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Home My WebLink AboutMINUTES - 04222014 - D.6RECOMMENDATION(S): ACCEPT written acknowledgment by the County Administrator (Chief Executive Officer) that he understands the current and future costs of the Retirement benefit changes for employees represented by the Professional & Technical Engineers Local 21, AFL-CIO, as determined by the County’s actuary in the February 12, 2014 Actuarial Report. FISCAL IMPACT: As shown in the valuation, the result of the retirement changes described herein, if implemented, will save 1.6% 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 savings described in the valuation report do not include the savings resulting from the implementation of PEPRA. APPROVE OTHER RECOMMENDATION OF CNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE Action of Board On: 04/22/2014 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: April 22, 2014 David Twa, County Administrator and Clerk of the Board of Supervisors By: June McHuen, Deputy cc: Contra Costa County Employees' Retirement Association, Robert Campbell, Auditor-Controller D.6 To:Board of Supervisors From:David Twa, County Administrator Date:April 22, 2014 Contra Costa County Subject:Government Code 7507 - Chief Executive Acknowledgement of Future Costs of Benefits - Local 21 BACKGROUND: At its meeting on February 25, 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 the County's actuary in a letter dated February 12, 2014. The Board 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 February 12, 2014 report 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 April 22, 2014. 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 February 12, 2014 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 Local 21 dated February 12, 2014 3200 N. Central Ave., Suite 2200 • Phoenix, AZ 85012-2425 602.864.3500 • 602.864.3535 fax February 12, 2014 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 of Professional and Technical Engineers IFPTE as of July 1, 2014 Dear Ms. Driscoll: 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 Assembly Bill 340 (AB340) with a 2.00% Cost of Living Adjustment (COLA). July 1, 2014 was used as the effective date for the proposed change for the members of the Professional and Technical Engineers IFPTE, Local 21. We are comparing this benefit structure to the AB340 structure with a 3.00% COLA which the plan currently provides. 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 July 1, 2014. We show the cost impacts on the enclosed charts per one hire 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 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 calendar years 2014, 2015, 2016, and 2017. 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 February 12, 2014 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 Joseph Son Principal and Consulting Actuary Senior Consultant, Retirement Actuary Enc. Ms. Lisa Driscoll February 12, 2014 Page 3 Professional and Technical Engineers IFPTE, Local 21 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 county is assumed to hire one active employee at July 1 of each projection year. The annual valuation pay amounts at entry are assumed to be $71,400, $73,900, $76,500, and $79,200 for the 2014, 2015, 2016, and 2017 hires, respectively. The age at entry for new hires is assumed to be 37. 3. The maximum compensation limit for the retirement benefit is $115,064 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. Calendar Year 2014 2015 2016 2017 Valuation Pay $32,100 $99,900 $170,300 $243,500 Annual Cost AB340 with 3.00% COLA i) $$5,100 $15,700 $26,700 $38,100 ii) % of Pay 15.9%15.7%15.7%15.6% AB340 with 2.00% COLA i) $$4,600 $14,200 $24,100 $34,400 ii) % of Pay 14.3%14.2%14.2%14.1% Saving/(Cost) i) $$500 $1,500 $2,600 $3,700 ii) % of Pay 1.6%1.5%1.5%1.5% $0 $10,000 $20,000 $30,000 $40,000 $50,000 2014 2015 2016 2017 Saving/(Cost)AB340 with 3.00% COLA AB340 with 2.00% COLA Contra Cost County -AB340 with 3.00 COLA vs. AB340 with 2.00 COLA Annual Cost by Plan Year ($) 0.0% 5.0% 10.0% 15.0% 20.0% 2014 2015 2016 2017 Saving/(Cost)AB340 with 3.00% COLA AB340 with 2.00% COLA Annual Cost by Plan Year (% of Pay)