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Home My WebLink About05.d.1)d) Action Summary: Administration Committee 10-26-15Asa Aj) REGULAR MEETING OF THE BOARD OF DIRECTORS: CENTRAL CONTRA COSTA MICHAEL R. MCC /LL SANITARY DISTRICT President ADMINISTRATION COMMITTEE TAD J.P/Tent President Pro ro Tent PAUL H. CAUSEY ACTION SUMMARY JAMES A. NEJEDLY DAV /D R. WILLIAMS LL /A Monday, October 26, 2015 PHONE (925) 228 - y FAX: : (925) 372 -00192 192 8 :00 a.m. www.centralsan.org Executive Conference Room 5019 Imhoff Place Martinez, California Committee: Acting Chair Mike McGill Member Tad Pilecki (Alternate) Invited Guest: District Labor Counsel W. Daniel Clinton, Partner, Hanson Bridgett (left after Item 3.) Staff.• General Manager Roger Bailey Deputy General Manager Ann Sasaki Director of Administration David Heath Director of Engineering and Technical Services Jean -Marc Petit Human Resources Manager Teji O'Malley Planning and Development Services Division Manager Danea Gemmell (left after Item 6.) Communication Services and Intergovernmental Relations Mgr. Emily Barnett Secretary of the District Elaine Boehme Senior Engineer Thomas Brightbill (left after Item 6.) Assistant to the Secretary of the District Donna Anderson 1. Call Meeting to Order Acting Chair McGill called the meeting to order at 8:42 a.m., with Member Pilecki serving as alternate in Chair Williams' absence. 2. Public Comments None. Administration Committee Action Summary October 26, 2015 Page 2 3. Discuss renewal of contract with District labor and employment related counsel, Hanson Bridgett LLP and W. Daniel Clinton, due to expire December 31, 2015 Mr. Bailey explained that the proposed contract includes no fee increase during the first year and a slight increase potentially in the second year. Acting Chair McGill noted that the hourly rate for Hanson Bridget is on the high side based on available comparative data. Mr. Clinton explained that the District's needs over the past several decades have included very little litigation work, which allows other firms to push work to lower level associates, thus bringing down the average rate. In his case, the District is paying primarily for advice and an occasional arbitration, work that is not handled by associates. He said the District has also used him for benefits work, which is a service many other firms do not provide. Member Pilecki noted that, in his experience, the District has benefitted greatly from the excellent counsel provided by Mr. Clinton and Hanson Bridgett over the years. Mr. Bailey opined that Mr. Clinton is readily available to staff, very knowledgeable, and provides excellent advice. COMMITTEE ACTION: Recommended Board approval. 4. Review draft Position Paper to retain Alliant Employee Benefits as the District's new benefits broker Ms. O'Malley stated that the District has had the same benefits broker for more than 20 years. As a means of assuring that the District is receiving competitive rates and services, from this point forward staff will be initiating requests for proposal (RFPs) every couple of years. In this instance, the RFP yielded six responses, with Alliant Employee Benefits as the standout in terms of legal compliance with the Affordable Care Act (ACA), analytics, and joint labor - management support and education. In response to a question from Member Pilecki, Ms. O'Malley said she does not anticipate the District requiring any services under the contract that would cause additional costs to be incurred during its two-year term. COMMITTEE ACTION: Recommended Board approval. Administration Committee Action Summary October 26, 2015 Page 3 5. Review proposed Board Member Conference attendance for 2016 Member Pilecki suggested that the description for those conferences for which the cost of attending will be borne by another agency be altered to read "Yes (but not paid for by District). " COMMITTEE ACTION: Recommended Board approval. 6. Review draft Position Papers to: a. Approve updates to Board Policy No. BP 010 - Contractual Assessment Districts (CADs) b. Approve updates to Board Policy No. BP 022 - Alhambra Valley Assessment Districts (AVADs) Ms. Gemmell explained that a great deal of wording was struck from the updated policies in accordance with the Board's expressed desire to remove procedural language from Board policies. COMMITTEE ACTION: Recommended Board approval. 7.'` Receive summary of recent Contra Costa County Employees' Retirement Association (CCCERA) Investment Development Strategy Workshop Mr. Heath distributed a handout from a recent presentation by Ca/PERS Chief Actuary Alan Milligan and actuary John Bartel of Bartel Associates, LLC on annual valuations, employer rates and risk mitigation. It was noted that an anticipated reduction in projected rates of return by CCCERA will impact the amount the District must pay for normal pension costs. Member McGill said he ultimately will be recommending that a separate trust be created to help address the ramifications of such changes in the future. The Committee suggested that this concept be explored in more detail during a Board Workshop held shortly after CCCERA determines its new projected rate of return, which is expected in February 2016. COMMITTEE ACTION: Received summary and suggested a Board Workshop be held in early 2016 to address strategies for dealing with issues surrounding CCCERA's anticipated lowering of the projected rate of return. Administration Committee Action Summary October 26, 2015 Page 4 8. Receive update on selection of actuary to help separate the unfunded actuarial accrued liability (UAAL) component from any particular employee's reportable compensation and benefits that are attributable to retirees Mr. Bailey reported that staff has asked John Bartel to conduct a study with respect to separating the UAAL component and possibly other post - employment benefits (OPEB) from current employee compensation figures for reporting purposes. Mr. Bailey explained that staff, after discussing the issue with the Committee Members, engaged Mr. Bartel for this study due to time constraints before the next anticipated compensation reporting cycle. Mr. Bartel's draft report is expected in the next few weeks. Mr. Bailey stated that staff can revisit the issue of actuary selection with an RFP next year. The Committee noted the wisdom of using the RFP process for actuary services as a means to ensure the Board Members are properly performing their due diligence as fiduciaries; it is not a reflection of dissatisfaction with Mr. Bartel's services. COMMITTEE ACTION: Discussed and provided input to staff. 9. Standing Items a. Planning for 2017 Labor Negotiations 1) Review Gantt chart of activities leading up to 2017 Labor Negotiations Ms. O'Malley reported that the updated Gantt chart includes critical path information as suggested by the Committee. It was noted that a future Board Workshop would be advisable to better comprehend the myriad of insurance issues arising from the Affordable Care Act (ACA), especially as they relate to upcoming labor negotiations. b. Risk Management - Loss Control Report; discuss outstanding claims & new claims, if any This item was deferred to the next meeting. Administration Committee Action Summary October 26, 2015 Page 5 C. Update on pending litigation re AB 197 (Public Employers Pension Reform Act of 2013) (PEPRA) and CCCERA straddling issues - No staff report None. COMMITTEE ACTION: Provided input to staff, including suggesting a future Board Workshop on ACA insurance issues. 10. Announcements a. Future scheduled meetings: Monday, November 9, at 8:00 a.m. Monday, November 23, at 8:00 a.m. Monday, December 7, at 8:00 a.m. b. Ms. Barnett announced that the District's 70th Anniversary will be celebrated on July 16, 2016. Periodic updates will be given to the Board as plans come together. COMMITTEE ACTION: Received the announcements. 11. Suggestions for future agenda items None. 12. Adjournment — at 9:49 a.m. * Attachment Agenda • What has been happening? - GASB 68 - Annual Valuations Where are Employer rates heading? s What is coming up? - Funding Risk Mitigation Policy • "On the Horizon" A CAPERS - 7. mandoo) 1 First Year GASB 68 Reports • All June 30, 2014 reports are available - Approx. 90% of agent plans provided to employers Approx. 75% of cost - sharing plans provided to employers • Remaining employers can order reports through mylCalPERS - Non - Pooled Plan Report Cost: $2500 per plan - Pooled Plan Report Cost: $850 per plan .4 CaIPERS - 2 "Second Year" GASB 68 Reports • Will be produced December 2015 through April 2015 Actuarial Valuation date — June 30, 2014 • Measurement date — June 30, 2015 Measurement period — July 1, 2014 through June 30, 2015 Used for - Second year of GASB 68 for employers with June 30 fiscal year end - First year of GASB 68 for other employers .�� CaIPERS -- - -- Annual Valuation • Delayed due to GASB 68 & resource constraints Not all reports available for CalPERS Educational Forum - Next week in San Jose A CaIPERS 3 Accelerated Funding New Section in Valuation Report at 6/30/13 Alternate Amortization Schedules The amortization schedule shown on the prewaus page snows the minimum contributions required according to CalPERS amortization policy. There has been considerable interest from many agencies in paying off these unfunded accrued liabilities sooner and the possible savings in doing so. As a result, we have provided alternate amortization schedules to help analyze your current amortization schedule and illustrate the advantages of accelerating unfunded liability payments towards your plan's unfunded liability of $836,108 as of lune 30, 2013 Shown below are the level rate payments required to amortize your plan's unfunded liability assuming a fresh start over the various periods noted. Note that the payments under this scenarw would increase by 3 percent for each year into the future. Level Rate Total l - -- Period 1 2015-16 Rate m mint �i Payments � Total Interest Savings 15 18.794% $76,646 $1.425.526 (589418 C 5128223 , 10 25.575% 104,296 1 1,195,633 MUM 5358.749 A Ca1PERS - -- -- Accelerated Funding Multiple ways to do it - Fresh start - Discretionary payment on an ad hoc basis • Discuss with your Plan Actuary C'a1PERS - 0 The New Amortization Policy • Adopted by the CalPERS Board in April 2013 • Designed to pay down unfunded liability faster 5 year direct rate smoothing - 30 year closed amortization of gains and losses - Five year ramp up /down 5 The New Amortization Policy Affected employer contribution rates for the first time in FY 2015 -16 (this year) • No impact on normal cost • Higher contributions short term • Lower contributions long term (25 + years) • Better funded status long term A. Ca1PERS New Asset Allocation & Actuarial Assumptions • Adopted by the Board in February 2014 • Changed economic and demographic assumptions - Projecting mortality improvements i Different implementation for State vs. public agencies - Valuation Date - Smoothing period A. CAPERS - -- 9 New Asset Allocation & Actuarial Assumptions s Affected public agency contribution rates for the first time in FY 2016 -17 (next year) • Earlier implementation for State • Generally higher normal cost s Generally higher contributions A CaIPERS Changes to Risk Pooling 0 Primarily due to PEPRA: - Closing of classic risk pools • Combining all pools into two (Miscellaneous and Safety) 9 Allocating pool's unfunded liability to each plan based on total liability instead of payroll Contributions toward unfunded liability set in dollars instead of a percentage of payroll - Rate still available in report A CaIPERS 7 Changes to Risk Pooling Affected employer contribution rates for the first time in FY 2015 -16 Impact specific to each pooled plan was included in the rate set by the June 30, 2013 valuation report A CaIPF,RS - -- Five Year Outlook for Safety Plans Percent Increase starting at 2015 -2016 Employer Rates over 5 Years Non - Pooled Public Agency - Safety Plans a0 70 60 C 0 50 a o � `w E 30 3 Z 20 10 0 Decrease Increase0%to 10% Increase between Increase between Increase between Increase between Increase more than t0°b to 20% MA to 30% 30-A to 409% 40% to 50% 5M. :�. Ca1PERS E:3 180 160 m 140 a G 120 v a 100 E Z 80 60 40 20 0 Five Year Outlook for Miscellaneous Plans Percent Increase starting at 2015 -2016 Employer Rates over 5 Years Nan - Pooled Public Agency - Miscellaneous Plans Decrease Inaease0%to10% Increase between Increasebetween Increase between Increase between Increase more than 10% to 20% 20% t. 30% 30% to 40% 40% to 50% 50% A CMPERS Where can I see my future rates? 4 Risk Section of your annual actuarial report • Estimated rates under five scenarios - Expected return — 7.5 percent per year Optimistic #1 — 12.0 percent per year - Optimistic #2 — 18.9 percent per year - Pessimistic #1 — 2.8 percent per year - Pessimistic #2 — - 3.8percent per year A Ca1PERS Asset Liability Management Framework • An integrated approach that considers assets, liability, and risk to ensure the sustainable funding of the system. A I'i' N LLG Balancing the Fund I Investment j Returns t Benefits Contributions OIPERS - - - -- Factors Driving Funding Risk Benefit Structure F!maturing s are • Asset and • Current Risk - liability to Return • Public payroll ratios includes employees increase with significant are living higher benefit volatility longer formulas • Market return • Increase cash expectations outflows CAPERS 11 CaIPERS Pension Funds Are Maturing Ratio of Actives to Retirees 99 2 1.5 1 -- - - - - - - - - - - - - - - - - - - 0.5 0 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 — Historical - - Projected L CaIPERS Historical Data from CalPERS 2014 Comprehensive annual Financial Report What is Funding Risk Mitigation? • Funding Risk Mitigation seeks to reduce funding risk over time • Reducing funding risk should mitigate the impact of investment volatility on employer contribution rates and funding levels over time 12 How Will Funding Risk Mitigation Work? a When an investment return exceeds the discount rate by a, certain threshold, a Funding Risk Mitigation Event will trigger When a Funding Risk Mitigation Event is triggered, a portion of the investment return is used to pay for lowering the expected investment return and discount rate 9 For example, a 11.5% investment return would reduce the expected investment and discount rate return five (5) basis points (0.05 %) CAPERS Current Status /Next Step CalPERS staff presented a draft Funding Risk Mitigation Policy earlier this week • Board directed staff to bring it back in November without any changes - But did request an additional option with a slightly lower threshold Second reading of the Policy is scheduled to occur at the November Finance and Administration Committee Meeting A Cal PERS 13 On the Horizon • Normal Cost by Benefit Formula - Additional disclosures in annual valuations - When? Hopefully in next year's annual valuations • ALM Workshop - Review of capital market assumptions - Review of actuarial assumptions - Review of risk mitigation policy (if adopted) - When? Late 2017 and early 2018 A Ca1PERS - 14 Questions & Comments CaIPEI6 - 15