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Home My WebLink AboutMINUTES - 09162008 - SD.5 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA TO: BOARD OF COMMISSIONERS FROM: Joseph Villarreal, Executive Director DATE: September 16, 2008 SUBJECT: Actuarial Statement for 2% at 55 Enhanced Retirement Benefit SPECIFIC REQUEST(S) OR RECOMMENDATION(S) & BACKGROUND AND JUSTIFICATION I. RECOMMENDED ACTION: ACCEPT the statement from The Segal Company (in the capacity of enrolled actuaries) that identifies the actuarial impact upon future annual costs of those retirement enhancements described in the Memorandum of Understanding approved by the Board on October 9, 2007 between the Authority and Public Employees' Union, Local No. 1. II. FINANCIAL IMPACT: There are no costs associated with accepting this statement as it is an information item. This item will be brought back to the Board for consideration at next month's meeting. The Housing Authority's budget for April 1, 2008 through March 31, 2009 provides for the costs associated with providing the enhanced retirement benefit. This cost will be included in all future budgets. III. REASONS FOR RECOMMENDATION/BACKGROUND California Government Code sections 7507 and 31516 require that an enrolled actuary provide a statement of the actuarial impact upon future annual costs before the Board may authorize increases in retirement benefits and that said statement shall be made public at a public meeting at least two weeks prior to the adoption of any increases in benefits. IV. CONSEQUENCES OF NEGATIVE ACTION: None. Information item only. CONTINUED ON ATTACHMENT: YES SIGNATURE Joseph Villarreal,Executive Director RECOMMENDATION OF EXECUTIVE DIRECTOR RECOMMENDATION OF BOARD O ITTEE APPROVE OTHER SIGNATURE(S): ACTION OF BOARD ON APPROVED AS RECOM ENDED_ �� OTHER VOTE OF COMMISSIONERS I HEREBY CERTIFY THAT THIS IS A UNANIMOUS (ABSENT TRUE AND CORRECT COPY OF AN AYES: NOES: ACTION TAKEN AND ENTERED ON THE ABSENT: ABSTAIN: MINUTF THE BOARD OF COM ISS ONERS ON THE DATE SHOWN. ATTEST JOSEPH VILLAR E L,CLERK F THE B ARD OF COMMISSIONERS XECUTIVE DIRECTOR BY UTY I r 7 Briployees' 1btirementAssociation j 1355 willow way suite 221 concord ca 94520 925.521.3960 fax 925.646.5747 I I I } l August 7,2008 f Joseph Villarreal i Executive Director Contra Costa Housing Authority 3133 Estudillo Street 4 Martinez,CA 94553 Dear Joseph: Enclosed,please find the Enhanced Benefit Formula Cost Study completed by The Segal ` i.. Company,for the Contra Costa Housing Authority.This study was completed to fulfill Government Code Section 7507 which requires that the employer(district)have an actuary j provide a statement of the actuarial impact upon future annual costs before authorizing increases i in benefits.In addition,"the future annual costs as determined by the actuary shall be made public at a public meeting at Ieast two weeks prior to the adoption of any increases in benefits". If you have any questions,please don't hesitate to call,write or e-mail. i L Sincerely, i i Rick Koehler Retirement Accounting Manager ~' rkoehler@ret.cccoun1y.us encl i i cc:Marilyn Leedom,Retirement CEO I i t i I O!Tist.-icts,.Housins,Authoritv'Cover letter for Enhanced cost study 8--7-2008.doc i i i ` f i� f 7rSEGAL THE SEGAL COMPANY Paul Angelo,FSA 120 Montgomery Street,Suite 500 San Francisco,CA 94104-4308 Senior Vice President&Actuary T 415.263.8200 F 415.263.8290 www.segalco.com pangelo@segalco.com i i August 5,2008 Ms. Marilyn Leedom Chief Executive Officer Contra Costa County Employees' Retirement Association 1355 Willow Way, Suite 221 Concord, CA 94520 i i Re: Housing Authority of Contra Costa County 2% at 55 (§31676.16)Benefit Formula Cost Study i Dear Marilyn: The purpose of this study is to provide information on the impact of improving benefits for members of the Housing Authority of Contra Costa County (Housing Authority) if they were to adopt the"Enhanced"(2%at 55) General Tier 1 benefit formula for all years of service. We understand that this formula would be adopted effective October 1, 2008 and would apply to both actives and deferred members. i f Per discussions with legal counsel,we have calculated the total increase in the Present Value of Benefits (PVB)due to adopting the "Enhanced"(2%@55)benefit formula for these members, treating them as a stand-alone group(i.e. they are not combined with the other employers in this cost group). The table on the next page shows results before and after P adopting the"Enhanced"formula and the resulting increase in PVB. This increase is split between the change in the Present Value of Future Normal Costs (PVFNC) for members and the employer, and the change in the Actuarial Accrued Liability(AAL). i Housing Authority of Contra Costa County } Current j "Non-enhanced" Proposed "Enhanced" Increase/ Formula 2%@ 55 Formula (Decrease) i Present Value of Future Normal Costs i (PVFNC)- Member $4,551,719 $3,754,436 ($797,283) Present Value of Future Normal Costs i (PVFNC)—Employer $6,387,822 $6,457,902 $70,080 Actuarial Accrued Liability (AAL) $39,219,952 $40,175,939 $955,987 Present Value of Benefits(PVB) $50,159,493 $50,388,277 $228,784 i Benefits,Compensation and HR Consulting ATLANTA BOSTON CALGARY CHICAGO CLEVELAND DENVER HARTFORD HOUSTON LOS ANGELES MINNEAPOLIS NEW ORLEANS NEWYORK PHILADELPHIA PHOENIX PRINCETON RALEIGH SAN FRANCISCO TORONTO WASHINGTON,DC j _- _ Multinational Group of Actuaries and Consultants BARCELONA BRUSSELS DUBLIN GENEVA HAMBURG JOHANNESBURG LONDON MELBOURNE MEXICO CITY OSLO PARIS i f i Ms. Marilyn Leedom August 5, 2008 Page 2 r Following CCCERA's funding policy,we have amortized the change in the AAL over a 15- year period and spread the change in the employer's PVFNC over future expected salaries. This converts the PVB increase to an estimated increase in annual employer cost. We have also reflected the.irnpact..of a..decreasc-in,future career salaries due.to members.retiring earlier under the proposed"Enhanced"formula. The estimated increase in the total "stand-alone" employer annual cost is 3.75% of payroll or$193,095 expressed as an annual dollar amount(based on estimated annual payroll of$5.15 million).This dollar amount would increase each year in proportion to the total payroll.Note that this additional employer cost reflects the reduction in the PVFNC for members shown above. As noted above, all the above results are based on treating the Housing Authority as a stand- alone group. In practice,the actual employer contribution rates charged to the Housing Authority will be the rate calculated in the actuarial valuation for their particular cost group. For example,the employer contribution rate that will be in effect on October 1,2008 for employers in the"Non-enhanced" General Tier 1 cost group is 34.53%of payroll. The corresponding employer contribution rate for district employers in the"Enhanced" General Tier 1 cost group (who have not issued pension obligation bonds)is 35.21%of payroll. I i In future actuarial valuations, employer rates for the"Non-enhanced" General Tier 1 formula would be determined excluding the Housing Authority and employer rates for the"Enhanced" i General Tier 1 formula would be determined including the Housing Authority. i The cost estimates shown in this letter are based on the December 31, 2007 actuarial valuation results, including the participant data and actuarial assumptions on which that valuation was based. All results exclude the effect of any employer subvention of member contributions. Calculations were completed under the supervision of John Monroe,ASA, MAAA,Enrolled Actuary and are in accordance with generally accepted actuarial standards of practice. i Please let us know if you have any questions. l i i i Sincerely, ' i Paul Angelo JXM/h Y i j� i. 4053344v3/05337.013