HomeMy WebLinkAbout04.c. Receive information on Contra Costa County Employees' Retirement Association (CCCERA) formulas for calculating employer and employee contribution ratesS
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Item 4.c.
Central Contra Costa Sanitary District
October 16, 2017
TO: ADMINISTRATION COMMITTEE
FROM: TEJI O'MALLEY HUMAN RESOURCES MANAGER
REVIEWED BY: ANN SASAKI, DEPUTY GENERAL MANAGER
ROGER S. BAILEY GENERAL MANAGER
SUBJECT: RECEIVE INFORMATION ON CONTRA COSTA COUNTY EMPLOYEES'
RETIREMENTASSOCIATION (CCCERA) FORMULAS FOR CALCULATING
EMPLOYERAND EMPLOYEE CONTRIBUTION RATES
At a previous Administration Committee meeting, staff was directed to provide the Committee with the
methodology that is utilized by CCCERA to determine both the employer and employee contribution rates.
CCCERA is governed by the California Constitution (Article 16 — Public Finance, Section 17); the County
Employees Retirement Law of 1937 (CERL); the California Public Employees' Pension Reform Act of
2013 (PEPRA), and is subject to various other state and federal laws, including the Internal Revenue
Code. CCCERA determines the contribution rates by formulas set forth within CERL, specifically Section
31676.16 for employers and Section 31676.11 (Legacy) and Section 7522.20 (PEPRA) for employees.
Contribution rates are split into the following three components:
Employer Normal Costs (Basic and the Cost of Living Adjustment (COLA)) - the amount of
contribution required by the employer to fund the cost allocated to each year of service.
2. Employee Normal Costs (Basic and the Cost of Living Adjustment (COLA)) - the amount of
contribution required by the employee to fund the cost allocated to each year of service.
3. Unfunded Actuarial Accrued Liability (UAAL� - the difference between the actuarial accrued
liability of the plan and the assets of the plan.
To determine the employee "normal costs," CCCERA utilizes the following formulas:
Tier
Formula
Legacy
Basic share: Must provide for an average annuity at age 60 equal to
1/120 of the projected final average salary (FAS).
Cost -of -Living: Half of future Cost -of -Living costs.
PEPRA
Half of the total Normal Cost rate.
October 16, 2017 Special ADMIN Committee Meeting Agenda Packet - Page 33 of 35
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The legacy employee's basic contribution rate for any given year of service is determined as that
percentage of compensation which, if paid annually from an employee's first year in the retirement system
through to the age of 60, would accumulate to the amount necessary to fund an annuity that is 1/1 20th of
the projected FAS. As an example, the annuity would be $1,000 on a projected FAS of $120,000. This
amount changes every year when CCCERA completes its valuation, which utilizes economic and
demographic assumptions, as well as actual experience, to project the total normal costs associated with
the pension benefit.
Any normal costs that remain after the employee share is calculated is borne by the employer. Based on
the most recent valuation that was completed in December 2016 and projects the Fiscal Year (FY) 2018-
19 rates, the split is approximately 60% to the employer and 40% to the employee. Any COLA
adjustments are split evenly amongst the employee and employer. PEPRA employee and employer
normal costs are split evenly amongst the two parties.
Staff will be available to answer any questions during the meeting.
October 16, 2017 Special ADMIN Committee Meeting Agenda Packet - Page 34 of 35