07 - July 24, 2025 - CalPERS comparison and City’s investment in PARS 115 Pension Trust
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CITY COUNCIL INFORMATIONAL MEMORANDUM
Date: July 24, 2025
To: Cupertino City Council
From: Jonathan Orozco, Finance Manager
Re: CalPERS comparison and City’s investment in PARS 115 Pension Trust
Background
At the Council’s request, staff have prepared additional information regarding the City’s
CalPERS funded status and its comparative standing with other local agencies. This memo
also addresses how the $10 million Additional Discretionary Payment (ADP), made in
December 2024, improved Cupertino’s pension position, and provides context regarding
Section 115 Pension Trusts, including the City’s investment in the PARS-managed trust.
City’s CalPERS Funded Status in Context
Using CalPERS’ most recent valuation data (as of June 30, 2023), Cupertino’s
Miscellaneous Plan had a funded status of 66.4%. To provide local context, staff reviewed
the same metric across other cities and towns within Santa Clara County using the
CalPERS Power BI tool, applying the following filters:
• Classification: Miscellaneous (Cupertino does not operate a safety plan)
• Agency type: City or Town
• County: Santa Clara
• Excluded Cupertino from the average (done once Excel sheet had been
downloaded)
Based on this dataset, the average funded ratio among comparable agencies in Santa Clara
County is 67.7%, placing Cupertino approximately 1.3% below the regional average.
There are 15 cities and towns in the county that participate in CalPERS pension plans. Of
those, seven agencies have made ADPs to CalPERS, with an average total contribution of
$12.2 million per agency. Moreover, including Cupertino, there are seven of the 15
agencies that currently have a Section 115 Trust with either CalPERS or Public Agency
Retirement Services (PARS).
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Staff also conducted a targeted comparison with peer jurisdictions that do not maintain
their own police or fire departments, agencies that, like Cupertino, contract for public
safety services. These include the City of Monte Sereno, the City of Saratoga, and the Town
of Los Altos Hills. These agencies reported an average funded status of 81.2%.
Additionally, these agencies are three of the seven cities or towns that have made ADPs,
with Los Altos Hills being the only one with a Section 115 Trust.
This comparison offers a more accurate benchmark, as unfunded accrued liabilities
(UALs) are typically much higher in agencies that operate their own police and fire
departments due to the significantly higher cost structure of public safety pension plans.
By focusing on jurisdictions with similar service models, the City can better assess the
relative strength of its pension funding position.
Impact of City’s ADP and Section 115 Trust
In December 2024, the City made a $10 million ADP toward its CalPERS UAL. In addition,
the City maintains a Section 115 Pension Trust through PARS, which is designated
exclusively for future pension obligations and may be used to pay CalPERS or reimburse
the City for eligible pension expenses.
Factoring in the $10 million ADP and the balance in the 115 Trust, Cupertino’s adjusted
funded ratio is estimated to reach approximately 81.9%. This would place the City slightly
ahead of the peer group average and significantly improve long-term pension
sustainability. While CalPERS actuarial valuations do not reflect these ADPs or 115 trust
balances until future valuation cycles, these funding actions have an immediate fiscal
benefit and will reduce future required contributions.
Recent CalPERS Investment Returns
In a recent press release, CalPERS reported a preliminary net investment return of 11.6%
for the fiscal year ending June 30, 2025, well above its assumed rate of return (discount
rate) of 6.8%. These stronger-than-expected returns, combined with the City's proactive
funding decisions, will further improve Cupertino’s pension outlook in the next
valuation cycle.
Sustainability Impact
No sustainability impact.
Fiscal Impact
No fiscal impact.
City Work Program Item/Description
None
City Council Goal
Fiscal Strategy
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California Environmental Quality Act
Not applicable.
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Prepared by: Jonathan Orozco, Finance Manager
Reviewed by: Kristina Alfaro, Director of Administrative Services
Approved for Submission by: Tina Kapoor, Interim City Manager
Attachments:
None