPrinted Name: Noi ad i. Large ES" es My Commission Expires: Ueda AY Aol ( 8 6 3 F 9 B 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 3 8 : 0 0 0 0 3 5 of 0 0 0 0 4 9 r y VERIFICATION 1, STEPHANIE WINKLER,President of the Kentucky Education Association, upon being duly sworn, do hereby swearthat I have read the foregoing Verified Complaint fora Declaration of Rights, a Temporary Injunction, and a Permancnt Injunctionand the factual allegations set out therein are true and correct to the hest ofmy knowledge and belief. COMMONWEALTH OF KENTUCKY ) COUNTY OF FRANKLIN Car scribed, sworn to and acknowledged before me by Stephanie Winklerthis 77h ol fork.2018. —— Ss Notary Pytflic As77 354 Printed NccsMsegCs ELLRLE MyCommission Expires:4 fy, 220/ ¢ 7 6 6 3 F 9 6 8 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 3 B : 0 0 0 0 3 6 of 0 0 0 0 4 9 VERIFICATION ON BEHALF OF STATE FOP 1, Berl Perdue, Jr. President ofthe Kentucky State Fraternal Order olPolice, herebystate that [ have reviewed the Complaintin this matter and that the factual statements in the Complaint relating to (he sworn lawenforcement officers, and to the KentuckyState Fraternal Order of Police and its associated Lodges, are true and accurateto the besttolmy information andbelie! QalaSeyse (Ger Perdud(Jr. . ~ . fy Subscribed and sworn to before me by Berl Perdue, Ir., this! |“t dayof “ 2018. OMelWE 2 on otary Public, Resfe at Tat‘ge. KentuckygtDone 8 SSOSECO Mycommissionexpires: 7 6 6 3 F 9 B 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 3 B : 0 0 0 0 3 7 of 0 0 0 0 4 9 Exhibit A 7 6 6 3 F 9 8 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 3 B : 0 0 0 0 3 8 of 0 0 0 0 4 9 AFFIDAVIT OF JASON BAILEY Comes the Affiant, after being duly sworn,andstates as follows: 1. Mynameis Jason Bailey. I am a founder and Executive Directorofthe Kentucky Center for Economic Policy. I have been the Executive Director since 2011. The Kentucky Center for Economic Policy (KCEP) seeks to improve the quality oflife for all Kentuckians through research, analysis and education on important policy issues facing the Commonwealth. KCEP produces research on timely issues; promotes public conversation about those issues through media and presentations; and advocatesto decision makers on the need for policies that moveall Kentuckians forward. In myrole I regularly give testimony, issue analysis in the form of reports, issue facts sheets, and give presentations on budget and tax; economicsecurity; education; health care; jobs and economy; and workforce and economic development. KCEPis a memberofthe State Priorities Partnership, a national network of organizations that work to address state tax and budget issues and their impact on low- and moderate-income families. The State Priorities Partnership is coordinated by the Center on Budget and Policy Priorities. KCEPis also a memberof the Working Poor Families Project and the Economic Analysis and Research Network (EARN). Prior to my role as Executive Director ofthe Kentucky Center for Economic Policy, I was the Policy Director for 8 years at Mountain Association for Community Economic Development. T received my Bachelor’s Degree from Carson-Newman College in 1998 and a Master’s Degree in Public Administration with a specialization in public finance in 2007 from New York University. Mypublic service work includes appointments to the Governor’s Blue Ribbon Commission on Tax Reform and the Kentucky Teachers’ Retirement System Funding Work Group. . In the scope of myjob, I analyzed Senate Bill 151. Thelegislation, introduced and passed suddenly in the General Assembly on March 29, 2018, moves new teachers into a less secure hybrid cash balance plan and endsthe inviolable contract moving forward for them, making their benefits vulnerable to further cuts in the future. 7 6 6 3 F 9 B 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 3 B : 0 0 0 0 3 9 of 0 0 0 0 4 9 B A M 10. 11. 12. 13. 14, 15. 16. Senate Bill 151 also caps the use of sick leave for teacher retirement benefits and weakensthe already-modest hybrid cash balanceforstate and local non- hazardous employees. By endingthe inviolable contract for new teachers, the General Assembly can now also weakenthe cash balance benefit at any time in the future. That could include lowering the amount employers credit to teachers’ accounts each year (set in the legislation initially at 8 percent of teachers’ pay, whereas teachers contribute their current 9.105 percent of pay) or giving them even less of the investment returns. Currently teachers have a legally protected benefit based on whentheyare hired, providing them with the security of knowing what they will receive when they retire. SB 15] shifts about 1/3 of the cost of the hybrid cash balance plan to school districts, which must contribute 2 percent of new teachers’ pay for the benefit. This change will continuethe trend of the state backing away from its responsibility to fund K-12 education and asking local schools to bear a larger share of costs. That pattern is creating a growing gap betweenrich and poor schooldistricts, which is returning to levels that were declared unconstitutionalin the 1980s. Thebill caps the use of sick leave in calculating retirement benefits for current teachers to the amountof sick leave accrued as of December 31, 2018. This changewill also add morecosts to local schooldistricts that will have to pay more for substitute teachers as use of sick days increases. Thebill raises the retirement eligibility for new teachers to age 65 with 5 years of work experienceoratleast age 57 and an age plus ycarsofservice that equal a minimum of 87. Currently, teachers can retire with full benefits at age 60 with at least 5 years’ experience or at any age with 27 years’ experience. State and local workers’ plansare cut again, and the defined contribution option takes resources from pensionplans. Thebill weakens the hybrid cash balance plan for state and local non-hazardous employees that wascreatedjustfive years ago — evidencethat endingthe teachers’ inviolable contract means benefits might be cut further in the future. Thestate and local non-hazardous plan guaranteed workers a 4 percent rate of return and gave them 75 percent of investment returns above that amount, while the new plan under SB 151 will — like the benefit for new teachers — guarantee 2 7 6 6 3 F 9 B 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 3 B : 0 0 0 0 4 0 of o 0 0 0 4 9 17. 18. oy, only a 0-percent rate of return and 85 percent of investment returns above that level. That meansless in retirement benefits for these workers. What’s more, the plan introduces a 401(a) defined contribution (DC)option for state and local non-hazardous employees in which the employer contributes 4 percent of pay (employees put in 5 percent). Workers who choose the DC plan cannotlater switch back to the hybrid cash balanceplan. The actuary says the DC planis slightly more expensive than the weakened hybrid cash balanceplan, and gives people 100 percent of investmentreturns rather than 85 percent in the cash balance option. Although DCplansare riskier for employees and will earn lower investment returns over time, the actuary projects that 25 percent of employees will end up in the DC plan. Themore employees who contribute to the DC plan instead of paying into the no ‘defined|benefit/cash balance plan pool, the morethe traditional plan is vulnerable tofurther: deterioration, SB 151 allows the Kentucky Retirement Systems (KRS) 20. 21. 22. 23. boardtocontractwith an outside entity to manage the DC investments. The bill also requires KRS employees hired between 2003 and 2008to pay an additional | percent of payforretiree health care. Kentucky’sretiree health plans are currently on a strong growth trajectory under the current law, without the need for additional contributions, with the KERS hazardous health plan 118 percent funded now. The plan endsthe ability of current employeesto use sick leave service credit for determining retirementeligibility after 2023, and eliminates a $5,000 post- retirement death benefit for those hired starting in 2014. Actuarial analysis of its impact on Kentucky Retirement Systems, which was attachedafter the bill was passed, showsit does not save money.It fact,it will cost $3.3 billion in debt for the state pension systems and $1.7 billion in debt for the local pension systems overthe next 35 years. The addedcosts are because the plan resets the 30-year period used to payoffthe liabilities to start in 2019 rather than 2013, lowering annual paymentsslightly but resulting in more costs over the entire period. The abilityto reset the 30-year period showsthat an urgency to pay off unfundedliabilities and repeated claims of imminent insolvency in the plans were unfounded. 7 6 6 3 F 9 B 8 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 3 B : 0 0 0 0 4 7 of 0 0 0 0 4 9 Se na », f\ Y /]Ce, bath, Jason Bailey, Executive Director Kentucky Center for Economic Policy COMMONWEALTH OF KENTUCKY county or WWediome Subscribed, sworn to and acknowledged before me bythis qt day ofSw 2018, by Jason Bailey. Vos ,) y Notary Public U Printed Name: DEBRA VT. REARDON | My Commission Expires: OF IOV; AOI DebraDe aJ. Reardon iF4) Notary Public, ID N o. 516929 State at Large, Kentucky SEE25S/ My Commission Expires on Sept.1, 2018 7663 F 9 B 6 - C 2 E B - 4 9 E 5 - B D 2 4 - E 3 2 8 C 3 C 8 9 B 3 B ; 0 0 0 0 4 2 of c o n o 4 9 Exhibit B 7 O 8 3 F 9 R 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 3 B : 0 6 0 0 4 3 of o o 0 0 4 g COMMONWEALTH OF KENTUCKY FRANKLIN CIRCUIT COURT DIVISION ___ CIVIL ACTION NO. 18-CI- COMMONWEALTHOF KENTUCKY ex rel. ANDY BESHEAR, ATTORNEY GENERAL and KENTUCKY EDUCATION ASSOCIATION and KENTUCKY STATE FRATERNAL ORDER OF POLICE LODGE PLAINTIFFS Vv. MATTHEWG. BEVIN,in his official capacity as Governor of the Commonwealth of Kentucky,et al. DEFENDANTS AFFIDAVIT OF STEPHANIE WINKLER I, Stephanie Winkler, being duly sworn, hereby state as follows: 1, | currently serve as the elected president of the Kentucky Education Association. Ihave served in this capacity since June 15, 2013. I amalso a teacherduly certified in the Commonwealth of Kentucky. Before becoming President of KEA,I taught 4"grade in Madison County Public Schools, 2. KEAis a voluntary membership organization for school cmploycesand represents over 40,000 members throughout Kentucky. KEAis affiliated with the National Education Association, and. haslocal affiliates in every school district in the state. KA is the largest professional association in Kentucky. 3. KEArepresents public schoolteachers in grades P-12, classified support professional employees, school administrators, Education and Workforce Development Cabinct employees, Kentucky Community and Technical College system employees, college students 7 6 6 3 F 9 B 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 3 B : 0 0 0 0 4 4 of C 0 0 0 4 9 preparing to becometeachers, and retired educators. We advocate for their employment and professionalinterests, including wages, school funding, pensions and health insurance. 4. For months, beginning in September/October of 2017 and continuing to the present, KEA and other stakeholders have been advocating against significant structural changes to the public pension systems. We don’t believe structural changes are necessary, but instead believe the legislature should fund the systemsper the appropriate actuarial calculations. For months affected stakeholder groups, including KEA members, have been contacting their legislators at homeandattheir offices, making their opinions knownonthis issue. The pension discussion has garnereda lot of press coverage and has beenthe primary political topic of interest in Kentucky for months. 5, During the afternoon of March 29, 2018, the House of Representatives State Government committce took SB 151, an act originally dealing with wastewater services, and amendedit to include a massive pensionreform bill. The bill was rushed to the floor of the House of Representatives, which passedit and sent it to the Senate, which passedit late that night. All these legislative maneuvers (ook place on the samc day, without piving KEA or the public any chance to comment onthe provisionsofthe bill, or even review the bill to be able to understand it. 6. SB 151 was also passed withoutthe legally required actuarial analysis, so neither KEAnorthe public has had an opportunity to properly review the actual financial impactofthe bill. 7. After months of being publicly insulted by the governor, who asserted that teachers “hoarded” their sick leave and that they were too “unsophisticated” and “ignorant” to understand their own pension system, this secretive and manipulative legislative maneuver to 7 6 6 3 F 9 B 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 3 B : 0 0 0 0 4 5 of 0 0 0 0 4 9 push through legal changes to the public pension systems that KEA and other stakeholders were vocally opposed to wasthe final straw. The governorand a majority of the Icgislature constantly tout transparency and accountability for public education and the public pension systems, but don’t hold themselvesto that same standard. Teachers were appalled by the process, which they accurately judged to be outrageous and obviously implemented for the sole purpose ofkeeping educators and the public from having any input. ‘They reacted strongly. Immediately after the passage of SB 151, thousandsof teachers across thestate called in sick for Friday, March 30. Over twenty school districts were forced to close due to insufficient numbers ofteachers and substitute teachers to cover classes and ensure thal students were educated and supervised in a safe environment. 8. Although KEA did not call for the sickout action, it has continued intermittently around the state every day since SB151 was passed. Based on posts we see on social media and conversations our members are having with their colleagues, we reasonably believe that teachers and other educational professionals will continue to protest the passage and possible implementation of SB151 by continuingto call in sick, which will result in continued understaffing or schoo! closings. 9, SB [51 irreparably harmsteachers and other educational professionals by violating the inviolable contract that they each entered into with the Commonwealth on the day they cach begantheir public employment. SB 151 illegally diminishes or eliminates the benetits that teachers were promised as conditions of their employmentas part of that inviolable contract. 10. SB 151 irreparably harmsteachers, educational professionals, and students in that it will strongly induce teachersto retire earlier than they originally planncd. KEA reasonably expects that after the passage of SB 151, teachers who are eligible to do so will retire prior to the 7 6 6 3 F 9 B 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 3 8 : 0 0 0 0 4 6 of C O 0 O 4 S dates that their bencfits will be diminished, thereby depriving them ofincome and the personal fulfillment of teaching, These teachers will also have to significantly accelerate their financial and personal planning for retirement. 11. The retirements will also irreparably harm students and will adversely impact their educations by removing the most experienced and knowledgeable teachers trom the classroom. 12. $B 151 irreparably harms the Teacher Retirement System of Kentucky (“TRS”) in which certified educators participate, and will also irreparably harm the County Employees’ Retirement System (“CERS”) in which classified personnel participale, As part of their actuarial analysis, the pension systems project the expected rates of retirement. That rate is the basis for ‘investment decisionsandis a [actor in calculating the statutory employer and employee contributions to be received from each participant. Early retirements shift participants from aclive contributors to annuitants earlier than actuarially projected. Cutting offthose contributions sooner than expected places an unanticipated financial burden on the systems, decreases the time over which the contributions are invested, and obligates each system to pay outretirees over a longer period of time than originally assumed. 13. $B 151 irreparably harms education by discouraging talented students from entering the education profession. The provisions of SB{51 create a hybrid cash balance plan that will apply to new hires after July 1, 2018. Thisplan shifts the financialrisk of retirement entirely onto the employee, who may or may not gather enough savings and investment income during his or her careerto retire with adequate income, Currently, teachers are guaranteed a defined benefit in retirement based on a factor determined by their final average wage, age and years of service, Once payout ofa defined pension begins, it continues for the entire life ofthe : 0 0 0 0 4 7 of 0 0 0 0 4 9 7 6 6 3 F 9 B 6 - C 2 E B - 4 9 E 5 - B D 2 A - E 3 2 8 C 3 C 8 9 B 3 8 retiree. The hybrid cash balance plan may allowa future retiree to purchase a lifetime annuity with the proceeds of his or her accumulated account, but the amount of monthly incomethe retiree will receive will be utterly unpredictable and will havelittle relationship to what the individual earned as an active teacher. This schemeinjects significant financialrisk into choosing public education as a profession in Kentucky. Public employment used to be attractive not for its annual salary, but for the defined benefit pension that could be camed overa career. Given these new developments, college students will be far less inclined to become educators knowing that they will earn Joss annually than their private sector counterparts and will also not be guaranteed a secure retirement. Furthermore, the provisions of $B151 eliminate the “inviolable contract” for all new hires, meaning that the General Assembly may renege on even these questionable promises at any lime 14. SB 151 also irreparably harms teachers and educational professionals by disrespecting them, demeaning their contributions, and devaluing their decades of publicservice. Throughout the legislative session, many KEA members have complained to KFAthat they have been disrespected and disparaged during the legislative process. The illegal violation of the Commonwealth’s inviolable contract, and the secretive manner in which the General Assembly rushed it through, demonstrate a willful indifference to the leyal rights of teachers and educators, the promises that the Commonwealth has made to its teachers, and the daily sacrifices made by teachers and educatorsinstriving to educate ourchildren. SB 151 is a direct affrontto the teaching profession in Kentucky and everyoneinit. 15. Finally, and most importantly, the manner by which the legislature passedthis bill is an irreparable harmto the democratic process and to all pcoples’ faith in government. Legislators are clected by the people and are accountable to the pcople, and are supposedto act 7 6 6 3 F 9 B 6 - C 2 E B - 4 A S E 5 - B D 2 A - E 3 2 8 C 3 C B 9 B 3 8 : 0 0 0 0 4 8 of 0 0 0 0 4 9 in a mannerthat creates faith in the deliberative process and confidence in the government and in their leadership. Jowever, all that was utterly undermined by the process used to pass $B151. The legislators involved were deceptive and purposely opaque and their acts were an affront to every thinking, voting cilizen ofthe statc. It’s worth noting that the rally that occurred in Frankfort on Monday, April 2, 2018 had in altendance not just teachers, but also other public cmployees, parents, students, and taxpayers. Many olthe pcople who turned out in protest were not directly affected by SB151. They turned out to publicly object to the insulting, disrespectful way the House and Senate behaved toward all citizens. Further affiant sayeth naught. COMMONWEALTH OF KENTUCKY ) ) ss. COUNTY OF 7 Raelae ) Subscribed and sworn to before me by Stephanie Winkler, Affiant, on this , 2018. [Varinpablo Notary Pyblic 7 day of Notary Number: S¢7sye My commission expires: Lega fc2 7 6 6 3 F 9 B 6 - C 2 E 8 - 4 9 E 5 - B 0 2 A - E 3 2 8 C 3 C 8 9 B 3 B : 0 0 0 0 4 9 of 0 0 0 0 4 9 Di nR E N E B e , o t e EXHIBIT J N D G@ ® @ w BE a 10 11 12 13 14 16 16 17 18 19 20 21 22 23 24 25 26 mph t ‘ % eeeee ha’.fhe besaea ! a ‘IN THE SUPREME COURT OF THE toe) “y STATE OF CALIFORNIA t j Wy aMANNING T, ALLEN, et al, W)LLIBM 1. SULLIVAN,Clerk Plaintiffs and Appellants, a oe Mossy vs, L.A. No, 22894 CITY OF LONG BREACH, a municipal corporation, et al., ) Defendants and Respondents, ELWIN L, ALGER, et al,, Plaintiffs and Appellants, vs. L.A. No, 22895 CITY OF LONG BEACH, a municipal corporation, et al, ) ) } ) ) ) ) ) } ) ) )Defendants and Respondents, STIPULATION TO SUBMIT CAUSE WITHOUT ORAL ARGUMENT. If IS HEREBY STIPULATED AND AGREED byand between counsel for the respective parties hereto that the above entitled causes may be submitted for decision without oral argument, upon the printed briefs now on file, eile D o O F m w @ R M LO Li LZ 13 14 16 16 ; 17 | 18 19 z20 al 22 23 24 25 26 DATED: This 26th day of April, 1955, Attorneys for plaintiffs Manning T. . Allen et al, Attorne Alger, et al, WALHFRED JACOBSON, City Attorne CLIFFORD E. HAYES, Deputy City _ Attorney fo — t 2 at “e at ee Z. i 4BY: C. seteBEoyfh 2. M¥teypte : -ye Attorneys for Defendants City of Long Beach, etc,, et al, ci fsa KENNETH SPERRY Hync OES $ ATTORNEY AT LAW ‘ff a SUITE (O17 SECURITY BUILDING - LONG BEACH 2, CALIFORNIA TELEPHONE 749-79 tN, * April 26, 1955 | ee cee Clerk of Supreme Court 10th Floor, State Building Los Angeles 12, California Attention: David Blomgren, Deputy Clerk Inre: Allen et al. v. City of Long Beach etal,, L.A. No. 22894; Alger et al, v. City of Long Beach etal, L.A. No. 22895, Dear Sir: Enclosedherewith please find stipulation to submit the — above cases without oral argument, in accordance with our telephone conversation of even date, Yours very truly, KS: mm Encl. Fhewe 2 Cacgee are on the FeteLeine LAE rea 3), ate, ClO.Dan R R “A B