ALAMEDA COUNTY EMPLOYEES' RETIREMENT ASSOCIATION

ALAMEDA COUNTY EMPLOYEES' RETIREMENT ASSOCIATION 475 14th Stn.:et, Suire 1000, Oakland, CA 94612 800/838-1932 510/628-3000 fax: 510/268-9574 www....
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ALAMEDA COUNTY EMPLOYEES' RETIREMENT ASSOCIATION

475 14th Stn.:et, Suire 1000, Oakland, CA 94612

800/838-1932

510/628-3000

fax: 510/268-9574

www.acera.org

Agenda,_ _...-:/2012 July 23, 2012 The Honorable Board of Supervisors Administration Building 1221 Oak Street, Room 536 Oakland, CA 94612

RE:

ADOPTION OF NEW RETIREMENT SYSTEM CONTRIBUTION RATES

Dear Board Members: RECOMMENDATION That the Board of Supervisors adjusts the employer and employee contribution rates as recommended by the Board of Retirement effective not later than 90 days following commencement of fiscal year 2012-13, per California Government Code section 31454. SUMMARY The Board of Retirement of the Alameda County Employees' Retirement Association (ACERA) is required by law to perform an actuarial valuation of the retirement system and establish appropriate assumptions and contribution rates to the system to ensure that all current and future liabilities can be paid. The Board of Retirement retained The Segal Company, an actuarial consulting firm, to perform such a valuation. The results of the valuation were adopted by the Board of Retirement at its regular meeting on july 19, 2012. The aggregate Employer rate will increase from 20.72% of payroll to 21.52% of payroll. The reasons for this change are a lower than expected return on investments (after smoothing) and amortizing the prior years' unfunded actuarial accrued liability (UAAL) over a smaller than expected projected total payroll. The Employer's rate increase was partially offset by gains from (i) lower than expected salary increases for active members, (ii) lower than expected COLA increases for retired members, and (iii) changes in the actuarial assumptions adopted by the Board of Retirement as a result of the December 1, 2007 ­ November 30, 2010 Experience Study. For further information, please refer to the Actuarial Valuation Report as of December 31, 2011. The detailed Employee, Employer, and District rates are set forth in the attached charts. The County of Alameda ("County") received a reimbursement of $4.4 million for the implicit retiree health care subsidy paid by the County for 2011. The $4.4 million together with the unused credit from prior years' transfer have been amortized over 21 years. Effective with the December 31, 2006 valuation, the employer rates for ACMC, Superior Court and First 5 are higher than the rates for the County to reflect that only the County received a reimbursement for the implicit retiree health care subsidy. On an average rate basis, the combined General and Safety member employee contribution rate decreased from 8.63% of payroll to 8.33% of payroll as a result of change in the membership demographics and the change in the actuarial assumptions referenced above.

Board of Supervisors Letter re Adoption of Contribution Rates Page 2

The ratio of the valuation value of assets to actuarial accrued liabilities decreased from 77.5% to 76.6% during the year, primarily as a result of the recognition of a portion of the deferred investment losses (after smoothing) through 2011. The total unrecognized investment loss as of December 31, 2011 is $481.8 million (in the previous valuation, this amount was $263.4 million). This investment loss will be recognized in the determination of the actuarial value of assets for funding purposes in the next few years, and will offset any investment gains that may occur after December 31,2011. For the December 31, 2011 Actuarial Valuation, the ACERA Board decreased the net investment earnings assumption rate from 7.90% to 7.80%, and maintained the annual inflation assumption at 3.50%, and the across-the-board salary increase assumption at 0.50%. DISCUSSION/FI NDI NGS Section 7504 of the Government Code requires that all state and local public retirement systems secure the services of an enrolled actuary and perform a complete valuation of the system at least once every three years. Section 31611 of the Government Code requires the Board of Retirement to recommend to the Board of Supervisors any appropriate changes in the rates of contributions of the employer or member. Contribution levels are recommended by the Actuary and adopted by the Board of Retirement each year. RESOLUTION TO ADOPT NEW RETIREMENT RATES Section 31454 of the Government Code states: "The Board of Supervisors shall, not later than ninety days after the beginning of the immediately succeeding fiscal year, adjust the rates of interest, the rates of contributions of members, and county and district appropriations in accordance with the recommendation of the Board, but shall not fix them in amounts as to reduce the individual benefits prOVided in this chapter." The Actuarial Valuation and Review Report was presented and discussed during a public meeting of the Board of Retirement held July 19, 2012. The adjustment of the rates for fiscal year 2012-13 must, therefore, occur effective pay period 12­ 19 ending September 1, 2012 for the pay date of September 14, 2012. FINANCING Employee contributions are deducted from the employees' salary and therefore, are not a direct charge against the County, except insofar as the salaries relate to a direct charge against the County Fund. Employer contributions for County employees are an obligation of the County and, therefore, are a direct charge against the County Fund. Very truly yours,

Vincent P. Brown Chief Executive Officer

Attachments VPB/bss

Board of Supervisors Letter re Adoption of Contribution Rates Page 3

cc: Alameda County Susan Muranishi, County Administrator, Alameda County Patrick O'Connell, Auditor-Controller, Alameda County Connie Land, Assistant Controller, Alameda County Donna Ziegler, County Counsel, Alameda County Cheryl Perkins, Assistant Clerk, Board of Supervisors, Alameda County Alameda County Medical Center (ACMC) Wright Lassiter, III, Chief Executive Officer, ACMC Jeanette Louden, Chief Human Resources Officer, ACMC Marion Schales, Chief Financial Officer, ACMC Jody Copeland, Director of Finance, ACMC Jodi De Lucca, Director of HRIS, Compensation and Benefits, ACMC Dennis Manzo, Retirement Benefits & HR Analyst, ACMC Ann Metzger, Controller, ACMC Marylou Lestro Mayo, Assistant Payrolll\llanager, ACMC First 5-Alameda County Children and Families Commission (First 5)

Mark Friedman, Chief Executive Officer, First 5

Mark Rasiah, Controller, First 5

Elen Fuentes, Payroll Manager, First 5

Janet Basta, Human Resources Administrator, First 5

Housing Authority of Alameda County (Housing Authority)

Christine Gouig, Executive Director, Housing Authority

Thomas Makin, Deputy Director of Operations, Housing Authority

Cathy Leoncio, Finance Manager, Housing Authority

Charla Freckmann, Human Resources Manager, Housing Authority

Lisa Gatchallan, Payroll Clerk, Housing Authority

Livermore Area Recreation and Park District (LARPD)

Tim Barry, General Manager, LARPD

Don Humphrey, Finance Manager, LARPD

Cindy Clements, Human Resources Manager, LARPD

Danielle Fournier, Payroll Manager, LARPD

Lynn Loucks, Finance, LARPD

Cheryl Bauer, HR Technician, LARPD

Alameda County Office of Education (Office of Education) Sheila Jordan, Superintendent of Schools, Office of Education Bert Padua, Director of Internal Business Services, Office of Education Lynne Van Landingham, Director of Human Resources, Office of Education Maria Pascual, Payroll Manager, Office of Education Vickie Chang, Controller of Internal Business Services, Office of Education Superior Court of California, Alameda County (Superior Court)

Patricia Sweeten, Executive Officer, Superior Court

Matthew McDonald, Finance Director, Superior Court

Doug Bailey, Assistant Finance Director, Superior Court

Jean Shapiro, Payroll Manager, Superior Court

Harry Ma, Budget Manager, Superior Court

All Other

Members of the Board of Retirement

ACERA Administration Department

ACERA Accounting Department

ACERA Benefits Department

ACERA Legal Department

ACERA PRISM Department

Andy Yeung, The Segal Company

Alameda County Employees' Retirement Association

Recommended County Contribution Rates'"

Before Pension Obligation Bond Credit

Calculated as of December 31, 2011

Basic COLA Total

General Tier 1 (31676.12) Integrated ]st$350 Over $350 Non Per Month Per Month Integrated 12.27% 18.41% 18.41% 3.17% 4.75% 4.75% 23.16% 15.44% 23.16%

General Tier 2 (31676.1) Integrated 1st $350 Over $350 Non Per Month Per Month Integrated 12.28% 18.42% 18.42% 2.58% 3.87% 3.87% 14.86% 22.29% 22.29%

Basic COLA Total

Safety Tier 1 (31664.1) Integrated 1st $350 Over $350 Non Per Month Per Month Integrated 30.84% 46.26% 46.26% 9.69% 14.54% 14.54% 40.53% 60.80% 60.80%

Safety Tier 2 (31664.1) Integrated 1st $350 Over $350 Non Per Month Per Month Integrated 26.00% 39.00% 39.00% 6.19% 9.29% 9.29% 32.19% 48.29% 48.29%

Basic COLA Total

Safety Tier 2C (31664) Integrated 1st $350 Over $350 Non Per Month Per Month Integrated 26.73% 40.10% 40.10% 6.04% 9.06% 9.06% 32.77% 49.16% 49.16%

Safety Tier 2D (31664.2) Integrated 1st $350 Over $350 Non Per Month Per Month Integrated 24.93% 37.40% 37.40% 6.22% 9.33%, 9.33% 31.15% 46.73% 46.73%

The following percentages should be used to credit the employer's contributions to the Employer Advance and Cost-of-Living Reserves:

Employer Advance Cost-of-Living Total

General Tier I 79.5% 20.5% 100.0%

Tier 2 82.6% 17.4% 100.0%

Employer Advance Cost-or-Living Total

Tier 1 76.1% ,23.9% 100.0%

Safety Tier 2 80.8% 19.2% 100.0%

Tier 2C 81.6% 18.4% 100.0%

Tier 2D

80.0%

20.0%

100.0%

.. Based on 7.80% interest, 3.50% inflation, 0.50% across-the-board salary increase and merit and promotion increases.

5195492v1/05579 001

SEGAL

Alameda County Employees' Retirement Association

Recommended County Contribution Rates*

After Pension Obligation Bond Cr~dit

Calculated as of December 31, 2011

Basic COLA Total

General Tier 1 (31676.12) Integrated Non 1st $350 Over $350 Per Month Per Month Integrated 14.90% 9.93% 14.90% 3.14% 2.09% 3.14% 18.04% 12.02% 18.04%

General Tier 2 (31676.1) Integrated 1st $350 Over $350 Non Per Month Per Month Integrated 9,93% 14.90% 14.90% 1,50% 2.25% 2.25% 11.43% 17.15% 17.15%

Basic COLA Total

Safety Tier 1 (31664.1) Integrated Non 1st $350 Over $350 Integrated Per Month Per Month 43.34% 28.89% 43.34% 12.75% 8.50% 12.75% 56.09% 37.39% 56.09%

Safety Tier 2 (31664.1) Integrated 1st $350 Over $350 Non Integrated Per Month Per Month 24.05% 36.08% 36.08% 7.50% 5.00% 7.50% 43.58% 29.05% 43.58%

Basic COLA Total

Safety Tier 2C (31664) Integrated Non 1st $350 Over $350 Integrated Per Month Per Month 37.18% 24.79% 37.18% 7.27% 4.85% 7.27% 44.45% 29.64% 44.45%

Safety Tier 2D (31664.2) Integrated 1st $350 Over $350 Non Integrated Per Month Per Month 34.48% 22.99% 34.48% 7.54% 5.03% 7.54% 42.02% 28.02% 42.02%

The following percentages should be used to credit the employer's contributions to the Employer Advance and Cost-of-Living Reserves:

Employer Advance Cost-of-Living Total

General Tier 1 82.6% 17.4% 100.0%

Tier 2

86.9%

13.1%

100.0%

Employer Advance Cost-of-Living Total

Tier I. 77.3% 22.7% 100.0%

Safety Tier 2 82.8% 17.2% 100.0%

Tier 2C 83.6% 16.4% 100.0%

Tier2D

82.1%

17.9%

100.0%

'" Based on 7.80% interest, 3.50% inflation, 0.50% across-the-board salary increase and merit and promotion increases.

5195492v1l05579.001

SEGAL

Alameda County Employees' Retirement Association

Recommended ACMC, Court & First 5 Contribution Rates·

Before Pension Obligation Bond Credit

Calculated as of December 31, 2011

Genera) Tier 1 (31676.12) Integrated 1st $350 Over $350 Non Integrated Per Month Per Month 12.47% 18.71 % 18.71% 4.75% 3.17% 4.75% 23.46% 15.64% 23.46%

Basic COLA

Total

Genera) Tier 2 (31676.1) Integrated 1st $350 Over $350 Non Per Month Per Month Integrated 12.45% 18.68% 18.68% ).86% 2.57% 3.86% 22.54% 15.02% 22.54%

The following percentages should be used to credit the employer's contributions to the Employer Advanoe and Cost-of-Living Reserves: General

Tier]

Tier 2

Employer AdYance

79.7%

Cost-or-Living

20.3% 100.0%

82.9%

17.1%

100.0%

TOlal II

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