AGENDA EBMUD EMPLOYEES RETIREMENT SYSTEM January 17, 2013 Training Resource Center (TRC1) 8:30 a.m.

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2 AGENDA EBMUD EMPLOYEES RETIREMENT SYSTEM January 17, 2013 Training Resource Center (TRC1) 8:30 a.m. ROLL CALL: PUBLIC COMMENT: The Retirement Board is limited by State Law to providing a brief response, asking questions for clarification, or referring a matter to staff when responding to items that are not listed on the agenda. ANNOUNCEMENT OF CLOSED SESSION AGENDA: 1. Existing Litigation Pursuant to Government Code Section (a): EBMUD Employees Retirement System v. Arceneaux Alameda County Superior Court, Small Claims Division Case No. RS ROLL CALL: REGULAR BUSINESS MEETING: Upon completion of Closed Session PUBLIC COMMENT: The Retirement Board is limited by State Law to providing a brief response, asking questions for clarification, or referring a matter to staff when responding to items that are not listed on the agenda. CONSENT CALENDAR: 1. Approval of Minutes Regular Meeting of November 15, Treasurer s Statement of Receipts and Disbursements for October 2012 and November Ratifying and Approving Investment Transactions by Counselors for October 2012 and November 2012 (R.B. Resolution No. 6772) 4. Ratifying and Approving Investment Transactions by Treasurer for October and November 2012 (R.B. Resolution No. 6773) ACTION: 5. Adopt the Actuarial Valuation of the Retirement System as of June 30, 2012 E. Sandler a) Adopt the contribution rates for the 1980 Plan and the Health Insurance Benefit b) Adopt the contribution rates for the 2013 Plan 6. Declaring the Rate of Interest Credited to Members (R. B. Resolution No. 6774) E. Grassetti

3 EBMUD Employees Retirement System Meeting of January 17, 2013 Page 2 INFORMATION: 7. Annual Health Insurance Benefit Survey E. Grassetti 8. Investment Fund Managers Fees E. Sandler REPORTS FROM THE RETIREMENT BOARD: 9. Brief report on any course, workshop, or conference attended since the last Retirement Board meeting. ITEMS TO BE CALENDARED: MEETING ADJOURNMENT: The next regular meeting of the Retirement Board will be held at 8:30 a.m. on Thursday, March 21, 2013.

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20 East Bay Municipal Utility District Retirement System Actuarial Valuation and Review of Pension Plan and Health Insurance Benefit Plan as of June 30, 2012 Supplemental Exhibits This report has been prepared at the request of the Retirement Board to assist in administering the Fund. This valuation report may not otherwise be copied or reproduced in any form without the consent of the Retirement Board and may only be provided to other parties in its entirety. The measurements shown in this actuarial valuation may not be applicable for other purposes. Copyright 2013 by The Segal Group, Inc., parent of The Segal Company. All rights reserved.

21 THE SEGAL COMPANY 100 Montgomery Street, Suite 500 San Francisco, CA T F January 9, 2013 Ms. Wanda Hendrix Treasury Manager East Bay Municipal Utility District 375 Eleventh Street Oakland, CA Re: June 30, 2012 Actuarial Valuations Supplemental Exhibits Dear Wanda: Enclosed please find two exhibits that provide supplemental information to the June 30, 2012 actuarial valuations for the pension and health insurance benefit (HIB) plans. For the HIB plan, this information is based on our HIB funding valuation report dated January 9, 2013 that includes a monthly benefit of $450 ($550 benefit for a retiree with a spouse or qualified domestic partner). It does not include the accounting liability for the implicit subsidy associated with the pooling of the health care premium rate for actives and retirees under age 65. Exhibit A provides a summary of results for both the pension plan and HIB plan valuations. In Exhibit B, we have included a comparison of the historical Pension Benefit Obligations with the market value of assets for both plans. We look forward to discussing this information with you and the Board. Sincerely, Andy Yeung, ASA, MAAA, FCA, EA Vice President and Associate Actuary DNA/bqb Enclosures v3/ Benefits, Compensation and HR Consulting Offices throughout the United States and Canada Founding Member of the Multinational Group of Actuaries and Consultants, a global affiliation of independent firms

22 I. Total Membership Exhibit A East Bay Municipal Utility District Retirement System Summary of Significant Valuation Results June 30, 2012 June 30, 2011 Percent Change A. Active Members 1,703 1, % B. Pensioners and Beneficiaries 1,361 1, % II. Valuation Salary* A. Total Annual Payroll $158,847,491 $159,504, % B. Average Monthly Salary 93,275 93, % III. Total System Assets A. Valuation Value of Pension Plan Assets $1,021,546,227 $954,718, % B. Valuation Value of HIB Plan Assets 14,240,105 12,047, % C. Total Valuation Value (Actuarial Value) $1,035,786,332 $966,766, % D. Market Value of Pension Plan Assets $973,403,000 $956,173, % E. Market Value of HIB Plan Assets 13,569,000 12,066, % F. Total Market Value $986,972,000 $968,239, % IV. Unfunded Actuarial Accrued Liability (UAAL) and Funded Ratio A. Pension Plan $535,150,038 $491,319, % B. Funded Ratio** 65.6% 66.0% N/A C. HIB Plan $88,961,173 $86,398, % D. Funded Ratio** 13.8% 12.2% N/A E. Pension Plan and HIB Plan $624,111,211 $577,718, % F. Funded Ratio** 62.4% 62.6% N/A * Projected payroll. ** Based on valuation value of assets. Note: The health insurance benefits (HIB) information is based on our HIB funding valuation report that includes a monthly benefit of $450 ($550 for a retiree with a spouse or qualified domestic partner). It does not include the accounting liability for the implicit subsidy associated with the pooling of the health care premium rate for actives and retirees under age 65.

23 Exhibit A (continued) East Bay Municipal Utility District Retirement System Summary of Significant Valuation Results V. Projected Benefit Obligation June 30, 2012 June 30, 2011 Percent Change A. Pension Plan $1,498,136,000 $1,395,484, % B. Funded Ratio*** 65.0% 68.5% N/A C. HIB Plan $108,837,000 $103,395, % D. Funded Ratio*** 12.5% 11.7% N/A E. Pension Plan and HIB Plan $1,606,973,000 $1,498,879, % F. Funded Ratio*** 61.4% 64.6% N/A VI. Budget Items**** FY FY Change Beginning of Year End of Pay Periods Beginning of Year End of Pay Periods Beginning of Year End of Pay Periods A. Pension Plan 1. Normal Cost as a Percent of Pay 15.45% 16.04% 13.88% 14.42% 1.57% 1.62% 2. Amortization of UAAL 21.50% 22.32% 19.28% 20.04% 2.22% 2.28% 3. Total Pension Plan Contribution 36.95% 38.36% 33.16% 34.46% 3.79% 3.90% B. HIB Plan 1. Normal Cost as a Percent of Pay 1.15% 1.19% 1.15% 1.19% 0.00% 0.00% 2. Amortization of UAAL 4.00% 4.15% 3.76% 3.91% 0.24% 0.24% 3. Total HIB Plan Contribution 5.15% 5.34% 4.91% 5.10% 0.24% 0.24% C. Total Contribution (Item A3 + Item B3) 42.10% 43.70% 38.07% 39.56% 4.03% 4.14% *** Based on market value of assets. **** Employer rates only (i.e., excludes the employee contribution rates of 6.74% for the pension plan and 0.09% for the HIB plan, payable at the end of each pay period). Note: The health insurance benefits (HIB) information is based on our HIB funding valuation report that includes a monthly benefit of $450 ($550 for a retiree with a spouse or qualified domestic partner). It does not include the accounting liability for the implicit subsidy associated with the pooling of the health care premium rate for actives and retirees under age 65.

24 Exhibit B East Bay Municipal Utility District Retirement System Comparison of Projected Benefit Obligation with the Market Value of Assets (Dollar Amounts in Thousands) Actuarial Valuation Date Projected Benefit Obligation Market Value of Assets Funded Ratio 06/30/2002 $749,113 $536, % 06/30/ , , % 06/30/ , , % 06/30/ , , % 06/30/2006 1,068, , % 06/30/2007 1,160, , % 06/30/2008 1,289, , % 06/30/2009 1,366, , % 06/30/2010 1,444, , % 06/30/2011 1,498, , % 06/30/2012 1,606, , % v3/

25 East Bay Municipal Utility District Retirement System Actuarial Valuation and Review of Pension Plan as of June 30, 2012 This report has been prepared at the request of the Retirement Board to assist in administering the Fund. This valuation report may not otherwise be copied or reproduced in any form without the consent of the Retirement Board and may only be provided to other parties in its entirety. The measurements shown in this actuarial valuation may not be applicable for other purposes. Copyright 2013 by The Segal Group, Inc., parent of The Segal Company. All rights reserved.

26 The Segal Company 100 Montgomery Street Suite 500 San Francisco, CA T F January 9, 2013 Ms. Wanda Hendrix Treasury Manager East Bay Municipal Utility District 375 Eleventh Street Oakland, CA Dear Wanda: We are pleased to submit this Actuarial Valuation and Review as of June 30, 2012 for only the pension plan. The Actuarial Valuation and Review for the health insurance benefit (HIB) plan is provided in a separate report. This report summarizes the actuarial data used in the valuation, establishes the funding requirements for fiscal 2013/2014 and analyzes the preceding year s experience. This report was prepared in accordance with generally accepted actuarial principles and practices, at the request of the Board to assist in administering the Plan. The census and financial information on which our calculations were based were prepared by EBMUD. That assistance is gratefully acknowledged. The actuarial calculations were completed under the supervision of Andy Yeung, ASA, MAAA, FCA, Enrolled Actuary. The measurements shown in this actuarial valuation may not be applicable for other purposes. Future actuarial measurements may differ 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; increases or decreases expected as part of the natural operation of the methodology used for these measurements (such as the end of an amortization period); and changes in plan provisions or applicable law. I am a Member of the American Academy of Actuaries and I meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion herein. To the best of our knowledge, the information supplied in this actuarial valuation is complete and accurate. Further, in our opinion, the assumptions as approved by the Board are reasonably related to the experience of and the expectations for the Plan. We look forward to reviewing this report at your next meeting and to answering any questions. Sincerely, THE SEGAL COMPANY By: Andy Yeung, ASA, MAAA, EA, FCA Vice President and Associate Actuary

27 SECTION 1 SECTION 2 SECTION 3 SECTION 4 VALUATION SUMMARY VALUATION RESULTS Purpose... i Significant Issues in Valuation Year... ii Summary of Key Valuation Results... v A. Participant Data... 1 B. Financial Information... 4 C. Actuarial Experience... 7 D. Recommended Contribution. 12 E. Information Required by GASB F. Volatility Ratios SUPPLEMENTAL INFORMATION REPORTING INFORMATION EXHIBIT A Table of Plan Coverage EXHIBIT B Participants in Active Service as of June 30, EXHIBIT C Reconciliation of Participant Data EXHIBIT D Summary Statement of Income and Expenses on an Actuarial Value Basis for All Pension Plan and HIB Plan Assets EXHIBIT E Summary Statement of Assets for Pension and HIB Plans EXHIBIT F Development of the Fund Through June 30, 2012 for All Pension Plan and HIB Plan Assets EXHIBIT G Development of Unfunded/(Overfunded) Actuarial Accrued Liability for Year Ended June 30, EXHIBIT H Table of Amortization Bases EXHIBIT I Section 415 Limitations EXHIBIT J Definitions of Pension Terms EXHIBIT I Summary of Actuarial Valuation Results EXHIBIT II Supplementary Information Required by GASB Schedule of Employer Contributions EXHIBIT III Supplementary Information Required by GASB Schedule of Funding Progress EXHIBIT IV Supplementary Information Required by GASB EXHIBIT V Actuarial Assumptions and Actuarial Cost Method EXHIBIT VI Summary of Plan Provisions... 43

28 SECTION 1: Valuation Summary for the East Bay Municipal Utility District Retirement System Purpose This report has been prepared by The Segal Company to present a valuation of the East Bay Municipal Utility District Retirement System as of June 30, The valuation was performed to determine whether the assets and contributions are sufficient to provide the prescribed benefits. The contribution requirements presented in this report are based on: The benefit provisions of the pension plan, as administered by the Board; The characteristics of covered active participants, inactive vested participants, and retired participants and beneficiaries as of June 30, 2012, provided by EBMUD; The assets of the plan as of June 30, 2012, provided by EBMUD; Economic assumptions regarding future salary increases and investment earnings adopted by the Board for the June 30, 2012 valuation; and Other actuarial assumptions, regarding employee terminations, retirement, death, etc., adopted by the Board for the June 30, 2012 valuation. One of the general goals of an actuarial valuation is to establish contributions which fully fund the System s liabilities, and which, as a percentage of payroll, remain as level as possible for each generation of active members. Annual actuarial valuations measure the progress toward this goal, as well as test the adequacy of the contribution rates. In preparing this valuation, we have employed generally accepted actuarial methods and assumptions to evaluate the System s assets, liabilities and future contribution requirements. Our calculations are based upon member data and financial information provided to us by the System s staff. This information has not been audited by us, but it has been reviewed and found to be consistent, both internally and with prior year s information. The contribution requirements are determined as a percentage of payroll. The System s employer rates provide for both normal cost and a payment or credit to amortize any unfunded or overfunded actuarial accrued liabilities. In the valuation, new UAAL established on or after July 1, 2011 as a result of actuarial gains or losses and change in actuarial assumptions has been amortized over separate declining 20-year and 25-year periods, respectively. The balance of the UAAL established prior to July 1, 2011 continues to be amortized in layers over the current respective remaining fixed periods. The rates calculated in this report may be adopted by the Board for the fiscal year that extends from July 1, 2013 through June 30, i

29 SECTION 1: Valuation Summary for the East Bay Municipal Utility District Retirement System Significant Issues in Valuation Year The following key findings were the result of this actuarial valuation: Ref: Pg. 33 Ref: Pg. 13 Ref: Pg. 13 Ref: Pgs. 23 and 31 The results of this valuation reflect changes in the actuarial assumptions as recommended by Segal and adopted by the Board for the June 30, 2012 valuation. These changes were documented in our Actuarial Experience Study and are also outlined in Section 4, Exhibit V of this report. These assumption changes resulted in an increase in the employer contribution rate of 2.79% of payroll. The assumption changes that had the largest impact on the contribution rate increase include the changes in the economic assumptions, the mortality assumption, and the introduction of the sick leave conversion assumption. In our review of the Board s actuarial funding policy (reference: letter dated September 12, 2012), we recommended a modification to the Entry Age Normal cost method that is currently used by EBMUD. The modification we recommended was a change in the normal cost calculation from an aggregate basis to an individual basis, and this change was adopted by the Board for use in the June 30, 2012 valuation. The results of this valuation reflect the change in the normal cost calculation, and this change resulted in an increase in the employer contribution rate of 0.72% of payroll. In the review of the Board s actuarial funding policy mentioned above, we also recommended alternative amortization periods for use in amortizing new unfunded actuarial accrued liability (UAAL) on or after July 1, 2011, with separate amortization periods depending on the source of the UAAL change. The Board adopted alternative #3 from that letter, which utilizes the following amortization periods by source: 20 years for actuarial gains or losses; 25 years for assumption or method changes, 15 years for plan amendments; 5 years for Early Retirement Incentive Programs; and 30 years for actuarial surplus. The results of this valuation reflect the changes in the amortization periods, and these changes resulted in an increase in the employer contribution rate of 0.06% of payroll. The funded ratio measured on a valuation value of assets basis decreased from 66.0% at June 30, 2011 to 65.6% at June 30, The funded ratio if measured on a market value of assets basis decreased from 66.1% to 62.5%. The UAAL increased from $491.3 million as of June 30, 2011 to $535.2 million as of June 30, The increase in the UAAL is primarily due to (a) the lower than expected return on the valuation value of assets (after smoothing), (b) the change in the actuarial assumptions, and (c) other actuarial losses, offset somewhat by actuarial gains from (d) less than expected salary increases for actives, and (e) less than expected COLA increases for retirees and beneficiaries. A complete reconciliation of the System s unfunded actuarial accrued liability is provided in Section 3, Exhibit G. ii

30 SECTION 1: Valuation Summary for the East Bay Municipal Utility District Retirement System Ref: Pg. 13 Ref: Pg. 5 Ref: Pg. 5 The aggregate employer rate calculated in this valuation has increased from 34.46% of payroll to 38.36% of payroll. The increase in the employer rate was primarily due to (a) lower than expected return on the valuation value of assets (after smoothing), (b) normal one-year lag in implementing the higher contribution rate calculated in the June 30, 2011 valuation for fiscal year , (c) less than expected growth in total payroll base to amortize the System s UAAL, (d) increase in normal cost rate due to a change in demographic profile for active members, (e) other actuarial losses, (f) the change in the actuarial assumptions, (g) the change to the individual Entry Age Normal cost method, and (h) the change in the amortization periods for actuarial (gains)/losses and assumption/method changes, offset somewhat by (i) less than expected salary increases for individual active members, and (j) less than expected COLA increases for retirees and beneficiaries. Based on action taken by the Board in 2012, the total unrecognized deferred gain of $1.5 million through June 30, 2011 as of that valuation has been recognized in four level amounts with three years of recognition remaining after the June 30, 2012 valuation. As indicated in Section 2, Subsection B (see Chart 7) of this report, the total unrecognized investment loss as of June 30, 2012 is $48.8 million for the assets for the pension and HIB plans. This investment loss will be recognized in the determination of the actuarial value of assets for funding purposes in the next few years. This implies that earning the assumed rate of investment return of 7.75% per year (net of expenses) on a market value basis will produce investment losses on the actuarial value of assets after June 30, The deferred losses of $48.8 million represent 4.9% of the market value of assets as of June 30, Unless offset by future investment gains or other favorable experience, the recognition of the $48.8 million market loss is expected to have a significant impact on the System s future funded percentage and contribution rate requirements. This potential impact may be illustrated as follows: If the pension plan portion of the deferred losses were recognized immediately and entirely in the valuation value of assets, the funded percentage would decrease from 65.6% to 62.5%. If the pension plan portion of the deferred losses were recognized immediately and entirely in the valuation value of assets, the aggregate employer rate would increase from 38.36% to about 40.6% of payroll. The actuarial valuation report as of June 30, 2012 is based on financial information as of that date. Changes in the value of assets subsequent to that date are not reflected. Declines in asset values will increase the actuarial cost of the plan, while increases will decrease the actuarial cost of the plan. iii

31 SECTION 1: Valuation Summary for the East Bay Municipal Utility District Retirement System Ref: Pg. 16 The California Actuarial Advisory Panel (CAAP) has recently adopted a set of model disclosure elements recommended for actuarial valuation reports for public retirement systems in California. Information has been added to this valuation report consistent with the recommendations regarding basic disclosure elements. In particular, we are now including new information regarding measures of plan volatility. The Governmental Accounting Standards Board (GASB) recently approved two new Statements affecting the reporting of pension liabilities for accounting purposes. Statement 67 replaces Statement 25 and is for plan reporting. Statement 68 replaces Statement 27 and is for employer reporting. It is important to note that the new GASB rules only redefine pension expense for financial reporting purposes, and do not apply to contribution amounts for actual pension funding purposes. Employers and plans can still develop and adopt funding policies under current practices. Because these new Statements are not effective until the fiscal year ending June 30, 2014 for Plan reporting and the fiscal year ending June 30, 2015 for employer reporting, the financial reporting information in this report continues to be in accordance with Statements 25 and 27. The California Public Employees Pension Reform Act of 2013 (AB340) was passed on September 12, AB340 will become effective on January 1, In general, it affects new members who enter the plan on or after January 1, There will be new plan provisions that include new benefit formulas, cap on pensionable income, 3-year final average salary, and new cost sharing by members. There are also changes that may affect current members including the normal cost sharing by members. We have not reflected any of the AB340 provisions in this report. The impact of AB340 will be addressed in a later report. Impact of Future Experience on Contribution Rates Future contribution requirements may differ from those determined in the valuation because of: Differences between actual experience and anticipated experience; Changes in actuarial assumptions or methods; Changes in statutory provisions; and Difference between the contribution rates determined by the valuation and those adopted by the Board. iv

32 SECTION 1: Valuation Summary for the East Bay Municipal Utility District Retirement System Summary of Key Valuation Results Contributions calculated as of June 30: Employer rate (payable at the end of each pay period) 38.36% 34.46% Employer annual amount (1) $60,933,898 $54,738,845 Employee rate (aggregate) 6.74% 6.74% Employee annual amount (1) $10,706,321 $10,706,321 Funding elements for plan year beginning July 1: Normal cost (beginning of year) (1) $34,856,820 $32,357,234 Market value of pension plan and HIB plan assets (MVA) 986,972, ,239,000 Actuarial value of pension plan and HIB plan assets (AVA) 1,035,786, ,766,525 Valuation value of pension plan assets (2) (VVA) 1,021,546, ,718,875 Actuarial accrued liability (AAL) 1,556,696,265 1,446,038,834 Unfunded/(overfunded) actuarial accrued liability (UAAL) 535,150, ,319,959 Funded ratio on VVA basis 65.6% 66.0% Market value of pension plan assets 973,403, ,173,000 Funded ratio on pension plan MVA basis 62.5% 66.1% GASB 25/27 for fiscal year ended June 30: Annual required contributions $52,156,000 $50,987,000 Actual contributions 52,156,000 50,987,000 Percentage contributed 100.0% 100.0% Demographic data for plan year ended June 30: Number of retired participants and beneficiaries 1,361 1,325 Number of vested former participants Number of active participants 1,703 1,702 Projected total payroll $158,847,491 $159,504,853 Projected average payroll 93,275 93,716 (1) Estimated based on June 30, 2012 projected payroll of $158,847,491. (2) Net of HIB plan assets. v

33 SECTION 2: Valuation Results for the East Bay Municipal Utility District Retirement System A. PARTICIPANT DATA The Actuarial Valuation and Review considers the number and demographic characteristics of covered participants, including active participants, vested terminated participants, retired participants and beneficiaries. This section presents a summary of significant statistical data on these participant groups. More detailed information for this valuation year and the preceding valuation can be found in Section 3, Exhibits A, B, and C. A historical perspective of how the participant population has changed over the past eight valuations can be seen in this chart. CHART 1 Participant Population: Year Ended June 30 Active Participants Vested Terminated Participants* Retired Participants and Beneficiaries Ratio of Non-Actives to Actives , , , , , , , , , , , , , , , , * Includes terminated participants due a refund of employee contributions. 1

34 SECTION 2: Valuation Results for the East Bay Municipal Utility District Retirement System Active Participants Plan costs are affected by the age, years of service and payroll of active participants. In this year s valuation, there were 1,703 active participants with an average age of 49.9, average service of 15.1 years and average payroll of $93,275. The 1,702 active participants in the prior valuation had an average age of 49.6, average service of 14.9 years and average payroll of $93,716. Inactive Participants In this year s valuation, there were 224 participants with a vested right to a deferred or immediate vested benefit compared to 226 in the prior valuation. These graphs show a distribution of active participants by age and by years of service. CHART 2 Distribution of Active Participants by Age as of June 30, 2012 CHART 3 Distribution of Active Participants by Years of Service as of June 30,

35 SECTION 2: Valuation Results for the East Bay Municipal Utility District Retirement System Retired Participants and Beneficiaries As of June 30, 2012, 1,117 retired participants and 244 beneficiaries were receiving total monthly benefits of $5,216,008. For comparison, in the previous valuation, there were 1,086 retired participants and 239 beneficiaries receiving monthly benefits of $4,880,792. These graphs show a distribution of the current retired participants and beneficiaries based on their monthly amount and age, by type of pension. Beneficiary Disability Regular CHART 4 Distribution of Retired Participants and Beneficiaries by Type and by Monthly Amount as of June 30, CHART 5 Distribution of Retired Participants and Beneficiaries by Type and by Age as of June 30,

36 SECTION 2: Valuation Results for the East Bay Municipal Utility District Retirement System B. FINANCIAL INFORMATION Pension plan funding anticipates that, over the long term, both contributions and net investment earnings (less investment fees and administrative expenses) will be needed to cover benefit payments. Pension plan assets change as a result of the net impact of these income and expense components. Additional financial information, including a summary of these transactions for the valuation year, is presented in Section 3, Exhibits D, E and F. The chart depicts the components of changes in the actuarial value of assets over the last seven years. Note: The first bar represents increases in assets during each year while the second bar details the decreases. CHART 6 Comparison of Increases and Decreases in the Actuarial Value of Assets for Years Ended June 30, (for pension and HIB benefits) Adjustment toward market value Benefits paid Net interest and dividends Contributions $ Millions

37 SECTION 2: Valuation Results for the East Bay Municipal Utility District Retirement System It is desirable to have level and predictable plan costs from one year to the next. For this reason, the Board has approved an asset valuation method that gradually adjusts to market value. Under this valuation method, the full value of market fluctuations is not recognized in a single year and, as a result, the asset value and the plan costs are more stable. The amount of the adjustment to recognize market value is treated as income, which may be positive or negative. Realized and unrealized gains and losses are treated equally and, therefore, the sale of assets has no immediate effect on the actuarial value. The chart shows the determination of the actuarial value of assets as of the valuation date. CHART 7 Determination of Actuarial Value of Assets for Year Ended June 30, 2012 (for pension and HIB plans) 1. Market value of assets: (a) Pension plan $973,403,000 (b) HIB plan 13,569,000 (c) Total $986,972,000 Actual Market Expected Market Investment Deferred Deferred 2. Calculation of deferred return: Return (net) Return (net) Gain / (Loss) Factor Return (a) Year ended June 30, $76,707,000 $75,340,031 -$152,047,031 (b) Year ended June 30, ,905,000 69,269, ,174,846 see footnote (1) below (c) Year ended June 30, ,737,000 55,360,181 40,376,819 (d) Year ended June 30, ,970,000 61,812, ,157,160 75% $1,104,356 (e) Year ended June 30, ,202,000 77,600,360-62,398,360 80% -49,918,688 (f) Total unrecognized return* -$48,814, Preliminary actuarial value: (1c) - (2f) $1,035,786, Adjustment to be within 30% corridor of market value $0 5. Final actuarial value of assets for pension and HIB plans: (3) + (4) $1,035,786, Actuarial value as a percentage of market value: (5) (1c) 104.9% 7. Valuation value of pension plan assets: (1a) (1c) x (5) $1,021,546,227 (1) Based on action taken by the Board in 2012, the total deferred gain of $1,472,475 through June 30, 2011 as of that valuation has been recognized in four level amounts, with three years of recognition remaining after the June 30, 2012 valuation. * The amount of deferred return that will be recognized in each subsequent valuation is as follows (amounts may not total exactly due to rounding): 6/30/2013 -$12,111,553 6/30/ ,111,553 6/30/ ,111,553 6/30/ ,479,672 Total -$48,814,332 5

38 SECTION 2: Valuation Results for the East Bay Municipal Utility District Retirement System The market value, actuarial value, and valuation value of assets are representations of EBMUD s financial status. As investment gains and losses are gradually taken into account, the actuarial value of assets tracks the market value of assets. The valuation value of assets is the actuarial value, excluding HIB assets. The valuation value of assets is significant because EBMUD s liabilities are compared to these assets to determine what portion, if any, remains unfunded. Amortization of the unfunded actuarial accrued liability is an important element in determining the contribution requirement. This chart shows the change in the actuarial value of assets versus the market value over the past eight years. CHART 8 Market Value, Actuarial Value, and Valuation Value of Assets as of June 30, * 1,100 1,000 $ Millions Actuarial Value Market Value Valuation Value * Market Value and Actuarial Value of Assets are for pension and HIB benefits. Valuation Value of Assets are for pension benefits only. 6

39 SECTION 2: Valuation Results for the East Bay Municipal Utility District Retirement System C. ACTUARIAL EXPERIENCE To calculate the required contribution, 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 measured against the assumptions. If overall experience is more favorable than anticipated (an actuarial gain), the contribution requirement will decrease from the previous year. On the other hand, the contribution requirement will increase if overall actuarial experience is less favorable than expected (an actuarial loss). Taking account of experience gains or losses in one year without making a change in assumptions reflects the belief that the single year s experience was a short-term development and that, over the long term, experience will return to the original assumptions. For contribution requirements to remain stable, assumptions should approximate experience. If assumptions are changed, the contribution requirement is adjusted to take into account a change in experience anticipated for all future years. The total gain is $15,668,764, a $11,909,918 loss from investments and a $27,578,682 gain from all other sources. The net experience variation from individual sources other than investments was 1.77% of the actuarial accrued liability. A discussion of the major components of the actuarial experience is provided on the following pages. This chart provides a summary of the actuarial experience during the past year. CHART 9 Actuarial Experience for Year Ended June 30, Net gain/(loss) from investments* -$11,909, Net gain/(loss) from other experience** 30,628, Net gain/(loss) from one year delay in implementing the higher contribution rate calculated in the June 30, 2011 valuation until fiscal year 2012/2013-3,050, Net experience gain/(loss): (1) + (2) + (3) $15,668,764 * Details in Chart 10. ** Details in Section 3, Exhibit G. 7

40 SECTION 2: Valuation Results for the East Bay Municipal Utility District Retirement System Investment Rate of Return A major component of projected asset growth is the assumed rate of return. The assumed return should represent the expected long-term rate of return, based on EBMUD s investment policy. For valuation purposes, the assumed rate of return on the valuation value of assets is 8.00% (for the June 30, 2011 valuation). The actual rate of return on a valuation value basis (after smoothing) for the 2012 plan year was 6.75%. Since the actual return for the year was less than the assumed return, EBMUD experienced an actuarial loss during the year ended June 30, 2012 with regard to its investments. This chart shows the gain/(loss) due to investment experience. CHART 10 Investment Experience for Year Ended June 30, 2012 Valuation Value, Actuarial Value, and Market Value of Assets Valuation Value (includes pension Actuarial Value (includes pension Market Value (includes pension plan assets only) and HIB plan assets) and HIB plan assets) 1. Actual return $64,558,352 $65,488,807 $15,202, Average value of assets $955,853,375 $968,532,025 $970,004, Actual rate of return: (1) (2) 6.75% 6.76% 1.57% 4. Assumed rate of return 8.00% 8.00% 8.00% 5. Expected return: (2) x (4) $76,468,270 $77,482,562 $77,600, Actuarial gain/(loss): (1) (5) -$11,909,918 -$11,993,755 -$62,398,360 8

41 SECTION 2: Valuation Results for the East Bay Municipal Utility District Retirement System Because actuarial planning is long term, it is useful to see how the assumed investment rate of return has followed actual experience over time. The chart below shows the rate of return on a valuation value, actuarial value, and market value basis for the last eight years. CHART 11 Investment Return Valuation Value, Actuarial Value, and Market Value: * Valuation Value Investment Return Actuarial Value Investment Return Market Value Investment Return Year Ended June 30 Amount Percent Amount Percent Amount Percent 2005 $28,180, % $28,310, % $51,008, % ,252, % 45,449, % 66,439, % ,055, % 84,360, % 144,934, % ,124, % 72,404, % -76,707, % ,442, % -40,593, % -171,905, % ,167, % 51,966, % 95,737, % ,223, % 33,642, % 191,970, % ,558, % 65,488, % 15,202, % Eight-Year Average Return 5.22% 5.24% 5.07% * Market Value and Actuarial Value of Assets are for the pension plan and the HIB plan. Valuation Value of Assets are for the pension plan only. 9

42 SECTION 2: Valuation Results for the East Bay Municipal Utility District Retirement System Subsection B described the actuarial asset valuation method that gradually takes into account fluctuations in the market value rate of return. The effect of this is to stabilize the actuarial rate of return, which contributes to leveling pension plan costs. This chart illustrates how this leveling effect has actually worked over the years CHART 12 Market Value, Actuarial Value, and Valuation Value of Assets: Rates of Return for Years Ended June 30, * Actuarial Value Market Value Valuation Value 30% 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% -25% * Market Value and Actuarial Value of Assets are for pension and HIB benefits. Valuation Value of Assets are for pension benefits only. 10

43 SECTION 2: Valuation Results for the East Bay Municipal Utility District Retirement System Other Experience There are other differences between the expected and the actual experience that appear when the new valuation is compared with the projections from the previous valuation. These include: the extent of turnover among the participants, retirement experience (earlier or later than expected), mortality (more or fewer deaths than expected), the number of disability retirements, and salary increases different than assumed. The net gain from this other experience for the year ended June 30, 2012 amounted to $27,578,682, which is 1.77% of the actuarial accrued liability. 11

44 SECTION 2: Valuation Results for the East Bay Municipal Utility District Retirement System D. RECOMMENDED CONTRIBUTION The amount of annual contribution required to fund the Plan is comprised of an employer normal cost payment and a payment on the unfunded actuarial accrued liability. This total amount is then divided by the projected payroll for active members to determine the funding rate of 38.36% of payroll. The chart compares this valuation s recommended contribution with the prior valuation. CHART 13 Recommended Contribution (% of payroll) 6/30/12 6/30/11 1. Total normal cost 21.94% 20.37% 2. Expected employee contributions (1) -6.49% -6.49% 3. Employer normal cost: (1) + (2) 15.45% 13.88% 4. Unfunded/(overfunded) actuarial accrued liability 21.50% 19.28% 5. Total recommended contribution, beginning of year: (3) + (4) 36.95% 33.16% 6. Total recommended contribution, end of each pay period 38.36% 34.46% (1) Discounted to beginning of year. The employee contribution rate for contributions made at the end of each pay period would be 6.74%. 12

45 SECTION 2: Valuation Results for the East Bay Municipal Utility District Retirement System The contribution rates as of June 30, 2012 are based on all of the data described in the previous sections, the actuarial assumptions described in Section 4, and the Plan provisions adopted at the time of preparation of the Actuarial Valuation. They include all changes affecting future costs, adopted benefit changes, actuarial gains and losses and changes in the actuarial assumptions. Reconciliation of Recommended Contribution The chart below details the changes in the recommended contribution from the prior valuation to the current year s valuation. The chart reconciles the contribution from the prior valuation to the amount determined in this valuation. CHART 14 Reconciliation of Recommended Contribution Rate from June 30, 2011 to June 30, 2012 Contribution Rate Estimated Annual Amount (1) Recommended Contribution as of June 30, % $54,738,845 Effect of investment loss 0.42% 667,159 Effect of one-year lag in implementing rates 0.11% 174,732 Effect of lower than expected salary increases -1.08% -1,715,553 Effect of lower than expected growth in total payroll 0.84% 1,334,319 Effect of lower than expected retiree COLA increases -0.16% -254,156 Effect of increase in employer normal cost due to demographic changes 0.05% 79,424 Effect of other experience losses 0.15% 238,273 Effect of change to individual Entry Age Normal method 0.72% 1,143,702 Effect of change in amortization periods for actuarial (gains)/losses and assumption/method changes 0.06% (2) 95,308 Effect of change in actuarial assumptions 2.79% 4,431,845 Total Change 3.90% $6,195,053 Recommended Contribution as of June 30, % $60,933,898 (1) (2) Based on projected payroll as of June 30, 2012 of $158,847,491. Combined effect of change in amortization periods for actuarial gains (-0.15% of payroll) and for assumption changes (0.21% of payroll). 13

46 SECTION 2: Valuation Results for the East Bay Municipal Utility District Retirement System Employee contribution rates are prescribed in the Ordinance. Effective April 17, 2006, the rate of member retirement contributions is 6.83% and 6.74% of that rate is allocated to pay pension benefits. The rest, or 0.09%, is used to pay HIB benefits. The Board of Directors may adjust the employee rates solely pursuant to the terms of a negotiated collective bargaining agreement or memorandum of understanding with employer bargaining units. 14

47 SECTION 2: Valuation Results for the East Bay Municipal Utility District Retirement System E. INFORMATION REQUIRED BY GASB Governmental Accounting Standards Board (GASB) reporting information provides standardized information for comparative purposes of governmental pension plans. This information allows a reader of the financial statements to compare the funding status of one governmental plan to another on relatively equal terms. Critical information to GASB is the historical comparison of the GASB required contribution to the actual contributions. This comparison demonstrates whether a plan is being funded within the range of the GASB reporting requirements. Chart 15 below presents a graphical representation of this information for the Plan. actuarial value of assets to the actuarial accrued liabilities of the plan as calculated under GASB. High ratios indicate a well-funded plan with assets sufficient to pay most benefits. Lower ratios may indicate recent changes to benefit structures, funding of the plan below actuarial requirements, poor asset performance, or a variety of other factors. The details regarding the calculations of these values and other GASB numbers may be found in Section 4, Exhibits II, III, and IV. The other critical piece of information regarding the Plan s financial status is the funded ratio. This ratio compares the These graphs show key GASB factors. CHART 15 Required Versus Actual Contributions CHART 16 Funded Ratio $ Millions % 80% 60% 40% 20% 0% Required Actual 15

48 SECTION 2: Valuation Results for the East Bay Municipal Utility District Retirement System F. VOLATILITY RATIOS Retirement plans are subject to volatility in the level of required contributions. This volatility tends to increase as retirement plans become more mature. The Asset Volatility Ratio (AVR), which is equal to the market value of assets divided by total payroll, provides an indication of the potential contribution volatility for any given level of investment volatility. A higher AVR indicates that the plan is subject to a greater level of contribution volatility. This is a current measure since it is based on the current level of assets. For EBMUD, the current AVR is about 6.1. This means that a 1% asset gain/(loss) (relative to the assumed investment return) translates to about 6.1% of one-year s payroll. Since EBMUD amortizes actuarial gains and losses over a 20-year period, there would be a 0.4% of payroll decrease/(increase) in the required contribution for each 1% asset gain/(loss). The Liability Volatility Ratio (LVR), which is equal to the Actuarial Accrued Liability divided by payroll, provides an indication of the longer-term potential for contribution volatility for any given level of investment volatility. This is because, over an extended period of time, the plan s assets should track the plan s liabilities. For example, if a plan is 50% funded on a market value basis, the liability volatility ratio would be double the asset volatility ratio and the plan sponsor should expect contribution volatility to increase over time as the plan becomes better funded. The LVR also indicates how volatile contributions will be in response to changes in the Actuarial Accrued Liability due to actual experience or to changes in actuarial assumptions. For EBMUD, the current LVR is about 9.8. This is about 61% higher than the AVR. Therefore, we would expect that contribution volatility will increase over the long-term. This chart shows how the asset and liability volatility ratios have varied over time. CHART 17 Volatility Ratios for Years Ended June 30, Year Ended June 30 Asset Volatility Ratio Liability Volatility Ratio

49 SECTION 3: Supplemental Information for the East Bay Municipal Utility District Retirement System EXHIBIT A Table of Plan Coverage Year Ended June 30 Category Change From Prior Year Active participants in valuation: Number 1,703 1, % Average age N/A Average service N/A Projected total payroll $158,847,491 $159,504, % Projected average payroll $93,275 $93, % Account balances $145,556,365 $140,440, % Total active vested participants 1,415 1, % Vested terminated participants: Number % Average age N/A Retired participants: Number in pay status 1,054 1, % Average age N/A Average monthly benefit $4,326 $4, % Disabled participants: Number in pay status % Average age N/A Average monthly benefit $1,941 $1, % Beneficiaries: Number in pay status % Average age N/A Average monthly benefit $2,190 $2, % 17

50 SECTION 3: Supplemental Information for the East Bay Municipal Utility District Retirement System EXHIBIT B Participants in Active Service as of June 30, 2012 By Age, Years of Service, and Average Projected Payroll Years of Service Age Total & over Under $68,094 $68, ,589 73,626 $100, ,288 83,153 88,290 $97, ,327 82,435 89,640 85,750 $90, ,094 88,957 91,776 92,976 94,905 $112, ,677 87,602 95,929 91,009 92, ,012 $111,489 $82, ,476 95,256 92,712 90,259 94,525 94, ,862 99,423 $105, ,412 84,593 93,812 79, ,461 96,695 98, , , ,449 79,698 96,506 86,964 96, , , ,265 95,844 $86, ,552 79,680 72,656 93, ,422 76,234 82, ,336 84, & over , ,726 42,305 69, , ,831 Total 1, $93,275 $84,223 $92,326 $88,106 $95,462 $98,246 $101,366 $100,793 $101,086 $82,006 18

51 SECTION 3: Supplemental Information for the East Bay Municipal Utility District Retirement System EXHIBIT C Reconciliation of Participant Data Active Participants Vested Former Participants Disableds Retired Participants Beneficiaries Total Number as of June 30, , , ,253 New participants 75 N/A N/A N/A N/A 75 Terminations with vested rights (16) Terminations without vested rights (1) N/A N/A N/A N/A (1) Retirements (54) (11) N/A 65 N/A 0 New disabilities (2) 0 2 N/A N/A 0 Return to work 2 (2) 0 0 N/A 0 Died with or without beneficiary (3) 0 (2) (34) 5 (1) (34) Refund of contributions 0 (5) (5) Data adjustments Number as of June 30, , , ,288 (1) This is the net increase in the number of beneficiaries after subtracting the number of beneficiaries who died during the year. 19

52 SECTION 3: Supplemental Information for the East Bay Municipal Utility District Retirement System EXHIBIT D Summary Statement of Income and Expenses on an Actuarial Value Basis for All Pension Plan and HIB Plan Assets Year Ended June 30, 2012 Year Ended June 30, 2011 Contribution income: Employer contributions $59,651,000 $58,481,000 Employee contributions 10,723,000 10,850,000 Net contribution income $70,374,000 $69,331,000 Investment income: Interest, dividends and other income $21,117,000 $19,674,000 Recognition of capital appreciation 48,899,807 18,018,654 Less investment and administrative fees -4,528,000-4,050,000 Net investment income $65,488,807 $33,642,654 Total income available for benefits $135,862,807 $102,973,654 Less benefit payments: Benefits paid -$66,254,000 -$61,862,000 Refund of contributions -589, ,000 Net benefit payments -$66,843,000 -$62,114,000 Change in amount available for future benefits $69,019,807 $40,859,654 20

53 SECTION 3: Supplemental Information for the East Bay Municipal Utility District Retirement System EXHIBIT E Summary Statement of Assets for Pension and HIB Plans Year Ended June 30, 2012 Year Ended June 30, 2011 Cash equivalents $33,068,000 $48,462,000 Accounts receivable: Brokers, securities sold $8,036,000 $23,333,000 Employer and employee contributions 2,602,000 2,132,000 Interest and dividends 2,276,000 2,079,000 Total accounts receivable $12,914,000 $27,544,000 Investments: Equities $693,123,000 $688,601,000 Fixed income investments 216,206, ,597,000 Real estate 48,876,000 17,730,000 Securities lending collateral 100,577, ,553,000 Other assets 434, ,000 Total investments at market value $1,059,216,000 $1,060,911,000 Total assets $1,105,198,000 $1,136,917,000 Less accounts payable: Accounts payable and accrued expenses -$1,365,000 -$1,362,000 Payables to brokers, securities purchased -16,284,000-37,763,000 Securities lending collateral -100,577, ,553,000 Total accounts payable -$118,226,000 -$168,678,000 Net assets at market value $986,972,000 $968,239,000 Net assets at actuarial value $1,035,786,332 $966,766,525 Net assets at valuation value (pension plan only) $1,021,546,227 $954,718,875 21

54 SECTION 3: Supplemental Information for the East Bay Municipal Utility District Retirement System EXHIBIT F Development of the Fund Through June 30, 2012 for All Pension Plan and HIB Plan Assets Year Ended June 30 Employer Contributions Employee Contributions Net Investment Return* Benefit Payments Actuarial Value of Assets at End of Year 2006 $35,635,000 $9,426,000 $45,449,540 $42,634,000 $744,230, ,332,000 9,891,000 84,360,520 46,508, ,305, ,603,000 10,394,000 72,404,538 50,780, ,927, ,803,000 10,740,000-40,593,156 54,502, ,375, ,756,000 10,918,000 51,966,871 58,109, ,906, ,481,000 10,850,000 33,642,654 62,114, ,766, ,651,000 10,723,000 65,488,807 66,843,000 1,035,786,332 * Net of investment fees and administrative expenses. 22

55 SECTION 3: Supplemental Information for the East Bay Municipal Utility District Retirement System EXHIBIT G Development of Unfunded/(Overfunded) Actuarial Accrued Liability for Year Ended June 30, Unfunded actuarial accrued liability at beginning of year $491,319, Normal cost at beginning of year 32,491, Actual employer and member contributions -62,738, Interest (a) For whole year on (1) + (2) $41,904,888 (b) For half year on (3) -2,509,520 (c) Total interest $39,395, Expected unfunded actuarial accrued liability $500,468, Changes due to:* (a) Loss from investments $11,909,918 (b) Gain on salaries lower than expected -30,332,209 (c) Gain from less COLA benefits granted than anticipated -4,428,575 (d) Loss from all other sources 4,131,917 (e) Loss from change in actuarial assumptions 53,400,521 (f) Total changes $34,681, Unfunded actuarial accrued liability at end of year $535,150,038 *Excludes $3,050,185 loss from contributions less than anticipated due to one-year delay in implementing the higher contribution rate calculated in the June 30, 2011 valuation. That loss is already included in the development of item 5. Note: The net gain/(loss) from other experience of $30,628,867 from Section 2, Chart 9 is equal to the sum of items 6(b) through 6(d). 23

56 SECTION 3: Supplemental Information for the East Bay Municipal Utility District Retirement System EXHIBIT H Table of Amortization Bases Type* Date Established Initial Years Initial Amount Outstanding Balance Years Remaining Annual Payment* Experience Gain 6/30/ $10,871,830 -$12,764, $959,510 Change in Assumptions 6/30/ ,629,891 10,132, ,644 Plan Amendments 6/30/ ,607,265 15,976, ,200, % COLA Assumption 6/30/ ,057,441 31,768, ,387,996 Experience Loss 6/30/ ,292,281 2,684, ,368 Experience Loss 6/30/ ,232,251 30,552, ,137,021 Plan Amendments 6/30/ ,111,914 5,953, ,444 Experience Loss 6/30/ ,692,270 50,496, ,419,792 Plan Amendments 6/30/ ,138,578 77,594, ,254,933 Experience Loss 6/30/ ,731,232 37,457, ,461,416 New Assumption / Domestic Partners 6/30/ ,812,646-11,229, ,919 Experience Loss 6/30/ ,910,233 30,434, ,944,346 Remove Limit Pension Base 6/30/ ,315,928 30,753, ,964,688 Experience Loss 6/30/ ,160,133 15,798, ,021 Experience Gain 6/30/ ,098,126-3,404, ,652 Experience Gain 6/30/ ,800,585-8,430, ,940 Change in Assumptions 6/30/ ,413,374 55,566, ,295,084 Experience Loss 6/30/ ,894, ,960, ,075,309 Experience Loss 6/30/ ,039,098 3,164, ,826 Change in Assumptions 6/30/ ,098,499 8,432, ,195 Experience Loss 6/30/ ,428,038 4,520, ,941 Experience Gain 6/30/ ,668,764-15,668, ,095,969 Change in Assumptions 6/30/ ,400,521 53,400, ,241,271 Total $535,150,038 $34,149,235 * Level percentage of payroll. Note: The equivalent single amortization period is about 24 years. 24

57 SECTION 3: Supplemental Information for the East Bay Municipal Utility District Retirement System EXHIBIT I Section 415 Limitations Section 415 of the Internal Revenue Code (IRC) specifies the maximum benefits that may be paid to an individual from a defined benefit plan and the maximum amounts that may be allocated each year to an individual s account in a defined contribution plan. Contribution rates determined in this valuation have not been reduced for the Section 415 limitations. Actual limitations will result in actuarial gains as they occur. A qualified pension plan may not pay benefits in excess of the Section 415 limits. The ultimate penalty for noncompliance is disqualification: active participants could be taxed on their vested benefits and the IRS may seek to tax the income earned on the plan s assets. In particular, Section 415(b) of the IRC limits the maximum annual benefit payable at the Normal Retirement Age to a dollar limit of $160,000 indexed for inflation. That limit is $200,000 for 2012 and $205,000 for Normal Retirement Age for these purposes is age 62. These are the limits in simplified terms. They must be adjusted based on each participant s circumstances, for such things as age at retirement, form of benefits chosen and after tax contributions. Legal Counsel s review and interpretation of the law and regulations should be sought on any questions in this regard. 25

58 SECTION 3: Supplemental Information for the East Bay Municipal Utility District Retirement System EXHIBIT J Definitions of Pension Terms The following list defines certain technical terms for the convenience of the reader: Assumptions or Actuarial Assumptions: Normal Cost: Actuarial Accrued Liability For Actives: Actuarial Accrued Liability For Pensioners: Unfunded Actuarial Accrued Liability: The estimates on which the cost of the Plan is calculated including: (a) Investment return the rate of investment yield that the Plan will earn over the long-term future; (b) Mortality rates the death rates of employees and pensioners; life expectancy is based on these rates; (c) Retirement rates the rate or probability of retirement at a given age; and (d) Turnover rates the rates at which employees of various ages are expected to leave employment for reasons other than death, disability, or retirement. The amount of contributions required to fund the benefit allocated to the current year of service. The equivalent of the accumulated normal costs allocated to the years before the valuation date. The single sum value of lifetime benefits to existing pensioners. This sum takes account of life expectancies appropriate to the ages of the pensioners and the interest that the sum is expected to earn before it is entirely paid out in benefits. The extent to which the actuarial accrued liability of the Plan exceeds the assets of the Plan. There is a wide range of approaches to paying off the unfunded actuarial accrued liability, from meeting the interest accrual only to amortizing it over a specific period of time. 26

59 SECTION 3: Supplemental Information for the East Bay Municipal Utility District Retirement System Amortization of the Unfunded Actuarial Accrued Liability: Payments made over a period of years equal in value to the Plan s unfunded actuarial accrued liability. Investment Return: The rate of earnings of the Plan from its investments, including interest, dividends and capital gain and loss adjustments, computed as a percentage of the average value of the fund. For actuarial purposes, the investment return often reflects a smoothing of the capital gains and losses to avoid significant swings in the value of assets from one year to the next. 27

60 SECTION 4: Reporting Information for the East Bay Municipal Utility District Retirement System EXHIBIT I Summary of Actuarial Valuation Results The valuation was made with respect to the following data supplied to us: 1. Retired participants as of the valuation date (including 244 beneficiaries in pay status) 1, Participants inactive during year ended June 30, 2012 with vested rights Participants active during the year ended June 30, ,703 Fully vested 1,415 Not vested 288 The actuarial factors as of the valuation date are as follows: 1. Normal cost, beginning of year $34,856, Present value of future benefits 1,820,299, Present value of future normal costs 263,603, Actuarial accrued liability Retired participants and beneficiaries $791,344,644 Inactive participants with vested rights 37,669,468 Active participants 727,682,153 Subtotal $1,556,696, Valuation value of assets ($986,972,000 at market value for pension and HIB plans, as reported by the auditor, and $1,035,786,332 at actuarial value for pension and HIB plans) $1,021,546,227 (1) 6. Unfunded actuarial accrued liability $535,150,038 (1) Net of HIB assets. 28

61 SECTION 4: Reporting Information for the East Bay Municipal Utility District Retirement System EXHIBIT I (continued) Summary of Actuarial Valuation Results The determination of the recommended contribution is as follows: 1. Total normal cost $34,856, Expected employee contributions -10,309, Employer normal cost: (1) + (2) $24,547, Payment on unfunded actuarial accrued liability $34,149, Total recommended contribution: beginning of year $58,696, Total recommended contribution: end of pay period $60,933, Projected payroll $158,847, Total recommended contribution as a percentage of projected payroll: (6) (7) 38.36% 29

62 SECTION 4: Reporting Information for the East Bay Municipal Utility District Retirement System EXHIBIT II Supplementary Information Required by GASB Schedule of Employer Contributions Plan Year Ended June 30 Annual Required Actual Contributions (1) Contributions 2007 $33,698,000 $33,698, % Percentage Contributed ,387,000 37,387, % ,485,000 39,485, % ,031,000 44,031, % ,987,000 50,987, % ,156,000 52,156, % (1) Annual required contributions up to the year ended June 30, 2008 were based on adopted contribution rates prepared by the System s prior actuary. 30

63 SECTION 4: Reporting Information for the East Bay Municipal Utility District Retirement System EXHIBIT III Supplementary Information Required by GASB Schedule of Funding Progress (Dollar Amounts in Thousands) Actuarial Valuation Date Valuation Value of Assets (a) Actuarial Accrued Liability (AAL) (b) Unfunded/ (Overfunded) AAL (UAAL) (b) - (a) Funded Ratio (a) / (b) Covered Payroll (c) UAAL as a Percentage of Covered Payroll [(b) - (a)] / (c) 06/30/2007 $827,098 $1,126,106 $299, % $153, % 06/30/ ,917 1,244, , % 158, % 06/30/ ,021 1,323, , % 161, % 06/30/ ,845 1,396, , % 164, % 06/30/ ,719 1,446, , % 159, % 06/30/2012 1,021,546 1,556, , % 158, % 31

64 SECTION 4: Reporting Information for the East Bay Municipal Utility District Retirement System EXHIBIT IV Supplementary Information Required by GASB Valuation date June 30, 2012 Actuarial cost method Amortization method Remaining amortization period Asset valuation method Actuarial assumptions: Entry Age Normal Cost Method Level percent of payroll Plan changes, assumption changes, and experience gains/losses prior to July 1, 2011 are amortized over separate decreasing 30-year amortization periods. On or after July 1, 2011, plan changes are amortized over separate decreasing 15-year periods; assumption changes are amortized over separate decreasing 25-year periods; and experience gains/losses are amortized over separate decreasing 20-year periods. Market value of assets less unrecognized returns in each of the last five years. Unrecognized return is equal to the difference between the actual market return and the expected return on the market value, and is recognized over a five year period, further adjusted, if necessary, to be within 30% of the market value. Investment rate of return 7.75% Inflation rate 3.25% Across the board salary increase 0.50% Projected salary increases* Ranges from 4.25% to 9.75% based on years of service Cost of living adjustments 3.15% Plan membership: Retired participants and beneficiaries receiving 1,361 benefits Terminated participants entitled to, but not yet 224 receiving benefits Active participants 1,703 Total 3,288 * Includes inflation at 3.25% plus across the board salary increase of 0.50% plus merit and promotional increases. See Exhibit V for these increases. 32

65 SECTION 4: Reporting Information for the East Bay Municipal Utility District Retirement System EXHIBIT V Actuarial Assumptions and Actuarial Cost Method Mortality Rates: Pre-retirement, After Service Retirement, and All Beneficiaries Males RP-2000 Combined Healthy Mortality Table projected with scale AA to 2016, set back one year for males Females RP-2000 Combined Healthy Mortality Table projected with scale AA to 2016, set back two years for females After Disability Retirement: Males RP-2000 Combined Healthy Mortality Table projected with scale AA to 2016, set forward six years for males Females RP-2000 Combined Healthy Mortality Table projected with scale AA to 2016, set forward six years for females The tables shown above were determined to contain sufficient provision appropriate to reasonably reflect future mortality improvement, based on a review of mortality experience as of the measurement date. Disability Rates: Rate (%) Rate (%) Age Male Female Age Male Female

66 SECTION 4: Reporting Information for the East Bay Municipal Utility District Retirement System Termination Rates: Rate (%) Ordinary Withdrawal* Service Male Female Ordinary Withdrawal** Rate (%) Vested Termination Age Male Female Male Female * Applicable for members with less than five years of service. ** Applicable after five years of service. 34

67 SECTION 4: Reporting Information for the East Bay Municipal Utility District Retirement System Retirement Rates: Rate (%) Age Male Female 54* * The rate for members age 54 with 30 or more years of service (i.e., eligible for unreduced benefits) is 50% for males and females. 35

68 SECTION 4: Reporting Information for the East Bay Municipal Utility District Retirement System Retirement Age for Inactive Vested Participants: 58 Reciprocity: 30% of members who terminate with a vested benefit are assumed to enter a reciprocal system. For reciprocals, we assume 4.25% compensation increases per annum. Unknown Data for Participants: Same as those exhibited by members with similar known characteristics. If not specified, members are assumed to be male. Percent Married: The Retirement System has indicated the marital status of each member. Age of Spouse: Female spouses are 3 years younger than their male spouses. Same sex domestic partners are assumed to be the same age. Future Benefit Accruals: 1.0 year of service per year of employment plus years of additional service to anticipate conversion of unused sick leave for each year of employment. Net Investment Return: Interest Credited to Employee Accounts: 7.75% Inflation: 3.25% Across the Board Salary Increases: 0.50% 7.75%, net of investment and administrative expenses. Cost of Living Increases: 3.15% per annum. 36

69 SECTION 4: Reporting Information for the East Bay Municipal Utility District Retirement System Salary Increases: Annual Rate of Compensation Increase Inflation: 3.25% per year; plus across the board salary increases of 0.50% per year; plus the following merit and promotional increases based on years of service: Years of Service Merit and Promotional Increases % % % % % % % % Actuarial Value of Assets: Market value of assets less unrecognized returns in each of the last five years. Unrecognized return is equal to the difference between the actual market return and the expected return on the market value, and is recognized over a five-year period, further adjusted, if necessary, to be within 30% of the market value. 37

70 SECTION 4: Reporting Information for the East Bay Municipal Utility District Retirement System Actuarial Cost Method: Changes in Actuarial Assumptions: Mortality Rates: Pre-retirement and After Service Retirement: After Disability Retirement: Disability Rates: Entry Age Normal Actuarial Cost Method. Entry Age is the age at the member s hire date. Actuarial Accrued Liability is calculated on an individual basis and is based on costs allocated as a level percentage of compensation. The Normal Cost is calculated on an individual basis where the Entry Age Normal Cost is calculated as the sum of the individual Normal Costs. Based on the July 1, 2008 June 30, 2012 actuarial experience study, the following actuarial assumptions were changed. Previously these assumptions were as follows: RP-2000 Combined Healthy Mortality Table for males, set back two years RP-2000 Combined Healthy Mortality Table for females, unadjusted RP-2000 Combined Healthy Mortality Table for males, set forward four years RP-2000 Combined Healthy Mortality Table for females, set forward four years Rate (%) Age Male Female

71 SECTION 4: Reporting Information for the East Bay Municipal Utility District Retirement System Changes in Actuarial Assumptions: (continued) Termination Rates: Rate (%) Ordinary Withdrawal* Service Male Female 0 2.5% 3.0% 1 2.5% 3.0% 2 1.5% 2.5% 3 1.5% 2.0% 4 1.0% 1.5% Ordinary Withdrawal** Rate (%) Vested Termination Age Male Female Male Female * Applicable for members with less than five years of service. ** Applicable after five years of service. 39

72 SECTION 4: Reporting Information for the East Bay Municipal Utility District Retirement System Changes in Actuarial Assumptions: (continued) Retirement Rates: Retirement Probability Age Male Female 54* 8.00% 4.00% % 7.00% % 10.00% % 10.00% % 13.00% % 15.00% % 10.00% % 10.00% % 15.00% % 20.00% % 20.00% % 25.00% % 25.00% % 35.00% % 50.00% % 60.00% % % * The rate for members age 54 with 30 or more years of service (i.e., eligible for unreduced benefits) is 70% for males and 45% for females. 40

73 SECTION 4: Reporting Information for the East Bay Municipal Utility District Retirement System Changes in Actuarial Assumptions: (continued) Reciprocity: 30% of members who terminate with a vested benefit are assumed to enter a reciprocal system. For reciprocals, we assume 4.70% compensation increases per annum. Age of Spouse: Female spouses are 4 years younger than their male spouses. Same sex domestic partners are assumed to be the same age. Future Benefit Accruals: 1.0 year of service per year. Net Investment Return: Interest Credited to Employee Accounts: 8.00% Inflation: 3.50% 8.00%, net of investment and administrative expenses. Cost of Living Increases: 3.25% per annum. 41

74 SECTION 4: Reporting Information for the East Bay Municipal Utility District Retirement System Changes in Actuarial Assumptions: (continued) Salary Increases: Annual Rate of Compensation Increase Inflation: 3.50% per year; plus across the board salary increases of 0.50% per year; plus the following merit and promotional increases based on years of service: Years of Service Merit and Promotional Increases % % % % % % % % % Actuarial Cost Method: Entry Age Normal Actuarial Cost Method. Entry Age is the age at the member s hire date. Actuarial Accrued Liability is calculated on an individual basis and is based on costs allocated as a level percentage of compensation. The Normal Cost is calculated on an aggregate basis by taking the Present Value of Future Normal Costs divided by the Present Value of Future Salaries to obtain a normal cost rate. This normal cost rate is then multiplied by the total current salaries. 42

75 SECTION 4: Reporting Information for the East Bay Municipal Utility District Retirement System EXHIBIT VI Summary of Plan Provisions This exhibit summarizes the major provisions of the EBMUD included in the valuation. It is not intended to be, nor should it be interpreted as, a complete statement of all plan provisions. Plan Year: July 1 through June 30 Census Date: June 30 Final Compensation for Benefit Determination: Highest two consecutive years of compensation earnable. Normal or Unreduced Retirement Eligibility: Age and Service Requirement Age 65; Age 62 with 5 years of service; Age 59 with 20 years of service; Age 54 with 30 years of service; Other combinations of age and service between ages 54 and 59. Early Retirement Eligibility: Age and Service Requirement Age 54 with 5 years of service. 43

76 SECTION 4: Reporting Information for the East Bay Municipal Utility District Retirement System Benefit Formula: 1955 Formula 2.42% (2.82% if member is credited with District Service on or after January 1, 2004) times Final Compensation per year of service including all service extension credit. 1955/80 Formula 2.42% (2.82% if member is credited with District Service on or after January 1, 2004) times Final Compensation per year of service up to August 1, 1980 including all service extension credit, plus 2.20% (2.60% if member is credited with District Service on or after January 1, 2004) times Final Compensation per year of service after August 1, Applies to members who elected to convert to the 1980 Formula in /90 Formula 2.42% (2.82% if member is credited with District Service on or after January 1, 2004) times Final Compensation per year of service up to January 1, 2000 including all service extension credit, plus 2.20% (2.60% if member is credited with District Service on or after January 1, 2004) times Final Compensation per year of service after January 1, Applies to members who elected to convert to the 1980 Formula in Formula 2.20% (2.60% if member is credited with District Service on or after January 1, 2004) times Final Compensation per year of service including all service extension credit. Applies to all members hired on or after January 1, Service Extension Credit 2.42% (2.82% if member is credited with District Service on or after January 1, 2004) for members with any service under the 1955 Formula or 2.20% (2.60% if member is credited with District Service on or after January 1, 2004) for members with service only under the 1980 Formula times Final Compensation per year of Service Extension Credit. Service extension credit is the number of unused sick leave days credited to a member at the time of retirement converted on a 260-day basis. The number of such days is then doubled for the benefit calculation and for service retirements to meet the early retirement provision of the Ordinance. Benefit Adjustments Reduced by 3% per year under the age of eligibility for an unreduced benefit, based on service at retirement, for retirements before age 63 (before age 62 commencing November 1, 2000). Effective July 1, 1999, Service Extension Credit is included in the years of service calculation of service for determining eligibility for unreduced retirement. 44

77 SECTION 4: Reporting Information for the East Bay Municipal Utility District Retirement System Disability: Eligibility Benefit Eight years of service (not available for Directors). Greater of: 1.5% times Final Compensation per year of service. One-third of Final Compensation. Vesting: Requirements Pre-Retirement Death Benefit: Eligibility Benefit Eligibility Benefit Post-Retirement Death Benefit(s): Member Contributions: Five years of service, must leave contributions on deposit, reciprocal service counts for vesting purposes. Eligible for retirement. 50% of the unmodified service retirement benefit to eligible surviving spouse plus the lump sum payment of accumulated retirement contributions. OR None. Lump sum payment of accumulated retirement contributions. 50% of the unmodified service retirement benefit to surviving spouse or registered domestic partner (tied to the implementation of the AB 205 legislation). Retirement system members currently contribute at a rate of 6.83% of pay, reflecting the allocation of increased costs of the negotiated Plan benefit multiplier enhancement. Member contribution rates, defined in the Ordinance, are scheduled to remain the same. 45

78 SECTION 4: Reporting Information for the East Bay Municipal Utility District Retirement System Cost of Living Changes in Plan Provisions: Payable July 1 of each year, the basic minimum COLA benefit is the lesser of 3% and the actual change in the cost of living index. Excess of the actual change of cost of living index over 3% is accumulated in individual retiree COLA banks. Withdrawals from the bank are made in years when the index increases less than 3%. Increases of up to 5% are granted in years when the Retirement Board determines that the System is more than 85% funded on a Projected Benefit Obligation basis. In those years when the System is more than 85% funded and the cost of living index exceeds 5%, any excess cost of living over 5% is accumulated in the COLA bank. Effective October 1, 2000, in those years when the system is more than 85% funded on a Projected Benefit Obligation basis and the cost of living is less than 4%, withdrawals from the bank are made to allow cost of living increases up to 4%. There have been no changes in plan provisions since the last valuation. NOTE: The summary of major plan provisions is designed to outline principal plan benefits as interpreted for purposes of the actuarial valuation. If the System should find the plan summary not in accordance with the actual provisions, the System should alert the actuary so that both can be sure the proper provisions are valued v3/

79 East Bay Municipal Utility District Retirement System Health Insurance Benefit Valuation Review of Contribution Rates and Funding Status June 30, 2012 This report has been prepared at the request of the Retirement Board to assist in administering the Fund. This valuation report may not otherwise be copied or reproduced in any form without the consent of the Retirement Board and may only be provided to other parties in its entirety. The measurements shown in this actuarial valuation may not be applicable for other purposes. Copyright 2013 by The Segal Group, Inc., parent of The Segal Company. All rights reserved.

80 THE SEGAL COMPANY 100 Montgomery Street, Suite 500 San Francisco, CA T F January 9, 2013 Ms. Wanda Hendrix Treasury Manager East Bay Municipal Utility District 375 Eleventh Street Oakland, California Dear Wanda: We are pleased to submit our Health Insurance Benefit Valuation as of June 30, 2012 for the prefunded $450 ($550 for a retiree with a spouse or qualified domestic partner) monthly health insurance subsidy. The Governmental Accounting Standards Board (GASB) requires employers, such as EBMUD, that pool health insurance premium rates for actives and retirees under age 65 to also calculate the liability associated with such pooled premiums for retirees under age 65 on an accrual basis. While that liability referred to as the implicit subsidy has to be disclosed, it is not required to be prefunded. The contribution rate developed in this report only includes the prefunding requirement for the $450/$550 benefit. The obligation required for disclosure purposes will be provided in a separate report. This valuation is based on financial statements and census data furnished by EBMUD. The actuarial calculations were completed under the supervision of Thomas Bergman, ASA, MAAA, Enrolled Actuary. The undersigned are Members of the American Academy of Actuaries and meet the qualification requirements to render the actuarial opinion contained herein. Sincerely, THE SEGAL COMPANY By: ER/hy Andy Yeung, FCA, ASA, MAAA, EA Vice President and Associate Actuary Thomas Bergman, ASA, MAAA, EA Assistant Actuary

81 SECTION 1 SECTION 2 SECTION 3 VALUATION SUMMARY Contributing Recommendations and Funding Status... i VALUATION RESULTS A. Introduction... 1 B. Financial Information... 2 C. Funding Ratio... 3 D. Recommended Contribution... 4 SUPPORTING EXHIBITS EXHIBIT I Table of Amortization Bases... 5 EXHIBIT II Actuarial Assumptions/Methods.. 6 EXHIBIT III Summary of Plan... 20

82 SECTION 1: Valuation Summary for EBMUD Health Insurance Benefit Valuation CONTRIBUTION RECOMMENDATIONS AND FUNDING STATUS The contribution rate recommended in the June 30, 2012 valuation has been calculated with the layered amortization approach. In the review of the Board s actuarial funding policy, we recommended alternative amortization periods for use in amortizing new unfunded actuarial accrued liability (UAAL) on or after July 1, 2011, with separate amortization periods depending on the source of the UAAL change. The Board adopted alternative #3 from that letter, which utilizes the following amortization periods by source: 20 years for actuarial gains or losses; 25 years for assumption or method changes, 15 years for plan amendments; 5 years for Early Retirement Incentive Programs; and 30 years for actuarial surplus. The results of this valuation reflect the changes in the amortization periods, but these changes did not have a material impact on the employer contribution rate. In the aggregate, the total payment from all the UAAL layers was about the same as amortizing the entire UAAL over a period of about 19 years. The recommended contribution rate increased to 5.34% of pay. The contribution rate calculated in the prior valuation was 5.10%. This was the result of assumption changes from the experience study and less than expected growth in total payroll base to amortize the System s UAAL. We have maintained the allocation of 0.09% of the member contribution to the HIB plan used in last year s valuation. This report assumes the HIB subsidy limit will remain at the current levels of $450/$550. Future increases in the HIB subsidy will increase the cost of the plan as a percent of pay. Based on prior directions from the District, we have not included the projected excise tax that may be imposed by the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act. Under these acts, beginning in 2018 health plans that provide a subsidy above certain thresholds (e.g. $11,850 for single or $30,950 for family coverage for non-medicare retirees age and for retirees with careers in high-risk professions) may be subject to a 40% excise tax. Based on action taken by the Board in 2012, the total unrecognized deferred gain of $1.5 million through June 30, 2011 as of that valuation has been recognized in four level amounts with three years of recognition remaining after the June 30, 2012 valuation. i

83 SECTION 1: Valuation Summary for EBMUD Health Insurance Benefit Valuation The following table summarizes the contribution rate recommendations for the employer and the employee: Employer Estimated Annual Amount (1) Employee Estimated Annual Amount (1) June 30, 2011 valuation 5.10% $8,101, % $143,000 June 30, 2012 valuation 5.34% $8,482, % $143,000 (1) Based on June 30, 2012 projected payroll of $158,847,491. The following table compares the valuation value of assets and liabilities for the Health Insurance Benefit as of June 30, 2012 and June 30, 2011: June 30, 2012 June 30, June 30, 2012 Valuation Value of Assets $14,240,105 $12,047, June 30, 2012 Actuarial Accrued Liabilities: Current Recipients $64,490,069 $60,310,019 Future Recipients 38,711,209 38,136,208 Total $103,201,278 $98,446, Liabilities minus Valuation Value of Assets (2) (1) $88,961,173 $86,398, Funding Ratio (1) (2) 13.80% 12.24% ii

84 SECTION 2: Valuation Results for EBMUD Health Insurance Benefit Valuation A. INTRODUCTION Pursuant to Section 36 of the Ordinance, the Retirement Board is authorized to administer a Health Insurance Benefit (HIB) through an IRC Section 401(h) account. The HIB may be used for the payment of sickness, accident, hospitalization, and medical expenses as permitted under the IRC and as authorized by the Retirement Board. In particular, the Retirement Board has authorized the use of the HIB towards the payment of medical insurance premiums. This report does not provide information required for disclosure under GASB statements 43 and 45. Such information will be provided in a separate report. In this valuation, we have used a layered amortization approach to determine the contribution rate to fund the Unfunded Actuarial Accrued Liability (UAAL). Plan changes, assumption changes, and experience gains/losses prior to July 1, 2011 are amortized over separate decreasing 30-year amortization periods. On or after July 1, 2011, plan changes are amortized over separate decreasing 15-year periods; assumption changes from the experience study are amortized over separate decreasing 25-year periods; and experience gains/losses (including year-to-year health assumption changes) are amortized over separate decreasing 20-year periods. The above payments would continue to be expressed as a level percent of a growing payroll base. The cost of the HIB is funded by both employer and employee contributions. The contribution rates for the employer are calculated to provide for the ongoing normal cost, plus any amounts necessary to fund any shortfall between the valuation value of assets and the actuarial accrued liabilities. A summary of the Health Insurance Benefit provisions is displayed in Section 3, Exhibit III. 1

85 SECTION 2: Valuation Results for EBMUD Health Insurance Benefit Valuation B. FINANCIAL INFORMATION It is desirable to have level and predictable plan costs from one year to the next. For this reason, the Board has approved an asset valuation method that gradually adjusts to market value. Under this valuation method, the full value of market fluctuations is not recognized in a single year and, as a result, the asset value and the plan costs are more stable. The amount of the adjustment to recognize market value is treated as income, which may be positive or negative. Realized and unrealized gains and losses are treated equally and, therefore, the sale of assets has no immediate effect on the actuarial value. The chart shows the determination of the actuarial value of assets as of the valuation date. CHART 1 Determination of Actuarial Value of Assets for Year Ended June 30, 2012 (for pension and HIB plans) 1. Market value of assets: (a) Pension plan $973,403,000 (b) HIB plan 13,569,000 (c) Total $986,972,000 Actual Market Expected Market Investment Deferred Deferred 2. Calculation of deferred return: Return (net) Return (net) Gain / (Loss) Factor Return (a) Year ended June 30, $76,707,000 $75,340,031 -$152,047,031 (b) Year ended June 30, ,905,000 69,269, ,174,846 See footnote (1) below (c) Year ended June 30, ,737,000 55,360,181 40,376,819 (d) Year ended June 30, ,970,000 61,812, ,157,160 75% $1,104,356 (e) Year ended June 30, ,202,000 77,600,360-62,398,360 80% -49,918,688 (f) Total unrecognized return* -$48,814, Preliminary actuarial value: (1c) - (2f) $1,035,786, Adjustment to be within 30% corridor of market value $0 5. Final actuarial value of assets for pension and HIB plans: (3) + (4) $1,035,786, Actuarial value as a percentage of market value: (5) (1c) 104.9% 7. Valuation value of HIB assets (excludes pension plan assets): (1b) (1c) x (5) $14,240,105 (1) Based on action taken by the Board in 2012, the total deferred gain of $1,472,475 through June 30, 2011 as of that valuation has been recognized in four level amounts, with three years of recognition remaining after the June 30, 2012 valuation. * The amount of deferred return that will be recognized in each subsequent valuation is as follows: 6/30/2013 -$12,111,553 6/30/ ,111,553 6/30/ ,111,553 6/30/ ,479,672 Total -$48,814,332 2

86 SECTION 2: Valuation Results for EBMUD Health Insurance Benefit Valuation C. FUNDING RATIO The funding of the Health Insurance Benefit comes from the following sources: 1. The valuation value of HIB assets, which equals $14,240,105 as of June 30, 2012; 2. Contributions from the employer; and 3. Contributions from the employees. The following table provides the funding status of the Health Insurance Benefit as of June 30, 2012 and June 30, 2011: June 30, 2012 June 30, June 30, 2012 Valuation Value of Assets $14,240,105 $12,047, June 30, 2012 Actuarial Accrued Liabilities: Current Recipients $64,490,069 $60,310,019 Future Recipients 38,711,209 38,136,208 Total $103,201,278 $98,446, Liabilities minus Valuation Value of Assets (2) (1) $88,961,173 $86,398, Funding Ratio (1) (2) 13.80% 12.24% The contribution requirements are determined based on the Entry Age Normal Funding Method. The excess of the actuarial accrued liability over assets (Item 3 in the above table) is amortized as a level percentage of payroll for current active members. The employer contribution rates are derived on the following page. 3

87 SECTION 2: Valuation Results for EBMUD Health Insurance Benefit Valuation The chart compares this valuation s recommended contribution with the prior valuation. D. RECOMMENDED CONTRIBUTION The amount of annual contribution required to fund the HIB is comprised of a net employer normal cost payment and a payment on the unfunded actuarial accrued liability. This total amount is then divided by the projected payroll for active members to determine the contribution rate of 5.34% of payroll for this year s valuation compared to 5.10% for last year s valuation. CHART 2 Recommended Contribution (% of payroll) June 30, Total Normal Cost 1.24% 1.24% 2. Expected employee contributions -0.09% -0.09% 3. Employer normal cost: (1) + (2) 1.15% 1.15% 4. Unfunded/(overfunded) actuarial accrued liability 4.00% 3.76% 5. Total recommended contribution, beginning of year: (3) + (4) 5.15% 4.91% 6. Total recommended contribution, end of each pay period 5.34% 5.10% 4

88 SECTION 3: Supporting Exhibits for EBMUD Health Insurance Benefit Valuation EXHIBIT I Table of Amortization Bases Type Date Established Amortization Bases Initial Years Initial Amount Outstanding Balance Years Remaining Annual Payment* Initial HIB Base 6/30/ $15,829,000 $18,377, $1,575,467 Combined Base 6/30/ (195,000) (228,068) 16 (18,646) Combined Base 6/30/ ,467,754 7,591, ,150 Combined Base 6/30/ ,543,694 6,508, ,267 Combined Base 6/30/ , , ,333 Combined Base 6/30/ ,413,242 21,445, ,500,042 Combined Base 6/30/ ,628,441 7,660, ,808 Combined Base 6/30/ ,942,176 2,278, ,718 Combined Base 6/30/ ,019,739 8,877, ,131 Combined Base 6/30/ (1,769,952) (1,974,791) 24 (122,873) Experience Loss 6/30/ ,878,105 3,162, ,976 Combined Base 6/30/ ,125,015 13,104, ,092 Combined Base 6/30/ (1,240,538) (1,316,836) 27 (76,393) Combined Base 6/30/ , , ,398 Combined Base 6/30/ (60,151) (61,413) 29 (3,422) Experience Gain 6/30/ (1,251,821) (1,251,821) 20 (87,560) Assumption Changes 6/30/ ,374,832 3,374, ,843 Total $88,961,173 $6,354,331 * Level percentage of payroll Note: The equivalent single amortization period is about 19 years. 5

89 SECTION 3: Supporting Exhibits for EBMUD Health Insurance Benefit Valuation EXHIBIT II Actuarial Assumptions/Methods Mortality Rates: Pre-retirement and After Service Retirement: After Disability Retirement: Disability Rates: RP-2000 Combined Healthy Mortality Table projected with Scale AA to 2016, set back one year for males RP-2000 Combined Healthy Mortality Table projected with Scale AA to 2016, set back two years for females RP-2000 Combined Healthy Mortality Table projected with Scale AA to 2016, set forward six years for males RP-2000 Combined Healthy Mortality Table projected with Scale AA to 2016, set forward six years for females The tables shown above were determined to contain sufficient provision appropriate to reasonably reflect future mortality improvement, based on a review of mortality experience as of the measurement date. Rate (%) Age Male Female

90 SECTION 3: Supporting Exhibits for EBMUD Health Insurance Benefit Valuation Termination Rates: Rate (%) Ordinary Withdrawal* Service Male Female * Applicable for members with less than five years of service. ** Applicable after five years of service. Ordinary Withdrawal** Rate (%) Vested Termination Age Male Female Male Female

91 SECTION 3: Supporting Exhibits for EBMUD Health Insurance Benefit Valuation Retirement Rates: Rate (%) Age Male Female 54* * The rate for members age 54 with 30 or more years of service (i.e., eligible for unreduced benefits) is 50% for males and females. 8

92 SECTION 3: Supporting Exhibits for EBMUD Health Insurance Benefit Valuation Retirement Age for Inactive Vested Participants: 58 Unknown Data for Participants: Spouse Coverage: Same as those exhibited by members with similar known characteristics. If not specified, members are assumed to be male. 80% of males and 50% of females are assumed to elect spouse HIB coverage at retirement. For current retirees, we relied upon the coverage indicated in the data. Age of Spouse: Female spouses are 3 years younger than their male spouses. Same sex domestic partners are assumed to be the same age. Future Benefit Accruals: 1.0 year of service per year. Net Investment Return: Inflation: 3.25% Across the Board Salary Increases: 0.50% Payroll Growth: 3.75% 7.75%, net of investment and administrative expenses. 9

93 SECTION 3: Supporting Exhibits for EBMUD Health Insurance Benefit Valuation Salary Increases: Actuarial Value of Assets: Actuarial Cost Method: Annual Rate of Compensation Increase Inflation: 3.25% per year; plus across the board salary increases of 0.50% per year; plus the following merit and promotional increases based on years of service: Years of Service Merit and Promotional Increases % Market value of assets less unrecognized returns in each of the last five years. Unrecognized return is equal to the difference between the actual market return and the expected return on the market value, and is recognized over a five-year period, further adjusted, if necessary, to be within 30% of the market value. Entry Age Normal Actuarial Cost Method. Entry Age is the age at the member s hire date. Actuarial Accrued Liability is calculated on an individual basis and is based on costs allocated as a level percentage of compensation. The Normal Cost is calculated on an individual basis where the Entry Age Normal Cost is calculated as the sum of the individual Normal Costs. 10

94 SECTION 3: Supporting Exhibits for EBMUD Health Insurance Benefit Valuation Participation in Health Insurance Benefit Plan: Average HIB subsidy: Projected HIB subsidy increase: 95% of future eligible retirees are assumed to enroll in the HIB plan. All current pensioners and beneficiaries with a retiree health insurance cash subsidy were valued. 47.5% of current and future deferred vested members are assumed to enroll in the HIB plan (50% of the future retiree election percent). For current retirees, we have used the HIB benefit on record. For future retirees, we have assumed that: Retirees under age 65 with single HIB coverage will receive an average $444 monthly benefit as of July 1, 2012, Retirees under age 65 with spouse HIB coverage will receive an average $539 monthly benefit as of July 1, 2012, Retirees age 65 and over with single HIB coverage will receive an average $413 monthly benefit as of July 1, 2012, Retirees age 65 and over with spouse HIB coverage will receive an average $530 monthly benefit as of July 1, We have projected the HIB medical benefit to increase with medical trend until it reaches the limits described in the Summary of Plan Provisions. The benefit limits are projected to remain unchanged at the current levels of $450/$

95 SECTION 3: Supporting Exhibits for EBMUD Health Insurance Benefit Valuation Carrier Election And Monthly Premiums Participant Under Age 65: 2012 Calendar Year Single Party Married/With Domestic Partner Eligible Survivor CARRIER Monthly Premium Monthly Premium Monthly Premium Kaiser $ $1, $ Blue Cross $ $1, $ Health Net $ $1, $ Calendar Year Single Party Married/With Domestic Partner Eligible Survivor CARRIER Monthly Premium Monthly Premium Monthly Premium Kaiser $ $1, $ Blue Cross $ $1, $ Health Net $ $1, $ Fiscal Year Single Party Married/With Domestic Partner Eligible Survivor Election CARRIER Percent Monthly Premium Monthly Premium Monthly Premium Kaiser 62 $ $1, $ Blue Cross 25 $ $1, $ Health Net 13 $ $1, $

96 SECTION 3: Supporting Exhibits for EBMUD Health Insurance Benefit Valuation Carrier Election and Monthly Premiums Participant Age 65 and Older: 2012 Calendar Year Single Party Married/With Domestic Partner Eligible Survivor CARRIER Monthly Premium Monthly Premium Monthly Premium Kaiser $ $ $ Blue Cross $ $1, $ Health Net $ $ $ Calendar Year Single Party Married/With Domestic Partner Eligible Survivor CARRIER Monthly Premium Monthly Premium Monthly Premium Kaiser* $ $ $ Blue Cross $ $1, $ Health Net $ $1, $ Fiscal Year Single Party Married/With Domestic Partner Eligible Survivor Election CARRIER Percent Monthly Premium Monthly Premium Monthly Premium Kaiser 59 $ $ $ Blue Cross 27 $ $1, $ Health Net 14 $ $1, $ * We assume all future Kaiser Medicare retirees will elect the High option. 13

97 SECTION 3: Supporting Exhibits for EBMUD Health Insurance Benefit Valuation Health care cost trend rates Trends to be applied in following fiscal years, to all health plans Trends to be applied to premium for shown fiscal year to calculate next fiscal year s projected premium First Fiscal Year (July 1, 2013 through June 30, 2014) PLAN Kaiser HealthNet Blue Cross Trend to be applied to Fiscal Year premium 8.15% 5.53% 8.41% The fiscal year trend rates are based on the following calendar year trend rates: Trend (applied to calculate following Fiscal Year Trend Calendar Year year premium) % % % % % % % % % % % % % % and later 5.00% 2020 and later 5.00% 14

98 SECTION 3: Supporting Exhibits for EBMUD Health Insurance Benefit Valuation Changes in Actuarial Assumptions Medical election assumption, trends and premiums were updated. The average HIB subsidy for future retirees was updated. The discount rate was lowered from 8.00% to 7.75%. The spouse coverage assumption and spouse age difference assumptions were updated. Based on the July 1, 2008 June 30, 2012 actuarial experience study, the following actuarial assumptions were changed. Previously these assumptions were as follows: Mortality Rates: Pre-retirement and After Service Retirement: RP-2000 Combined Healthy Mortality Table for males, set back two years RP-2000 Combined Healthy Mortality Table for females, unadjusted After Disability Retirement: RP-2000 Combined Healthy Mortality Table for males, set forward four years RP-2000 Combined Healthy Mortality Table for females, set forward four years 15

99 SECTION 3: Supporting Exhibits for EBMUD Health Insurance Benefit Valuation Changes in Actuarial Assumptions: (continued) Disability Rates: Rate (%) Age Male Female Termination Rates: Rate (%) Ordinary Withdrawal* Service Male Female 0 2.5% 3.0% 1 2.5% 3.0% 2 1.5% 2.5% 3 1.5% 2.0% 4 1.0% 1.5% 16

100 SECTION 3: Supporting Exhibits for EBMUD Health Insurance Benefit Valuation Changes in Actuarial Assumptions: (continued) Termination Rates: (continued) Ordinary Withdrawal** Rate (%) Vested Termination Age Male Female Male Female * Applicable for members with less than five years of service. ** Applicable after five years of service. 17

101 SECTION 3: Supporting Exhibits for EBMUD Health Insurance Benefit Valuation Changes in Actuarial Assumptions: (continued) Retirement Rates: Retirement Probability Age Male Female 54* 8.00% 4.00% % 7.00% % 10.00% % 10.00% % 13.00% % 15.00% % 10.00% % 10.00% % 15.00% % 20.00% % 20.00% % 25.00% % 25.00% % 35.00% % 50.00% % 60.00% % % * The rate for members age 54 with 30 or more years of service (i.e., eligible for unreduced benefits) is 70% for males and 45% for females. 18

102 SECTION 3: Supporting Exhibits for EBMUD Health Insurance Benefit Valuation Changes in Actuarial Assumptions: (continued) Age of Spouse: Female spouses are 4 years younger than their male spouses. Same sex domestic partners are assumed to be the same age. Future Benefit Accruals: 1.0 year of service per year. Net Investment Return: Inflation: 3.50% 8.00%, net of investment and administrative expenses. Salary Increases: Annual Rate of Compensation Increase Inflation: 3.50% per year; plus across the board salary increases of 0.50% per year; plus the following merit and promotional increases based on years of service: Years of Service Merit and Promotional Increases % % % % % % % % % 19

103 SECTION 3: Supporting Exhibits for EBMUD Health Insurance Benefit Valuation EXHIBIT III Summary of Plan Plan Year: July 1 through June 30 Census Date: June 30 Normal or Unreduced Retirement Eligibility: Age and Service Requirement Age 65; Age 62 with 5 years of service; Age 59 with 20 years of service; Age 54 with 30 years of service; Other combinations of age and service between ages 54 and 59. Early Retirement Eligibility: Age and Service Requirement Covered Members: Age 54 with 5 years of service. All members with at least 5 years of service. Member Contribution Rate: 0.09% Employer Contribution Rate: 100% of total cost net of the 0.09% rate paid by the employee. 20

104 SECTION 3: Supporting Exhibits for EBMUD Health Insurance Benefit Valuation Benefit Formula: For members entering the System prior to July 1, 1996, a monthly allowance of up to $450 ($550 for married retirees and retirees with financially dependent registered domestic partners) is paid to retirees with at least five years of full-time service to reimburse employee-paid medical expenses. For members entering the System after June 30, 1996, the members shall receive the full monthly allowance multiplied by the applicable percentage below based on years of full-time service. Years of Full-time Service Percent of HIB Less than 5 0% % % % 20 or more 100% An eligible surviving spouse may receive a Health Insurance Benefit of up to $450 per month v3/

105 East Bay Municipal Utility District Actuarial Valuation and Review of Other Postemployment Benefits (OPEB) as of June 30, 2012 In accordance with GASB Statements No. 43 and No. 45 This report has been prepared at the request of the Retirement Board to assist in administering the Fund. This valuation report may not otherwise be copied or reproduced in any form without the consent of the Retirement Board and may only be provided to other parties in its entirety. The measurements shown in this actuarial valuation may not be applicable for other purposes. Copyright 2013 by The Segal Group, Inc., parent of The Segal Company. All rights reserved.

106 THE SEGAL COMPANY 100 Montgomery Street, Suite 500 San Francisco, CA T F January 9, 2013 Ms. Wanda Hendrix Treasury Manager East Bay Municipal Utility District 375 Eleventh Street Oakland, California Dear Wanda: We are pleased to submit this Actuarial Valuation and Review of Other Postemployment Benefits (OPEB) as of June 30, 2012 under Governmental Accounting Standards Board Statements 43 and 45. The report summarizes the actuarial data used in the valuation, discloses the Net OPEB obligation (NOO) as of June 30, 2012, establishes the Annual Required Contribution (ARC) for the 2013/2014 plan year, and analyzes the preceding year s experience. This report was based on the census and financial data and the terms of the Plan as provided by the District. The actuarial calculations were completed under the supervision of Thomas Bergman, ASA, MAAA, EA. This actuarial valuation has been completed in accordance with generally accepted actuarial principles and practices. To the best of our knowledge, the information supplied in this actuarial valuation is complete and accurate. Further, in our opinion, the assumptions used in this valuation and described in Exhibit II are reasonably related to the experience of and the expectations for the Plan. The actuarial projections are based on these assumptions and the plan of benefits as summarized in Exhibits II and III. Sincerely, THE SEGAL COMPANY By: Andy Yeung, FCA, ASA, MAAA, EA Thomas Bergman, ASA, MAAA, EA Vice President and Associate Actuary Assistant Actuary TXB/gxk

107 SECTION 1 SECTION 2 SECTION 3 SECTION 4 EXECUTIVE SUMMARY VALUATION RESULTS VALUATION DETAILS SUPPORTING INFORMATION Purpose... 1 Highlights of the Valuation... 1 Summary of Valuation Results... 3 Actuarial Certification... 4 CHART 1 Actuarial Present Value of Total Projected Benefits (APB) and Actuarial Balance Sheet... 5 CHART 2 Actuarial Accrued Liability (AAL) and Unfunded AAL (UAAL)... 6 CHART 3 Table of Amortization Bases... 7 CHART 4 Determination of Annual Required Contribution (ARC) Payable Throughout Fiscal Year 8 CHART 5 Required Supplementary Information Schedule of Employer Contributions EXHIBIT A Summary of Participant Data EXHIBIT B Cash Flow Projections EXHIBIT C Summary Statement of Assets for Pension and HIB Plans EXHIBIT D Summary Statement of Income and Expenses on an Actuarial Value Basis for All Pension Plan and HIB Plan Assets EXHIBIT E Actuarial Value of Assets EXHIBIT I Summary of Required Supplementary Information EXHIBIT II Actuarial Assumptions and Actuarial Cost Method EXHIBIT III Summary of Plan EXHIBIT IV Definitions of Terms EXHIBIT V Accounting Requirements EXHIBIT VI GASB 43/45 Concepts CHART 6 Required Supplementary Information Schedule of Funding Progress CHART 7 Required Supplementary Information Net OPEB Obligation (NOO)... 12

108 SECTION 1: Executive Summary for East Bay Municipal Utility District June 30, 2012 Measurement Under GASB 43 and 45 PURPOSE This report presents the results of our actuarial valuation of East Bay Municipal Utility District (the District ) OPEB plan as of June 30, The results are in accordance with the Governmental Accounting Standards, which prescribe an accrual methodology for accumulating the value of other postemployment benefits (OPEB) over participants active working lifetimes. HIGHLIGHTS OF THE VALUATION A separate report provides the funding requirement for a monthly health insurance subsidy of $450 ($550 for married retirees and retirees with qualified domestic partners). GASB requires employers, such as EBMUD, that pool health insurance premium rates for actives and retirees under age 65 to also calculate on an accrual basis the liability associated with such pooled premiums for retirees under age 65. That liability, referred to as the implicit subsidy, is included in this valuation in addition to the liability for the $450/$550 subsidy. According to GASB, the discount rate used to determine the accrual rate should be based on an analysis of the amount of assets currently held to pay for retiree health benefits relative to the retiree health liability. GASB Statement 45 paragraph 13 (c) states the investment return assumption (discount rate) should be the estimated long-term investment yield on the investments that are estimated to be used to finance the payment of benefits, with consideration given to the nature and mix of current and expected investments The 7.00% discount rate used in this valuation is based on a weighted average of a 7.75% discount rate for a fully funded plan with 4.5% discount rate assuming no prefunding of any liabilities and only District s assets are available to pay these benefits. The weighted average discount rate was previously 7.25% (8.00% for a fully funded plan). It is our understanding that the Annual Required Contribution (ARC) for the valuation as of June 30, 2012 will be used for the 2013/2014 fiscal year and the ARC for each subsequent fiscal year would follow with a similar 12-month lag between the date of the valuation and the date of the rate implementation. Please note that this is consistent with the time lag that is in place for the payment of cash contributions for the pension plan and the $450/$550 subsidy. The unfunded actuarial accrued liability (UAAL) as of June 30, 2012 is $123,999,446 and the UAAL from the prior valuation was $123,312,279. As of June 30, 2012, the ratio of actuarial value of assets to the AAL (the funded ratio) is 10.30%. Last year, the funded ratio was 8.90%. The funded ratio on a market value of assets basis increased from 8.91% to 9.82% in this valuation. Based on prior input provided by the Plan s auditor, we have included only cash payments made explicitly to fund the $450/$550 subsidy as contributions. In particular, we have excluded as contributions, all the implicit subsidies that the District has paid. The Annual Required Contribution (ARC) increased to $10,823,446 this year. The ARC was $10,761,877 last year. Both numbers have been adjusted with interest to the middle of the year. 1

109 SECTION 1: Executive Summary for East Bay Municipal Utility District June 30, 2012 Measurement Under GASB 43 and 45 The results of this valuation reflect changes in the actuarial assumptions as recommended by Segal and adopted by the Board for the June 30, 2012 valuation. These changes were documented in our Actuarial Experience Study are also outlined in Section 4, Exhibit III of this report. The decrease in normal cost from the prior valuation was due mainly to the lower retirement rates adopted in the experience study. In the review of the Board s actuarial funding policy, we recommended alternative amortization periods for use in amortizing new unfunded actuarial accrued liability (UAAL) on or after July 1, 2011, with separate amortization periods depending on the source of the UAAL change. The Board adopted alternative #3 from that letter, which utilizes the following amortization periods by source: 20 years for actuarial gains or losses; 25 years for assumption or method changes, 15 years for plan amendments; 5 years for Early Retirement Incentive Programs; and 30 years for actuarial surplus. The results of this valuation reflect the changes in the amortization periods. We have provided the results of the HIB funding valuation in a separate report. In that report, the UAAL amortization rate (calculated without the implicit subsidy) increased somewhat when compared with the prior HIB funding valuation. Based on action taken by the Board in 2012, the total unrecognized deferred gain of $1.5 million through June 30, 2011 as of that valuation has been recognized in four level amounts with three years of recognition remaining after the June 30, 2012 valuation. Based on prior directions from the District, we have not included the projected excise tax that may be imposed by the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act. 2

110 SECTION 1: Executive Summary for East Bay Municipal Utility District June 30, 2012 Measurement Under GASB 43 and 45 The key valuation results for the current and prior years are shown. SUMMARY OF VALUATION RESULTS June 30, 2012 June 30, 2011 Actuarial Accrued Liability (AAL) $138,239,551 $135,359,929 Actuarial Value of Assets (AVA) 14,240,105 12,047,650 Unfunded Actuarial Accrued Liability 123,999, ,312,279 Funded Ratio on AVA Basis 10.30% 8.90% Market Value of Assets (MVA) $13,569,000 $12,066,000 Funded Ratio on MVA Basis 9.82% 8.91% Annual Required Contribution (ARC) for Fiscal Years 2013/ /2013 Normal cost (beginning of year) $3,483,783 $3,601,676 Amortization of the unfunded actuarial accrued liability 6,979,637 6,790,090 Adjustment for timing 360, ,111 Total Annual Required Contribution, including adjustment for timing* $10,823,446 $10,761,877 Covered payroll $158,847,491 $159,504,853 Total Participants 3,183 3,164 Annual OPEB Cost (AOC) for Fiscal Years 2013/ / /2012 Annual Required Contributions $11,195,860 $11,145,169 $11,289,088 Interest on Net OPEB Obligations N/A 1,164, ,785 ARC Adjustments N/A -865, ,254 Total Annual OPEB Cost N/A $11,443,477 $11,517,619 * The ARCs, when adjusted with interest to end of year, are $11,195,860 and $11,145,169 for 2013/14 and 2012/13, respectively. 3

111 SECTION 1: Executive Summary for East Bay Municipal Utility District June 30, 2012 Measurement Under GASB 43 and 45 ACTUARIAL CERTIFICATION January 9, 2013 This is to certify that The Segal Company has conducted an actuarial valuation of certain benefit obligations of East Bay Municipal Utility District s other postemployment benefit plan as of June 30, 2012, in accordance with generally accepted actuarial principles and practices. The actuarial calculations presented in this report have been made on a basis consistent with our understanding of GASB Statements 43 and 45 for the determination of the liability for postemployment benefits other than pensions. The actuarial valuation is based on the plan of benefits verified by the District and reliance on participant, premium, claims and expense data provided by the District or from vendors employed by the District. The Segal Company has not audited the data provided. The accuracy and comprehensiveness of the data is the responsibility of those supplying the data. Segal, however, has reviewed the data for reasonableness and consistency. The actuarial computations made are for purposes of fulfilling plan accounting requirements. Determinations for purposes other than meeting financial accounting requirements may be significantly different from the results reported here. Accordingly, additional determinations may be needed for other purposes, such as judging benefit security at termination of the plan, or determining short-term cash flow requirements. To the best of our knowledge, this report is complete and accurate and in our opinion presents the information necessary to comply with GASB Statements 43 and 45 with respect to the benefit obligations addressed. The signing actuary is a member of the Society of Actuaries, the American Academy of Actuaries, and other professional actuarial organizations and meets the General Qualification Standards for Statements of Actuarial Opinions to render the actuarial opinion contained herein. Thomas Bergman, ASA, MAAA, EA Assistant Actuary 4

112 SECTION 2: Valuation Results for the East Bay Municipal Utility District June 30, 2012 Measurement Under GASB 43 and 45 The actuarial present value of total projected benefits uses the actuarial assumptions disclosed in Section 4 to calculate the value today of all benefits expected to be paid to current actives and retired plan members. The actuarial balance sheet shows the expected breakdown of how these benefits will be financed. CHART 1 Actuarial Present Value of Total Projected Benefits (APB) and Actuarial Balance Sheet Participant Category Actuarial Present Value of Total Projected Benefits (APB) June 30, 2012 June 30, 2011 Current retirees, beneficiaries, and dependents $77,254,816 $73,174,682 Current active members 80,393,110 80,853,673 Terminated members entitled but not yet eligible 5,746,110 5,141,200 Total as of June 30 $163,394,036 $159,169,555 Actuarial Balance Sheet The actuarial balance sheet as of the valuation date is as follows: Assets June 30, 2012 June 30, Actuarial value of assets $14,240,105 $12,047, Present value of future normal costs 25,154,485 23,809, Unfunded actuarial accrued liability 123,999, ,312, Present value of current and future assets $163,394,036 $159,169,555 Liabilities 5. Actuarial Present Value of total Projected Benefits $163,394,036 $159,169,555 5

113 SECTION 2: Valuation Results for the East Bay Municipal Utility District June 30, 2012 Measurement Under GASB 43 and 45 The actuarial accrued liability shows that portion of the APB (Chart 1) allocated to periods prior to the valuation date by the actuarial cost method. The chart below shows the portion covered by retiree contributions, the portion covered by accumulated plan assets, and reconciles the unfunded actuarial accrued liability from last year to this year. CHART 2 Actuarial Accrued Liability (AAL) and Unfunded AAL (UAAL) Participant Category June 30, 2012 June 30, 2011 Current retirees, beneficiaries, and dependents $77,254,816 $73,174,682 Current active members 55,238,625 57,044,047 Terminated members entitled but not yet eligible 5,746,110 5,141,200 Total $138,239,551 $135,359,929 Actuarial value of assets 14,240,105 12,047,650 Unfunded actuarial accrued liability $123,999,446 $123,312,279 Development of Unfunded Actuarial Accrued Liability 1. Unfunded actuarial accrued liability as of July 1, 2011 $123,312, District normal cost at beginning of year 3,601, Total District and member contributions, payable throughout the year, including implicit subsidy -9,350, Interest 8,868, Expected unfunded actuarial accrued liability [(1) + (2) - (3) + (4)] $126,432, Change due to the combined effect of experience gains,* updated starting costs, and trend assumptions -4,903, Change due to assumption changes from experience study 2,470, Unfunded actuarial accrued liability as of June 30, 2012 [(5) + (6) + (7)] $123,999,446 * Experience gains due in part to fewer than expected retirements. This has a relatively larger impact on the GASB valuation when compared to the funding valuation because the implicit subsidy paid to early retirees is only included in the GASB valuation. 6

114 SECTION 2: Valuation Results for the East Bay Municipal Utility District June 30, 2012 Measurement Under GASB 43 and 45 The unfunded actuarial accrued liability may be amortized over periods of up to 30 years. Amortization payments may be calculated as level dollar amounts or as amounts designed to remain level as a percent of a growing payroll base. Consistent with the amortization periods used for the prefunding valuation, the unfunded actuarial accrued liability for this GASB valuation has been amortized using the following rules: Plan changes, assumption changes, and experience gains/losses prior to July 1, 2011 are amortized over separate decreasing 30-year amortization periods. On or after July 1, 2011, plan changes are amortized over separate decreasing 15-year periods; assumption changes from the experience study are amortized over separate decreasing 25-year periods; and experience gains/losses (including year-to-year health assumption changes) are amortized over separate decreasing 20-year periods. The above payments would continue to be expressed as a level percent of a growing payroll base. CHART 3 Table of Amortization Bases Date Initial Initial Outstanding Annual Years Type Established Year Amount Balance Payment* Remaining Combined Base 6/30/ $101,200,454 $109,966,404 $6,214, Combined Base 6/30/ ,703,483 28,481,015 1,568, Combined Base 6/30/ ,453,057-9,955, , Combined Base 6/30/ , ,914 22, Combined Base 6/30/ ,887,456-3,959, , Experience Gain 6/30/ ,441,091-3,441, , Assumption Changes 6/30/ ,470,490 2,470, , Total $123,999,446 $6,979,637 * Level percentage of pay 7

115 SECTION 2: Valuation Results for the East Bay Municipal Utility District June 30, 2012 Measurement Under GASB 43 and 45 The Annual Required Contribution (ARC) is the amount calculated to determine the annual cost of the OPEB plan for accounting purposes as if the plan were being funded through contributions to a trust fund. The GASB standards cannot require the contributions actually be made to a trust fund. The ARC is simply a device used to measure annual plan costs on an accrual basis. The calculation consists of adding the Normal Cost of the plan to an amortization payment. The resulting sum is then adjusted to the start of the accounting period and adjusted as if the annual cost were to be contributed at the end of the fiscal year. The amortization payment is based on 30-year closed (or declining) layers for plan changes, assumption changes, and experience gains/losses prior to July 1, On or after July 1, 2011, plan changes are amortized over separate decreasing 15-year periods; assumption changes are amortized over separate decreasing 25-year periods; and experience gains/losses are amortized over separate decreasing 20-year periods. The above payments would continue to be expressed as a level percent of a growing payroll base. CHART 4 Determination of Annual Required Contribution (ARC) Payable at End of Fiscal Year Cost Element Fiscal Year Beginning July 1, 2013 and Ending June 30, 2014 Fiscal Year Beginning July 1, 2012 and Ending June 30, 2013 Amount Amount 1. Normal cost $3,483,783 $3,601, Amortization of the unfunded actuarial accrued liability 6,979,637 6,790, Adjustment for timing to end of year 732, , Total Annual Required Contribution (ARC) $11,195,860 $11,145, Covered Payroll $158,847,491 $159,504,853 8

116 SECTION 2: Valuation Results for the East Bay Municipal Utility District June 30, 2012 Measurement Under GASB 43 and 45 The Annual OPEB Cost (AOC) adjusts the ARC for timing differences between the ARC and contributions in relation to the ARC. The AOC is the cost of OPEB actually booked as an expense for the Fiscal Year under GASB 45. CHART 4 (continued) Determination of Annual OPEB Cost (AOC) Cost Element Fiscal Year Beginning July 1, 2012 and Ending June 30, 2013 Fiscal Year Beginning July 1, 2011 and Ending June 30, 2012 Amount Amount 1. Annual Required Contribution $11,145,169 $11,289, Interest on Beginning of Year Net OPEB Obligation (NOO) 1,164, , ARC adjustment -865, , Annual OPEB Cost $11,443,477 $11,517,619 9

117 SECTION 2: Valuation Results for the East Bay Municipal Utility District June 30, 2012 Measurement Under GASB 43 and 45 For GASB 43 (plan reporting) purposes, the schedule of employer contributions compares actual contributions to the ARC. For GASB 45 (employer reporting) purposes, the schedule of employer contributions compares actual contributions to the AOC. CHART 5 Required Supplementary Information Schedule of Employer Contributions GASB 43 Fiscal Year Ended June 30 Annual Required Contributions * Actual Contributions * Percentage Contributed 2008 $9,475,504 $7,513, % ,475,504 6,543, % ,775,082 8,000, % ,869,456 7,760, % ,289,088 7,761, % ,145,169 Not made yet N/A * Includes an interest adjustment to the end of the year. Required Supplementary Information Schedule of Employer Contributions GASB 45 Fiscal Year Ended June 30 Annual OPEB Cost * Actual Contributions * Percentage Contributed 2008 $9,475,504 $7,513, % ,509,729 6,543, % ,870,830 8,000, % ,037,119 7,760, % ,517,619 7,761, % ,443,477 Not made yet N/A * Includes an interest adjustment to the end of the year. 10

118 SECTION 2: Valuation Results for the East Bay Municipal Utility District June 30, 2012 Measurement Under GASB 43 and 45 This schedule of funding progress presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. CHART 6 Required Supplementary Information Schedule of Funding Progress Actuarial Valuation Date Actuarial Value of Assets (a) Actuarial Accrued Liability (AAL) (b) Unfunded AAL (UAAL) (b) - (a) Funded Ratio (a) / (b) Covered Payroll (c) UAAL as a Percentage of Covered Payroll [(b) - (a) / (c)] 6/30/2007 $4,208,061 $105,408,515 $101,200, % $153,393, % 6/30/2008 7,010, ,055, ,044, % 158,498, % 6/30/2009 7,354, ,244, ,890, % 161,893, % 6/30/ ,061, ,379, ,318, % 164,084, % 6/30/ ,047, ,359, ,312, % 159,504, % 6/30/ ,240, ,239, ,999, % 158,847, % 11

119 SECTION 2: Valuation Results for the East Bay Municipal Utility District June 30, 2012 Measurement Under GASB 43 and 45 The Net OPEB obligation measures the accumulated differences between the annual OPEB cost and the actual contributions in relation to the ARC. CHART 7 Required Supplementary Information Net OPEB Obligation (NOO) Fiscal Year End Annual Required Contribution * (a) Interest on Existing NOO (b) ARC Adjustment (c) Annual OPEB Cost (a) + (b) + (c) (d) Actual Contribution Amount * (e) Net Increase in NOO (d) - (e) (f) NOO as of Fiscal Year (g) 6/30/2008 $9,475,504 $0 $0 $9,475,504 $7,513,660 $1,961,844 $1,961,844 6/30/2009 9,475, , ,009 9,509,729 6,318,000 3,191,729 5,153,573 6/30/ ,775, , ,886 11,870,830 8,000,132 3,870,698 9,024,271 6/30/ ,869, , ,597 11,037,119 7,760,904 3,276,215 12,300,486 6/30/ ,289, , ,254 11,517,619 7,761,940 3,755,679 16,056,165 6/30/ ,145,169 1,164, ,764 11,443,477 Not made yet N/A N/A 6/30/ ,195,860 N/A N/A N/A N/A N/A N/A * Includes an interest adjustment to the end of the year. N/A: To be completed when actual contribution amount is known. 12

120 SECTION 3: Supplemental Valuation Details for the East Bay Municipal Utility District June 30, 2012 Measurement Under GASB 43 and 45 This exhibit summarizes the participant data used for the current and prior valuations. EXHIBIT A Summary of Participant Data Year Ended June 30 Category Active participants in valuation: Number 1,703 1,702 Average age Average service Projected total payroll $158,847,491 $159,504,853 Projected average payroll $93,275 $93,716 Vested terminated participants: Number Average age Retired participants: Number in pay status 1,054 1,023 Average age Number receiving a health subsidy 1, Disabled participants: Number in pay status Average age Number receiving a health subsidy Beneficiaries: Number in pay status Average age Number receiving a health subsidy

121 SECTION 3: Supplemental Valuation Details for the East Bay Municipal Utility District June 30, 2012 Measurement Under GASB 43 and 45 EXHIBIT B Cash Flow Projections The ARC generally exceeds the current pay-as-you-go ( paygo ) cost of an OPEB plan. Over time the paygo cost will tend to grow and may even eventually exceed the ARC in a well funded plan. The following table projects the paygo cost as the projected net fund payment over the next ten years. Year Ending June 30 Projected Number of Retirees* Projected Benefit Payments** Current Future Total Current Future Total , ,139 $8,286,329 $799,198 $9,085,527*** , ,232 8,222,847 1,555,504 9,778, , ,326 8,035,883 2,364,033 10,399, , ,420 7,776,957 3,167,059 10,944, , ,509 7,466,517 3,981,581 11,448, , ,599 7,125,986 4,793,108 11,919, ,641 1,036 2,677 6,798,358 5,553,617 12,351, ,588 1,162 2,750 6,518,779 6,261,423 12,780, ,532 1,281 2,813 6,195,636 6,854,589 13,050, ,476 1,392 2,868 5,887,667 7,402,258 13,289,925 * Includes spouses of retirees. ** Includes Implicit subsidy *** Includes projected implicit subsidy payment of $1,906,

122 SECTION 3: Supplemental Valuation Details for the East Bay Municipal Utility District June 30, 2012 Measurement Under GASB 43 and 45 EXHIBIT C Summary Statement of Assets for Pension and HIB Plans Year Ended June 30, 2012 Year Ended June 30, 2011 Cash equivalents $33,068,000 $48,462,000 Accounts receivable: Brokers, securities sold $8,036,000 $23,333,000 Employer and employee contributions 2,602,000 2,132,000 Interest and dividends 2,276,000 2,079,000 Total accounts receivable $12,914,000 $27,544,000 Investments: Equities $693,123,000 $688,601,000 Fixed income investments 216,206, ,597,000 Real estate 48,876,000 17,730,000 Securities lending collateral 100,577, ,553,000 Other assets 434, ,000 Total investments at market value $1,059,216,000 $1,060,911,000 Total assets $1,105,198,000 $1,136,917,000 Less accounts payable: Accounts payable and accrued expenses -$1,365,000 -$1,362,000 Payables to brokers, securities purchased -16,284,000-37,763,000 Securities lending collateral -100,577, ,553,000 Total accounts payable -$118,226,000 -$168,678,000 Net assets at market value $986,972,000 $968,239,000 Net assets at actuarial value $1,035,786,332 $966,766,525 Net assets at valuation value (HIB only) $14,240,105 $12,047,650 15

123 SECTION 3: Supplemental Valuation Details for the East Bay Municipal Utility District June 30, 2012 Measurement Under GASB 43 and 45 EXHIBIT D Summary Statement of Income and Expenses on an Actuarial Value Basis for All Pension Plan and HIB Plan Assets Year Ended June 30, 2012 Year Ended June 30, 2011 Contribution income: Employer contributions $59,651,000 $58,481,000 Employee contributions 10,723,000 10,850,000 Net contribution income $70,374,000 $69,331,000 Investment income: Interest, dividends and other income $21,117,000 $19,674,000 Recognition of capital appreciation 48,899,807 18,018,654 Less investment and administrative fees -4,528,000-4,050,000 Net investment income $65,488,807 $33,642,654 Total income available for benefits $135,862,807 $102,973,654 Less benefit payments: Benefits paid -$66,254,000 -$61,862,000 Refund of contributions -589, ,000 Net benefit payments -$66,843,000 -$62,114,000 Change in amount available for future benefits $69,019,807 $40,859,654 16

124 SECTION 3: Supplemental Valuation Details for the East Bay Municipal Utility District June 30, 2012 Measurement Under GASB 43 and 45 EXHIBIT E Actuarial Value of Assets Determination of Actuarial Value of Assets for Year Ended June 30, 2012 (for pension and HIB plans) 1. Market value of assets: (a) Pension plan $973,403,000 (b) HIB plan 13,569,000 (c) Total $986,972,000 Actual Market Expected Market Investment Deferred Deferred 2. Calculation of deferred return: Return (net) Return (net) Gain / (Loss) Factor Return (a) Year ended June 30, $76,707,000 $75,340,031 -$152,047,031 (b) Year ended June 30, ,905,000 69,269, ,174,846 see footnote (1) below (c) Year ended June 30, ,737,000 55,360,181 40,376,819 (d) Year ended June 30, ,970,000 61,812, ,157,160 75% $1,104,356 (e) Year ended June 30, ,202,000 77,600,360-62,398,360 80% -49,918,688 (f) Total unrecognized return* -$48,814,332 (1) 3. Preliminary actuarial value: (1c) - (2f) $1,035,786, Adjustment to be within 30% corridor of market value $0 5. Final actuarial value of assets for pension and HIB plans: (3) + (4) $1,035,786, Actuarial value as a percentage of market value: (5) (1c) 104.9% 7. Valuation value of HIB assets (excludes pension plan assets): (1b) (1c) x (5) $14,240,105 Based on action taken by the Board in 2012, the total deferred gain of $1,472,475 through June 30, 2011 as of that valuation has been recognized in four level amounts, with three years of recognition remaining after the June 30, 2012 valuation. * The amount of deferred return that will be recognized in each subsequent valuation is as follows (amounts may not total exactly due to rounding): 6/30/2013 -$12,111,553 6/30/ ,111,553 6/30/ ,111,553 6/30/ ,479,672 Total -$48,814,332 17

125 SECTION 4: Supporting Information for the East Bay Municipal Utility District Health Insurance Benefit Valuation Under GASB 43 and 45 EXHIBIT I Summary of Required Supplementary Information Valuation date June 30, 2012 Actuarial cost method Entry age normal, level percent of pay Amortization method Level percent of payroll Remaining amortization periods Plan changes, assumption changes, and experience gains/losses prior to July 1, 2011 are amortized over separate decreasing 30-year amortization periods. On or after July 1, 2011, plan changes are amortized over separate decreasing 15-year periods; assumption changes are amortized over separate decreasing 25-year periods; and experience gains/losses are amortized over separate decreasing 20-year periods. Asset valuation method Market value of assets less unrecognized returns in each of the last five years. Unrecognized return is equal to the difference between the actual market return and the expected return on the market value, and is recognized over a five year period, further adjusted, if necessary, to be within 30% of the market value. The expected value of assets for the year is the market value of assets at the beginning of the prior year brought forward with interest at the assumed rate of return (for the prefunded plan) to the end of the current year plus contributions minus benefit disbursements, all adjusted with interest at the assumed rate of return on the funded portion of the liabilities to the end of the current year. Actuarial assumptions: Discount rate 7.00%, based on the understanding that the District is fully prefunding the Health Insurance Benefit and is not prefunding the implicit subsidy. The discount rate for a fully funded plan is assumed to be 7.75%. The discount rate for an unfunded plan is assumed to be 4.50%. Inflation rate 3.25% Across the board salary increases: 0.50% Projected payroll increases 3.75% Assumed increase in the $450/$550 HIB None subsidy maximum Medical Trends for Implicit Subsidy See Exhibit II 18

126 SECTION 4: Supporting Information for the East Bay Municipal Utility District Health Insurance Benefit Valuation Under GASB 43 and 45 EXHIBIT II Actuarial Assumptions and Actuarial Cost Method Mortality Rates: Pre-retirement and After Service Retirement: After Disability Retirement: Disability Rates: RP-2000 Combined Healthy Mortality Table projected with Scale AA to 2016, set back one year for males RP-2000 Combined Healthy Mortality Table projected with Scale AA to 2016, set back two years for females RP-2000 Combined Healthy Mortality Table projected with Scale AA to 2016, set forward six years for males RP-2000 Combined Healthy Mortality Table projected with Scale AA to 2016, set forward six years for females The tables shown above were determined to contain sufficient provision appropriate to reasonably reflect future mortality improvement, based on a review of mortality experience as of the measurement date. Rate (%) Age Male Female

127 SECTION 4: Supporting Information for the East Bay Municipal Utility District Health Insurance Benefit Valuation Under GASB 43 and 45 Termination Rates: Rate (%) Ordinary Withdrawal* Service Male Female * Applicable for members with less than five years of service. ** Applicable after five years of service. Ordinary Withdrawal** Rate (%) Vested Termination Age Male Female Male Female

128 SECTION 4: Supporting Information for the East Bay Municipal Utility District Health Insurance Benefit Valuation Under GASB 43 and 45 Retirement Rates: Retirement Probability Age Male Female 54* 6.00% 3.00% * The rate for members age 54 with 30 or more years of service (i.e., eligible for unreduced benefits) is 50% for males and females. 21

129 SECTION 4: Supporting Information for the East Bay Municipal Utility District Health Insurance Benefit Valuation Under GASB 43 and 45 Retirement Age for Inactive Vested Participants: 58 Unknown Data for Participants: Spouse Coverage: Same as those exhibited by members with similar known characteristics. If not specified, members are assumed to be male. 80% of males and 50% of females are assumed to elect spouse HIB coverage at retirement. For current retirees, we relied upon the coverage indicated in the data. Age of Spouse: Female spouses are 3 years younger than their male spouses. Same sex domestic partners are assumed to be the same age. Future Benefit Accruals: 1.0 year of service per year. Net Investment Return: Inflation: 3.25% Across the Board Salary Increases: 0.50% Payroll Growth: 3.75% 7.00%, net of investment and administrative expenses. 22

130 SECTION 4: Supporting Information for the East Bay Municipal Utility District Health Insurance Benefit Valuation Under GASB 43 and 45 Salary Increases: Annual Rate of Compensation Increase Inflation: 3.25% per year; plus across the board salary increases of 0.50% per year; plus the following merit and promotional increases based on years of service: Years of Service Merit and Promotional Increases % Actuarial Value of Assets: Actuarial Cost Method: Market value of assets less unrecognized returns in each of the last five years. Unrecognized return is equal to the difference between the actual market return and the expected return on the market value, and is recognized over a five-year period, further adjusted, if necessary, to be within 30% of the market value. Entry Age Normal Actuarial Cost Method. Entry Age is the age at the member s hire date. Actuarial Accrued Liability is calculated on an individual basis and is based on costs allocated as a level percentage of compensation. The Normal Cost is calculated on an individual basis where the Entry Age Normal Cost is calculated as the sum of the individual Normal Costs. 23

131 SECTION 4: Supporting Information for the East Bay Municipal Utility District Health Insurance Benefit Valuation Under GASB 43 and 45 Participation in Health Insurance Benefit Plan: Average HIB subsidy: Projected HIB subsidy increase: 95% of future eligible retirees are assumed to enroll in the HIB plan. All current pensioners and beneficiaries with a retiree health insurance cash subsidy were valued. 80% of future eligible retirees are assumed to enroll in EBMUD medical insurance plans and receive the implicit subsidy. For deferred vested members, we assume an election equal to 50% of the future retiree election percent. For current retirees, we have used the HIB benefit on record. For future retirees, we have assumed that: Retirees under age 65 with single HIB coverage will receive an average $444 monthly benefit as of July 1, 2012, Retirees under age 65 with spouse HIB coverage will receive an average $539 monthly benefit as of July 1, 2012, Retirees age 65 and over with single HIB coverage will receive an average $413 monthly benefit as of July 1, 2012, Retirees age 65 and over with spouse HIB coverage will receive an average $530 monthly benefit as of July 1, We have projected the HIB medical benefit to increase with medical trend until it reaches the limits described in the Summary of Plan Provisions. The benefit limits are projected to remain unchanged at the current levels of $450/$

132 SECTION 4: Supporting Information for the East Bay Municipal Utility District Health Insurance Benefit Valuation Under GASB 43 and 45 Carrier Election And Monthly Premiums Participant Under Age 65: 2012 Calendar Year Single Party Married/With Domestic Partner Eligible Survivor CARRIER Monthly Premium Monthly Premium Monthly Premium Kaiser $ $1, $ Blue Cross $ $1, $ Health Net $ $1, $ Calendar Year Single Party Married/With Domestic Partner Eligible Survivor CARRIER Monthly Premium Monthly Premium Monthly Premium Kaiser $ $1, $ Blue Cross $ $1, $ Health Net $ $1, $ Fiscal Year Single Party Married/With Domestic Partner Eligible Survivor Election CARRIER Percent Monthly Premium Monthly Premium Monthly Premium Kaiser 62 $ $1, $ Blue Cross 25 $ $1, $ Health Net 13 $ $1, $

133 SECTION 4: Supporting Information for the East Bay Municipal Utility District Health Insurance Benefit Valuation Under GASB 43 and 45 Carrier Election and Monthly Premiums Participant Age 65 and Older: 2012 Calendar Year Single Party Married/With Domestic Partner Eligible Survivor CARRIER Monthly Premium Monthly Premium Monthly Premium Kaiser $ $ $ Blue Cross $ $1, $ Health Net $ $ $ Calendar Year Single Party Married/With Domestic Partner Eligible Survivor CARRIER Monthly Premium Monthly Premium Monthly Premium Kaiser* $ $ $ Blue Cross $ $1, $ Health Net $ $1, $ Fiscal Year Single Party Married/With Domestic Partner Eligible Survivor Election CARRIER Percent Monthly Premium Monthly Premium Monthly Premium Kaiser 59 $ $ $ Blue Cross 27 $ $1, $ Health Net 14 $ $1, $ * We assume all future Kaiser Medicare retirees will elect the High option. 26

134 SECTION 4: Supporting Information for the East Bay Municipal Utility District Health Insurance Benefit Valuation Under GASB 43 and 45 Health care cost trend rates Trends to be applied in following fiscal years, to all health plans Trends to be applied to premium for shown fiscal year to calculate next fiscal year s projected premium First Fiscal Year (July 1, 2013 through June 30, 2014) PLAN Kaiser HealthNet Blue Cross Trend to be applied to Fiscal Year premium 8.15% 5.53% 8.41% The fiscal year trend rates are based on the following calendar year trend rates: Trend (applied to calculate following Fiscal Year Trend Calendar Year year premium) % % % % % % % % % % % % % % and later 5.00% 2020 and later 5.00% 27

135 SECTION 4: Supporting Information for the East Bay Municipal Utility District Health Insurance Benefit Valuation Under GASB 43 and 45 Implicit Subsidy Retiree under age 65 and active health insurance premiums have been underwritten together. Under GASB, the health care costs must be valued as if the under age 65 retirees had been underwritten separately from the actives. Any excess of the retiree only per capita costs over the blended active/retiree premiums is the implicit subsidy. The tables below show the annual implicit subsidies for sample ages under different carriers. No implicit subsidy exists for retirees over age 65. KAISER Annual Blended Active/Retiree Premium $6,924 Annual Per Capita Costs Annual Implicit Subsidy Rates Age Retiree Spouse Retiree Spouse Age Male Female Male Female Male Female Male Female 50 $7,646 $8,709 $5,340 $6, $722 $1,785 -$1,584 $ ,080 9,375 7,146 8, ,156 2, , ,783 10,105 9,567 9, ,859 3,181 2,643 2, ,371 10,719 12,077 10, ,447 3,795 5,153 3,642 HEALTH NET Annual Blended Active/Retiree Premium $10,129 Annual Per Capita Costs Annual Implicit Subsidy Rates Age Retiree Spouse Retiree Spouse Age Male Female Male Female Male Female Male Female 50 $10,638 $12,117 $7,431 $9, $509 $1,988 -$2,698 -$ ,634 13,044 9,943 11, ,505 2, , ,004 14,059 13,311 13, ,875 3,930 3,182 2, ,213 14,915 16,803 14, ,084 4,786 6,674 4,572 28

136 SECTION 4: Supporting Information for the East Bay Municipal Utility District Health Insurance Benefit Valuation Under GASB 43 and 45 Implicit Subsidy (Continued) BLUE CROSS Annual Blended Active/Retiree Premium $7,665 Annual Per Capita Costs Annual Implicit Subsidy Rates Age Retiree Spouse Retiree Spouse Age Male Female Male Female Male Female Male Female 50 $7,145 $8,138 $4,991 $6, $520 $473 -$2,674 -$1, ,485 8,761 6,678 7, , ,077 9,443 8,940 8, ,412 1,778 1,275 1, ,561 10,017 11,286 9, ,896 2,352 3,621 2,209 WEIGHTED AVERAGE, Use for future retirees Annual Blended Active/Retiree Premium $7,526 Annual Per Capita Costs Annual Implicit Subsidy Rates Age Retiree Spouse Retiree Spouse Age Male Female Male Female Male Female Male Female 50 $7,910 $9,009 $5,525 $7, $384 $1,483 -$2,001 -$ ,393 9,698 7,393 8, ,867 2, ,155 10,453 9,897 9, ,629 2,927 2,371 2, ,798 11,089 12,494 10, ,272 3,563 4,968 3,404 29

137 SECTION 4: Supporting Information for the East Bay Municipal Utility District Health Insurance Benefit Valuation Under GASB 43 and 45 Changes in Actuarial Assumptions The per capita costs, medical election assumption, trends and premiums for calculating the implicit subsidy were updated. The average HIB subsidy assumed for future retirees was updated. Spouse coverage and spouse age difference assumptions were updated. The discount rate was lowered from 7.25% to 7.00%. Based on the July 1, June 30, 2012 actuarial experience study, mortality rate, disability rate, termination rate, retirement rate, and salary scale assumptions were changed. Based on the July 1, 2008 June 30, 2012 actuarial experience study the following actuarial assumptions were changed. Previously these assumptions were as follows: Mortality Rates: Pre-retirement and After Service Retirement: RP-2000 Combined Healthy Mortality Table for males, set back two years RP-2000 Combined Healthy Mortality Table for females, unadjusted After Disability Retirement: RP-2000 Combined Healthy Mortality Table for males, set forward four years RP-2000 Combined Healthy Mortality Table for females, set forward four years 30

138 SECTION 4: Supporting Information for the East Bay Municipal Utility District Health Insurance Benefit Valuation Under GASB 43 and 45 Changes in Actuarial Assumptions: (continued) Disability Rates: Rate (%) Age Male Female Termination Rates: Rate (%) Ordinary Withdrawal* Service Male Female 0 2.5% 3.0% 1 2.5% 3.0% 2 1.5% 2.5% 3 1.5% 2.0% 4 1.0% 1.5% 31

139 SECTION 4: Supporting Information for the East Bay Municipal Utility District Health Insurance Benefit Valuation Under GASB 43 and 45 Changes in Actuarial Assumptions: (continued) Termination Rates: (continued) Ordinary Withdrawal** Rate (%) Vested Termination Age Male Female Male Female * Applicable for members with less than five years of service. ** Applicable after five years of service. 32

140 SECTION 4: Supporting Information for the East Bay Municipal Utility District Health Insurance Benefit Valuation Under GASB 43 and 45 Changes in Actuarial Assumptions: (continued) Retirement Rates: Retirement Probability Age Male Female 54* 8.00% 4.00% % 7.00% % 10.00% % 10.00% % 13.00% % 15.00% % 10.00% % 10.00% % 15.00% % 20.00% % 20.00% % 25.00% % 25.00% % 35.00% % 50.00% % 60.00% % % * The rate for members age 54 with 30 or more years of service (i.e., eligible for unreduced benefits) is 70% for males and 45% for females. 33

141 SECTION 4: Supporting Information for the East Bay Municipal Utility District Health Insurance Benefit Valuation Under GASB 43 and 45 Changes in Actuarial Assumptions: (continued) Age of Spouse: Female spouses are 4 years younger than their male spouses. Same sex domestic partners are assumed to be the same age. Future Benefit Accruals: 1.0 year of service per year. Net Investment Return: 7.25%, net of investment and administrative expenses. Inflation: 3.50% Salary Increases: Annual Rate of Compensation Increase Inflation: 3.50% per year; plus across the board salary increases of 0.50% per year; plus the following merit and promotional increases based on years of service: Years of Service Merit and Promotional Increases % % % % % % % % % 34

142 SECTION 4: Supporting Information for the East Bay Municipal Utility District June 30, 2012 Measurement Under GASB 43 and 45 EXHIBIT III Summary of Plan Plan Year: July 1 through June 30 Census Date: June 30 Normal or Unreduced Retirement Eligibility: Age and Service Requirement Age 65; Age 62 with 5 years of service; Age 59 with 20 years of service; Age 54 with 30 years of service; Other combinations of age and service between ages 54 and 59. Early Retirement Eligibility: Age and Service Requirement Covered Members: Age 54 with 5 years of service. All members with at least 5 years of service. Member Contribution Rate: 0.09% Employer Contribution Rate: 100% of total cost net of the 0.09% rate paid by the employee. 35

143 SECTION 4: Supporting Information for the East Bay Municipal Utility District June 30, 2012 Measurement Under GASB 43 and 45 Benefit Formula: For members entering the System prior to July 1, 1996, a monthly allowance of up to $450 ($550 for married retirees and retirees with financially dependent registered domestic partners) is paid to retirees with at least five years of full-time service to reimburse employee-paid medical expenses. For members entering the System after June 30, 1996, the members shall receive the full monthly allowance multiplied by the applicable percentage below based on years of full-time service. Years of Full-time Service Percent of HIB Less than 5 0% % % % 20 or more 100% An eligible surviving spouse may receive a Health Insurance Benefit of up to $450 per month. 36

144 SECTION 4: Supporting Information for the East Bay Municipal Utility District June 30, 2012 Measurement Under GASB 43 and 45 EXHIBIT IV Definitions of Terms The following list defines certain technical terms for the convenience of the reader: Assumptions or Actuarial Assumptions: Actuarial Present Value of Total Projected Benefits (APB): Normal Cost: Actuarial Accrued Liability For Actives: Actuarial Accrued Liability For Retirees: The estimates on which the cost of the Plan is calculated including: (a) Investment return the rate of investment yield that the Plan will earn over the long-term future; (b) Mortality rates the death rates of employees and pensioners; life expectancy is based on these rates; (c) Retirement rates the rate or probability of retirement at a given age; (d) Turnover rates the rates at which employees of various ages are expected to leave employment for reasons other than death, disability, or retirement. Present value of all future benefit payments for current retirees and active employees taking into account assumptions about demographics, turnover, mortality, disability, retirement, health care trends, and other actuarial assumptions. The amount of contributions required to fund the benefit allocated to the current year of service. The equivalent of the accumulated normal costs allocated to the years before the valuation date. The single sum value of lifetime benefits to existing retirees. This sum takes account of life expectancies appropriate to the ages of the retirees and of the interest which the sum is expected to earn before it is entirely paid out in benefits. 37

145 SECTION 4: Supporting Information for the East Bay Municipal Utility District June 30, 2012 Measurement Under GASB 43 and 45 Actuarial Value of Assets (AVA): Funded Ratio: Unfunded Actuarial Accrued Liability (UAAL): Amortization of the Unfunded Actuarial Accrued Liability: Investment Return (discount rate): Covered Payroll: ARC as a Percentage of Covered Payroll: Health Care Cost Trend Rates: Annual Required Contribution (ARC): The value of assets used by the actuary in the valuation. These may be at market value or some other method used to smooth variations in market value from one valuation to the next. The ratio AVA/AAL. The extent to which the actuarial accrued liability of the Plan exceeds the assets of the Plan. There is a wide range of approaches to paying off the unfunded actuarial accrued liability, from meeting the interest accrual only to amortizing it over a specific period of time. Payments made over a period of years equal in value to the Plan s unfunded actuarial accrued liability. The rate of earnings of the Plan from its investments, including interest, dividends and capital gain and loss adjustments, computed as a percentage of the average value of the fund. For actuarial purposes, the investment return often reflects a smoothing of the capital gains and losses to avoid significant swings in the value of assets from one year to the next. If the plan is funded on a pay-as-you-go basis, the discount rate is tied to the expected rate of return on day-to-day employer funds. Annual reported salaries for all active participants on the valuation date. The ratio of the annual required contribution to covered payroll. The annual rate of increase in net claims costs per individual benefiting from the Plan. The ARC is equal to the sum of the normal cost and the amortization of the unfunded actuarial accrued liability. 38

146 SECTION 4: Supporting Information for the East Bay Municipal Utility District June 30, 2012 Measurement Under GASB 43 and 45 Net OPEB Obligation (NOO): The NOO is the cumulative difference between the ARC and actual contributions made. If the plan is not pre-funded, the actual contribution would be equal to the annual benefit payments less retiree contributions. There are additional adjustments in the NOO calculations to adjust for timing differences between cash and accrual accounting, and to prevent double counting of OPEB plan costs. 39

147 SECTION 4: Supporting Information for the East Bay Municipal Utility District June 30, 2012 Measurement Under GASB 43 and 45 EXHIBIT V Accounting Requirements The Governmental Accounting Standards Board (GASB) issued Statement Number Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, and Statement Number 45 Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. Under these statements, all state and local government entities that provide other post employment benefits (OPEB) are required to report the cost of these benefits on their financial statements. The accounting standards supplement cash accounting, under which the expense for postemployment benefits is equal to benefit and administrative costs paid on behalf of retirees and their dependents (i.e., a pay-as-you-go basis). The statements cover postemployment benefits of health, prescription drug, dental, vision and life insurance coverage for retirees; long-term care coverage, life insurance and death benefits that are not offered as part of a pension plan; and long-term disability insurance for employees. The benefits valued in this report are limited to those described in Exhibit III of Section 4, which are based on those provided under the terms of the substantive plan in effect at the time of the valuation and on the pattern of sharing costs between the employer and plan members. The projection of benefits is not limited by legal or contractual limits on funding the plan unless those limits clearly translate into benefit limits on the substantive plan being valued. The new standards introduce an accrual-basis accounting requirement, thereby recognizing the employer cost of postemployment benefits over an employee s career. The standards also introduce a consistent accounting requirement for both pension and non-pension benefits. The total cost of providing postemployment benefits is projected, taking into account assumptions about demographics, turnover, mortality, disability, retirement, health care trends, and other actuarial assumptions. These assumptions are summarized in Exhibit II of Section 4. This amount is then discounted to determine the actuarial present value of the total projected benefits (APB). The actuarial accrued liability (AAL) is the portion of the present value of the total projected benefits allocated to years of employment prior to the measurement date. The unfunded actuarial accrued liability (UAAL) is the difference between the AAL and actuarial value of assets in the Plan. Once the UAAL is determined, the Annual Required Contribution (ARC) is determined as the normal cost (the APB allocated to the current year of service) and the amortization of the UAAL. This ARC is compared to actual contributions made and any difference is reported as the Net OPEB Obligation (NOO). In addition, Required Supplementary Information (RSI) must be reported, including historical information about the UAAL and the progress in funding the Plan. Exhibits IV and VI of Section 40

148 SECTION 4: Supporting Information for the East Bay Municipal Utility District June 30, 2012 Measurement Under GASB 43 and 45 4 contain a definition of terms as well as more information about GASB 43/45 concepts. The calculation of an accounting obligation does not, in and of itself, imply that there is any legal liability to provide the benefits valued, nor is there any implication that the Employer is required to implement a funding policy to satisfy the projected expense. Actuarial calculations reflect a long-term perspective, and the methods and assumptions use techniques designed to reduce short term volatility in accrued liabilities and the actuarial value of assets, if any. Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events far into the future, and the actuarially determined amounts are subject to continual revision as actual results are compared to past expectations and new estimates are made about the future. 41

149 SECTION 4: Supporting Information for the East Bay Municipal Utility District June 30, 2012 Measurement Under GASB 43 and 45 EXHIBIT VI GASB 43/45 Concepts The following graph illustrates why a significant accounting obligation may exist even though the retiree contributes most or all of the blended premium cost of the plan. The average cost for retirees is likely to exceed the average cost for the whole group, leading to an implicit subsidy for these retirees. The accounting standard requires the employer to identify and account for this implicit subsidy as well as any explicit subsidies the employer may provide. Hypothetical Cost Curve $500 $450 $400 $350 $300 $250 $200 $150 $100 $50 $ Cost Projected Cost Blended Cost Age 42

150 SECTION 4: Supporting Information for the East Bay Municipal Utility District June 30, 2012 Measurement Under GASB 43 and 45 This graph shows how the actuarial present value of the total projected benefits (APB) is broken down and allocated to various accounting periods. The exact breakdown depends on the actuarial cost method and amortization methods selected by the employer. GASB 43/45 Measurement Elements Using Actuarial Cost Methods Present Value of Future Benefits Future Accounting Periods Future Accruals (Actives) Current Period Historical Accounting Periods Normal Cost (Actives) Actuarial Accrued Liability (Actives + Retirees) Normal Cost + 30 Years Amortization of Unfunded Actuarial Accrued Liability Annual Required Contribution (ARC) Net OPEB Obligation = ARC1 + ARC2 + ARC3 + - Contribution1 - Contribution2 - Contribution v3/

151 East Bay Municipal Utility District Retirement System CalPEPRA New Tier of Benefit for New Entrants Copyright 2013 THE SEGAL COMPANY, INC. THE PARENT OF THE SEGAL COMPANY ALL RIGHTS RESERVED

152 The Segal Company 100 Montgomery Street Suite 500 San Francisco, CA T F January 9, 2013 Ms. Wanda Hendrix Treasury Manager East Bay Municipal Utility District 375 Eleventh Street Oakland, CA Dear Wanda: We are pleased to submit our findings of the prescribed benefit formula under the California Public Employees Pension Reform Act of 2013 (CalPEPRA) for new employees. Other than the required formula changes, all the other benefit provisions are assumed to be the same as those currently offered to members. The results in this report are determined so as to be applicable for members with a membership date on and after January 1, As these prescribed formula would only be offered to new employees, and since data for such employees is not yet available, we have assumed in this valuation that their demographic profiles (e.g., entry age, composition of male versus female, etc.) can be approximated by the data profiles of current active members hired in the last five years prior to the valuation as of June 30, No current active, inactive vested members, retirees, or beneficiaries have been included in this valuation. With the exception of the service retirement assumptions under the proposed formula, this study utilizes the actuarial assumptions and methodologies adopted by the EBMUD Retirement Board for use in the June 30, 2011 valuation for the current members. 1 The actuarial calculations were completed under the supervision of Andy Yeung, ASA, MAAA, FCA, Enrolled Actuary. I am a member of the American Academy of Actuaries and I meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion herein. Sincerely, THE SEGAL COMPANY By: Andy Yeung, ASA, MAAA, FCA, EA Vice President and Associate Actuary AW/kek 1 We have used the assumptions from the June 30, 2011 valuation because the employer rate for the employees covered under the current formula for the 2012/2013 Fiscal Year has been set based on the June 30, 2011 valuation.

153 SECTION 1 SECTION 2 SECTION 3 REVIEW SUMMARY VALUATION RESULTS SUPPORTING EXHIBITS Overview... 1 A. Demographics as of June 30, B. Comparison of Normal Cost Rates for New Members... 4 EXHIBIT I Actuarial Assumptions and Plan Summary... 5

154 SECTION 1: Proposed Benefit Changes for New Members of EBMUD Review Summary OVERVIEW As required by CalPEPRA, members with membership dates on and after January 1, 2013 would be enrolled in the new tier described below. The Unfunded Actuarial Accrued Liability (UAAL) currently amortized and funded by the employer will continue to be paid off as a level percent of total payroll (including future new hires), assuming payroll will grow at 4.00% per year. In this study, we have assumed that new members would receive a benefit of 2.5% at age 67 as described under CalPEPRA Section (a), with a final 3-year average compensation. For the new members, we have continued to value their benefits with the same Cost-of-Living Adjustment available to retirees under EBMUD s current plan. The service retirement benefit formula included in this study can be found in Section 3. Unless otherwise noted, it is assumed that all the other benefit provisions for this proposed tier would be unchanged from those provided to members in the current plan. We note that under the new CalPEPRA formula, there is a 3-year period required for determining final average compensation and there is a new definition of compensation for purposes of determining retirement benefits ( pensionable compensation ). This study assumes that the demographic profiles of new members would be comparable to current members hired in the last five years prior to the June 30, 2011 actuarial valuation. We included current members hired in the last five years in order to capture a larger, more representative population for use in this study. Note that we also reviewed the demographic profile of current members hired in the last three years and we observed that there was not a significant difference in the average entry age between members hired in the last three years or the last five years. We have calculated the employer and member Normal Cost contribution rates for the group of recently hired members under the proposed benefit formula as of June 30, Note that the actual costs will be based on the actual demographics of the new members once actual membership enrollment data becomes available. It is our understanding that in the determination of pension benefits under the CalPEPRA formula, the pensionable compensation that can be taken into account for 2013 is equal to the Social Security Taxable Wage Base or $113,700 (For an employer that is not enrolled in Social Security, the maximum amount is $136,440 or 120% of the Social Security Taxable Wage Base.). This is also the maximum amount of compensation over which employer and member contributions will be collected. (reference: Section ) It is our understanding that new members entering on or after January 1, 2013 would be required to contribute at least 50% of the Normal Cost rate. (reference: Section (a)) In addition, there are certain additional requirements that would have to be met such as requiring the member rates be rounded to the nearest one quarter of one percent and requiring the new employees to pay the contribution rate of similarly situated employees, if it is greater. (reference: Section (c)) 1

155 SECTION 1: Proposed Benefit Changes for New Members of EBMUD Review Summary It is our further understanding that different rules may have to be applied for collectively bargained employees, nonrepresented, managerial or other supervisory employees. (reference: Section (e)) In preparing the Normal Cost rates in this report, we have assumed that exactly 50% of the Normal Cost would be paid by the new members and we have taken into account in this study only the requirements of Section (c), but not the requirements of Section (e). In Section 2B, we have provided the employer and member Normal Cost contribution rates approved by the Retirement Board for members in the June 30, 2011 valuation. For comparison purposes only, we have recalculated and provided in the footnote to the above Section the employer and the member Normal Cost rates based on the demographic profile of only the members outlined in Section 2A under the current formula. Those Normal Cost rates may be compared to the Normal Cost rates calculated under the prescribed formula to estimate the potential cost impacts for the employer and the member. In illustrating the average annual contributions in Section 2B, we have applied the average annual salary after it has been limited by Section even though it would not apply to the current tier. Note that the actual costs for the new tier would be based on the actual demographics of the new members once actual membership enrollment data becomes available in a future valuation. As stated at the beginning of this section, in addition to the employer Normal Cost rates provided in Section 2B, it is anticipated that the employer would have to continue to contribute for new hires the UAAL rate that was determined in the June 30, 2011 valuation. With the exception of the service retirement assumptions, the actuarial assumptions used in this study are the same as those adopted by the Retirement Board for use in the June 30, 2011 valuation. The service retirement assumptions used in this study are shown in Section 3, Exhibit I of this report. These assumptions were developed for this study to estimate the anticipated impact of the change in the benefit formula on future retirement age experience. We are assuming that new members would tend to retire later than is assumed in the June 30, 2011 valuation because of the lower benefit accruals under the new formula. 2

156 SECTION 2: Proposed Benefit Changes for New Members of EBMUD Valuation Results A. Demographics as of June 30, 2011 Active members in valuation (1) : New members 328 Average entry age 39.1 Projected average compensation $84,543 Projected average compensation after applying the limit under Section $82,293 (1) The data is based on the June 30, 2011 valuation and it includes active members hired in the last five years prior to the June 30, 2011 actuarial valuation. 3

157 SECTION 2: Proposed Benefit Changes for New Members of EBMUD Valuation Results Formula B. Comparison of Normal Cost Rates for New Members: % of Payroll (1) Current Formula 14.42% (3) $11, % (3) Employer Rate Member Rate Total Rate Estimated Average % of Estimated Average % of Annual Amount (2) Payroll (1) Annual Amount (2) Payroll (1) Estimated Average Annual Amount (2) $5, % (3) $17,414 CalPEPRA Formula ( (a)) 7.65% $6, % $6, % $12,590 Rounded CalPEPRA ( (c)) 7.55% $6, % $6, % $12,590 (1) (2) (3) These are the Normal Cost rates only, adjusted to end of pay periods. The total employer rate would be equal to the Normal Cost rate above plus the UAAL rate of 20.04%. These per member amounts are based on the June 30, 2011 projected average annual payroll for active members hired in the last five years of $82,293. These current formula rates are the Normal Cost rates of all the members included in the June 30, 2011 valuation. For comparison purposes, if we were to use the Normal Cost rates calculated only for the members included in this study (see demographic profile provided in Section 2A), the current formula employer Normal Cost rate would be 15.68%, the member Normal Cost rate would be 6.74%, and the total Normal Cost rate would be 22.42%. There is no change in the member Normal Cost rate as the member rate of 6.83% is prescribed by the Ordinance, and 6.74% of that rate is allocated to pay pension benefits. Note: These Normal Cost rates have not been adjusted to reflect the applicable requirements, if any, under Section (e) as discussed in Section 1. 4

158 SECTION 3: Proposed Benefit Changes for New Members of EBMUD Supporting Exhibits EXHIBIT I Actuarial Assumptions and Plan Summary Actuarial Assumptions: The service retirement assumptions (probability of retirement) that are used in determining results for the proposed formula are shown on the next page. For purposes of this study, we have assumed that the pay elements that currently comprise compensation amounts would not be affected by the requirements regarding compensation earnable under Ordinance Section 2 as amended by AB 340 and AB 197. In addition, we have made the simplifying assumption that pensionable compensation as required for use for new members would be identical to compensation earnable as required for current members in EBMUD s current plan. However, we understand that there may be some elements of pay that are included in compensation earnable that would be excluded from pensionable compensation. This would reduce the compensation amounts used in the determination of the Normal Cost dollar amounts, but should not significantly impact the Normal Cost rates developed in this study. We are also assuming that the maximum amount of pensionable compensation that can be taken into account for 2013 of $113,700 increases by 3.50% per year, consistent with assumed increases in the Consumer Price Index. All the other actuarial assumptions are the same as those adopted by the Retirement Board for use in the June 30, 2011 actuarial valuation. 5

159 SECTION 3: Proposed Benefit Changes for New Members of EBMUD Supporting Exhibits Retirement Rates (probability of retirement): Rates (%) Age Current Formula Male CalPEPRA Formula Male Current Formula Female CalPEPRA Formula Female

160 SECTION 3: Proposed Benefit Changes for New Members of EBMUD Supporting Exhibits Plan Provisions: Please note that with the exception of the plan provisions described below, all the other plan provisions are assumed to be the same as those used in the June 30, 2011 valuation. Membership Eligibility: All members with membership dates on or after January 1, Final Compensation for Benefit Determination: Current Formula CalPEPRA Formula Highest consecutive twenty four months of compensation earnable (FAS2). Highest consecutive thirty six months of pensionable compensation (FAS3). ( ) Compensation Limit: For the CalPEPRA formulas, $113,700 for ( ) Normal or Unreduced Retirement Eligibility: Current Age and Service Requirement Age 65; Age 62 with 5 years of service; Age 59 with 20 years of service; Age 54 with 30 years of service; Other combinations of age and service between ages 54 and 59. CalPEPRA Age and Service Requirement Early Retirement Eligibility: Current Age and Service Requirement CalPEPRA Age and Service Requirement Age 67 with 5 years of service (for unreduced benefit). ( (a)) Age 54 with 5 years of service. Age 52 with 5 years of service. ( (a)) 7

161 SECTION 3: Proposed Benefit Changes for New Members of EBMUD Supporting Exhibits Retirement Benefit Formula: 1955 Formula 2.42% (2.82% if member is credited with District Service on or after January 1, 2004) times Final Compensation per year of service including all service extension credit. 1955/80 Formula 2.42% (2.82% if member is credited with District Service on or after January 1, 2004) times Final Compensation per year of service up to August 1, 1980 including all service extension credit, plus 2.20% (2.60% if member is credited with District Service on or after January 1, 2004) times Final Compensation per year of service after August 1, Applies to members who elected to convert to the 1980 Formula in /90 Formula 2.42% (2.82% if member is credited with District Service on or after January 1, 2004) times Final Compensation per year of service up to January 1, 2000 including all service extension credit, plus 2.20% (2.60% if member is credited with District Service on or after January 1, 2004) times Final Compensation per year of service after January 1, Applies to members who elected to convert to the 1980 Formula in Formula 2.20% (2.60% if member is credited with District Service on or after January 1, 2004) times Final Compensation per year of service including all service extension credit. Applies to all members hired on or after January 1, Service Extension Credit 2.42% (2.82% if member is credited with District Service on or after January 1, 2004) for members with any service under the 1955 Formula or 2.20% (2.60% if member is credited with District Service on or after January 1, 2004) for members with service only under the 1980 Formula times Final Compensation per year of Service Extension Credit. Service extension credit is the number of unused sick leave days credited to a member at the time of retirement converted on a 260-day basis. The number of such days is then doubled for the benefit calculation and for service retirements to meet the early retirement provision of the Ordinance. Benefit Adjustments Reduced by 3% per year under the age of eligibility for an unreduced benefit, based on service at retirement, for retirements before age 63 (before age 62 commencing November 1, 2000). Effective July 1, 1999, Service Extension Credit is included in the years of service calculation of service for determining eligibility for unreduced retirement. 8

162 SECTION 3: Proposed Benefit Changes for New Members of EBMUD Supporting Exhibits Retirement Age Benefit Formula CalPEPRA Formula % x FAS3 x Years of Service ( (a)) % x FAS3 x Years of Service % x FAS3 x Years of Service % x FAS3 x Years of Service % x FAS3 x Years of Service 67 or later 2.50% x FAS3 x Years of Service Member Contributions: Under CalPEPRA, members are assumed to pay 50% of the total Normal Cost rate v3/

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