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Home My WebLink AboutMINUTES - 12032013 - D.6RECOMMENDATION(S): ACCEPT actuarial valuation of future annual costs of proposed changes to Retirement Benefits, changing the COLA for In-Home Supportive Services Public Authority employees who become members of the CCCERA on or after January 1, 2014, as provided by Buck Consultants in a letter dated November 25, 2013. FISCAL IMPACT: As shown in the valuations, the result of the retirement changes described herein for In-Home Supportive Services Public Authority employees will save 2.2% 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: 12/03/2013 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: December 3, 2013 David Twa, County Administrator and Clerk of the Board of Supervisors By: June McHuen, Deputy cc: Robert Campbell, Auditor-Controller, Harjit S. Nahal, Assistant Auditor-Controller, Dorothy Sansoe, Senior Deputy County Administrator D.6 To:In-Home Supportive Services Public Authority From:David Twa, County Administrator Date:December 3, 2013 Contra Costa County Subject:Government Code 7507 Compliance - Retirement Benefits - In-Home Supportive Services Public Authority Employees BACKGROUND: 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 code also requires that an actuary be present to provide information as needed at the public meeting at which the adoption of a benefit change shall be considered. Assembly Bill 340 (AB340), known as the California Public Employees' Pension Reform Act of 2013 (PEPRA), took effect January 1, 2013. Generally, for those In-Home Supportive Services Public Authority employees who become members of the Contra Costa County Employees’ Retirement Association (CCCERA) on or after January 1, 2013, PEPRA requires a pension formula of 2% at age 62, 36 month final compensation averaging, and a maximum salary amount used for pension calculation of $110,100 (plus CPI). PEPRA does not address Cost of Living Adjustments (COLAs). On December 17, 2013, the Board of Supervisors may consider and may take formal action with respect to a proposed reduction in the COLA to the pension benefit. This action would set a 2.00% COLA to the pension benefit for In-Home Supportive Services Public Authority employees who become members of the CCCERA PEPRA Tier on or after January 1, 2014. The 7507 report from Buck Consultants dated November 25, 2013 is attached. The report explains that this change affects only future employees; it will have no effect on the unfunded actuarial accrued liabilities of CCCERA. The savings shown are combined employee and employer normal costs. The savings are equal to the excess of the normal cost for the PEPRA structure and a 3.00% COLA to the pension benefit over the normal cost of a PEPRA structure and a 2.00% COLA. On December 17, 2013, the Human Resources Director will return to the Board to adopt implementation of these changes. An actuary will be present to answer any questions that the Board or public poses regarding the savings associated with the pension change. For FY 2013-14, the majority of the In-Home Supportive Services Public Authority employees hired after January 1, 2014 will be under the following pension rate structure: CONSEQUENCE OF NEGATIVE ACTION: Delayed implementation of the COLA reduction, resulting in loss of savings. CHILDREN'S IMPACT STATEMENT: None. None. ATTACHMENTS 7507 Report for IHSS dated November 25, 2013 3200 N. Central Ave., Suite 2200 • Phoenix, AZ 85012-2425 602.864.3500 • 602.864.3535 fax November 25, 2013 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 as of January 1, 2014 Dear Ms. Driscoll: We have been asked to estimate the effect on the In-Home Supportive Services Authority’s (IHSSA’s) current and future unfunded actuarial accrued liabilities and Annual Required Contributions resulting from a new tier of benefits in the structure of Assembly Bill 340 (AB340) with a 2.00% Cost of Living Adjustment (COLA). January 1, 2014 was used as the effective date for the proposed change for the IHSSA. We are comparing this benefit structure to the AB340 structure with a 3.00% COLA. Because this change affects only future employees, it will have no effect on the unfunded actuarial accrued liabilities of Contra Costa County Employees’ Retirement Association (CCCERA) as of January 1, 2014. We show the cost impacts on the enclosed charts per one hire per year for each bargaining unit (8I and 8J). The costs shown are combined employee and employer normal costs. By going from a 3.00% COLA to a 2.00% COLA, the IHSSA will realize a savings. The savings are equal to the excess of the normal cost for an AB340 structure with a 3.00% COLA over the normal cost of an AB340 structure with a 2.00% COLA. We have expressed the savings in annual dollar amounts and as percentages of covered payroll for fiscal years 2014, 2015, and 2016. These results are merely illustrative and the actual impact will depend upon the actual demographic characteristics of the employees as well as the pattern of future hiring. Ms. Lisa Driscoll November 25, 2013 Page 2 Future actuarial measurements may differ significantly from the current measurement presented in this report due to such factors as: plan experience different from that anticipated by the economic and demographic assumptions; increases or decreases expected as part of the natural operation of the methodology used for these measurements; and changes in plan provisions or applicable law. Due to the limited scope of this report, an analysis of the potential range of such future measurements has not been performed. The methods and assumptions used are the same as those used in the December 31, 2012, actuarial valuation of CCCERA. Information on our new entrant profile is given in Note 2 of the enclosed projections. The report was prepared under the supervision of Charlie Chittenden, an Enrolled Actuary, a Fellow of the Society of Actuaries, and a Member of the American Academy of Actuaries, who met the Qualification Standards of the American Academy of Actuaries to render the actuarial opinions contained in this report. This report has been prepared in accordance with all Applicable Actuarial Standards of Practice. I am available to answer any questions on the material contained in the report, or to provide explanations or further details as may be appropriate. Sincerely, Charles E. Chittenden, FSA, EA, MAAA Joseph Son, FSA, EA, MAAA Principal and Consulting Actuary Senior Consultant, Retirement Actuary Enc. Ms. Lisa Driscoll November 25, 2013 Page 3 In-Home Supportive Services Authority – Total Plan Year 2014 2015 2016 Valuation Pay $78,200 $159,400 $243,600 Annual Cost AB340 with 3.00% COLA i) $$17,300 $35,100 $53,600 ii) % of Pay 22.1%22.0%22.0% AB340 with 2.00% COLA i) $$15,600 $31,800 $48,600 ii) % of Pay 19.9%19.9%20.0% Saving/(Cost) i) $$1,700 $3,300 $5,000 ii) % of Pay 2.2%2.1%2.0% $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 2014 2015 2016 Saving/(Cost)AB340 with 3.00% COLA AB340 with 2.00% COLA Contra Cost County -AB340 with 3.00 COLA vs. AB340 with 2.00 COLA Annual Cost by Plan Year ($) 0.0% 10.0% 20.0% 30.0% 2014 2015 2016 Saving/(Cost)AB340 with 3.00% COLA AB340 with 2.00% COLA Annual Cost by Plan Year (% of Pay) Ms. Lisa Driscoll November 25, 2013 Page 4 In-Home Supportive Services Authority – 8I Plan Year 2014 2015 2016 Valuation Pay $45,800 $93,300 $142,600 Annual Cost AB340 with 3.00% COLA i) $$10,400 $21,100 $32,200 ii) % of Pay 22.7%22.6%22.6% AB340 with 2.00% COLA i) $$9,400 $19,100 $29,200 ii) % of Pay 20.5%20.5%20.5% Saving/(Cost) i) $$1,000 $2,000 $3,000 ii) % of Pay 2.2%2.1%2.1% $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 2014 2015 2016 Saving/(Cost)AB340 with 3.00% COLA AB340 with 2.00% COLA Contra Cost County -AB340 with 3.00 COLA vs. AB340 with 2.00 COLA Annual Cost by Plan Year ($) 0.0% 10.0% 20.0% 30.0% 2014 2015 2016 Saving/(Cost)AB340 with 3.00% COLA AB340 with 2.00% COLA Annual Cost by Plan Year (% of Pay) Ms. Lisa Driscoll November 25, 2013 Page 5 In-Home Supportive Services Authority – 8J Notes: 1. The methods and assumptions used to determine the savings were the same as those used for the December 31, 2012, valuation. 2. The IHSSA is assumed to hire two actives, one from each bargaining group (8I and 8J), at January 1 of each projection year. The annual pensionable pays at entry are assumed to be $50,900, $52,700, and $54,500 for the 8I employee for the 2014, 2015, and 2016 hires and $36,000, $37,300, and $38,600 for the 8J employee for the 2014, 2015, and 2016 hires, respectively. The ages at entry for new hires are assumed to be 41 and 37 for the 8I and 8J employees, respectively. 3. The Social Security Wage Base is $117,000 for 2014 and it is expected to grow 2.00% per year. 4. In the AB340 benefit structure, the multiplier is 2% at 62. The multiplier increases by 0.1% for ages above 62 to a maximum of 2.5% at 67. It decreases by 0.1% for ages below 62 to a minimum of 1.0% at 52. Plan Year 2014 2015 2016 Valuation Pay $32,400 $66,100 $101,000 Annual Cost AB340 with 3.00% COLA i) $$6,900 $14,000 $21,400 ii) % of Pay 21.3%21.2%21.2% AB340 with 2.00% COLA i) $$6,200 $12,700 $19,400 ii) % of Pay 19.1%19.2%19.2% Saving/(Cost) i) $$700 $1,300 $2,000 ii) % of Pay 2.2%2.0%2.0% $0 $5,000 $10,000 $15,000 $20,000 $25,000 2014 2015 2016 Saving/(Cost)AB340 with 3.00% COLA AB340 with 2.00% COLA Contra Cost County -AB340 with 3.00 COLA vs. AB340 with 2.00 COLA Annual Cost by Plan Year ($) 0.0% 10.0% 20.0% 30.0% 2014 2015 2016 Saving/(Cost)AB340 with 3.00% COLA AB340 with 2.00% COLA Annual Cost by Plan Year (% of Pay)