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07.a. CCCERA Update
Central Contra Costa, S,a,nitar District April 21, 201' 1 1 VIA: JAMES M. KELLY, GENERAL, MANAGER FROMM- RANDALL M. MUSGRAVESY DIRECTOR OF ADMINISTRATION SUBJECT-, CONTRA COSTA COUNTY EMPL,OYEE,SRETIREMEN 1 T ASSOCIATION (CCCERA)i 4/13/2,01 BOARD MEETING Attached is a cop of the April 13, 201 CCCERA Board meetin a and the associated a items, material. Of particular interest is a item #6. The i'tem. addresses the District's March 4, 201 letter to the CCCERA Board;, re meetin #6 Consilder and tak�e poss*1ble action on letter receilived from Central Contra Costa San'Itar D'1str'1C%t. The CCCERA Board authorized the CICCERA Board President, J�err Telles, General aaa A Counsel, Karen Lev Outside Professional Support Attorne H�arve Leiderman, anIu CCCERA CEO, Maril Leedom to meet with the District's Board Committee to d, iscus-1 ['.,W,,e District's letter. No other discussiion oiccur,reu. T'I,-,i,e Marcf-i,4-, 20"I'l Distrid,�'Itic) �'ERA rei a, j oit��it ry'�ieetin o"I"" a �'t Board [is Boia,rd Conr"irr"iittee of CCCEFIA with a 1Z>' �, rei t:o pt�-oviide directior""i re fl-ie Distr'i1Ir,:.,,t 13oard i�i���'ien-ibers to at,"'tend so tliae i""i'��ieefin c i be sc[iedUled. Items #5 Consider and t�ak�e poss'Ible action on recommendation from the Se Co., re terminal pa assumption methodolo for existin and new CCCERiA members The CCCERA Board directeid'Se C�ompan staff, CCCERA's Actuar to develop terminal pa assumptions b cost g roup. The q uestion of includin terminal pa as a I component of the member contribution rate was postponedi pendin le review. Sitaff'will be avallable to answer an q uestions the Board ma �havel Page 1 of 2 cS$ka cQr,�r v Employees' Fbtirement Association 1355 willow way suite 221 concord ca 94520 925.521.3960 fax 925.646.5747 RETIREMENT BOARD MEETING Retirement Board Conference Room FIRST MONTHLY MEETING The Willows Office Park 9:00 a.m. 1355 Willow Way Suite 221 April 13, 2011 Concord, California THE RETIREMENT BOARD MAY DISCUSS AND TAKE ACTION ON THE FOLLOWING: 1. Pledge of Allegiance 2. Accept comments from the public. 3. Approve minutes from the March 30, 2011 meeting_. 4. Routine items for April 13. 2011. a. Approve certifications of membership. b. Approve service and disability allowances. c. Accept disability applications and authorize subpoenas as required. d. Approve death benefits. 5. Consider and take possible action on recommendation from The Segal Co. re ardin terminal pay assumption methodoloLyies for existing and new CCCERA members. 6. Consider and take possible action on letter received from Central Contra Costa County Sanitary District. 7. Consider and take possible action on letter received from City of Pittsburg regarding request for possible amendment to termination agreement. 8. Consider and take possible action on the SACRS Proxy Voting Form. 9. Consider and take action on the proposed slate of SACRS officers for 2011 -12. CLOSED SESSION 10. The Board will go into closed session under Gov. Code Section 54957 to consider recommendations from the Medical Advisor and/or staff regarding the following disability retirement applications: Member Type Sought Recommendation a.Teri Lee Major Service connected Service connected 11. The Board will continue in closed session under Gov. Code Section 54957 to consider recommendations from the Medical Advisor and/or staff regarding the disability of Linda Battles. 12. The Board will continue in closed session under Gov. Code Section 54957 to consider the Hearing http: / /cccera.org /agendas /agendas %202011 /agenda %204.13.11 w.htm 4/12/2011 Page 2 of 2 Officer's recommendation regarding the disability application from Glenda Edwards. OPEN SESSION 13. Consider authorizing the attendance of Board and/or staff: a. User's Group Conference, Multiview, June 15 — 17, 2011, Charlotte, NC. b. Client Conference, Adams Street, June S — 9, 2011, Chicago, IL (note conflict with Board meeting). c. Market Makers 2011, IFE, June 26 — 29, 2011, Laguna Beach, CA (note conflict with Board meeting). d. Global Real Assets Conference, J.P. Morgan, April 27 — 29, 2011, New York, NY (note conflict with Board meeting). e. Client Education Seminar, PIMCO, June 9 -10, 2011, Newport Beach, CA. 14. Miscellaneous a. Staff Report b. Outside Professionals' Report c. Trustees' comments http: / /cccera.org /agendas /agendas %202011 /agenda %204.13.11 w.htm 4/12/2011 V 7T- r"111% THE SEGAL COMPANY 190 Montgomery Street. Suite 599 Sari Francisco, CA 94104 -4308 T 415.263.8200 F 415.283.8299 www.segalco.com April ?, 2011 Ms. Marilyn Leedom Chief Executive officer Contra Costa County Employees' Retirement Association 1355 willow way, Suite 221 Concord, CA 3.520 MEETING DATE APR 13 2011 AGENDA ITEM Re; Contra Costa County Employees' Retirement Association Methodology Choices for the Treatment of Terminal Pay in Actuarial valuation Dear Marilyn: We are providing information and requesting direction on some methodology choices for the treatment of terminal pay in the annual actuarial valuation. We also provide information on the levels of recent terminal pay, both by tier and by cost group, under both the "current" and "new" terminal pay policies. Note that for purposes of this letter and the annual actuarial valuation we use "terminal pay" as a broad term that includes such items as vacation sellbacks, administrative leave sellbacks and terminal pay items during the final average pay period. Summary of Open Methodology Choices A detailed discussion of the methodologies that we will apply and the open methodology choices where we need direction are provided in the body of this letter. In summary, there are really only two major methodology choices that need to be made by the Board: For future actuarial valuations, should the current terminal pay assumption structure b tier be continued or should we develop terminal pay assumptions separately for each cost oun Given the substantial reduction in terminal pay that applies to members with membership dates on or after January 1, 2011, should we continue to include terminal pay as a component of the member contribution rates for these members? Benefits, Compensation and HR Consulting Offices throughout the United States and Canada M G • t.. Founding Member of the Multinational Group of Actuaries and Consultants, a global affiliation of independent firms A Ms. Marilyn Leedom April 7, 2011 Wage 2 Background In 1997, the Board adopted a policy that determined which pay items are considered compensation for retirement purposes. under that policy, various types of terminal pay were included in the determination of compensation for retirement purposes. This policy still applies to members with membership dates before January 1, 2011. In March 2010, the Board adopted a change to this policy for members with membership dates on or after January 1, 2011. Under this amended policy, certain terminal pay elements are no longer included in the determination of compensation for retirement purposes. In January 2011, we were directed by the Board to proceed with developing a set of employer and member contribution rates that would apply only on behalf of members with membership dates on or after January 1, 2011. We then requested and received data from retirement association staff that contained information on terminal pay for members that retired during 2008, 2009 or 2010. we were provided both: • The amount of terminal pay the member actually received at retirement under the policy that applies to members with membership dates before January 1, 2011. The amount of terminal pay the member would have hypothetically received at retirement under the new policy that applies to members with membership dates on or after January 1, 2011. Terminal Pay Experience and Assumptions Exhibit A summarizes the data on terminal pay (as a percentage of final average pay excluding such terminal pay) for the three -year period from 2008 through 2010 under both the current and the new policy (as if it was hypothetically in effect at these members' retirement dates). This exhibit also shoves the current terminal pay assumptions (as a percentage of final average pay excluding such terminal pay) that apply to members with membership dates before January 1, 2011 and those that we propose using for members with membership dates on or after January 1, 2011. In this exhibit, we have followed the structure of the current terminal pay assumptions, which is to have a different terminal pay assumption for each tier. Note that there is a significant decrease in terminal pay under the new policy, but it does not appear to be completely eliminated. 5128542v3105337.013 Ms, Marilyn Leedom April 7, 2011 Page 3 Impact of Terminal Pay on Contribution hates The contribution rates determined in the actuarial valuation reflect the anticipated impact that terminal pay will have on expected future benefit payments. The member Basic contribution rate is not affected by the terminal pay assumption (i.e. it is an employer only cost) and there is only a relatively small Cost -of- Living (COL) component for members. As a result, the great majority of the contribution rate impact of the terminal pay assumption is borne by the employer. The portion of the aggregate employer and member contribution rates from the December 31, 2009 actuarial valuation due to the application of the terminal pay assumption is shown in the table below: Portion of Contribution late from December 31, 2009 Actuarial Valuation due to the Application of the Terminal Pa Assum tion Basic COL Total Employer 3.42% 1.01% 4.43% Member 0.00% 0.34% 0.34% Total 3.42% 1.35% 4.77% Since the Board action to change the terminal pay policy for new members significantly reduces terminal pay, we would expect to see significant reductions in the above components of the employer and member contribution rates for members affected by the new policy, due to the application of the new terminal pay assumptions. Recent Information Concerning Further Changes to Terminal Pay While we were in the process of determining the employer and member contribution rates that would apply on behalf of members with a membership date on or after January 1, 2011, we were informed about another change made by the County that would apply to some of their employees and may apply to more of their employees depending on the outcome of collective bargaining. These changes would eliminate vacation sellbacks for applicable County members with membership dates on or after April 1, 2011. This would further lower the hypothetical terminal pay under the new policy as compared to what is shown in Exhibit A. We also understand that there is another change in terminal pay that may affect a small group of County members with membership dates before January 1, 2011. . We will proceed using the same terminal pay methodology and assumptions for all members with membership dates on or after January 1, 2011. This will mean that the same employer and member contribution rates will apply to all such members. We are aware that there may be slight differences in terminal pay depending upon whether the membership date was in the first three months of 2011 or thereafter. However, we believe it is not practical to create a separate 5128542v3/05337.013 Ms. Marilyn Leedom April 7, 2011 Page 4 set of employer and member contribution rates for a very small subset of the members (i.e. those with.membership dates in the first three months of 2011). We also do not believe it is practical to create different sets of member and employer contribution rates each time a small change to a terminal pay policy is made. The change made starting January 1, 20 1. 1 was significant and that is why separates rates are warranted. Any smaller changes in terminal pay experience that occur in future years will be handled through assumption changes at future experience studies as appropriate. Possible Methodologies for the Treatment of Terminal Pay in Actuarial Valuation Based on the above information and also in consideration of the depooling action taken by the Board in 2009, the Board should consider whether or not it is appropriate to develop terminal pay assumptions separately for each cost group (rather than only by tier as is the current practice). In addition, given the substantial reduction in terminal pay that applies to members with membership dates on or after January 1, 2011, the Board should consider whether to continue to include terminal pay as a component of the member contribution rates for these members. Regarding the first issue, Exhibit B contains terminal pay information similar to that shown in Exhibit A. except that it is now shown for each cost group instead of only by tier. A summary of the employers that are included in each cost group is shown in Exhibit C, Dote that certain districts that use the County payroll system are included with the County cost groups in Exhibit B. This is why some cost groups (for example Cost Group #8) do not show any retiring members during this period. Also, for retiring members with service in more than one tier, their terminal pay is determined separately for each tier's benefit and these amounts are then allocated separately to each applicable cost group in this exhibit. The rest of this discussion details the two different methodology choices for how terminal pay should be valued in the annual actuarial valuation. Our intent is to receive direction from the Board in April on which of each methodology choice to adopt. Then we will calculate any applicable employer and member rates with the intention of bringing these results to the Board for the May 2011 meeting. Methodology Choice #1— For future actuarial valuations (starting with the December 31. , 2010 valuation), should the current terminal pay assumption structure by tier be continued or should we develop terminal pay assumptions separately for each cost group? Options and/or Recommendations — we do not necessarily have a strong opinion as ultimately benefits will be adequately funded under either option. Exhibit B clearly shows that there can be significant variations in terminal pay for employers in the same tier, but different cost groups. This paeans that continuing the current structure based on averages by tier may result in more actuarial gains and losses (that are funded over 18 years) for 5128542v3/05337.013 Ms. Marilyn Leedom April 7, 2011 Wage 5 some employers as compared to more immediate cost recognition under an assumption structure based on cost group. Terminal pay assumptions that are separate for each cost group would seem to be more consistent with the depooling action taken by the Board in 2009. Even then there still will be some averaging involved in determining the assumptions for each cost group as some cost groups have more than one employer (such as cost groups #1 and #2 that have numerous small districts in addition to the County). However, also note that there will be less experience available by cost group (since some of the cost groups have a relatively small number of members) as compared to by tier. This means the data will be less statistically reliable, if broken down into cost groups. Our only specific recommendation on this matter is that if the methodology that uses terminal pay assumptions by cost group is adopted, it should be applied consistently to both current and new members starting no earlier than the December 31, 2010 actuarial valuation. Regardless of the Board's choice for future valuations, for those members with membership dates on or after January 1, 2011, we will base both the employer and member contribution rates for the first six months of 2011 and for the 20 11/2012 County fiscal year on the demographics of members in the December 31, 2008 and December 31, 2009 valuations, respectively. For this purpose, we will use the terminal pay assumptions shown in Exhibit A by tier. > Methodology Choice #2 — Whether a portion of member contribution rates should continue to reflect the application of the terminal pay assumption for members with membership dates on or after January 1, 2011. Options and /or Recommendations — As was shown earlier, even under the current terminal pay policy only a relatively small portion of current member contribution rates is attributable solely to the terminal pay assumption and that portion is only in the Cost -of- Living (COL) component. And then, terminal pay appears to have been reduced significantly for new members under the new policy. For these reasons, consideration should be given to eliminating any terminal pay component in the calculation of the member contribution rates for members with membership dates on or after January 1, 2011. However, this would shift to the employer the small portion of the cost due to terminal pay that would. otherwise continue in the member contribution rates. For all matters pertaining to interpretations of the Government Code, we would defer to legal counsel on what is allowable, especially in regards to Methodology Choice #2 above. 5128542v3/O5337.013 Ms. Marilyn Leedom April 7, 2011 Page 6 Please let us know if you have any questions, and we look forward to discussing this with your Board., Sincerely, Paul Angelo, FSA, EA, N4AAA Senior Vice President and Actuary ��u'vwU John onroe, ASA, EA, MAAA Vice President and Associate Actuary JZM /jmc 5128542v3/05337.013 M:lcceera.cli1val201lNspecial_ studies \tcrmpay\[terrnpay2008_2009 2010 v2.xls]SUnUnary 5128542v3/053371013 Exhibit A Contra Costa County Employees' Rctirement Association Comparison of Terminal .Pay Under Old Policy versus New Policy for Those With a Membership Date on or After January 1, 2011 Illustration of Policies Based on New Retirements Bethveen January 1, 2008 and December 31, 2010 Terminal Pay as a Percentage of Final Average Pay (Excluding Such Terminal Pay) General Tier 1 General Tier 2 General flier 3 Safety Tier A Safety Tier C Year Average Terminal Pay Average Termtn Pay Average Terminal Pay Average Tcni Pay Average Ternitn Pay Actual Terminal Pay_ under Old Police 2008 12184% 3.27% 7.51% 9156% N/A 2009 13.37% 4.1 8,20% 11.76% NIA 2010 15.74% 3.1.4% 6.81 13.13 NIA Average 14.17% 155% 7.53% 11.57% NIA Hyriothedeal Terminal. Pay_ under New Policy 2008 3.73% 0.67% 1.47% 1.04% N/A 2009 3114% 0.62% 1.28% 1.36% NIA 2010 4149% � 0.49% 1.17% 1.92% N/A Average 3.83% 0.60% 1.30% 1.45% NIA Current Applies to members with membership date before January 1, 2011 Assumptions 12.00% 3.50% 7.50 % 11.25% " "" " " " " "" 3.75% 11 Y 1 1 1111 1 111 II 1 Passible Proposed Applies to members with membership date on or after January 1, 2011 Assumptions 3.50% 0.50% 1.25% 1.54% _ 0,50% M:lcceera.cli1val201lNspecial_ studies \tcrmpay\[terrnpay2008_2009 2010 v2.xls]SUnUnary 5128542v3/053371013 V-4 .1 N rl a � a N o � 4? ° cQ G� a� L Cl sa Q H � Q IU `" a cu � q C ►Q o �� h � � 3 � � O Ad wl D an ,u O 0 w.f s F cl C6 0 U N od Q' o�� wr cet d O Q Q l` r-� y O � � � V � n N ON ' cc `° '^ W) -� O o n aK h1 �f'i N oo d �D eF y Lr O C� 1 1- 0 1 l U t ~ i M 4 O O O kn v cd 00 O C 4 Q [•1 Ci O � q 0. V o 0 o d a o 0 0 o c�c�oo aar�d ` o u V r � i 5 w � ('? o 0 0 o g o o c d vl 0% M T d d qk o s z 0. o o r...o ° o L 6 � a a a c, © o 1 o 0 o © v, ►� Ton o ff C ld e� Q o o ca Q o 0 C O 6 a o a o d d d 0 6 6 6 .. „C L co 0 4 v o V d d --� 16d C rn .K a � O � � �''' oa ti v, of c •-- (D o >, o V w V a Q, 4A, *Ml c a. 0 Oa it ti no Do Do u ,� 4A ° V ¢ > 5PIo A °a .� i co o d as "d 4A u IWU �N flo trf1 00 d as o OIL ° � ° U > � 49 ee G C D O D O d in .�. r m N M M lu 00 O O c G CS ID •� N N C ? N N N 47 ID q T C) LO 0 C" ). N s Exhibit C Summary of Cost Groups and Employers GENERAL Cost Group Employer Name Benefit Structure (1) County General Tier 1 Enhanced Local Agency Fon Commission Tier i Enhanced CC Mosquito and Vector Control District Tier I Enhanced Bethel Island Municipal District Tier 1 Enhanced First S - Children & Families Commission Tier 1 Enhanced Contra Costa County Employees' Retirement Association Tier 1 Enhanced Superior Court Tier 1 Enhanced East Contra Costa Fire Protection District 'Fier 1 Enhanced Moraga- Drinda Fire District Tier I Enhanced Rodeo - Hercules Fire Protection District Tier I Enhanced San Ramon Valley Fire District Tier 1 Enhanced (2) County General Tier 3 Enhanced In -Horne Supportive Services Authority Tier 3 Enhanced Contra Costa Mosquito and Vector Control District Tier 3 Enhanced Superior Court Tier 3 Enhanced (3) Central Contra Costa Sanitary District Tier 1 Enhanced (4) Contra Costa Housing Authority Tier 1 Enhanced (5) Contra Costa County Fire Protection District Tier 1 Enhanced (6) Rodeo Sanitary District 'Fier 1 Non - Enhanced Byron Brentwood Cemetery Tier 1 Non - Enhanced 5128542v3105337.01 3 Exhibit C Summary of Cost Groups and Employers (continued) SAFETY Cost Group Employer lame Benefit Structure (7) County Safety Tier A Enhanced (8) Contra Costa County Fire Protection District Tier A Enhanced East Contra Costa Fire Protection District Tier A Enhanced (9) County Safety Tier C Enhanced (Deputy Sheriff new hires) (10) Moraga- Drinda Fire District Tier A Enhanced (11) San Ramon Valley Fire District Tier A Enhanced (12) Rodeo - Hercules Fire Protection District Tier A Ton- Enhanced 5128542v3145337.013 RECD MAR R 4 2 0 11 1 Central Contra Costa Sanitary District March 4, 2011 Mr. Jerry Telles Chairperson of the Board Contra Costa County Employees' Retirement Association 1355 Willow Way, Suite 221 Concord, CA 94520 RE: CCCERA'S ACTIONS ON DE- POOLING Dear Mr. Telles: MEETING DATE APR 13 2011 AGENDA ITEM We received Marilyn Leedom's letter of January 25, 2011. We thank you for that response, however the Central Contra Costa Sanitary District ( "District ") is not satisfied that it fully addressed the issues raised in our letter of December 27, 2010 or the current circumstances facing public agencies. Initially, we recognize that both the County Employees Retirement Law ( "CERL ") and the California constitution, as amended by Proposition 162 in 1992, do provide substantial authority to the CCCERA Board for the administration of the retirement system. We accept that CCCERA has the "sole and exclusive power to provide for actuarial services in order to assure competency of the assets of the public pension or retirement system", as well as other enumerated responsibilities (California Constitution Article XVI, section 17). However, we do not believe pension boards are exempt from the scope of judicial review, nor from the careful scrutiny by impacted member agencies and the constituents that ultimately pay the bills. We do not accept the implication that CCCERA's authority is essentially unrestricted or not subject to traditional legal limitations. Separately, we question CCCERA's authority to act in a manner based on a "retroactive" approach' when responsible member agencies made financial decisions relying on your prior policies and contribution rates. If this were Ms. Leedom's letter of January 25, 2011 attempts to suggest that the effect of the de- pooling decision of the Board of .Retirement was not retroactive because it only impacts future contribution rates. However, common sense and your actuary recognize your actions in fact adopted a "retroactive" approach. (Segal Company Letter dated August 311) 2010 at pg. 5) . E) Recycled Paper Jerry Telles, Chairperson of the Board March 4, 2011 Page 2 the case, future CCCERA decisions could create or eliminate additional financial obligations on publically funded agencies without restriction, even when these decisions might offend the basic legal principles such as those related to retroactivity and detrimental reliance. We question if CCCERA's records had been relatively complete for the past 50 years, would CCCERA have no limitation on taking a retroactive approach dating back 50 years? Notwithstanding the district's substantial concern with CCCERA's contention that it has unchecked authority on retirement policy decisions, including the right to take actions through a retroactive approach, we want to clarify that the District does not seek to take legal action to reverse CCCERA's de- pooling decisions. our reluctance to consider litigation is based on the simple proposition that the District does not seek for any other member agency to subsidize any of the costs of retirement of its employees. Therefore, the District will pay appropriate amounts to cover all of its costs resulting from de- pooling and the delay of CCCERA to change its "Policy" in response to the clarification on final compensation resulting .from the In re Retirement cases (2003) 110 Cal.App.4 420. The District, does, however, seek procedural changes to prevent similar unfortunate circumstances from occurring in the future. The District strongly suggests one of several courses of actions should be pursued. The intent is to provide for meaningful input from member agencies and minimize the potential for future decisions that result in unfortunate instances of detrimental reliance or missed opportunities to react to favorable changes in the law. The District strongly requests that CCCERA promptly adopt new formal bylaws or regulations that mandate a formal notice and right to comment by member agencies on important policy changes substantially affecting their finances. These regulations should provide for written responses from CCCERA to member agency comments and a realistic avenue for lodging formal objections, including an administrative appeal procedure. Separately, the District requests a joint meeting of a Board Committee of CCCERA with a District Board Committee to initiate consideration of these formal bylaw or regulation changes and address the appropriate roles of CCCERA vis a vis its member agencies. The subject of discussion should be to address the nature of reforms that may eliminate similar controversies in the future and enhance responsiveness to the financial realities of member agencies and the public. The current financial difficulties of governmental entities throughout California and the nation highlight the need for new approaches, greater transparency and closer attention to the impact of the increasing cost of public services. Taking no action at this time does not appear to be an acceptable alternative. Jerry Telles, Chairperson of the Board March 4, 2011 Page 3 In closing, our December 27, 2010 letter appears to have been handled in a manner intended to deflect public attention or Board -level consideration of our concerns. It is the intent of this letter that these issues receive thoughtful public consideration and to that end we are reattaching our letter of December 27, 2010 and providing copies of both to each CCCERA member agency. Sincerely, Barbara D. Hockett Board President Attachment cc (with attachment): Z a CERA Board of Directors rilyn Leedom, CCCERA Executive Director All CCCERA Member Agencies Daniel Borenstein, Contra Costa Times CCCSD Board of Directors Central Contra Costa Sanitary District Pr public health and the environment • Imhoff Place, 1 BOARD OF DIRECTORS; MICHAU, R. AX"GILL December 27, 2010 President BARHAM 1). H(XXI 7T Prr►ideni Pro 1em HAND DELIVERED MAR10h. M.-W SINI J,Wh'-V A. NI•.ADLY Honorable Members of the Board DA WD R WILUAMS Contra Costa County Employees' Retirement PHONE: (925) 228 -9500 Association FAX. (925) 676 -7211 1355 Willow Way, Suite 221 www.centralsan.org Concord, CA 94520 Dear Members of the Board: The Central Contra Costa Sanitary District ( "CCCSD ") Board of Directors thanks CCCERA for the information it has provided and for delaying action on its consideration of retroactive de- pooling to allow CCCSD to review CCCERA's proposed rate adjustments. CCCSD has spent substantial effort in evaluating the retroactive de- pooling decision of CCCERA and the implementation of those decisions through the proposed member rates, to be implemented July 1, 2011. The cumulative impact of CCCERA's actions or inactions and the de- pooling methodology would increase CCCSD's unfunded liability (and hence burden our ratepayers) by $20 million. This potential unfunded liability would result in a substantial increase in CCCSD's cost of operations beginning in July 2011. As part of our review to ensure CCCERA was correctly calculating our liability, CCCSD reviewed our practices of reporting final annual salary (FAS) to CCCERA (following CCCERA Policy "Determine Which Ray Items are "Compensation" for Retirement Purposes" ( "Policy ")), Based on this review we concur with CCCERA's analysis that the vast majority of the pay codes that make up the FAS are being correctly reported (memorandum from Harvey Leiderman to Marilyn Leedom dated September 15, 2010), and hence the retirement benefits comply with CCCERA's "Policy ". The CCCSD Board has significant concerns about decisions CCCERA made that led to the proposed de- pooling action, although we are willing to consider paying our fair share of the de- pooled retirement costs, as appropriately determined. 'CCCSD rejects the proposition that all of the current circumstances which have led to de- pooling could not have been avoided or ameliorated. We contend it is the CCCERA Board, not the employer, that has the constitutional and statutory duty to manage retirement funds and to determine whether and how much the fund is obligated to pay to individual retirees. Central Contra Costa Sanitary District further .contends that subsequent to the July 11, 2003 decision of In re Retirement Cases (2003) 110 Cal.App.4th 425, 457 -460, CCCERA had both the opportunity to and obligation to modify its "Policy" as it ultimately did on March 10, 2010. It is worth noting that CCCERA's lack of action after 2003 led to much of CCCSD's and other employers' accrued de- pooling unfunded liability. We "contract" with you to administer the fund and your failure to either track or consider changes in the law at that time detrimentally impacted CCCSD and other employers. For example, approximately 90 of CCCSD's 250 employees have been hired since January 2004, and could have been covered by the second tier policy adopted t0 Letter to CCCERA Board December 27, 2010 Page 2 this year. We would like to know why the decision to set up a second tier was delayed for years and only occurred when "spiking" became a matter of public controversy. Given the significant public policy change by CCCERA to move from a pooled system to a de- pooled system by employer and to do so retroactively, and the resultant unanticipated liability and costs to CCCSD and several other employers, we, as Board members of CCCSD, request that: (1) the CCCERA Board respond to our questions set forth on Attachment A as an agenda item for the CCCERA January 12 t 201 1 Board meeting, and (2) the CCCERA Board make this letter available for distribution at the meeting as part of the public record. The purpose of our letter is to seek a statement and understanding from the CCCERA Board as to its perceived authority for certain decisions and the process used to rake those decisions so we can perform our due diligence as a Board and to ensure this is a lawful change in public policy. We hope that your response to this request will satisfy our concerns and make CCCERA's decision - making process more transparent to CCCSD as an employer member, to other employer members, as well as to the public. It is critical that future decisions which affect CCCSD's financial and policy status allow for our timely input prior to becoming final. Notwithstanding these comments and the questions set forth in the attachment, the professional manner in which you and your staff have dealt with our inquiries and concerns on this matter is appreciated. We look forward to CCCERA's response to this letter and the questions presented in the attachment. If the Board has any questions or needs further clarification, please contact James M. Kelly, General Manager, at (925) 229 -7335. Sinter _ Michael R. McCII , P. E. President of the Board of Directors Central Contra costa Sanitary District cc: Ms. Marilyn Leedom, Executive Director Attachment A : Questions to CCCERA Board of Directors regarding de- pooling ATTACHMENT A 1. October 13, 2009 "De- pooling" Decision Please identify the authority CCCERA relied upon to unilaterally implement its October 14, 2009 "de- pooling" decision. To prevent any confusion, our question seeks the following: a. Did CCCERA rely on any California constitutional authority? If so, please specify. b. Did CCCERA rely on any Califomia statutory authority? If so, please specify. C. Did CCCERA rely on its own regulations, bylaws or other authority? if so, please specify. d. Is there any authority CCCERA relied upon other than the above? e. Does CCCERA believe that its Board has unfettered authority to make policy decisions, without seeking input and/or approval from its employer members? If so, what authority does the Board rely upon for this conclusion? 2. Is it CCCERA's position that its "de- pooling decision did not require consent or other form of approval from its employer members? If so, what is the authority for that conclusion? 3. When did the CCCERA Board commence its discussion of adopting a "de- pooling" policy? Please provide a list of dates when this issue was discussed by the Board, including publicly noticed open and closed session meetings. 11. Retroactive Effect of "De- pooling" Decision 1. Please identify the authority CCCERA relied upon to unilaterally decide to effectuate the "de-pooling" decision retroactively to 2002. a. Did CCCERA rely on any California constitutional authority? If so, please specify. b. Did CCCERA rely on any California statutory authority? if so, please specify. C. Did CCCERA rely on its own regulations, bylaws or other authority? If so, please specify. d. Is there any authority CCCERA relied* upon other than the above? e. Do you assert that the CCCERA Board has unfettered authority to . make policy decisions, without seeking input and/or approval from its employer members? If so, what authority does the Board rely upon for this conclusion? 2. Under the County Employees Retirement Law, Government Code Sec. 31453.0 provides statutory authority to, on a one -time basis, amortize unfunded accrued actuarial obligations for 30 years, for the purpose of determining employer contribution rates. In making its decision to apply "der - pooling" retroactively to 2002, did the Board consider exercising its authority under Government Code Sec. 31453.6? If so, did the Board decide that this section was irrelevant or not necessary? To the extent that the Board responds that no request was forthcoming from the Board of Supervisors, please advise whether, as part of the Board's "de-pooling" decision - making, any discussions have taken place with respect to the Board's powers afforded by the above statute. Ill. Implementation of "In re Retirement Cases' Limitations on Reportable Compensation 1. Please identify and list any and all documents, including but not limited to settlement agreements, policy directives, etc. by which CCCERA decided to implement the compensation benefits as identified in the Supreme court's decision Ventura County Deputy Sheriffs' Assn. v. Board of Retirement ( 1997) 16 Cal.4 453, 66 Cal. Rptr. 2d 304. 2. Please identify and list any and all non - attorney client privileged documents which the Board considered with respect to whether the Board should adopt, or refrain from adopting, the compensation limitations approved by the Court of Appeal in In re Retirement Cases (2003) 110 Cal.App.4 426, 1 Cal. Rptr.3d 796. 3. Please identify and list any Board decision to refrain from adopting the compensation limitations set forth the In re Retirement Cases decision. If none is identified and listed, what was the Board's decision - making procedure, if any, for evaluating the legal impact of the above 2003 court of Appeal decision? Is it accurate to conclude that the CCCERA Board has voluntarily applied the Ventura decision to all then and currently active employee members since that 1997 decision, without imposing the limitations approved by the In re Retirement Cases court? 4. We understand that the Board received a legal opinion on or about October 21, 2009 related to CCCERA's treatment of final compensation and retirement benefits. Please describe the decision - making process resulting in the Board's policy to implement the Court of Appeal limits'on compensation, effective in 2091. Iv. Future Decision - making Process Please identify the decision - making protocols under which CCCERA currently operates. Further, we assume that the CCCERA Board will have future policy decisions to consider; these decisions, similar to the those above, may potentially involve significant financial impact on members, including, but not limited to, contribution rates and addressing unfunded liabilities. 1564067.6 City of Pittsburg Finance Department • 65 Civic Avenue 9 Pittsburg, California 94565 -3814 Telephone: (925) 252 -4946 •Fax; (925) 252 -6969 • ci.pittsburg.ca.us March 31, 2011 Ms. Marilyn Leedom Chief Executive Officer Contra Costa County Employees Retirement Association (CCCERA) 1355 Willow Way, Suite 21 Concord, CA 04520 Subject: City of Pittsburg Request to Amend the Termination Agreement with CCCERA Gear Ms. Leedom; In response to CCCERA's recently calculated triennial update of the City of Pittsburg's ( "the City") withdrawal liability, the City contracted with Bartel Associates to review the calculation to ensure it was accurate as well as provide the City with options to reduce its unfunded obligation. Bartel Associates confirmed that the triennial update of the City's withdrawal liability was accurately calculated. However, as described in the attached letter from Mr. John Bartel of Bartel Associates, Mr. Bartel is recommending that the City and CCCERA amend the City's Termination Agreement to (1) allow the calculation be prepared on an Actuarial rather than Market value of assets basis, and (2) create an 18 -month lag between the valuation date and the date the contribution is - due. Mr. Bartel estimated that making these changes to the City's Termination Agreement with CCCERA would result in lowering the 12/31/2009 unfunded obligation from $15.9 million to $9.9 million and therefore lowering the City's annual payment on July 1, 2011 from $2 million to $1.3 million. Given this reduced unfunded obligation and annual payments to CCCERA, we respectfully request to amend the City of Pittsburg's Termination Agreement with CCCERA as suggested by Mr. Bartel. Ms. Marilyn Leedom CEO, CCCERA City of Pittsburg Request to Amend Termination Agreement with CCCERA March 31 , 2011 Page 2 of 2 Thank you in advance for considering our request for these amendments. If you have any questions, please contact me at (925) 252 -4848 or tolson ci. ittsbur .ca.us. Sincerely Tina Olson Director of Finance Cc: Marc Grisharn, City Manager Marc Fox, Assistant City Manager BQ P TIP L RECEIVED "SSOCIATES, LLC March. 2s, 2011 MAR 2 9 2011 Tina Olson FINANCE DEPT Director of Finance City of Pittsburg 65 Civic Drive Pittsburg, CA 94565 Re: City of Pittsburg -- Review of CCCERA December 31, 2009 Withdrawal Liability Triennial Update Dear Ms, Olson: Bartel Associates has reviewed the December 17, 201 CCCERA updated withdrawal Liability calculation. Our comments and recommendations are: 1. we matched the Segal actuarial liability calculations very closely. This means, absent changes in the agreement, we do not disagree with the amounts in Rick Kohler's December 17, 2010 letter. 2. we suggest the City request the agreement be modified for the following reasons; a. A Iack of "lag" between the valuation date and the date any contribution is due creates an insurmountable budget issue. b. Using the market value of assets in the calculations creates unanticipated volatility, 3. we recommend the City discuss with CCCERA the following agreement changes: a. Allow the calculation to be prepared on an A.ctuariai rather than a Market value of assets basis. b. Create a 18 month lag between valuation date and date contribution is due. For example the ,tune 30, 2009 valuation would determine the City's 2011/12 fiscal year contribution. We estimate the impact of our recommendations as: • (3a) results in a lower 12/31 unfunded obligation of $9.9 million rather than $15.9 million. • (3b) using Market value of assets results in a 7/1/11 payment of $2.043 million rather a 1 /1110 payment of $1.827 million. • Combining (3a) and (3b) results in a 711111. payment of $1.271 million. Please note: R 5% Corridor: • Currently if the market value of assets are less than 105 or more than 95% of the Actuarial Accrued Liability no contribution is due. • if CCCERA agrees to (3a) & (3b) above they will almost certainly want to eliminate the 5% corridor around the liability. 0 we do not believe expanding the corridor will help much in mitigating future volatility. X Amortization /payment period: • we do not suggest an increase in the payment period (c 15 years). • Doing so would: CJ tower short term payment a=Ullts and 0 significantly increase the interest the City will pay. • However, for budget reasons the City may want to make such a request. 4 Borel Avenue, Suite 101 * Sari Mateo, CA 94402 main: ��t) - R I 7 i 4 Ann 7 * lav Agin- KA -Rn O vwpli %ans),af f'►'1Y +n� �rrnri ^err rr.rv, Tina Olson March 28, 2011 Page 2 Please feel free to call me at (650)377-1.601 if you have any questions about this letter. Sincerely, John E. Bartel President c: Marc Fox, City of Pittsburg. Bianca Lin, Bartel Associates, LLC oAclien(Acity of pittsburglcccerall2 -31 -09 vat updatelba 11-03-28 pittsburgei eccera t2 -31 -09 review. doe CBA 411 Borel Avenue, Su 101 & San Mateo, CA 94.402 main. Fief -3 77- 1Fs00 * fay' F;�n -. Ar, -Rnr) 7 • IA /Ph' 0AAAA1 hartal_accnri ;i•ac rrim SACRS VOTING PROXY FORM AGENDA ITEM The following are authorized by the County Retirement Board to vote on behalf of the County Retirement System at the upcoming SACRS, Conference (ifyou have more than one alternate, please attach the last of alternates in priority order): Voting Delegate Alternate Voting Delegate These delegates were approved by the Retirement Board on The person authorized to fill out this form on behalf of the Retirement Board: Signature: Print Name: Position: Date: Please send your system's voting proxy by April 1, 2011 to: Strategic Local Government Services, LLC Attn: Sulema H. Peterson, SACRS Administrator 1415 L Street, Suite 200 Sacramento, CA 95814 Tel: (918) 441 -1850 / FAX: (916) 441 -6178 / E -mail: sacrs @sacrs.org 1415 L Street o Suite 200 • Sacramento • California • 95814 • (91 d) 441 -1850 Operating under County Employees Retirement Law of 1937, Government Cade 31450 et seq ME ING DATE APR 13 2011 CRS State of County Rctirenjrnt Systems 4t,sfJ' • flp;lc�r * ijjlliut €s * Ctrs - .ar A UAKgeku muss nofii ( wparalioo SACRS MEMORANDUM April 1, 2011 Attn: SACRS Administrators From: Raymond McCray, SACRS Nominating Committee Chair SACRS Nominating Committee Re: SACRS Board of Director Elections — Final Ballot AGENDA ITEM iT �i Per SACRS Bylaws, Article VI — Section 2 — Election, Qualification and Term of Office "The officers of SACRS shall be regular members of SACRS. The officers shall be elected by majority vote of the quorum of delegates and alternate delegates present at the first meeting in each calendar year and shall hold office for one (1) year and until a successor is elected. " Per SACRS Bylaws, Article VI — Section 4 - officer Elections "... The Board of any regular member County Retirement System may submit write -in candidates to be included in the Nominating Committee's final ballot provided the Nominating Committee receives those write -in candidates prior to March 25 The Nominating Committee will report a final ballot to each regular member County Retirement System prior to April 1. The Administrator of each regular member County Retirement System shall be responsible for communicating the Nominating Committee's recommended ballot and f nal ballot to each trustee and placing the election of SACRS Officers on his or her Board agenda. The .Administrator shall acknowledge the completion of these responsibilities with the Nominating Committee... " SACRS Nomination committee received notice from a candidate listed on the original March 1 2011 recommended ballot requesting that his name be withdrawn from the election. Therefore the Nomination committee ballot has been amended and is being presented for consideration with a vacancy. OCERS submitted an alternate slate for consideration to the Nomination Committee, and does not have any vacancies. Below are 2 ballots — As in the past, a voting delegate may entertain a motion to vote by individual officer positions or by complete ballot/slate. Please be sure to authorize your voting delegate to vote either way. • SACRS Nominating Committee ballot for the annual SACRS Board of Directors elections. • OCERS ballot for the annual SACRS Board of Directors election. CRS iTajf 1 Triix:Frs x .�j /ilia�r� • 5?it�'ris A (;a ifar la Tapp Vi4il Colporalivis The elections will be held at the upcoming SACRS Spring Conference May 10 -13, 2011 at Fess Parker Doubletree Hotel & Resort, Santa Barbara, CA. Elections will be held during the Annual Business meeting on Friday, May 13 2011 at 9:30 a.m. Please distribute the ballots /slates to all standing/eligible board members for approval and authorization for your voting delegate. As stated above, Administrators are required to send acknowledgement of completion to our office at sulema@sacrs.org . SACRS Nominating Committee Recommended 2011 -2012 Nominees /Candidates: President Vacant Vice President Doug Rose, San Diego County Treasurer Vanessa Patterson, Santa Barbara County Secretary Yves Chery, Los Angeles County OCERS Recommended 2011 -2012 Nominees /Candidates: President Richard White, orange County Vice President Doug Rose, San Diego County Treasurer Vanessa Patterson, Santa Barbara County Secretary Yves Chery, Los Angeles County If you have any questions or require assistance, please contact me directly at 209-468-2163 or ra m 1 sbc lobal.net . Thank you for your prompt attention to this timely matter. Sincerely, lzaywwnd.McCray Raymond McCray, San Joaquin County SACRS Nominating Committee Chair CC: SACRS Board of Directors SACRS Nominating Committee Members Sulema H. Peterson, SACRS Administrator Attachment RMC: shp 2 ?RETIREMENT SYSTEM Semin the Artirse and Retired Members q f- CITY 01: SAN J('AiN' CA(1JSTRXN() March 2 201 , Sulema H. Peterson .].m- Dis 1 )uc I SACRS Administrator SAGS Cot -N-,I.y & F.mvill 1415 L. Street, Suite 200 Sacramento, CA 95814 j � 0 ItA N G F C1 WNI V IZE: Write-in candidate nomination for SACKS President Em vi , -)N- Dear Ms. Peterson: ORAN(4; Y F]1-9: A nf�- On March 21't the Board of the Oran Count Emplo Retirement S ( OCERS ) voted to recomn send Richard white as a write-in candidate for the office of president in the upcomin SACKS Board of Directors Election to take place at the I Ma 2011 SACKS Conference. Ct ,I ,N '`�- piM V ' Please include Mr. White's name on the final ballot for the office of president. I; F. wn, "() t. K [') 11 Ver trul y ours,, MORI?) 1. Steve Delane Chief Executive Officer C C I - ') 1 -. I I , R, N F' C 1 JN' r �, f 114 1 N I -. E S R f -I' I - I R F N I F- NT SY-c� " f"E"IN 1 2223 (A I - h ltphimc 14Jj55H_020(j Fco (f 7 /4j .�'5S-02_1`0