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Home My WebLink AboutMINUTES - 10142008 - D.1 HA C HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA TO: BOARD OF COMMISSIONERS FROM: Joseph Villarreal, Executive Director DATE: October 14, 2008 i SUBJECT: ENHANCED RETIREMENT BENEFIT (2% @55) p. SPECIFIC REQUEST(S) OR RECOMMENDATION(S) & BACKGROUND AND JUSTIFICATION I. RECOMMENDED ACTION: ADOPT Resolution No. 5100l'authorizing the two percent at fifty-five benefit of Government Code Section 31676.16 effective October 1, 2008 for all permanent employees of the Housing Authority of the County of Contra Costa. II. FINANCIAL IMPACT: The Housing Authority budget for April 1, 2008 through March 31, 2009 provides for the costs associated with providing the enhanced retirement benefit. This cost will be included in all future budgets. III. REASONS FOR RECOMMENDATION/BACKGROUND Through contract negotiations with Public Employees' Union, Local No. 1, it was mutually agreed that the Authority's retirement program administered by the Contra Costa County Employees Retirement Association would include the 2% at 55 benefit from and after October 1, 2008. The Memorandum of Understanding, including this]benefit, was approved by the Board on October 9, 2007. As required by California Government Code sections 7507 and 31516, the Authority commissioned an actuarial study of the impact upon future annual costs of this increase. This study is attached and was also made available to the public at the Board meeting on September 16, 2008. The net annual effect to the Authority is an in' reased cost from 34.53% of payroll to 35.21% of payroll. This increase of 0.68% equals $35,020 based on a $5.15 million payroll. The Authority's current, Board-approved budget includes this increase'. CCCERA Retirement Accounting Manager Rick Koehler confirmed that this increased cost will have a negligible financial impact on the funding status of CCCERA. IV. CONSEQUENCES OF NEGATIVE ACTION: Should the Board of Commissioners elect not to adopt Resolution No. 5100, the Housing Authority 11 would not be able to provide the necessary documentation to the Contra Costa Employees' Retirement Association to implement the enhanced benefit for all permanent employees of the Housing Authority. i CONTINUED ON ATTACHMENT:, YES SIGNA Joseph Villarreal,Executive Director RECOMMENDATION OF EXECUTIVE DIRECTOR RECOMMENDATION OF BOARD COMMITTEE APPROVE OTHER SIGNATURE(S): �Wn 4(n ACTION OF BOARD ON ,, �'�,o�OfAPPROVE AS RECOMMENIIED OTHER VOTE OF COMMISSIONERS I HEREBY CERTIFY THAT THIS IS A UNANIMOUS (ABSENT ) TRUE AND CORRECT COPY OF AN AYES: NOES: ACTION TAKEN AND ENTERED ON THE ABSENT: ABSTAIN: MINUTES OF THE BOARD OF COMMISSIONERS ON THE DATE SHOWN. ATTESTED i J / -/;O6-e JOSEPH VILLARREAL,CLERK OF THE BOARD OF COMMISSIONERS ZAD EXECUTIVE DIRECTOR BY , EPUTY THE BOARD OF COMMISSIONERS HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA RESOLUTION NO. 5100 A RESOLUTION OF THE BOARD OF COMMISSIONERS OF THE HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA AUTHORIZING THE APPLICABILITY OF GOVERNMENT CODE SECTION 31676.16 (2% AT 55 RETIREMENT BENEFIT) EFFECTIVE OCTOBER 1, 2008 WHEREAS, Government Code section 31676.16 of the County Employees Retirement Law of 1937 authorizes an enhanced retirement benefit commonly referred to as 2% at 55; and, WHEREAS, on October 1, 2002, the Contra Costa County Board of Supervisors adopted Resolution No. 2002/608 making Government Code section 31676.16 applicable in the County; and WHEREAS, Government Code section 31755.3(a)(2) permits the Authority's Board of Commissioners by resolution to grant to employees of the Authority the enhanced retirement benefit of 2% at 55 of Government Code section 31676.16; and, WHEREAS, the Board of Commissioners approved a Memorandum of Understanding between the Authority and Public Employees' Union, Local No. 1 on October 9, 2007, in which the Authority and Local No. 1 agreed to a 2% at 55 enhanced retirement benefit effective October 1, 2008; and WHEREAS, pursuant to Government Code sections 7507 and 31516, the services of an enrolled actuary were secured to provide a statement of the actuarial impact upon future annual costs of the 2% at 55 retirement benefit. The'statement of the enrolled actuary of the actuarial impact upon future annual costs of the 2% at 55 retirement benefit was made public at a public meeting of the Board of Commissioners on September 16, 2008. NOW, THEREFORE, BE IT RESOLVED, by the Board of Commissioners of the Housing Authority of the County of Contra Costa, as follows: 1. Government Code section"31676.16 shall apply to the Authority effective October 1, 2008; and 2. The Board of Commissioners authorizes the 2% at 55 enhanced retirement benefit for all employees of the Authority, including the unrepresented employees of the Authority, effective October 1, 2008; and, 3. The Authority acknowledges that the statement, of the enrolled actuary of the actuarial impact upon future annual costs of the 2% at 55 retirement benefit all employees of the Authority was made public at a public meeting of the Board of Commissioners on September 16, 2008, in accordance with Government Code sections 7507 and 31516; and 4. The Authority is directed to forward a copy of this resolution to the Contra Costa County Employees Retirement Association. PASSED AND ADOPTED ON ��o`�O� by the following vote of the Commissioners. AYES: NOES: N-di► -e— ABSENT: Vel ABSTAIN: I HEREBY CERTIFY THAT THIS IS A TRUE AND CORRECT COPY OF AN ACTION TAKEN AND ENTERED ON THE MINUTES OF THE BOARD OF COMMISSIONERS ON THE DATE SHOWN. ATTESTED G � JO EPH VILLARREAL, CLERK OF THE BOARD OF COMMISSIONERS AND EXECUTIVE DIRECTOR By i i to� �- Employeee Fbtirement Association 1355 willowway:suite 221 concord ca 94520 925.521.3960 fax 925.646.5747 August 7,2008 I i I Joseph Villarreal Executive Director Contra Costa Housing Authority 3133 Estudillo Street Martinez,CA 94553 Dear Joseph: Enclosed,please find the Enhanced Benefit Fo6ula Cost Study completed by The Segal Company,for the Contra Costa Housing Authority.This study was completed to fulfill ` Government Code Section 7507 which requires that the employer(district)have an actuary provide a statement of the actuarial impact upon future annual costs before authorizing increases in benefits.In addition,"the future annual costs as determined by the actuary shall be made public at a public meeting at least two weeks prior to the adoption of any increases in benefits". If you have any questions,please don't hesitate to call,write or e-mail. Sincerely, Rick Koehler ' Retirement Accounting Manager rkoehler@ret.eccouM.us encl 1 i- cc:Marilyn Leedom,Retirement CEO i:. "s i O:\DistrictstHousing AuthoritNA.Cover fetter for Enhanced cost study 8-7-2008.doc r } S EG AL THE SEGAL COMPANY Paul Angelo,FSA 120 Montgomery Street,Suite 500I''San Francisco,CA 941d4-4308 Senior Vice President&Actuary j T 415.263.8200 F 415.263.8290 www.segalco.com pangelo@segalco.com I August 5,2008 Ms. Marilyn Leedom Chief Executive Officer Contra Costa County Employees' Retirement Association 1355 Willow Way, Suite 221 Concord, CA 94520 Re: Housing Authority of Contra Costa County 2% at 55(§31676.16)Benefit Formula Cost Study Dear Marilyn: The purpose of this study,is to provide information on the impact of improving benefits for members of the Housing Authority of Contra Costa County(Housing Authority)if they were to adopt the"Enhanced"(2%at 55) General Tier 1 benefit formula for all years of service. We understand that this formula would be adopted effective October 1,2008 and would apply to both actives and deferred members. i Per discussions with legal counsel,we have calculated the total increase in the Present Value of Benefits (PVB)due to adopting the"Enhanced"(2%@55)benefit formula for these members, treating them as a stand-alone group(i.e.they are not combined with the other employers in this cost group). The table on the next page shows results before and after f adopting the"Enhanced"formula and the resulting increase in PVB. This increase is split between the change in the Present Value of Future Normal Costs(PVFNC) for members and the employer, and the change in the Actuarial Accrued Liability(AAL). i Housing Authority of Contra Costa County f I Current "Non-enhanced" Proposed"Enhanced" Increase/ Formula 2%@ 55 Formula (Decrease) Present Value of Future Normal Costs (PVFNC)-Member $4,551,719 $3,754,436 ($797,283 Present Value of Future Normal Costs I (PVFNC)—Employer $6,387,822 $6,457,902 $70,080 Actuarial Accrued Liability(AAL) $39.219,952 $40,175,939 $955,987 t Present Value of Benefits(PVB) $50,159,493 $50,388,277 $228,784 i Benefits,Compensation and HR Consulting ATLANTA BOSTON CALGARY CHICAGO CLEVELAND DENVER HARTFORD HOUSTON LOS ANGELES MINNEAPOLIS NEW ORLEANS NEW YORK PHILADELPHIA PHOENIX PRINCETON RALEIGH SAN FRANCISCO TORONTO WASHINGTON,DC >ti G j h •. Multinational Group of Actuaries and Consultants BARCELONA BRUSSELS DUBLIN GENEVA HAMBURG JOHANNESBURG LONDON MELBOURNE i MEXICO CITY OSLO PARIS I Ms. Marilyn Leedom August 5,2008 Page 2 r Following CCCERA's funding policy,we have amortized the change in the AAL over a 15- year period and spread the change in the employer's PVFNC over future expected salaries. This converts the PVB increase to an estimated increase in annual employer cost. We have ................. career salaries due to members retiring earlier under the proposed"Enhanced"formula. The estimated increase in the total"stand-alone" employer annual cost is 3.75%of payroll or$193,095 expressed as an annual dollar amount(based on estimated annual payroll of$5.15 million).:This dollar amount would increase each year in proportion to the total payroll.Note that this additional employer cost reflects the reduction in the PVFNC for members shown above. As noted above,all the above results are based on treating the Housing Authority as a stand- alone group.In practice,the actual employer contribution rates charged to the Housing Authority will be the rate calculated in the actuarial valuation for their particular cost group. For example,the employer contribution ratethat will be in effect on October 1,2008 for employers in the"Non-enhanced" General Tier 1 cost group is 34.53%of payroll. The corresponding employer contribution rate for district employers in the"Enhanced" General Tier 1 cost group (who have not issued pension obligation bonds) is 35.21%of payroll. In future actuarial valuations, employer rates for the"Non-enhanced"General Tier 1 formula would be determined excluding the Housing Authority and employer rates for the"Enhanced" General Tier I formula would be determined including the Housing Authority. The cost estimates shown in this letter are based on the December 31, 2007 actuarial valuation results, including the participant data and actuarial assumptions on which that valuation was based. All results exclude the effect of any employer subvention of member contributions. Calculations were completed under the supervision of John Monroe,ASA, MAAA,Enrolled Actuary and are in accordance with generally accepted actuarial standards of practice. L Please let us know if you have any questioms. Sincerely, Paul Angelo JXM/hy 4. 4053344v3/05337.013 IT- SEGAL THE,SEGAL COMPANY Jollij W.Mortroe,ASA,MAAA 120 Montgormy Street,Suite 500 San Franc.isca,CA 94104-4308 Vice President&Associate Actuary T41 5.263 8.260 F 415.263.8290 vwm.segalco.coin jm0nioe@__dSega1c0,CQ1n October 7, 2008 Ms. Marilyn Leedom Chief Executive Officer Contra Costa County Employees' Retirement Association 1355 Willow Way, Suite 221 Concord, CA 94520 Re: Housing Authority of Contra Costa County Response to Questions Concerning 2% at 55 (§31676.16)Benefit Formula Cost Study Dear Marilyn: The purpose of this letter is to provide responses to questions from the Housing Authority concerning the 2%at 55 (§31676,16)Benefit Formula Cost Study (dated August 5, 2008) that we prepared. The questions and our responses are as follows: > Question#1: Why is there a substantial decrease in the Present Value of Future Normal Costs (PVFNC) for the member. The amount drops from approximately$4.6 million to approximately $3.8 million. > Response: The PVFNC for the member represents the present value of the future contributions expected to be paid by the member while they are employed. The decrease in this amount is due to a slight decrease in each of the contribution rates that members are required to pay under the 2% at 55 formula as compared to the current formula, Also, since we assume members covered by the 2% at 55 formula will retire sooner, there is a decrease in the expected number of years that members will be employed. This also leads to a reduction in the amount,of contributions members will pay while employed, > Question#2: The estimated increase in the total stand-alone employer cost is 3.75% of payroll (before any employer loyer subvention of member contributions) or approximately $193,000 as an annual dollar amount that would increase each year in proportion to payroll. However,based on the difference between the current General Tier I Non-enhanced and Enhanced employer contributions rates,their annual increase is only about$38,500 per year. Benefits,Cornponsition and HIR Coostilting ATLANTA BOSTON CALGARY CHICAGO CLEVELAND DENVER HARTFORD HOUSTON LOS ANGELES MINNEAPOLIS NEW ORLEANS NEW YORK PHILADELPHIA PHOENIX PRINCETON RALEIGH SAN FRANCISCO TORONTO WASHINGTON,D.C. Multinational Group of Actuaries and Consultants BARCELONA BRUSSELS DUBLIN GENEVA HAMBURG JOHANNESBURG LONDON MELBOURNE MEXICO CITY OSLO PARIS f Mr. Marilyn Leedom October 7, 2008 Page 2 If the.Mousing Authority makes the change now, they will be charged the current rate as outlined in the annual actuarial valuation, effective July 1, 2008. However, would there be a new rate for them in 2009, or 2010?Are we to assume that with the pooling effect,the actual annual employer increased cost of approximately$193,000 annually, will really be pooled among all.Tier I !I Enhanced employers? > Response: In practice, the actual employer contribution rates charged to the Housing Authority will be the rate calculated in the actuarial valuation for their particular cost group. For example,the employer contribution rate that will be in effect on October 1,2008 for employers in the"Non-enhanced." General Tier 1 cost group is 3091% of payroll (34.53% including employer subvention of member.contributions). The corresponding employer contribution rate for district employers in the "Enhanced" General Tier I cost group (who have not issued pensi.on''obligation bonds) is 32.33% of payroll (35.21% including employer subvention of,member contributions). In fixture actuarial. valuations, employer rates for the"Non-enhanced" General Tier 1 formula would be determined excluding the Mousing Authority and employer rates for the "Enhanced" General.Tier 1 formula would be determined including the Housing Authority. If the employer contribution rate that the IIousing Authority would pay on a stand-alone basis is different then the current rate for the"Enhanced" General Tier 1 category, then any difference will be pooled among all Tier 1 Enhanced employers when contribution rates are calculated in the next actuarial valuation. The cost estimates shown in our August 5, 2008 letter are based on the December 31, 2007 actuarial valuation results, including the participant data and actuarial assumptions on which that valuation was based. Unless otherwise noted, all results exclude the effect of any employer subvention of member contributions. Calculations were completed under the supervision of John.Monroe, ASA, MAAA, Enrolled Actuary and are in accordance with generally accepted actuarial standards of practice. Please let us know if you have any questions..;. � I Sincerely, John Monroe /kelt 5008982v1/05337.001 1. 0 1 X m Fn X M Xm X > 0 m c: z vi z 0 Ili V! C) z Ln > — vi > m rri Ln m Uq 0 C: =r z =r z m z 0 > 0 =3 r- :3 r m 0 mI Z (D I Lna- m CL m m "a --i Pu PLJ m :3 :3 0 K r) r) to Go rD (D CL m o > Z 00 Cl Z Z 0 z z 0 rn r- m < o. > 6 > 6 -4 r m m m m m laA iA Iq m 0 0 t 00 0, m m W to to X vi ur X PO — W W :q - W 0 00 VI 4h, jr 4A J 'A rri kA m 6A tf! WO 0 4 m m m w w m PI lD 00 uj r%j tIq oa a) C)) ui 00 01 tD W r1i kq0 4A 4A 4A 1 r1i NJ CY) -4. 00 00 00 �j rQ lo Ol 00 N00 P