HomeMy WebLinkAbout03.a. Update regarding benefit related payments made outside standard channels Page 1 of 2
Item 3.a.
CENTRAL
CONTRACENTRAL COSTA SANITARY DISTRICT
December 18, 2018
TO: FINANCE COMMITTEE
FROM: TODD SMITHEY, FINANCE ADMINISTRATOR
REVIEWED BY: PHILIP LEI BER, DIRECTOR OF FINANCE AND ADMINISTRATION
ROGER S. BAILEY GENERAL MANAGER
SUBJECT: UPDATE REGARDING BENEFIT RELATED PAYMENTS MADE OUTSIDE
STANDARD CHANNELS
At a recent Finance Committee meeting during the review of expenditures, a question was asked by a
Committee member regarding a payment to an employee for a retirement related matter--specifically, the
extent of such payments for benefits outside the standard channels. This memorandum provides
information on this situation.
Central San's Board has approved memorandums of understanding (MOUs), individual contracts and
Board resolutions that can provide employees with certain post-employment benefits, namely a monthly
pension benefit and health benefits. Central San has contracted with the Contra Costa County
Employees' Retirement Association (CCCERA)to administer its pension obligations. CCCERA is a
"qualified" plan approved by the Internal Revenue Service, meaning taxes are not collected on any
contributions or investment earnings; instead, taxes are only collected on the benefits paid out as a
pension or if a former member not drawing a pension removes their employee contributions from the fund.
To maintain its status as a qualified plan, CCCERA must adhere to the provisions set forth in the I nternal
Revenue Code (IRC).
RC Section 415 provides an annual limit as to how much any one qualified plan can pay a plan participant
who retired on or after the "normal retirement age". If the plan participant retired earlier than the normal
retirement age, the annual limit is reduced and gets progressively lower based on retirement at the younger
age. The annual limit for 2018 is $220,000 and the normal retirement age for non-safety workers is 62.
In 2012, Central San established a supplemental Section 415 plan in order to fulfill benefit obligations that
exceeded the Section 415 limit at CCCERA. If a participant reaches the limit at CCCERA, Central San
will make the payment directly to the participant through the supplemental Section 415 plan. Then, at the
end of the fiscal year, Central San takes a credit equal to the amount of the payment made directly to the
participant when trueing up the prepayment with CCCERA.
Central San has one retiree who receives payments directly under the supplemental Section 415 plan:
Randy Grieb. As an early retiree, Mr. Grieb's Section 415 limit was determined to be $158,954.11, which
is lower than his annual benefit. Once the calendar year is over, CCCERA will resume making his pension
benefit payments. Once the fiscal year is over, Central San will take that credit and then there will be no
net expense from these payments. Accordingly, the "payment" made directly by Central San is temporary;
it is netted out with the credit.
December 18, 2018 Regular FINANCE Committee Meeting Agenda Packet- Page 3 of 288
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As for the other post-employment benefits (non-pension)approved in MO Us, contracts and Board
resolutions, most of the benefit expenses are paid directly to a service provider and not the retirees. The
notable exceptions are the payments to retirees reimbursing them for certain Medicare parts and
reimbursement for out-of-service-area retiree medical plans. Central San also receives reimbursements
from some non-Tier 1 retirees for their medical coverage.
GOAL THREE:Be a Fiscally Sound and Effective Water Sector Utility
Strategy 2- Manage costs
December 18, 2018 Regular FINANCE Committee Meeting Agenda Packet- Page 4 of 288