HomeMy WebLinkAboutMINUTES - 08062002 - C121 C.121
THE BOARD OF SUPERVISORS OF
CONTRA COSTA COUNTY, CALIFORNIA
Adopted this Order on August 6, 2002,by the following vote:
AYES: Supervisors Uilkema, Gerber, DeSaulnier, Glover and Gioia
NOES: None
ABSENT: None
ABSTAIN: None
ACCEPTED Comprehensive Annual Financial Report(CAFR) for the Contra Costa
County Employees'Retirement Association(CCCERA) for the year ended December 31,
2001, as recommended by the Retirement Administrator.
I hereby certify that this is a true and correct copy of
and action taken and entered on the minutes of the
Board of Supervisors on the date shown.
Attested:August 6,2002
John Sweeten,Clerk of the Board
of Supervisors and County Administrator
.!1
By: �
Deputy Clerk
'NO Cole,
r 'Employees' Retirement Association e
1355 willow way suite 221 concord ca 94520
925,646,5741 fax;925.646.6747
f RECEIVED
JUL 8 ?0
July 16,2002
Clerk of the Board
Board of Supervisors COUNTY � � IST T
Contra Costa County
651 Pine Street
Martinez CA 94553
Enclosed please find a copy of the Comprehensive Annual Financial Report(CAFR)for the
Contra Costa County Employees' Retirement Association(CCCERA) for the year ended
December 31,2001.
We were awarded the prestigious Certificate of Achievement for Excellence in Financial
Reporting by the Government Finance Officers Association(GFOA)of the United States and
Canada for our December 31,2000 CAFR.
The CAFR contains information about the Association, its Board and consultants, our financial
condition, investments and actuarial data as well as pertinent statistics. We are pleased to present
this valuable information regarding CCCERA to our members and others whom we sincerely
hope will find it useful.
Sincerely,
Patricia F. Wiegert, CEBS
Administrator
enclosure
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Ta6f e of Contents
1, -Introductory Section
Letter of Transmittal 10
Members of the Retirement Board 17
List of Professional Consultants 18
Administrative Organization Chart 19
PPCC Achievement Award 20
GFOA Certificate of Achievement for Excellence in
Financial Reporting 21
1-® Financial Section
Independent Auditor's Report 24
Financial Statements.
Statement of Plan Net Assets 26 -
Statement of Changes in Plan Net Assets 27
Notes to Financial Statements 28
Required Supplementary Information:
Schedule of Funding Progress 39
Schedule of Employer Contributions 39
Latest Actuarial Valuation Methods and Assumptions 40
Other Report.
Independent Auditor's Report on Compliance and on
Internal Control over Financial Reporting Based on an
Audit of Financial Statements Performed in Accordance
with Government Auditing Standards 41
Other Supplementary Information;
Schedule of Administrative Expenses 42
Schedule of Investment Expenses 43
VI. CCCERA COMPREHENSIVE ANNUAL FINANCIAL REPORT 2001
Tabf e of contents
111® Investment Section
Investment Consultant's Report 46
General Information and Proxy Summary 48
Investment Results Based on Fair Value 49
Asset Allocation 50
Largest Stock and Bond Holdings (at Fair Value) 51
Schedule of Investment Management Fees 52
Investment Summary 53
Investment Managers 54
W. Actuarial Section
Actuary's Certification Letter 56 :.
Summary of Assumptions and Funding Methods 61
Probability of Occurrence 63
Summary of December 31, 2000 Valuation Results 64
Summary of Significant Results 65
Schedule of Active Member Valuation Data 66
Retirants and Beneficiaries Added to
and Removed from Retiree Payroll 67
Solvency Test 67
- Actuarial Analysis of Financial Experience 67
Summary of Major Pension Plan Provisions 68
V Statistical Section
Revenue by Source 74
Expenses by Type 74
Schedule of Benefit Expenses by Type 75
Schedule of Retired Members by Type of Benefit 76
Schedule of Average Benefit Payment Amounts 77
Participating Employers and Active Members 79
2001 CCCERA COMPREHENSIVE ANNUAL FINANCIAL REPORT VII.
I. Introductory Section
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Employees'Retirement Association
Employees'Retlre'rietlf Association
355 Mlow way suite 221 concord ca 94520
925.646.5741'ax:925.646.5747 ------
Letter of Transmittal
April 30, 2002
Board of Retirement
Contra Costa County Employees' Retirement Association
1355 Willow Way, Suite 221
Concord, CA 94520-5728
Dear Board Members: -
I am pleased to present the Contra Costa County Employees'Retirement Association's
(CCCERA) Comprehensive Annual Financial. Report(CAFR) for the year ended
December 31, 2001, our 56th year of operation.
The Contra Costa County Employees' Retirement Association is a public employee retirement
system that was established by the County of Contra Costa on July 1, 1945, and is administered
by the Board of Retirement(Board)to provide service retirement, disability, death and survivor
benefits for its employees and 18 other participating agencies under the California State
Government Code, Section 31450 et.seq. (County Employees Retirement Law of 1937).
REPORT CONTENTS
CCCERA management is responsible for both the accuracy of the data and the completeness
and fairness of the presentation of financial information, including all disclosures. The
Comprehensive Annual Financial Report is divided into five sections:
The INTRODUCTORY SECTION describes CCCERA's management and organizational
structure, a letter of transmittal, a listing of the members of The Board of Retirement and a
listing of professional consultants CCCERA utilizes.
The FINANCIAL SECTION presents the financial condition and funding status of CCCERA.
This section contains the opinion of the independent certified public accountants, Macias, Gini
& Company LLP,the financial statements,the related supplementary financial information, and
other report.
The INVESTMENT SECTION contains a report on investment activity, investment policies,
investment results and various investment schedules.
The ACTUARIAL SECTION communicates CCCERA's funding status . .
and presents other actuarial related information. This section contains the
certification of the consulting actuary,William M. Mercer,Inc., actuarial statistics,
and general plan provisions.
The STATISTICAL SECTION presents information pertaining to CCCERA's operations on a
multi-year basis.
CCCERA AND ITS SERVICES
CCCERA was established on July 1, 1945,to provide retirement allowances and other
benefits to the safety and general members employed by Contra Costa County. Currently,
Contra Costa County and 18 other participating agencies are members of CCCERA. The
participating agencies include:
Bethel Island Municipal Improvement District
Byron,Brentwood,Knightsen Union Cemetery District
Central Contra Costa Sanitation District
Contra Costa County Employees' Retirement Association
Contra Costa Housing Authority
Contra Costa Mosquito and Vector Control District
Delta Diablo Sanitation District
Diablo Water District
Local Agency Formation Commission(LAFCO)
Ironhouse Sanitary District
Rodeo Sanitary District
In-Horne Supportive Services Authority(IHSS)
Children& Families Commission
Bethel Island Fire District
Contra Costa Fire Protection District
Moraga-Orinda Fire District
Rodeo-Hercules Fire Protection District
San Ramon Valley Fire District
CCCERA is governed by the California Constitution,the County Employees Retirement Law of
1937, and the regulations,procedures and policies adopted by CCCERA's Board of Retirement.
The Contra Costa County Board of Supervisors may also adopt resolutions, as permitted by the
County Employees Retirement Law of 1937, which may affect benefits of CCCERA members.
The Board of Retirement is responsible for the general management of CCCERA and is
comprised of 10 members, one of whom is a safety alternate. Four Board members are appointed
by the Contra Costa County Board of Supervisors, four Board members, including the safety
alternate, are elected by CCCERA's active membership and one Board member is elected by the
retirees. The County Treasurer serves as an ex-officio member. Board members,with the
exception of the County Treasurer, serve three year terms in office, with no term limits.
ADDITIONS TO AND DEDUCTIONS
FROM PLAN NET ASSETS
FOR THE YEARs ENDED DECEMBER 31, 2001 AND 2000
Additions:
The primary sources to finance the benefits CCCERA provides to its members are accumulated
through income on investments and through the collection of member(employee) and employer
contributions. These income sources for the year ended December 31, 2001, totaled a loss of$40.7
million, a decrease of$139.5 million(approximately -1.41%)when compared to the similar period
ended December 31, 2000. The decrease in revenues can be attributed primarily to a decrease in
the fair value of the investments.
SCHEDULE OF ADDITIONS
Increase/
Decrease Percent
2001 2000 Amount Change
...___. __.____--_ --------- ----_--------- --------
Employer $55,182,505 $52,986,645 $2,195,860 4.1%
Contributions
Erriployee- __.-._I8_,68.1?23 _ I5,453,36 _ __..3217;872 - 24.8%':Contributions
Net Investment (114,531,841} 30,409,3$7 (144,941,234) 476.6%
Income/(Lass)
Total -($40,668,103} - $9$,859,399 {$139,527,502) :-141.1%
Deductions:
The primary uses of CCCERA's assets are the payment of benefits to retirees and their beneficiaries,
refund of contributions to terminated employees and the cost of administering the system. These
deductions for the year ended December 31, 2001,were $157.5 million, an increase of$23.8 million
(approximately 18%) compared to deductions of$133.7 million for the year ended December 31,
2000. This increase is largely due to the initial benefit payments attributed to the settlement of the
Paulson Lawsuit for retirees as well as the growth in the numbers and the average amount of benefits
paid to members and a one time deduction of$10,791,085 for membership withdrawal by the City
of Pittsburg which is described in.Note 12 of the Financial Statements.
SCHEDULE OF DEDUCTIONS
Increase/
Decrease Percent -
2001 2000 Amount Change
-------------- - - _.._. - - -------- _.------. ----
Pension Benefits $126,190,164 $113,149,480 $13,040,684 11.5%
CHealth Care-Benefits ---- -
Reimbursed 12,342,64412,408,770 : (66,126) -0.5%
------ _._ _. ,.._.__ - - -- - --..
Refunds --- ---- - ,- -- --858,013 1,060,249 (202,236) -19.1%
Administrative--- - - -3,745,158_ .... 3,128,624 --616,534 19.7'
_ -
Cjtlierpenses— 3,321,656- 3;944,263 ,.._. .:376,607} - -9.6%
1VIelnbersllip- - — ------- -----------
Withdrawal
-------Withdrawal 10,791,085 0 10,791,085 100.0%
--
Total - - -X157,454,724 $133,651,386 $23,803,334 °
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ACCC}UNTING SYSTEMS AND REPORTS aw:" ........... ,.,.,._.....................
This CAFR was prepared in conformity with accounting principles generally accepted in the
United States of America including the guidelines set forth by the Governmental Accounting
Standards Board(GASB) in Statement No. 25,Financial Reporting for Defined Benefit Pension
Flans and Note Disclosures for Defined Contribution Plans, and the County Employees Retire-
ment Law of 1937. The accompanying financial statements are prepared using the accrual basis
of accounting. Contributions from employers and members are recognized as revenue when
earned. Expenses are recorded when corresponding liabilities are incurred, regardless of when
payment is due or made.
Macias, Gini & Company LLP, CCCERA's independent auditor,has audited the accompanying
financial statements. Management believes internal control is adequate and the accompanying
statements, schedules and tables are fairly presented and free from material misstatement.
ACTUARIAL FUNDING STATUS
CCCERA's funding objective is to meet long-term benefit promises by maintaining a well-funded
plan status and obtaining optimum investment returns. Pursuant to provisions in the County
Employees Retirement Law of 1937, CCCERA engages an independent actuarial firm to perform
an actuarial valuation of the system annually. Economic assumptions are reviewed annually.
Additionally, every 3 years, a triennial experience study of the members of CCCERA is completed.
The non-economic assumptions are updated at the time each triennial experience study is performed.
The most recent triennial experience study,which was completed by William M. Mercer, Inc.,
was performed as of December 31, 2000. William M. Mercer, Inc.'s actuarial valuation as of
December 31, 2000, determined the funding status (the ratio of assets to liabilities)to be 89.1
using recommended assumptions.
The County of Contra Costa issued $333,724,000 of pension obligation bonds on March 1, 1994,
to satisfy the Unfunded Actuarial Accrued Liability(UAAL) for the County, calculated as of that
date. A more detailed discussion of funding is provided in the Actuarial Section of this report.
INVESTMENTS
The Board has exclusive control of all retirement system investments and is responsible for
establishing investment objectives, strategies and policies. The California Constitution and
Government Code Sections 31594 and 31595 authorize the Board to invest in any investment
deemed prudent in the Board's opinion.
The Board has adopted an Investment Policy, which provides the framework for the management
of CCCERA's investments. This policy establishes CCCERA's investment objectives and defines
the principal duties of the Board, custodian bank and investment managers. The asset allocation
is an integral part of the Investment Policy and is designed to provide an optimum mix
of asset classes with return expectations to satisfy expected liabilities. A summary of the asset
allocation can be found in the Investment Section of this report.
For the year ended December 31, 2001, CCCERA's investment portfolio returned-2.4%,before
investment management fees. This result, while disappointing, was not totally unexpected after a
number of extremely good years of returns.
CCCERA's annualized rate of return was 5.0% over the last three years and 10.4% over the last
five years,net of fees. CCCERA's earnings (except for the last two years)have significantly
outperformed the current actuarially assumed rate of 8.50%,which increased from 8.25%on July
1, 2001.
ECONOMIC AND MARKET REVIEW
2001 was a tough time for the U.S. equity markets, ending the year down 12%. For most of the
year, major stock indices were in decline, extending the slide that began in March 2000. This is
the first time since 1977-78 that the Dow has lost ground two years in a row. The NASDAQ was
down about 20% for the year. On September 11, 2001, the United States suffered the worst
terrorist attack in its history. This contributed to an already abysmal year for equity investors and
the resulting blow to investors' confidence sent the major stock market indices down more than
10% in the immediate aftermath of the attack.
As stock funds suffered, investors flocked to the relative safety of bonds. The Federal Reserve
cut short-term interest rates I I times to their lowest levels in.40 years,boosting fixed-income
funds, since bond prices move in the opposite direction of interest rates. Increased demand for
bonds from investors and the U.S. Treasury's end-of-October announcement that it would stop
issuing 30-year bonds also helped.
There were a few bright spots during 2001, in spite of the turbulent equity markets. The Russell
2000 small capitalization index was up 2.5% for the year while the Lehman Brothers Aggregate
bond index was up 8.4%. Finally,the Wilshire Real Estate funds index was up 6.3% for the year.
AWARDS
The Government Finance Officers Association of the United States and Canada(GFOA)
awarded a Certificate of Achievement for Excellence in Financial Reporting to CCCERA for its
Comprehensive Annual Financial Report(CAFR) for the year ended December 31, 2000. The
Certificate of Achievement is a prestigious national award recognizing conformance with the
highest standards for preparation of state and local government financial reports.
In order to be awarded a Certificate of Achievement, a government unit must publish an easily
readable and efficiently organized Comprehensive Annual Financial Report,the contents of
which meet or exceed program standards. The CAFR must satisfy both generally accepted
accounting principles and applicable legal requirements.
A Certificate of Achievement is valid for a period of one year only. We believe our current report
continues to conform to the Certificate of Achievement program requirments, and we are
submitting it to the GFOA for evaluation.
CCCERA was awarded the Public Pension Coordinating Council's (PPCC) Public Pension Prin-
ciples Achievement Award in 2000. This two-year award is to recognize the achievement of high
professional standards for public employee retirement systems. The award is based on compliance
with 18 specific principles that govern retirement systems' performance in the areas of benefits,
actuarial valuations, financial reporting, investments and disclosures to members.
SERVICE EFFORTS AND ACCOMPLISHMENTS
Paulson Lawsuit Settlement-During the year ended December 31, 1999,
CCCERA settled its litigation, entitled Vernon D. Paulson et al, Y. Board of Retirement of the
Contra Costa County Employees'Retirement Association, et al. The lawsuit was brought on
behalf of a class of retired members of CCCERA regarding the inclusions and exclusions of certain
pay items from the "final compensation"that are used in calculating member's retirement benefits
as a result of the Ventura Decision. Further disclosure on this settlement can be found in the
Financial Section footnotes.
During 2000 and 2001, significant progress was made in computing and paying the retroactive
payments to the retirees whose benefits were recalculated under the settlement provisions. The total
of the 2001 payments was approximately$35.1 million paid to 2,474 retirees.Additionally, three
batches of retroactive payments totaling$3.0 million were paid to 462 retirees during the period
January through March 2002. Of the $53.8 million paid through March 2002, $51.6 million is for
periods prior to the year 2001. It is estimated there will be a total of approximately 22 batches of
retroactive payments to be completed by June 30, 2002. The Board of Retirement, per the settlement
agreement, set aside S90 million of excess earnings to cover these payments and any future liability.
"New Dollar Power" Supplemental COLA Benefit- On November 7, 2000, the Board adopted a
change in the method of calculating the supplemental COLA paid to eligible retirees under the
Board's"Dollar Power,"program. Whereas eligible retirees under the prior program were those who
lost at least 25% of their purchasing power,the "New Dollar Power,"program expands the group
- of eligible retirees to those who lost at least 20% of their purchasing power. In addition, the"New
Dollar Power"COLA becomes a permanent part of a retiree's monthly benefit allowance. This
improved benefit was prefunded from excess earnings as of January 1,2001.
Enhanced Retirement Benefits - On January 30, 2001, the Retirement Board held a special
meeting to discuss enhancing benefits for retirees and the usage of excess earnings. The Board
passed a motion to propose and support legislation to provide a$200/month benefit increase to
all retirees and$120/month benefit increase to survivors as of a date specified by the Retirement
Board and to fully fund this cost from surplus excess earnings. Legislation was signed by the
Governor(SB795), a date was selected by the Retirement Board, and the benefit is currently
awaiting the County Board of Supervisors approval for enactment.
Additional benefit enhancement law changes to Code sections 31664 and 31676.11 to provide
3%per year of service at 50 years of age for safety members and 2%per year of service at 55
years of age for general members,respectively, are part of the current negotiations between the
bargaining coalition and Contra Costa County for CCCERA members as of the writing of this
letter, with the exception of one fire"special district,"that has already implemented the benefit
enhancements.
Office Expansion -During 2001, CCCERA remodeled and expanded its current office space at
- 1355 Willow Way in Concord, CA, from 8,300 to 14,000 square feet. In addition to the space for
the Board, staff and counseling area for members, state of the art technology was added to the
boardroom to enhance presentations made by staff', investment managers or others who conduct
business before the Retirement Board.
ACKNOWLEDGEMENT
The compilation of this report reflects the combined and dedicated effort of many people on
CCCERA's staff. It is intended to provide complete and reliable information as the basis for
making management decisions, as a means of determining compliance with legal provisions,
and as a means of determining responsible stewardship of the funds of CCCERA.
I would like to take this opportunity to express my thanks to the Board of Retirement,the
consultants and staff for their commitment to the Association and for their diligent work to
assure the continued successful operation of CCCERA.
Respectfully submitted,
re� _
Patricia F. Wiegert, CESS
Retirement Administrator
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CONTRA COSTA COLNTY EMPLOYEES'RETIREMENTASSOCIATION
Members of The Retirement Board
As OF DECEMBER 31, 2001
TRUSTEES TERM EXPIRES APPOINTED/ COMMITTEE
ELECTED BY
J. James Lee, Chairperson June 30, 2002 Board of Supervisors N/A
Brian Hast, Vice-Chairperson June 30, 2004 General Members Investment
- Paul Katz, Secretary June 30, 2002 Board of Supervisors Administration
Richard Cabral June 30, 2002 General Members Investment
Peter Camejo June 30, 2002 Board of Supervisors Investment
William J. Pollacek, County Treasurer Permanent by office Administration
Bob Rey June 30, 2002 Safety Members Investment
Helen J. Shea June 30, 2004 Retirees Administration
Maria Theresa Viramontes June 30, 2004 Board of Supervisors Administration
Louis Kroll(alternate) June 30, 2002 Safety Members Alternate to both
List of Professional Consultants
As of DECEMBER 31,2001
ACTUARY
William M. Mercer, Inc.
BENEFIT STATEMENT CONSULTANT
Automatic Data Processing, Inc,
DATA PROCESSING
Contra Costa County Department of Information Technology
AUDITOR
Macias, Gini &Company LLP
LEGAL COUNSEL
County Counsel of Contra Costa County
Morrison&Foerster LLP
Jan Bourg,Weinberg, Roger&Rosenfeld
INVESTMENT CONSULTANT
Dorn,Helliesen& Cottle, Inc.
MASTER CUSTODIAN
Bankers Trust Company
PROXY GUIDELINE VOTING AGENT SERVICE
Institutional Shareholder Services
Note: List of Investment Managers is located on page 54 of the Investment Section of this report.
AdministratiV
Organization Chart
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BOARD OF RETIREMENT
PATRICIA F.WIEGERT, CE+BS
Retirement Administrator CHUCK BARRON
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Public Pension Coordinating Council
Public Pension Principles
2000 Achievement Award
............................................
Public Pension Coordinating Council
Public Pension Principles
Ppcc
2000 Achievement Award
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 of Teacher Retirement(NCTR)
Michael L.Mory
Chairman
........................................................................................................................................................................................................................................................................................................................
GFOA Certificate of f
Achievement Award
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
Contra Crista County
Employees' Retirement
Association, California
For its Comprehensive Annual
Financial Report
for the Fiscal Year Ended
December 31, 2000
A Certificate of Achievement for Excellence in Financial
Reporting is presented by the Government Finance Officers
Association of the United States and Canada to
government units and public employee retirement
systems whose comprehensive annual financial
reports (CAFRs) achieve the highest
standards in government accounting
and financial reporting.
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To the Board of Retirement of the Contra
Costa County Employees' Retirement Association
County of Contra Costa, California
INDEPENDENT AUDITOR's REPORT
We have audited the accompanying statement of plan net assets of the Contra Costa County
Employees' Retirement Association(CCCERA), a component unit of the County of Contra Costa,
California, as of December 31, 2001, and the related statement of changes in plan net assets for
the year then ended.These financial statements are the responsibility of CCCERA's management.
Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United
States of America and the standards applicable to financial audits contained in Government Auditing
Standards, issued by the Comptroller General of the United States. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion,the financial statements referred to above present fairly, in all material respects,
the plan net assets of CCCERA as of December 31, 2001, and the changes in plan net assets for
the year then ended in conformity with accounting principles generally accepted in the United States
of America.
In accordance with Government Auditing Standards, we have also issued our report dated April 3,
2002, on our consideration of CCCERA's internal control over financial reporting and on our tests
of its compliance with certain provisions of laws,regulations and contracts. That report is an
integral part of an audit performed in accordance with Government Auditing Standards and should
be read in conjunction with this report in considering the results of our audit.
Macias,Gini&Company LLP CCCERAFINANCIAL
Independent Auditor's Report
Page 2
The schedules designated as required supplementary information in the table of contents are not
a required part of the basic financial statements but are supplementary information required by
the Governmental Accounting Standards Board. We have applied certain limited procedures, which
- consisted principally of inquiries of management regarding the methods of measurement and
presentation of the supplementary information. However, we did not audit the information and
express no opinion on it.
Our audit was made for the purpose of forming an opinion on the basic financial statements
taken as a whole. The data designated as other supplementary information in the table of
contents is presented for purposes of additional analysis and is not a required part of the basic
financial statements. Such information has been subjected to the auditing procedures applied
in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material
respects, in relation to the basic financial statements taken as a whole.
The other data included in this report, designated as the investment, actuarial and statistical
sections in the table of contents, has not been subjected to the auditing procedures applied
in the audit of the basic financial statements and, accordingly, we do not express an opinion
on such data.
Certified Public Accountants
Walnut Creek, California
April 3, 2002
2001 COMPREHENSIVE ANNUAL,. FINANCIAL. REPORT 25
FINANCIAL Statement of Plan Net Assets
As or DECEMBER 31, 2001
ASSETS:
Cash equivalents $ 129,733,427
Receivables:
Contributions 1,883,651
Investment trades 39,954,132
Investment income 6,651,300
Total receivables 48,489,083
Investments at fair value:
Domestic stocks 795,785,855
Domestic bonds 1,034,050,284
International stocks 361,624,686
International bonds 79,707,114
Real estate 267,431,185
Alternative investments 50,652,596
Total investments 2,589,251,720
Other Assets:
Prepaid Expenses/Deposits 344,393
Fixed Assets,net of accumulated depreciation
of$244,239 573,628
Total assets 2,768,392,251
LIABILITIES:
Employer contributions unearned 24,930,607
Retirement allowance payable 13,988,586
Accounts payable 3,940,198
Investment trades 19,654,797
Unclaimed contributions 607,444
Contributions refundable 273,937
Other liabilities 267,930
Total liabilities 63,663,499
NET ASSETS HELD IN TRUST FOR PENSION BENEFITS $ 2,704,728,752
(A schedule of funding progress is presented on page 39)
See accompanying notes to financial statements.
26 COMPREHENslvr- ANNUAL FNANr-IAL REPORT 2001
t
Statement of Changes in CCERA FINANCIAL
Plan Net Assets
FOR THE YEAR ENDED DECEMBER 31,2001
Additions:
Contributions:
Employer $ 55,182,505
Employee 18,681,239
Total contributions 73,863,744
Investment income
Net depreciation in fair value of investments (196,732,301)
Net increase in fair value of real estate 1,901,509
Interest 61,147,217
Dividends 11,438,164
Real estate income,net 16,827,594
Other income 19,182
Investment expense (9,447,816)
Net investment loss,before securities lending income (114,846,451)
Securities lending income:
Earnings 6,349,113
Rebates (5,839,949)
Fees (194,560)
Net securities lending income 314,604
Net investment loss (114,531,847)
Total additions(contributions and investment income) _ (40,668,103)
Deductions:
Benefits paid 126,190,164
Retirement healthcare benefits
reimbursed to Contra Costa County 12,342,644
Administrative 3,745,158
Contribution prepayment discount 2,920,164
Refunds of contributions 858,013
Other 607,492
Membership withdrawal (See Note 12) 10,791,085
Total deductions 157,454,720
Net Decrease (198,122,823)
NET ASSETS HELD IN FRUST FOR PENSION BENEFITS:
Beginning of year, as previously stated 2,931,261,879
Prior period adjustment(See Note 13) (28,410,304)
Beginning of year, as restated 2,902,851,575
End of year $2,704,728,752
See accompanying notes to financial statements.
2001 COMPRCHENsivE ANNUAL FINANCIAL REPORT 27
FINANCIAL
Notes To Financial Statements
FOR THE YEAR ENDED DECEMBER 31, 2001
NOTE 1. PLAN DESCRIPTION
The Contra Costa County Employees' Retirement Association(CCCERA) is governed by the
Board of Retirement(Board)under the County Employees' Retirement Law of 1937 (1937 Act),
as amended. Members should refer to the 1937 Act for more complete information.
General
CCCERA is a contributory defined benefit plan(the Plan) initially organized under the provisions
of the 1937 Act on July 1, 1945. It provides benefits upon retirement, death or disability of
members. CCCERA operates as a cost-sharing, multiple employer defined benefit pension plan
that covers substantially all of the employees of the County of Contra Costa(the County) and
eighteen other member agencies. CCCERA membership at December 31, 2401 is presented below.
Retirees and Beneficiaries Receiving Benefits 5,918
Inactive Vested Members entitled to but not yet
receiving benefits 949
Current Employees:
Vested:
General Employees 4,301
Safety Employees 1,129
Non-Vested:
General Employees 3,266
Safety Employees 569
TOTAL MEMBERSHIP 16,132
CCCERA,with its own governing board, is an independent governmental entity, separate and
distinct from the County of Contra Costa. CCCERA is a component unit of the County. CCCERA
is presented in the County's general purpose financial statements as a pension trust fund.
Benefit Provisions
The Plan is currently divided into four benefit sections in accordance with the 1937 Act. These
sections are known as General Tiers I, II, III, and Safety. Tier I includes members not mandated
to be in Tier II and reciprocal members that elect Tier I membership. Tier II includes members
hired on or after August 1, 1980, by the two employers adopting this benefit provision and their
members who elected to transfer from Tier I at that date. Tier 111, which became effective for all
eligible employees on October 1, 1998, includes members with five years of Tier II service who
elect to transfer to Tier III coverage. Safety includes members in active law enforcement, active fire
suppression work or certain other"Safety"classifications as designated by the Retirement Board.
28 COMPREHENSIVE ANNUAL FINANCIAL.. REPORT 2001
................................................................._.....................
s
NOTF,s To)~i\-ANCIA. S A._EMFN.TS
CCCERA FINANCCIAL.
Benefits are established by the Board under the provisions of the 1937 Act. Annual cost-of-living
adjustments(COLA)to retirement benefits may be granted by the Board as provided by State statutes.
Service retirements are based on age, length of service and final average salary. Subject to vested
status, employees may withdraw contributions plus interest credited or leave them on deposit for a
deferred retirement when they terminate or transfer to a reciprocal retirement system.
Pertinent provisions for each section follow:
- General- Tier I
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 minimum service credit required or non-service connected with five years of
service credit required. The retirement benefit is based on a one-year average salary in
accordance with Government Code Section 31462.
General- Tier II
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 minimum service credit 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 five years of service.
- 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 average salary in accordance with
Government Code Section 31462.
General- Tier III
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 minimum service credit or non-service connected with ten years of service credit
required. The definition of disability is the same as Tier II. The retirement benefit is based
on a one-year average salary in accordance with Government Code Section 31462.
Safety
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 minimum service credit required or non-service connected with five years of
service credit required. The retirement benefit is based on a one-year average salary in
accordance with Government Code Section 31462.
2001 C&)MPREI-IENSwE ANNUAL FINANCIAL. REPORT 29
FINANCIAL NOTFS To FINANCIAL S-F-Al- :MIENTS
Cost of Living Adjustments
The 1937 Act authorizes the Retirement Board to grant annual automatic and ad hoc cost
of living increases to all eligible retired members. Article 16.5 requires the Board to grant an
annual automatic COLA effective April 1 st. This benefit is based on the Consumer Price
Index and is limited to three percent for Tier I,Tier III and Safety members, and four percent
for Tier II members. Government Code Section 31874.3 allows the granting of a supplemental
cost-of-living benefit, on a prefunded basis to eligible retirees whose unused Consumer Price
Index increase accumulations equal or exceed 20 percent. This supplemental increase became
a permanent part of the retirees'monthly benefit effective January 1, 2001, and is known as
"New Dollar Power."
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
CCCERA's financial statements are prepared using the accrual basis of accounting. Investment
income is recognized when it is earned and expenses are recognized in the period in which they
are incurred. Employee and employer contributions are recognized as revenues in the period in
which employee services are performed. Benefits and refunds of prior contributions are
recognized when due and payable in accordance with the terms of the Plan. All investment
purchases and sales are recorded on the trade date.
Cash Equivalents
Cash equivalents include deposits in the County Treasurer's commingled cash pool and certain
investments held by the County Treasurer, custodian bank and other investment managers. Cash
equivalents are highly liquid investments with a maturity of three months or less when purchased.
Short-term investments with the custodian bank include foreign currencies, cash held in
short-term investment funds and other short-term,highly liquid investments. Short-term
investments considered cash equivalents are recorded at cost, which approximates fair value.
Methods Used to Value Investments
Investments are reported at fair value. Fair value is the amount that CCCERA can reasonably
expect to receive in a current sale between a willing buyer and a willing seller-that is, other
than in a forced or liquidation sale. The fair values of equity and fixed income securities are
derived from quoted market prices. The fair values of private market investments are estimated
from fair values provided by real estate investment funds, generally using periodic independent
appraisals, and alternative investment managers. Investments listed as alternative investments are
comprised of a U.S. timberland fund and private equity partnerships,that invest in a diversified
portfolio of venture capital, buyout and other special situations partnerships.
Receivables
Receivables consist primarily of interest, dividends, investments in transition, i.e., traded but not
yet settled, and contributions owed by the employing entities as of December 31, 2001.
30 COMPREHENsivE ANNUAL FINANCIAL REPORT 2001
...............................
NOTES TO FiN. ANCIAI, STATEMENTS
�GsrERA FINANCIAL
Fixed Assets
Fixed assets, consisting of leasehold improvements and office equipment, are presented at historical
cost, less accumulated depreciation. Depreciation is calculated using the straight-line method,with
estimated lives of ten years for leasehold improvements and ranging fromm four to five years for office
equipment.Depreciation for the year ended December 31, 2001 was $143,119.
Compensated Absences
The liability for accumulated annual leave earned by CCCERA employees, included in other
liabilities on the Statement orf Flan Net Assets, is recorded when earned by the employee. Upon
termination of employment, an employee receives compensation for hours of unused annual
leave limited by the number of annual leave hours which can be accumulated in two years of
employment.
Retirement Healthcare Benefits Reimbursed to the County of Contra Costa
Government Code Section 31592.2 authorizes the Board to pay for healthcare costs of County
retired members from the County advance reserves (see Note 8 - Valuation Reserves for
Employer Advances). The transfer of undistributed surplus excess earnings to the County
advance reserves is done on a year-by-year basis, and is an actuarially determined amount.
The amount actually expended by the County for its retired members is reimbursed up to the
actuarial determined limit. The County submits monthly, certified claims for the cost of
healthcare premium payments for retired members. In 1994, the County eliminated its unfunded
liability by issuing the 1994 Pension Obligation Bonds. By eliminating its unfunded liability
without a corresponding elimination by the other participating employers,the Board determined
the County would not receive its equitable share of the distribution of surplus excess earnings to
employers for funding cost of living adjustment(COLA)benefits. To ensure the County
continues to receive its fair share of surplus excess earnings, in lieu of funding COLA benefits,
CCCERA agreed to reimburse the County for retirement healthcare benefits.
Use of Estimates
The preparation of the financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of additions and deductions during the reporting
period.Actual results could diger from those estimates.
NOTE 3. CASH EQtiIVALENTS AND INVESTMENTS
Investment Stewardship
Except as otherwise expressly restricted by the California Constitution and by law,the Board may,
at its discretion, invest, or delegate CCCERA to invest the assets of CCCERA through the pur-
chase, holding, or sale of any form or type of instrument, or financial transaction when prudent in
the informed opinion of the Board. In addition, the Board has established an investment policy,
which places limits on the compositional mix of cash, fixed income and equity securities, alterna-
tive investments and real estate investments. CCCERA currently employs external investment
managers to manage its assets subject to the guidelines of the investment policy.
2001 ComPREHENsivE ANNUAL FINANCIAL. REPORT 31
FINANCIAL NOTEs TO FINANCIAL STAT-EMENTs
As permitted by the Government Code, CCCERA directs the County Treasurer to make specific
investments on behalf of CCCERA. Investments made by the County Treasurer are subject to
regulatory oversight by the Treasury Oversight Committee, as required by the California
Government Code Section 27134.
Industry Concentrations of Portfolio Assets
The Board's investment policies and guidelines permit investments in numerous specified asset
classes to take advantage of professional investment management advice and a well-diversified
portfolio. The investment portfolio contained no concentration of investments in any one entity
(other than those issued or guaranteed by the U.S. Government)that represented five percent or
more of plan net assets.
Custodial Credit Risk Categories
Custodial credit risk categories have been established by the Governmental Accounting Standards
Board(GASB) Statement No. 3. Category 1 includes investments that are insured or registered
or for which the securities are held by CCCERA or its agents in CCCERA's name. Category 2
includes uninsured and unregistered investments for which securities are held by the counterparty's
trust department or agent in CCCERA's name. Category 3 includes uninsured and unregistered
investments for which the securities are held by the counterparty or by its trust department or agent
but not in CCCERA's name. Investments not represented by individual securities are not subject to -
categorization, including but not limited to pooled funds, mutual funds, real estate and alternative
investments.
Investments stated at fair value as of December 31, 2001 are presented below:
Category I Category 22 Non-cateszorized Fair Value
Cash Equivalents:
Repurchase Agreements $ 13,734,000 $ 13,734,000
Funds pooled with County $ 5,893,810 5,893,810
Short-term Investment Funds
held with Fiscal Agent 110,105,617 110,105,617
TOTAL CASH EQUIVALENTS 13,734,000 115,999,427 129,733,427
Investments:
Domestic Stocks $ 795,785,855 795,785,855
Domestic Bonds 588,847,152 445,203,132 1,034,050,284
Intemational Stocks 44,412,817 317,211,869 361,624,686
International Bonds 79,707,114 79,707,114
Real Estate 267,431,185 267,431,185
Private Equity Funds 34,768,003 34,768,003
Natural Resource Funds 15,884,593 15,884,593
TOTAL INVESTMENTS 1,508,752,938 1,080,498,782 2,589,251,720
TOTAL 1,508,752,938 S 13,734,000 $ 1,196,498,209 S 2,718,985,147
32 COMPREHENSIVE ANNUAL. FINANCIAL. REPOR`r 2001
.............................. ..
6
NOTES To FINAN VIAL STATEMENTS
CCCERA FINANCIAL
CCCERA has made investments in forward currency contracts, which are unrecorded commitments
to purchase or sell stated amounts of foreign currency. Gains or losses on the disposition of the
commitments are recorded at the time of settlement. The fair values of forward currency contracts
are determined by quoted currency prices from national exchanges. As of December 31, 2001,total
commitments in forward currency contracts to purchase and sell foreign securities were $95,333,296
and $95,333,296, respectively, with fair values of$95,319,252 and $94,423,907,respectively.
NOTE 4. SECURITIES LENDING TRANSACTIONS
The investment policy, adopted by the Board, permits the use of a securities lending program with its
principal custodian bank. CCCERA lends domestic and international bonds and equities to various
brokers for collateral that will be returned for the same securities plus a fee in the future. The custo-
dian bank provides loss indemnification to CCCERA if the borrower fails to return the securities.
The custodian bank manages the securities lending program and receives cash and securities as
collateral. The collateral cash cannot be invested and the collateral securities cannot be pledged or
sold by CCCERA without borrower default. Securities on loan must be collateralized at 102% and
105% of the fair value of domestic securities and non-domestic securities, respectively. There are no
restrictions on the amount of the securities which can be loaned at one time. The term to maturity of
the security loans is generally matched with the term to maturity of the securities collateral. Such
matching existed at year-end. There were no losses associated with securities lending transactions
during the year.At year-end, CCCERA has no credit risk exposure to borrowers. The fair value of
investments on loan at December 31, 2001 is $115,197,507, which was collateralized by cash and
securities in the amount of$117,874,184.
NOTE 5. DERIVATIVE FINANCIAL INSTRUMENTS
As permitted by the California Government Code and the investment policy, CCCERA uses
forward settlement contracts, forward currency contracts, futures contracts and other derivative
products within fixed income financial instruments. These derivative financial instruments are
used to reduce financial market risks, enhance yields and to participate in all market areas
without increasing investment costs. At December 31, 2001, the following derivative financial
instruments were held by investment managers:
Alliance Capital Management and Zurich Scudder manage fixed income portfolios that
contain derivative type financial instruments. These instruments include government and
corporate obligations consisting of asset-backed securities, floating rate notes, constant
maturity index,Adjustable Rate Mortgages (ARMs), Collateralized Mortgage Obliga-
tions and LIBOR Indexed ARM's. The fair value of derivative financial instruments at
December 31, 2001 is $307,707,000 and is reported within domestic bonds, category 1,
in the table in Note 3.
Information is not available on whether the various mutual funds in which CCCERA has
invested have used,held, or written derivative financial products during the year ended
December 31, 2001.
2001 COMPREHENS1ve A€`dNUAL. FINANCIAL RF-PORT 33
FINANCIAL NOTES To FINANCIAL STATF-MFNTS
NOTE 6. INSTALLMENT CONTRACTS
CCCERA entered into agreements with the City of Pittsburg and the Riverview Fire Protection
District to accept their employees as members in 1973 and 1975, respectively. Effective July 1,
1994,the Riverview Fire Protection District was annexed into the Contra Costa County Fire
Protection District,which assumed the obligations of this agreement. Each employer agreed to
contribute, over a 30-year period,the amounts necessary to fund the acquired benefits of its
employees for services rendered prior to the date of their entry into CCCERA. Effective June 30,
2001, the City of Pittsburg terminated its membership with CCCERA and as stated in the
termination agreement,the balance of$291,488 plus interest through June 30th reduced the gross
amount transferred to CaiPERS on behalf of the City's assets (See Note 12).The following
summary lists the pertinent details of each agreement plus the amount due at December 31, 2001.
City of Contra Costa
Agreement Details: N Pittsburg Fire Protection District
Effective Date of Agreement July 4, 1973 July 1, 1975
First Annual Payment Due July 1, 1974 July 1, 1976
Rate of Interest 5% 5.75%
Annual Principal and Interest Payment $ 107,051 $ 19,380
Original Payment 1,645,626 274,067
Receivable at December 31,2001
Future Principal Payments $ - $ 55,044
Interest Accrued from July 1, 2001 - 1,583
Total $ - $ 56,627
NOTE 7. CONTRIBUTIONS
Employer and member contributions are based on statute and rates recommended by an independent
actuary and adopted by the Retirement Board. Covered employees are required by statute to
contribute toward their pensions. The rates are set to provide a retirement benefit equal to a
fractional part of the highest year(s) salary, based on membership and tier. CCCERA members are
required to contribute between 3.99% and 10.37% of their annual covered salary. Member
contributions are refundable upon termination of employment.
Employers are required to contribute at an actuarially determined rate calculated on the alternate
funding method permitted by Government Code Section 31453.5. Pursuant to provisions of the
1937 Act, the Retirement Board recommends annual contribution rates for adoption by the Board
of Supervisors. The "Entry Age Normal,"funding method is used to calculate the rate required to
provide benefits to members.
Six-year historical trend information, designed to provide information about CCCERA's progress
in accumulating sufficient assets to pay benefits when due, is presented as required supplementary
information on page 39.
Employer contributions for 1997 through 2001 are less than 100% due to action taken by the -
Board to phase-in, over a three year period, increased contribution requirements associated with
the December 31, 1997 actuarial experience study, as well as the Ventura Decision (discussed in
Note 10). The Retirement Board, at its meeting on July 11, 2000, deferred for one year,the third
year phase-in from the experience study and the second year phase-in of the Ventura Decision.
34 COMPREHENSIVE ANNUAL FINANCIAL REPORT 2001
........................................................................................................................................................ -
......................................................................................................................................................................................................................................................................................................
No,rl--s To FINANCIAL 5IATEMENTS
CCCERA FINANCIAL
This action has the effect of keeping contribution rates lower currently,
while extending the time for the phase-in of rates. The increase in the ultimate employer
contribution rate at the end of the phase-in schedule(in FY 2002-2003) is approximately 0.27%
of payroll through the end of the amortization period.
OTE 8. REBERVE,S AND DESIGNATIONS
Reserves are established from member and employer contributions and the accumulations of
investment income after satisfying investment and administrative expenses. The reserves are not
fully funded to satisfy retirement and other benefits as they become due, as noted in the Schedule
offunding Progress. Following are brief explanations of the major classes of reserves and
designations used by CCCERA:
Member Deposits Reserve represents the balance of member contributions. Additions include
member contributions and related earnings; deductions include refunds of member contributions
and transfers to Retired Member Reserve.
.Employer Advance Reserve represents the balance of employer contributions for future retire-
ment payments to current active members. Additions include contributions from the employer
and related earnings; deductions include transfers to Retired Member Reserve, lump sum death
benefits, and supplemental disability payments under legislated rehabilitation programs;
Retired Member Reserve represents the balance of transfers from Member Deposits Reserve
and Employer Advance Reserve and related earnings, less payments to retired members. Included
in the Retired Member Reserve is the Retirement Board Reserve for the New Dollar Power cost of
living supplement for Retirees.
Smoothed Market Value Valuation represents the accumulated difference between the Actuarial
Value of Assets for valuation and the accumulated balances in the valuation reserves. This was
- a one-time adjustment to increase the valuation reserves as a result of implementing Governmental
Accounting Standards Board Statement No. 25.
Statutory Contingency Reserve represents investment earnings accumulated for future earnings
deficiencies, investment losses and other contingencies. Additions include investment income
and other revenues; deductions include investment expenses, administrative expenses, interest
allocated to other reserves, funding of Supplemental COLA and transfers of excess earnings to
other Reserves and other Designations. The Statutory Contingency Reserve is used to satisfy the
California Government Code requirement that CCCERA reserve one percent of its assets against
deficiencies in interest earnings in other years, losses on investments, and other contingencies.
Market Stabilization Account represents the deferred return developed by the smoothing of
realized and unrealized gains and losses based on a five-year smoothing. This method smoothes
only the semi-annual deviation of total market return(net of expenses) from the return target,
8.50 percent per annum. As of December 31, 2001,the Market Stabilization Account is in a
negative position due to market losses over the past two years.
2001 COMPREHENSIVE ANNUAL FINANCIAL REPORT 3
FINANCIAL NOTEs To FINANCIAL STATEMENT'S
Reserved and designated net assets at December 31, 2001 are as follows:
Valuation Reserves:
Member Deposits $ 226.946.787
Member Cost of Living 42,720,067
Employer Advance 558,650,009
Employer Cost of Living 383,857,478
Retired Member 868,375,917
Retired Cost of Living 314,529,580
Smoothed Market Value Valuation 114,581,216
Total Valuation Reserves 2,509,661,054
Supplemental Reserves:
Post.Retirement Death Benefit 11,585,380
New Dollar Power Cost of Living Supplement&Pre-Fund 35,163,270
Total Supplemental Reserves 46,748,650
Other Reserves/Designations:
Statutory Contingency Reserve(one percent) 27,683,923
Board Contingency Designations:
Additional one percent contingency designation 27,683,923
Paulson Lawsuit Settlement Designation 53,087,977
Excess Earnings from previous years 316,832,593
Actuarial Transfer Designation 16,100,498
Retiree Health Benefit Transfer Designation 4,637,588
Total Other Reserves/Designations 446,026,502
Total Allocated Reserves/Designations 3,002,436,206
Market Stabilization Account (385,448,325)
Unrestricted net assets 87,740,871
NET ASSETS HELD IN TRUST FOR PENSION BENEFITS $2,704,728,752
36 COMPREHENSIVE: ANNUAL FINANCIAL REPORT 2001
Noes To FINANCIAL STATEMENTS
CCCERA FINANCIAL
NOTE 9. RISK MANAGEMENT
CCCERA is exposed to various risks of loss related to torts; theft of, damage to, and destruction of
assets; injuries to employees; and natural disasters. CCCERA manages and finances these risks by
purchasing commercial insurance. There have been no significant reductions in insurance coverage
from the previous year,nor have settled claims exceeded CCCERA's commercial insurance
coverage in any of the past three years.
NOTE 10. VENTURADECISION
On August 14, 1997, the Supreme Court of the State of California issued a decision in a case entitled
Ventura County Deputy Sheriffs Association vs. Board of Retirement of Ventura County Employees'
Retirement Association (Ventura Decision). On October 1, 1997, the Ventura Decision became final.
The Supreme Court held that a County Retirement System operating under provisions of the County
Employees Retirement Law of 1937 must include certain types of cash incentive payments and
additional pay elements received by an employee,within the employee's "compensation earnable,"
and"final," compensation when calculating the employee's retirement benefits. The Board voted to
implement the changes to the retirement benefits as of October 1, 1997, the date the decision became
final
NOTE 11. PAULSON LAWSUIT SETTLEMENT
During the year ended December 31, 1999, CCCERA settled its litigation, entitled Vernon D.
Paulson, et al. vs. Board of Retirement of the Contra Costa County Employees'Retirement
Association, et al. As of October 14, 1999, all legal documents to finalize the case settlement
were signed by the court.
The lawsuit was brought on behalf of a class of retired members of CCCERA regarding the
inclusions and the exclusions from "final" compensation that are used in calculating member's
retirement benefits as a result of the Ventura Decision (see Note 10). A settlement agreement has
been entered into with all parties and a petitioner's class has been certified consisting of all
retired members of CCCERA whose effective retirement date was on or before September 30,
1997 (i.e.,the period prior to the October 1, 1997 effective date of the Ventura Decision).
The Board designated$90 million from unrestricted excess earnings to cover the anticipated
liability of the settlement. Interest at the actuarial assumed rate (currently 8.50 percent) is cred-
ited to the settlement amount until the final liability is determined. As claim forms are submitted,
benefits recalculated and paid, the funds will be transferred to the Employer Advance Reserve to
cover the liability. The costs will then be "funded"to the Retiree Reserves. It is anticipated it will
take another year for CCCERA to determine the final effect of this case.
CCCERA's actuary will determine the present value of future benefits after the completion of the
final batch payment for past benefits. This amount will further reduce the $90 million set aside
for the liability. If the $90 million is sufficient to cover the past and future liability,the remainder
will be transferred to the employer advance reserve per the settlement agreement. If the $90
million is insufficient, each participating employer will be assessed its share of the additional
liability that will be paid to CCCERA over a time period not to exceed 20 years.
2001 COMPREHENSIVE ANNUAL FINANCIAL REPORT 37
FINANCIAL NoTEs To l INANCIAI, STxrEmENTs
The recalculation and distribution of past and future benefits is being conducted in batches. As of
December 31, 2001, CCCERA already has recalculated and paid 16 batches (3,203 claimants) for
a total of$50.8 million. As of March 2002, CCCERA had recalculated batches 17 through 1.9
(462 claimants) and accrued a payable of$3.0 million in past benefits. Of the $53.8 million paid
and accrued through March 2002, $24.0 million was recorded as of December 31, 2000 and
$29.8 is recorded for the year ended December 31, 2001. Of the $29.8 million paid and accrued
for 2001, $2.2 million pertains to the current year and $27.6 million is for periods prior to the
year ended December 31, 2001 and is recorded as a prior period adjustment on the Statement of
Changes In Plan Net Assets. The total liability for past benefits cannot be reasonably estimated
due to the complexity involved in calculating the "Paulson Benefit."As calculations are com-
pleted,the liability for the past benefits will be recognized. As of December 31, 2001, the
Paulson Lawsuit settlement designation is $53.1 million.
MOTE 12. COMMITMENTS AND CONTINGENCIES
City of Pittsburg Withdrawal from Membership
The City of Pittsburg(the City)terminated its membership with CCCERA effective June 30,
2001. The City held an election of its sworn and miscellaneous active employees. The result of
that election was a decision to convert to California Public Employees' Retirement System
(CalPERS) on July 1, 2001.
The retired and deferred members from the City,who either currently draw a benefit or could
draw a benefit in the future, will continue with CCCERA. A determination of the value of the --.
City's accumulated assets as well as the City's current and unfunded liability was undertaken
using methodology per CCCERA's Employer Termination Policy. The amount of$10,791,085,
which is after the deduction for the remaining contract balance and an excess terminal pay
liability owed to CCCERA, was transferred to CalPERS in November 2001 for the City's share
of assets as of June 30, 2001. Sufficient assets remain with CCCERA to pay the ongoing benefits
of the retirees and beneficiaries of the City.
CCCERA's independent actuary will redetermine the City's liability as of December 31 of each
year for which CCCERA conducts a triennial experience analysis, the most recent experience
analysis being December 31,2000. If the ratio of the City's assets to the terminiation liability (as
measured per the termination agreement) is below 95% or above 105%,the difference between
the City's assets and liability will be amortized and transferred as provided in the termination
agreement.
NOTE 13. PRIOR PERIOD ADJUSTMENT
The beginning Net Assets were decreased by$27.6 million for the portion of the Paulson Benefit
that was paid in 2001 but is for periods prior to the year ended December 31, 2001 (see Note 11).
In addition,the beginning Net Assets were decreased by $810,000 for an amount still owed to
CalPERS for membership withdrawal plus the remaining contract balance owed by the City of
Pittsburg for prior service as well as the reduction of the designations for facilities/system
enhancements and capital outlay that were used by CCCERA during the initial phases of the
office expansion project in 2000.
38 COMPREHENSIVE ANNUAL FINANCIAL REPORT 2001
CCC1 RA FINANCIAL,
Required Supplementary Information
SCHEDULE OF FUNDING PROGRESS (DOLLARS IN THOUSANDS)
Actuarial
Accrued UAAL as a
Actuarial Liability Unfunded Percentage of
Actuarial Value of (AAL) AAL Funded Covered Covered
Valuation Assets* Entry Age (URAL) Ratio Payroll Payroll
Date (a) (b) (b-a) (a/b) (c) (b-a)/c)
1/1/96 $ 1,522,796 $ 1,632,227 $ 109,431 93.3% $ 351,831 31.1%
1/l/97 1,629,592 1,730,879 101,287 94.1% 353,738 28.6%
12/31/97 1,742,014 1,983,394 241,380 87.8% 385,412 62.6%
12/31/98 1,868,521 2,320,315 451,794 80.5% 411,748 109.7%
12/31/99** 2,137,554 2,433,614 296,060 87.8% 463,279 63.9%
12/31/00 2,355,179 2,643,526 288,347 89.1% 488,384 59.0%
*Restated to exclude non-valuation reserves.
**Adjusted to reflect the Retirement Hoard's action to change the annual investment return assumption to 8.5%.
SCHEDULE OF EMPLOYER CONTRIBUTIONS
Year Annual
Ended Required Percentage
December 31 Contribution Contributed
1996 $40,081,019 100.0%
1997 38,537,711 95.2%
1998 44,243,668*** 92.5%
1999 52,565,912`** 93.7%
2000 58,035,756 ** 91.3%
2001 58,642,407 * 94.1%
***The contribution percentage is less than 100%due to actions taken by the Board of Retirement to phase-in,over
three years,increased contribution requirements associated with the significant actuarial assumption changes
and the expansion of eamable compensation required by the"Ventura Decision,"which is discussed in Note 10
of the Notes to Financial Statements.
Actuarial valuations of CCCERA are normally carried out as of December 31 of each year and
contribution requirements resulting from such valuations become effective on July 1 of the
following fiscal year.
The information presented in the required supplementary schedules was determined as part of the
actuarial valuations at the dates indicated.
2001 COMPREHENsivE ANNUAL. FINANCIAL. REPORT 39
FINANCIAL
Latest Actuarial Valuation Methods
and Assumptions
Valuation Date December 31, 2000
Actuarial Cost Method Entry Age Normal Funding Method
Amortization Method Level Percent- closed
Remaining Amortization Period 40 Years
Asset Valuation Method 5 year Smoothed Market, excluding
non-valuation reserves and designations*
Actuarial Assumptions
Investment Rate of Return 8.50%
Projected Salary Increases 5.71%
Attributed to Inflation 4.25x/0
Cast-of-Living Adjustments Contingent upon CPI Increases with a
3% or 4% Maximum
*The exclusion of non-valuation reserves and designations was implemented in the January 1, 1997 actuarial
study.The six year history on page 39 has been restated to reflect this change.
40 COMPREHENSIVE ANNUAL FINANCIAL REPORT 2001
.. .-------- . .................................... ............ ....................................................................................................................................................................................................................
CCCERA FINANCIAL..
4G
Macias, Gini &Company
Cet tied Public ACCtauntan anti
Management Consultants :ns:,q; ,_. .�;"i._¢
To the Board of Retirement of the Contra
Costa County Employees' Retirement Association
County of Contra Costa, California
INDEPENDENT AUDITORS RERORT ON COMPLIANCE AND ON
INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN
AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE
WITH riffvERNmENTAUDITINGSTA NDARDs
We have audited the financial statements of the Contra Costa County Employees' Retirement Association
(CCCERA),a component unit of the County of Contra Costa,California, as of and for the year ended
December 31,2001, and have issued our report thereon dated April 3, 2002. We conducted our audit in
accordance with auditing standards generally accepted in the United States of America and the standards
applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller
General of the United States.
Compliance
As part of obtaining reasonable assurance about whether CCCERA's financial statements are free of material
misstatement, we performed tests of its compliance with certain provisions of laws, regulations and contracts,
noncompliance with which could have a direct and material effect on the determination of financial statement
amounts.However,providing an opinion on compliance with those provisions was not an objective of our
audit and, accordingly we do not express such an opinion. The results of our tests disclosed no instances of
noncompliance that are required to be reported under Government Auditing Standards.
Internal Control over.Financial Reporting
In planning and performing our audit,we considered CCCERA's internal control over financial reporting in
order to determine our auditing procedures for the purpose of expressing our opinion on the financial state-
ments and not to provide assurance on the interal control over financial reporting. Our consideration of the
internal control over financial reporting would not necessarily disclose all matters in the internal control over
financial reporting that might be material weaknesses. A material weakness is a condition in which the design
or operation of one or more of the internal control components does not reduce to a relatively low level the
risk that misstatements in amounts that would be material in relation to the financial statements being audited
may occur and not be detected within a timely period by employees in the normal course of performing their
assigned functions. We noted no matters involving the internal control over financial reporting and its
operation that we consider to be material weaknesses.
This report is intended solely for the information and use of the Board of Retirement,management and
participating governmental agencies and is not intended to be and should not be used by anyone other than
these specified parties.
Certified Public Accountants
Walnut Creek, California
April 3, 2002
2001 COMP'REHENsivE ANNUAL, FINANCIAL„ REPORT 41
FINANCIAL
OTHER SUPPLEMENTARY INFORMATION
Schedule of Administrative Expenses
FOR FISCAL YEAR ENDED DECEMBER 31, 2001
Personnel Services:
Salaries and Wages $ 1,687,679
Employee Retirement 607,663
TOTAL PERSONNEL EXPENSES 2,295,342
Professional Services:
Actuarial Consulting Fees 17,237
Actuary -Benefit Statement 100,273
Attorney Fees 177,642
Computer and Software Services and Support 28,958
County Counsel-General 26,433
County Counsel-Disability 67,871
Disability Hearing Officer/Medical Reviews 39,133
Disability Stenographic Fees 1,130
External Audit Fees 33,714
Contra Costa Dept of Information Technology 31,380
Newsletters 20,056
Other Professional Services 60,419
TOTAL PROFESSIONAL SERVICES 604,246 -
Office Expenses:
Office Lease 216,586
Office Supplies 59,344
Minor Equipment and Computer Supplies 98,193
Postage 37,445
Equipment Lease 24,796
Requested Maintenance 6,682
Communications/Telephone 12,990
Printing and Publications 17,683
TOTAL OFFICE EXPENSES 473,719
Miscellaneous:
Fiduciary and Staff-Education/Travel 112,801
Fiduciary and Staff-Meetings/Other Travel 3,010
Insurance 102,063
Memberships 10,858
TOTAL MISCELLANEOUS 228,732
Depreciation and Amortization 143,119
TOTAL ADMINISTRATIVE EXPENSES S 3,745,158
42 COMPREHENSIVE ANNUAL FINANCIAL REPORT 2001
................-.............................................................................................
O
CCCERA FINANCIAL
Schedule of Investment Expenses
FOR THE YEAR ENDED DECEMBER 31, 2001
Investment Management Fees,by portfolio:
Stocks $ 3,595,733
Bonds 1,589,056
Real Estate 2.,574,513
Alternative 987,900
Cash and Short Terra 1,637
TOTAL INVESTMENT MANAGEMENT FEES 8,748,839
Investment Consulting Fees:
Consulting Services 245,421
Actuarial Services 217,094
TOTAL INVESTMENT CONSULTING FEES 462,515
Investment Custodian Fees 236,462
TOTAL INVESTMENT EXPENSES $ 9,447,816
2001 COMPREHENSIVE ANNUAL FINANCIAL REPORT 43
III. Investment Section
kaMX
.....
el�r..aorta.
h
tr �
0.
44Emmplloyees'Retirement Assoclotion
INVESTMENT
Report On Investment Activity
DORM, HELLIESEN & COTTLE INC.
INVESTMENT CONSULTING
February 27, 2002
Patricia Wiegert
Retirement Administrator
Contra Costa County Employees' Retirement Association
1355 Willow Way, Suite 221
Concord, California 94520
Dear Pat:
This letter reviews the investment performance of the Contra Costa County Employees'
Retirement Association for the year ended December 31, 2001.
Contra Costa County Employees' Retirement Association had a total return on a market value
basis before deduction of fees of-2.4% for the calendar year 2001. (This return may differ from -
other return calculations because it is before deduction of fees and treats private equity and some
real estate investments with a one quarter lag due to timing constraints.) Annualized returns for
the three years ended December 31, 2001 were 5.0%per year, and for five years were 10.4°/x.
These returns were calculated by Dorn, Helliesen&Cottle, Inc., from custodial statements and
other source data using methodology approved by the Bank Administration Institute Study and
by AIMR.
The -2.4% return did not meet most investment objectives. It fell short of the actuarial interest
rate of 8.25% and then 8.5%, which were in effect for the year, and it did not meet the consumer
price index plus 400 basis points target. Longer term results have exceeded the actuarial and
inflation targets.
The total return for the year equalled the median public fund return of-2.4% (from the Wilshire
Cooperative database)but slightly trailed the total fund median at-1.6%. Three and five year -
results have been better than the database medians.
650 CALIFORNIA STREET, 17TH FLOOR •SAN FRANCISCO,CALIFORNIA 94108-2702•TEL:415 986-2700•FAX:415 985-2777
46 COMP€2EHENSivE ANNUAL FINANCIAL. STATEMENT 2001
_
...............................................................
REPoRr ON INVEST-NIBNT AcTivi-fy,PAGB 2
CCCERA INVESTMENT
Patricia Wiegert
February 27,2002
Page 2
Domestic equity markets posted negative results in the year 2001, after a negative year in 2040.
The two down years followed a number of years of extremely strong performance. The Standard
&Poors 500 index was down -11.9% for 2041. However, the Russell 2004 small capitalization
index was up 2.5% for the year. CCCERA's domestic equity returned -9.2%,better than the large
capitalization indexes and the median. International equity was also down in 2041,with the
EAFE index down -21.2%. CCCERA's international equity was down -18.1%, in the third
quartile.
Domestic bond markets,which had trailed equities prior to 2000 and were strong last year,again
out-performed in 2001 with a strong return for the year of 8.4% for the Lehman Aggregate index
and the median bond portfolio. CCCERA's domestic fixed income had a 7.2%return for the year.
CCCERA again was helped by its investments in real estate(up 10.1% for the year)Alternative
investments,however,pulled down returns in 2041 with a-22.8% return.. Private equity markets
that had been strong in 2040 fell on hard times in 2041.
Total assets in the Fund as of December 31, 2001 excluding cash were $2.733 billion, compared
to $2.851 billion a year earlier.
2401 was a difficult year for investors, and we share with you the belief that future returns will be
- more in keeping with long term trends, with positive returns approaching 10%per year on
average.
Yours truly, 1�
INVESTMENT
.,: .
General Information
CCCERA's investment program objective is to provide CCCERA participants and beneficiaries
with benefits as required by the County Employees Retirement Law of 1937. The Plan's main
investment objective is for the total fund return to exceed the CPI plus 400 basis points over a
market cycle (four or five years). This is accomplished by the implementation of a carefully
planned and executed long-term investment program.
The California Constitution and Government Code Section 31594 and 31595 authorize the Board
to invest in any investment deemed prudent in the Board's opinion. Investment decisions are to
be made in the sole interest and for the exclusive purpose of providing benefits, minimizing
employer contributions and defraying reasonable expenses for administering the system.
Investments are to be diversified to minimize the risk of loss and to maximize the rate of return,
unless under the circumstances it is clearly not prudent to do so.
The Board has adopted an Investment Policy, which provides the framework for the management
of CCCERA's investments. This policy establishes CCCERA's investment policies and
objectives and defines the principal duties of the Board, custodian bank and investment
managers. For the year ended December 31, 2001, the total fund return was -2.4%, below the
targeted return of 5.5% (CPI plus 400 basis points),but equal to the median fund return of-2.4%.
SUMMARY OF PROXY VOTING GUIDELINES AND PROCEDURES
Voting of proxy ballots shall be in accordance with CCCERA's Proxy Voting Guidelines. CCCERA
utilizes the services of Institutional Shareholders Services(ISS)to research and vote CCCERA's
U.S. proxy ballots in order to protect and enhance our returns.
48 COMPREHENSwE ANNUAL I~3N ANC#133..
Investment Results Based on
air Value* CCCERA INVESTMEN r
As of DECEMBER 31,2001
CURRENT ANNUALIZED
YEAR 3 YEAR 5 YEAR
DOMESTIC EQUITY -9.20% 1.70% 11.20%
Benchmarks: S&P 500 -11.90% -1.10% 10.70%
S&P 500 ex Tobacco -12.10% -0.90% 10.80%
Russell 2000 2.50% 6.40% 7.50%
Russell 3000 -11.50% -0.30% 10.10%
INTERNATIONAL EQUITY -18.10% 1.00% 5.40%
Benchmarks: MSCI EAFE Index -21.20% -4.80% 1.20%
MSCI EM Free Index -2.40% 4.10% -7.70%
DOMESTIC FIXED INCOME 7.20% 5.70% 7.00%
Benchmarks: Lehman Aggregate 8.40% 6.30% 7.40%
Salomon Mortgage 8.20% 7.00% 7.50%
Salomon High Yield 5.40% 0.40% 3.50%
T-Bills 4.40% 5.00% 5.20%
INTERNATIONAL FIXED INCOME ** 5.40% - -
Benchmark: Sal Non US Govt Hedged 6.10% 6.10% 8.20%
REAL ESTATE 10.10% 10.70% 12.70%
Benchmarks: Wilshire RE Funds Index 6.30% 8.60% 11.30%
CPI+ 500 bps 6.70% 7.60% 7.20%
ALTERNATIVE INVESTMENTS -22.80% 14.90% 13.00%
TOTAL FUND -2.40% 11.30% 14.20%
CPI+400 bps 5.50% 6.50% 6.20%
*Using time-weighted rate of return based on the market rate of return
**International Fixed Income returns not applicable for 3&5 years
INVESTMENT
ASSET ALLOCATION
The Asset Allocation is an integral part of the Investment Policy. If a new asset class is implemented
or a current asset class is expanded,the Plan's policy is modified to reflect the change or revision.
The Board implements the asset allocation plan by hiring passive(index fund)and active investment
managers to invest assets on CCCERA's behalf, subject to investment guidelines incorporated into
each firm's investment manager contract. CCCERA's investment consultant assists the Board with
the design and implementation of the asset allocation as depicted in the following chart:
As of DEcf�,mBF-R 31, 2001
Real Intl Int'l
Estate Fixed Cash Equity Alt.Inv.
10.0% 4.0°l0 l.o% :2.0% 5.0%
US Fixed _
US Equity 29.0P/o
39.0%
Target Asset Allocation
50 COMPREHENSivE ANNUAL. FINANCIAL STATEMENT 2001
__
10 Largest Stock Holdings c7CERA INVESTMENT
as of 12/31/01
CUSIP SHARES SECURITY NAME FAIR VALUE
369604100 640,500 General Electric Co $ 25,671,240
172967100 158,007 Citigroup Inc 22,834,931
717081100 541,000 Pfizer Inc 21,558,850
594918100 300,400 Microsoft Corp 19,901,500
478160100 298,844 Johnson&Johnson 17,661,680
294741100 568,900 Equity Office Properties Trust 17,112,512
026874100 201,733 American Int'l Group Inc 16,017,600
458140100 508,200 Intel Corp 15,982,890
902124100 266,065 Tyco Intl Ltd New 15,671,229
026509100 244,000 American Home Products Corp 14,971,840
TOTAL LARGEST STOCK HOLDINGS $ 187,384,272
10 Largest Bond Holdings as of 12/31/01
CUSIP PAR VALUE SECURITY NAME COST FAIR VALUE
912827550 $19,230,000 US Treasury Note $20,811,605 $ 20,362,767
31295MZRO 14,800,000 Federal Horne Loan Mtg Corp 14,957,250 14,809,324
22540AKHO 14,020,000 Credit Suisse 1 st Boston Mtg Secs Corp 14,022,547 14,020,000
912810EZO 8,720,000 US Treasury Bond 9,980,521 9,695,506
31298HRKO 9,469,012 Federal Horne Loan Mtg Corp 9,443,120 9,480,848
31383XN40 8,898,217 Federal National Mtg Assoc 9,115,111 9,479,360
58962FAPO 9,300,000 Meridian Funding Company 9,293,336 9,285,678
3128GMVJO 8,773,205 Federal Dome Loan Mtg Assoc 9,089,853 8,951,389
31387F5EO 7,930,482 Federal National Mtg Assoc 7,849,938 7,950,308
126671N'KO 7,587,283 Countrywide Asset-Backed Certs 7,685,185 7,704,426
TOTAL LARGEST BOND HOLDINGS $ 111,739,606
A complete list of portfolio holdings is available on request.
2001 COMPREHENSIVE ANNUAL FINANCIAL REPORT 51
INVESTMENT
Schedule of Investment Management Fees
FOR THE YEAR ENDrD DECEMBER 31, 2001
Investment Activity
Stock Managers
Domestic $ 2,812,643
International 783,090
Subtotal 3,595,733
Bond Managers
Domestic 1,220,799
International 368,257
Subtotal 1,589,056
Real Estate Managers 2,574,513
Alternative Investment Managers 987,900
Cash & Short Term with County Treasurer 1,637
Total Fees from Investment Activity8,7481839
{see page 43}
Securities Lending Activity
Management Fee 194,560
Borrower Rebate 5,839,949
Total Fees from Securities Lending Activity 6,034 509
TOTAL, INVESTMENT MANAGEMENT FEES $ 14,783,348
52 COMPREHENSIVE ANNUAL FIPiIANC5AL STATEMENT 2001
j''��rm nt Sum TM
Investment � �����A INVESTMENT
�
As OF DECEMBER 31, 2001
TYPE OF INVESTMENT FAIR VALUE PERCENT OF
TOTAL FAIR
VALUE
Short Term Investments held by Fiscal Agent $ 110,105,617 4.05%
Short Term Investments held by the County 19,627,810 0.72%
TOTAL SHORT TERM INVESTMENTS 129,733,427 4.77%
LAS Government and Agency Instruments 267,865,105 9.85%
Domestic Corporate Bonds 766,185,179 28.18%
International Bonds _ 79,707,114 2.93%
TOTAL BONDS 1,113,757,398 40.96%
Domestic Stocks 795,785,855 29.27%
International Stocks 361,624,686 13.30%
TOTAL STOCKS 1,157,4111,541 42.57%
Real Estate 267,431,185 9.84%
Alternative Investments 50,652,596 1.86%
TOTAL INVESTMENTS $ 2,718,985,147 100%
INVESTMENT
Investment Managers
AS OF DECEMBER 31,2041
ALTERNATIVE ASSETS
Adams Street Partners
Pathway Capital Management
Prudential Timber Investments Inc
EQUITY -DOMESTIC EQUITY - INTERNATIONAL
Alliance Capital Management Corp Capital Guardian Trust Company
Boston Partners Deutsche Asset Management
Dreyfus Investment Advisors,Inc
Wentworth, Hauser and Violich
FIXED INCOME -DOMESTIC FIXED INCOME -INTERNATIONAL
AFL-CIO Housing Investment Trust Fischer,Francis, Trees &Watts, Inc
Barclays Global Investors -
Fountain Capital Management LLC
Nicholas-Applegate Capital Management
Zurich Scudder Investments
REAL ESTATE
DLJ Real Estate Capital Partners LP
FFCA Institutional Advisors, Inc
Hearthstone Advisors
Lend Lease Rosen
Prudential Investment Management Service
SSR Realty Advisors
US Realty Advisors
WP Carey& Co, Inc
CASH & SHORT TERM
Contra Costa County Treasurer
Bankers Trust Company(subsidiary of Deutsche Bank)
SECURITIES LENDING .PROGRAM
Bankers Trust Company(subsidiary of Deutsche Bank)
54 COMPREHENSIVE ANNUAL FINANCIAL STATEMENT 2001
j�f r
f
I
f
_.
................................_..._.
Actuary Certification Leger
William M.
NURCER
Contra Costa County Employees'Retirement Association's basic financial goal is to establish contributions
which fully fund the system's liabilities, and which, as a percentage of payroll,remain level for each genera-
tion of active members. Annual actuarial valuations measure the progress toward this goal, as well as test the
adequacy of the contribution rates.
The actuarial valuation required for the Contra Costa County Employees' Retirement Association has been
prepared as of December 31, 2000, by William M. Mercer,Incorporated. In preparing this valuation, we have
employed generally accepted actuarial methods and assumptions to evaluate the Association's assets, liabili-
ties and future contribution requirements. Our calculations are based upon member data and unaudited
financial information provided to us by the Association's staff. This information has not been audited by us,
but it has been reviewed and found to be consistent, both internally and with prior year's information.
The contribution requirements are determined as a percentage of payroll. The Association's employer rates
provide for both normal cost and a contribution to amortize any unfunded or overfunded actuarial accrued
liabilities.At its June 9, 1998 meeting, the Board of Retirement elected to amortize the Association's un-
funded actuarial accrued liability over a 20 year period. In addition, the Board elected to phase-in over a three
year period the significant employer contribution rate increase which resulted from the December 31, 1997
triennial experience analysis. This phase-in expired with the December 31, 1999 valuation.
The Board has also decided to transfer an amount of$32,943,000 from the Unrestricted Reserve to reduce the
employer's basic contribution rates to those provided in William M. Mercer's letter dated March 9, 2001.
The rates calculated in this report may be adopted by the Board for the Fiscal Year 2002-2003.
The ratio of actuarial value of assets to actuarial accrued liabilities increased from 88%to 89%as a result of
this vaulation.
Paulson Court Settlement
As a result of the Paulson Court Settlement, the Retirement Board has begun to recognize additional pay
elements as Earnable Compensation. The additional pay elements recognized as Earpable Compensation
include items which are not known until a member retires("terminal pay" items). As a result, it is necessary
to include an assumption to anticipate terminal pay for members who have not yet retired.
At its November 2, 1999 meeting,the Board adopted terminal pay assumptions for active members and took
the following actions with respect to the associated contribution rate increases:
Wiiliom i\11. Merce, lncorporotc.d Phone 415 745-£1700 Ca;ifo,ni!a insurance license CSI 0400
3 Emdarcadero Center, Suite 1 500 Fox 415 743-8950
Box 7440%94 1210
San Francisco, CA 941 1 1-4015
......... ._ ...... .........
1.To avoid creating an inequity among members,there will be no change in member basic benefit
contribution rates as a result of the new terminal pay assumptions. The inequities could occur as a
result of the considerable differences in terminal pay policies among participating employers, as well
as the likelihood of considerable variation in terminal pay that will be received by individual members.
2. The increase in the employer contribution rates resulting from the application of the terminal pay
assumptions will be phased in over three years, effective with the December 31, 1998 valuation.This
valuation reflects the final phase-in of the employer rate increase.
The terminal pay assumptions are described in the Actuarial Assumptions section of this report(under
Salary Increase Assumption).
A further impact of the Paulson Settlement is the additional benefits to be paid to members of the
Association who were retired at the time the decision was rendered. These retired members would receive
- the following additional benefits,based on a litigation settlement agreement between the Association's
sponsoring employers and retirees who were party to the litigation:
• Retroactive benefits(to September 1, 1994);plus
• Increased future benefits
In order to determine the amount of these additional benefits, it will be necessary for the Association to
determine the amounts that retired members had received in additional pay elements now recognized as
Earnable Compensation. This process could take several years. In the interim,the Board designated$90
million of assets to provide for the resulting additional liabilities and to assume $90 million will satisfy
these liabilities. The actual liability could be greater or less than $90 million. Because a portion of those
additional liabilities have been included in this valuation, a transfer has been made from this reserve to
offset the additional liability included.
City of Pittsburg
The report has been prepared to reflect the withdrawal of the City of Pittsburg from the CCCERA.The
assets of the flan have been adjusted to take account of the contribution balances payable to CalPERS on
behalf of the active members,and the liabilities of the Plan exclude the active members of the City of
Pittsburg as of December 31, 200€1.The Plan retains the inactive liabilities of the City in accordance with
the withdrawal contract between the CCCERA and the City.
Experience A alysis
Changes were recommended for most of the assumptions following the Experience Analysis carried out as
of December 31,2000. The following list gives a brief description of the most significant recommended
changes:
• Withdrawal- Separate rates were determined for members with less than one year of
service, since they generally exhibit higher withdrawal rates. Slightly higher withdrawals
were observed among Female General Tier 3 members and the withdrawal assumptions
were modified to reflect this trend. Other changes were only modest adjustments.
• Duty Disability-"There were more duty disabilities among General Tier I female and Safety
members than expected. Adjustments were made to anticipate more duty disabilities.
• Service Retirement Rates- Service retirement took place earlier than expected for General Tier
1, 2 and Safety members, and adjustments were made to the rates. General Tier 3 members
retired at much lower rates than expected(based on Tier I assumptions)so appropriate
adjustments were made.
• Termination with Vested Benefit-We observed that several members terminated employment
with less that 5 years of CCCERA service and became entitled to a deferred retirement benefit
(through reciprocal service with a prior or a new employer). We have extended the vested
termination assumption to apply to members with less than 5 years of service.
• Marriage Assumption-Based on experience from the last five years,we recommended new
marriage assumptions(used to calculate the cost of survivor benefits)to reflect the observed
percentage of members married at retirement. At the direction of the Board, the valuation did not
use the recommended marriage assumption.
• Service from Unused Sick Leave Conversion Members are allowed to convert unused sick leave
to service credit at retirement. Previously, such service was not recognized in the actuarial
valuation until it was actually converted. We are recommending that"sick leave service"be
prefunded during a member's active working years. The Board decided not to pre-fund but to
continue the current practice of funding the conversions at retirement.
• Tier 2 Members Electing Tier 3 Membership-We recommend an increase in the Tier 2 employer
normal cost for those employers who allow their members to elect Tier 3 after five years of
service. This will pre-fund the increase in the Unfunded Actuarial Accrued Liability which arises
when their employees elect Tier 3.
• Salary Increase-Changes were made to the merit and longevity salary increase assumptions to
reflect observed salary increases over the last three years.
• Post-Retirement Mortality-We recommended the mortality tables for retired female General and
Safety members reflect lower than expected deaths over the experience study period. At the
direction of the Board,the valuation did not use the recommended mortality tables.
• Post-Retirement Cost-of-Living Adjustment for Tier 2 Members -Tier 2 retirees are expected to
receive an average COLA of 3.75% annually during their retired lifetime. We recommend that an
assumed COLA of 3.75%be used for Tier 2 funding purposes.
In January 2001,we provided a recommendation that the Board adopt an investment return assumption of
8.25% for determining the contribution rates for the 2001-2002 fiscal year. The Board considered the
adoption of either an 8.25%, 8.50% or 8.75% investment return.assumption. After extensive discussion,
the Board decided to adopt an 8.50%investment return assumption in lieu of our recommendations.
Although our recommendation in this report remains at 8.25°/x,we believe the 8.50%assumption adopted
by the Board does not pose an unsound financial risk to CCCERA. However, it will make it more difficult
to fund supplemental retiree COLA benefits as well as subsidize member and employer COLA contribu-
tions with excess returns.
The contribution rates provided in this report are based on the 8.50%investment
return assumption adopted by the Board.
Benefit Changes,
The following is a list of benefit plan changes since our December 31, 1999 valuation:
The following new benefits/improvements were granted during the year 2000.
• A supplemental cost-of-living benefit for all retirees and beneficiaries who have lost at least 20%
of their purchasing power. This benefit is then compared to the Dollar Power Benefit, and the
larger amount will be paid. This benefit will be implemented effective January 1, 2001. Since the
implementation date is after December 31, 2000,we have not included either the liability or the
excess earnings transfer made by the Board in this report.
• In the past, 60%of a retiree's benefit will continue to the spouse as long as they have been
married at least one year before the member retires. Under the new provision, a spouse will
receive the 60%continuance as long as the retiree is over 55 and they have been married at least
two years before the member's date of death. In this report,we have included the additional
liabilities relating to this new provison and the corresponding excess earnings transfer made by
the Board of$13,300,000.
This report does not reflect any change in funding status and employer and member contributions from
retirement benefit improvements which may take place after December 31, 2000.
The new assumptions and methods,when applied in combination, fairly represent past and anticipated
future experience of the Association and meet the parameters required by GASB Statement 25. However,
the Board's decision not to adopt all the recommended assumptions in our December 31, 2000 experience
study leads us to believe future assumption changes will be required.
Future contribution requirements may differ from those determined in the valuation because of:
(1) differences between actual experience and anticipated experience;
(2) changes in actuarial assumptions or methods;
(3) changes in statutory provisions; and
(4) differences between the contribution rates determined by the valuation and those adopted by the
Board.
We have prepared the Solvency Test for inclusion in this Section of the Association's CAFR report.
CCCERA staff prepared the supporting schedules in this section and the trend tables in the financial
section based on information supplied in the prior actuarial reports, as well as our December 31, 2000
report.
This report conforms with the requirements of the governing state and local statutes, accounting rules,
and generally accepted actuarial principles and practices. The undersigned are members of the American
Academy of Actuaries and meet the Qualification Standards to render the actuarial opinion contained
herein.
William M. Mercer, Incorporated
1
CUA
Andy Yeung,ASA, EA, MAAA Marcia L. Chapman, FSA, EA, MAAA
February 20,2002 February 20, 2002
Summary of Assumptions
and Funding Methods
The fallowing assumptions have been adopted by the Board for the fiscal years 2000-2001 and
2001-2002 and are based on the December 31, 2000 valuation. The rates produced by the
December 31, 2000 valuation will not be implemented until Fiscal Year 2002-2003.
AssUMPTIONs
Valuation Interest rate 8.50%
Inflation Assumption 4.25%
Cost of Living Adjustments 3%for Tiers I, III and Safety
4% for Tier 11
Interest Rate Credited to
Active Member Accounts 8.50%
Post-Retirement Mortality
A. Service
General Tier 11,Tier.II and Tier III
Males 1994 Group Annuity Mortality Table set back 1 year(male)
Females 1994 Group Annuity Mortality Table set forward 1 year(female)
Safety Members 1994 Group Annuity Mortality Table set forward 1 year(male)
Beneficiaries 1994 Group Annual Mortality Table set forward 1 year(female)
B. Disability
General Tier I Tier 1981 General Disability Mortality Table set back 3 years
II and Tier III
Safety 1981 Safety Disability Mortality Table
C. For Employee Contribution
Rate Purposes 1994 Group Annuity Mortality Table (male) set back 3 years
for General Members
1994 Group Annuity Mortality Table (male)set forward
one year for Safety Members
D. For Optional Benefit
Purposes 1994 Group Annuity Mortality Table with a three year setback
(male)
Pre-Retirement Mortality Based upon the Experience Analysis as of 12/31/00
Withdrawal Rates Based upon the Experience Analysis as of 12/31/00
Disability Rates Based upon the Experience Analysis as of 12/31/00
Service Retirement Rates Based upon the Experience Analysis as of 12/31/00
Salary Scales Total increases of 5.71%per year reflecting
approximately 4.25%for inflation and approximately
1.46% for merit and longevity
Marriage Assumption At 80% for reale members
Retirement 55% for female members
Value of Assets for Actuarial Value as described in Actuarial Valuation
Contribution Rate Purposes Methods Section of Valuation Report
Funding Method and Amortization of Actuarial Gains or Losses
The employer's liability is being funded on the Entry Age Normal ?Method and with an Unfunded
Actuarial Accrued Liability(UAAL). The current amortization period for the g.IAAL is 17 years
from the valuation date. The year 2000 was the last year of phasing in the impact of the 1997
Experience Analysis over three years. This valuation, represents the last year of phasing in the
1998 Ventura terminal pay assumptions.
• a
Probability of occurrence
............
SERVICE WITHDRAWAL, WITHDRAWAL TERMINATED NON-DUTY SERVICE 'VON-DUTY 'SERVICE
EDGE RETIREMENT <FIVE'YEARS >=i"IVEYEARS VESTED DISABILITY DISABILITY DEATH DEATH
General Male Members-Tier I
20 0.0000 0.1000 0.0412 0.0014 0.0000 0.0005 0.0002 0.0001
30 0.0000 0.0600 0.0239 0.0350 0.0008 0.0013 0.0003 0.0001
40 0.0000 0.0450 0.0058 0.0325 0.0016 0.0026 0.0006 0.0001
50 0.0300 0.0200 0.0000 0.0075 0.0025 0.0040 0,0017 0.0001
60 0.2476 0.0100 0.0000 0.0023 0.0025 0.0086 0.0086 0,0001
70 1.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
General Male Members-Tier 2
20 0,0000 0.1360 0.0800 0.0272 0.0000 0.0001 0.0002 0.0001
30 0.0000 0.1000 0.0547 0.0085 0.0008 0.0002 0,0003 0.0001
40 0.0000 0.0697 0.0247 0.0145 0.0012 0.0004 0.0006 0.0001
50 0.0295 0.0608 0,0068 0.0101 0.0032 0,0006 0.0017 0.0001
60 0.1439 0.0500 0.0016 0.00$7 0.0044 0.0017 0.0086 0.0001
70 1.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
General Male Mein m-Tier i
20 0.0000 0.0000 0.0412 0.0000 0.0000 0.0001 0.0002 0.0001
30 0.0000 0,0000 0.0239 0.0450 0.0008 0.0002 0.0003 0.0001
40 0.0000 0.0000 0.0058 0.0300 0.0009 0.0005 0.0006 0.0001
50 0,0100 0.0000 0.0000 0.0065 0.0012 0.0006 0.0017 0.0001
60 0.5610 0.0000 0.0000 0.0050 0.0037 0.0017 0.0086 0.0001
70 1.0000 0,0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
General Fem fe Members-Tier I
20 0.0000 0.1000 0.0319 0.0000 0.0000 0.0005 0,0001 0.0001
30 0.0000 0.0600 0.0125 0.0750 0.0001 0,0015 0.0003 0,0001
40 0.0000 0.0450 0.0050 0.0246 0.0012 0,0036 0.0005 0,0001
so 0.0315 0.0200 0.0000 0.0037 0,0028 0.0055 0.0012 0.0001
60 0.1800 0.0100 0.0000 0.0015 0.0060 0.0105 0.0022 0,0001
70 1.0000 0,0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
GGenetal Female Members-Tier 2
20 0.0000 0.1360 0.0275 0.0056 0.0000 0.0001 0.0001 0.0001
30 0.0000 0,0900 0.0250 0.0071 0.0004 0.0001 0.0003 0.0001
40 0.0000 0,0700 0.0200 0.0094 0.0015 0.0002 0.0005 0.0001
5o 0.0373 0.0600 0.0126 0.0065 0.0027 0.0010 0.0012 0.0001
60 0.1496 0.0500 0.0045 0,0073 0.0100 0.0035 0,0022 0,0001
70 1.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0001
Ceneral Female L embers-Tier 3
20 0.0000 0.0000 0.0319 0.0000 0.0000 0.0001 0,0001 0.0001
30 0.0000 0,0000 0.0179 0.0450 0.0004 0.0001 0.0003 0.0001
40 0.0000 0.0000 0.0102 0.0281 0.0015 0.0002 0.0005 0.0001
so 0.0223 0.0000 0.0000 0.0065 0,0027 0.0013 0.0012 0.0223
60 0.0689 0.0000 0.0000 0.0050 0.0087 0.0022 0.0022 0.0689
70 1,0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 1.0000
Maig&Female Members-Safety
20 0.0000 0.0668 0.0200 0.0024 0.0000 0.0008 0.0001 0.0001
30 0.0000 0.0408 0.0118 0.0190 0,0006 0.0046 0.0001 0.0002
40 0.0000 0.0310 0.0050 0.0100 0.0006 0.0085 0.0002 0.0003
50 0.0075 0.0130 0.0010 0.0020 0.0005 0.0150 0.0004 0.0005
60 1.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
70 1.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
Summary of December 31, 2000 Valuation Results
SUMMARY OF RECOMMENDATIONS
Employer Contribution Rates* December 31,2400** December 31, 1999 Increase(Decrease)
Normal Cost Rate: 12.72% 11-1.71% 1.01%
Rate of Contribution to Unfunded
Actuarial Accrued Liability: 4.78% 3.28% 1.50%
Total Employer Rate: 17.50% 14.99% 2.51%
Estimated Annual Amount***: $89,075,000 $76,3099000 $12,766,000
Member Contribution Rates*
General Members(Tier D****
25 5.98% 5.56% 0.42%
35 6.58% 6.26% 0.32`%®
45 7.49% 7.28% O,21%
Average Entry Age(Age 32) 6.36% 6.00% 0.36%
General Members(Tier IIS
25 2.28% 2.19% 0.09%
35 2.50% 2.47% 0.04%
45 2.85% 2.87% -0.02%
Average Entry Age(Age 38) 2.60% 2.58% 0.02%
General Members(Tier III)****
25 4.63% 4.55% 0.08%
35 5.09% 5.12% -0.03%
45 5.79% 5.96% _0.17%
Average Entry Age(Age 35) 5.09% 5.12% -0.03%
Safety Members
21 7.49% 6.87% 0.62%
25 7.63% 7.05% 0.58%
30 7.97% 7.46% 0.51%
Average Entry Age(Age 29) 7.89% 736% 0.53%
Estimated Annual Amount*** $25,301,000 $24,917,000 $384,000
Actuarial Assumptions
Annual Inflation Rate: 4.25% 4.25%
Annual Investment Return: 8.50% 8.50%
Average Annual Salary Increase: 5.71% 5.35%
Other Assumptions 12/31/00 Experience Study 12/31/97 Experience Study
* Reflects 50%subvention of member basic contribution rates. -
** Rates shown are to be applied in FY 2002-2003.
* Based on 1.2/31/2000 payroll projected with inflation to 12/31/2001
**** Monthly contributions for the first$350 are based upon 2/3 of the above rates.
......................................................................_..........................................................
Summary
of
Significant Results
Association Membership December 31,2000 December 31, 1999 Increase/
(Decrease)
Active Members
1. Number of Members 8,884*** 8,798 1.0%
2. Total Active Payroll $488,384,000*** $463,279,000 5.4%
3.Average Monthly Salary $4,581 $4,388 4.4%
Retired Members
1. Number of Members:
Service Retirement 3,838 3,690 4.0%
Disability Retirement 777 770 0.9%
Beneficiaries 943 922 2.3%
2. Total Retired Payroll $110,348,000 $100,058,000 10.3%
3. Average Monthly Pension $1,654 $1,549 6.8%
Inactive Vested Members
1.Number of Members* 877 772 13.6%
Asset Values (Net)
Market Value $2,931,262,000 $2,987,089,000
.Return on Market Value 0.79% 15.16% -1.9%
Actuarial Value $2,916,159,000 $2,637,972,000
Return on Actuarial Value 13.75% 17.48% 10.5%
Valuation Assets $2,355,179,000** $2,137,554,000
Return on Valuation Assets 8.21% 8.58% 10.2%
Liability Values
Actuarial Accrued Liability** $2,643,526,000 $2,433,614,214 8.6%
Unfunded Actuarial Accrued
Liability(UAAL)** $288,347,000 $296,060,214 -2.6%
Funding Ratio 89% 88% 1%
GASB No. 25
*Only includes members who are not active in any other tier.
**After adjusting for the withdrawal of the City of Pittsburg.December 31, 1999 restated using 8,50%interest assumption.
***Excludes active members from the City of Pittsburg.
Schedule of Active .Member Valuation luta
Average % Increase in
'valuation Plan Annual Annual Average
Date Type Dumber Salary Salary Salary
12/31/95 General 6,135 $259,088,000 542,231 1.42%
Safety 1,521 92,743,000 60,975 1.14%
TOTAL 7,656 $351,831,000 $45,955 1.47%
12/31/96 General 6,292 $263,616,000 $41,897 -0.79%
Safety 1,.504 90,122,000 59,922 -1.73%
TOTAL 7,796 $353,738,000 $45,374 -1.26%
12/31/97 General 6,514 $288,065,000 $44,222 5.55%
Safety 1,577 97,347,000 61,729 3.02%
TOTAL 8,491 $385,412,000 $47,635 4.98%
12/31/98 General 6,808 $309,594,000 $45,475 2.83%
Safety 1,607 102,154,000 63,568 2.98%
TOTAL 8,415 $411,748,000 $48,930 2.72%
12/31/99 General 7,127 $351,693,000 $49,347 8.51%
Safety 1,674 111,586,000 66,658 4.86%
Total 8,801 $463,279,000 $52,639 7.58%
12/31/00 General 7,243 $374,918,000 51,763 4.90%
Safety 1,641 113,465,000 69,144 3.73%
TOTAL 8,884 $488,383,000 $54,973 4.43%
......
Re
tr
is and Beneficiaries
Added To and
Removed From .Retiree Payroll
At Added Removed %Increase Average
Beginning During During At End Retiree in Retiree Annual
Year of Year Year Year of Year Payroll Payroll Allowance
._._
. ........................
1995 4,485 274 (123) 4,636 $ 69,251,953 6.23%__ $ 14,938
1996 4,636 258 (119) 4,775 75,049,433 8.37% 15,717
1997 4,775 252 (100) 4,927 82,019,428 9.29% 16,647
1998 4,927 312 (68) 5,171 89,859,684 9.56% 17,378
1999 5,171 342 (127) 5,386 100,519,544 16.00% 19,353
2000 5,386 446 (274) 5,558 113,149,480 8.55% 20,358
Solvency Test
(DOLLAR AMOUNTS IN THOUSANDS)
Aggregate Accrued Liabilities(AAL) for: Portion of Accrued Liabilities
Covered by Reported Assets
1 2 3
Valuation Active Retirants Active Members Reported
Date Member and Employer Assets 1 2 3
Contributions ! Beneficiaries Portion
......................
12/31/95 $ 179,181 $ 790,640 $ 661,769 $ 1,522,796 100% 100% 84%
12/31/96 193,790 860,929 676,160 1,629,592 100% 100% 85%
12/31/97 206,642 944,701 832,051 1,742,014 100% 100% 71%
12/31/98 210,483 1,070,102 1,039,720 1,868,521 100% 100% 57%
12/31/99 220,643 1,189,931 1,023,040 2,137,554 100% 100% 71%
12/31/00 235,308 1,279,927 1,128,291 2,355,179 100% 100% 74%
Actuarial Analysis of Financial E-vperience
FOR YEARS ENDED DECEMBER 31
- (DOLLAR AMOUNTS IN THOUSANDS)
Type of Activity 2000 1999 1998 1997 1996 1995
...................
Composite
Gain(or Loss) $7,713 $155,734 ($210,414) ($140,093) $8,144 ($41,617)
During Year
Summary of Major Pension, Play Provisions
MAJOR PROVISIONS OF THE PRESENT SYSTEM
BENEFIT SECTIONS 31676.11,31751,31.664 AND 31664.1 OF THE 1937 COUNTY AcT
Briefy summarized below are the major provisions of the County Employees Retirement Law of
1937, as amended through December 31, 2000, and as adopted by Contra Costa County,
A. GENERAL MEMBERS -
Tier 1 and Tier 3 Plans (Section 3167611) Tier 2 Plan(Section 31751
Coverage
Tier 1: Tier 2:
a. All General Members hired before a. All General members hired on or after
August 1, 1980 and electing not to August 1, 1980. and all General members
transfer to Tier 11 Plan. hired before August 1, 1980 electing to
transfer to the Tier 2 Plan.
Tier 3:
Tier 2 members can elect Tier 3 coverage(for
future service) effective on the later of:
• October 1, 1998 or
• The day after achieving 5 years of
service
Final Average Salary (FAS)
a. One year final average salary a. Three year final average salary
Service Retirement
a. Requirement a. Requirement
Age 50 and 10 years of service, or with Age 50 and 10 years of service, or with 30
30 years of service regardless of age. years of service regardless of age.
b. Benefit b. Benefit _
Retirement Retirement _
Age Benefit Formula Age Benefit Formula
50: (1.24%xFAS-1/3x 1.24%x$3 50)x Yrs 50: (0.83%xFASxYrs-0.57%xYrs*xPIA)
55: (1.67%xFAS-1/3x1.67%x$350)x Yrs 55: (1.13%xFASxYrs-0.87%xYrsxP1A)
60: (2.18%xFAS-!/3x2.18%x$350)x Yrs 60: (1.43%xFASxYrs-1.37%xYrsxPIA)
62: (2.35%xFAS-1/3x2.35%xS350)x Yrs 62: (1.55%xFASxYrs-1.67%xYrsxPIA)
65: (2.61%xFAS-1/3x2.61%x$350)x Yrs 65: (1.73%xFASxYrs-1.67%xYrsxPIA)
Maximum benefit 100% of FAS
*Not greater than 30 years,where PIA is the Social Security Primary Insurance Amount.
Disability R
etYreme
nt
Disability
Retirement
Tier 1: Tier 2 and Tier 3:
a. Requirements a. Rectuirements
(1) Service-connected :None (1) Service-connected:None
(2) Nonservice-connected: five years of (2) Nonservice-connected: ten years
service of service
(3) Definition of disability is more
strict than in Tier 1 Plan.
b. Benefit b. Benefit
(1) Service-connected (1) Service-connected or nonservice-
(2) Nonservice-connected: 1-1/2%x connected is 40%FAS plus 10%
PAS x years of service. Future FAS for each minor child
service years projected to age 65. (maximum of three).
Generally leads to 1/3 FAS benefit. (2) Disability benefits are offset by
other plans of the County except
Workers Compensation and
Death Before Retirement Social Security.
a. Prior to disability retirement eligibility a. Prior to eli ig bility to retire (less than
(less than five years): ten years)
(1) One month's salary for each year (1) $2,000 lump sum benefit offset
of service by any Social Security payment
(2) Return of contributions (2) Return of contributions
b. While eligible to retire(after five years) b. While eligible to retire(ten years or
60% of Service or Disability Retirement service-connected death)60%c,of Service
Benefit. Generally the benefit is 20%of or Disability Retirement Benefit
FAS. (minimum benefit is 24%of FAS)Mus.
for each minor child, 20%of the
allowance otherwise paid to the member.
Minimum family benefit is 60%of the
member's allowance.Maximum family
C. Line of Duty Death- 1/2 FAS benefit is 100%of member's allowance.
Death After Retirement
a. After Service Retirement or a. After Service or Disability Retirement
Nonservice-Connected Disability- (1) 60% of allowance continued to
60%of the allowance continued spouse plus 20% of allowance
to the spouse or to minor children. to each minor child. Minimum
benefit is 60%of allowance.
b. After Service-Connected Disability- Maximum benefit is 100% of
100% of the allowance continued to the allowance.
spouse or minor children. (2) Lump sum payment of$7,000
less any Social Security Lump
sum payment.
C. Lump sum payment of$5,000
......................................
................................
...........................
Withdrawal Benefits
a. If less than five years of service, a. If less than five years of service, return,
return of contributions. of contributions.
b. If greater than five years of service, b. If greater than five years of service,
right to have vested deferred retirement right to have vested deferred retirement
benefit. benefit.
Cost of Living Benefit
3%maximum change per year 4%maximum change per year
except for Tier 3 disability benefits
which can increase 4%per year.
Employee's Contribution Rates
a. Basic: to provide for 1/2 of the Section a. 40% of the full Section 31676.11
31676.11 benefit at age 55. employee contribution rate.
b. COL: to pay for 1/2 of future COL b. COL: to pay for 1/2 of future COL
costs. costs.
Employer Contribution Rates
Enough to make up for the balance of the Enough to make up the balance of the basic
basic and COL contributions needed. and COL contributions needed.
Transfers from the Tier I Plan to the Tier 2 Plan were made on an individual,voluntary,irrevocable basis.Credit is
given under the Tier 2 Plan for future service only.The COL maximum is 4%only for the credit under the Tier 2 Plan.
Transferred Tier 2 Plan members keep the five year requirement for nonservice-connected disability.Those who
were members before April 1, 1473 will be exempt from paying member contributions after 30 years of service.
B. SAFETY MEMBERS (31664 and 31664.1)
Coverage
a. All Safety members
Final Average Salary (FAS)
a. One year final average salary
Service Retirement
a. Requirement
Age 50 and 10 years of service,or with 20 years of service regardless of age.
b. Benefit at Retirement(for all except San Ramon Valley Fire Protection District)
Age Benefit Formula
50 2.00%x FAS x Yrs
55 2.62%x FAS x Yrs
60 2.62%x FAS x Yrs
Maximum Benefit: 100% of FAS
C. Benefit at Retirement(San Ramon Valley Fire Protection Districtl
Age Benefit Formula
50 3.00%x FAS x Yrs.
55 3.00%x FAS x Yrs.
60 3.00%x FAS x Yrs
Maximum Benefit: 100%of FAS
Disability Retirement
a. Requirements
(1) Service-connected:None
(2) Nonservice-connected: five years of service
b. Benefit
(1) Service-connected: 50%FAS or Service Retirement
benefit if greater.
(2) Nonservice-connected: 1.8%x FAS x Yrs of service.
Future service years projected to age 55. Generally
leads to 1/3 FAS benefit.
Death Before Retirement
a. Prior to retirement eliig_bility(less than 5 years)
(1) One month's salary for each year of service
(2) Return of contributions
b. While eligible to retire(after five years)
60%of Service or Disability Retirement Benefit.
Generally the benefit is 20°% of FAS.
C. Line of DgU death- 1/2 FAS
Death After Retirement
a. After Service Retirement or Nonservice-Connected Disability-
60%of the allowance continued to the spouse or to minor children
b. After Service-Connected Disability-
100% of the allowance continued to the spouse or to minor children
C. Lump sum payment of$5,000
Withdrawal Benefits
a. If less than five years of service, return of contributions
b. If greater than five years of service, right to have vested deferred retirement benefit
Cost of Living Benefit
3%maximum change per year
Employees' Contribution Rates
a. Basic-to provide for 1/2 of the Section 31664 and 31664.1 benefits at age 50
b. COL -to pay for 1/2 of fixture COL costs
Employer Contribution Rate
Enough to make up the balance and COL costs
......... ......... ......... .._...._
./�
�
< �
���� dY : z
�
... .
STATISTICAL
Revenue by Source
FOR YEARS 1996-2001
Year Employee Employer Investment --
Ending Contributions Contributions Income/(Lass)* TOTAL
1996 $12,707,872 $40,081,019 $266,043,100 $318,831,991
1997 9,856,075 36,687,901 409,112,609 455,656,585
1998 11,704,335 40,925,393 342,811,108 395,440,836
1999 14,460,506 49,254,260 402,876,035 466,590,801
2000 15,463,367 52,986,645 30,409,387 98,859,399
2001 18,681,239 55,182,505 (114,531,847) (40,668,103)
*Net of Investment Expenses
Expenses by 1pe
FOR YEARS 1996-2001
Retiree
Healthcare
Benefits Other
Year Benefits* Refunds Reimbursements Administrative Expenses TOTAL
1996 $75,049,433 $754,796 $4,460,348 $1,867,816 $1,865,846 $83,998,239
1997 82,019,428 1,014,600 6,665,785 2,185,024 1,650,880 93,535,717
1998 89,859,684 765,618 11,361,045 2,590,124 2,467,215 107,043,686
1999 100,519,544 8563620 8,625,395 2,675,125 3,845,689 116,522,373
2000 113,149,480 1,060,249 12,408,770 3,128,624 3,904,263 133,651,386
2001** 126,190,164 858,013 12,342,644 3,745,158 3,527,656 146,663,635
*The benefit amounts do not reflect the prior period adjustment that resulted from the recalculation and payments(see footnote
11 for more detail) of the"Paulson Benefit." The recalculations and payments began in 2000 and are reflected in the State
went of Changes in Plan Net Assets as a prior period adjustment.
**A one time payment of$10,791,085 for membership withdrawal by the City of Pittsburg is excluded from 2001 (See
footnote 12 of the Financial Statements).
74 COMPREHENS€vE ANNUAL FINANCIAL REPORT 2001
Schedule of Benefit CCCERA --TAT`s--`-AL
Expenses by 1pe
ESTIMATES BASED ON ANNUALIZED BENEFIT AMOUNTS
AS OF DECEMBER 31, OF EACH YEAR
2000 1999 1998 1997 1996 1995
Service Retirement
Payroll:
General $57,580,704 $53,205,888 $49,150,068 $44,141,628 $41,396,052 $38,962,500
Safety .22,648,836 19,21&240 240 16 618,140 13.536.888 12,623,328 11,190,948
TOTAL 80,229,540 72,424,128 65,768,208 57,678,516 54,019,380 50,153,448
Disability Retirement
Payroll:
General 8,052,996 7,478,112 6,540,395 6,132,840 5,532,732 5,013,612
Safety 10,830,432 9,925,116 8,385,012 7,184,760 6,763,344 6,472,392
TOTAL 18,883,428 17,403,228 14,925,407 13,317,600 12,296,076 11,486,004
Beneficiary
Payroll:
General 7,600,296 7,078,608 6,685,716 5,977,404 5,484,900 5,107,896
Safety 3,635,004 3,151,620 2,814,048 2,421,012 2,247,900 1,999,584
TOTAL 11,235,300 10,230,228 9,499,764 8,398,416 7,732,800 7,107,480
Total Benefit
Expense:
General 73,233,996 67,762,608 62,376,179 56,251,872 52,413,684 49,084,008
Safety 37,114,272 32,294,976 27,817,200 23,142,660 21,634,572 19,662,924
TOTAL $110,148,268 $100,057,584 $90,193,379 $79,394,532 $74,048,256 $68,746,932
2001 COMPREHENsivE ANNUAL FINANCIAL REPORT 75
STATISTICAL
Schedule of Retired Members
by type of Benefit
SUMMARY OF MONTHLYALLOWANCEs BEING PAID
As OF DECEMBER 31, 2000
GENERAL MEMBERS
MONTHLY ALLOWANCE
Service Retirement: Number Basic Cost of Living Total
Unmodified 2,981 $ 3,358,868 $ 1,019,976 $ 4,378,844
Option 1 166 168,844 36,864 205,708
Option 2,3,& 4 180 179,777 34,063 213,840
TOTAL 3,327 $ 3,707,489 $ 1,090,903 $ 4,-798,392
Disability:
Unmodified 429 475,753 $ 154,920 $ 630,673
Option 1 22 23,927 5,910 29,837
Option 2,3 & 4 9 9,092 1,481 10,573
TOTAL 460 508,772 $ 162,311 $ 671,083
Beneficiaries: 742 $ 408,350 $ 225,008 $ 633,358
TOTAL 4,529 $4,624,611 $ 1,478,222 $ 6,102,833
SAFETY MEMBERS
MONTHLY ALLOWANCE
Service Retirement: Number Basic Cost of Living Total
Unmodified 489 $ 1,446,492 $ 387,820 $ 1,834,312
Option I 11 14,853 3,641 18,494
Option 2,3,& 4 11 29,602 4,995 34,597
TOTAL 511 $ 1,490,947 $ 396,456 $ 1,887,403
Disability:
Unmodified 308 $ 691,524 $ 194,179 $ 885,703
Option 1 4 4,533 1,932 6,465
Option 2,3 & 4 5 8,674 1,696 10,370
ToTAi, 317 $ 704,731 $ 197,807 $ 902,538
Beneficiaries: 201 $ 196,929 $ 105,988 $ 302,917
TOTAL 11029 ...21392,607...... $ 700,251 I 310922858
76 COMPREHENSivE ANNUAL FINANCIAL REPORT 2001
.....................................................................................................................I..................................
Schedule of Average Benefit CCCERA STATISTICAL.
Payment Amounts
ESTIMATES BASED ON ANNUALIZED BENEFIT AMOUNTS
AT DECEMBER 31 OF EACH YEAR
YEARS SINCE RETIREMENT
TIER I 0-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40+
2000 Average Monthly Benefit $2076 $1727 $1530 $1211 $873 $664 $469 $428 $1053
Number Retirees&Beneficiaries 830 822 704 696 505 228 74 12 43
1999 Average Monthly Benefit $1850 $1679 $1401 $1103 $843 $588 $458 $328 $ 319
Number Retirees&Beneficiaries 902 796 736 683 472 208 59 10 7
1998 Average Monthly Benefit $1689 $1584 $1300 $1029 $776 $555 $437 $304 $ 412
Number Retirees&Beneficiaries 883 827 761 679 445 182 46 12 2
1997 Average Monthly Benefit $1526 $1495 $1224 $ 944 $707 $520 $414 $350 $ 565
Number Retirees&Beneficiaries 825 840 784 683 394 157 48 15 1
1996 Average Monthly Benefit $1512 $1396 $1164 $ 812 $672 $442 $389 $319 $ 645
Number Retirees&Beneficiaries 882 796 785 666 390 127 33 13 2
1995 Average Monthly Benefit $1521 $1401 $1109 $ 845 $662 $493 $349 $235 $ 466
Nurnber Retirees&Beneficiaries 888 800 818 550 326 122 26 11 3
TIER II
2000 Average Monthly Benefit $675 $571 $550 $288
Number Retirees&Beneficiaries 316 160 32 13
1999 Average Monthly Benefit $654 $521 $584 $ 191
Number Retirees&Beneficiaries 310 127 25 9
1998 Average Monthly Benefit $614 $535 $453 $216
Number Retirees&Beneficiaries 268 107 22 6
1997 Average Monthly Benefit $584 $502 $416 $336
Number Retirees&Beneficiaries 223 88 17 3
1996 Average Monthly Benefit $515 $491 $366 $475
Number Retirees&Beneficiaries 187 61 13 2
1995 Average Monthly Benefit $509 $443 $524
Number Retirees&Beneficiaries 170 32 12
2001 COMPREHENSwE ANNUAL FINANCIAL REPORT 77
STATISTICAL
as&$WSchedule of Average
Benefit Payment Amounts
ESTIMATES BASED ON ANNUALIZED BENEFIT AMOUNTS
AT DECEMBER 31 OF EACH YEAR
YEARS SINCE RETIREMENT
TIER 111 0-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-
2000 Average Monthly Benefit $388
Number Retirees&Beneficiaries 92
1999 Average Monthly Benefit $397
Number Retirees&Beneficiaries 47
1998*Average Monthly Benefit $244 -
Number Retirees&Beneficiaries 4
*Tier III started October 1998
SAFETY 0-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-
2000 Average Monthly Benefit $3763 $3021 $3061 $2591 $2328 $1554 $1102 $704 $2301
Number Retirees&Beneficiaries 307 262 150 130 96 51 17 5 11
1999 Average Monthly Benefit $3261 $2912 $2518 $2338 $2186 $1266 $ 977 $751
Number Retirees&Beneficiaries 307 260 145 123 96 41 16 3
1998 Average Monthly Benefit $2866 $2795 $2437 $2248 $1854 $1190 $ 737 $884 $ 801
Number Retirees&Beneficiaries 285 237 145 117 89 37 14 2 1
1997 Average Monthly Benefit $2581 $2543 $2331 $2069 $1544 $1072 $ 675 $832
Number Retirees&Beneficiaries 261 197 151 11.4 81 31 8 3
1996 Average Monthly Benefit $2548 $2367 $2234 $1952 $1427 $ 896 $ 613 $755
Number Retirees&Beneficiaries 283 166 155 110 69 27 7 1 -
1995 Average Monthly Benefit $2419 $2362 $2047 $1853 $1298 $ 797 $ 561 $733
Number Retirees&Beneficiaries 277 159 140 109 63 24 5
78 C:OMPREHENSwE e4.letltiE.AL FINANCIAL RF-PORT 2001
Participating Employers
CCCERA STATISTICAL
an
Active Heelers
As of DEcEMBER 31, 2001
County of Contra Costa:
General Members 6,610
Safety Members 1,517
ToTAL: 8,127
Participating Agencies:
Bethel Island Municipal Improvement District 2
Byron, Brentwood,Knightsen Union Cemetery District 4
Central Contra Costa Sanitary District 246
Contra Costa County Employees' Retirement Association. 30
Contra Costa Housing Authority 95
Contra Costa Mosquito and Vector Control District 24
Delta Diablo Sanitation District 58
Diablo'Water District I I
.Local Agency Formation Commission(LAFCO) I
Ironhouse Sanitary District 23
Rodeo Sanitary District 7
In-Home Supportive Services Authority(IHSS) 6
Children & Families Commission 6
Bethel Island Fire District 3
Contra.Costa County Fire Protection District 366
Moraga--Orinda Fire District 65
Rodeo-Hercules Fire Protection District 21
San,Ramon Valley Fire District 170
TOTAL: 1,138
TOTAL ACTIVE MEMrBERSmp: 9,265
2001 COMPREHENSIVE ANNUAL FINANCIAL.. REPORT 79
DESIGN ANIS PHOTOGRAPHY.
Joelle Luhn
Contra Costa County Employees' Retirement Association
PRINTING ANIS BINDERY SERVICES-
Central Services
A Division of General Services,
Contra Costa County, California