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Home My WebLink AboutMINUTES - 08021994 - 1.59 I 1 . 59 THE BOARD OF SUPERVISORS OF CONTRA COSTA COUNTY, CALIFORNIA Adopted this Order on August 2, 1994 by the following vote: AYES: Supervisors Smith, Bishop, DeSaulnier, Torlakson and Powers NOES: None ABSENT: None ABSTAIN: None ----------------------------------------------------------------- ----------------------------------------------------------------- S'UBJECT: Annual Audit Report for the Contra Cost County Employees' Retirement Association for the Year Ended December 31, 1993 . IT IS BY THE BOARD ORDERED that the annual audit report for the Contra Costa County Employees' Retirement Association is ACCEPTED. I hereby certify that this is a true and correct copy of an action taken and entered on the minutes of the Board of Supe ors on the Oats shown. ATTESTED: _ PHIL BA C LOR,Clerk of the Board o uperviso nd County inistrator By - 0 ,D@Duty CC: County Administrator County Counsel Auditor-Controller Contra Costa County Office Of Kenneth J.Corcoran COUNTY AUDITOR-CONTROLLERAuditor-Controller 625 Court Street - Judith A.Van Note Martinez, California 94553-1282 �� As _ '; Assistant Auditor-Controller Telephone (510) 646-2181 n' - s o �;auom t� Fax (510) 646-2649 srq,couti'� July 13, 1994 Fri. {Y: RECEDE® Z Alt The Board of Supervisors K Contra Costa County BOARDCONTRA OF SUPCOS Martinez, CA 94553 osrA Co Ladies and Gentlemen: Enclosed are twelve (12) copies of the annual audit report for the Contra Costa County Employees'Retirement Association for the year ended December 31, 1993. This is a non- agenda item. Very truly yours, Kenneth J. Corcoran Auditor-Controller By: LeoD. S hmall, C1A Senior Auditor KJC/LDS:ad Enclosures REPORT ON THE FINANCIAL CONDITION OF THE CONTRA COSTA COUNTY f EMPLOYEES' RETIREMENT ASSOCIATION FOR THE YEAR ENDED DECEMBER 31, 1993 ' CONTRA COSTA COUNTY Employees'Retirement Association Annual Financial Report Table of Contents December 31, 1993 Page Financial Section Auditor's Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Statement of Financial Condition . . . . . . . . . . . . . . . . . . . . . . . 3 Schedule of Investments in Securities . . . . . . . . . . . . . . . . . . . . . 5 Schedule of Investments in Real Property . . . . . ' . . . . . . . . . . . . 6 Schedule of Activity and Balances -Deposits and Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Statement of Investment Income and Changes in Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Schedule of Income from Securities and Trust Deed Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Statement of Administrative Expense . . . . . . . . . . . . . . . . . . . . 10 Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 11 Comments on Financial Statements . . . . . . . . . . . . . . . . . . . . . 21 Supplementary Information Organization of Retirement Association 24 Certificate of Achievement . . . . . . . . . . . . . . . . . . . . . . . . 25 Analysis of Funding Progress . . . . . . . . . . . . . . . . . . . . . . . . 26 Revenues by Source - Ten Year History Expenses by Type - Ten Year History . . . . . . . . . . . . . . . . . . . 27 Contra Costa County Office of Kenneth J.Corcoran COUNTY AUDITOR-CONTROLLERAuditor-Controller 625 Court Street -- Judith A.Van Note Martinez, California 94553-1282 / Assistant Auditor-Controller Telephone (510) 646-2181 Fax (510) 646-2649 C'OS = •'CT r'4 COUN'� June 1, 1994 Independent Auditor's Report on Examination of Financial Statements The Board of Supervisors Contra Costa County Martinez, California 94553 The Retirement Board Contra Costa County Employees'Retirement Association Concord, California 94520 Members of the Board: We have audited the accompanying general purpose financial statements of the Contra Costa County Employees' Retirement Association for the year ended December 31, 1993 pursuant to Sections 31593 and 7504 of the Government Code. These general purpose financial statements are the responsibility of the Retirement Association's management. Our responsibility is to express an opinion on these general purpose financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards as prescribed by the Governmental Accounting Standards Board. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the general purpose financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall general purpose financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The Board of Supervisors June 1, 1994 � Contra Costa County The Retirement Board Contra Costa County The Retirement Association has established an accounting policy to recognize appraised market value declines on investments in commercial real estate over a five year accounting cycle. Generally accepted accounting principles(GAAP) require that such declines be reflected in the current financial statement presentation. However, we believe this departure from GAAP is appropriate in the circumstances and that the financial statements included herein do not misrepresent the long-term marketability of this investment group as described in Note 1.B.2. In our opinion, the general purpose financial statements referred to above present fairly, in all material respects, the financial position of the Contra Costa County Employees' Retirement Association as of December 31, 1993 and the results of its operations for the fiscal year then ended in conformity with generally accepted accounting principles. The supplementary financial information required by Governmental Accounting Standards Board Statement No. 5 has been subjected to audit procedures applied in the examination of the basic general purpose financial statements and is, in our opinion, fairly stated in all material respects in relation to the basic general purpose financial statements, taken as a whole. Very Y trul yours, KENNETHJ. CORCORAN Auditor-Controller KJC/LDS:ad Enclosures 2 CONTRA COSTA COUNTY EXHIBIT A Employees' Retirement Association Statement of Financial Condition December 31, 1993 ASSETS CURRENT ASSETS: Cash: Petty Cash $ 100 Deposits with County Treasurer 223,751 Cash and Cash Equivalents with Fiscal Agents Bankers Trust Company Fixed and Equity Accounts 41,847,243 Mellon-McMahan Real Estate Advisors Commercial Real Estate Account 488,230 Wells Fargo Bank 9 Prudential SPF-1 731 Bank of America First Mortgage Loan Trust Fund Account 9,078 42,569,142 Receivables: Forward Currency Contract 567,210 Contributions Receivable 4,150,173 Accrued Interest and Dividends Receivable 6,206,172 Real Estate Rental Income Receivable 319,699 Other 39,802 11,283,056 Prepaid Expense: Prepaid Insurance 53,335 INVESTMENTS: Securities and Trust Deeds (Schedule I) 885,473,349 Real Property (Schedule II) (Note 1. B.) 108,379,575 993,852,924 FIXED ASSETS: Furniture, Fixtures and Equipment Net of Accumulated Depreciation of$184,054 64,147 OTHER ASSETS: Installment Contributions and Interest Receivable (Note 2) 1,008,503 TOTAL $1,048,831,107 3 CONTRA COSTA COUNTY EXHIBIT A Employees'Retirement Association Statement of Financial Condition December 31, 1993 (Continued) LIABILITIES, RESERVES AND SURPLUS CURRENT LIABILITIES &DEFERRED CREDITS: �( Investments Payable $ 7,506,826 Accounts Payable 1,152,585 Contributions Refundable 280,173 Retirement Allowance Payable 4,621,163 Loan Trust Fund Payable 9,078 Terminated Members'Deposits Unclaimed 545,643 Real Property Deposits 194,330 Accrued Vacation Liability 40,100 Other 424,084 Forward Settlement Contracts - BEA Associates 4,435 14,778,417 DEPOSITS AND RESERVES: (Schedule III) Members'Deposits 137,117,789 Employers' Advance Reserve 99,668,149 Retired Members'Reserve 480,090,530 Cost of Living Reserve 262,482,354 Cost of Living Supplement-Standard 915,837 Cost of Living Supplement-Additional 521,029 Post Retirement Death Benefit Reserve 1,380,163 982,175,851 SURPLUS: Statutory Reserve (Note 3) 10,488,311 Unreserved: Board Designated Reserves: Contingency 20,976,622 Capital Outlay 92,108 Relocation and Systems Enhancement 1,197,036 Other 19,122,762 Total Unreserved 41,388,528 Total Surplus (Exhibit B) 51,876,839 TOTAL $1,048,831,107 See Accompanying Notes to Financial Statements 4 I EXHIBIT A SCHEDULEI CONTRA COSTA COUNTY Employees'Retirement Association Schedule of Investments in Securities December 31, 1993 f� Unamortized Net Face or Cost(1) Premium Book Value (Discount) Value Bonds: ^� Domestic $ 404,390,499 $ $ 404,390,499 Foreign 48,219,917 1,780,136 50,959,710 Total Bonds(2) 452,610,416 1,780,136 454,390,552 Stocks: Index Fund(4) 77,689,218 77,689,218 International Fund ts> 96,180,524 96,180,524 Common 252,546,594 252,546,594 Total Stocks (3) 426,416,336 426,416,336 First Mortgages FHANVA 72,113 (1,652) 70,461 Short Term Investments 4,596,000 4,596,000 Total $ 883,694,865 $ 1,778,484 $ 885,473,349 (1) Domestic Bonds at Amortized Cost, First Mortgages Brinson International Bonds and Short Term Investments at Face, Common Stocks at Cost. (2) Total Market Value of Bonds at December 31, 1993 was $457,673,735. (3) Total Market Value of Stocks at December 31 1993 was $522,572,408. (4) Invested by Alliance Index Fund. (S) Invested by Capital Guardian Trust Company and BEA Associates. See Accompanying Notes to Financial Statements 5 M O N O p"� M d .Wa ol O O O\ -+ O N t- O -- _N 00 vl �O N N �t cY -- Q � W M O O t- O O 00 00 v') N 00 to M kn O\ M O\ 110 I'D t- t- O — t- 00 O M �O ON ON O t-- 011 t- xy t- V1 O O M t- 00 M V1 d o0 M t- M 00 N O� V t-:, 00 O\ N M 06 CDA i.i •� 00 00 i y > U O N Z o A T N Q O N 0 O U a> dGOCIv w 0 C140 CA a a cd CCd cl to O ,`ter M "T V100 00 00 O., (ON ON ON �-7 00 00 00 00 OO w w 00 00 00CIS v N C13I.. 00 ►-� LSr 00 --� r— O\ M 00 00 00 k w . a f:4oN rn GOS Cd ° ° CO� 0 U A, pq ° � t~ b � y en � a� a� re tn A, � C70 � � Gq � Q u W Cd Cd O N _O ° cd a .� N w ' d -0 CTS �¢ o¢. b o O .W 0 3 o > � ' a� w 04 P d d_ � W 0u3zaoa .6 .aconcon � � Nww 0 -+ N 6 cf 00 Inn In In 10 11) H n lzC ' n nOrnOn 'M o0 O, 00N K rn K �' Vi 00 N O O n O� M g N O 1 r - (-.. M M M�t V,00 000 K 00 InCl In -- .-• . 00 N V •'•" r vNi n v^ ...J ONO 00 tm O O ppO P C U d O OO 00 00 ^ �v Q bq b9 0 o �• 'd K o i o ^ �n U C rn n �n ra i - N N N v v In Cl O O 'n cr .r 11:1K ° N 'n 00 r- °, K K In oo n 00 a 0 (A b9 N � Ooror O In oho a - v. V q � N O � U r Mr 'nx oov^ c N ° r O N101, N r rn — N P y ro rn 'n M 0o O 'r n -r r�� C r4 Z r4 coo lz OWN N C rn N 00 M ._ a ^ O O N O x n In — o In Irl y rn O: .n In AO ^ r^ 00 M 00 p (01 00 O� S3 In r a u v � c V1'�l •b �J g K K 00 ^ ol M K 5 0 K� cr"rte-" EE33 4�• • 4i H � N-}} �t I7' O r n 00 0pp0 . i6d �•..• �D r C r v N O� M p N O F^ ON ^ rl) r� In N M OM 00 V1 00 O 'V KI ...i N N .... rq T M N 00 I I oc r 00 T1 b � 00 •.- rn v•. rn n �. 69 Nf J V) rn r N C �O rn rn 00 O U �O.O r0 M 00 O M M r _ .•+ 00 rn 00 cA V CT N 00 . In M V 00 ^ O� _ V P 'V' �lr 00 rNn frn b . 00 r In M K 00In In v O r V Q C7) o;rr rnN'n o NO N In 00 GA yy rN/� Ra. w A ro O p c' V a3 r~ oa v 4 0 0 9 o°o�C�� p n' C t- ww5 v, � ¢ x b rr F EXHIBIT B CONTRA COSTA COUNTY Employees' Retirement Association �- Statement of Investment Income and Changes in Surplus For the Year Ended December 31, 1993 Income for the Year: Income from Securities and Trust Deeds (Exhibit B, Schedule I) $ 107,509,384 Income from Real Property(Less Service fee of$691,996, Operating Expense of$1,194,900 and Write Down of Value of$2,911,381) (Note 1.B.) 3,415,835 ' Miscellaneous Income(Expense) (61,434) Total Income(Net of Fees) 110,863,785 Less: Administrative Expense (Exhibit B, Schedule II) 1,535,199 Net Income 109,328,586 Less Interest Credited to Reserves: Interest Credited to Reserves, Current Year (Exhibit A, Schedule III) 72,814,448 i Miscellaneous Prior Year Adjustments _ 104,961) Net Interest Credited to Reserves 72,709,487 Income Loss Closed to Surplus 36,619,099 � (Loss) p j� Surplus, Beginning of Year 38,647,643 Distributions from Surplus (Note 4) (23,362,711) 1 Other Adjustments (27,192) Surplus, End of Year $ 51,876,839 See Accompanying Notes to Financial Statements 8 EXHIBIT B SCHEDULEI CONTRA COSTA COUNTY Employees'Retirement Association Schedule of Income from Securities and Trust Deed Investments For the Year Ended December 31, 1993 First Bonds Stocks Mortgages Short Term Futures Totals Income Earned for the Year: Security Lending $ 150,686 $ $ $ $ $ 150,686 Currency Conversion (305,071) (305,071) Interest or Dividends 39,981,546 10,695,636 6,899 1,255,674 51,939,755 Net Gain or(Loss)on Sales 11,868,815 43,963,970 108,053 2,661,367 58,602,205 Total Income 51,695,976 54,659,606 6,899 1,363,727 2,661,367 110,387,575 Less Service or Counselor Fee (1,063,556) (1,814,270) (365) (2,878,191) Net Income(Loss) $SQ632,420 $52,845,336 $6,534 $1,363,727 $2,661,367 $ 107,509,384 I See Accompanying Notes to Financial Statements 9 EXHIBIT B SCHEDULE H CONTRA COSTA COUNTY Employees'Retirement Association Statement of Administrative Expense For the Year Ended December 31, 1993 Expenses Board of Directors $ 14,500 Salaries and Wages 643,646 Retirement 111,733 Employee Group Insurance 64,002 Workers Compensation Insurance 4,704 Contracted Temporary Help 12,530 Communications 7,256 Maintenance - Equipment 4,412 Memberships 2,025 Office Expense 55,535 Professional and Specialized Services 227,545 County Counsel 58,817 Insurance 57,587 Rent - Structure 85,518 Rent - Equipment 4,800 Minor Equipment 4,566 Travel - Fiduciary Education/Staff Training 65,781 Data Processing Service 62,142 Depreciation& Amortization 44,221 Other 3,879 I Total Administrative Expenses $ 1,535,199 See Accompanying Notes to Financial Statements 10 CONTRA COSTA COUNTY Employees'Retirement Association Notes to Financial Statements December 31, 1993 1. Summary of Plan. Funding and Accounting Policies / A. Retirement Program The Contra Costa County Employees'Retirement Association is a contributory retirement plan governed by the County Employees' Retirement Law of 1937, as amended. The plan covers substantially all of the employees of the County and County Special Districts and fourteen other member agencies. The total membership of 12,240 is divided among active general and safety members, and retired members, as follows: Retirees and beneficiaries receiving benefits 4,154 Terminated employees entitled to benefits but not yet receiving them 628 Vested active general employees 4,104 Vested active safety employees 1,182 Non-vested general employees 1,904 Non-vested safety employees 268 Total Membership 12,240 The plan is divided into three separate benefit sections of the 1937 Act. Each section provides for retirement, disability, death and survivor benefits. Annual cost-of-living(C.O.L.) adjustments to retirement allowances can be granted by the Retirement Board as provided by State statutes. Service retirements are based on age, length of service and final average salary. Subject to vested status, employees can withdraw contributions plus interest credited or leave them as a deferred retirement when they terminate or transfer to a reciprocal retirement system. Pertinent provisions for each section follow: General - Tier I Covers all employees eligible to become General members before August 1 1980 and who did not elect to transfer to the General - Tier II Plan. Members may elect service retirement at age 50 with 10 years of service or with 30 years of service regardless of age. Disability retirements may be granted as service connected with no years of employment required or non- service connected with five years of service credit required. The retirement benefit is based on a one year final average salary. t1 l CONTRA COSTA COUNTY Employees' Retirement Association Notes to.Financial Statements (Continued) December 31, 1993 1. Summary of Plan, Funding and Accounting`Policies(Continued) A. Retirement Program (Continued) General - Tier II Covers all employees eligible to become General members on or after August 1, 1980 and all General members before August 1, 1980 who elected to transfer to the General- Tier II Plan. Members may elect service retirement at age 50 with 10 years of service, or with 30 years of service regardless of age. Disability retirements may be granted as service connected with no years of employment required or non- service connected with ten years of service credit required. Those members who elected to transfer from General - Tier I to General - Tier II are eligible for non-service connected disability retirement with 5 years of service credit. The definition of disability is more strict under General - Tier II than in the General - Tier I plan. The retirement benefit is based on a three year final average salary. As of December 31, 1993, three employers had adopted Government Code 31751 (General - Tier II). Safety Generally covers all members who are in active law enforcement, active fire suppression work or certain other "safety" classifications as designated by the Retirement Board. Members may elect service retirement at age 50 with 10 years of service, or with 20 years of service regardless of age. Disability retirements may be granted as service connected with no years of employment required or non-service connected with five years of service credit required. The retirement benefit is based on a one year final average salary. The 1937 act statutes require employees to pay 1/2 of the basic retirement benefit (General - Tier II members pay 40 percent of the General - Tier I rate) and 1/2 of future C.O.L. costs. The employers make up the balance of the basic and C.O.L. contributions needed. However, as shown in Note 1D, the employers subvented part of the employees' basic contributions and most of the C.O.L. costs were covered by surplus investment earnings. 12 CONTRA COSTA COUNTY 1 Employees'Retirement Association Notes to Financial Statements (Continued) December 31, 1993 B. Summary of Significant Accounting`Policies and Plan Asset Matters Basis of Accounting- The accompanying financial statements are prepared on the accrual basis of accounting. Employee and employer contributions are recognized in the period in which employee services are performed. The financial statements include solely the accounts of the Association, which include all programs, activities, and functions relating to the accumulation and investment of the assets and related income necessary to provide the service, disability and death benefits required under the terms of the governing statutes and amendments. Methods Used to Value Investments Investments are carried at the following values: Bonds, FHANA First Mortgages and Short Term - Amortized Cost (face value adjusted by unamortized premium or discount). The total market value of bonds held by the Retirement Association at December 31, 1993, was greater than their carrying value (See Exhibit A, Schedule I). Corporate Stock - Acquisition Cost Because of the wide fluctuations in market values from ear, ear to , gains and Y Y losses are recognized only at the time of sale; however, if the aggregate market value of stocks is less than cost as of the statement date, surplus is reserved for any net difference that exceeds the statutory reserve. (See Note 3) Index Fund- Acquisition Cost At December 31, 1993, $77,689,218 was invested in the Alliance Index Trust Fund. International Equity Fund - Acquisition Cost At December 31, 1993, the Retirement Association had invested $96,180,524 in international equity funds. $69,189,925 was invested in the Capital Guardian International (Non-U.S.) Equity Fund managed by the Capital Guardian Trust Company. $26,990,599 was invested with BEA Associates. 13 l CONTRA COSTA COUNTY Employees'Retirement Association Notes to Financial Statements (Continued) December 31, 1993 1. Summary of Plan, Funding and Accounting Policies (Continued) B. Summary of Significant Accounting Policies and Plan Asset Matters (Continued) Real Property 1) County Lease - Amortized Cost (Original investment less return of principal). At December 31 1993 the Retirement owned Association o o ed onecom completed eted building which was leased to the County. The lease agreement provides for amortization of the total Retirement Association investment in monthly installments over the life of the lease. Although the useful life of the building is longer than the lease period, it is our opinion that the policy of reducing income by the amount of the lease amortization is realistic in that it recognizes the probability that the County will exercise its purchase option at the end of the lease period, and in so doing avoid a write-off of Retirement Association assets when the option is exercised. The County has the option to purchase the property at the price specified in the agreement. Title to the land on which the building is located is held by the County. Should the County fail to exercise its purchase option, the lease agreement provides a procedure for sale of the land to the Retirement Association. 2) Commercial Property- Amortized Cost, (Acquisition Cost plus Unamortized Cost of Leasehold Improvements less Market Decline in Value.) At December 31, 1993, the Retirement Association owned ten commercial properties. Mellon-McMahan Real Estate Advisors manage tenant leases and property maintenance. Net earnings are gross rents less the manager's service fees and building operating expenses. These properties should be presented at cost subject to adjustment for market value declines judged to be other than temporary to comply with generally ! accepted accounting principles (GAAP). GAAP recommends that a market decline in asset values, that are judged to be other than temporary, be recognized in the Financial Statements through reporting a loss and a corresponding reduction of building investments. The Retirement Association has adopted a I policy to recognize declines in market values based on periodic appraisals over { time. Beginning in 1993, these market declines will be recognized over a five ` year accounting cycle. During calendar year 1993, real estate values were 14 CONTRA COSTA COUNTY Employees'Retirement Association Notes to Financial Statements (Continued) December 31, 1993 1. Summary of Plan, Funding and Accounting Policies(Continued) B. Summa ry •f Significant Accun ing Policies and Plan Asset Matters (Continued reduced $2,892,647 for market declines. This policy recognizes that the underlying investment will be held as a long term investment and will not be actively traded. Also, appraisals will be performed on a two year cycle which will enhance management's ability to judge if market declines are other than temporary. The December 31, 1993, market value for commercial real estate reflects the current period's appraisal for the following six properties: Amortized Report Cost When Date Title Location Appraised Market 7-1-93 College Greens Office Sacramento, CA $ 4,316,165 $ 2,550,000 7-1-93 Willows Office Park Concord, CA 8,932,350 5,100,000 7-1-93 Northwest Parkway Ind. Santa Clara, CA 2,500,000 2,550,000 1-1-94 Iowa Distribution Center Riverside, CA 7,388,590 3,600,000 1-1-94 Rialto Shopping Center Rialto, CA 9,018,672 6,600,000 1-1-94 Boeing Building Tukwila, WA 4,071,317 3,650,000 . Totals $ 36,227,094 $ 24,050,000 3) Real Estate Investment Funds - Equity At December 31, 1993, the Retirement Association held investments in four Real Estate Investment Funds. The carrying value of each fund is adjusted quarterly for the Retirement Association's appropriate share of earnings, losses and other changes in stockholders' equity in the fund. The carrying value of the four funds increased $15,314,473 during calendar year 1993, due to the following transactions: Description Amount Additional investment in the funds $ 14,135,736 Earnings added to equity 1,524,893 - Management fees deducted from equity (327,422) Realized losses that write down equity _(18,734) Total change in Real Estate Investment Funds $ 15,314,473 15 ' CONTRA COSTA COUNTY Employees' Retirement Association Notes to Financial Statements (Continued) December 31, 1993 1. Summary of Plan, Funding, and Accounting Policies (Continued) B. Summary of Significant Accounting Policies and Plan Asset Matters(Continued) Investment Risk The Retirement Association's investments are authorized by the County Employees' Retirement Law of 1937. Statutes authorize a "Prudent Expert" guideline as to the form and types of investments which may be purchased. The Retirement Association has cash deposits of$42,345,291 that are uninsured and/or uncollateralized deposits being held by trustees. These cash deposits are principally being managed by bond and stock investment managers who have a portion of their portfolios in liquid short term instruments. The Retirement Association's investments are required by Governmental Accounting Standards Board Statement#3 to be categorized to give an indication of the level of risk assumed by each investment portfolio at year end. Category 1 includes investments that are insured or registered or the securities are held by the Retirement Association or its agent in the agent's nominee name, with subsidiary records listing the Retirement Association as the legal owner. Category 3 includes uninsured and unregistered investments in which securities are held by the counterparty or by its trust department or agent but not in the Retirement Association's name. The Retirement Association's investments and related market values as of December 31, 1993 are as follows: Carrying Market Category l Category 3 Value Value 1 Common& Preferred Stocks $426,416,336 $ $426,416,336 $ 522,572,408 Corporate& Governmental Bonds 454,390,552 454,390,552 457,673,735 Other Investments 70,461 70,461 70,461 Repurchase Agreements 4,596,000 4,596,000 4,596,000 Total $880,877,349 $4,596,000 885,473,349 984,912,604 Real Estate 108,379,575 91,259,256 Total Investments $993,852,924 $1,076,171,860 16 CONTRA COSTA COUNTY Employees'Retirement Association Notes to Financial Statements (Continued) December 31, 1993 1. Summary of Plan, Funding and Accounting Policies (Continued) C. Funding Status and Progress The amount shown below as "pension benefit obligation" is a standardized disclosure measure of the present value of pension benefits, adjusted for the effects of projected salary increases and any step-rate benefits, estimated to be payable in the future as a result of employee service to date. The measure is intended to help users assess the funding status of the Association on a going- concern basis, assess progress made in accumulating sufficient assets to pay benefits when due, and make comparisons among employers. The measure is the ratio of assets available to pay benefits to the actuarial present value of credited projected benefits and is independent of the funding method used to determine contributions to the Association. The pension benefit obligation was computed as part of an actuarial valuation performed as of December 31, 1993. Significant actuarial assumptions used in the valuation include(a) a rate of return on the investment of present and future assets of 8.0 percent per year, (b) projected salary increases of 4.75 percent per year compounded annually, attributable to inflation, (c) additional projected salary increases of 1 percent per year, attributable to longevity and merit, and (d) annual post-retirement benefit increases of 3 percent for Tier I and Safety and 4 percent for Tier II, attributable to inflation as measured by the Consumer Price Index. Total unfunded pension benefit obligation applicable to the Association's employees was $445.3 million at December 31, 1993 as follows (in millions): Pension benefit obligation: Retirees and beneficiaries currently receiving benefits and terminated employees not yet receiving benefits $ 695.9 Current employees: Accumulated employee contributions including allocated investment income 158.8 Employer-financed vested 575.4 Employer-financed nonvested 46.5 Other reserves (post-retirement death benefit and C.O.L supplement) 2.8 Total pension benefit obligation $ 1,479.4 Net assets available for benefits, at cost 1,034.1 Unfunded pension benefit obligation $ 445.3 17 CONTRA COSTA COUNTY Employees'Retirement Association Notes to Financial Statements (Continued) December 31, 1993 1. Summary of Plan. Funding and Accounting Policies (Continued) D. Contributions Required and Contributions Made New contribution rates based on the actuarial study of January 1, 1993 became effective July 1, 1993. The employer rates were calculated on the alternate funding method permitted by Section 31453.5 of the Government Code. The "entry age normal" funding method is used to calculate the rate required to provide all the benefits promised to a new member. Unfunded costs resulting from this calculation are amortized over 17.5 years from the January 1, 1993 ' valuation date. Contributions totaling $55,830,745 ($44,398,691 employer and $11,432,054 employee) for 1993 were made in accordance with actuarially determined contribution requirements determined through actuarial valuations performed at January 1, 1993 and January 1, 1992 and adopted by the Retirement Board. For the fiscal year beginning July 1, 1993 these contributions consisted of(a) normal costs at (8.5 percent of current covered payroll).and (b) amortization of the unfunded actuarial accrued liability at (8.75 percent of current covered payroll). The employer contributions include $7,510,294 paid on behalf of employees. During 1993, employers generally paid 50 percent of employees' basic contributions pursuant to agreements reached during salary negotiations. The Retirement Board paid cost-of-living contributions by transferring from surplus $17,538,988 to the employers C.O.L. reserves and $3,269,626 to the employees C.O.L. reserves. The significant actuarial assumptions used to compute the actuarially determined contribution requirement are the same as those used to compute the pension benefit obligation as described in I.C. Additionally, the 1983 Group Annuity Mortality tables are used as part of the assumptions for actuarial valuation for service retirements, and the 1981 Disability Mortality table for valuation for disability retirements. E. Historical Trends Ten-year historical trend information, designed to provide information about the Contra Costa County Employees' Retirement Association's progress in accumulating sufficient assets to pay benefits when due, is presented as supplementary information. 18 CONTRA COSTA COUNTY Employees'Retirement Association Notes to Financial Statements (Continued) December 31, 1993 2. Installment Contributions and Interest Receivable The Retirement Association has entered into agreements with the City of Pittsburg and the Riverview Fire Protection District to accept their employees as members of the Association. Each employer agreed to contribute, over a thirty year period, the amounts necessary to fund the acquired benefits of its employees for services rendered prior to the date of their entry into the Association. The following summary lists the pertinent details of each agreement plus the amounts due at December 31, 1993: City of Riverview Pittsburg Fire District Agreement Details: Effective date of agreement 7-1-73 7-1-75 First annual payment due 7-1-74 7-1-76 ' Rate of interest 5% 5.75% Annual principal and interest payment $ 107,051 $ 9,380 Original principal $ 1,645,626 $ 274,067 Receivable at December 31, 1993: Future principal payments $ 826,592 $ 156,740 Interest accrued from July 1, 1993 20,665 4,506 Total Receivable at December 31, 1993 $ 847,257 $ 161,246 ' 3. Statutory Reserve The statutes require that surplus up to one percent of the Association's assets be retained in the fund as a reserve against future deficiencies in interest earnings, losses on investments and other contingencies. The Retirement Board has resolved that ' unreserved surplus up to two percent of the Association's assets be designated as a contingency reserve. 4. Distributions from Surplus 1 The following amounts were paid from or charged to surplus as authorized by the Retirement Board: • $20,808,664 to the Cost of Living Reserves to reduce contribution rates for one year. • $2,550,721'to give retirees a monthly supplemental cost-of-living allowance. This allowance was authorized for the year April 1, 1993 through March 31, 1994. 19 CONTRA COSTA COUNTY Employees' Retirement Association Notes to Financial Statements (Continued) December 31, 1993 4. Distributions from Su lus Continued • $3,326 to pay employer share of health plan premiums for retirees who retired before retired members could be included in the County group health plans. 5. Subsequent Events On March 1, 1994, The Retirement Association received $333,724,000 from Contra Costa County as proceeds from the issuance of a Pension Obligation Bond. This amount is based upon an actuarial study using December 31, 1992 data and on 8.0 ' percent and 5.0 percent interest and salary rate assumptions respectively. These proceeds will be used to reduce or extinguish the County's Unfunded Actuarial Accrued Liability (UAAL). For the County's 1993-94 fiscal year, the Retirement Board transferred $20,808,664 from its undistributed earnings and contingency reserve to reduce contributions due from employees and employers for the cost of living program (COL). Approximately $10,700,000 of the transferred amount was intended to cover the UAAL component of the County's COL contribution requirement. Through January 1994, the County had received the benefit of approximately $6,200,000 of this amount leaving a balance of $4,500,000 as unapplied. The Retirement Board redirected the $4,500,000 to be used to offset other County expenses as permitted by Government Code Section 31592.2. The above mentioned $4,500,000 has been removed from the applicable reserve 1 accounts for purposes of the January 1, 1994 Actuarial Valuation to avoid duplication of this amount in the calculation of contribution rates. 20 CONTRA COSTA COUNTY Employees' Retirement Association Comments on Financial Statements December 31, 1993 Investments Yield on Investments As a measure of the overall effectiveness of the Retirement Association's investment program, we have computed the percent of total earnings for 1993 to the average investable assets owned by the Association during 1993. Our computations show the earnings to be 11.17 percent of average assets. The following schedule summarizes and compares, by class, the ratio of earnings to ' average investments for the last five years. The percentages shown as return on total investments are weighted to reflect the total investment represented by each class. 21 r CONTRA COSTA COUNTY Employees'Retirement Association Comments on Financial Statements(Continued) December 31, 1993 Investments(Continued) Yield on Investments(Continued) RATIO OF EARNINGS TO AVERAGE INVESTMENTS Commercial Return Index County Real First Short Savings on Total Bonds Stocks Fund Buildings Property Mortgages Tema Account Investment (3) (2) 1993 Interest/Dividends/Currency ' Conversion(1) 9.28% 2.35% 9.58% 4.47% 8.31% 2.27% 5.56% Gain/(Losses) 2.84% 12.31% (2.06)% 5.61% Total 12.12% 14.66% 9.58% 2.41% 8.31% 2.27% 11.17% 1992 Interest/Dividends/Currency Conversion(1) 9.41% 2.89% 10.81% 4.02% 7.18% 2.24% 5.99% Gains/(Losses) 2.01% 10.68% 4( 52)% 4.26% Total 11.42% 13.57% 10.81% (.50)% 7.18% 2.24% 10.25% 1991 Interest/Dividends/Currency ' Conversion(1) 8.87% 3.53% 9.78% 6.25% 6.09% 4.13% 6.53% Gains/(Losses) 3.16% 4.93% 3.18% Total 12.03% 8.46% 9.78% 6.25% 6.09% 4.13% 9.71% 1990 Interest/Dividends(1) 8.97% 2.80% 10.33% 6.52% 6.12% 5.70% 6.20% rGains/(Losses) .7( 4)% 2.38% .55% Total 8.23% 5.18% 10.33% 6.52% 6.12% 5.70% 6.75% 1989 Interest/Dividends(1) 9.71% 3.06% 4.13% 8.82% 6.37% 5.83% 7.36% .01% 6.97% Gains/(Losses) (.76) 9.64% 14.02% 3.72% Total 8.95% 12.70% 18.15% 8.82% 6.37% 5.83% 7.36% .01% 10.69% r r 22 CONTRA COSTA COUNTY Employees'Retirement Association Comments on Financial Statements (Continued) December 31, 1993 Investments (Continued) ' Yield on Investments (Continued) RATIO OF EARNINGS TO AVERAGE INVESTMENTS•(CONTINUED) (1) Earnings less service or counselor fees and operating expenses as shown on Exhibit B and Exhibit B, Schedule I for the applicable year. (2) Rate reflects average uninvested cash held throughout the year. (3) Beginning in 1990 the Index Fund is combined with the other stocks. In prior years the Index Fund was segregated to show how the following types of investments affected its ' yield. Capital Guardian Public Funds International Equity Fund (Capital)was funded from the Index Fund and the two funds were combined for yield analysis in 1988. Capital was excluded from yield analysis in 1990 and 1991 since its incomefloss was not recognized unless the Retirement Association liquidated its investment in Capital. Capital's income and recognized gain/loss is included in the 1992 yield analysis for stocks since the Retirement Association has decided to record earnings as they occur. 23 ' CONTRA COSTA COUNTY Employees'Retirement Association ' Supplementary Information December 31, 1993- Organization 993Organization of the Retirement Association The Contra Costa County Employees'Retirement Association was formed July 1, 1945 and operates pursuant to the provisions of the Government Code known as the County Employees'Retirement Law of 1937. At December 31, 1993, the Association was governed by the following Board of Retirement: Retirement Board Term Expires Helen J. Shea, Board Chairman June 30, 1995 Richard Cabral June 30, 1996 Gerald Cruson(1) June 30, 1996 William Cullen, Secretary June 30, 1996 Ed Fleming, Vice Chairman June 30, 1996 ' F. Robert Koenig June 30, 1996 Alfred P. Lomeli, County Treasurer Permanent by Office Sharon Naramore June 30, 1995 Wayne L. Price June 30, 1995 William Shinn(alternate) June 30, 1996 Officer of the Board: Patricia Wiegert, Retirement Administrator ' (1)Effective May 3, 1994, Gerald Cruson resigned from the Board. ' 24 Pic Public Pension Coordinating Council Public Pension Principles c 1993 Achievement Award � I Presented to Contra Costa County Employees' Retirement Association In recognition of instituting professional standards for public employee retirement systems as established by the Public Pension Principles. Presented by the Public Pension Coordinating Council, a confederation of Government Finance Officers Association (GFOA) National Association of State Retirement Administrators (NASRA) National Conference on Public Employee Retirement Systems (NCPERS) National Council on Teacher Retirement (t Cc-rR) Michael L.Mort' Chairman 1 1 ' 25 1 ' CONTRA COSTA COUNTY Employees' Retirement Association Supplementary Information(Continued) December 31, 1993 Historical trend information about the Retirement Association'sro ress in accumulating sufficient P g g su assets to pay benefits when due is presented below: Analysis of Funding Progress 1. Going Concern Basis (Millions) End of Net Assets Pension Calendar Available Benefit Percentage Year for Benefits Obligation Funded 1986 528.5 770.4 68.6% 1987 573.5 837.0 68.5% 1988 619.1 913.4 67.8% 1989 692.0 995.2 69.5% (1) 1990 741.3 1120.1 66.2% 1991 826.2 1238.2 66.7% 1992 928.0 1380.0 67.2% 1993 1034.1 1479.4 69.9% 2. Unfunded Pension(Millions) Unfunded Pension End of Unfunded Annual Benefit Obligation Calendar Pension Benefit Covered as a Percentage Year Obligation Payroll of Covered Payroll 1986 241.9 195.4 123.8% ' 1987 263.5 210.7 125.0% 1988 294.3 232.6 126.5% 1989 303.2 256.6 118.2% (1)1990 378.8 290.8 130.3% 1991 412.0 306.5 134.4% 1992 452.0 327.4 138.0% ' 1993 445.3 329.4 135.2% Analysis of the dollar amounts of net assets available for benefits, pension benefit obligation, and ' unfunded pension benefit obligation in isolation can be misleading. Expressing the net assets available for benefits as a percentage of the pension benefit obligation provides one indication of the Association's funding status on a going-concern basis. Analysis of this percentage over time indicates whether the Association is becoming financially stronger or weaker. Generally, the greater this percentage, the stronger the Association. Trends in unfunded pension benefit obligations and annual covered payroll are both affected by inflation. Expressing the unfunded pension benefit obligation as a percentage of annual covered payroll approximately adjusts for the effects of inflation and aids analysis of the Association's progress made in accumulating sufficient assets to pay benefits when due. Generally, the smaller this percentage,the stronger the Association. 26 CONTRA COSTA COUNTY Employees' Retirement Association Supplementary Information (Continued) December 31, 1993 Trend information is not available for years prior to 1986. (1) Restated November 22, 1991 by the actuary based on corrected salary data for the January 1; 1991 actuarial study. ' Revenues by Source Calendar Employee Employer Investment Year Contributions Contributions Income Total (1) ' 1984 5,354,994 18,725,550 34,962,733 59,043,277 1985 5,776,334 20,733,251 47,822,120 74,331,705 1986 6,011,139 25,152,522 66,318,067 97,481,728 1987 6,434,956 25,879,174 47,930,046 80,244,176 1988 7,359,040 28,288,397 49,502,909 85,150,346 1989 8,634,487 34,916,060 70,399,815 113,950,362 1990 10,180,155 40,662,786 51,629,516 102,472,457 1991 11,139,858 44,806,942 76,245,939 132,192,739 1992 12,078,177 48,510,091 94,979,922 155,568,190 1993 11,432,054 44,398,691 113,859,269 169,690,014 Expenses by Type Calendar Administrative Year Benefits Expenses Refunds Total 1984 23,050,043 465,355 1,859,517 25,374,915 1985 26,516,054 462,955 1,172,437 28,151,446 1986 29,975,295 500,737 1,358,223 31,834,255 1987 33,322,342 602,240 1,084,968 35,009,550 1988 36,714,986 666,859 1,231,017 38,612,862 1989 39,147,569 850,554 769,391 40,767,514 1990 41,959,542 1,069,980 677,252 43,706,883 ' 1991 47,550,048 1,145,435 624,646 49,320,129 1992 52,945,939 1,391,067 1,070,229 55,407,235 1993 59,428,595 1,535,199 805,056 61,768,850 ' Contributions were made in accordance with actuarially determined contribution requirements. m (1) Employer contributions include contributions paid on behalf of employees as described in Note I.D. 27