Agenda

Return

SD. 5

To:	Board of Supervisors
From:	David Twa, County Administrator
Date:	December 6, 2011

Contra

Costa

County

Subject:

EMPLOYEE RETIREMENT PLAN CONTRIBUTION RATES FOR FISCAL YEAR 2012/2013

APPROVE	OTHER
RECOMMENDATION OF CNTY ADMINISTRATOR	RECOMMENDATION OF BOARD COMMITTEE

Action of Board On: 12/06/2011

APPROVED AS RECOMMENDED

OTHER

Clerks Notes:

VOTE OF SUPERVISORS

AYE:

John Gioia, District I Supervisor
Gayle B. Uilkema, 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
cc:	Robert Campbell, County Auditor-Controller

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: December 6, 2011
David Twa,

BY:	, Deputy

RECOMMENDATION(S):

ADOPT the attached Resolution No. 2011/462 approved by the Retirement Board, which establishes the retirement plan contribution rates for employers and employees effective July 1, 2012 through June 30, 2013.

FISCAL IMPACT:

Significant fiscal impact - see 'Background' below.

BACKGROUND:

Each year, the Retirement Board establishes contribution rates for employee retirement plans based on an annual actuarial valuation study. The FY 2012-13 rates were based upon the actuary's December 31, 2010 Valuation Report, a copy of which can be found on CCCERA's website at www.cccera.org under the Publications link. On October 12, 2011, the Retirement Board adopted the attached resolution establishing employee and employer rates for Tier I, Tier II, Tier III and Safety retirement plans for the 2012-13 fiscal year. These rates will be included in the salary forecast and planning for the 2012-13 budget.

BACKGROUND: (CONT'D)

It should be noted that these rates include the impact of recent earning losses due to the economy. It is anticipated that rates will be significantly higher for FY 2012-13 and could continue for at least the next several years. These rates include the following:

The interest rate assumption was reduced from 7.8% to 7.75% by Retirement Board action at its March 10, 2010 meeting.
The rates quoted in these schedules are the employer and employee required rates without taking into consideration any employer subvention of employee contributions. Contra Costa County subvents employee contributions in many labor agreements.
The rates quoted are before any employee-employer cost sharing. A provision in the law allows safety members to defray the employer's cost of the '3% at 50" enhanced benefit. Contra Costa County safety members defray a portion of this cost. These cost sharing agreements vary by bargaining unit.
The rates reflect the Retirement Board action to depool CCCERA's assets, liabilities and normal cost by employer.
The rates reflect the Retirement Board action to change the terminal pay policy for members with membership dates on or after January 1, 2011. Resolution Exhibits ending in "-1" are for members with membership dates before January 1, 2011. Exhibits ending in "-2" are for members will membership dates on or after January 1, 2011.

In a letter dated August 11, 2011, CCCERA’s actuary issued a report with a five-year projection of estimated employer contribution rate changes based on an estimated 14% market value return for 2010. The rate changes for the average rate for the aggregate plan were provided. Note that because the actuary estimated the allocation of the rate changes across the cost groups, the actual rate changes by group may differ from those shown in the exhibit, even if the plan-wide rate changes are close to those shown below. As can be seen in the chart, the cumulative impact of smoothing gains and losses is projected to be 4.85% (as of 12/31/15). The total impact to the County, all things considered, is expected to be very close to these figures

Projected contribution rate increases, assuming at least 7.75% earnings annually are depicted in the chart below:

Additionally per the norm, rates in FY 2012-13 will be adjusted to cover pension obligation bonds (POB). POB rates will increase from 14.18% to 16.57% for Tier 1, from 9.18% to 10.63% for Tier 3, and from 21.05% to 29.24% for Safety. POB increases are paid by the employer and do not impact employee rates. It is important enough to repeat that the projected increases are net of a 7.75% earning assumption and do not include adjustments for pension obligation bond payments.

CONSEQUENCE OF NEGATIVE ACTION:

Rates will not be properly applied to employees and the County which will cause an imbalance between what is owed to the Contra Costa county Employees Retirement Association and what is put aside for those payments.

CHILDREN'S IMPACT STATEMENT:

None.