S'.J-~,g:;--- Miguel A. Santana, City Administrative Offic:Y c. Date: May 25, The City Council. From: Subject:

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1 FORM GEN. 160 CITY OF LOS ANGELES INTER-DEPARTMENTAL CORRESPONDENCE Date: May 25, 2011 To: From: The City Council Miguel A. Santana, City Administrative Offic:Y c. S'.J-~,g:;--- Subject: LOS ANGELES FIRE AND POLICE PENSIONS TIER 6 - ACTUARIAL STUDY REGARDING HEALTH BENEFIT SUBSIDY FOR SERVICE~ CONNECTED DISABILITY PENSIONS WITH LESS THAN TEN YEARS OF SERVICE (CF 10~1621) On March 8, 2011, Los Angeles voters approved Charter Amendment G, which establishes a new pension tier (Tier 6) within the Los Angeles Fire and Police Pensions plan (LAFPP). Tier 6 includes a plan provision that provides a health subsidy for members that retire on a service-connected disability with less than ten years of service. The City Attorney has submitted to the City Council a draft ordinance which, if approved, will implement this benefit Pursuant to the California Government Code Section 7507, enclosed is an actuarial study that provides the cost impact for providing the benefit. The actuary concludes that this benefit would increase the normal cost rate by 0.04% of payroll. It is recommended to receive and file this report. MAS: TTS: Attachment

2 SEGAL THE SEGAL COMPANY 100 Montgorncry Strocl Suite 500 Snn Francisco, CA T 41 [) F Andy Yeung, ASA, MAAA, FCA, EA Vice President & Associate Actuary ayeung@segalco.com VIA and USPS May 18,2011 Mr. Thomas Simonovski Sr. Labor Relations Specialist City of Los Angeles Office of the City Administrative Officer 200 North Main Street, Room 1200 Los Angeles, CA Re: Los Angeles Fire & Police Pensions Tier 6- Cost to Provide a Retiree Health Benefit for Members Eligible for Service-Connected Disability But With Less Than 10 Years of Service Dear Thomas: We have calculated the cost of providing a benefit to Tier 6 members who become eligible for a service-connected disability benefit before attaining 10 years of service. BENEFIT DESIGN ASSUMPTIONS The important assumptions made in pricing this improvement were: > 90% of disability retirements will be service-connected. > As there was no information available on the demographic profile of employees (e.g., entry age, salary, etc.) who would join the new Tier 6, we estimated the results assuming that the new employees would have the same demographic profile as those actual active members who joined the Plan in the last three years ending June 30, The summary of the demographic profile can be found in the Tier 6 "Option A" study, dated October 14, > The percentages of service-connected disabled members who are expected to enroll in a retiree health benefit plan are 45% before they reach age 65 and 80% after they reach age 65. These percentages are the same as for other members expected to retire with 10 to 14 years of service, as shown in Exhibit II of the June 30, 2010 OPEB valuation, dated November 17, Foundinu Membur of!he MuHinntional Grnup of Actuaries and ConsuHants,.;1 global af1hi8ti0n n-f indp.pondent Orn.1s

3 Mr. Thomas Simonovski May18,2011 Page 2 > All other assumptions are the same as shown in Exhibit II of the June 30, 20 l 0 OPEB valuation, dated November 17, BENEFIT PROVISIONS We have valued the following benefits in the study: > Retirees under age 65 will receive 40% ofthe maximum medical subsidy (as of July 1, 2010, that \.Vould be $ or 40% of$1,025.62). The subsidy is subject to a maximum ofthe actual premium paid to the City's approved health carrier. > Retirees over age 65 will receive 75% of the maximum medical subsidy (as of July 1, 2010, that would be $ or 75% of $440.09). The subsidy is subject to a maximum of the actual premium paid to the City's approved health carrier. > Retirees will receive 40% of the maximum dental subsidy (as of July 1, 2010, that would be $14.46 or 40% of $36. 16). The subsidy is subject to a maximum of the actual premium paid to the City's approved dental ca1tier. > Retirees over age 65 will receive a Medicare Part B premium reimbursement > Benefits wi11 commence upon reaching age 55, regardless of the age at disability incidence. > No benefits will be provided to spouses, domestic partners, or dependents. > All other plan provisions are the same as those shown in Exhibit III of the June 30, 2010 OPEB valuation, dated November 17,2010. RESULTS We have calculated that providing the benefit to Tier 6 members would increase the normal cost rate by 0.04% of payroll. This rate is higher than the cost previously provided in our sludy dated August 13, 2007 ofo.ol% of payroll. There has been an increase in the probability of disability retirement approved by LAFPP since the August 13, 2007 study. The disability rates at younger ages, which affect low service employees in particular covered by this report, have been increased. In addition, LAFPP approved a reduction in the investment retum assumption and adopted higher health care trend assumptions since the August 13, 2007 study. Calculations were completed under the supervision of Patrick Twomey, ASA, MAAA, Enrolled Actuary and Andy Yeung, ASA, MAAA, FCA, Enrolled Actuary v l/ l

4 Mr. Thomas Simonovski May 18, 2011 Page 3 If you have any questions, please let us know. Sincerely, TXB/bqb v 1/ I

5 THE SEGAL COMPANY 1 00 Montgomery S!ree! Suite 500 San Francisco, CA T F Andy Yeung, ASA, MAAA, FCA, EA Vice President & Associate Actuary ayeung@segalco.com VIA and USPS May 18, 2011 Mr. Thomas Simonovski Sr. Labor Relations Specialist City of Los Angeles Office of the City Administrative Officer 200 North Main Street, Room 1200 Los Angeles, CA Re: Los Angeles Fire & Police Pensions Tier 6- Cost to Provide a Retiree Health Benefit for Members Eligible for Service-Connected Disability But With Less Than 10 Years of Service Dear Thomas: We have calculated the cost of providing a benefit to Tier 6 members who become eligible for a service-connected disability benefit before attaining 10 years of service. BENEFIT DESIGN ASSUMPTIONS The important assumptions made in pricing this improvement were: > 90% of disability retirements will be service-connected. :> As there was no information available on the demographic profile of employees (e.g., entry age, salary, etc.) who would join the new Tier 6, we estimated the results assuming that the new employees would have the same demographic profile as those actual active members who joined the Plan in the last three years ending June 30, The summary of the demographic profile can be found in the Tier 6 "Option A" study, dated October 14, > The percentages of service-connected disabled members who are expected to enroll in a retiree health benefit plan are 45% before they reach age 65 and 80% after they reach age 65. These percentages are the same as for other members expected to retire with 10 to 14 years of service, as shown in Exhibit II of the June 30, OPEB valuation, dated November 1 7, Fouodmg ~~ernbn oi the Multinational Group ol Acluarios and Consultants, a global affiliation of independeni firms

6 Mr. Thomas Simonovski May 18, 2011 Page 2 > All other assumptions are the same as shown in Exhibit II of the June 30, 2010 OPEB valuation, dated November 17, BENEFIT PROVISIONS We have valued the following benefits in the study: > Retirees under age 65 will receive 40% of the maximum medjcal subsidy (as of July 1, 2010, that would be $ or 40% of$1,025.62). The subsidy is subject to a maximum of the actual premium paid to the City's approved health canier. > Retirees over age 65 will receive 75% of the maximum medical subsidy (as of July 1, 2010, that would be $ or 75% of$440.09). The subsidy is subject to a maximum ofthe actual premium paid to the City's approved health carrier. > Retirees will receive 40% of the maximum dental subsidy (as of July 1, 2010, that would be $14.46 or 40% of$36.16). The subsidy is subject to a maximum of the actual premium paid to the City's approved dental canier. > Retirees over age 65 will receive a Medicare Pmt B premium reimbursement. >- Benefits will commence upon reaching age 55, regardless of the age at disability incidence. > No benefits will be provided to spouses, domestic partners, or dependents. >- All other plan provisions are the same as those shown in Exhibit III of the June 30, 2010 OPEB valuation, dated November 17,2010. RESULTS We have calculated that providing the benefit to Tier 6 members would increase the nmmal cost rate by 0.04% of payroll. This rate is higher than the cost previously provided in our study dated August 13, 2007 ofo.ol% of payroll. There has been an increase in the probability of disability retirement approved by LAFPP since the August 13, 2007 study. The disability rates at younger ages, which affect ]ow service employees in particular covered by this report, have been increased. In addition, LAFPP approved a reduction in the investment retum assumption and adopted higher health care trend assumptions since the August 13, 2007 study. Calculations were completed under the supervision ofpatrick Twomey, ASA, MAAA, Enrolled Actuary and Andy Yeung, ASA, MAAA, FCA, Enrolled Actuary v 1/ l

7 Mr. Thomas Simonovski May 18, 2011 Page 3 If you have any questions, please let us know. Sincerely, TXB/bqb 5J34972vl/079l6,00l

8 v 7 "SEGAL THE SEGAL COMPANY 1 00 Montgomery Street Suite 500 San Francisco, CA T F VIA ONLY November 16, 2010 Mr. Thomas Simonovski Senior Labor Relations Specialist City of Los Angeles 200 N. Main Street, Room 1200 City Hall East Los Angeles, CA Re: Los Angeles Fire and Police Pension Plan- Cost of Proposed Tier 6 Charter Amendment Dear Thomas: In our repmt to the City dated October 14, 2010 (Tier 6 "Option A"), we provided the cost associated with providing modified pension and health benefits for new employees of the Fire and Police Departments. You have asked us to comment on three proposed provisions of the flnal pension and health benefit package chosen by the City and the bargaining groups that are different from the provisions we included in our cost study as described under Option 6 of our October 14,2010 report (see your offriday, November 12,2010 8:10am). #1. Redirecting the 2% Employee Contribution Originally Contemplated for the Health Plan to the Pension Plan In our October 14,2010 cost analysis, we assumed that employees would make 9% contributions to the Pension Plan and 2% contributions to the Health Plan until they accrued the maximum pension and health benefits after 33 years and 25 years of service, respectively. We also assumed that those contributions would be returned to the employees if they elected the refund option upon tennination of employment The City has asked Segal to detem1ine the cost impact to the City ifthe 2% contributions originally assumed for the Health Plan are made instead to the Pension Plan. In answering this question, we assume that the 2% employee health contributions now paid to the Pension Plan would continue to be refundable and payable only until the employees have accrued 25 years of service. That means for the first 25 years of service, employees would contribute at the rate of 1 1% and the contribution rate would drop to 9% when the employee has between 25 and 33 years of service. B<.::n.c~ hts, Cornpensat!an m~d Hn C--nnsn!U:c~), Offke:::; throughoul the UnH~:d St~JlC!:> nnd Canada..,.t.ti r-o11ncling Membel of lhf' MollinationAI GroGp Dl Actuoric~ '"'d Consu!\ants. a glob"l affiliation ol independent firms

9 Mr. Thomas Simo11ovski November 16, 2010 Page 2 Since redirecting the employees' contributions from the Health Plan to the Pension Plan would not result in any increase in the combined benefits paid by two Plans or any decrease in the combined employee contributions paid to the two Plans, we do not believe that there would be any impact on the City's combined contribution requirements to the two Plans. #2. Providing a Non-Service Connected Death Benefit for Spouses or Domestic Partners of Members Killed in the Line of Military Duty With Less than 10 Years of Service In our October 14, 2010 cost analysis, we assumed that a continuance benefit would be paid to a spouse or domestic partner of a member who died while the member was in active employment immediately before the date of death. We assumed that there would be no minimum service requirement if the death was service connected and a 5 year minimum service requirement if the death was not service connected. The continuance benefit payable under service connected death was assumed to be 80% of final average compensation and that under non-service connected death was assumed to be 50% of final average compensation. As we indicated in our cost analysis, for valuation purposes all pre-retirement deaths were assumed to be service com1ected based on the prior experience of other active members enrolled in other tiers of LAFPP. The City has asked Segal to comment on the cost impact to the Pension Plan if a non-service connected death benefit is paid to spouses or domestic partners of members killed in the line of military duty with less than 10 years of service. In our cost analysis, we estimated the employer and the employee Normal Costs for the Pension to be 15.21% and 9.00% of payroll, respectively. About one-nineteenth ofthose Normal Costs were expected to be required to pay for continuance benefits associated with pre-retirement (service connected) deaths. Ifthe City were to hire 100 new employees in the Fire and Police Departments, about 3 of those employees would be expected to die during their entire career with the City before retirement An argument can be made that the cost to provide non~service connected death benefits for members with 5 to 10 years of service has already been included in our October 14 1 h cost analysis and therefore the only additional cost not included in the prior cost analysis would be for members expected to die before 5 years of service. The 3 expected pre-retirement deaths described above were based on assumptions adopted by the Board in the June 30,2007 triennial experience analysis and they were calculated using the same mortality tables used by the Board to predict the number of post-retirement deaths. We have not analyzed the pre-retirement deaths that had occurred at LAFPP to determine how many actual deaths were from military and non-military causes. Even if the above breakdown is available, there are also other factors such as how long the United States would remain in the current conflicts, the level of deployment, etc., that would complicate any attempt to prepare an accurate estimate of the cost to provide such a benefit v1/

10 Mr. Thomas Simonovski November 16, 2010 Page 3 If we assume that out of a cohort of 1 00 new employees, there would be 1 additional death from employees with less than 5 years of service and that we can continue to use the one-nineteenth of the 15.21% employer and the 9.00% employee Normal Costs from about 3 deaths as our benchmark to estimate the cost, the combined Normal Cost to provide the benefit for the 1 additional death is about 0.2 to 0.3% of payroll after adjusting for the lower cost associated with providing for a non-service connected instead of a service connected death benefit. Again, this analysis is highly dependent on the number of additional covered deaths before the employees have accrued at least 5 years of service. #3. Providing a Health Subsidy for Service Connected Disabled Retirees with Less Than 10 Years of Service In our October 14, 2010 cost analysis, we assumed that a health subsidy would be paid only after the members retired with at least 10 years of service upon reaching age 55. The percentages of the maximum subsidy payable for members with exactly 10 years of service would be at least 40% under age 65 and 75% after age 65. The City has asked Segal to comment on the cost impact to the Health Plan if the 40% or 75% subsidies would be paid to a service connected disabled retiree upon reaching age 55 with less than 10 years of service before and after age 65, respectively. While we have not performed an actuarial study to determine the cost of providing this benefit under the proposed the Tier 6 Health Plan, the anticipated cost should be comparable to that provided in the attached repmt dated August 13, In particular, under Scenario A of the August 13,2007 report, we calculated the increases in the Normal Cost and the payment to amortize the Unfunded Actuarial Accrued Liability (UAAL) if health benefit similar to what is described above would be provided to the then current active employees in each of Tiers 2, 3, 4 and 5. There was a cost to amortize an additional UAAL only because the payment of the higher Normal Cost calculated in that study had not been paid from the date of hire for the duration of employment for those current active employees included in that study. As the higher normal cost would be paid for each Tier 6 employee from the date of employment, the only cost that would need to be added to our October 14, 2010 cost analysis should be the Normal Cost. If we use the increase in the Normal Cost from Tier 5 of our August 13, 2007 report as an apqroximation for the additional cost required for Tier 6, the additional Normal cost required would be about 0.01% of payroll v1/

11 Mr. Thomas Simonovski November 16, 2010 Page4 Please let us know if you have any questions. Sincerely, ip "1!\ ~ (J C~J.L :f1,"'~5;-.q...aj.j 0_,3 _.:J! -.. Paul Angelo, FSA, EA, MAAA Senior Vice President and Actuary l\:1;--~~~j~-\ L' QA_P--t~;:~-- (j Andy Yeung, ASA, EA, MAAA Vice President and Associate Actuary AYY/hy Enclosure ( ) v1!

12 Los Angeli&s Fire & Ponce Pensions Other Postemployment Benefit (OPEB) Improvement Study as of June 30, 2006 Ccpylright 2007 THE SEGAll.. GROUP, inc., THE PARII!NT OF TH!. SEGAL COMPANY ALL RIGHTS Rlli!SIIl!RVI!!D

13 y ~~SEGAL The Segal Company 120 Montgomel)' Street, Suite 5 00 San Francisco, CA T F August 13, 2007 Ms. Robyn L. Barnes Communications & Special Projects Manager Los Angeles Fire and Police Pensions 360 East Second Street, Suite 400 Los Angeles, CA Dear Robyn: We are pleased to submit our study of the cost of providing postretirement health benefits to service-connected disabled members with less than 10 years of service. The benefit improvement calculations assume alternatively that the improvement will be extended only to all active members (i.e. future retirees only) or to all current members, active and retired We have also assum.ed alternatively that the health benefits will become effective at age 55 or upon retirement if earlier. We assume the benefit improvement and the payment of the associated contribution rates will begin on July 1, This review is based on financial statements and employee data furnished by LAFPPS as of June 30, The actuarial calculations were completed under the supervision of Patrick Twomey, ASA, MAAA, Enrolled Actuary and Andy Yeung, ASA, MAAA, Enrolled Actuary. Sincerely, THE SEGAL COMPANY By: A~L~~ Paul Angelo, FSA, MAAA, FCA, EA Senior Vice President and Actuary l\ F'n, ' lin.~ ~ '- -"-' K.. --~""""\ >J Andy Yeung, ASA, MAAA, EA Vice President and Associate Actuary EZY/dvb/hy

14 LAFPP Other Postemployment Benefit (OPES) Improvement Valuation- Review Summary BENEFIT IMPROVEMENT VALUATION- DESCRIPTION OF SPECIAL STUDY PERFORMED The benefit improvement proposals that were studied are the provision of postretirement health care benefits to serviceconnected disabled participants with less than 10 years of service. Benefit Design Assumptions The important assumptions made in pricing this improvement were: > For the current disabled retirees, we do not have an indicator on the data file to determine which retirees have retired with a service-connected disability. We made a working assumption that all disabilities with less than 5 years of service and all disabilities with between 5 and 10 years of service who do not have a retirement benefit equal to 40% of final average salaries are service-connected disabilities. On that basis, we identified 3 60 members as service-connected disabled retirees, which is very close to a count of 356 that we obtained from another document based on actual statistics compiled by Pensions. > The amount of subsidy for Non-Medicare and Medicare Part B members is the lower of 40% of the maximum monthly subsidy (currently $ per month or $9, per year) or 40% of the single party premium of a member's plan; for Medicare Part A & B members, it is the lower of75% ofthe maximum Medicare subsidy (currently $ per month or $4, per year) or 75% of the single patiy premium of a member's plan. > Based on the current retirees receiving a medical subsidy, we calculated 40% of the average single party premium for retirees not yet eligible for Medicare to be $2,707 per year. We calculated 75% of the average single party premium for retirees eligible for Medicru e to be $2,959 per year. > We have calculated costs under the following four design scenarios: a. Eligible members draw the benefit beginning at age 55, future retirees only. b. Eligible members draw the benefit beginning at age 55, current and future retirees. c. Eligible members draw the benefit upon disablement, future retirees only. d. Eligible members draw the benefit upon disablement, current and future retirees. > No benefits will be provided to dependents. -x-segal

15 LAFPP Other Postemp!oyment Benefit (OPEB) Improvement Valuation- Review Summary CONTRIBUTION RECOMMENDATIONS > The following exhibits show the cost effect by tier of each of the above design scenarios: Exhibit 1, Scenario A: Exhibit 2, Scenario B: Exhibit 3, Scenario C: Exhibit 4, Scenario D: Eligible members draw the benefit beginning at age 55, future retirees only. Eligible members draw the benefit beginning at age 55, current and future retirees. Eligible members draw the benefit upon disablement, future retirees only. Eligible members draw the benefit upon disablement, current and future retirees. > The increase in the aggregate contributions and the change in the Unfunded Actuarial Accrued Liability (UAAL) is summarized below: Change in Annual Required Contributions (ARC) Change in VAAL Scenario A $96,048 ($453,137) Scenario B $836,193 $12,936,765 Scenario C $178,654 ($1,016,356) Scenario D $1,023,765 $14,272,526 Please note that there is a reduction in the UAAL under Scenarios A and C even though there is an improvement in the benefit for those future service-connected disabled members with less than 10 years of service. This is because under the Entry Age Normal funding method used by the Board, it is assumed that payment ofnormat Cost for this benefit starts immediately upon a member's date of entry into LAFPP and it continues to accrue even after the member has 10 years of service. This means that the UAAL will become negative as the present value of this new benefit becomes zero for a member with over 10 yem-s of service. *SEGAL ii

16 LAFPP Other Postemployment Benefit (OPEB) Improvement Valuation- Review Summary > Please note that with the exceptions of the plan provisions and assumptions described above, all the plan provisions and assumptions described in Exhibits VI and V, respectively, of the June 30, 2006 actuarial valuation were used unchanged in this repo1i. *SEGAL iii

17 LAFPP Other Postemployment Benefit (OPEB) Improvement Valuation- Review Summary Exhibit 1: Determination of Annual Required Contributions for Scenario A- Age 55, future retirees only Current Plan Determined as of June 30, 2006 Tier 1 Tier 2 Tier 3 Tier4 Tier 5 Total I Normal cost $0 $601,781 $3,559,605 $1,216,049 $29,624,001 $35,001,436 Amortization of the unfunded actuarial 2 accrued liability, 30 years $1,299,737 $34,695,322 $2,557,491 $1,496,067 $14,000,03 7 $54,048,654 Total annual required contribution, 3 beginning of year $1,299,737 $35,297,103 $6,117,096 $2,712,116 $43,624,038 $89,050,090 4 Percent of compensation N/A 3.23% 6.77% 6.37% 4.66% 8.15% Adjustment for timing (payable 5 throughout the year) $52,657 $1,430,001 $247,824 $109,877 $1,767,352 $3,607,711 6 Total annual required contribution $1,352,394 $36,727,104 $6,364,920 $2,821,993 $45,391,390 $92,657' Percent of compensation N/A 3.36% 7.05% 6.63% 4.85% 8.48% 8 Payroll N/A 1,092,814,844( 1 ) 90,311,641 42,595, ,317,449 1, 092,814,844 Scenario A Determined as of June 30, 2006 Tier 1 Tier 2 Tier 3 Tier4 Tier 5 Total 1 Normal cost $0 $602,655 $3,581,993 $1,218,663 $29,714,506 $35,117,817 Amortization of the unfunded actuarial 2 accrued liability, 30 years $1,299,737 $34,695,118 $2,552,772 $1,495,515 $13,981,440 $54,024,582 Total annual required contribution, 3 beginning of year $1,299,737 $35,297,773 $6,134,765 $2,714,178 $43,695,946 $89,142,399 4 Percent of compensation N/A 3.23% 6.79% 6.37% 4.67% 8.16% Adjustment for timing (payable 5 throughout the year) $52,657 $1,430,028 $248,539 $109,960 $1,770,266 $3,611,450 6 Total annual required contribution $1,352,394 $36,727,801 $6,383,304 $2,824,138 $45,466,212 $92,753,849 7 Percent of compensation NIA 3.36% 7.07% 6.63% 4.86% 8.49% 8 Pa 'roll N/A 1,092,814,844( 1 ) 90,311,641 42,595, ,317,449 1,092,814,844 9 Increase in ARC $0 $697 $18,384 $2,!45 $74,822 $96,048 (IJ Tier 2 normal cost rate based on total payroll. *SEGAL lv

18 LAFPP Other Postemployment Benefit (OPES) improvement Valuation - Review Summary Exhibit 2: Determination of Annual Required Contributions for Scenario B- Age 55, current and future retirees Current Plan Determined as of June 30, 2006 Tier 1 Tier 2 Tier 3 Tier4 Tier 5 ~ Total Normal cost $0 $601,781 $3,559,605 $1,216,049 $29,624,00! $35,001,436 Amortization of the unfunded 2 actuarial accrued liability, 3 0 years $1,299,737 $34,695,322 $2,557,491 $1,496,067 $14,ooo,o37 I $54,048,654 Total annual required contribution, 3 beginning of year $1,299,737 $35,297,103 $6,117,096 $2,712,116 $43,624,038 I $89,050,090 4 Percent of compensation N/A 3.23% 6.77% 6.37% 4.66% 8.15% Adjustment for timing (payable 5 throughout the year) $52,657 $1,430,001 $247,824 $109,877 $1,767,3521 $3,607,711 6 Total annual required contribution $1,352,394 $36,727,104 $6,364,920 $2,821,993 $45,391,390 $92,657,801 7 Percent of compensation N/A 3.36% 7.05% 6.63% 4.85% 8.48% 8 Pavroll NIA 1,092,814,844( 1 ) 90,311,641 42,595, ,317,449 I 1,092,814,844 Scenario 8 Determined as of June 30, 2006 Tier 1 Tier 2 Tier 3 Tier4 Tier5 Total Normal cost $0 $602,655 $3,581,993 $1,218,663 $29,714,506 $35,117,817 Amortization ofthe unfunded 2 actuarial accrued liability, 30 years $1,369,551 $35,177,038 $2,707,374 $!,497,451 $13,984,493 I $54,735,907 Total annual required contribution, 3 beginning of year $1,369,551 $35,779,693 $6,289,367 $2,716,114 $43,698,999 I $89,853,724 4 Percent of compensation N/A 3.27% 6.96% 6.38% 4.67% 8.22% Adjustment for timing (payable 5 throughout the year) $55,485 $1,449,553 $254,803 $110,039 $1,770,390 $3,640,270 6 Total annual required contribution $1,425,036 $37,229,246 $6,544,170 $2,826,153 $45,469,389 $93,493,994 7 Percent of compensation NIA 3.41% 7.25% 6.63% 4.86% 8.56% 8 Payroll N/A 1,092,814,844( 1 ) 90,311,641 42,595, ,317,449!,092,814,844 9 Increase in ARC $72,642 $502,142 $179,250 $4,160 $77,999 $836,193 (l) Tier 2 normal cost rate based on total payroll. *SEGAL v

19 LAFPP Other Postemployment Benefit (OPEB) Improvement Valuation- Review Summary Exhibit 3: Determination of Annual Required Contributions for Scenario C- Date of disability, future retirees only Current Plan Determined as of June 30, 2006 Tier 1 Tier 2 Tier 3 Tier4 Tier 5 Total Normal cost $0 $601,781 $3,559,605 $1,216,049 $29,624,001 $3 5' 001,43 6 Amortization ofthe unfunded 2 actuarial accrued liability, 30 years $!,299,737 $34,695,322 $2,557,491 $1,496,067 $!4,ooo,o37 I $54,048,654 Total annual required contribution, 3 begi1ming of year $1,299,737 $35,297,103 $6,117,096 $2,712,116 $43,624,038 I $89,050,090 4 Percent of compensation N/A 3.23% 6.77% 6.37% 4.66% 8.15% Adjustment for timing (payable 5 throughout the year) $52,657 $1,430,001 $247,824 $109,877 $1,767,352 $3,607,711 6 Total annual required contribution $1,352,394 $36,727,104 $6,364,920 $2,821,993 $45,391,390 $92,657,801 7 Percent of compensation N/A 3.36% 7.05% 6.63% 4.85% 8.48% 8 Pavroll N/A 1,092,814,844( 1 ) 90,311,641 42,595, ,317,449 1,092,814,844 Scenario C Determined as of June 30, 2006 Tier 1 Tier 2 Tier 3 Tier4 Tier5 Total Normal cost $0 $603,404 $3,595,160 $1,222,069 $29,806,494 $35,227,127 Amortization of the unfunded 2 actuarial accrued liability, 30 years $1,299,737 $34,694,928 $2,547,732 $1,494,529 $13,957,735 $53,994,661 Total annual required contribution, 3 beginning of year $1,299,737 $35,298,332 $6,142,892 $2,716,598 $43,764,229 $89,221,788 4 Percent of compensation N/A 3.23% 6.80% 6.38% 4.68% 8.16% Adjustment for timing (payable 5 throughout the year) $52,657 $1,430,051 $248,1169 $110,058 $1,773,032 $3,614,667 6 Total annual required contribution $1,352,394 $36,728,383 $6,391,761 $2,826,656 $45,537,261 $92,836,455 7 Percent of compensation N/A 3.36% 7.08% 6.64% 4.87% 8.50% 8 Fa roll NIA 1,092,814,844( 1 ) 90,311,64! 42,595, ,317,449 1,092,814,844 9 Increase in ARC $0 $1,279 $26,841 $4,663 $145,871 $178,654 (IJ Tier 2 normal cost rate based on total payroll. *SEGAL vi

20 LAFPP Other Postemployment Benefit {OPEB) Improvement Valuation- Review Summary Exhibit 4: Determination of Annual Required Contributions for Scenario D- Date of disability, current and future retirees Current Plan Determined as of June 30, 2006 Tier 1 Tier 2 Tier3 Tier4 Tier 5 Total Normal cost $0 $601,731 $3,559,605 $1,216,049 $29,624,00 l $35,00 l,436 Amortization of the unfunded 2 actuarial accrued liability, 30 years $1,299,737 $34, $2,557,491 $1,496,067 $14,ooo,o37 I $54,048,654 Total annual required contribution, 3 beginning of year $1,299,737 $35,297,103 $6,117,096 $2,712,116 $43,624,0381 $89,050,090 4 Percent of compensation N/A 3.23% 6.77% 6.37% 4.66% 8.15% Adjustment for timing (payable 5 throughout the year) $52,657 $1,430,001 $247,824 $109,877 $1,767,352 $3,607,711 6 Total annual required contribution $1,352,394 $36,727,104 $6,364,920 $2,821,993 $45,391,390 $92,657,80 l 7 Percent of compensation N/A 3.36% 7.05% 6.63% 4.85% 8.48% 8 Pavroll N/A 1,092,814,844(!) 90,311,641 42,595, ,317,449 1,092,814,844 Scenario D Determined as of June 30, 2006 Tier 1 Tier 2 Tier 3 Tier4 Tier 5 Total Normal cost $0 $603,404 $3,595,160 $1,222,069 $29,806,494 $35,227,127 Ammiization of the unfunded 2 actuarial accrued liability, 30 years $1,369,551 $35,185,325 $2,790,283 $1,497,446 $13,964,262 I $54,806, years Total annual required contribution, 3 beginning ofyear $1,369,5:51 $35,788,729 $6,385,443 $2,719,515 $43,770,7561 $90,033,994 4 Percent of compensation N/A 3.27% 7.07% 6.38% 4.68% 8.24% Adjustment for timing (payable 5 throughout the year) $55,485 $1,449,919 $258,695 $110,176 $1,773,297 $3,647,572 6 Total annual required contribution $1,425,036 $37, $6,644,138 $2,829,691 $45,544,053 $93,68!,566 7 Percent of compensation N/A 3.41% 7.36% 6.64% 4.87% 8.57% 8 Payroll NIA l,092,814,844 (l) 90,311,641 42,595, ,317,449 l,092,814,844 9 Increase in ARC $72,642 $511,544 $279,218 $7,698 $!52,663 $1,023,765 *SEGAL (IJ Tier 2 normal cost rate based on total payroll v 1/ vii