HomeMy WebLinkAbout04.b. Receive information on Contra Costa County Employees' Retirement Association's (CCCERA) valuation as of December 31, 2018 and 2019 GASB 68 Financial Valuation Highlights Page 1 of 2
Item 4.b.
CENTRAL SAN
November 26, 2019
TO: FINANCE COMMITTEE
FROM: TODD SMITHEY, FINANCE ADMINISTRATOR
REVIEWED BY: T. KEVIN MIZUNO, FINANCE MANAGER
PHILIP LEIBER, DIRECTOR OF FINANCE AND ADMINISTRATION
ANN SASAKI, DEPUTY GENERAL MANAGER
ROGER S. BAILEY, GENERAL MANAGER
SUBJECT: RECEIVE INFORMATION ON CONTRA COSTA COUNTY EMPLOYEES'
RETIREMENT ASSOCIATION'S (CCCERA) VALUATION AS OF
DECEMBER 31, 2018 AND 2019 GASB 68 FINANCIAL VALUATION
HIGHLIGHTS
On Wednesday, October 9, 2019, the Board of Retirement for the Contra Costa County Employees'
Retirement Association (CCCERA) received the system's Actuarial Valuation as of December 31, 2018.
The valuation, commonly referred to as the "funding valuation," analyzes that year's actual experience and
then uses that data to establish required contribution rates for the upcoming fiscal year, which in this case
is Fiscal Year (FY) 2020-21. CCCERA also received the Governmental Accounting Standards (GAS) 68
Valuation reporting as of June 30, 2019, commonly referred to as the "GASB 68" or"financial reporting
valuation". The reporting valuation will be used for reporting our net pension liability in the comprehensive
annual financial report (CA FR)for the year ended June 30, 2019.
CCCERA Plan Highlights
The overall investment return for CCCERA for calendar year 2018 was -2.3%, which is clearly lower than
CCCERA's long-term assumed earnings rate of 7.0%. While the system's overall funded status
increased from 88.5% to 89.3% on a valuation value basis, the funded status decreased from 90.8% to
84.2% on a market value basis. I n terms of dollars, the unfunded actuarial accrued liability (UAAL)
decreased from $1.1 billion (B)to $1.013 on a valuation value basis, and increased from $0.813 to $1.513 on
a market value basis. This net decrease on the funding valuation basis resulted from changes in
assumptions and member demographic changes offset by investment returns being less than actuarially
assumed as well as retiree cost-of-living being higher than expected. The net impact of these changes
resulted in the average employer contribution rate dropping from 36.07% (FY 2019-20) of payroll to
35.72% (FY 2020-21), and the average employee rate dropping from 12.03% to 11.98%.
Funding Valuation Basis Impact to Central San
Fortunately for Central San, the funding valuation just published is more relevant as it has direct and
immediate budgetary impacts. From FY 2019-20 to FY 2020-21, the funding valuation reported an
increase in Central San's funded status from 81.1% to 82.1% along with a slight drop in the UAAL from
$74.1 million (M)to $74.OM. There was also a modest increase to the blended employer contribution rate
November 26, 2019 Regular FINANCE Committee Meeting Agenda Packet- Page 96 of 100
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from 49.57% to 49.86% and the employee contribution rate dropped from 11.45% to 11.29% (contribution
rates are a weighted average of Legacy and Public Employees' Pension Reform Act of 2013 rates).
Financial Reporting Valuation Basis Impact to Central San
The financial reporting valuation (GAS 68) publishes Central San's Net Pension Liability(NPL) necessary
for financial reporting in Central San's FY 2018-19 CAFR. This report uses data from the preceding
valuations and projects it forward using the plans economic and demographic assumptions. Importantly, it
also removes the five-year smoothing method used in the funding valuation. The elimination of this
"smoothing effect" makes the reporting valuation similar to stating our UAAL on a market value basis
thereby exposing the year-to-year funded position to significantly increased market volatility risk. The
following are the past three year's NLP and funded percentages on a market value reporting basis:
• FY 2016-17 - NPL was $87.8M, or 76.4%funded
• FY 2017-18 - NPL was $63.8M, or 83.6%funded
• FY 2018-19 - NPL was $90.4M, or 77.9%funded
As noted previously, this valuation is necessary for compliance with GAS B accounting pronouncements
and CAFR reporting purposes only and fortunately has no direct impact on Central San's required
contribution rate for the upcoming fiscal year. Another important detail helping put the results of the
reporting basis valuation into perspective is that despite the national market losses incurred in the final
quarter of calendar year 2018, the latest CCCERA Quarterly Performance Report available as of June 30,
2019 reported a calendar year-to-date return of 9.5% for the fund as a whole, exceeding the actuarially
assumed discount rate of 7.0%. Therefore, the 2018 investment results were largely due to the timing of
the snapshot with the December 2018 market downturn reversing in early calendar year 2019.
Staff will address any questions on this matter at the Finance Committee meeting.
Strategic Plan Tie-In
GOAL THREE:Be a Fiscally Sound and Effective Water Sector Utility
Strategy 1 - Conduct long-range financial planning, Strategy 2- Manage costs
November 26, 2019 Regular FINANCE Committee Meeting Agenda Packet- Page 97 of 100