Ltos Received Mar 03 2017*

Campbell, Gilroy, Los Altos Hills, Los Gatos, Milpitas and Palo Alto have adopted second tier plans that offer reduced Benefits, which help reduce future costs, but further changes are needed to address today's unfunded liability. Santa Clara County and the cities of Cupertino, Los Altos, Monte Sereno, Morgan Hill, Mountain View, San Jose, Santa Clara, Saratoga and Sunnyvale have not adopted second tier plans. Response 2: Respondent, City of Los Altos, disagrees partially due to the second sentence in the Finding that states that the City of Los Altos has not adopted second tier plans. On October 1, 2011, the City of Los Altos adopted its second tier plans for all new safety and new miscellaneous employees that include reduced benefits in an effort to address rising costs and unfunded liabilities.

Retroactive Benefit enhancements were enacted by Cities using overly optimistic ROI and actuarial assumptions without adequate funding in place to pay for them. Response 3: Respondent, City of Los Altos, agrees with the Finding. <b>Recommendation 3:</b> The Cities should adopt policies that do not permit Benefit enhancements unless sufficient monies are deposited, such as in an irrevocable trust, concurrent with enacting the enhancement, to prevent an increase in unfunded liability. Response 3: The recommendation has not yet been implemented, but will be implemented in the future conditioned on economic trends, direction from City Council and future labor collective bargaining negotiations. 2017 Update City has not enhanced pension retirement benefits.

The Cities are making an overly generous contribution towards the cost of providing Benefits. Response 4: Respondent, City of Los Altos, agrees with the Finding.

The Cities are not fully funding OPEB benefits as evidenced by large unfunded liabilities and small funded ratios. Response 5: Respondent, City of Los Altos, agrees with the Finding.

The Cities' defined benefit pension plan costs are volatile. Defined contribution plan costs are predictable and therefore more manageable by the Cities. Response 7: Respondent, City of Los Altos, agrees with the Finding. The ability of cities contracting with CalPERS Pension System to implement a defined contribution pension plan is now precluded under CalPERS law. <b>Recommendation 7:</b> The City should transition from defined benefit pension plans to defined contribution plans as the new tier plans are implemented. Response 7: The recommendation will not be implemented because it is not warranted or is not reasonable due to current requirements of CalPERS regulations. The evaluated financial impact on the ability of the City to withdraw from the CalPERS Pension System, along with future labor collective bargaining negotiations and future Council Policy will condition what the City of Los Altos may accomplish in this area. Should CalPERS offer a defined contribution plan in the future, the City would consider this option based upon Council direction and labor collective bargaining negotiations. 2017 Update As a CalPERS agency, the City would consider this option based upon Council direction and labor collective bargaining negotiations should CalPERS offer a defined contribution plan.