Reso 1673 06/2024RESOLUTION NO. 1673
RESOLUTION OF THE BOARD OF DIRECTORS
OF THE VALLECITOS WATER DISTRICT
ESTABLISHING PENSION FUNDING POLICIES AND PROCEDURES FOR
CALPERS UNFUNDED ACCRUED LIABILITY FOR THE DISTRICT
WHEREAS, the Board of Directors is committed to financial sustainability by
employing long-range financial planning and employing prudent practices in
governance, management, budgeting, forecasting, and financial reporting; and
WHEREAS, said Board desires to increase the District's financial resiliency,
achieve savings to help maintain services, ensure intergenerational equity, and increase
the funding ratio for District's CalPERS pension plans to help reduce insolvency risk and
ensure pension benefits to members are fulfilled; and
WHEREAS, the Board of Directors recognizes that a pension funding policy is
one tactic in a broader strategy to manage the District's retirement costs and help
provide guidelines for the management of pension obligations; and
WHEREAS, the Board of Directors of the Vallecitos Water District desires to
establish formal pension funding policies and procedures for the CalPERS unfunded
accrued liability; and
WHEREAS, the Board of Directors recognizes the policy should support the
District's credit worthiness and ensure the District has flexibility to respond to changes
in future service priorities, revenue levels, and operating expenditures; and
NOW, THEREFORE, BE IT RESOLVED THAT the Board of Directors of the
Vallecitos Water District does hereby enact as follows:
Section 1: Definitions
UAL: Unfunded accrued liability as shown in CalPERS annual actuarial reports.
ADP: Additional discretionary payments are payments made in addition to the
District's required annual normal cost and UAL payments.
Minimum Required Employer Contribution: The sum of the plan's Employer
Normal Cost Rate (expressed as a percentage of payroll and paid as payroll is reported)
plus the Employer Unfunded Accrual Liability Contribution Amount (billed monthly or
prepaid annually).
Negative Amortization: Negative amortization occurs when the UAL payment
does not cover the UAL interest. When this situation occurs, deferred interest is created.
Resolution No. 1673 Page 2
The amount of deferred interest created is added to the UAL balance which causes the
UAL balance to increase over time instead of decrease.
Section 2: Payment:
Section 2.1: The District will annually pay the total minimum required employer
contribution which avoids negative amortization. The required employer contribution is
the sum of the respective plan's Normal Cost Rate (expressed as a percentage of
payroll and paid as payroll is reported) and the UAL Contribution Amount. In situations
where this minimum required employer contribution does not avoid negative
amortization, an ADP will be made sufficient enough to ensure the UAL balance does
not increase due to negative amortization. This ADP is identified in the respective
CaIPERS Actuarial Valuation Report. Payments deviating from this approach are
subject to Section 5.
Section 3: Prepayment
Section 3.1: As part of the management of The District's pension obligations,
CalPERS provides member agencies with the option to prepay their annual UAL
obligations. Prepayment saves half a year's interest costs. The District should strive to
prepay its annual CalPERS UAL pension obligations to reduce the cost of its annual
pension obligations whenever the costs/benefits of doing so are favorable.
Section 4: Funding Ratio Target Range
Section 4.1: Vallecitos Water District has a target funding ratio between 85 and
100 percent of the District's total Accrued Liability. The District will strive to achieve this
funding level through ADP management, cost containment measures, or other
approaches available.
Section 5: Procedures
Section 5.1: The District will review the CalPERS Actuarial Valuations
("Reports") for the Miscellaneous Plan and PEPRA Miscellaneous Plan ("Plans") upon
publication by CalPERS, typically during August each year, to determine the Plans'
Funded Ratio.
Section 5.2: If the Plans' funded ratio is within funding ratio target range the
District will make the Minimum Required Employer Contribution plus any ADP
necessary to avoid negative amortization and this amount will be included in the
following fiscal year's operating and capital budget.
Section 5.3: If the Plans' funded ratio is above the funding ratio target range the
District will make the Minimum Required Employer Contribution and this amount will be
included in the following fiscal year's operating and capital budget.
Resolution No. 1673 Page 3
Section 5.4: If the Plans' funded ratio is below the funding ratio target range and
70% or above the District will make the Minimum Required Employer Contribution plus
an ADP contribution sufficient to restore the plan to within the funding ratio target range.
This amount will be included in the following fiscal year's operating and capital budget.
Section 5.5: If the Plans' funded ratio is below 70% the District will make the
Minimum Required Employer Contribution plus an ADP contribution at the Discretion of
the Board. This amount will be included in the following fiscal year's operating and
capital budget.
Any and all other Resolutions, Articles or Sections of Resolutions, or
Amendments in conflict herewith are hereby rescinded.
PASSED AND ADOPTED by the Board of Directors of the Vallecitos Water
District at a regular meeting held on the 5th day of June 2024, by the following roll call
vote:
AYES: ELITHARP, GROSET, HERNANDEZ, PENNOCK
NOES:—�
ABSTAIN:
ABSENT: BOYD-HODGSON
s Pennock, Vice -President
and of Directors
allecitos Water District
ATTEST:
umpe ,
oard of Directors
Vallecitos Water District