HomeMy WebLinkAbout03. Bartel Presentation re reporting of UAAL, etc.3 J CENTRAL CONTRA COSTA SANITARY DISTRICT j3 I{ :-I LL ti ()(- KII` 17C 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 O \CLenv Central Contra Cosm S—wn oretn1rNr11jttt:.CCC1 RAT,, Stub '_n 15Uieprn BA C—ralContraC, —SD 15 12:7 Pay Stub dram 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 This page intentionally blank 2 7-MS r7c.'r-ICTI DEFINITION OF TERMS L � ■ 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 i ■ 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 i ■ 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 - - -Z I- 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 F 7-cvc-s