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HomeMy WebLinkAboutMINUTES - 11062012 - SD.3RECOMMENDATION(S): ACCEPT that this Board Order serves as written acknowledgment by the County Administrator (chief executive officer) that he understands the current and future cost of Retirement benefit changes for the Contra Costa County Deputy District Attorneys' Association, as determined by the County's actuary in the October 16, 2012 Actuarial Report (Attached). FISCAL IMPACT: As shown in the valuation, the result of the retirement changes described herein, if implemented, will save 1.1% of annual pensionable pay with the first hire in year one. Future valuation results will change with demographic and cost updates. These projections do accurately measure the direction of the plan change costs. Over time, as more employees are hired into the new PEPRA tier at a 2% COLA, the savings will become more significant. It should be noted that the figures presented in this report represent the savings associated only with the negotiation of a 2% COLA. The actual savings from both the new State law and the negotiated change beginning January 1 is the savings between the new PEPRA tier with a 2% COLA and Tier III with a 3% COLA. When considering the difference between these tiers the total savings is closer to 5.0%. APPROVE OTHER RECOMMENDATION OF CNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE Action of Board On: 11/06/2012 APPROVED AS RECOMMENDED OTHER Clerks Notes: VOTE OF SUPERVISORS AYE:John Gioia, District I Supervisor Candace Andersen, District II Supervisor Mary N. Piepho, District III Supervisor Karen Mitchoff, District IV Supervisor Federal D. Glover, District V 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: November 6, 2012 David Twa, County Administrator and Clerk of the Board of Supervisors By: June McHuen, Deputy cc: Robert Campbell, Auditor-Controller SD. 3 To:Board of Supervisors From:David Twa, County Administrator Date:November 6, 2012 Contra Costa County Subject:Government Code 7507 - Chief Executive Acknowledgement of Future Costs of Benefits - Deputy District Attorneys' Association BACKGROUND: At its meeting on October 22, the Board of Supervisors accepted an actuarial valuation of future annual costs of negotiated and proposed changes to Other Post Employment Benefits, as provided by Buck Consultants in a letter dated October 16, 2012. The Board of Supervisors was informed that Government Code, Section 7507 requires with regard to local legislative boards, that the future costs of changes in retirement benefits or other post employment benefits as determined by the actuary, shall be made public at a public meeting at least two weeks prior to the adoption of any changes in public retirement plan benefits or other post employment benefits. The October 16, 2012 report from Buck Consultants fulfilled that requirement. Government Code, Section 7507 also requires that if the future costs (or savings) of the changes exceed one-half of 1 percent of the future annual costs of the existing benefits for the body, an actuary shall be present to provide information as needed at the public meeting at which the adoption of a benefit change shall be considered. An actuary will be present at the meeting of November 6, 2012. And finally, Section 7507 requires that upon the adoption of any benefit change to which the section applies, the person with responsibilities of a chief executive officer in an entity providing the benefit, however that person is denominated, shall acknowledge in writing that he or she understands the current and future cost of the benefit as determined by the actuary. As the County Administrator (chief executive officer) and by approving this Board Order, I acknowledge in writing that I understand the current and future cost of the benefit changes presented to you today, as determined by the actuary and contained in the October 16, 2012 letter from Buck Consultants (County's actuary). CONSEQUENCE OF NEGATIVE ACTION: Delayed implementation of the COLA reduction, resulting in loss of savings. CHILDREN'S IMPACT STATEMENT: None. ATTACHMENTS 7507 Report for DDAAs dated October 16, 2012 3200 N. Central Ave., Suite 2200 • Phoenix, AZ 85012-2425 602.864.3500 • 602.864.3535 fax October 16, 2012 Ms. Lisa Driscoll Finance Director Contra Costa County 651 Pine Street, 10th floor Martinez, CA 94553 Re: Complying with California Government Code Section 7507 Regarding Changes to Pension Benefits for Deputy District Attorneys as of January 1, 2013 Dear Ms. Driscoll: Assembly Bill 340 (AB340), known as the California Public Employees' Pension Reform Act of 2013 (PEPRA), was signed into law by Governor Brown on September 12, 2012. PEPRA takes effect January 1, 2013. Generally, for those Deputy District Attorneys who become members of the Contra Costa County Employees’ Retirement Association (CCCERA) on or after January 1, 2013, PEPRA legislates a pension formula of 2% at age 62, a 36-month final averaging, and a maximum annual salary amount used for pension calculation of $110,100 (plus CPI). PEPRA does not specify a Cost of Living Adjustment (COLA). Contra Costa County has negotiated a 2.00% COLA for those Deputy District Attorneys who become members of CCCERA on or after January 1, 2013. The default COLA for these employees would have been 3.00%. Per California Government Code 7507, this change in COLA requires an actuarial report of "Future annual costs" which includes, but is not limited to, annual dollar changes, or the total dollar changes involved when available, as well as normal cost and any change in accrued liability. We have been asked to estimate the effect on the County’s current and future unfunded actuarial accrued liabilities and Annual Required Contributions resulting from a new tier of benefits in the structure of PEPRA and a 2.00% COLA. We are comparing this benefit structure to the PEPRA structure and the default COLA of 3.00%. Ms. Lisa Driscoll October 16, 2012 Page 2 Because this change affects only future employees, it will have no effect on the unfunded actuarial accrued liabilities of CCCERA. We show the cost impacts on the enclosed charts per member hired per year. The costs shown are combined employee and employer normal costs. By going from a 3.00% COLA to a 2.00% COLA, the County will realize a savings. The savings are equal to the excess of the normal cost for the PEPRA structure and a 3.00% COLA over the normal cost of a PEPRA structure and a 2.00% COLA. We have expressed the savings in annual dollar amounts and as percentages of covered payroll for fiscal years 2013, 2014, and 2015. The methods and assumptions used are the same as those used in the 2011 actuarial valuation of CCCERA. Information on our new entrant profile is given in Note 2 of the attached exhibit. Sincerely, Charles E. Chittenden Principal and Consulting Actuary Exhibit to Letter of October 16, 2012 Employer & Employee Normal Cost Exhibit Plan Year 2013 2014 2015 Valuation Pay $66,500 $134,100 $202,800 Annual  Cost AB340 with 3.00% COLA i) $ $7,500 $15,000 $22,600 ii) % of  Pay 11.3% 11.2% 11.1% AB340 with 2.00% COLA i) $ $6,800 $13,600 $20,400 ii) % of  Pay 10.2% 10.1% 10.1% Saving/(Cost) i) $ $700 $1,400 $2,200 ii) % of  Pay 1.1% 1.1% 1.0% $0 $5,000 $10,000 $15,000 $20,000 $25,000 2013 2014 2015 Saving/(Cost)AB340 with 3.00% COLA AB340 with 2.00% COLA Contra  Cost  County  ‐AB340 with 3.00 COLA  vs. AB340 with 2.00 COLA Annual Cost  by Plan Year ($) 0.0% 5.0% 10.0% 15.0% 2013 2014 2015 Saving/(Cost)AB340 with 3.00% COLA AB340 with 2.00% COLA Annual Cost  by Plan Year (% of Pay) Notes:  1. The methods and assumptions used to determine the savings were the same as those used  for the December 31, 2011, actuarial valuation for General Tier 3 members.  2. The county is assumed to hire one active (Deputy District Attorney‐Fixed Term), who will be  subject to the new tier of benefits in AB 340, at January 1 of each projection year.  The  annual pensionable pays are derived from negotiated salaries by date.  These amounts are  below the AB340 cap on pay.  The age at entry for new hires is assumed to be 28.  3. In the AB340 benefit structure, the multiplier is 2% at 62.  The multiplier increases by .1% for  ages above 62 to a maximum of 2.5% at 67.  It decreases by .1% for ages below 62 to a  minimum of 1.0% at 52.