HomeMy WebLinkAbout06.a.1. DE-POOLING DATA FROM CONTRA COSTA COUNTY EMPLOYEES' RETIREMENT ASSOCIATION (CCCERA)6.a.1)
Central Contra Costa Sanitary District
May 20, 201.0
TO: HONORABLE BOARD OF DIRECTORS
VIA: JAMES M. KELLY, GENERAL MANAGER ~~
FROM: RANDALL M. MUSGRAVES, DIRECTOR OF ADMINISTRATION ~~~
SUBJECT: DE-POOLING DATA FROM CONTRA COSTA COUNTY EMPLOYEES'
RETIREMENT ASSOCIATION (CCCERA)
Attached is a copy of the letter the CCCERA Board directed the Chief Executive Officer,
Ms. Marilyn Leedom, to send to all CCCERA employers. The last sentence of the third
paragraph assures that the District will receive the data and methodology and have time
to provide input to the CCCERA Board before final action is taken.
Also attached is Segal's report to the CCCERA Board regarding possible methodology
for implementation of de-pooling. Staff will be attending the May 17, 2010 special
meeting and will be reporting back to the Budget and Finance Committee on May 17,
2010 and the full Board at the May 20, 2010 meeting.
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Employees' F~tirementAssociation
1355 willow way suite 221 concord ca 94520
925.521.3960 fax 925.646.5747
May 6, 2010
To All Interested Parties:
At CCCERA's Board of Retirement meeting on October 14, 2009 there was discussion on the
current methodology used for pooling assets and liabilities when calculating unfunded
liabilities and contribution rates for CCCERA members and employers. At that meeting the
Board of Retirement made o motion to move forward towards depooling by separating
CCCERA's experience and assets (AAL, UAAL and normal cost) by each employer (with 50 or
more employees) separately, commencing with December 31, 2002 valuation and going
forward from that date.
The Segal Company, CCCERA's actuary, provided additional information regarding this issue
to the Board of Retirement at the January 13, 2010 and March 10, 2010 meetings. The
Board subsequently requested and set a Special Board meeting date of May 17, 2010 to
discuss data issues and options related to the depooling study.
CCCERA will hold a Special Board meeting on May 17, 2010 at 8:30 a.m. to further discuss
the depooling issue with The Segal Company. The Board asked that we advise all employers
that the depooling discussion will continue on this date. We plan to have a series of meetings
on this issue, if needed. Please be assured that no final contribution rates based on
depooling will be adopted by the Board until the employers are given a period of time to
review the actuarial data and methodology used to create the contribution rates.
We invite you to attend this meeting, ask questions and learn more about this critical
subject.
Sincerely,
l-6
Marilyn.Lee
Chief Executive Officer
MEETING DATE
MAY 17 2010
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'~SEGAL
THE SEGAL COMPANY
100 Montgomery Street, Suite 500 San Francisco. CA 941044308
T 415.263.8273 F 415.263.8290 vww.segalco.com
May 4, 2010
Ms. Marilyn Leedom
Chief Executive Officer
Contra Costa County Employees' Retirement Association
1355 Willow Way, Suite 221
Concord, CA 94520
Re: Contra Costa County Employees' Retirement Association
Possible Methodology for Implementation of Depooling
Dear Marilyn:
AG~E~NDA ITEM
Paul Angelo, FSA, MAAA, FCA
Senior Vice Presitlenl 8 Actuary
pangelo(r~ segalco.com
This letter provides information related [o a possible methodology for implementation of
depooling that is generally consistent with the Board action to depool. This implementation
would also avoid some of the data issues related to the retroactive application of depooling that
have been encountered, as noted in our March 2, 2010 letter to the Board.
Background
At its October 14, 2009 meeting, the Board took action to depool CCCERA's assets, Actuarial
Accrued Liability (AAL) and Normal Cost both by tier and by employer for determining
employer contribution rates. However, the smaller employers (those with less than 50 active
members) would continue to be pooled with the applicable County tier.
The Board action also included a retroactive application of the depooling back to December 3 ],
2002. This retroactive approach would not involve recalculation of employer rates prior to
December 31, 2008. However, it would involve reflecting the separate experience of the'
employers in each individual cost group back to December 31, 2002.
In the results provided in our January 6, 2010 letter, we used an implementation date of
December 31, 2008 to illustrate the effect of this depooling as if it were implemented on that
date, on the retroactive basis just described. In practice, the implementation date would be
December 31, 2009, so as to avoid changing the rates that were already adopted based on the
completed December 3l, 2008 valuation. The first employer rates actually affected by
depooling would be those in the December 31, 2009 valuation that would go into effect July 1,
2011.
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Founding Memoer of Ne Multinational Greup of Aduades and Consultant, a glaoal atrtliation W independent lrms
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Ms. Marilyn Leedom
May 4, 2010
Page 2
The January 6, 2010 letter contained results for General members only. This was due to the
unresolved data issues for Safety members. The data issues were discussed in our March 2,
2010 letter.
Possible Methodology for Implemention of Depooling
After discussions with Retirement Association staff, we have developed a possible
methodology for implemention of depooling that would be less data intensive than the method
described above. It would also, in effect, reflect some of the separate terminal pay experience
back to December 31, 2002 starting with the valuation in which depooling is firs[ implemented.
This new methodology for implementation of depooling would not directly involve going back
[o December 31, 2002 to reflect the separate experience for the employers of each individual
cost group. Instead, we would implement depooling starting with the December 31, 2009
actuarial valuation (or possibly December 31, 2010) and base the initial allocation of assets and
liabilities for each cost group on the valuation results, prior to applying the following new
procedure.
We would then develop different terminal pay assumptions for each cost group based on the
actual terminal pay experience for those employers over the seven years ending December 31,
2009. These new terminal pay assumptions would then be applied in this valuation, after
adoption of these assumptions by the Board.
This method would be less data intensive since it only requires verification of the members last
employer or current employer as of December 31, 2009. This is different from how depooling
was originally to be implemented, using a method which could involve verification of each
member's employer code at different points in time during the six yeazs prior to December 31,
2008. As mentioned in our Mazch 2, 2010 letter, implementation of the original depooling
poses a challenge since the employer specific historical data was never tracked. This is because
it was never expected that this level of employer specific costs would be required.
This new methodology would in effect, reflect the last seven years of terminal pay experience
on a prospective basis. This is because the Normal Cost and AAL for each separate cost group
would now reflect the new cost group specific terminal pay assumptions. This is generally
consistent with the original Board action to adopt depooling by employer and to reflect separate
experience back to December 31, 2002. However, it would not reflect separate experience for
any other assumption back to December 31, 2002.
On a prospective basis after implementing this methodology, there would still be data tracking
issues related to when members transfer between employers and or/tiers. We would
recommend that [he final employer and tier absorb all of the liability associated with that
member. This would be much less data intensive, but may not be preferable for the employers.
As stated in our March 2, 2010 letter, allocating a member's liability amongst multiple
employer and/or tiers presents significant challenges.
5078474v1/08337.013
Ms. Marilyn Leedom
May 4, 2010
Page 3
Timeline for Schedule of Implementation
We would propose the following timeline for implementation of the depooling described in this
letter:
> Actuarial Experience Study for the period from January 1, 2007 through December 31,
2009 is completed in June or July 2010
• Completed consistent with pas[ practice
> Last employer code for General retirees is verified by Retirement Office by end of May
2010
Note that Safety retirees were already verified earlier this year
> December 31, 2009 employer code for active members based on new data system is
provided by Retirement Office by end of June 2010
> New cost group specific terminal pay assumptions are developed and presented to the
Board for adoption in July or August 2010
> December 31, 2009 actuarial valuation completed and presented to the Boazd for
adoption in August or September 2010
Please note that depending on the availability of the December 31, 2009 employer code for
active members based on the new data system, we may need to delay the implementation of the
depooling until the December 31, 2010 actuarial valuation. However, we do understand that
this means that the contribution rates with depooling would then not go into effect until July 1,
2012.
If there is any additional information you require, please let us know.
Sincerely,
~~~
Paul Angelo
JZM/kek
5078474v1/05337.013