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Home My WebLink About08.b. CCCERA Audit�b Central Contra Costa Sanitary District March 9, 2015 TO: ADMINSTRATION COMMITTEE VIA: ROGER S. BAILEY, GENERAL MANAGER ANN SASAKI, DEPUTY GENERAL MANAGE FROM: TEJI O'MALLEY, HUMAN RESOURCES MANAGE SUBJECT: CONTRA COSTA COUNTY EMPLOYEES' RETIREMENT ASSOCIATION (CCCERA) AUDIT The District received the "Preliminary Findings Report" on February 10, 2015 related to the audit that was conducted by CCCERA, as mandated by the Public Employees' Pension Reform Act of 2013 (PEPRA). In late 2014, CCCERA conducted a thorough review of District records to ensure that the employee and compensation data utilized to calculate retiree pension benefits is accurate and verifiable. The following areas were reviewed during the audit: 1. Correctness of retirement benefits 2. Reportable compensation 3. Enrollment in, and reinstatement to the system 4. Pensionable compensation 5. Determine if employees convicted of certain felonies have forfeited benefits earned or accrued from the commission of the felony 6. Evaluate whether memoranda of understanding (MOUs) are being complied with (i.e. employee contribution rates, vacation sales, etc.) 7. Evaluate whether compensation is paid to enhance a member's retirement benefit The review included both active and retired employee records going back to 2012. The audit has preliminarily concluded that the District is in compliance with all facets of the California Employees Retirement Law of 1937 (CERL) and CCCERA policies and procedures with the following two exceptions: 1. CCCERA is requiring that the District modify its reporting to delineate differentials from other pay items as well as specify when employee position changes are provisional or temporary. 2. CCCERA is also requiring that the District update its policy on rehiring retirees to include mandates set forth by PEPRA. Central Contra Costa Sanitary District Contra Costa County Employees' Retirement Association ( CCCERA) Audit Page 2 of 2 In regard to Item #1, the District's reporting system currently is not configured to distinguish these pay items from the other reportable pay items. Staff is currently evaluating what changes will need to be made to the system in order to meet the requirements outlined in this finding. Relative to Item #2, the District's current hiring practice for retirees is in compliance with PEPRA mandates; however, the current policy needs to be revised to reflect those changes. Staff will update the policy and submit the revised policy to CCCERA. CCCERA has requested a written response from the District related to the exceptions noted above by March 13, 2015. CCCERA will then finalize the report and submit it to the CCCERA Board of Trustees. Staff will provide the Committee with the District's written response at a subsequent Administration Committee meeting. The Preliminary Findings Report is attached in its entirety for your review. Staff will be available to answer any questions or provide clarification during the meeting. Attachment I C: \Users \c4ee \Desktop \Memo template - CCCERA Audit (3 -9 -15 Admin Committee).docxDoGurnent3 CENTRAL CONTRA COSTA SANITARY DISTRICT Employer Review low E Central Contra Costa Sanitary District 7reatrncrt Plant EAU2014100 - CCCSD Preliminary Findings Report Dated 21912015 Prepared by: Central Contra Costa Sanitary District Table of Contents Background............................................................................................................. ............................... 2 Scope.......................................................................................................................... ............................... 3 Findings& Observations ......................................................................................... ............................... 5 FollowUp Items ........................................................................................................ ............................... 8 DistrictResponse ..................................................................................................... ............................... 9 1 CONIMA COSTA CCCERA Employees' Retirement Association 2014 Employer Review Central Contra Costa Sanitary District Background The Contra Costa County Employees' Retirement Association is a public employee retirement system that was established by the County of Contra Costa (County) on July 1, 1945, and is administered by the Board of Retirement (Board) to provide service retirement, disability, death, and survivor benefits for County employees and 16 other participating agencies under the California State Government Code, Section 31450, et. seq. (County Employees Retirement Law of 1937). The agencies contract with CCCERA to administer retirement benefits for its employees. Participating agencies within the CCCERA retirement system transmits payroll information and contributions to fund the benefits for their employees. CCCERA sets up retirees' accounts, processes applications, calculates retirement allowances, prepares monthly retirement benefit payment rolls, and makes adjustments to retirement benefits when needed. Retirement allowances are computed using three factors: years of service, age at retirement, and final compensation. Final compensation is defined as the highest average annual compensation earnable by a member during the last one or three consecutive years of employment depending on the member's Tier, unless the member elects a different period with a higher average. The employer's knowledge of the laws relating to membership and payroll reporting facilitates the employer in providing CCCERA with appropriate employee information. Appropriately enrolling eligible employees and correctly reporting payroll information is necessary to accurately compute a member's retirement allowance. The Central Contra Costa Sanitation District has been serving residents and businesses in Contra Costa County since 1946 by providing the collection and treatment of wastewater. The District maintains 1,500 miles of underground sewer pipelines which deliver the wastewater to its treatment plant in Martinez. The District entered the retirement system May 18, 1949. 2 �:-n CCCERA Employees' Retirement Association 2014 Employer Review Central Contra Costa Sanitary District Scope The California Public Employees' Pension Reform Act of 2013 (PEPRA) and related County Employees' Retirement Law (CERL) created the authority under GC §31543 for CCCERA to conduct on -site reviews of employers to ensure that employee and payroll information used in the calculation of Retiree pension benefits is correct and verifiable. The scope of these on -site reviews include: • Correctness of retirement benefits; • Reportable compensation; • Enrollment in, and reinstatement to the system (GC 31543); • Pensionable compensation (GC 7522.31 (c)(1), (c)(11), (c)(12); • Determine if employees convicted of certain felonies have forfeited benefits earned or accrued from the commission of the felony (GC 7522.72(g) and GC 7522.74(g)); • Evaluate whether MOUs are being complied with (i.e. EE Contribution Rates, Vacation Sales etc.); • Determine if compensation is paid to enhance a member's retirement benefit (GC 31461(b)(1)). The on -site review of the District was conducted October 8th through 101h, 2014. The review period encompassed active employee records for 2013 through 2014 and retired employees from 2012 through 2014. 3 COSTA�CCCERA Employees" Retirement Association 2014 Employer Review Central Contra Costa Sanitary District The following review activities were performed: ➢ Reviewed the District's "Employee Handbook, 2011 Edition" ➢ Reviewed the District's "Human Resources Procedures" ➢ Interviewed key staff members to obtain and understanding of the District's personnel and payroll procedures; ➢ Reviewed the payroll transactions and compared the District's payroll register with the data reported to CCCERA to determine whether the district correctly reported employees' compensation; ➢ Reviewed the District's payroll information reported to CCCERA for all employees to determine whether pay -rates were reported pursuant to public salary information; ➢ Reviewed the District's process for reporting payroll to CCCERA to determine whether the payroll reporting elements were reported correctly; ➢ Reviewed the District's employer and employee retirement contribution calculations for accuracy; ➢ Reviewed the District's enrollment practices pertaining to temporary /part -time employees, retired annuitants, and independent contractors to determine whether individuals met CCCERA membership requirements; ➢ Reviewed the District's tracking and calculation of unused sick leave balances for retired members; ➢ Reviewed timesheets and payroll data for retired employees. 4 cosTACCCERA Employees' Retirement Association 2014 Employer Review Central Contra Costa Sanitary District Findings & Observations Accuracy of Payroll The review included the reconciliation of payroll data provided information during the on -site field work with the compensation and provided to contribution reports submitted to CCCERA for the 2013 - 2014 CCCERA time periods. The reconciliation included a review of the methodology used by the District's administrative staff to calculate monthly compensation amounts and the application of the appropriate contribution rates. Active Members: The review was comprised of a comparison of salary data transmitted to CCCERA from the District for thirty -five (35) active members against the District's payroll reports for the 2013 and 2014 years. Employee and employer contributions recorded in CCCERA's pension administration system (CPAS) were reconciled against the District contribution and 130 reports. It was noted that the District transmits salary information to CCCERA as a grossed up number which appears in CPAS as "Base Earnings" and is inclusive of all pensionable compensation including differentials. The District currently has thirty -three (33) earn codes [see Appendix A] of which thirteen (13) have been deemed non - pensionable by statute and Board of Retirement policy. Retirees: Thirty -five (35) retirees were randomly selected for review for the 2012 through 2014 years. The review consisted of a comparison of the District's payroll information against the Retirement Verification Form & Reporting Worksheet submitted to the retirement system for each of the sample retirees at the time of their retirement. Items that were compared included employee and employer contributions, base pay, differentials, vacation sales, and terminal pay items as allowed per the date of the individual's retirement. Payroll items were further reconciled against the retirement pension benefit calculation worksheets. E COSTA CCCERA Employees' Retirement Association 2014 Employer Review Central Contra Costa Sanitary District Observations o Although the District reported its employee's compensation on the I30 report including adjustments, it was noted that the I30 reports did not have the differential earn code detail broken out. o With respect to retirees, the retirement system requires all pensionable salary components to be disclosed in order to verify and validate that the compensation reported does not include items determined by the Board of Retirement that have been paid to specifically enhance a member's retirement benefit. (Policy Regarding Assessment and Determination of Compensation Enhancements Adopted 11912013) o Through the submission of I29 reports employee demographic information is submitted to the retirement system. Items that are to be transmitted on the 129 reports include: • Position changes; • Bargaining unit changes; • Leave of absences; • New hires; • Terminations; • Name Changes; Items that were noted during the review: • Position changes were not consistently reported; • Temporary and provisional appointments were not indicated. COSTA CCCERA Employees' Retirement Association 2014 Employer Review 0 Central Contra Costa Sanitary District Salary Reported in In accordance with GC §7522.34(a), salary schedules are to be accordance with publicly available. published salary schedules Reviewed the District's Code of Laws governing personnel. Under Title 4, Chapter 4.12 - Classifications, it sets out the standards under which a class of employment is established, maintained, and changed within the District. There were 120 position classifications as of the date of review including management and management support (MSCG Group) classifications which are recorded in the Districts salary table as of 7/17/2014. The salary tables are maintained in hard and soft copy and are publicly available via the District's website and upon request in the administrative office. Approval of salaries and classifications are evidenced through archived Board of Directors meeting minutes indicating approval resolutions. It was noted that when an active member works "out -of- class" for a short duration, or receives a temporary upgrade to meet District staffing needs, a "Personnel Action Form" is completed indicating the specific classification, salary rate, and duration of the classification change. The District has three classes of appointment: • Temporary Appointments which are limited to periods of up to twelve months; • Special Emergency Appointment of up to ninety days in duration; • Provisional Appointments to fill a vacated position for not less than thirty days and no more than one year. The District maintains a "Temp Tracking Roster" broken out by department indicating the name of the employee, the position title, anticipated completion date of the upgrade, and cumulative hours worked in the appointed position. COSTA Employees' Retirement Association 2014 Employer Review 7 Central Contra Costa Sanitary District COSTA CCERA Employees' Retirement Association 2014 Employer Review Observations: • The payroll records reviewed for the period for employees that had received additional compensation for temporary, provisional, and emergency appointments had corresponding payroll adjustments back to their original classification. • The review of payroll records for both active members and retirees indicated that the District followed its classification and salary policies during the review period. No exception or variance was noted. Enrollment of all The District had two hundred and seventy -five (275) eligible employees employees in active membership within the retirement system as of the review date. There are four different types of employment statuses within the District: • Regular Probationary; • Regular; • Regular Part -Time; • Temporary. (CCCSD Human Resources Procedures Manual Chapter 4.12.050) Temporary employees are hired to perform seasonal work and are not to exceed 2,080 hours or twelve months from the first date of hire and are not eligible for benefits or entry in to the retirement system. (Employee Handbook, 2011 Edition, p. 10) Regular Part -Time employees are those employees that work up to thirty -hours per week and are eligible for participation in the retirement system when twenty hours per week or more are worked. (CCCSD Human Resources Procedures Manual Work Status and Benefit Application, Revised 12/20/1999) District retirees can be rehired on a temporary basis subject to a statutory limitation of 960 hours per fiscal year. Additional rules governing the re- employment of retirees include: o Reinstatement from retirement requirement if rehired by an employer in the same public retirements stem COSTA CCERA Employees' Retirement Association 2014 Employer Review Central Contra Costa Sanitary District from which the retiree receives the benefit; PEPRA §7522.56(b) • Waiting period of 180 days between retirement date and rehire of retiree CERL §31641.04(b)(0 • Twelve month exclusion from re- employment if the retiree receives unemployment insurance CERL §31680.2(b)(2) • Compensation limits. Observations: • A review of the District's work schedules and time - sheets did not reveal any retirement system eligible employees had not been enrolled. It was noted that the District had three retirees that had been re -hired post retirement and the District was monitoring the hours worked via its "Temp Tracking Roster" to limit the hours worked to the 960 hours per fiscal year statutory limit. The District, in its "Policy and Procedure for Hiring District Retirees" (Revised 9/14/2010), provides guidance with respect to the conditions under which a retiree can be rehired on a temporary basis. The policy limits retirees to working up to 960 hours per fiscal year and only when a position is vacant. In addition, the policy provides guidance when the employment of a retiree may exceed the 960 hour statutory limit and indicates that the retiree has two options: o Independent Contractor which is defined in the policy as an individual who "....establish her /his own working hours, provide his /her own vehicle, equipment, and tools, not be supervised by District Staff, contract for a project or number of hours, etc.) o Contract Employee through a third party provider where that third party is providing a service to the district and the retiree is the employee of that vendor and then is subsequently assigned to do work for the District by the vendor. 0 COSTA A coc»rrn- YAC CE1 Employees' Retirement Association 2014 Employer Review Central Contra Costa Sanitary District 10 ��CCCERA COSTA Employees' Retirement Association 2014 Employer Review Government Code Section 7522.56 provides that a retired person cannot serve, be employed by, or be employed through a contract directly by, a public employer in the same public retirement system from which the retiree receives benefits without reinstatement from retirement, except as permitted. The key word in the statutory language is the term "serve ". In both of the retiree options indicated in the District's policy the retiree would be serving the District. Accuracy of Reviewed sick leave accrual procedures and balances for both employee sick active employees and retirees. A reconciliation was performed leave accrual between the sick leave accrual balances indicated on the 130 balances reports transmitted to the retirement system and the hard copy timesheets and schedules maintained by the District. No exception or variance was noted. Accuracy of Reviewed vacation accrual procedures for both active employee vacation employees and retirees. A reconciliation was performed accrual balances between the sick leave accrual balances indicated on the I30 reports transmitted to the retirement system and the hard copy timesheets and schedules maintained by the District. No exception or variance was noted. Forfeiture of At the date of this review there were no known retirees with benefits earned or felony convictions pursuant to GC 7522.72(g) and GC accrued from the 7522.74(g) that require the District to notify the retirement commission of a system. felony The review of the District's human resources policies indicated that these had not yet been updated to incorporate the requirements set forth in GC 7522.72(g) and GC 7522.74(g). 10 ��CCCERA COSTA Employees' Retirement Association 2014 Employer Review Central Contra Costa Sanitary District Follow- Up Items The following items were noted during the course of the review and require follow -up by the District: ➢ Update I30 report preparation procedures to report all pensionable differentials as separate earn code items; ➢ Update I29 report preparation procedures to report all employee position changes including temporary and provisional upgrades; ➢ Review District policy on hiring District retirees and update to reflect the statutory limitations for post- retirement employment; ➢ Update District policy to reflect retirement benefit forfeiture by retirees that commit an employment related felony including a notification procedure to inform the retirement system when a covered felony event and case disposition occurs. 11 COSTA CCCERA Employees' Retirement Association 2014 Employer Review Central Contra Costa Sanitary District District's Response Items that appear in the "Follow -Up" section of this report require a written response from the District to acknowledge each of the points indicated that pertain to the District and provide CCCERA with feedback on how the District may propose to address the items noted. The District should provide its response to CCCERA not later than four weeks from the date of this Preliminary Findings Report. 12 �� CCCERA Employees' Retirement Association 2014 Employer Review Central Contra Costa Sanitary District ADDendix A: 13 COSTA COLN'ry CONTILAIC Employees' Retirement Association 2014 Employer Review Compensation Earnable §31461 Pensionable Prior to Implementation Compensation of AB 197 §7522.34 Membership After Earnings Code Earn Membership before Membership on or Implementing on or after Description Code 1/1/2011 after 1 1 2011 AB 197 1/1/2013 REGULAR HOURS 1 YES YES YES YES SYSTEM SA YES YES YES NO ADJUSTMENT LONGEVITY PAY LP YES YES YES NO REGISTRATION RD YES YES YES NO DIFFERENTIAL PROVISIONAL 1 YES YES YES NO APPOINTMENT CLASSA /B AB YES YES YES NO LICENSE PAY CAFETERIA PLAN C1 /C YES YES YES NO CASH 2/C3 CAFETERIA PLAN C4 YES YES YES NO BENEFIT OUT OF CLASS OC YES YES YES NO VACATION VV YES YESM YESM NO PAYOUT SALARY RA YES YES YES YES ADJUSTMENT RET TERMINAL RA YES YES(1) YESM NO COMPENSATION MEAL MA YES YES YES NO ALLOWANCE SWING 4 YES YES YES NO NIGHT 5 YES YES YES NO STANDBY 12 YES YES YESM NO (Mandatory) SCHEDULED 24 YES YES YES NO HOLIDAY OT SCHEDULED 25 YES YES YES NO HOLIDAY SWING OT SCHEDULED 32 YES YES YES NO HOLIDAY NIGHT OT SCHEDULED 31 YES YES YES NO HOLIDAY DT Note (1): Only included to the extent it is earned and payable in each 12 -month period during the final average salary period. (Gov. Code §3146(b)(2)). Note (2): The Board of Retirement on April 10,2013, that AB 197 requires the exclusion for services rendered outside of normal working hours (standby pay, on call pay). Only scheduled, employer required, and performed by all similarly classified employees is pensionable. (Gov. Code. §31461(b)(3)). This was reaffirmed by the Board of Retirement in its "Policy On Determining "Compensation Ear nab le" Under Assembly Bill 197 for purposes of Calculating Retirement Benefits for "Legacy" (Pre -PEP RA Members) Adopted 9/10/2014. 13 COSTA COLN'ry CONTILAIC Employees' Retirement Association 2014 Employer Review Central Contra Costa Sanitary District Non - Pensionable Earn Codes Pensionable Pensionable Compensation Earnable (§31461) Compensation Compensation §7522.34 §7522.34 Prior to Implementation of AB 197 After Implementing Membership on or after Membership before Membership on or 1/1/2011 after 1 1 2011 AB 197 1/1/2013 OVERTIME AT 22 NO NO NO NO 100% REGULAR 2 NO NO NO NO OVERTIME CALL OUT 27 NO NO NO NO OVERTIME CAPITAL CO NO NO NO NO OVERTIME AT 150% COMP EARNED 13 NO NO NO NO SWING 14 NO NO NO NO OVERTIME NIGHT OVERTIME 15 NO NO NO NO DOUBLE 3 NO NO NO NO OVERTIME CAPITAL CD NO NO NO NO OVERTIME AT 200% HOLIDAY COMP 20 NO NO NO NO EARNED COMP OVERTIME CP NO NO NO NO PAID MANUAL SALARY MS NO NO NO NO ADJUSTMENT STANDBY 28 NO NO NO NO (Voluntary) 14 °COSTA;CCCERA Employees' Retirement Association 2014 Employer Review