CC 09-17-2024 Item No. 10 Employer’s Contribution_Supplemental ReportSupplemental Report
CC 09-17-2024
Item No. 10
Employer Contribution
for medical and
hospitalization insurance
CITY COUNCIL STAFF REPORT
SUPPLEMENTAL 1
Meeting: September 17, 2024
Agenda Item #10
Subject
Adopt a resolution increasing the employer's contribution for medical and
hospitalization insurance consistent with the Public Employees’ Medical and Hospital
Care Act (“PEMHCA” or the “Act”) for retired annuitants hired with the City of
Cupertino prior to August 2004
Recommended Action
Adopt Resolution No. 24-XXX increasing the employer's contribution for medical and
hospitalization insurance for retired annuitants hired with the City of Cupertino prior to
August 2004
Background
On September 11, 2024, the League of California Cities is urging the CalPERS not to lower the
fund’s discount rate and expected rate of return (Attachment A). Cities can voice their concerns
by sending a letter or providing testimony at the upcoming CalPERS Board meeting on
September 17. As the CalPERS Board meeting coincides with the City Council Meeting, no
position letter will be forwarded.
California Public Employees’ Retirement System’, CalPERS, preliminary investment
returns for the fiscal year ending June 30, 2024, outpaced its discount rate, triggering an
automatic review under the CalPERS Funding Risk Mitigation Policy. The investment
return of 9.3% exceeded the established discount rate of 6.8%, prompting the CalPERS
Board to consider whether to lower the discount rate for future years. This year, the Board
could reduce the discount rate and the expected investment return by 0.05%, from 6.8% to
6.75%.
Typically, lowering the discount rate and expected investment rate of return would
increase employer liabilities and contributions. However, in this case, the strong
investment return of 9.3% for the prior fiscal year, is expected to offset the impact of the
proposed rate reduction. As a result, the potential 0.05% decrease in the discount rate is
not expected to materially change the City's future cash flows or contribution levels over
the next several years.
It is important to note that should the discount rate decrease be approved, it will not
impact the item before you this evening which, involves CalPERS health rate changes for
retired annuitants. However, staff wanted to ensure the Council was informed on this
pending decision and its potential implications for the City’s long-term budget planning.
Attachments Provided with Original Staff Report:
A - Draft Resolution Employees and Annuitants Hired Prior to August 1, 2004
Attachments Provided with Supplemental 1:
A – September 11 League of California Cities letter