HomeMy WebLinkAbout03. Bartel Presentation re reporting of UAAL, etc.3
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CENTRAL CONTRA COSTA SANITARY DISTRICT
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What Should Be Provided to Employees for "Cost" of
Pensions?
John E. Bartel, President
Bartel Associates, LLC
December 7, 2015
CONTENTS
Topic Page
Question 1
Definition of Terms 3
Value of Pension/OPEB Plan to Employees 5
Cost of Pension/OPEB Plan to the District 7
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QUESTION
■ What should be included on employees' pay stubs for pension and /or OPEB
benefits?
■ Two options:
• Value of pension/OPEB plan to employees or
• Cost of pension/OPEB plan to the District
9 December 7, 2015
ADecember 7, 2015
QUESTION
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DEFINITION OF TERMS
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■ PVB - Present Value of all Projected Benefits:
• Discounted value (at valuation date), of all future expected benefit
payments based on various (actuarial) assumptions
■ Normal Cost:
• Portion of PVB allocated to (or "earned" during) current year
• Value of members current years' service benefit
• Paid by both members and employer
■ Actuarial Liability:
• Discounted value (at measurement date) of benefits attributed or
earned through measurement date [value of past service benefit]
• Portion of PVB "earned" at measurement
• Generally all paid by employer
■ Target:
• Have money in the bank to cover Actuarial Liability (past service)
J 1` December 7, 2015 3 '
I DEFINITION OF TERMS
• Unfunded Liability:
• Money short of target at measurement date
• Total Contribution:
• Total Normal Cost
• Payment on the Unfunded Liability
❑ Expressed as percent of payroll for budgeting and convenience
❑ Typically based on closed amortization period that varies based on
cause of unfunded liability (e.g. CCCERA):
O 12/31/07 UAL amortized over 15 year closed period (8 years
remaining)
O Gains /losses and assumption/method changes over closed 18
years from occurrence
O Plan amendments over closed 10 years from occurrence
O Early retirement incentives 1 year
B4December 7, 2015 4 r
VALUE OF PENSION /OPEB PLAN TO EMPLOYEES
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■ Best represented by the Normal Cost
■ Note
• Pay stub reflects compensation "earned" during pay period
❑ Similarly Normal Cost reflects benefit attributed (or earned) during
pay period
• Member Contribution Rates vary based on benefit tier and entry age for
Pension
❑ Should vary any amount shown based on benefit tier and entry age
• Payment on the Unfunded Liability:
❑ Includes impact of prior benefit increases, current retirees,
investment losses, etc. Cannot reasonably be allocated to actives.
❑ Has nothing to do with benefits earned during period
❑ While paid as a percent of pay, can not be attributed or allocated to
individuals
❑ CCCERA decides amortization period
• Employer Normal Cost Rate varies based on benefit tier for both
Pension and OPEB
J 1" December 7, 2015 5 '
VALUE OF PENSION /OPEB PLAN TO EMPLOYEES
■ Recommend showing:
• Total Normal Cost
• Member Contribution
❑ As an offset to Total Normal Cost
• Net Normal Cost
• Both as rate and dollar amounts
B.4 December 7, 2015 6 .491ML
COST OF PENSION /OPEB PLANS TO THE DISTRICT
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■ Best represented by the Total Contribution
■ Note
• Member Contribution Rates vary based on benefit tier and entry age for
Pension and benefit tier for OPEB
❑ Should vary any amount shown based on benefit tier and entry age
• Pay stub reflects compensation "earned" during pay period
❑ Total District Cost reflects amount "paid" by District during pay
period
• Payment on the Unfunded Liability:
❑ Payment is the same percent of pay, regardless of tier, prior service,
etc.
❑ Includes impact of prior benefit increases, current retirees,
investment losses, etc. Cannot reasonably be allocated to actives.
❑ Has nothing to do with benefits earned during period
❑ While paid as a percent of pay, can not be attributed or allocated to
individuals
❑ CCCERA decides amortization period
❑ Significantly overstates individual's cost
J 1 December 7, 2015
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7
COST OF PENSION /OPEB PLANS TO THE DISTRICT
■ Recommend showing:
• Total Normal Cost
• Member Contribution
• Net Normal Cost
• Unfunded Liability payment
• Total District Cost
• Both as rate and dollar amounts
BblDecember 7, 2015 8
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