Loading...
HomeMy WebLinkAboutADMINISTRATION ACTION SUMMARY 12-15-14SPECIAL MEETING OF THE CENTRAL CONTRA COSTA SANITARY DISTRICT ADMINISTRATION COMMITTEE ACTION SUMMARY Chair McGill Member Williams Monday, December 15, 2014 8:00 a.m. Executive Conference Room 5019 Imhoff Place Martinez, California ict BOARD OF DIRECTORS: DAVID R. WILLIAMS President MICHAEL R. MCGILL President Pro Tem PAUL H CAUSEY JAMES A. NEJEDLY TAD J. PILECKI PHONE: (925) 228 -9500 FAX.- (925) 372 -0192 www.centralsan.org PRESENT: Chair Mike McGill, Member David Williams, General Manager Roger Bailey, Director of Administration David Heath, Director of Engineering Jean -Marc Petit (left at the beginning of Item 4.), Finance Manager Thea Vassallo (left after Item 4.), Human Resources Manager Teji O'Malley, Secretary of the District Elaine Boehme, Safety and Risk Administrator Shari Deutsch, Principal with NexLevel IT Consulting Joe Blackwell, Consultant with NexLevel IT Consulting Stephen Madler, and Assistant to the Secretary of the District Donna Anderson 1. Call Meeting to Order Chair McGill called the meeting to order at 8:00 a.m. 2. Public Comments None. 3. Review Key Performance Indicators (KPIs) that have been refined by staff to carry out the Goals and Strategies in the Fiscal Years 2014 -16 Strategic Plan, and metrics for periodic Board reports on progress toward reaching strategic planning goals Member Williams said he was pleased with the staff - driven KPIs, noting that they are the k_y performance indicators, and not meant to be all inclusive. It was his Administration Committee Action Summary December 15, 2014 Page 2 suggestion that the targets listed beneath each KPI be shown in a separate column to facilitate periodic adjustments as warranted. Chair McGill said he too was pleased with the look and content of the newly designed Strategic Planning document as well as the KPIs. And, since the KPIs and associated targets fall within the domain of the General Manager, no Board action is needed. In response to a question from Director of Administration David Heath as to the frequency with which staff should report to the Committee and /or Board with respect to the Strategic Plan, it was suggested that the Administration Committee should receive updates with the same frequency as the Executive Management team (quarterly or semi - annually), and the Board should receive updates annually. COMMITTEE ACTION: Directed staff to provide copies of the finalized Fiscal Years 2014 -16 Strategic Plan to the full Board for information and reference; and suggested that staff provide status updates to the (1) Committee with the same frequency as updates are provided to the Executive Management team, and (2) Board annually. *4. Receive summary of December 10, 2014 Contra Costa County Employees' Retirement Association (CCCERA) Board Meeting Finance Administrator Todd Smithey summarized the portions of the CCCERA Board meeting that were germane to the District and distributed a document entitled "CCCERA Retiree Lookback Project — Compensation Enhancement Study" (see attached) which summarized the findings of a comparative analysis of final average salaries (FAS) versus pre -FAS for retirees during the ten -year period 2004 -14. Referring to page 9, which illustrated that roughly 5% of the retirees during that period had FAS increases of at least 30% to 50 %, Mr. Smithey said the CCCERA Board has directed its staff to take a high- level, detailed lookback to see if it appears that any manipulation of the system occurred. If so, the CCCERA Board will consider developing a policy to (1) prevent overstating income in the future, and (2) implement clawbacks for retirees deemed to have manipulated the system or are being overpaid (going back to 2004 at this point, but CCCERA could reach further back if warranted). He noted this is a work in progress and that the CCCERA Board has taken no official action on the matter. Upon discussion, it was the consensus of the Committee that Mr. Smithey should prepare a summary of the study for presentation to the full Board in February or March, including the associated editorial by Contra Costa Times columnist Daniel Borenstein that appeared in the December 14, 2014 edition (see attached), and a Administration Committee Action Summary December 15, 2014 Page 3 rough count of the retirees who may be affected by CCCERA's actions, so the Board Members can have an opportunity to ask questions. Mr. Smithey said he may be able to arrange for CCCERA's compliance office to present this information to the Board. COMMITTEE ACTION: Received brief summary of meeting and directed Finance Administrator Todd Smithey to prepare a written summary of the CCCERA Lookback Project for presentation to the full Board at a meeting in February or March 2015. 5.' Standing Items *a. Receive update on ongoing Contra Costa County Employees' Retirement Association ( CCCERA) audit COMMITTEE ACTION: Received update. b. Planning for 2017 Labor Negotiations, including Gantt chart that was requested at a previous meeting No report. C. Risk Management (discuss outstanding claims and new claims, if any, and receive Loss Control Report once a month) Safety and Risk Administrator Shari Deutsch provided updates on several pending claims against the District. COMMITTEE ACTION: Received the update. d. Receive update on pending litigation re AB 197 (Public Employers Pension Reform Act of 2013) (PEPRA) No report. e. Biennial review of existing Board - approved policies, with a view toward separating the procedures included in many previously - adopted Board policies Mr. Heath said that a proposed fiscal reserve policy and local vendor preference policy would be discussed at the next meeting. Administration Committee Action Summary December 15, 2014 Page 4 Secretary of the District Elaine Boehme said proposed amendments to separate the policy from the procedures for the following Board Policies will be presented at a meeting in the near future: BP 001 - Employee Computer Loan Program BP 003 — Hiring of District Retirees. COMMITTEE ACTION: Received the updates. 6. Announcements a. Future scheduled meetings: Chair McGill and Member Williams agreed to a roster of dates for 2015 Committee meetings, pending confirmation of their appointment as members of the Administration Committee next year. 7. Suggestions for future agenda items Member Williams asked staff to begin strategizing to minimize potential future liability to the District with regard to sewer overflows at locations where no overflow protection device (OPD) has been installed. Chair McGill asked staff to research the extent and frequency of past and ongoing community outreach with regard to OPDs and report back to the Committee. 8. Adjournment - at 9:25 a.m. * Attachment Standing Items CCCERA RETIREE LOOKBACK PROJECT - COMPENSATION ENHANCEMENT STUDY Prepared for CCCERA Board of Retirement December 2014 Summary of Findings Final Average Salary (FAS) versus pre -Final Average Salary Ten Year Comparative Analysis 2004-2014 The purpose of this review was to provide insights for the CCCERA Board of Retirement and Executive Management into the trending and tracking of Service Retirement Pension Benefits calculation components with the emphasis being on the calculation of Retirees Final Average Salary (FAS) and perform a comparative analysis between Retirees pre -FAS compensation and their FAS as calculated and used to determine their pension benefit. Direction to CCCERA Staff was provided in two Board of Retirement Statements: Statement of the Board Intent to Review Past Incidents of Unusual Compensation Increases At End of Employment (May 8, 2014) • Supplemental Direction Regarding Review of Past Incidents of Unusual Compensation Increases at the End of Employment (July 23, 2014) CCCERA Staff conducted its study using the guidance provided by the following: California Employees' Retirement Law (CERL): o §31460 "Compensation" Defined o §31461 "Compensation Earnable" Defined • CCCERA Board of Retirement Policies: o A -97 -4 Policy on Monitoring for Final Average Salary (FAS) Spiking o A97 -5 Determining Which Pay Items are "Compensation" for Retirement Purposes o A98 -4 Final Compensation Period o A13 -1 Policy Regarding Assessment and Determination of Compensation Enhancements CCCERA Staff designed the study of compensation enhancements within the following parameters: Page 1 of 31 • Identify all Service Retirement Pension Benefit Calculations performed during the period June 2004 — June 2014; • Perform an analysis on the identified Retirees during the period which included: o Calculate percentage change on compensation between the Final Average Salary (FAS) year and the Retirees' pre - FAS year; o Identify the specific compensation components that led to the change (if any) between Retirees' FAS and pre -FAS year; o Conduct a trending and tracking analysis of FAS compensation components to identify any ineligible compensation that may have been included in FAS calculations. • Review of Retirees with a FAS versus pre -FAS increase that had: o Unique items of pay that were not recurring; o Earn code items that appeared in FAS year versus pre -FAS year and note those instances when any appeared only in FAS year; o Earn codes appear in FAS year that were variable in nature, contain elements of discretion in scheduling and work assignment, or other allotment either by supervisory discretion or voluntary assignment; o Any unique earn code or adjustments that did not have sufficient documentation to provide an adequate description of the nature of the compensation to support it inclusion as pensionable compensation. Page 2 of 31 CCCERA Staff performed the following: • Performed a data extract from its CPAS pension administration system to capture the following: o All Service Pension Benefit Retirees during the period 2004 — 2014 which generated a population of 3,881 records; o All Base Compensation Histories for all identified Retirees for the five (5) years preceding their retirement date; o All Differential Compensation paid to Retirees during their FAS and pre -FAS period broken out by each Earn Code; Identified all Retirees during the period that had a positive percentage change in FAS over pre -FAS and noted the following: o All unique compensation items paid and included in the Retirees' FAS calculation; o All non - recurring compensation items that appeared in the population; o Any illegible component of FAS used in a Retiree's pension benefit calculation. Page 3 of 31 The Study Population: There were 3,881 Retirees during the 2004 — 2014 study period. Amongst the total population there were 3,448 Retirees that had an increase in their FAS over pre -FAS compensation. The analysis of the Retirees that had a positive increase in FAS revealed that across the sub - population Retirees averaged a 13.59% increase in FAS over pre -FAS. Further analysis of the sub - population that experienced increases in FAS over the period identified 188 Retirees that as a group had an average increase of 36.22% which is over 1.5 times the average of the population. The number of Retirees during the period 2004 through June 2014 was not evenly distributed year to year from the beginning of the study timeline to the end. Prior to 2011 CCCERA would process on average three hundred retirement applications and service retirement benefit calculations each year. During the period 2011 through 2012 the retirement systems saw a significant increase in the number of retirees nearly doubling the previous annual average. Contra Costa County & Districts Number of Retirements by Year 2004 - 2014 (June) 691 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Page 4 of 31 Across all employers that had Retirees with an increase in FAS versus pre -FAS above the experience of the sub populaiton the average increase was 36.22 %. There were three notable exceptions: Contra Costa Fire Protection District which had two Retirees with FAS over pre -FAS increased over 50 %; Delta Diablo Sanitary District with one Retiree over 40 %; and Contra Costa County Hazardous Materials Department whose Retirees averaged a FAS over pre -FAS change of over 40 %. Districts Average Increase FAS vs. pre -FAS Number of Retirees with FAS vs pre -FAS Increase Contra Costa County Fire 51.86% 2 Protection District Delta Diablo Sanitary 42.97% 1 District Rodeo - Hercules Fire 38.53% 1 Protection District Contra Costa Central 37.33% 55 Sanitation District Superior Court 35% 3 East Contra Costa County 34.73% 1 Fire Protection District Moraga- Orinda Fire 34.09% 2 Protection District San Ramon Valley Fire 34.07% 5 Protection District Page 5 of 31 County Average Change FAS vs. pre -FAS Number of Retirees with FAS vs pre -FAS Increase HazMat 41.04% 7 Public Defender 36.54% 7 Health Services 36.41% 35 District Attorney 35.81% 2 Sheriff 35.61% 17 General (All other Dept.) 34.19% 39 Probation 33.23% 11 Page 6 of 31 The average increase between FAS and pre -FAS periods for the 3,881 Retirees in the study population was 11.28 %. Within the population there were 3,448 Retirees that had an average FAS over pre -FAS increase of 13.59 %. The following chart displays the distribution of FAS over pre -FAS increases during the period which indicates that 94% or 3,260 of the Retirees averaged a 12.28% increase. The remaining 6% of the Retirees had an average increase in FAS over pre -FAS of over 36 %. 70% 60% 50% 40% 30% 20% 10% 0% L $0 All Retirees pre -FAS vs FAS % Increase 2004-2014 a# i + • $5,000 $10,000 X + ri,. X I , • ae Q •i $15,000 $20,000 FAS Monthly jZ5,0u0 530,000 $35,000 See Appendix B for Employer legend Page 7 of 31 General Observations: On the whole, the majority of the 3,881 Retirees in the study population had an increase in FAS over pre -FAS. There were a number of observable factors that generally contributed to the increase in compensation during the FAS year: • Changes in Base Earnings attributed to promotions and grade enhancements as the Member entered their final year before retirement; • Sale of Accrued Vacation Time as permitted by memorandum of understanding and employer policy; • Terminal pay -off of accrued vacation and holiday time; • Payment of differential compensation; • Payment of pensionable variable compensation; • Payment of unique compensation items during final year before retirement. Throughout the study it was observed in a general way that it was the cumulative effect of several compensation components coming together when a Retiree's FAS was calculated that lead to an increase over their pre -FAS compensation. Predominant elements that were noted as contributing to increases in FAS over pre -FAS included the following: Length of service which lead to a Retiree's receipt of higher longevity differential payments as service milestones coincided with their FAS year in addition to attaining higher vacation accrual levels available for terminal pay at retirement as allowed by their employer policy or negotiated benefit; Promotion into management or further advancement into executive level compensation levels allowing the Retiree to become eligible for additional differential and management class compensation components; Specialization by occupation, skill, or education leading to a Retiree's eligibility to receive additional fixed and variable compensation. Page 8 of 31 The following chart shows the distribution of FAS versus pre -FAS percent changes over the ten year period with the majority of Retirees having a percent change within the range between 5% and 25 %. It was observed that for those FAS calculations falling within this range the changes were attributed mostly to differential items that have a high correlation to a Member's length of service such as longevity based earn code amounts. In addition, those Members that had long employment tenures also derived a benefit of being either at the maximum or close to the allowed maximum accrual pay -off amounts for vacation and holiday. ■ ■ ■ Page 9 of 31 Final Average Salary Increases Over Prior Years' 1000 900 800 700 600 500 400 300 200 146 100 96 --- E�j�0�18 T: 0 At least 5% and less than 10% At least 103'. and At least 15% At least 20% At least 25% At least 30% At least 35% and and and and and At least 40% and At least 45% At least 50% and less than 15% less than 20% less than 25% less than 30% less than 35% less than 40% less than 45% less than 50% ■ ■ ■ Page 9 of 31 High FAS over pre -FAS Increase Observations: Retirees with FAS vs. pre -FAS Change Greater than SO%: There were seven (7) Retirees that were identified with FAS versus pre -FAS changes in excess of 50 %. The study revealed that there were four instances where a change in the base earnings contributed greatly to the change in salary amounts and there were three instances where differentials made a significant impact on the gain for the FAS year over the pre -FAS year. The observations are as follows: Significant Four of the seven retirees experienced significant increases in their base earnings going into Change in Base their FAS year ranging from 19% to 27 %. The four individuals entered into higher pay classes Earnings and management positions for their final FAS year. In one case a Retiree was given a temporary upgrade which was then subsequently used as the base for their FAS calculation when they decided to retire while receiving the higher pay amounts. High Differential Three of the seven Retirees received significant variable differential compensation pay during Payment their FAS year with the most notable being one Retiree receiving $119,641 in combined "on- Amounts call" and "call back" pay. The other two Retirees also received "on- call" and "call back" pay, although to a lesser extent, that contributed between 18% to 27% as a component of their FAS. Page 10 of 31 Cumulative Effect of Differential & Accrual Payments: The cumulative effect of two or more differential compensation items being included in FAS calculations in addition to allowable accrual pay -off items at retirement contributed to significant increases in FAS versus pre -FAS. 188 Retirees Distribution of High FAS Caculation Components Leading to Increases over pre -FAS 2004-2014 8 i Change in Base Salary Change in Base with Accrual Pay -Offs only Differentials and Accrual Differentials,Accrual Pay- Accrual Pay -Offs & Only Differentials Pay -Offs Offs, Vacation Sales Vacation Sales 37 Page 11 of 31 For the 188 Retirees in the sub - population that had high increases in FAS over pre -FAS additional analysis was performed. In order to ensure that each FAS calculation only included items that were allowable each FAS component was verified with the applicable memorandum of understanding (MOU), contract, and written CCCERA policy governing pensionable compensation. During the course of the study it was observed that the impact of the inclusion of certain types of compensation items above base salaries was dependent on what the employer allowed to be paid as indicated in its MOU for represented Members and contracts with un- represented Members and management classification groups. Generally, pensionable compensation items that were variable in nature such as shift -pay and on -call pay tended to contribute more to increases in FAS versus pre -FAS amounts rather than regularly recurring compensation items. The following was found: Change in Base with Differentials: Changes in base salary alone can be attributed to a number of factors including negotiated increases, merit increases, changes in position and classification, and promotion. It was found during the study that typical corresponding increases in associated differentials occurred such as the attainment of service milestones leading to increased longevity percentage payment rates in addition to other position classification, management, and other training, education, and certification differentials. In some of the cases observed, Retirees that had long service tenures became eligible for multiple longevity and educational differential payments which, given their combination of attained age and service years, coincidently occurred with their eligibility for retirement under their respective tiers. • Two Retirees had a change in longevity payment rates from 2.5% (1_05) to 5% (1-06). In these two instances the percent change between pre -FAS and FAS periods appeared greater given that there was a rise in base pay accompanied by a corresponding raise in the differential rate. It was noted that there was a corresponding 100% decrease in the lower L05 payment amounts in the Retirees FAS year as it was wholly replaced by the L06 differential payment rate. • There was one Retiree that had attained a longevity milestone having attained their fifteen year service mark thus making the Retiree eligible for the longevity differential L17 which increased the differential rate to 15% during the Retiree's FAS period and correspondingly contributed to the increase of FAS over pre -FAS. Page 12 of 31 Differentials & Accrual Pay -Offs: The review found that differential compensation paid and included in FAS calculations alone did not contribute to the FAS versus pre -FAS change in most cases, but when added to the allowable accrual pay -offs per MOU and employer contract, a significant FAS versus pre -FAS percentage change occurred. • Three Retirees from the same safety employer all had the same retirement date and coinciding FAS periods to capture maximum holiday pay (HOL) and corresponding holiday shift pay @ 1.5% (HP2) contributing to an average increase in holiday related pay between the two codes paid to the three Retirees of 162.40 %. When considered in concert with the Retirees' other differential pay including emergency paramedic pay (ALS, BLS), FLSA pay (FOT), the cumulative contribution of all of these differential items along with each of the Retiree's accrual pay -offs led to an average change in FAS over pre -FAS of 33.33 %. For the remaining retirees it was the cumulative effect of both differentials and accrual pay -offs that led to an average increase of FAS over pre -FAS of 36.5 %. Differentials, Accrual Pay -Offs & Vacation Sales: It was found that the cumulative effect of having several differentials and accruals included in FAS calculations was further compounded by the inclusion of vacation sales in FAS when allowed by MOU or employer contract. The following was noted: • For fifty -six (56) Retirees it was found that the impact of differentials, accrual pay -offs and vacation sales when all were included in FAS calculations resulted in an average increase of 36.52 %. Page 13 of 31 Accrual Pay -offs & Vacation Sales: The review indicated that for Retirees that did not have any differential compensation items included in their FAS calculations and only accrual pay -offs and vacation sales as allowed by MOU and employer contract. The following was observed: Longevity of Retirees realizing maximum accrual rates at the date of their retirement contributed to the high amounts of vacation accruals that were available to the retiree to sell; • Vacation Sale policies that are provided by the employer through MOU, contract and policy allowed for vacation sales to occur within the same FAS period but within two separate calendar years; • Although most retirees would sell some vacation when eligible to do so in the years prior to their FAS as a recurring practice, it was noted that ten retirees did not sell any vacation in their pre -FAS period thus maximizing their vacation sale election during their FAS period. Page 14 of 31 Unique non - Recurring Items of FAS Compensation: During the earn code trending and comparison analysis the goal was to identify any and all earn codes that may have been paid during a Retiree's FAS period that either alone, or in concert with other differentials may have caused the Retiree's FAS to increase significantly over their pre -FAS compensation amounts. Across the 188 Retirees that had high FAS increases there were 118 earn codes represented that were paid within the Retirees FAS and pre -FAS periods. Out of the earn codes represented there were forty -five (45) earn codes that had percentage increases of 10% or more in payment amounts when FAS and pre -FAS periods were compared. Amongst the earn codes observed in the study there were two that were identified as being unique to each of the Retirees receiving them: . EAN Differential Exec Adv. Notice: This differential is paid to Members that provide the County with advance notice of their intention to retire at least twelve months prior to their proposed retirement date. The EAN payment is paid in the last pay period that the member is on active payroll immediately preceding the Member's retirement date. There was only one Member that received this differential that had a pre -FAS vs FAS change over 30% in the amount of $2142.78 which represented 16.72% of the Member's FAS. ZSP Special Project Compensation: The differential was paid to augment an employee's compensation while participating in a project or being on loan to another government agency during which the employee would incur additional living and travel expenses. The Member's FAS increased over pre -FAS by 48.02% due to the inclusion of this one differential. Page 15 of 31 Non - Recurring Compensation Components of FAS: It was observed that a Retiree may only receive some forms of differential compensation on a sporadic or non - recurring basis. Typically items that were found to be non - recurring included the following: • Compensation for specialized skills; 0 Compensation for special or additional services performed; To illustrate the non - recurring nature of these differentials, the following observations were made: D39 Differential In House OB GYN: Retiree received D39 in two months during pre -FAS period and then four months in FAS period. Review of period preceding pre -FAS indicated that no D39 was paid. D44 Differential Charge Nurse: Retiree received D44 in eight of the months in FAS period and five in pre -FAS period. Review period preceding pre -FAS indicated that none had been paid. SH2 SH2 Shift Pay @ 5 %: Three Retirees had the differential included in FAS calculations. Two of the three received the differential only during their FAS periods. Non - Recurring and Increased Variable Compensation Components to FAS: Across the spectrum of other variable differentials that were paid to Retirees, observations were made with respect to low or no differential payments being made during the Retirees' pre -FAS year and then a corresponding up -tick in the differential payments during the FAS year. The study found that there were forty -two (42) retirees that had variable differential compensation included in their FAS calculation. In order to provide a clearer assessment of the impact that differential payments had on changes between a Retiree's FAS and pre -FAS amounts, differentials that were variable in nature and were dependent on such other parameters such as scheduling, varying shift -work, volunteered work or shift -time, or supervisory discretion to allocate work assignment time were examined. In addition, a year- over -year comparison was made for those Retirees that received variable differentials during their FAS and pre -FAS years and the percentage change between the two periods was calculated. Page 16 of 31 The following table summarizes the findings of the FAS versus pre -FAS earn code change percentages that are variable and represent additional compensation that was paid to the Retirees that for work activity that was in addition to their regular base salary work activity. The review noted that the Retirees during the ten year period that had variable differential compensation payments included in their FAS calculations and also had high percentage changes in the payments of the variable differential and trended towards the higher overall FAS over pre -FAS changes. Change Individual Differential Payments FAS over pre -FAS Period * D19 was originally included in Retiree FAS but was subsequently removed and FAS revised for final calculation at a later date Page 17 of 31 Differential Phys Call Back Differential Call Back @ 1.5 Differential Weekend Rounds Differential On Call Pay @ 1.0 Differential On Call EMP D16 D19 D20 D32 D33 HAZMAT -------------- 110.30% 104.41% _ HAZMAT HAZMAT - 370.16% �---- — - - -- - - - - — -- 110.97% 125.64% HAZMAT -- ------- - - - -__ 891.82% _ HAZMAT _913.68% 158_.00% _HLTH SVCS 1979.63% _ — HLTH SVCS 4567.37% HLTH SVCS 38.24% 198.49% HLTH SVCS 716.13% _ 187.17% HLTH SVCS _ 335.15% _ HLTH SVC_S 1118.00% HLTH SVCS _ _ 435.03% * D19 was originally included in Retiree FAS but was subsequently removed and FAS revised for final calculation at a later date Page 17 of 31 During the course of CCCERA's implementation of a procedure to identify and assess compensation enhancements, it was discovered that "call back" pay had erroneously been reported to CCCERA as pensionable since 1998, despite the Retirement Board's determination in 1997 and instruction to the County in 1998 that the pay was to be excluded from compensation for retirement purpose as overtime. During the pendency of the AB 197 lawsuit with the Superior Court, Petitioners argued that "call back" pay should be pensionable. At CCCERA's instruction, the County stopped reporting "call back" pay as a pensionable item. CCCERA has been working on the correction of this error. The following was observed with respect to variable differential compensation components: D16 Differential Phys Call Back: One Member with a high FAS over pre -FAS change had varying payments of the differential in pre -FAS years but was paid every month during FAS period. D19 Differential Call Back @ 1.5: Marked difference pre -FAS versus FAS period payments was observed. During the Retiree's pre -FAS period payments were not seen to have been paid consistently. However, the Retiree consistently received payment of the differential each month during FAS period. One Member had payments of the differential double during the FAS period. Six (6) of the Retirees had differential D19 included in FAS calculations. D20 Differential Weekend Rounds: Member received D20 one time in 2005, two times in 2006 (pre -FAS) and twelve times (every month) FAS period. D21 Differential Phone Call Back: Two Retirees had this differential included in their FAS calculations. D21 has been defined as payment for services outside of normal working hours and is therefore not pensionable compensation. D32 Differential On Call Pay @ 1.0: One out of the three members with high percentage changes was not paid the differential during their preFAS period. The remaining two had a sharp increase in the payment amount of the differential in the FAS period. D33 Differential On Call @ 1.05: Two out of the eight had not been paid D33 in the periods immediately preceding FAS leading to very high percentage changes. Page 18 of 31 Unique Items of Compensation Requiring Manual Review for Inclusion in FAS: It was observed that Retirees would have unique items of compensation included in FAS that would have to be manually reviewed by CCCERA staff to make a determination as to whether it is pensionable and therefore eligible for inclusion in the Retiree's FAS. These items include: • Compensation adjustments for retro pay earned within the FAS period but paid in a later part of the FAS period; 0 Shift differential and holiday compensation adjustments; 0 Payment for "out of class" services performed; • Other payroll corrections that are deemed to be pensionable; RPR The RPR differential code is used to report a variety of adjustments to a Member's pay including retro -pay items. In November 1999 the County discontinued use of the RPN (Lump Sum not in Retirement Base) code and began to report these items under the RPR code. Due to the delay in reporting retro -pay items in some cases these lump sum amounts may have appeared during Retirees' FAS periods and included in their benefit calculations. Retro -pay items attributed to pay periods preceding a Retiree's FAS period and were not normally included for FAS calculations. CCCERA staff must manually review each of these to make a determination if the payment is pensionable. There were twenty -nine (29) Retirees that received RPR payments during their FAS year with twelve (12) of them having had the RPR earn code included in their FAS calculation which on average contributed an additional 3% to the Member's annualized FAS compensation. D01 The D01 differential code is used to pay adjusted compensation items that are pensionable. Although the D01 differential code is to be used only for pensionable compensation items, CCCERA staff must manually review each instance as it appears in the payroll records for a Retiree during their FAS year to determine the payment's exact nature and confirm it as a pensionable item. There were twenty -three (23) Retirees that received D01 payments during their FAS year. Page 19 of 31 Calculation Errors: In reviewing each of the 188 Service Retirement Benefit Calculations for Retirees that had high increases in FAS in the study errors in benefit calculations were found: • One over - payment of a pension benefit to a Retiree over $32,000 due to FAS calculation error; • One underpayment of pension benefit to a Retiree of $95 per month attributed to a pro -rated salary amount being overlooked during FAS calculation; Page 20 of 31 Summary Findings: • The results of the analysis found that for all Retirees with a high increase in FAS over their pre -FAS compensation a uniform presentation of most earn codes was observed and was mostly attributed to the recurring payment of differential compensation items such as longevity, education incentives, and other pensionable occupational based differentials. • During the course of the study the most observed cause leading to increased FAS over pre -FAS was the cumulative impact of a Retiree's differentials, accrual pay -offs, and changes to base salary all working in concert when included in FAS calculations to provide the Retiree with a FAS upon which their retirement benefit allowance was based. There were observed instances that had the appearance of providing the Retiree with a much higher retirement allowance based on enhanced FAS calculation components that either increased dramatically during the Retiree's FAS period or had not been present as a compensation component during the Retiree's pre -FAS or earlier periods. The most notable of the components that were found to either have increased from the pre -FAS period or appeared for the first time as a compensation component were differentials that were variable in nature and had some element of discretion either on the part of supervisors and managers in allocating schedules or by the volition of the Retiree to volunteer to perform the work activity and receive the enhanced compensation over their base salary. Variable differential items noted included on call pay, shift pay, and holiday shift pay. The study revealed that there were Retirees that had differential components included in FAS for which were unique and not widely paid. The study revealed two errors relating to FAS calculations, one leading to an overstatement of the Retiree's pension benefit allowance and the other leading to an understatement. In addition, through a separate and distinct compensation review, "call back" pay was deemed not to be pensionable and is no longer being reported by the County and CCCERA is working to make corrections. Page 21 of 31 It was observed that Retirees maximized FAS differential components and accruals when eligible during their FAS periods. Although the exact intent of each Retiree cannot be determined by the data, the trending and tracking analysis performed suggests that some Retirees benefitted by the timing of their receipt of additional variable compensation during their FAS periods. • In the case of those Retirees that had a sharp increase in variable differential compensation in their FAS year versus their pre -FAS year it appeared to be limited to three employer groups and was not a general trend that was observed across the entire study population. Page 22 of 31 Appendix A List of Differentials with Increases in FAS Year Page 23 of 31 Variable Differential Compensation Denotes differential only appeared in FAS year County Differential Name Differential Earn Code FAS vs pre -FAS Increase in Differential Pay Number of Retirees in sub - population that Received the Differential Compensation Differential OBGYN On Call _ E39 1 Fire Recall & Standby @ 5% F67 00 2 Differential Weekend Rounds D20 975% 2 Differential On Call @ 1.05 D33 939% 8 Shift Pay @ 5% SH2 859% 1 Differential In House OB GYN D39 467% 1 Differential Phys Call Back D16 377% 2 Differential On Call Pay @ 1.0 D32 240% 3 Differential Call Back @ 1.5 D19 239% 5 Holiday Pay @ 1.50 HP2 151% 11 Bonus FNP Weekend Assignment B31 76% 1 Holiday Comp Excess Hours Pay HCE 63% 1 FLSA Overtime Pay FOT 40% 3 Holiday Pay HOL 40% 3 Differential Lieut On -Call D25 39% 4 Differential Physican FallBack D98 31% 1 Differential Name Differential Earn Code FAS vs pre -FAS Increase in Differential Pay Number of Retirees in sub - population that Received the Differential Compensation Districts Standby Pay 77/0 2 Out of Class Pay 2 Swing 13% 2 Night 8% 4 Page 24 of 31 Inique Differential Compensation Differential Name :ounty Differential Exec Adv Notice Special Proiect Compensation — Denotes differential only a Differential Earn Code EAN ZSP in FAS FAS vs pre -FAS Increase in Differential Pa} ar Number of Retirees in sub - population that Received the Differential Compensation _ 1 1 I Districts I NONE I I I I Jo Earn Codes Differential Name ;ounty Bonus Special Pay Fire Schedule FLSA Adjustment Lump Sum Pay Retirement CompRate Differential VDT )istricts Differential Name Signing Bonus Differential Earn Code B79 F29 RPR RXX D38 Differential Earn Code FAS vs pre -FAS Increase in Differential Pay 00 CIO 104% 25% 8% FAS vs pre -FAS Increase in Differential Pay Number of Retirees in sub - population that Received the Differential Compensation 1 1 15 3 1 Number of Retirees in sub - population that Received the Differential Compensation 1 Page 25 of 31 Education & Training Differentials Denotes differential only appeared in FAS year Number of Retirees in sub - FAS vs pre -FAS population that Increase in Received the Differential Differential Differential Differential Name Earn Code Pay Compensation County Fire Mgmt Education Incentive F05 CIO 2 Fire Mgmt Continuing Education Incentive F07 00 2 Continuing Education Allow 5% AC2 30% 11 Differential Assessor Education D09 18% 1 Certificate Hazardous Materals C28 9% 6 Differential Training Assignment E29 13% 1 Number of Retirees in sub - FAS vs pre -FAS population that Increase in Received the Districts Differential Name Differential Earn Code Differential Pay_ Differential Compensation NONE Page 26 of 31 Recurring Differential Compensation 00 Denotes differential only appeared in FAS year Differential Name Differential Earn Code FAS vs pre- FAS Increase in Differential Pay Number of Retirees in sub - population that Received the Differential Compensation County Differential DA Office Manager D54 2 Differential HM Program Leader E42 DO 1 Fire Mgmt Longevity Pay F08 00 2 Longevity Nurs Mgmr 20 yrs L28 00 1 Bi Lingual Pay $80 M80 C� 1 Differential Police Manager 9% D69 386% 4 Longevity 4% for CNA 15 years L17 263% 4 Longevity Pay @ 5% L06 181% 13 In Lieu of Def Comp Bene -Elect M43 91% 1 Differential HM Prog Coord E41 75% 2 Longevity 6% for CNA 20 Years L18 74% 4 Differential Police Svcs 10% D61 65% 1 Uniform Allowance EDFD A75 61% 1 Uniform Allowance A80 50% 1 ALS (Paramedic) Pay ALS 43% 1 Retirement Allotment RET 41% 3 BLS (EMT) Pay BLS 38% 2 Uniform Allowance $40 A76 36% 1 Longevity /Mgmt Incen @ 2.5% L05 27% 69 Auto Allow Department Heads AU3 18% 3 Bonus Hazard Matl Response TM B95 14% 6 Differential Longevity Law Enf D73 14% 17 Performance Registrar Stipend M49 13% 2 Auto Allowance AU1 8% 1 MH Supervisor Stipend M47 8% 1 Performance Stipend M48 6% 4 Page 27 of 31 Page 28 of 31 FAS vs pre- Number of Retirees in FAS Increase sub - population that in Received the Differential Earn Differential Differential Districts Differential Name Code Pay Compensation Longevity n/a g %a 24 Licensing n/a 8 1 Cafeteria Plan /Benefits - Cash - Pensionable n/a 8% 19 Page 28 of 31 Leave Cash -Outs & Pay -Offs Denotes differential only appeared in FAS year Number of Retirees in sub - population FAS vs pre -FAS that Received the Increase in Differential Differential Earn Code Differential Pay Compensation County Differential Name Personal Holiday Hrs Pay Off PHP CIO 1 PersHoliday Pay Off - L PLP C-0 56 Pers Hol Pay Off L 5% PP5 31 Sabbitical Hours Pay Off SBP CIO 9 Vacation Pay Off Subject to Retirement ( 1 Year Accruals) V07 00 1 Vacation Pay Off — L V12 00 61 Vacation Pay Off L 5.0% V22 00 17 Holiday Comp Hrs Pay Off - Ret HPR 680% 1 Vacation Sale Vol 158% 2 Sale of Vacation L 5.0% V21 136% 2 Sale of Vacation — L V11 100% 18 Districts Differential Name Differential Earn Code FAS vs pre -FAS Increase in Differential Pay Number of Retirees in sub - population that Received the Differential Compensation Vacation Sale 1305% 7 Vacation Sale in FAS year only C� 24 Page 29 of 31 Appendix B Employer Symbol Key Page 30 of 31 Employer Symbol Key for Chart on p. 7 County Departments and Special Districts — Limited List •CCCSD Contra Costa Central Sanitation District CAO Contra Costa County Chief Administration Office ■COMSvcs Contra Costa County Community Services COMMUNITY SERVICES Contra Costa County Community Services * EMP & H S Contra Costa County Employment & Human Services ♦C C C FIRE Contra Costa County Fire Protection District - PUBLICDEF Contra Costa County Public Defender -- PUBLIC WRKS Contra Costa County Public Works +SHERIFF Contra Costa County Sheriff Department ■COURTS Contra Costa County Superior Courts • HEALTH SVCS Contra Costa County Health Health Services •EAST CC FP East Contra Costa Fire Protection District ♦ MOFD Moraga- Orinda Fire Protection District SRVFPD San Ramon Valley Fire Protection District Page 31 of 31 Daniel Sorenstein: Ubiquitous Contra Costa pension spiking spreads across all income levels By Daniel Borenstein, staff columnist © 2014 Bay Area News Group (Handou POSTED: 12/12/2014 04:00:00 PM PST An eye- opening Contra Costa pension - spiking analysis shows that most public employees received significant salary increases during the year before they retired. The study, prepared by staff of the Contra Costa County Employees Retirement Association and released last week, examined records for 3,881 government workers in that pension system who retired from 2004 to 2014. Some findings were so surprising that even one of the most ardent defenders of the status quo on the nine - member association board joined trustees' unanimous decision Wednesday to dig deeper into the numbers. "I saw abuses that I didn't think were there," said Jerry Telles, who is elected by current retirees. The study was prompted by 2013 revelations in this column of pay spikes for county doctors and hazardous material workers, who were collecting large amounts of final -year compensation for being on call. For most past and current workers, top -year salary, usually from the last 12 months on the job, provides a critical component in the calculation of their pensions. Other factors are the number of years on the job and the age at retirement. A salary increase during the final year results in a proportional lifetime hike in retirement pay. The analysis compared retirees' salaries during their final year on the job to their salaries from the year before. Among the results: 75 percent of retirees had a final -year bump of more than 5 percent; 56 percent increased more than 10 percent; and 5 percent increased more than 30 percent. The data also shows that major pension spiking to increase final -year salaries 30 percent or more spreads across all income levels. Contrary to union leaders' frequent assertions, the big abusers are not just top -paid managers. The Contra Costa system administers pensions for 17 government agencies, including the county. The biggest final -year salary spikes, at more than 40 percent, were found at Central Contra Costa Sanitary District, Contra Costa Fire Protection District and within the county at the sheriffs office, public defender's office, and employment and health services departments. Salaries used in the calculations and examined in the study include not only base wages but also items such as on -call pay, longevity pay and money from the sale of unused vacation time. In other words, there are multiple ways to game the system, and workers often use several of them to fatten their pensions -- especially in Contra Costa. The Contra Costa system is one of 20 county -level pension plans that operate under a different set of laws than the mammoth statewide Ca1PERS system. Until this year, the Contra Costa system allowed pension - spiking techniques found nowhere else, even though they ran counter to state court rulings. A new state law, upheld by a trial court this year, ended one of the most abusive practices, counting in pension calculations pay received at termination for unused leave time. But that could be reinstated, depending on the outcome of appellate court rulings on the case. Either way, those changes only address some of the spiking techniques, as the study showed. Another new state law should temper other abuses, but only for new employees. Their pensions will be based on average pay from the final three years on the job, rather than just the last one. That means the effect of last- minute promotions, for example, will be minimized. Significantly, the study looked only at changes in salary in the final year. It did not examine recurring add -ons employees receive each year that also count toward their pensions such as car allowances, uniform allowances, longevity pay and enhancements for completing additional education, standby pay and annual sale of unused leave time. Under the new state law, the retirement board could count only base pay in pension calculations for new employees, and not include the scores of additional pay items. The Contra Costa retirement board opted to go that way, but it might reconsider because Ca1PERS decided to allow new workers in its system to count the items in their pension calculations. In other words, while looking to close one set of abuses, the Contra Costa board might reopen others. Daniel Borenstein is a staff columnist and editorial writer. Reach him at 925-943 -$248 ordborenstein@bayareanewsgroup .coin. Follow him at Twitter.com /BorensteinDan. http:/ /www.contracostatimes.com / News /ci_ 27124830 /Daniel - Borenstein:- Ubiquitous- Contra - Costa- pension- spiking- spreads- across -all- income - levels