HomeMy WebLinkAboutMINUTES - 09092014 - D.3RECOMMENDATION(S):
ACCEPT the 2014 Other Post Employment Benefits (OPEB) Valuation Report as of January 1, 2014 including
Annual Required Contributions for the Fiscal Year Ending June 30, 2014.
FISCAL IMPACT:
The attached 2014 Other Post Employment Benefit (OPEB) Valuation Report is required per Governmental
Accounting Standards Board (GASB) Statements 43 and 45 to be completed, by a County the size of Contra Costa,
every two years. The report presents a calculation of liability and has no specific fiscal impact on its own. The
County’s actions to reduce the liability have had significant impact on the County’s overall fiscal stability and ability
to deliver services. As of January 1, 2014, the most recent actuarial valuation date, the County’s other post
employment benefits were 14.0% funded. The actuarial accrued liability for benefits was $924 million, and the
actuarial value of assets was $129 million, resulting in an unfunded actuarial accrued liability of $794 million, and an
Annual Required Contribution of $89 million.
APPROVE OTHER
RECOMMENDATION OF CNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE
Action of Board On: 09/09/2014 APPROVED AS RECOMMENDED OTHER
Clerks Notes:
VOTE OF SUPERVISORS
Contact: Lisa Driscoll, County
Finance Director
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: September 9, 2014
David Twa, County Administrator and Clerk of the Board of Supervisors
By: , Deputy
cc: Robert Campbell, Auditor-Controller, Christine Penkala, County Benefits Manager, Mary Ann McNett Mason, Assistant County Counsel
D.3
To:Board of Supervisors
From:David Twa, County Administrator
Date:September 9, 2014
Contra
Costa
County
Subject:Other Post Employment Benefits (OPEB) - 2014 Valuation Report
BACKGROUND:
In 2004, due to growing concern over the potential magnitude of government employer obligations for post-employment benefits, the Governmental
Accounting Standards Board enacted Statement 45 (GASB 45). The main reason for the Statement was to establish uniform accrual accounting and reporting
of these governmental liabilities much like under the Financial Accounting Standards Board (FASB) rules that already applied to the private sector for OPEBs
(and GASB 25 and 27 statements that already applied to governmental pension liabilities). Accrual accounting was needed to report the cost of providing
government services over the working lifetime of employees providing the services rather than just the "pay-as-you-go" (paygo) cost that was not realized
until after those employees retired.
Additionally, an intended audience of these GASB 45 results was the bond markets to better assess levels of government solvency in issuing debt. Although
plan solvency was not the main impetus behind Statement 45, GASB 45 is considered 'funding friendly' because it adds some stability for those receiving the
benefits, if those benefits are actually pre-funded. Because Statement 45 requires the public sector to account for total long term OPEB costs over the active
service life of benefit-earning employees, rather than reporting current year OPEB costs only for existing retirees, it is thought that addressing these long-term
liabilities would help to avoid the collapses in benefit plans that have occurred in the private sector.
Pursuant to GASB 45 requirements, Contra Costa County ordered its initial actuarial report in 2006. The 2006 report valued the County’s unfunded liability
for retiree medical costs at $2.6 billion based upon a cash discount rate. This outstanding liability, if fully amortized over the following 30 years, would have
necessitated an Annual Required Contribution (ARC) of $216 million. At that point in time, $216 million would have been six times the amount that the
County was paying toward retiree health care costs on a paygo basis.
As is described in the attached 2014 report and in the table below, the County has taken significant actions to address GASB 45 and to reduce its OPEB
liability since the initial report of 2006. Interim valuation results have been presented to the Board of Supervisors, pursuant to California Government Code
7507, since the 2008 report. However, for comparison purposes, the table below compares bi-annual GASB 45 valuation results at fiscal year-end (FYE).
In June, 2007, the County established a funding target of 100% of the potential liability for the retiree population. At that time, retirees accounted for
approximately 40% of the liability population. That figure is now 43% and expected to continue to grow. Partial pre-funding began in 2008 with an annual
County allocation of $20 million. The County's OPEB was 3.9% funded in 2010, 6.3% in 2012, and as of January 1, 2014, the County's OPEB was 14.0%
funded. Although the County has made great strides towards reducing the liability, the current funded ratio is only 14%. Additionally, the UAAL as a
percentage of covered payroll, is still high at 126.2%. Pursuant to County Ordinance No. 2014-04, the annual resources of $20 million will be increased by
$47 million to $67 million in FY 2022/23 when the County retires its current Pension Obligation Bond.
Both the 2006 and 2008 valuation reports used a 4.5% discount rate, reflecting the County’s funding policy at that time. The 2010 and 2012 results reflected a
6.32% discount rate to reflect the County’s adopted discount rate assumption based on $20 million in partial pre-pay into an OPEB trust fund, plus paygo
funding. The 2014 report reflects a 5.70% discount rate, which reflects the County's current policies. This rate is derived based upon the fund's investment
policy, level of partial funding, and long-term inflation assumption. Based upon the portfolio's target allocation, the average return of Trust assets over the
next 30 years is expected to be 6.25%. Because the County's annual contribution is not equal to the Annual Required Contribution, GASB requires that the rate
be blended with the expected return of the County's general fund (we assumed a long term return of 3.5%).
Throughout the last six years through labor negotiations, the County has worked with employees to adopt and implement the County’s OPEB goals. Through
the efforts of the majority of our employees, the County has adopted an OPEB financing plan that balanced the County's requirement to provide public
services with its desire to provide competitive health care benefits to employees and fully complies with GASB 45. It is important to note that the significant
improvement in the County’s OPEB liability could not have been achieved without the support of our employees. These efforts will not only help to ensure the
County’s overall fiscal stability and ability to deliver services, but will also increase the likelihood that health care benefits will be available to our employees
and retirees in the future.
A reconciliation of the County's valuation changes breaks out in the following way:
2006 to 2008
Updated Contra Costa County Employees' Retirement Association (CCCERA) pension valuation assumptions where applicable (valuation assumption)
Better overall medical and dental plan trend and renewals over the two years than originally assumed (demographic gain)
Fewer new retirements than originally assumed, which delayed the onset of benefits (demographic gain)
Overall cleaner and more complete data than was available in 2006
Effective 2008, the County contribution for non-represented retirees was set at the 2009 level for future years (this date was later changed to 2011 and
included in subsequent valuation plan provisions)
2008 to 2010
Reduced liability due to the negotiated plan change savings over time. The impact from these changes was more than expected due to conservative plan
change assumptions and up to date bargaining unit coding.
Migration to lower cost plans as a result of the plan changes and a resulting lower subsidy amount (active rates subsidizing retiree rates).
Demographic gains:
This was due to both active and retiree counts being lower than in the 2008 valuation,
Fewer new retirements than expected,
Fewer continuing retirees than expected, and
Fewer active employees than in 2008.
2010 to 2012
Reduced liability due to the negotiated plan change savings over time.
Migration to lower cost plans as a result of the plan changes and a resulting lower subsidy amount.
Demographic losses:
This was due to active counts being lower and retiree counts being higher than in the 2010 valuation,
More new retirements than expected (loss),
More retirees than in 2010 (loss), and
Fewer active employees than in 2010 (gain).
2012 to 2014
Reduced liability due to the negotiated plan change savings over time. See Appendix A of attached report (Summary of Benefits), for details regarding
plan changes made for the majority of County employees.
Migration to lower cost plans as a result of the plan changes and a resulting lower subsidy amount.
Demographic losses:
Active and retiree counts were higher than in the 2012 valuation, however the ratio of actives to retirees remained at 43.4%,
More new retirements than expected (loss),
More retirees than in 2012 (loss), and
More active employees than in 2012 (loss).
Summary
Over the last eight years, the County has reduced its OPEB UAAL by 64%, Normal Cost by 79%, amortization of UAAL by 29%, and Annual Required
Contribution by 59%. Although the County’s annual trust deposit of $20 million combined with the annual paygo cost of $48 million shows great progress, it
does not meet the GASB definition of paying the total Annual Required Contribution for pre-funding ($88 million). Additionally, a 14% funded level is still
far from the targeted level of 40%. The Board of Supervisors, through the County Administrator's Office will continue to work towards a financial balance
between the provision of necessary services to the public and provision of competitive health care benefits for employees and retirees.
None of these reductions could have been achieved without the support and cooperation of our employees. Continued negotiations toward Countywide health
care cost containment strategies and the redirection of designated future resources remain key to reducing the OPEB liability. The Board of Supervisors
continues to make significant progress toward a solution for one of the biggest fiscal challenges the County has faced to date.
The results contained in this report are our best estimate; however, variation from these or any other estimates of future retiree medical costs is possible.
Actual future costs may vary from the estimates in this report. Detailed information on the Board’s actions, including all of the County’s OPEB reports, is
available on the County’s web-site at www.cccounty.us/1318/Other-Post-Employment-Benefits.
CONSEQUENCE OF NEGATIVE ACTION:
The County will be out of compliance with GASB 45.
CHILDREN'S IMPACT STATEMENT:
None.
ATTACHMENTS
2014 OPEB Valuation
Milliman Client Report
Contra Costa County
GASB 45 Actuarial Valuation of Post Employment
Benefits Other than Pensions as of January 1, 2014
Prepared by:
John R. Botsford
FSA, MAAA
Milliman, Inc.
650 California Street, 17th Floor
San Francisco, California 94108
Tel 415 403 1333 Fax 415 403 1334
milliman.com
August 8, 2014
Offices in Principal Cities Worldwide
650 California Street, 17th Floor
San Francisco, CA 94108-2702
USA
Tel +1 415 403 1333
Fax +1 415 403 1334
milliman.com
August 8, 2014
Contra Costa County
651 Pine Street
Martinez, CA 94553
Contra Costa County –
GASB 45 Actuarial Valuation of Post Employment Benefits as of January 1, 2014
At the request of the Contra Costa County, we have completed an actuarial valuation of other post
employment benefits as of January 1, 2014.
The purpose of this report is to determine the Annual Required Contribution and required financial
disclosures under the Governmental Accounting Standards Board Statement No. 45 – Accounting and
Financial Reporting by Employers for Postemployment Benefits Other Than Pensions (GASB 45). Our
determinations reflect the procedures and methods prescribed in GASB 45.
In preparing our report, we relied, without audit, on information (some oral and some in writing)
supplied by Contra Costa County’s staff. This information includes but not limited to employee census
data, financial information and the County’s other post employment benefit (OPEB) provisions. While
Milliman has not audited the financial and census data, they have been reviewed for reasonableness
and are, in our opinion, sufficient and reliable for the purposes of our calculations. If any of this
information as summarized in this report is inaccurate or incomplete, the results shown could be
materially affected and this report may need to be revised.
All costs, liabilities, rates of interest, and other factors for the County have been determined on the
basis of actuarial assumptions and methods which are individually reasonable (taking into account the
experience of the County and reasonable expectations); and which, in combination, offer our best
estimate of anticipated experience affecting the County. Further, in our opinion, each actuarial
assumption used is reasonably related to the experience of the County and to reasonable expectations
which, in combination, represent our best estimate of anticipated experience for the County.
This valuation report is only an estimate of the County’s other post employment benefit liability as of
a single date. It can neither predict the future condition of the County’s other post employment
benefit liability nor guarantee future financial soundness. Actuarial valuations do not affect the
ultimate cost of other post employment benefits, only the timing of County contributions. While the
valuation is based on an array of individually reasonable assumptions, other assumption sets may
also be reasonable and valuation results based on those assumptions would be different. No one
set of assumptions is uniquely correct. Determining results using alternative assumptions is outside
the scope of our engagement.
Future actuarial measurements may differ significantly from the current measurements presented in
this report due to such factors as the following: County experience differing from that anticipated by
the economic or demographic assumptions; changes in economic or demographic assumptions;
Contra Costa County
Actuarial Valuation as of January 1, 2014
Page 2
Milliman
increases or decreases expected as part of the natural operation of the methodology used for these
measurements (such as the end of an amortization period); and changes in other post employment
benefit provisions or applicable law. Due to the limited scope of our assignment, we did not perform
an analysis of the potential range of future measurements. The County has the final decision
regarding the appropriateness of the assumptions and actuarial cost methods.
Actuarial computations presented in this report under GASB Statement No. 45 are for purposes of
assisting the County in fulfilling its financial accounting requirements. The computations prepared for
this purpose may differ as disclosed in our report. The calculations in the enclosed report have been
made on a basis consistent with our understanding of the County’s funding policy and goals. The
calculations in this report have been made on a basis consistent with our understanding of the
County’s current other post employment benefits described in Appendix A of this report, and of
GASB Statement No. 45. Determinations for purposes other than meeting these requirements may
be significantly different from the results contained in this report. Accordingly, additional
determinations may be needed for other purposes.
Milliman’s work is prepared solely for the internal business use of the Contra Costa County. To the
extent that Milliman's work is not subject to disclosure under applicable public records laws,
Milliman’s work may not be provided to third parties without Milliman's prior written consent.
Milliman does not intend to benefit or create a legal duty to any third party recipient of its work
product. Milliman’s consent to release its work product to any third party may be conditioned on the
third party signing a Release, subject to the following exceptions:
a) Contra Costa County may provide a copy of Milliman’s work, in its entirety, to the County's
professional service advisors who are subject to a duty of confidentiality and who agree to
not use Milliman’s work for any purpose other than to benefit the County.
b) Contra Costa County may provide a copy of Milliman’s work, in its entirety, to other
governmental entities, as required by law.
No third party recipient of Milliman's work product should rely upon Milliman's work product. Such
recipients should engage qualified professionals for advice appropriate to their own specific needs.
The consultants who worked on this assignment are actuaries. Milliman’s advice is not intended to be
a substitute for qualified legal or accounting counsel.
The signing actuary is independent of the County. We are not aware of any relationship that would
impair the objectivity of our work.
Contra Costa County
Actuarial Valuation as of January 1, 2014
Page 3
Milliman
On the basis of the foregoing, we hereby certify that, to the best of our knowledge and belief, the report
is complete and accurate and has been prepared in accordance with generally recognized and
accepted actuarial principles and practices which are consistent with the applicable Actuarial
Standards of Practice of the American Academy of Actuaries. The undersigned is a member of the
American Academy of Actuaries and meets the Qualification Standards of the American Academy of
Actuaries to render the actuarial opinion contained herein.
Sincerely,
John R. Botsford, FSA, MAAA
Principal and Consulting Actuary
JRB:dyu
This work product was prepared solely for the Contra Costa County for the purposes described herein and may not be appropriate to
use for other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third
parties hire their own actuary or other qualified professional when reviewing Milliman work product.
Milliman
Contra Costa County
GASB 45 Actuarial Valuation as of January 1, 2014
Milliman Client Report TABLE OF CONTENTS
Section Page
I MANAGEMENT SUMMARY
Introduction ....................................................................................................................... 1
Background ....................................................................................................................... 1
Assumptions ..................................................................................................................... 1
Results of Study ................................................................................................................ 2
Variability of Results ......................................................................................................... 3
II EXHIBITS
Exhibit 1. Projected Benefit Payments ..................................................................... 4
Exhibit 2. Liabilities and Normal Cost ....................................................................... 5
Exhibit 3. Unfunded Actuarial Accrued Liability ........................................................ 6
Exhibit 4. Required Financial Statement Disclosures ............................................... 7
Exhibit 5. Required Supplementary Information ....................................................... 8
Exhibit 6. Results by County’s Entities ..................................................................... 9
Exhibit 7. Value of Subsidized Early Retiree Health Premium ............................... 10
Exhibit 8. Valuation Results – Changes from Prior Valuation ................................ 11
III APPENDICES
Appendix A. Summary of Benefits .............................................................................. 12
Appendix B. Actuarial Cost Method and Assumptions ................................................ 20
Appendix C. Changes in Actuarial Cost Method and Assumptions ............................ 25
Appendix D. Summary of Participant Data .................................................................. 26
This work product was prepared solely for the Contra Costa County for the purposes described herein and may not be appropriate to use for other purposes. Milliman
does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties hire their own actuary or other
qualified professional when reviewing Milliman work product.
Milliman
Contra Costa County
GASB 45 Actuarial Valuation as of January 1, 2014 1
Milliman Client Report SECTION I. MANAGEMENT SUMMARY
Introduction
Milliman, Inc. (“Milliman”) has been retained by the Contra Costa County (“County”) to provide a
GASB 45 actuarial valuation of its other post employment benefits (OPEB). In our valuation we:
Project expected payouts
Calculate the present value of total benefits
Calculate the actuarial accrued liability (present value of benefits attributable to past service)
Determine the Annual Required Contribution (ARC) and annual OPEB expense under GASB
Statement No. 45
Prepare the financial statement disclosures relating to the funded status of the plan
Background
Currently, employees who retire directly from the County may receive certain retiree health benefits
if they meet certain eligibility requirements. The County may contribute an amount toward the cost
of retiree health benefits for some retirees consistent with the bargaining agreement between the
County and various bargaining units. Appendix A provides a more detailed summary of benefits.
Assumptions
With any valuation of future benefits, assumptions of anticipated future events are required. If actual
events differ from the assumptions made, the actual cost of the County’s OPEB will vary as well.
The following assumptions should be reviewed for appropriateness.
Discount Rate. GASB 45 requires that the interest rate used to discount future benefit payments
back to the present be based on the expected rate of return on any investments set aside to pay for
these benefits. The County’s OPEB Irrevocable Trust assets are invested in the Public Agency
Retirement Services’ Highmark Diversified Portfolio. We have used a discount rate of 5.70% for this
valuation. This rate represents a “blended” rate assuming the County partially funds its ARC each
year. The County’s current funding policy is to fund the pay-as-you-go costs for retirees, plus $20
million into the OPEB Trust each year. GASB 45 states that the discount rate used to calculate the
present value of future benefits be derived based on the Trust’s investment policy and the County’s
funding policy. Based on the Trust’s asset allocation, the average return over the next 30 years for
assets invested in the Trust is expected to be 6.25%. This would be an appropriate discount rate if
the County’s annual contribution were equal to the ARC. However, the County is currently funding
only a portion of the ARC. Therefore, the discount rate should be a blend between the expected
return on assets held in the Trust and the expected return of the County’s general fund (we have
assumed a long term return of 3.50% for the County’s general fund for this purpose). For this
valuation we used a blended discount rate of 5.70%.
Health Cost Trend. We have assumed overall health costs of the medical benefits will increase
according to the health cost inflation trend derived by using the “Getzen” model developed by the
Society of Actuaries. Under the Patient Protection and Affordable Care Act of 2010, a Federal
excise tax will apply for high cost health benefits beginning in 2018. A margin to reflect to impact of
the excise tax in future years is reflected in the assumed trend.
This work product was prepared solely for the Contra Costa County for the purposes described herein and may not be appropriate to use for other purposes. Milliman
does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties hire their own actuary or other
qualified professional when reviewing Milliman work product.
Milliman
Contra Costa County
GASB 45 Actuarial Valuation as of January 1, 2014 2
Milliman Client Report SECTION I. MANAGEMENT SUMMARY
Demographic Rates. The assumptions for turnover and retirement used in this valuation are based
on the latest pension actuarial report from the Contra Costa County Employees’ Retirement
Association (CCCERA).
A complete summary of the actuarial assumptions is presented in Appendix B.
Results of Study
The valuation results are summarized in the following exhibit and use the following terms:
The Present Value of Benefits is the present value of projected benefits (projected claims less
retiree contributions) discounted at the valuation interest rate (5.70%).
The Actuarial Accrued Liability (AAL) is the present value of benefits that are attributed to past
service only. The portion attributed to future employee service is excluded. For retirees, this is
equal to the present value of benefits. For active employees, this is equal to the present value of
benefits prorated by service to date over service at the expected retirement age.
The Normal Cost is that portion of the County provided benefit attributable to employee service in
the current year. Employees are assumed to have an equal portion of the present value of benefits
attributed to each year of service from date of hire to expected retirement age.
The Annual Required Contribution (ARC) is equal to the Normal Cost plus an amount to amortize
the unfunded AAL as a level dollar amount over a period of 30 years on a “closed” basis starting
January 1, 2008. There are 24 years remaining as of January 1, 2014.
January 1, 2014 January 1, 2012 *
Active Employees 8,089 7,720
Retirees 6,206 5,941
Total Participants 14,295 13,661
Present Value of Benefits $ 1,193,162,000 n/a
Actuarial Accrued Liability $ 923,848,000 $ 1,034,125,000
Assets 129,426,000 65,491,000
Unfunded Actuarial Accrued Liability $ 794,422,000 $ 968,634,000
Normal Cost as of valuation date $ 27,882,000 $ 27,523,000
Annual Required Contribution (ARC) $ 88,538,000 $ 59,811,000
* Reported in prior actuary’s actuarial valuation report as of January 1, 2012.
This work product was prepared solely for the Contra Costa County for the purposes described herein and may not be appropriate to use for other purposes. Milliman
does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties hire their own actuary or other
qualified professional when reviewing Milliman work product.
Milliman
Contra Costa County
GASB 45 Actuarial Valuation as of January 1, 2014 3
Milliman Client Report SECTION I. MANAGEMENT SUMMARY
Variability of Results
The results contained in this report represent our best estimates. However, variation from these or
any other estimates of future retiree medical costs is not only possible but probable. Actual future
costs may vary significantly from estimates in this report.
This work product was prepared solely for the Contra Costa County for the purposes described herein and may not be appropriate to use for other purposes. Milliman
does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties hire their own actuary or other
qualified professional when reviewing Milliman work product.
Milliman
Contra Costa County
GASB 45 Actuarial Valuation as of January 1, 2014 4
Milliman Client Report SECTION II. EXHIBITS
Exhibit 1. Projected Benefit Payments
The table below illustrates the projected annual County costs of providing retiree health benefits.
The projections only consider the closed group of existing employees and retirees.
Explicit County Subsidy Implicit Rate Subsidy
Year
Current
Retirees
Future
Retirees
Current
Retirees
Future
Retirees Total
2014 $44,183,000 $1,670,000 $8,165,000 $421,000 $54,439,000
2015 42,272,000 4,814,000 7,773,000 1,322,000 56,181,000
2016 41,130,000 7,858,000 7,241,000 2,208,000 58,437,000
2017 40,287,000 10,823,000 7,115,000 3,123,000 61,348,000
2018 39,286,000 13,610,000 6,647,000 4,087,000 63,630,000
2019 38,393,000 16,224,000 6,317,000 5,091,000 66,025,000
2020 37,704,000 18,676,000 6,202,000 6,022,000 68,604,000
2021 36,871,000 20,971,000 5,835,000 6,916,000 70,593,000
2022 35,933,000 23,137,000 5,526,000 7,849,000 72,445,000
2023 34,966,000 25,430,000 5,061,000 8,954,000 74,411,000
2024 34,069,000 27,706,000 4,850,000 10,069,000 76,694,000
2025 32,992,000 29,955,000 4,474,000 11,314,000 78,735,000
2026 31,809,000 32,031,000 4,143,000 12,236,000 80,219,000
2027 30,632,000 34,077,000 3,675,000 13,142,000 81,526,000
2028 29,409,000 35,896,000 3,195,000 13,731,000 82,231,000
2029 28,262,000 37,697,000 2,771,000 14,201,000 82,931,000
2030 27,245,000 39,416,000 2,510,000 14,942,000 84,113,000
2031 26,189,000 40,828,000 2,282,000 15,129,000 84,428,000
2032 25,046,000 42,208,000 2,023,000 15,178,000 84,455,000
2033 23,994,000 43,547,000 1,888,000 15,707,000 85,136,000
2034 22,949,000 44,562,000 1,695,000 15,945,000 85,151,000
2035 21,972,000 45,617,000 1,503,000 15,725,000 84,817,000
2036 20,912,000 46,737,000 1,131,000 16,102,000 84,882,000
2037 19,922,000 47,416,000 977,000 16,524,000 84,839,000
2038 18,977,000 48,103,000 873,000 16,662,000 84,615,000
2039 17,991,000 48,610,000 762,000 16,564,000 83,927,000
2040 17,030,000 48,765,000 695,000 16,397,000 82,887,000
2041 16,052,000 48,768,000 548,000 16,237,000 81,605,000
2042 15,039,000 48,575,000 409,000 15,784,000 79,807,000
2043 14,107,000 48,343,000 354,000 15,466,000 78,270,000
This work product was prepared solely for the Contra Costa County for the purposes described herein and may not be appropriate to use for other purposes. Milliman
does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties hire their own actuary or other
qualified professional when reviewing Milliman work product.
Milliman
Contra Costa County
GASB 45 Actuarial Valuation as of January 1, 2014 5
Milliman Client Report SECTION II. EXHIBITS
Exhibit 2. Liabilities and Normal Cost
The Present Value of Benefits is the actuarial present value of benefits expected to be paid for all
eligible retirees and covered employees.
The Actuarial Accrued Liability (AAL) is the actuarial present value of benefits attributed to
employee service rendered prior to the valuation date. The AAL equals the present value of benefits
multiplied by a fraction equal to service to date over service at expected retirement.
The Normal Cost is the actuarial present value of benefits attributed to one year of service. This
equals the present value of benefits divided by service at expected retirement. Since retirees are
not accruing any more service, their normal cost is zero.
January 1, 2014 January 1, 2012
Present Value of Benefits
Actives $ 625,243,000 n/a
Retirees 567,919,000 n/a
Total $ 1,193,162,000 n/a
Actuarial Accrued Liability
Actives $ 355,929,000 $ 437,344,000
Retirees 567,919,000 596,781,000
Total $ 923,848,000 $ 1,034,125,000
Normal Cost as of valuation date $ 27,882,000 $ 27,523,000
This work product was prepared solely for the Contra Costa County for the purposes described herein and may not be appropriate to use for other purposes. Milliman
does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties hire their own actuary or other
qualified professional when reviewing Milliman work product.
Milliman
Contra Costa County
GASB 45 Actuarial Valuation as of January 1, 2014 6
Milliman Client Report SECTION II. EXHIBITS
Exhibit 3. Unfunded Actuarial Accrued Liability
The Unfunded Actuarial Accrued Liability (UAAL) is the actuarial liability offset by any assets set-
aside to provide retiree health benefits. This is equal to the value of the retiree health benefits
accrued to date that has not been funded. The amortization of UAAL shown in the exhibit below is
based on a level dollar amount over a period of 30 years on a closed basis from January 1, 2008.
There are 24 years remaining as of the valuation date of January 1, 2014.
January 1, 2014
Unfunded Actuarial Accrued Liability (UAAL)
Actuarial Accrued Liability $ 923,848,000
Reserve Fund 129,426,000
Unfunded Actuarial Accrued Liability $ 794,422,000
Funded Percentage 14.0%
Amortization of UAAL for ARC
UAAL $ 794,422,000
Amortization Period 24 years
Level Dollar Amortization Factor 13.6416
Amortization Amount – January 1, 2014 $ 58,235,000
Interest to June 30, 2014 1,637,000
Amortization Amount – June 30, 2014 $ 59,872,000
This work product was prepared solely for the Contra Costa County for the purposes described herein and may not be appropriate to use for other purposes. Milliman
does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties hire their own actuary or other
qualified professional when reviewing Milliman work product.
Milliman
Contra Costa County
GASB 45 Actuarial Valuation as of January 1, 2014 7
Milliman Client Report SECTION II. EXHIBITS
Exhibit 4. Required Financial Statement Disclosures
The following table shows the calculation of the Annual Required Contribution and Net OPEB
Obligation.
June 30, 2014 June 30, 2013
Determination of Annual Required Contribution
Normal Cost at Fiscal Year End $ 28,666,000 $ 27,493,000
Amortization of UAAL 59,872,000 72,242,000
Annual Required Contribution (ARC) $ 88,538,000 $ 99,735,000
Determination of Net OPEB Obligation
Annual Required Contribution $ 88,538,000 $ 99,735,000
Interest on Prior Year Net OPEB Obligation 27,839,000 29,801,000
Adjustment to ARC (35,802,000) (35,756,000)
Annual OPEB Cost $ 80,575,000 $ 93,780,000
County Contributions Made (76,645,000)* (76,921,000)
Increase in Net OPEB Obligation $ 3,930,000 $ 16,859,000
Net OPEB Obligation – Beginning of Year $ 488,397,000 $ 471,538,000
Net OPEB Obligation – End of Year $ 492,327,000 $ 488,397,000
This amount is equal to the actual contributions the County made to the OPEB Trust during the fiscal year ending June
30, 2014, ($19,373,000) plus the portion of retiree premiums paid by the County, including the value of the implicit rate
subsidy, during the fiscal year ($57,272,000).
The following table shows the annual OPEB cost and net OPEB obligation for the prior years.
Fiscal
Year Ended
Annual
OPEB Cost
Percentage Of
OPEB Cost
Contributed
Net OPEB
Obligation
06/30/2012 $ 94,630,000 74.7% $ 471,538,000
06/30/2013 $ 93,780,000 82.0% $ 488,397,000
06/30/2014 $ 80,575,000 95.1% 492,327,000
Funded Status and Funding Progress. As of January 1, 2014, the most recent actuarial valuation
date, the County’s OPEB was 14.0% funded. The actuarial accrued liability for benefits was $924
million, and the actuarial value of assets was $129 million, resulting in an unfunded actuarial accrued
liability of $794 million.
This work product was prepared solely for the Contra Costa County for the purposes described herein and may not be appropriate to use for other purposes. Milliman
does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties hire their own actuary or other
qualified professional when reviewing Milliman work product.
Milliman
Contra Costa County
GASB 45 Actuarial Valuation as of January 1, 2014 8
Milliman Client Report SECTION II. EXHIBITS
Exhibit 5. Required Supplementary Information
The following table shows a schedule of Funding Progress required under GASB 45.
(Figures in millions)
Actuarial
Valuation
Date
Actuarial
Value of
Assets AAL UAAL
Funded
Ratio
Covered
Payroll
UAAL as %
of Covered
Payroll
01/01/2010* $ 41 $ 1,047 $ 1,006 3.9% $ 604 166.3%
01/01/2012* 65 1,034 969 6.3% 624 155.3%
01/01/2014 129 924 794 14.0% 614 126.2%
* Figures taken from Contra Costa County’s CAFR as of June 30, 2013, due to rounding figures may not add up.
This work product was prepared solely for the Contra Costa County for the purposes described herein and may not be appropriate to use for other purposes. Milliman
does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties hire their own actuary or other
qualified professional when reviewing Milliman work product.
Milliman
Contra Costa County
GASB 45 Actuarial Valuation as of January 1, 2014 9
Milliman Client Report SECTION II. EXHIBITS
Exhibit 6. Results by County’s Entities
The following table shows the breakdown of valuation results by various entities within the County.
ENTITY AAL NC 1 ARC 2
Safety Non-Fire $ 203,145,000 $ 5,984,000 $ 19,149,000
CCC Fire 116,651,000 2,914,000 10,474,000
Hospital 179,966,000 7,503,000 19,166,000
CCHP 7,105,000 349,000 809,000
Airport 2,329,000 26,000 177,000
CCC Retirement System 2,971,000 118,000 311,000
All Other CCC Departments 411,681,000 11,772,000 38,452,000
Total $ 923,848,000 $ 28,666,000 $ 88,538,000
1. Normal Cost includes interest to June 30, 2014.
2. We allocated the assets used to calculate the Annual Required Contribution for each entity based on their AAL relative to
the total AAL.
This work product was prepared solely for the Contra Costa County for the purposes described herein and may not be appropriate to use for other purposes. Milliman
does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties hire their own actuary or other
qualified professional when reviewing Milliman work product.
Milliman
Contra Costa County
GASB 45 Actuarial Valuation as of January 1, 2014 10
Milliman Client Report SECTION II. EXHIBITS
Exhibit 7. Value of Subsidized Early Retiree Health Premium
Currently, the County charges early retirees not yet eligible for Medicare a health premium based on
the claims experience of both actives and retirees. Since health claims costs generally increase with
age, retiree health premiums would be significantly higher if they were determined without regard to
active claims experience. GASB 45 requires that the portion of age-adjusted expected retiree health
claims costs that exceed the carrier premiums (known as an “implicit rate subsidy”) be recognized as
a liability for accounting purposes. Implicit rate subsidies for spouses of retirees must also be valued
in determining the ARC under GASB 45. The following table shows the County’s GASB 45 liability
broken down by the County’s actual payments toward retiree premiums and the “subsidized” value
of retiree health premiums.
County’s Payment Implicit Rate Subsidy Total
Present Value of Benefits
Active Employees $ 479,513,000 $ 145,730,000 $ 625,243,000
Retirees 498,860,000 69,059,000 567,919,000
Total $ 978,373,000 $ 214,789,000 $ 1,193,162,000
Actuarial Accrued Liability
Active Employees $ 281,385,000 $ 74,544,000 $ 355,929,000
Retirees 498,860,000 69,059,000 567,919,000
Total $ 780,245,000 $ 143,603,000 $ 923,848,000
Normal Cost as of Valuation Date $ 21,346,000 $ 6,536,000 $ 27,882,000
This work product was prepared solely for the Contra Costa County for the purposes described herein and may not be appropriate to use for other purposes. Milliman
does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties hire their own actuary or other
qualified professional when reviewing Milliman work product.
Milliman
Contra Costa County
GASB 45 Actuarial Valuation as of January 1, 2014 11
Milliman Client Report SECTION II. EXHIBITS
Exhibit 8. Valuation Results – Changes from Prior Valuation
The following exhibit shows changes of Actuarial Accrued Liability (AAL) from the prior valuation:
In Millions
Actuarial Accrued Liability (AAL) as of January 1, 2012 (Prior Actuary’s Report) $ 1,034
Actuarial Accrued Liability (AAL) as of January 1, 2012 (Milliman’s Report as of 11/19/2013) 983
Increase due to benefit accrued from January 1, 2012 to January 1, 2014 $ 57
Decrease due to expected benefit payments made in January 1, 2012 to December 31, 2013 (99)
Increase due to decrease in the discount period in January 1, 2012 to December 31, 2013 127
Increase due to change in actuarial cost method from Entry Age Normal to Projected Unit Credit 4
Decrease due to demographic assumption updates 1 (49)
Decrease due to actual premium increases less than expected (150)
Increase due to updates to health cost trends 45
Decrease due to benefit changes for UCOA, DAIA, CNA, and DSA since last valuation (28)
Increase due to discount rate change from 6.32% to 5.70% 60
Decrease due to entities no longer eligible for County medical and dental benefits (1)
Decrease due to other changes 2 (25)
Total change in Actuarial Accrued Liability $ (59)
Actuarial Accrued Liability (AAL) as of January 1, 2014 $ 924
1. We updated the demographic assumptions based on the latest demographic assumptions adopted by CCCERA
for their pension actuarial valuation. Also we updated the coverage election assumptions and health cost
inflation assumptions. See Appendix C for a summary of the changes.
2. Includes changes in census data and other experience.
This work product was prepared solely for the Contra Costa County for the purposes described herein and may not be appropriate to use for other purposes. Milliman
does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties hire their own actuary or other
qualified professional when reviewing Milliman work product.
Milliman
Contra Costa County
GASB 45 Actuarial Valuation as of January 1, 2014 12
Milliman Client Report SECTION III. APPENDICES
Appendix A. Summary of Benefits
The following description of retiree health benefits is intended to be only a brief summary and is not
complete information.
Eligibility
Currently, employees may receive retiree health benefits if they retire from the County, are receiving
a pension, and meet certain eligibility requirements as follows:
General employees - age 50 with 10 years of pension service or age 70 with a vested pension, or
after 30 years of pension service with no age requirement.
Safety employees - age 50 with 10 years of pension service or age 70 with a vested pension, or after
20 years of pension service with no age requirement.
Employees hired after December 31, 2006 and represented by the following bargaining groups
(AFSCME, California Nurses Association, Deputy District Attorneys’ Association, Public Defenders
Association, IFPTE, Western Council of Engineers, SEIU, PEU, Probation Peace Officers
Association, and Unrepresented) also must have 15 years of County service.
Employees hired on or after October 1, 2005, and represented by the Physicians’ and Dentists’
Organization also must have 15 years of County service.
Health Benefits
Currently, eligible retirees and their dependents are covered either under the Contra Costa Health
Plans, Health Net plans, Kaiser plans, or health plans sponsored by CalPERS (PEMHCA).
Coverage may be provided for a retiree and surviving spouse as long as retiree and surviving
spouse monthly premium contributions are paid. The County may pay a subsidy toward eligible
retirees’ monthly medical and dental premiums. This subsidy may vary by bargaining unit and date
of hire as described in this appendix. Employees hired on or after dates described in the table below
and represented by the following bargaining groups must pay the entire cost of premiums to
maintain coverage.
Bargaining Unit Name
Hire Date on or after which eligible retirees
must pay entire cost of premiums
IFPTE, Unrepresented January 1, 2009
AFSCME, Western Council of Engineers, SEIU, and PEU January 1, 2010
Deputy District Attorneys Association December 14, 2010
Probation Peace Officers Association of CCC January 1, 2011
CCC Public Defenders Association March 1, 2011
All surviving spouses must pay the entire cost of premiums to maintain coverage, with the exception
of the following bargaining groups for whom the surviving spouse receives the same County subsidy
as the retiree (covered by CalPERS health plans): A8 (Sheriff). BD (Fire Chief), BS (Sworn Exec.
Mgmt.), HA, V#, VH, VN, 4N, BF, and XJ.
This work product was prepared solely for the Contra Costa County for the purposes described herein and may not be appropriate to use for other purposes. Milliman
does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties hire their own actuary or other
qualified professional when reviewing Milliman work product.
Milliman
Contra Costa County
GASB 45 Actuarial Valuation as of January 1, 2014 13
Milliman Client Report SECTION III. APPENDICES
Bargaining Units V#, VH, VN, F8 and FW
Currently, for eligible retirees from the bargaining units listed in the table below, the County will
contribute toward the cost of monthly premiums (medical and dental) in 2014 an amount equal to the
actual dollar monthly premium amount paid by the County as of November 30, 2013, at each
coverage level, plus 50% of the actual premium increase for 2014. For premium increases in 2015
and later, the County and retiree will split the increase evenly: the County will pay for 50% of the
increase, and the retiree must pay for the other 50% of the increase.
Retirees who elected dental coverage without health coverage will pay one cent ($0.01) per month
for 2013, plus 50% of the actual premium increase for 2014. For premium increases in 2015 and
later, the County and retiree will split the increase evenly: the County will pay for 50% of the
increase, and the retiree must pay for the other 50% of the increase.
Bargaining
Unit Code Bargaining Unit Name
General /
Safety
F8 Unrep Classified & Exempt-Othr General
FW Unrep Cl & Ex-Sworn Peace Offc Safety
V# Sheriff's Sworn Mgmt Unit Safety
VH Deputy Sheriff's Unit-Sworn Safety
VN Deputy Sheriff's Unit-NonSworn General
For employees hired between January 2, 2007, and September 30, 2011, and represented by the
Deputy Sheriffs’ Association, the County subsidy is subject to a vesting schedule as shown in the
table below.
Credited Years of
Service
Percentage of Employer
Contribution
10 50
11 55
12 60
13 65
14 70
15 75
16 80
17 85
18 90
19 95
20 or more 100
Bargaining Unit HA – Fire Management
Currently, for eligible Fire Management retirees represented by United Chief Officers Association
(UCOA) with bargaining unit code HA, the County will subsidize an amount equal to 80% of the
CalPERS Kaiser Bay Area premium at each coverage level (employee only, employee + one,
employee + two or more) for any region in which the retiree resides, but the County’s subsidy will not
exceed the total premium of a lower cost plan.
This work product was prepared solely for the Contra Costa County for the purposes described herein and may not be appropriate to use for other purposes. Milliman
does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties hire their own actuary or other
qualified professional when reviewing Milliman work product.
Milliman
Contra Costa County
GASB 45 Actuarial Valuation as of January 1, 2014 14
Milliman Client Report SECTION III. APPENDICES
For retirees enrolled in a health plan from CalPERS, the County will subsidize 78% of the monthly
dental premium.
For retirees who elect dental coverage without medical coverage, the County will subsidize an
amount toward the monthly dental premium such that the retiree will pay one cent ($0.01) per month
for such coverage.
Bargaining Unit XJ – D.A. Investigators
Currently, for eligible retirees from the bargaining unit XJ, the County will pay a subsidy toward the
cost of monthly premiums (medical and dental) in 2014 an amount equal to the actual dollar monthly
premium amount paid by the County in 2013, depending on coverage level. For 2014 and later, the
County subsidy will increase by 75% of the actual premium increase in Bay Area Kaiser rates.
For retirees enrolled in a health plan from CalPERS, the County will subsidize an amount equal to
78% of the monthly dental premium.
For retirees who elect dental coverage without medical coverage, the County will subsidize an
amount toward the monthly dental premium such that the retiree will pay one cent ($0.01) per month
for such coverage.
Bargaining Units 1P, 1R, 4N, and L3
Currently, for eligible retirees from the following bargaining units, the County subsidizes a
percentage of monthly premiums that varies depending on the medical and dental plan elected.
Retirees from certain bargaining units described below may also receive reimbursement of their
Medicare Part B premiums as long as the total County subsidy does not exceed 100% of the
medical plan premium.
Bargaining
Unit Code Bargaining Unit Name
General /
Safety
Part B
Reimbursement
1P Physicians and Dentists Unit General Yes, stops in 2015
1R Physicians & Dentists Unit-Residents General Yes, stops in 2015
4N Fire Suppression & Prevention Unit Safety No
L3 Registered Nurses Unit General
If retired on or before
6/30/2012 and age 65 on
or before 10/31/2012
This work product was prepared solely for the Contra Costa County for the purposes described herein and may not be appropriate to use for other purposes. Milliman
does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties hire their own actuary or other
qualified professional when reviewing Milliman work product.
Milliman
Contra Costa County
GASB 45 Actuarial Valuation as of January 1, 2014 15
Milliman Client Report SECTION III. APPENDICES
Retirees from the above listed units receive the following County subsidy based on the medical plan
elected:
Medical Plan Bargaining Unit
County Subsidy
% (Medical)
County Subsidy
% (Dental)
Contra Costa Health Plan A and B
Without Dental 1P, 1R, L3 98% 0%
With Delta Dental 1P, 1R, L3 98% 98%
With PMI Delta Dental 1P, 1R, L3 98% 98%
Kaiser, Health Net HMO
Without Dental 1P, 1R, L3 80% 0%
With Delta Dental 1P, 1R, L3 80% 78%
With PMI Delta Dental 1P, 1R, L3 80% 78%
Health Net PPO
Without Dental 1P, 1R, L3 55%* 0%
With Delta Dental 1P, 1R, L3 55%*78%
With PMI Delta Dental 1P, 1R, L3 55%*78%
All Medical Plans
Without Dental 4N 87% of Kaiser 0%
With Dental Plan 4N 87% of Kaiser 70%
Dental Only All Units Listed Above 0% All but $0.01 /
month
Approximately 55% for 2014. Future increases are split evenly between the County and the retiree.
This work product was prepared solely for the Contra Costa County for the purposes described herein and may not be appropriate to use for other purposes. Milliman
does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties hire their own actuary or other
qualified professional when reviewing Milliman work product.
Milliman
Contra Costa County
GASB 45 Actuarial Valuation as of January 1, 2014 16
Milliman Client Report SECTION III. APPENDICES
All other Bargaining Units - County Subsidy Frozen at the 2011 Level
Currently, eligible retirees from the following bargaining units listed may receive County subsidies
towards medical and dental premiums in the same amounts as active employees, with no future
increases in this subsidy amount.
Bargaining
Unit Code Bargaining Unit Name
General /
Safety
Bargaining
Unit Code Bargaining Unit Name
General /
Safety
1X Phys & Dnts & Optometrist Unit General JF CCC Defenders/Investigators General
25 Social Services Unit General K2 Property Appraisers Unit General
51 Professional Engineers Unit General K5 Court Professional Svcs Unit General
99 DEFAULT BARGAINING UNIT General K6 Supervisory Clerical Unit General
2D Community Aide Unit General KK Income Maintence Program Unit General
2I Service Line Supervisors Unit General KL Engineering Technician Unit General
2R Superior Court Reporters-Ex General KM Sheriff's Non-Sworn Mgmt Unit General
3A Superior Court Clerical Unit General KU Probation Supervisors Unit Safety
3B Superior Court Barg Unit-Loc1 General KZ Social Svcs Staff Special Unit General
3G Deputy Clerks Unit General MA District Attorneys' Unit General
3R General Clerical Unit General N2 Property Appraisers Unit General
A8 Elected Department Heads General PP Probation Unit of CCC Safety
AJ Elected Superior Court Judges General QA Agriculture & Animal Ctrl Unit General
AM Elected Municipal Court Judges General QB LVN/Aide Unit General
AS Elected Board of Supvs Members General QC Fam/Chld Svs Site Supv Unit General
B8 Mgmt Classes-Classified & Exem General QE Building Trades Unit General
BA General QF Deputy Public Defender Unit/At General
BC Superior Court Exempt Mgmt Gen General QG Deputy Public Defender Unit-In General
BD Mgmt Classified & Ex Dept Head General QH Family and Children Services General
BF Fire District (MS) Safety Mgmt Safety QM Engineering Unit General
BH Superior Ct Exempt Mgmt-DH General QP General
BJ Sup Ct Judicial Ofcrs Ex-Mgmt General QS General Services & Mtce Unit General
BS Sheriff's Sworn Executive Mgmt Safety QT Health Services Unit General
C8 Management Project-Other General QV Investigative Unit General
CH CS Head Start Mgmt-Project General QW Legal & Court Clerk Unit General
D8 Unrepresented Proj Class-Other General QX Library Unit General
F8 Unrep Classified & Exempt-Other General QY Probation Unit General
FC Unrep Superior Ct Clerical Exempt General S2 General
FD Unrep Superior Ct Other Exempt General Z1 Supervisory Project General
FM Unrep Muni Ct Reporter-Exempt General Z2 Non-Supervisory Project General
FR Unrep Superior Ct Reptrs-Exempt General ZA Supervisory Management General
FS Unrep Cl & Ex Student Workers General ZB Non-Supervisory Management General
FX Unrep Exempt Medical Staff General ZL Supervisory Nurse General
JD CCC Defenders/Attorneys General ZN Non-Supervisory Nurse General
This work product was prepared solely for the Contra Costa County for the purposes described herein and may not be appropriate to use for other purposes. Milliman
does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties hire their own actuary or other
qualified professional when reviewing Milliman work product.
Milliman
Contra Costa County
GASB 45 Actuarial Valuation as of January 1, 2014 17
Milliman Client Report SECTION III. APPENDICES
Health Insurance Premium Rates (non-PEMHCA)
The following table shows monthly retiree health insurance premiums for the 2014 calendar year for
coverage under various health plans sponsored by Contra Costa County, and the County’s subsidies
as frozen at the 2011 level.
Medical Plan
County’s
Subsidy
(Frozen in
2011)
2014
Premium Rate
County’s
Subsidy for
2014
Retiree’s
Share for 2014
Contra Costa Health Plan A
Retiree on Basic Plan $ 509.92 $ 612.77 $ 509.92 $ 102.85
Retiree & 1 or more dependents on Basic Plan 1,214.90 1,459.96 1,214.90 245.06
Retiree on Medicare Coordination of Benefits (COB) Plan 420.27 279.23 279.22 0.01
Retiree & 1 or more dependents on Medicare COB Plan 1,035.60 1,228.77 1,035.60 193.17
Contra Costa Health Plan B
Retiree on Basic Plan 528.50 679.27 528.50 150.77
Retiree & 1 or more dependents on Basic Plan 1,255.79 1,614.06 1,255.79 358.27
Retiree on Medicare COB Plan 444.63 287.60 287.59 0.01
Retiree & 1 or more dependents on Medicare COB Plan 1,088.06 1,265.63 1,088.06 177.57
Kaiser Permanente – Plan A
Retiree on Basic Plan 478.91 768.47 478.91 289.56
Retiree & 1 or more dependents on Basic Plan 1,115.84 1,790.52 1,115.84 674.68
Retiree on Medicare COB Plan 263.94 295.01 263.94 31.07
Retiree & 1 dependent on Medicare COB Plan 712.79 796.71 712.79 83.92
Retiree & 2 dependents on Medicare COB Plan 1,161.65 1,298.41 1,161.65 136.76
Kaiser Permanente – Plan B
Retiree on Basic Plan 478.91 676.03 478.91 197.12
Retiree & 1 or more dependents on Basic Plan 1,115.84 1,575.17 1,115.84 459.33
Retiree on Medicare COB Plan 263.94 223.69 223.68 0.01
Retiree & 1 dependent on Medicare COB Plan 712.79 603.97 603.96 0.01
Retiree & 2 dependents on Medicare COB Plan 1,161.65 984.25 984.24 0.01
Health Net HMO – Plan A
Retiree on Basic Plan 627.79 1,067.40 627.79 439.61
Retiree & 1 or more dependents on Basic Plan 1,540.02 2,618.43 1,540.02 1,078.41
Retiree on Medicare Seniority Plus Plan 409.69 514.28 409.69 104.59
Retiree & 1 dependent on Medicare Seniority Plus Plan 819.38 1,028.56 819.38 209.18
Retiree & 2 dependents on Medicare Seniority Plus Plan 1,229.07 1,542.84 1,229.07 313.77
Health Net HMO – Plan B
Retiree on Basic Plan 627.79 836.04 627.79 208.25
Retiree & 1 or more dependents on Basic Plan 1,540.02 2,050.86 1,540.02 510.84
Retiree on Medicare Seniority Plus Plan 409.69 431.74 409.69 22.05
Retiree & 1 dependent on Medicare Seniority Plus Plan 819.38 863.48 819.38 44.10
Retiree & 2 dependents on Medicare Seniority Plus Plan 1,229.07 1,295.22 1,229.07 66.15
This work product was prepared solely for the Contra Costa County for the purposes described herein and may not be appropriate to use for other purposes. Milliman
does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties hire their own actuary or other
qualified professional when reviewing Milliman work product.
Milliman
Contra Costa County
GASB 45 Actuarial Valuation as of January 1, 2014 18
Milliman Client Report SECTION III. APPENDICES
Health Insurance Premium Rates (continued)
Medical Plan
County’s
Subsidy
(Frozen in
2011)
2014
Premium Rate
County’s
Subsidy for
2014
Retiree’s
Share for 2014
Health Net Medicare COB
Retiree only $ 467.13 $ 573.03 $ 467.13 $ 105.90
Retiree & spouse 934.29 1,146.06 934.29 211.77
Health Net CA & Nat’l PPO – Basic Plan A
Retiree on PPO 604.60 1,365.43 604.60 760.83
Retiree & 1 or more dependents on PPO Basic Plan 1,436.25 3,243.69 1,436.25 1,807.44
Retiree on PPO Medicare Plan with Medicare Part A & B 563.17 924.22 563.17 361.05
Retiree & 1 or more dependents on PPO Medicare Plan with
Medicare Part A & B 1,126.24 1,848.43 1,126.24 722.19
Health Net CA & Nat’l PPO – Basic Plan B
Retiree on PPO 604.60 1,240.08 604.60 635.48
Retiree & 1 or more dependents on PPO Basic Plan 1,436.25 2,945.89 1,436.25 1,509.64
Retiree on PPO Medicare Plan with Medicare Part A & B 563.17 839.40 563.17 276.23
Retiree & 1 or more dependents on PPO Medicare Plan with
Medicare Part A & B 1,126.24 1,678.80 1,126.24 552.5
The following table shows monthly retiree health insurance premiums for the 2015 calendar year for
health coverage under Contra Costa Health Plans sponsored by the Contra Costa County.
Medical Plan
County’s
Subsidy
(Frozen in
2011)
2015
Premium Rate
County’s
Subsidy for
2015
Retiree’s
Share for 2015
Contra Costa Health Plan A
Retiree on Basic Plan $ 509.92 $ 654.44 $ 509.92 $ 144.52
Retiree & 1 or more dependents on Basic Plan 1,214.90 1,559.24 1,214.90 344.34
Retiree on Medicare COB Plan 420.27 301.01 301.00 0.01
Retiree & 1 dependent on Medicare COB Plan 1,035.60 602.02 602.01 0.01
Family, 1 on Medicare COB Plan, and 1 or more on Basic Plan 1,035.60 963.23 963.22 0.01
Contra Costa Health Plan B
Retiree on Basic Plan 528.50 725.46 528.50 196.75
Retiree & 1 or more dependents on Basic Plan 1,255.79 1,723.82 1,255.79 468.03
Retiree on Medicare COB Plan 444.63 310.03 310.02 0.01
Retiree & 1 or more dependents on Medicare COB Plan 1,088.06 620.06 620.05 0.01
Family, 1 on Medicare COB Plan, and 1 or more on Basic Plan 1,088.06 992.10 992.09 0.01
This work product was prepared solely for the Contra Costa County for the purposes described herein and may not be appropriate to use for other purposes. Milliman
does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties hire their own actuary or other
qualified professional when reviewing Milliman work product.
Milliman
Contra Costa County
GASB 45 Actuarial Valuation as of January 1, 2014 19
Milliman Client Report SECTION III. APPENDICES
PEMHCA Health Plan Premium Rates
Eligible retirees from the bargaining units 4N, A8, B8, BD, BF, BS, F8, FW, HA, V#, VH, VN, and XJ
can choose to enroll in health plans sponsored by CalPERS based on their residence region (Bay
Area, Sacramento, Los Angeles, Northern California, Southern California and Out of State of
California). The following table shows the monthly Bay Area retiree health insurance premiums for
the 2014 calendar year:
Monthly Premium Rates – 2014
Single 2-Party Family
Under 65 Over 65 Under 65 Over 65 Under 65 Over 65
Blue Shield $ 836.59 $ 298.21 $ 1,673.18 $ 596.42 $ 2,175.13 $ 894.63
Blue Shield NetValue 704.01 298.21 1,408.02 596.42 1,830.43 894.63
Kaiser 742.72 294.97 1,485.44 589.94 1,931.07 884.91
PERSCare 720.04 327.36 1,440.08 654.72 1,872.10 982.08
PERS Choice 690.77 307.23 1,381.54 614.46 1,796.00 921.69
PERS Select 661.52 307.23 1,323.04 614.46 1,719.95 921.69
Anthem HMO Select 657.33 341.12 1,314.66 682.24 1,709.06 1,023.36
Anthem HMO Traditional 728.41 341.12 1,456.82 682.24 1,893.87 1,023.36
United Healthcare 764.24 193.33 1,528.48 386.66 1,987.02 579.99
PORAC 634.00 397.00 1,186.00 791.00 1,507.00 1,264.00
CCHP 723.74 618.84 1,281.39 1,071.59 1,674.11 1,359.41
Dental Plan Premiums
The following table shows monthly retiree dental insurance premiums for the 2014 calendar year.
County subsidies vary based on retiree’s medical plan enrollment election and bargaining unit upon
retirement.
Plan Monthly Premiums
Delta Dental - $1,800 Annual Maximum
Retiree $ 44.27
Family 100.00
Delta Dental - $1,600 Annual Maximum
Retiree $ 42.45
Family 95.63
Delta Care (PMI)
Retiree $ 29.06
Family 62.81
This work product was prepared solely for the Contra Costa County for the purposes described herein and may not be appropriate to use for other purposes. Milliman
does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties hire their own actuary or other
qualified professional when reviewing Milliman work product.
Milliman
Contra Costa County
GASB 45 Actuarial Valuation as of January 1, 2014 20
Milliman Client Report SECTION III. APPENDICES
Appendix B. Actuarial Cost Method and Assumptions
The actuarial cost method used for determining the benefit obligations is the Projected Unit Credit
Cost Method. Under this method, the actuarial present value of projected benefits is the value of
benefits expected to be paid for current actives and eligible retirees and is calculated based on the
assumptions and census data described in this report.
The Actuarial Accrued Liability (AAL) is the actuarial present value of benefits attributed to employee
service rendered prior to the valuation date. The AAL equals the present value of benefits multiplied
by a fraction equal to service to date over service at expected retirement. The Normal Cost is the
actuarial present value of benefits attributed to one year of service. This equals the present value of
benefits divided by service at expected retirement. Since retirees are not accruing any more service,
their normal cost is zero. The actuarial value of assets is equal to the market value of assets as of
the valuation date.
In determining the Annual Required Contribution, the Unfunded AAL is amortized as a level dollar
amount over 30 years on a “closed” basis. There are 24 years remaining in the amortization period
as of January 1, 2014. The actuarial assumptions are summarized below.
Economic Assumptions
Discount Rate (Liabilities) 5.70%
We have used a discount rate of 5.70% in this valuation to reflect the County’s current policy of
partially funding its OPEB liabilities. This rate is derived based on the fund’s investment policy, level
of partial funding, and includes a 2.50% long-term inflation assumption. County OPEB Irrevocable
Trust assets are invested in the Public Agency Retirement Services’ Highmark Portfolio. Based on
the portfolio’s target allocation (shown below), the average return of Trust assets over the next 30
years is expected to be 6.25%, which would be an appropriate discount rate if the County’s annual
contribution is equal to the ARC. If the County were to elect not to fund any amount to a Trust, the
discount rate would be based on the expected return of the County’s general fund (we have
assumed a long term return of 3.50% for the County’s general fund). Since the County is partially
funding the Trust with a contribution of $20 million per year, we used a blended discount rate of
5.70%.
Asset Class
Expected 1-Year
Nominal Return
Targeted Asset
Allocation
Domestic Equity Large Cap 8.14% 17.0%
Domestic Equity Mid Cap 8.92% 6.0%
Domestic Equity Small Cap 9.90% 8.0%
U.S. Fixed Income 4.69% 38.0%
International / Global Equity (Developed) 8.56% 16.0%
Real Estate 8.12% 4.0%
Cash 3.01% 1.0%
Alternatives 5.71% 10.0%
Expected Geometric Median Annual Return (30 years) 6.25%
This work product was prepared solely for the Contra Costa County for the purposes described herein and may not be appropriate to use for other purposes. Milliman
does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties hire their own actuary or other
qualified professional when reviewing Milliman work product.
Milliman
Contra Costa County
GASB 45 Actuarial Valuation as of January 1, 2014 21
Milliman Client Report SECTION III. APPENDICES
Demographic Assumptions
Below is a summary of the assumed rates for mortality, retirement, disability and withdrawal, which are
consistent with assumptions used in the December 31, 2012 CCCERA Actuarial Valuation.
Pre / Post Retirement Mortality
Healthy: For General Members: RP-2000 Combined Healthy Mortality Table projected to 2030
with Scale AA, set back one year.
For Safety Member: RP-2000 Combined Healthy Mortality Table projected to 2030 with
Scale AA, set back two years.
Disabled: For General Members: RP-2000 Combined Healthy Mortality Table projected to 2030
with Scale AA, set forward six years for males and set forward seven years for
females.
For Safety Member: RP-2000 Combined Healthy Mortality Table projected to 2030 with
Scale AA, set forward three years.
Beneficiaries: Beneficiaries are assumed to have the same mortality as a General Member of the
opposite sex who had taken a service (non-disability) retirement.
Disability
Age General Tier 3 Safety (All Tiers)
20 0.01% 0.02%
25 0.02% 0.22%
30 0.03% 0.42%
35 0.05% 0.56%
40 0.08% 0.66%
45 0.13% 0.94%
50 0.17% 2.54%
Withdrawal – Sample probabilities of terminating employment with the County are shown below for
selected years of County service.
Years of Service General Safety
Less than 1 13.50% 11.50%
1 9.00% 6.50%
2 9.00% 5.00%
3 6.00% 4.00%
4 4.50% 3.50%
5 4.00% 3.00%
10 2.75% 1.90%
15 2.10% 1.40%
20 or more 2.00% 1.00%
This work product was prepared solely for the Contra Costa County for the purposes described herein and may not be appropriate to use for other purposes. Milliman
does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties hire their own actuary or other
qualified professional when reviewing Milliman work product.
Milliman
Contra Costa County
GASB 45 Actuarial Valuation as of January 1, 2014 22
Milliman Client Report SECTION III. APPENDICES
Retirement – For this valuation, we have applied the Tier 3 rates for all General employees and Tier
A rates for all Safety employees since nearly all current employees are in these two pension tiers.
Age
General
Tier 3
Safety
Tier A Age
General
Tier 3
Safety
Tier A
45 0% 2% 60 15% 40%
46 0% 2% 61 20% 40%
47 0% 7% 62 27% 40%
48 0% 7% 63 27% 40%
49 0% 20% 64 30% 40%
50 4% 25% 65 40% 100%
51 3% 25% 66 40%100%
52 3% 25% 67 40%100%
53 5% 25% 68 40%100%
54 5% 25% 69 40%100%
55 10% 30% 70 40%100%
56 10% 25% 72 40%100%
57 10% 25% 73 40%100%
58 12% 35% 74 40%100%
59 12% 35% 75 100% 100%
Coverage Election Assumptions
Retiree Coverage – We have assumed 90% of new retirees will elect medical and dental coverage at
retirement. For new retirees who were members of bargaining units listed in the table on page 12 and
hired after the date indicated in the table (eligible retirees must pay entire cost of premium to maintain
coverage), we have assumed 50% will elect medical and dental coverage at retirement.
Spouse Coverage – We have assumed 50% of new retirees electing coverage will elect spouse
medical and dental coverage at retirement.
Spouse Age – Female spouses are assumed to be three years younger than male spouses.
Dependent Coverage – We have assumed 30% of retirees with no spouse coverage will elect
coverage for a dependent child until age 65, and 50% of retirees with spouse coverage will elect
coverage for a dependent child until age 65.
Health Plan Election – We have assumed that new retirees will remain enrolled in the same plan they
were enrolled in as actives. For actives who waived coverage, we have assumed that they will elect
Kaiser plan coverage.
This work product was prepared solely for the Contra Costa County for the purposes described herein and may not be appropriate to use for other purposes. Milliman
does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties hire their own actuary or other
qualified professional when reviewing Milliman work product.
Milliman
Contra Costa County
GASB 45 Actuarial Valuation as of January 1, 2014 23
Milliman Client Report SECTION III. APPENDICES
Valuation of Retiree Premium Subsidy Due to Active Health Costs
Currently, the County and California PERS (PEMHCA) health plans charge the same premiums for
retirees who are not yet eligible for Medicare as for active employees. Therefore, the retiree
premium rates are being subsidized by the inclusion of active lives in setting rates. (Premiums
calculated only based on retiree health claims experience would have resulted in higher retiree
premiums.) GASB 45 requires that the value of this subsidy be recognized as a liability in valuations
of OPEB costs. To account for the fact that per member health costs vary depending on age (higher
health costs at older ages), we calculated equivalent per member per month (PMPM) costs that vary
by age based on the age distribution of covered members, and based on relative cost factors by
age. The relative cost factors were developed from the Milliman Health Cost GuidelinesTM. Based
on the carrier premium rates and relative age cost factors assumptions, we developed age adjusted
monthly PMPM health costs for 2014 to be used in valuing the implicit rate subsidy. The following
tables show the age adjusted expected monthly claims cost for a male participant at age 64 for each
health plan and relative age factors compared to a male age 64.
Plan
Monthly Age Adjusted Claims
Cost for Age 64 Male
Dependent Child Cost
Load
CCHP A $ 1,164 $ 157
CCHP B 1,431 329
Kaiser A 1,384 246
Kaiser B 1,278 264
Health Net HMO A 1,878 394
Health Net HMO B 1,621 369
Health Net PPO 1,903 316
California PERS Plans (average) 1,100 219
Relative Claims Cost Factor Compared to Male age 64
Age Male Female
50 0.458 0.572
55 0.604 0.668
60 0.786 0.789
64 1.000 0.915
Since retirees eligible for Medicare (age 65 and beyond) are enrolled in Medicare supplemental plans,
the premiums for retirees with Medicare are determined without regard to active employee claims
experience and no such subsidy exists for this group for medical cost.
This work product was prepared solely for the Contra Costa County for the purposes described herein and may not be appropriate to use for other purposes. Milliman
does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties hire their own actuary or other
qualified professional when reviewing Milliman work product.
Milliman
Contra Costa County
GASB 45 Actuarial Valuation as of January 1, 2014 24
Milliman Client Report SECTION III. APPENDICES
Medical Cost Inflation Assumption
We assumed future increases to the health costs and premiums are based on the “Getzen” model
published by the Society of Actuaries for purposes of evaluating long term medical trend. Under the
Patient Protection and Affordable Care Act of 2010, a Federal excise tax will apply for high cost
health plans beginning in 2018. A margin to reflect the impact of the excise tax in future years is
reflected in the assumed trend. The following table shows the assumed rate increases in future
years for Medical premiums.
Calendar County Plans * Calendar PEMHCA Plans Calendar All Plans *
Year Pre 65 Year Pre 65 Year Post 65
2014 6.50% 2014 7.00% 2014 7.25%
2015 5.25% 2015 5.75% 2015 6.00%
2016 5.75% 2016 6.25% 2016 6.50%
2017 6.50% 2017 – 2018 6.75% 2017 – 2025 6.00%
2018 – 2020 5.75% 2019 7.00% 2026 – 2032 5.75%
2021 – 2023 6.50% 2020 – 2022 7.25% 2033 6.00%
2024 – 2028 6.25% 2023 – 2024 7.00% 2034 6.75%
2029 6.50% 2025 – 2029 6.75% 2035 6.50%
2030 – 2035 6.25% 2030 – 2033 6.50% 2036 – 2042 6.25%
2036 6.00% 2034 – 2036 6.25% 2043 – 2045 6.00%
2037 – 2040 5.75% 2037 – 2038 6.00% 2046 – 2051 5.75%
2041 – 2048 5.50% 2039 – 2043 5.75% 2052 – 2059 5.50%
2049 – 2063 5.25% 2044 – 2050 5.50% 2060 – 2070 5.25%
2064 – 2074 5.00% 2051 – 2061 5.25% 2071 – 2076 5.00%
2075 – 2079 4.75% 2062 – 2074 5.00% 2077 – 2081 4.75%
2080 + 4.50% 2075 – 2079 4.75% 2082 + 4.50%
2080 + 4.50%
* For Contra Costa Health Plan A and B, actual increase from calendar year 2014 to 2015 was
used.
Dental Cost We assumed Dental costs will increase 4.0% annually.
This work product was prepared solely for the Contra Costa County for the purposes described herein and may not be appropriate to use for other purposes. Milliman
does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties hire their own actuary or other
qualified professional when reviewing Milliman work product.
Milliman
Contra Costa County
GASB 45 Actuarial Valuation as of January 1, 2014 25
Milliman Client Report SECTION III. APPENDICES
Appendix C. Changes in Actuarial Cost Method and Assumptions
The following is a list of assumption and method changes from the prior actuarial valuation. The Board
adopted the recommended changes at its March 2014 Board meeting.
Actuarial Cost Method
The actuarial cost method used for determining the benefit obligations was changed from the Entry
Age Normal cost method to the Projected Unit Credit cost method. The Entry Age Normal cost
method is typically used to value pension benefits related to salary. Since health benefits are not
based on salary, the Projected Unit Credit cost method is commonly used for OPEB valuations as it
allocates the present value of future benefits based on an employee’s expected service with the
County at retirement. The Actuarial Accrued Liability (AAL) is equal to the present value of future
benefits prorated by service to the valuation date over service at the expected retirement age. The
Normal Cost is equal to the portion of the present value of future benefits attributed to one year of
service. This equals the present value of benefits divided by the expected years of service at
retirement.
Demographic Assumptions
The demographic assumptions used in the prior actuarial valuation were consistent with those used in
the December 31, 2008 CCCERA actuarial valuation. CCCERA has since updated its demographic
assumptions based on more recent experience. The demographic assumptions for this OPEB
valuation be updated to were consistent with the assumptions used in the December 31, 2012
CCCERA actuarial valuation.
Coverage Election Assumptions
In the prior valuation, an assumption of marital status was included; however, assumed coverage
elections for spouses and dependent children were not specified. Please see Appendix B for all
assumed coverage elections, which are based on recent County experience.
Health Cost Inflation Assumption
The medical cost inflation trend used in the prior actuarial valuation was applied to both non-Medicare
and Medicare premiums. We developed the medical cost trend based on the “Getzen” model
published by the Society of Actuaries for purposes of evaluating long term medical trend. Under the
Patient Protection and Affordable Care Act of 2010, a Federal excise tax will apply for high cost health
plans beginning in 2018. A margin to reflect the impact of the excise tax in future years is reflected in
the assumed trend, which differs for non-Medicare and Medicare health costs. We have assumed
dental premiums will increase 4% per year.
This work product was prepared solely for the Contra Costa County for the purposes described herein and may not be appropriate to use for other purposes. Milliman
does not intend to benefit and assumes no duty or liability to other parties who receive this work. Milliman recommends that third parties hire their own actuary or other
qualified professional when reviewing Milliman work product.
Milliman
Contra Costa County
GASB 45 Actuarial Valuation as of January 1, 2014 26
Milliman Client Report SECTION III. APPENDICES
Appendix D. Summary of Participant Data
The following census of participants was used in the actuarial valuation and provided by Contra Costa
County.
Active Employees
Age General Safety Total
Under 25 44 10 54
25 – 29 377 124 501
30 – 34 732 168 900
35 – 39 838 203 1,041
40 – 44 883 236 1,119
45 – 49 1,043 226 1,269
50 – 54 1,148 85 1,233
55 – 59 997 34 1,031
60 – 64 663 17 680
65 & Over 257 4 261
Total 6,982 1,107 8,089
Average Age at Hire: 45.93
Average Age on Valuation Date: 10.31
Current Retirees
Age General Safety Total
Under 50 22 69 91
50 – 54 104 146 250
55 – 59 390 163 553
60 – 64 821 211 1,032
65 – 69 1,155 255 1,410
70 – 74 869 125 994
75 – 79 619 86 705
80 – 84 444 72 516
85 & Over 595 60 655
Total 5,019 1,187 6,206
Average Age on Valuation Date: 69.92