HomeMy WebLinkAbout06.c. Receive information on CCCERA Valuation as of December 2019 and 2020 GASB 68 Financial Valuation highlights Page 1 of 2
Item 6.c.
,orVIOIN SAN
November 16, 2020
TO: FINANCE COMMITTEE
FROM: TODD SMITHEY, FINANCE ADMINISTRATOR
REVIEWED BY: KEVIN MIZUNO, FINANCE MANAGER
PHILIP LEIBER, DIRECTOR OF FINANCE AND ADMINISTRATION
ROGER S. BAILEY, GENERAL MANAGER
SUBJECT: RECEIVE INFORMATION ON CONTRA COSTA COUNTY EMPLOYEES'
RETIREMENT ASSOCIATI ON'S (CCCERA) VALUATION AS OF
DECEMBER 31, 2019 AND 2020 GASB 68 FINANCIAL VALUATION
HIGHLIGHTS
On October 14, 2020, the Board of Retirement (Board)for the Contra Costa County Employees'
Retirement Association (CCCERA) received the system's Actuarial Valuation as of December 31, 2019.
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) 2021-22. On October 28, 2020, the CCCERA Board also received the Governmental
Accounting Standards (GAS) 68 Valuation report as of June 30, 2020, 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 (CAF R)for the year ended June 30, 2020.
CCCERA Plan Highlights
The overall investment return for CCCERA for calendar year 2019 was 14.4%, which is significantly higher
than CCCERA's long-term assumed earnings rate of 7.0%. The system's overall funded status increased
from 89.3% to 90.6% on a "valuation value" basis (with application of the actuarial assumptions such as
smoothing, etc.), and the funded status increased from 84.2% to 91.9% on a "market value" basis. In
terms of dollars, the unfunded actuarial accrued liability (UAAL) decreased from $1.0 billion (B)to $0.913
on a valuation value basis, and decreased from $1.513 to $0.813 on a market value basis. This decrease in
the funding valuation UAAL is primarily due to contributions paying down a portion of the UAAL, offset to
some degree by an investment return (after asset smoothing) less than the 7% assumed rate. The net
impact of these changes resulted in the average employer contribution rate dropping slightly from 35.73%
(FY 2020-21) of payroll to 35.66% (FY 2021-22), and the average employee rate has remained at 11.97%
for both fiscal years.
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 2020-21 to FY 2021-22, the funding valuation reported an
increase in Central San's funded status from 82.1% to 83.6% along with a drop in the UAAL from $74.0
million (M) to $70.8M. There was also a minor increase to the blended employer contribution rate from
49.86% to 50.16% and the employee contribution rate increased from 11.29% to 11.39% (contribution
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rates are a weighted average of Legacy and Public Employees' Pension Reform Act of 2013 rates).
When taking into consideration Central San's Section 115 pension pre-funding trust assets as of
12/31/19, the funded rate, as calculated internally by Central San staff, increases to 85.8%. The
CCCERA actuarial valuation does not take into account restricted assets held by participating employers
in Section 115 trusts as participating employers have discretion over when and how to use the trust assets
for pension plan contributions, impacting actuarial assumptions. Central San had $10.3 million in a Section
115 Trust as of June 30, 2020, which along with the CCCERA assets would bring Central San's total
funded status to 85.8%.
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 2019-20 comprehensive annual financial report (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 NPLs and funded percentages on a
market value reporting basis:
• FY 2017-18 - NPL was $63.8M, or 83.6% funded
• FY 2018-19 - NPL was $90.4M, or 77.9% funded
• FY 2019-20 - NPL was $64.1 M, or 85.1% funded
As noted previously, this valuation is necessary for compliance with GAS B accounting pronouncements
and CAFR reporting purposes only and has no direct impact on Central San's required contribution rate
for the upcoming fiscal year.
Staff will address any questions on this matter at the Finance Committee meeting.
Strategic Plan Tie-In
GOAL THREE:Fiscal Responsibility
Strategy 1—Maintain financial stability and sustainability, Strategy 2—Ensure integrity and transparency in financial
management
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