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HomeMy WebLinkAboutMINUTES - 11172015 - D.10RECOMMENDATION(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 California Nurses' Association and Safety employees in specific units of Probation Management, Fire Management and AFSCME 512, as determined by the County’s actuary in Actuarial Reports dated September 8, 2015 and October 12, 2015 respectively. FISCAL IMPACT: As shown in the valuations and the chart below, the result of the retirement changes described herein for employees would result in a savings 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 proposed plan change costs. Over time, as more employees are hired into the new PEPRA tier at a 2% COLA, the savings will become more significant. It should be noted that the figures presented in this report represent the savings associated only with the negotiation of a 2% COLA. The actual savings from both the new State law and the negotiated change beginning January 1 is the savings between the new PEPRA tier with a 2% COLA and Tiers A and III with a 3% COLA. APPROVE OTHER RECOMMENDATION OF CNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE Action of Board On: 11/17/2015 APPROVED AS RECOMMENDED OTHER Clerks Notes: VOTE OF SUPERVISORS AYE:John Gioia, District I Supervisor Candace Andersen, District II Supervisor Mary N. Piepho, District III Supervisor Karen Mitchoff, District IV Supervisor Federal D. Glover, District V Supervisor Contact: Lisa Driscoll, County Finance Director, 335-1023 I hereby certify that this is a true and correct copy of an action taken and entered on the minutes of the Board of Supervisors on the date shown. ATTESTED: November 17, 2015 David J. Twa, County Administrator and Clerk of the Board of Supervisors By: June McHuen, Deputy cc: Ann Elliott, Employee Benefits Manager, County Counsel D.10 To:Board of Supervisors From:David Twa, County Administrator Date:November 17, 2015 Contra Costa County Subject:Government Code 7507 - Chief Executive Acknowledgement of Future Costs of Benefits for Employees Represented by CNA and Other Specific Units BACKGROUND: At its meetings of August 15, 2015 and November 10, 2015, the Board of Supervisors accepted actuarial valuations of future annual costs of negotiated and proposed changes to Other Post Employment Benefits, as provided by the County's actuary in letters dated September 8, 2015 and October 12, 2015. 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 prior to the adoption of any changes in public retirement plan benefits or other post employment benefits. The September 8, and October 12, 2015 reports fulfilled that requirement. Government Code, Section 7507 also requires that if the future costs (or savings) of the changes exceed one-half of 1 percent of the future annual costs of the existing benefits for the body, an actuary shall be present to provide information as needed at the public meeting at which the adoption of a benefit change shall be considered. An actuary will be present at the meeting of November 17, 2015. 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 September 8, and October 12, 2015 letters 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 CNA dated September 8, 2015 7507 Report for Probation Management dated October 12, 2015 7507 Report for Fire Management dated October 12, 2015 7507 Report for AFSCME 512 Safety dated October 12, 2015 September 8, 2015 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 California Nurses Association 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) effective on January 1, 2016 or, alternatively, effective July 1, 2016. Both dates are used as potential effective dates for the proposed change for the members of California Nurses Association. 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 the effective dates. We show the cost impacts on the charts below per one hire per year (results are averages of one male and one female). 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 2016, 2017 and 2018 (2019 is also included for the July 1, 2016 effective date). 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. On the exhibit for the July 1, 2016 effective date, results shown for 2016 are for the six month period July 1 through December 31. Buck Consultants, LLC 353 Sacramento Street Suite 800 San Francisco, CA 94111 tel 415.392.0616 fax 415.392.3991 Ms. Lisa Driscoll September 8, 2015 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 pote ntial range of such future measurements has not been performed. The methods and assumptions used are the same as those used in the December 31, 2014, actuarial valuation of CCCERA. The demographic as well as the economic assumptions with respect to investment yield, salary increase and inflation set forth in the December 31, 2014 valuation have been based upon a review of the existing portfolio structure as well as recent and anticipated experience. Information on our new entrant profile is given in Note 2 of the enclosed projections. The report was prepared under the supervision of David Kershner and Stephen Drake, who are both Enrolled Actuaries and Members of the American Academy of Actuaries. David Kershner is a Fellow of the Society of Actuaries and Stephen Drake is an Associate of the Society of Actuaries. Both meet 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. We are available to answer any questions on the material contained in the report, or to provide explanations or further details as may be appropriate. Sincerely, David J. Kershner, FSA, EA, MAAA Stephen Drake, ASA, EA, MAAA Principal and Consulting Actuary Director, Retirement Actuary Ms. Lisa Driscoll September 8, 2015 Page 3 California Nurses Association – January 1, 2016 Notes: 1. The methods and assumptions used to determine the savings were the same as thos e used for the December 31, 2014 valuation. 2. The County is assumed to hire one active employee at January 1 of each projection year (we have averaged results for one male and one female). The annual salary at entry is assumed to be $100,400, $103,900, and $107,500 for the 2016, 2017, and 2018 hires, respectively. The age at entry for new hires is assumed to be 39. These assumptions were provided by the County. 3. The maximum compensation limit for the retirement benefit is assumed to be $120,870 for 2016 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 2016 2017 2018 Valuation Pay $90,300 $184,200 $281,600 Annual Cost AB340 with 3.00% COLA i) $$12,200 $24,700 $37,600 ii) % of Pay 13.5%13.4%13.4% AB340 with 2.00% COLA i) $$11,000 $22,200 $33,700 ii) % of Pay 12.2%12.1%12.0% Saving/(Cost) i) $$1,200 $2,500 $3,900 ii) % of Pay 1.3%1.3%1.4% $0 $10,000 $20,000 $30,000 $40,000 $50,000 2016 2017 2018 Saving/(Cost)AB340 with 3.00% COLA AB340 with 2.00% COLA Contra Costa County -AB340 with 3.00 COLA vs. AB340 with 2.00 COLA Annual Cost by Plan Year ($) 0.0% 5.0% 10.0% 15.0% 2016 2017 2018 Saving/(Cost)AB340 with 3.00% COLA AB340 with 2.00% COLA Annual Cost by Plan Year (% of Pay) Ms. Lisa Driscoll September 8, 2015 Page 4 California Nurses Association – July 1, 2016 Notes: 1. The methods and assumptions used to determine the savings were the same as those used for the December 31, 2014 valuation. 2. The County is assumed to hire one active employee at July 1 of each projection year (we have averaged results for one male and one female). The annual salary at entry is assumed to be $100,400, $103,900, $107,500, and $111,300 for the 2016, 2017, 2018, and 2019 hires, respectively. The age at entry for new hires is assumed to be 39. These assumptions were provided by the County. 3. The maximum compensation limit for the retirement benefit is assumed to be $120,870 for 2016 and it is expected to grow 2.00% per year. 4. In the AB340 benefit structure, the multiplier is 2% at 62. The multiplier increases by 0.1% for ages above 62 to a maximum of 2.5% at 67. It decreases by 0.1% for ages below 62 to a minimum of 1.0% at 52. 5. Results for 2016 are for six months only (July 1 through December 31). Calendar Year 2016 2017 2018 2019 Valuation Pay $45,200 $140,500 $239,600 $342,400 Annual Cost AB340 with 3.00% COLA i) $$6,100 $18,900 $32,100 $45,800 ii) % of Pay 13.5%13.5%13.4%13.4% AB340 with 2.00% COLA i) $$5,500 $17,000 $28,800 $41,100 ii) % of Pay 12.2%12.1%12.0%12.0% Saving/(Cost) i) $$600 $1,900 $3,300 $4,700 ii) % of Pay 1.3%1.4%1.4%1.4% $0 $10,000 $20,000 $30,000 $40,000 $50,000 2016 2017 2018 2019 Saving/(Cost)AB340 with 3.00% COLA AB340 with 2.00% COLA Contra Costa County -AB340 with 3.00 COLA vs. AB340 with 2.00 COLA Annual Cost by Plan Year ($) 0.0% 5.0% 10.0% 15.0% 2016 2017 2018 2019 Saving/(Cost)AB340 with 3.00% COLA AB340 with 2.00% COLA Annual Cost by Plan Year (% of Pay) October 12, 2015 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 Probation Management 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) effective on January 1, 2016 or alternatively, effective July 1, 2016. Both dates are used as potential effective dates for the proposed change for the members of Probation Management. 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 entrants, it will have no effect on the unfunded actuarial accrued liabilities of Contra Costa County Employees’ Retirement Association (CCCERA) as of the effective dates. We show the cost impacts on the enclosed charts per one hire per year (results are averages of one male and one female). 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 sa vings. 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 2016, 2017 and 2018 (2019 is also included for the July 1, 2016 effective date). 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. On the exhibit for the July 1, 2016 effective date, results shown for 2016 are for the six month period July 1 through December 31. Buck Consultants, LLC 353 Sacramento Street Suite 800 San Francisco, CA 94111 tel 415.392.0616 fax 415.392.3991 Ms. Lisa Driscoll October 12, 2015 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 pote ntial range of such future measurements has not been performed. The methods and assumptions used are the same as those used in the December 31, 2014, actuarial valuation of CCCERA. The demographic as well as the economic assumptions with respect to investment yield, salary increase and inflation set forth in the December 31, 2014 valuation have been based upon a review of the existing portfolio structure as well as recent and anticip ated experience. Information on our new entrant profile is given in Note 2 of the enclosed projections. The report was prepared under the supervision of David Kershner and Stephen Drake, who are both Enrolled Actuaries and Members of the American Academy of Actuaries. David Kershner is a Fellow of the Society of Actuaries and Stephen Drake is an Associate of the Society of Actuaries. Both meet 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. We are available to answer any questions on the material contained in the report, or to provide explanations or further details as may be appropriate. Sincerely, David J. Kershner, FSA, EA, MAAA Stephen Drake, ASA, EA, MAAA Principal and Consulting Actuary Director, Retirement Actuary Ms. Lisa Driscoll October 12, 2015 Page 3 Probation Management – January 1, 2016 Notes: 1. The methods and assumptions used to determine the savings were the same as those used for the December 31, 2014 valuation for the Safety members. 2. The County is assumed to hire one Safety employee into Probation Management at January 1 of each projection year (we have averaged results for one male and one female). The assumed age at entry for new hires is 45, and the annual salary is assumed to be $111,800, $115,700, and $119,700 for the 2016, 2017, and 2018 hires, respectively. These assumptions were provided by the County. 3. The maximum compensation limit for the retirement benefit is assumed to be 120% of $120,870, or $145,044, for 2016 and it is expected to grow 2.00% per year. 4. In the AB340 benefit structure, the multiplier is 2.5% at 55. The multiplier increases by 0.1% for ages above 55 to a maximum of 2.7% at 57. It decreases by 0.1% for ages below 55 to a minimum of 2.0% at 50. Calendar Year 2016 2017 2018 Valuation Pay $101,200 $208,200 $321,400 Annual Cost AB340 with 3.00% COLA i) $$42,700 $87,600 $134,800 ii) % of Pay 42.2%42.1%41.9% AB340 with 2.00% COLA i) $$38,300 $78,500 $120,800 ii) % of Pay 37.8%37.7%37.6% Saving/(Cost) i) $$4,400 $9,100 $14,000 ii) % of Pay 4.4%4.4%4.3% $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 $160,000 2016 2017 2018 Saving/(Cost)AB340 with 3.00% COLA AB340 with 2.00% COLA Contra Costa County -AB340 with 3.00 COLA vs. AB340 with 2.00 COLA Annual Cost by Plan Year ($) 0.0% 20.0% 40.0% 60.0% 2016 2017 2018 Saving/(Cost)AB340 with 3.00% COLA AB340 with 2.00% COLA Annual Cost by Plan Year (% of Pay) Ms. Lisa Driscoll October 12, 2015 Page 4 Probation Management – July 1, 2016 Notes: 1. The methods and assumptions used to determine the savings were the same as thos e used for the December 31, 2014 valuation for the Safety members. 2. The County is assumed to hire one Safety employee into Probation Management at July 1 of each projection year (we have averaged results for one male and one female). The assumed age at entry for new hires is 45, and the annual salary is assumed to be $111,800, $115,700, $119,700, and $123,900 for the 2016, 2017, 2018, and 2019 hires, respectively. These assumptions were provided by the County. 3. The maximum compensation limit for the retirement benefit is assumed to be 120% of $1 20,870, or $145,044, for 2016 and it is expected to grow 2.00% per year. 4. In the AB340 benefit structure, the multiplier is 2.5% at 55. The multiplier increases by 0.1% for ages above 55 to a maximum of 2.7% at 57. It decreases by 0.1% for ages below 55 to a minimum of 2.0% at 50. 5. Results for 2016 are for six months only (July 1 through December 31). Calendar Year 2016 2017 2018 2019 Valuation Pay $50,600 $158,400 $272,300 $392,900 Annual Cost AB340 with 3.00% COLA i) $$21,400 $66,700 $114,400 $165,000 ii) % of Pay 42.3%42.1%42.0%42.0% AB340 with 2.00% COLA i) $$19,100 $59,800 $102,500 $147,800 ii) % of Pay 37.7%37.8%37.6%37.6% Saving/(Cost) i) $$2,300 $6,900 $11,900 $17,200 ii) % of Pay 4.6%4.3%4.4%4.4% $0 $50,000 $100,000 $150,000 $200,000 2016 2017 2018 2019 Saving/(Cost)AB340 with 3.00% COLA AB340 with 2.00% COLA Contra Costa County -AB340 with 3.00 COLA vs. AB340 with 2.00 COLA Annual Cost by Plan Year ($) 0.0% 20.0% 40.0% 60.0% 2016 2017 2018 2019 Saving/(Cost)AB340 with 3.00% COLA AB340 with 2.00% COLA Annual Cost by Plan Year (% of Pay) October 12, 2015 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 Fire Management 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) effective on January 1, 2016 or alternatively, effective July 1, 2016. Both dates are used as potential effective dates for the proposed change for the members of Fire Management. 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 entrants, it will have no effect on the unfunded actuarial accrued liabilities of Contra Costa County Employees’ Retirement Association (CCCERA) as of the effective dates. We show the cost impacts on the enclosed charts per one hire per year (results are averages of one male and one female). 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 2016, 2017 and 2018 (2019 is also included for the July 1, 2016 effective date). 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. On the exhibit for the July 1, 2016 effective date, results shown for 2016 are for the six month period July 1 through December 31. Buck Consultants, LLC 353 Sacramento Street Suite 800 San Francisco, CA 94111 tel 415.392.0616 fax 415.392.3991 Ms. Lisa Driscoll October 12, 2015 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, 2014, actuarial valuation of CCCERA. The demographic as well as the economic assumptions with respect to investment yield, salary increase and inflation set forth in the December 31, 2014 valuation have been based upon a review of the existing portfolio structure as well as recent and anticipated ex perience. Information on our new entrant profile is given in Note 2 of the enclosed projections. The report was prepared under the supervision of David Kershner and Stephen Drake, who are both Enrolled Actuaries and Members of the American Academy of Actuaries. David Kershner is a Fellow of the Society of Actuaries and Stephen Drake is an Associate of the Society of Actuaries. Both meet 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. We are available to answer any questions on the material contained in the report, or to provide explanations or further details as may be appropriate. Sincerely, David J. Kershner, FSA, EA, MAAA Stephen Drake, ASA, EA, MAAA Principal and Consulting Actuary Director, Retirement Actuary Ms. Lisa Driscoll October 12, 2015 Page 3 Fire Management – January 1, 2016 Notes: 1. The methods and assumptions used to determine the savings were the same as thos e used for the December 31, 2014 valuation for the Safety members. 2. The County is assumed to hire one Safety employee into Fire Management at January 1 of each projection year (we have averaged results for one male and one female). The assumed age at entry for new hires is 42, and the annual salary is assumed to be $121,100, $125,300, and $129,700 for the 2016, 2017, and 2018 hires, respectively. These assumptions were provided by the County. 3. The maximum compensation limit for the retirement benefit is assumed to be 120% of $120,870, or $145,044, for 2016 and it is expected to grow 2.00% per year. 4. In the AB340 benefit structure, the multiplier is 2.5% at 55. The multiplier increases by 0.1% for ages above 55 to a maximum of 2.7% at 57. It decreases by 0.1% for ages below 55 to a minimum of 2.0% at 50. Calendar Year 2016 2017 2018 Valuation Pay $109,700 $226,100 $350,000 Annual Cost AB340 with 3.00% COLA i) $$38,300 $78,700 $121,500 ii) % of Pay 34.9%34.8%34.7% AB340 with 2.00% COLA i) $$34,300 $70,400 $108,600 ii) % of Pay 31.3%31.1%31.0% Saving/(Cost) i) $$4,000 $8,300 $12,900 ii) % of Pay 3.6%3.7%3.7% $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 2016 2017 2018 Saving/(Cost)AB340 with 3.00% COLA AB340 with 2.00% COLA Contra Costa County -AB340 with 3.00 COLA vs. AB340 with 2.00 COLA Annual Cost by Plan Year ($) 0.0% 10.0% 20.0% 30.0% 40.0% 2016 2017 2018 Saving/(Cost)AB340 with 3.00% COLA AB340 with 2.00% COLA Annual Cost by Plan Year (% of Pay) Ms. Lisa Driscoll October 12, 2015 Page 4 Fire Management – July 1, 2016 Notes: 1. The methods and assumptions used to determine the savings were the same as thos e used for the December 31, 2014 valuation for the Safety members. 2. The County is assumed to hire one Safety employee into Fire Management at July 1 of each projection year (we have averaged results for one male and one female). The assumed age at entry for new hires is 42, and the annual salary is assumed to be $121,100, $125,300, $129,700, and $134,200 for the 2016, 2017, 2018, and 2019 hires, respectively. These assumptions were provided by the County. 3. The maximum compensation limit for the retirement benefit is assumed to be 120% of $120,870, or $145,044, for 2016 and it is expected to grow 2.00% per year. 4. In the AB340 benefit structure, the multiplier is 2.5% at 55. The multiplier increases by 0.1% for ages above 55 to a maximum of 2.7% at 57. It decreases by 0.1% for ages below 55 to a minimum of 2.0% at 50. 5. Results for 2016 are for six months only (July 1 through December 31). Calendar Year 2016 2017 2018 2019 Valuation Pay $54,900 $171,900 $296,200 $428,700 Annual Cost AB340 with 3.00% COLA i) $$19,200 $59,900 $103,000 $148,900 ii) % of Pay 35.0%34.8%34.8%34.7% AB340 with 2.00% COLA i) $$17,100 $53,600 $92,000 $133,100 ii) % of Pay 31.1%31.2%31.1%31.0% Saving/(Cost) i) $$2,100 $6,300 $11,000 $15,800 ii) % of Pay 3.9%3.6%3.7%3.7% $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 $160,000 2016 2017 2018 2019 Saving/(Cost)AB340 with 3.00% COLA AB340 with 2.00% COLA Contra Costa County -AB340 with 3.00 COLA vs. AB340 with 2.00 COLA Annual Cost by Plan Year ($) 0.0% 10.0% 20.0% 30.0% 40.0% 2016 2017 2018 2019 Saving/(Cost)AB340 with 3.00% COLA AB340 with 2.00% COLA Annual Cost by Plan Year (% of Pay) October 12, 2015 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 AFSCME 512 Safety 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) effective on January 1, 2016 or alternatively, effective July 1, 2016. Both dates are used as potential effective dates for the proposed change for the members of AFSCME 512 Safety. 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 entrants, it will have no effect on the unfunded actuarial accrued liabilities of Contra Costa County Employees’ Retirement Association (CCCERA) as of the effective dates. We show the cost impacts on the enclosed charts per one hire per year (results are averages of one male and one female). 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 2016, 2017 and 2018 (2019 is also included for the July 1, 2016 effective date). 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. On the exhibit for the July 1, 2016 effective date, results shown for 2016 are for the six month period July 1 through December 31. Buck Consultants, LLC 353 Sacramento Street Suite 800 San Francisco, CA 94111 tel 415.392.0616 fax 415.392.3991 Ms. Lisa Driscoll October 12, 2015 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, 2014, actuarial valuation of CCCERA. The demographic as well as the economic assumptions with respect to investment yield, salary increase and inflation set forth in the December 31, 2014 valuation have been based upon a review of the existing portfolio structure as well as recent and anticip ated experience. Information on our new entrant profile is given in Note 2 of the enclosed projections. The report was prepared under the supervision of David Kershner and Stephen Drake, who are both Enrolled Actuaries and Members of the American Academy of Actuaries. David Kershner is a Fellow of the Society of Actuaries and Stephen Drake is an Associate of the Society of Actuaries. Both meet 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. We are available to answer any questions on the material contained in the report, or to provide explanations or further details as may be appropriate. Sincerely, David J. Kershner, FSA, EA, MAAA Stephen Drake, ASA, EA, MAAA Principal and Consulting Actuary Director, Retirement Actuary Ms. Lisa Driscoll October 12, 2015 Page 3 AFSCME 512 Safety – January 1, 2016 Notes: 1. The methods and assumptions used to determine the savings were the same as those used for the December 31, 2014 valuation for the Safety members. 2. The County is assumed to hire one Safety employee into AFSCME 512 Safety at January 1 of each projection year (we have averaged results for one male and one female). The assumed age at entry for new hires is 56, and the annual salary is assumed to be $79,700, $82,500, and $85,400 for the 2016, 2017, and 2018 hires, respectively. These assumptions were provided by the County. 3. The maximum compensation limit for the retirement benefit is assumed to be 120% of $120,870, or $145,044, for 2016 and it is expected to grow 2.00% per year. 4. In the AB340 benefit structure, the multiplier is 2.5% at 55. The multiplier increases by 0.1% for ages above 55 to a maximum of 2.7% at 57. It decreases by 0.1% for ages below 55 to a minimum of 2.0% at 50. Calendar Year 2016 2017 2018 Valuation Pay $70,800 $143,000 $216,900 Annual Cost AB340 with 3.00% COLA i) $$46,100 $93,000 $141,200 ii) % of Pay 65.1%65.0%65.1% AB340 with 2.00% COLA i) $$41,800 $84,400 $128,100 ii) % of Pay 59.0%59.0%59.1% Saving/(Cost) i) $$4,300 $8,600 $13,100 ii) % of Pay 6.1%6.0%6.0% $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 $160,000 2016 2017 2018 Saving/(Cost)AB340 with 3.00% COLA AB340 with 2.00% COLA Contra Costa County -AB340 with 3.00 COLA vs. AB340 with 2.00 COLA Annual Cost by Plan Year ($) 0.0% 20.0% 40.0% 60.0% 80.0% 2016 2017 2018 Saving/(Cost)AB340 with 3.00% COLA AB340 with 2.00% COLA Annual Cost by Plan Year (% of Pay) Ms. Lisa Driscoll October 12, 2015 Page 4 AFSCME 512 Safety – July 1, 2016 Notes: 1. The methods and assumptions used to determine the savings were the same as thos e used for the December 31, 2014 valuation for the Safety members. 2. The County is assumed to hire one Safety employee into AFSCME 512 Safety at July 1 of each projection year (we have averaged results for one male and one female). The assumed age at entry for new hires is 56, and the annual salary is assumed to be $79,700, $82,500, $85,400, and $88,400 for the 2016, 2017, 2018, and 2019 hires, respectively. These assumptions were provided by the County. 3. The maximum compensation limit for the retirement benefit is assumed to be 120% of $120,8 70, or $145,044, for 2016 and it is expected to grow 2.00% per year. 4. In the AB340 benefit structure, the multiplier is 2.5% at 55. The multiplier increases by 0.1% for ages above 55 to a maximum of 2.7% at 57. It decreases by 0.1% for ages below 55 to a minimum of 2.0% at 50. 5. Results for 2016 are for six months only (July 1 through December 31). Calendar Year 2016 2017 2018 2019 Valuation Pay $35,400 $109,500 $185,100 $262,700 Annual Cost AB340 with 3.00% COLA i) $$23,000 $71,200 $120,500 $170,900 ii) % of Pay 65.0%65.0%65.1%65.1% AB340 with 2.00% COLA i) $$20,900 $64,600 $109,300 $155,100 ii) % of Pay 59.0%59.0%59.0%59.0% Saving/(Cost) i) $$2,100 $6,600 $11,200 $15,800 ii) % of Pay 6.0%6.0%6.1%6.1% $0 $50,000 $100,000 $150,000 $200,000 2016 2017 2018 2019 Saving/(Cost)AB340 with 3.00% COLA AB340 with 2.00% COLA Contra Costa County -AB340 with 3.00 COLA vs. AB340 with 2.00 COLA Annual Cost by Plan Year ($) 0.0% 20.0% 40.0% 60.0% 80.0% 2016 2017 2018 2019 Saving/(Cost)AB340 with 3.00% COLA AB340 with 2.00% COLA Annual Cost by Plan Year (% of Pay)