HomeMy WebLinkAboutMINUTES - 12142010 - D.3RECOMMENDATION(S):
ADOPT Resolution No. 2010/588 applying health plan modifications to certain persons
retired from classifications represented by the Deputy District Attorneys' Association at the
time of retirement.
FISCAL IMPACT:
As shown in the attached valuation, the result of the health plan changes described herein, if
implemented, will create a $5.3 million or 0.51% decrease in the Actuarial Accrued
Liability and a $378,000 or 0.61% decrease in the calculated Annual Required
Contribution. These figures represent the changes for both active and retired individuals.
BACKGROUND:
On November 23, 2010, the Board of Supervisors received a report on the County's other
post employment benefits regarding proposed future costs/savings of changes in other post
employment benefits. At that meeting, staff from the County Administrator's office
announced that the County Administrator would be recommending that the Board consider
taking formal action with respect to proposed changes in health care affecting:
employees represented by the Deputy District Attorney's Association,
APPROVE OTHER
RECOMMENDATION OF CNTY
ADMINISTRATOR
RECOMMENDATION OF BOARD
COMMITTEE
Action of Board On: 12/14/2010 APPROVED AS RECOMMENDED OTHER
Clerks Notes:
VOTE OF SUPERVISORS
AYE:John Gioia, District I Supervisor
Mary N. Piepho, District III
Supervisor
Federal D. Glover, District V
Supervisor
ABSENT:Gayle B. Uilkema, District II
Supervisor
Contact: Lisa Driscoll, County
Finance Director, 335-1023
I hereby certify that this is a true and correct copy of an action taken and entered on
the minutes of the Board of Supervisors on the date shown.
ATTESTED: December 14, 2010
David J. Twa, County Administrator and Clerk of the Board of
Supervisors
By: June McHuen, Deputy
cc:
D. 3
To:Board of Supervisors
From:David Twa, County Administrator
Date:December 14, 2010
Contra
Costa
County
Subject:OPEB - Application of Health Plan Modifications to Persons Retired from Classifications Represented by the
Deputy District Attorneys' Association
employees represented by the Deputy District Attorney's Association,
and persons who retired from classifications that were represented at the time of
retirement by the Deputy District Attorney's Association and who are eligible for
health care coverage.
The County Administrator is recommending adoption of the attached resolution (2010/588),
which applies health plan modifications (summarized below) to retirees in the above listed
groups:
BACKGROUND: (CONT'D)
New Hires. Employees hired on or after December 14, 2010 will not receive a County
subsidized retiree health/dental care benefit.
Dual Coverage. Provide as of 04/01/11, that employees and retirees and dependents of
employees and retirees can no longer have dual coverage in two County/District health
or dental plans. This provision will apply to County and District employees and retirees
who have spouses or partners who are either County or District employees or retirees.
Premium Cost Sharing January 1, 2010 - April 1, 2011.
Contra Costa Health Plan and Coordinated Dental Plans – Currently shared 98%
County, 2% Participant for Plan A and 90% County, 10% Participant for Plan B.
Kaiser and Health Net HMO and dental plans – Increases 01/01/10 and 01/01/11
to be shared 80% by the County and 20% by the Participant.
Health Net PPO- Increases 01/01/10 and 01/01/11 to be shared 50% by the County
and 50% by the Participant.
Premium Cost Sharing April 1, 2011.
o Contra Costa Health Plan and Coordinated Dental Plans – Currently shared 98%
County, 2% Participant for Plan A and 90% County, 10% Participant for Plan B.
Effective 04/01/11, County will pay a premium subsidy equal to 93% of the 2010
premium for Plan A and Participant will pay an amount equal to 7% of the 2010
premium for Plan A. County will pay an amount equal to 87% of the 2010
premium for Plan B and Participant will pay an amount equal to 13 % of the 2010
premium for Plan B. Any premium increases for 2011 in Plan A and Plan B to be
shared 50% by the County and 50% by the Participant, up to a maximum of 11%;
portion of increase above 11% to be paid by the County.
o Kaiser and Health Net HMO and dental plans – Increases 01/01/10 and 01/01/11
to be shared 50% by the County and 50% by the Participant, up to a maximum of
11%; portion of increase above 11% to be paid by the County.
Health Net PPO- Increases 01/01/10 and 01/01/11 to be shared 50% by the County and
50% by the Participant.
Fixed Premium. Effective 06/29/11, fix the County monthly premium subsidy for all of
these plans at the May 2011 amount.
Dental Plan Benefit. Increase to $1,800, from $1,600, the annual maximum benefit
available in the Delta Dental Insurance plan effective 01/01/11.
Medicare Parts A and B . Effective 04/01/11, require enrollment in Medicare Parts A
and B for retirees who become 65 on or after December 14, 2010.
CONSEQUENCE OF NEGATIVE ACTION:
Delayed implementation of health plan modifications.
CHILDREN'S IMPACT STATEMENT:
None.
ATTACHMENTS
Resolution No. 2010/588
Resolution No. 2010/588
Actuarial Report - November 17, 2010
November 17, 2010
Ms. Lisa Driscoll
County Finance Director
Contra Costa County Administrator’s Office
651 Pine Street, 10th Floor
Martinez, CA 94553
RE: Complying with California Government Code Section 7507 Regarding
Changes to the Postretirement Medical Plan Effective as of 1/1/2011
Dear Ms. Driscoll:
This letter documents the changes in future annual costs including actuarial accrued
liability, normal cost, and future cash flows based on collectively bargained changes
to be effective as early as January 1, 2011 for the Deputy District Attorneys’
Association and other assumed changes to the post retirement medical plan.
Throughout this document medical refers to both health and dental costs. All costs
presented herein tie to the County’s GASB 45 liability that was developed using
census data as of January 1, 2010 and beginning of year valuation results updated in
a prior 7507 report dated November 16, 2010 reflecting the Probation Peace Officers
Association changes as of January 1, 2011. This was the most recently updated
valuation result for the County and serves as the baseline for actuarial comparison of
the current plan change costs/savings.
General Description of the Deputy District Attorneys’ Association
Postretirement Medical Benefits Prior to Currently Negotiated Benefit Changes
For Employees Represented by the Deputy District Attorneys’ Association:
Future County premium contributions are assumed to increase with trend as specified
in Appendix A. All other rates and assumptions are as detailed in the most recent
valuation report as of January 1, 2010.
Ms. Lisa Driscoll
November 17, 2010
Page 2
This analysis includes all actives and retirees of County entities included in the
County’s CAFR and utilizing CCC health benefits. All results rely on census and
health plan data provided by the County. A listing of 8,013 active employees with
an average age of 46.5 years and average service of 11.4 years was used for this
study. A separate file containing 5,251 retirees and survivors was provided for this
study as well.
Baseline Valuation Results Before Plan Changes
Table 1 summarizes the Actuarial Accrued Liability (AAL) as of January 1, 2010 as
calculated for all participants under the current benefit schedule (incorporating the
changes to the Probation Peace Officers Association as per the November 16, 2010
valuation update). The AAL is defined as the actuarial present value of benefits
attributed to employee service rendered to a particular date.
The table also shows the normal cost (NC), which is the amount of benefit to be
earned by the active employees for service in calendar year 2010. A discount rate of
6.32% is used throughout this analysis based on the County’s decision to partially
prefund the plan to a dedicated irrevocable trust.
Table 1
CCC Postemployment Health Benefits Plan
Actuarial Accrued Liability and Normal Cost as of January 1, 2010
GASB Statement 45 requires the calculation of an Annual Required Contribution
(ARC) consisting of the Normal Cost and a not greater than 30 year amortization of
the Unfunded Actuarial Accrued Liability (UAAL). There is no requirement for
CCC to actually fund the full ARC. The UAAL is the Actuarial Accrued Liability
(AAL) less any assets held for the plan.
Table 2 on the following page shows the calculated ARC for the fiscal year ending in
2010 under the current health benefit plan using the 6.32% discount rate assumption.
Before Plan Changes
Actuarial Accrued
Liability at a 6.32%
Discount Rate
Normal Cost
at a 6.32%
Discount Rate
Active Employees $474,475,000 $28,722,000
Retirees 562,717,000 0
Total $1,037,192,000 $28,722,000
Ms. Lisa Driscoll
November 17, 2010
Page 3
Table 2
CCC Postemployment Health Benefits Plan
Annual Required Contribution for Fiscal Year Ending 2010
Before Plan Changes 6.32% Discount Rate
Total AAL $1,037,192,000
Assets 25,048,000
UAAL $1,012,144,000
Annual Required Contribution
Normal Cost $28,722,000
30 Year Amortization of UAAL 33,738,000
ARC $62,460,000
The amounts above include the liability associated with the subsidization of retiree
premiums by active employees as required by GASB 45. This subsidization occurs
because the under age 65 retiree medical costs are much higher than active employee
costs but the retiree premium rates are the same as the active rates due to the pooling
of the costs in the underwriting process. Approximately $118 million of the liability
is caused by this rate subsidy, or 11.4% of the total liability under the 6.32%
discount rate assumption.
Table 3 on page 5 shows the updated ARC for the fiscal year ending in 2010 under
the new health benefit provisions negotiated to begin as early as January 1, 2011 for
employees represented by the Deputy District Attorneys’ Association and proposed
for persons who retired from classifications that were represented at the time of
retirement by the Deputy District Attorneys’ Association using the same 6.32%
discount rate assumption.
Here is a brief summary of the Deputy District Attorneys’ Association changes:
Active Employees
• Employees represented by the Deputy District Attorneys’ Association hired
on or after the date the Board approves the new Memorandum of
Understanding will not receive a County subsidized retiree health/dental care
benefit.
• Dual Coverage. Provide as of 01/01/11, that employees and retirees and
dependents of employees and retirees can no longer have dual coverage in
two County/District health or dental plans. This provision will apply to
County and District employees and retirees who have spouses or partners
who are either County or District employees or retirees.
Ms. Lisa Driscoll
November 17, 2010
Page 4
• Premium Cost Sharing 2010-2011.
• Contra Costa Health Plan and Coordinated Dental Plans – Currently
shared 98% County, 2% Participant for Plan A and 90% County, 10%
Participant for Plan B.
o Effective 01/01/11, County will pay a premium subsidy equal to
93% of the 2010 premium for Plan A and Participant will pay an
amount equal to 7% of the 2010 premium for Plan A. County will
pay an amount equal to 87% of the 2010 premium for Plan B and
Participant will pay an amount equal to 13 % of the 2010 premium
for Plan B. Any premium increases for 2011 in Plan A and Plan B
to be shared 50% by the County and 50% by the Participant, up to
a maximum of 11%; portion of increase above 11% to be paid by
the County.
• Kaiser and Health Net HMO and dental plans – Increases 01/01/10 and
01/01/11 to be shared 50% by the County and 50% by the Participant, up
to a maximum of 11%; portion of increase above 11% to be paid by the
County.
• Health Net PPO- Increases 01/01/10 and 01/01/11 to be shared 50% by
the County and 50% by the Participant.
• Fixed Premium. Effective 06/29/11, fix the County monthly premium
subsidy for all of these plans at the May 2011 amount.
• Dental Plan Benefit. Increase to $1,800, from $1,600, the annual maximum
benefit available in the Delta Dental Insurance plan effective 01/01/11.
Retired Employees
• Dual Coverage. Provide as of 04/01/11, that employees and retirees and
dependents of employees and retirees can no longer have dual coverage in
two County/District health or dental plans. This provision will apply to
County and District employees and retirees who have spouses or partners
who are either County or District employees or retirees.
• Premium Cost Sharing January 1, 2010 - April 1, 2011.
• Contra Costa Health Plan and Coordinated Dental Plans – Currently
shared 98% County, 2% Participant for Plan A and 90% County, 10%
Participant for Plan B.
Ms. Lisa Driscoll
November 17, 2010
Page 5
• Kaiser and Health Net HMO and dental plans – Increases 01/01/10 and
01/01/11 to be shared 80% by the County and 20% by the Participant.
• Health Net PPO- Increases 01/01/10 and 01/01/11 to be shared 50% by
the County and 50% by the Participant.
• Premium Cost Sharing April 1, 2011.
• Contra Costa Health Plan and Coordinated Dental Plans – Currently
shared 98% County, 2% Participant for Plan A and 90% County, 10%
Participant for Plan B.
o Effective 04/01/11, County will pay a premium subsidy equal to
93% of the 2010 premium for Plan A and Participant will pay an
amount equal to 7% of the 2010 premium for Plan A. County will
pay an amount equal to 87% of the 2010 premium for Plan B and
Participant will pay an amount equal to 13 % of the 2010 premium
for Plan B. Any premium increases for 2011 in Plan A and Plan B
to be shared 50% by the County and 50% by the Participant, up to
a maximum of 11%; portion of increase above 11% to be paid by
the County.
• Kaiser and Health Net HMO and dental plans – Increases 01/01/10 and
01/01/11 to be shared 50% by the County and 50% by the Participant, up
to a maximum of 11%; portion of increase above 11% to be paid by the
County.
• Health Net PPO- Increases 01/01/10 and 01/01/11 to be shared 50% by
the County and 50% by the Participant.
• Fixed Premium. Effective 06/29/11, fix the County monthly premium
subsidy for all of these plans at the May 2011 amount.
• Dental Plan Benefit. Increase to $1,800, from $1,600, the annual maximum
benefit available in the Delta Dental Insurance plan effective 01/01/11.
• All retirees, who retire after 1/1/2011 are required to enroll in Medicare when
eligible.
Ms. Lisa Driscoll
November 17, 2010
Page 6
Table 3
CCC Postemployment Health Benefits Plan
Annual Required Contribution for Fiscal Year Ending 2010
After Plan Changes 6.32% Discount Rate
Total AAL $1,031,885,000
Assets 25,048,000
UAAL $1,006,837,000
Annual Required Contribution
Normal Cost $28,521,000
30 Year Amortization of UAAL 33,561,000
ARC $62,082,000
The plan changes for the Deputy District Attorneys’ Association created a $5.3
million or 0.51% decrease in the Actuarial Accrued Liability (AAL) and a $378,000
or 0.61% decrease in the calculated Annual Required Contribution. Future valuation
results will change with demographic and cost updates but these changes to the most
recent valuation as of January 1, 2010 do accurately measure the magnitude and
direction of the plan change costs.
In undiscounted cash flow terms there will be decreased cash costs for the County as
early as the January 1, 2011 calendar year for the postretirement medical plan based
on these plan changes. The first 2-year total cash decrease from the plan change
beginning in calendar 2010 is about $1,000, while the 25-year total cash decrease
beginning in calendar 2010 is about $7.1 million. These are conservative estimates
based on current plan participation and are subject to change upon open enrollment
as the plan changes impact future retiree plan selections.
Appendix A provides the assumptions used for this actuarial analysis. This list
includes items such as expected turnover rates, retirement rates, future trend rates,
and mortality rates. The rates that we used are consistent with those used by
CCCERA in its pension actuarial valuations. Appendix B provides a glossary of
commonly used terms for postretirement medical valuations.
All valuation results reflect the use of the Entry Age Normal (EAN) actuarial cost
method. This assumption also matches the cost method used by CCCERA for the
pension valuation.
The current assumption is that annual actuarial valuations will be conducted although
GASB 45 does allow for biennial valuations.
Ms. Lisa Driscoll
November 17, 2010
Page 7
Please contact us at (619) 725-1769 should you have any questions. Sincerely,
Michael W. Schionning, FSA, MAAA James A. Summers, FSA, MAAA Principal & Consulting Actuary Director & Consulting Actuary
cc: Jacqueline Farren, Buck Consultants
APPENDIX A
Valuation Assumptions
Mortality Rates—RP-2000 Combined Healthy Mortality Tables set back two years.
Withdrawal Rates—Representative values are shown below
Year
General
Withdrawals per
1,000 Lives for
employees with less
than 5 years of
Service
Safety
Withdrawals per
1,000 Lives for
employees with less
than 5 years of
Service
1 140.00 110.00
2 90.00 70.00
3 80.00 50.00
4 60.00 40.00
5 50.00 30.00
General
Withdrawals per
1,000 Lives for
employees with more
than 5 years of
Service
Safety
Withdrawals per
1,000 Lives for
employees with more
than 5 years of
Service
Age
30 50.00 30.00
35 49.20 22.00
40 42.30 16.10
45 35.40 10.50
50 16.80 0.00
55 3.70 0.00
60 0.00 0.00
New Entrants—None Assumed.
APPENDIX A
Dependent Assumptions—For active employees, 80% of males and 55% of females
are assumed married at retirement. Female spouses are assumed to be three (3) years
younger than their husbands.
Discount Rate—6.32%.
Participation Assumption—98% active participation assumed upon retirement.
Medical Demographic Information—8,013 active employees and 5,251 retirees as
of January 1, 2010.
Retirement Rates
Probability of retiring at age 70 equals 100% for both General and Safety.
Probability of Eligible
Retirements During the Year
Age General Safety
50 3.0% 25.0%
51 3.0% 20.0%
52 3.0% 20.0%
53 3.0% 20.0%
54 5.0% 25.0%
55 10.0% 30.0%
56 10.0% 30.0%
57 10.0% 40.0%
58 10.0% 40.0%
59 10.0% 40.0%
60 15.0% 100.0%
61 20.0% 100.0%
62 25.0% 100.0%
63 25.0% 100.0%
64 30.0% 100.0%
65 35.0% 100.0%
66 35.0% 100.0%
67 35.0% 100.0%
68 35.0% 100.0%
69 35.0% 100.0%
APPENDIX A
Health Care Cost and Expense Trend—Annual trend rates are shown below.
Medical Trend Rates
by Calendar Year
CY10 10%
CY11 9%
CY12 8%
CY13 7%
CY14 6%
CY15+ 5%
Contra Costa County 2010 Rates and Contributions
The following Premium Rates and Increases vary by bargaining unit. For illustrative
purposes the following R-1A rates for 2010 cover over 75% of the current retiree
population including the newly negotiated Deputy District Attorneys’ Association
benefits.
Total Monthly
Premium
County Monthly
Premium
Early Retirees (under 65)
Kaiser EE $572.41 $444.39
EF $1,333.72 $1,035.42
Health Net
HMO EE $781.71 $611.22
EF $1,917.59 $1,499.36
Health Net PPO EE $946.32 $544.25
EF $2,248.05 $1,292.88
CCHP - A
EE $536.75 $499.18
EF $1,278.84 $1,189.32
CCHP - B EE $592.15 $515.17
EF $1,407.05 $1,224.13
APPENDIX A
Contra Costa County 2010 Rates and Contributions (continued)
Retirees (over65)
Total Monthly
Premium
County Monthly
Premium
Kaiser Cost EE $662.20 $618.26
Retiree EF $1,505.64 $1,379.35
Kaiser Senior EE $274.12 $261.26
Advantage EE+1 $740.29 $705.57
Health Net Cost EE $436.65 $430.28
Retiree EF $873.30 $860.58
Health Net EE $408.88 $390.88
Seniority Plus EE+1 $817.76 $781.76
Health Net Flex EE $730.55 $516.58
Net PPO EE+1 $1,461.11 $1,033.06
CCHP - A EE $440.35 $409.53
Retiree EE+1 $1,086.04 $1,010.02
CCHP - B EE $495.75 $431.30
Retiree EE+1 $1,214.25 $1,056.40
APPENDIX B
Glossary of Terminology
Actuarial Accrued Liability (AAL) - The actuarial present value of benefits
attributed to employee service rendered to a particular date.
Active Plan Participant - Any active employee who has rendered service during the
credited service period and is expected to receive benefits, including benefits to or
for any beneficiaries and covered dependents, under the postretirement benefit plan.
Actuarial Present Value - The value, as of a specified date, of a future benefit cost or
a series of benefit costs, with each amount adjusted to reflect (a) the time value of
money (through discounts for interest and (b) the probability of payment (for
example, by means of decrements for events such as death, disability, withdrawal or
retirement) between the specified date and the expected date of payment.
Amortization - Systematic reduction of the principal portion (only) of an asset or
liability.
Annual Required Contribution – Consists of the normal cost and a portion of the
total unfunded actuarial accrued liability (UAAL). The normal cost and UAAL are
derived from the actuarial present value of benefits, the actuarial cost method and the
plan assets.
Attribution Period - The period of an employee’s service to which the expected
postretirement benefit obligation for that employee is assigned.
Discount Rate - The interest rate used in developing present values to reflect the time
value of money.
APPENDIX B
Health Care Cost Trend Rate - An assumption about the annual rate(s) of change in
the cost of health care benefits currently provided by the postretirement benefit plan,
due to factors other than changes in the composition of the plan population by age
and dependency status, for each year from the measurement date until the end of the
period in which benefits are expected to be paid. The Health Care Cost Trend Rate
implicitly considers estimates of health care inflation, changes in health care
utilization or delivery patterns, technological advances, and changes in the health
status of plan participants. Differing types of service, such as hospital care and
dental care, may have different trends.
Normal Cost - The portion of the Actuarial Present Value of Future Benefits
attributed to employee service during a period.
Substantive Plan - The terms of a postretirement benefit plan as understood by an
employer that provides postretirement benefits and the employees who render
services in exchange for those benefits. The substantive plan is the basis for the
accounting for that exchange transaction. In some situations an employer’s cost-
sharing policy, as evidenced by past practice or by communication of intended
changes to a plan’s cost-sharing provisions, or a past practice of regular increases in
certain monetary benefits may indicate that the substantive plan differs from the
extant written plan.