HomeMy WebLinkAboutMINUTES - 10132015 - HA C.03RECOMMENDATIONS
ADOPT Resolution No. 5193 authorizing adoption of the Public Agencies Post-Employment Benefits Trust
administered by Public Agency Retirement Services in order to provide for the funding of Post-Retirement Health
Care obligations and/or unfunded Retirement Liabilities effective October 14, 2015; and
APPOINT the Executive Director or his/her successor or his/her designee as the Plan Administrator; and
AUTHORIZE the Plan Administrator to execute the required legal and administrative documents to implement the
Trust on behalf of the Authority and to take whatever additional actions are necessary to maintain the Authority's
participation in the Trust.
BACKGROUND
On June 2, 2015, the Government Accounting Standards Board (GASB) finalized two new standards affecting the
financial accounting and reporting of other post-employment benefits (OPEB) (non-pension benefits such as health
plans) for state and local agencies. These new standards supersede prior guidance and bring OPEB accounting and
reporting in line with the standards GASB issued for public pensions in 2012. The new standards are effective for
fiscal years beginning after June 15, 2017. Since HACCC’s fiscal year begins on April 1st, this means the effective
date for HACCC is April 1, 2018.
Action of Board On: 10/13/2015 APPROVED AS RECOMMENDED OTHER
Clerks Notes:
VOTE OF COMMISSIONERS
AYE:John Gioia, Commissioner
Candace Andersen,
Commissioner
Karen Mitchoff, Commissioner
Federal D. Glover,
Commissioner
ABSENT:Mary N. Piepho, Commissioner
Fay Nathaniel, Commissioner
Seat Vacant, Commissioner
Contact: Joseph Villarreal
925-957-8011
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: October 13, 2015
, Executive Director
By: June McHuen, Deputy
cc:
C.3
To:Contra Costa County Housing Authority Board of Commissioners
From:Joseph Villarreal, Housing Authority
Date:October 13, 2015
Contra
Costa
County
Subject:PARTICIPATION IN THE POST EMPLOYMENT BENEFIT TRUST PROGRAM ADMINISTERED BY PUBLIC
AGENCY RETIREMENT SERVICES
BACKGROUND (CONT'D)
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The first of these two new standards is GASB Statement No. 74, Financial Reporting for Post-Employment
Benefit Plans Other Than Pension Plans (GASB 74) which governs the accounting standards used by OPEB plans
in their financial reporting.
The second new standard is GASB Statement No. 75, Accounting and Financial Reporting for Post-employment
Benefits Other Than Pensions (GASB 75)which updates the guidance for financial reporting by government
employers that provide OPEB to their employees. GASB 75 replaces the requirements of GASB Standard No. 45
and GASB Statement No. 57. One of the most significant changes under GASB 75 is a first time requirement that
the net liability for publicly sponsored retiree healthcare plans (and other post-employment benefits) be stated on
balance sheets. For HACCC, and most employers, the result will be an increase in liability shown on the balance
sheet. If not addressed, this could cause HACCC to be rated as “troubled” under HUD’s financial performance
measurements among other negative outcomes.
Pre-funding OPEB liabilities is not required under GASB 75. However, if the agency pre-funds OPEB through a
plan that is administered through a GASB-qualifying trust (with irrevocable contributions, assets dedicated to
providing OPEB in accordance with benefit terms, and assets protected from creditors), then it may report its “net
OPEB liability”—its total liability net of the OPEB plan fiduciary’s net position available for paying benefits. If,
however, the agency does not have a trust meeting the requirements above, it is required to report its total OPEB
liability. Therefore, by pre-funding OPEB via a trust, HACCC will be able to reduce the OPEB liability shown on
its financial statements, and thus improve its overall financial position.
By beginning to do so approximately 2 ½ years before required, HACCC should be able to improve its position
further by the time it is required to report OPEB using GASB 75 standards. Staff believes it is prudent to start
funding OPEB via a trust immediately. Provided HUD funding permits, HACCC will use the annual required
contribution (ARC) to determine how much to fund the OPEB trust each year. ARC is an actuarially derived cost
based on any new benefits earned in a given year (aka the “normal cost”) plus any additional amount that might
be required to make up for shortfalls that have developed in the past. These amounts added together equal the
ARC. HACCC’s current ARC rate is approximately $300,000. The use of ARC to determine funding levels will
have to be reviewed before HACCC falls under GASB 75, but it is in accord with current GASB standards and
can be met under present HUD funding levels.
Because of the agency’s size and benefit levels, the amount of money in HACCC’s trust will remain relatively
small for many years. In general, fees are more costly on a percentage basis for smaller trusts than they are for a
larger trust. Because of this, and in order to stay in compliance with HUD procurement regulations, staff believes it
is prudent that HACCC go out to bid/renegotiate pricing more frequently for OPEB trust services, at least
initially. Staff, therefore, proposes that HACCC should reevaluate pricing of trust services prior to falling under
GASB 75 rules in 2 ½ years on April 1, 2018.
The three largest and most qualified firms that provide OPEB trust services for California counties and
municipalities are: Public Agency Retirement Services (PARS), California Public Employees Retirement System
(CalPERS), and ICMA-RC. HACCC sought and received quotes from all three firms. CalPERS quoted a fee of
0.10% of the deposit with a requirement to conduct an actuarial update every two years. ICMA’s fee is 0.15%
with an actuarial update required every two years. PARS rate is 0.56%, but currently PARS only requires an
actuarial update every three years (this will have to change to every two years under GASB 75). An actuarial for
HACCC in the recent past has cost the agency about $6,000. The total anticipated cost for the next two years for
CalPERS will be $6,900, for ICMA it will be $7,350 and for PARS it will be $5,040. Therefore, staff
recommends that HACCC utilize PARS for its trust services until no later than April 1, 2018. Prior to that date,
HACCC will reevaluate pricing.
FISCAL IMPACT
By pre-funding its OPEB costs via a trust, HACCC expects to reduce its outstanding OPEB liability by $90,000
in the first year. Reductions after the first year will be dependent on the investment performance of the trust and
the level of ongoing contributions by HACCC.
CONSEQUENCE OF NEGATIVE ACTION
Should HACCC not establish a trust to fund post-retirement health care obligations, then HACCC’s financial
position will be negatively impacted as will financial scoring with HUD. Further, not funding a trust for OPEB
liabilities may impact HACCC’s ability to secure favorable financing for current and future capital projects.
CLERK'S ADDENDUM
ATTACHMENTS
HACCC Resolution No. 5193_OPEB Funding