HomeMy WebLinkAboutCM Pension OPEB - CERBTCMYOF��Aott
Agenda Item No: 4. c
Meeting Date: June 17, 2013
SAN RAFAEL CITY COUNCIL AGENDA REPORT
Department: Management Services
Prepared by: Jim Schutz, 1�s City Manager Approvall:i
Assistant City Manager
SUBJECT: REPORT AND RECOMMENDATIONS REGARDING CURRENT ACTIONS OF
THE PENSION/OPEB SUBCOMMITTEE OF THE SAN RAFAEL CITY COUNCIL
RECOMMENDATION:
1. Adopt a resolution formalizing a pension funding policy.
2. Adopt a resolution authorizing (A) adoption of the California Employers' Retiree Benefit
Trust program (CERBT) for pre -funding the City's long-term obligation for providing
retiree health benefits for eligible employees; (B) approval of the asset transfer to the
CERBT; and (C) designating the City Manager and Finance Director or designees with
the authority to request and receive disbursements from the CERBT for payment of
future retiree health benefit obligations
3. Accept an informational report from Bartel Associates estimating cost savings due to
pension and Other Post Employment Benefits (OPEB) reform measures taken to date.
4. Direct staff to increase transparency of pension and OPEB finances and City initiatives
through use of a pension/OPEB-specific page on the City's website.
BACKGROUND:
In early 2012, the City Council established seven subcommittees to focus on various high-
priority issues. One of these was the Pension and Other Post Employment Benefits (OPEB)
Subcommittee which was made up of Mayor Gary Phillips and Councilmember Andrew
McCullough. The Subcommittee's charge was to review pension reform actions taken by the
City as of that date and consider future actions as appropriate.
One of the Subcommittee's actions was to assemble a Council resolution regarding pension and
OPEB reform efforts. On May 7, 2012, the City Council approved the resolution. The report for
that item contained an overview of statewide pension issues, background information regarding
pension and OPEB specific to San Rafael, the list of pension and OPEB cost saving measures
and other reforms already implemented, and a detailed description of the pension and OPEB
resolution itself. The resolution included a set of 12 guiding principles and practices including
such issues as pension cost controls, benefit formulas, employee contributions, and reserve
funding.
FOR CITY CLERK ONLY
7—
File No.:
Council Meeting: ,j ( :4 Z ;�_ / 2— —
Disposition:
SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 2
Since the resolution was approved, the Subcommittee has been active meeting with City staff,
Boardmembers and staff from the Marin County Employees' Retirement Association (MCERA),
actuaries, and interested community members. This effort has led to a number of actions for
Council consideration discussed in the next section.
ANALYSIS:
At this time, there are four pension and OPEB-related issues for City Council consideration.
They include: 1) formalizing a pension funding policy, 2) prefunding the City's OPEB through a
trust, 3) accepting a report regarding cost saving measures to date, and 4) creating a new web
page focused on San Rafael pensions and OPEB.
Pension Funding Policy
The Purpose of this Pension Funding Policy is to provide direction and guidance with respect to
the areas of funding and reporting on the City's defined -benefit plans that are within the purview
and control of the City. The MCERA Board is charged under the County Employee Retirement
Law with administration of the pension system which includes all aspects of determining the
contributions required to fund current and future pension obligations.
The City of San Rafael is committed to adopting best fiscal practices in order to fully use the
knowledge, resources, and experience available throughout the industry. Public agencies that
offer defined benefit pensions to their employees should fund the cost of those benefits in an
equitable and sustainable manner. An actuarial valuation provides an employer with crucial
information on the amount that needs to be contributed each period to fund the long-term cost of
benefits promised to plan participants. Generally accepted accounting principles (GAAP) have
required that this actuarially determined amount, known as the actuarially required contribution
(ARC), be calculated within standardized parameters and disclosed as part of an employer's
annual financial report.
Recently, the Governmental Accounting Standards Board (GASB) changed its approach to
pension reporting and moved from one that served both the purposes of accounting/financial
reporting and funding to one related solely to accounting/financial reporting. Beginning with the
financial reporting in fiscal year 2014-2015, the net pension liability (total pension liability less
market value of assets) will be presented on the City's government -wide statement of net assets
(balance sheet).
One consequence of this change is that GAAP will no longer require that employers calculate
and disclose an ARC in their financial reports. Likewise, the parameters (e.g., actuarial cost
method, asset smoothing, and amortization) that have standardized how an ARC is calculated
have been eliminated from GAAP. In the absence of ARC disclosures, it may be difficult for
stakeholders, including policy -makers, employees and the public to determine whether
obligations are being appropriately funded. Consequently, there is a pressing need for widely
recognized, standardized guidelines as to what constitutes a sound funding plan for a local
government employer that offers defined benefit pensions.
The Government Finance Officers Association (GFOA) and ten other national associations
representing state and local governments and retirement systems developed a set of pension
funding guidelines to meet this need. The GFOA recommends that every state and local
government that offers defined benefit pensions formally adopt a funding policy that provides
reasonable assurance that the cost of those benefits will be funded in an equitable and
sustainable manner.
The attached resolution includes the recommended pension funding policy. It would provide
reasonable assurance that the costs of the City's defined benefit pensions will be funded in an
SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 3
equitable and sustainable manner. It states the City's commitment to fund these benefits based
on regular actuarial valuations, and to measure and report them in accordance with generally
accepted accounting principles (GAAP). Adhering to a funding policy that embodies these
funding and accounting principles is a prudent governance practice, and helps achieve
intergenerational equity among those who financially support the plan. It also ensures that
resources are available to fulfill the City's contractual promises to its employees, and minimizes
the chance that funding of these benefits will interfere with the City's ability to provide essential
services to the public. Specifically, the policy includes these actions as called out in the
resolution:
1. The City will use the actuarially determined contribution (ADC) provided by MCERA to
serve as the basis for its pension contributions;
2. The City supports an ADC that is calculated in a manner that fully funds the long-term
costs of promised pension benefits, while balancing the goals of keeping contributions
relatively stable and equitably allocating the costs over the employees' period of active
service.
3. The City supports a policy of funding the full amount of the ADC each year and making
the full contribution as determined by MCERA. In the event the City is unable to fund the
full amount of the ADC in a given year with current resources (i.e., without borrowing or
use of reserves), the Finance Director and City Manager will identify a reasonable
transition period to return to full funding.
4. The City will demonstrate accountability and transparency by communicating all of the
information necessary for assessing the City's progress toward meeting its pension
funding objectives. This will be achieved, in part, by ensuring full and accurate
implementation of GASB 68 beginning with fiscal year 2014-2015.
5. As part of the annual budget adoption process, the Finance Director and City Manager
will report to the City Council on the following:
a) most recent actuarially determined pension contribution (ADC)
b) relationship between ADC and budgeted pension contribution
c) projected ADC for next three years
d) impact of funding full ADC over the three-year planning horizon
e) any other significant issues associated with funding the defined benefit pension
in a stable and equitable manner as described in #2 above.
6. Staff will monitor changes to and expansions of pension funding best practices, as well
as any additional guidance provided by the GFOA that relate to the funding of defined
benefit pensions. Staff will return to City Council with modifications to this policy as
needed.
The Pension/OPEB Subcommittee recommends the above as a prudent governmental practice
to guide the City regarding pension funding equity and sustainability.
OPEB Trust
The City of San Rafael has had a 401(h) trust fund dedicated to fund post retirement medical
expenses for City employees since 1994. This 401(h) fund has been maintained by the Marin
County Employees' Retirement Association (MCERA) and currently has a balance of
approximately $12 million. In 2012, MCERA and the City had agreed to identify a new vendor to
manage the funds. Both parties acknowledge that a vendor with specialized expertise in the
management and compliance issues related to OPEB trusts would be ideal.
SAN RAFAEL CITY COUNCIL AGENDA REPORT / Paye: 4
The transfer of the medical trust account assets to the City should have no effect on funding of
the City's retirement, death and disability benefits through MCERA, as all assets in the medical
trust account have been excluded from valuation assets for purposes of determining the funding
status of the City's plan and setting contribution rates.
MCERA contacted the Internal Revenue Service (IRS) regarding the proposed transfer to
ensure compliance with federal tax requirements. MCERA has since received assurance from
the IRS regarding the proper method to transfer of funds to the City
As part of the fund transfer process, the City contracted with SST Benefits Consulting (SST) to
implement a Request for Proposals (RFP) process to help identify a vendor. With the help of
SST, the City sent out a RFP request to several firms as well as advertised the process on the
City's web site to solicit proposals. The City received proposals from the International City
Managers Association — Retirement Corporation (ICMA-RC), the Public Agency Retirement
Services (PARS), and the California Public Employees' Retirement System (CalPERS). Staff
considered various factors including the cost of the services, expertise, and rate of return. Staff
recommends CalPERS CERBT as the vendor.
Staff valued that CalPERS assumed the full fiduciary responsibility to manage the fund and
direct investments since CalPERS requires minimal administrative oversight through a portfolio
management approach. The City's funds are pooled with those from other agencies, amounting
to over $2.6 billion of public employer assets. CalPERS has more than 300 public employers
participating in its OPEB trust program. The CalPERS CERBT contract is for a minimum term
of three years.
CalPERS, as well as the other two proposals, suggested a Section 115 Integral Part Trust as
the instrument by which the City should fund its OPEB obligation. According to the last actuarial
report based on data from June 30, 2011, the City has an OPEB liability of approximately $35
million and an OPEB trust balance of approximately $11 million making the unfunded portion of
the OPEB liability approximately $24 million, The City's health insurance plans are fully insured
through CalPERS. It is anticipated that the City would fund the Annually Required Contribution
(ARC) of approximately $2.5 million annually directly out of the operating budget with no
distribution from the fund until the ARC falls below the pay-as-you-go amount.
The targeted rate of return of the portfolio selected by the City is 7.6% which is close to the
current estimate of 7.5% that was used in the previous actuarial valuations. CalPERS refers to
this as the "moderate" portfolio. The targeted rate of return and thus the mix of investments can
be changed by the City. Staff expects to review the rate of return at least each time the OPEB
actuarial study is conducted every two years.
In short, the attached resolution authorizes the agreement with MCERA to, among other items,
transfer the funds currently held in the 401(h) account to a Section 115 trust chosen by the City
and adopts that trust vehicle. The funds held in the Section 115 account will grow over time and
be used exclusively for payment of future retiree health benefit obligations.
Estimated Savings
The extraordinary investment losses brought on by the "Great Recession" have increased the
contributions required by employers to fully fund pension systems. Many public agencies
responded by implementing measures designed to reduce short and long term costs related to
pension and OPEB. The most typical sort of reforms included requiring employees to pay some
or all of the "employee share;" creating a new (lower) benefit tier: and basing pensions off of the
average of three years of compensation rather than the single, highest year. San Rafael
SAN RAFAEL CITY COUNCIL AGENDA REPORT / Pau: 5
implemented each of these and other measures as well (see May 7, 2012 staff report for
complete list).
The below chart is taken from an actuarial analysis (attached) performed by Bartel Associates,
LLC of savings over the next 30 years associated with various City of San Rafael pension and
OPEB reform measures. It does not cover all of San Rafael efforts, but includes those with the
greatest financial impacts. The first, equaling $93.5 million, is the value of the employees
assuming full responsibility of the employee pension share. Prior to this action, the City was
contributing 7% toward the employee portion of pension costs for safety employees and 5%
toward that of non -safety employees. During this period, the City also provided a pension
benefit enhancement by retroactively changing the pension benefit formula to 3% at 55 for
safety and 2.7% at 55 for non -safety employees. This enhancement is estimated to cost the
City $101.6 million over the full term of the next 30 years.
Subsequent to the above, there were a number of additional cost saving measures. In the order
shown on the chart, the next is pension savings valued at $21.7 million related to new (lower)
pension tiers that were negotiated with employees and became effective July 1, 2011. These
new pension tiers for safety and non -safety employees were prior to the California Public
Employees' Pension Reform Act of 2013 (PEPRA). Those tiers, shown on the chart as saving
$60.3 million, became effective on January 1, 2013 thus creating a three-tier structure in San
Rafael. The final change shown in the pension category is a provision of PEPRA that
encourages additional employee contributions and allows jurisdictions to require such changes
starting on January 1, 2018 if they are not already in place by that time. Staff will be working
with the bargaining units to implement this provision.
On the OPEB side, the first measure shown on the chart stems from the City Council's May 7,
2012 resolution #13344 which states the Council's intent to not increase retiree health benefits
other than those required by law or existing resolutions. Over the 30 -year term, this is valued at
$41.9 million. The final measure shown comes from labor negotiations that took place in 2009
and 2010 that reduced the retiree health benefit to the minimum allowed by law for new hires
after those dates. This action will save $9.3 million.
Action
Savings/Costs
(in 000's)
Pension
2000-2004 City contributions cease for em portion
93,500
2003-2007 benefit enhancements
(101,600)
7/1 /11 Tier 2 plan change
21,700
1/1 /13 PEPRA benefit change
60,300
2018 increased employee contributions
6,800
Pension Savin s total
$80.700
OPEB
2012 Council Resolution #13344 freezing caps
41,900
2009 and 2010 Tier 2 PEMHCA minimum benefit
9,300
OPEB Savings total
k $51,200
Total Savings
a $131,9001
SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 6
Such actions demonstrate the City's commitment to reforms and cost management related to
pensions and OPEB. Aspects such as new pension tiers and medical benefit changes
demonstrate the employee groups' recognition of the financial situation and willingness to be
part of the solution.
Even after factoring the pension benefit enhancement in the early/mid 2000s, the City will
experience a note -worthy savings of almost $132 million over the next 30 years through various
pension/OPEB reform measures. This is an 18% drop in the pension and OPEB liability due to
these efforts.
Web Presence
The Pension/OPEB Subcommittee recognizes that such employee benefits can be a
complicated topic especially when considering multiple types of public employers, federal and
state retirement law, contract clauses of federal and state constitutions, court decisions, labor
law, difference in actuarial methodology, differences in organizational make-up and financing,
etc. The Subcommittee has always advocated for transparency and awareness of the financial
challenges related to pension and OPEB and the City's responses. One way to further these
goals is to enhance the City's web presence focused specifically on pension and OPEB.
With the Council's concurrence, staff would create a new web page linked to the overall City of
San Rafael website that focuses directly on pension and OPEB and is updated on a regular
basis such as when a new actuarial analysis is complete or when the Council takes specific
action on pension or OPEB issues.
It is envisioned that the web page would include, but not be limited to:
• A "plain English" overview of pension and OPEB;
• The key financial details such as assets, liabilities, debts, reserves, etc. updated with
each new actuarial report;
• Links to pension actuarial reports back to 2002 (as they are available through the
IVICERA website);
• Any actuarial audits of past valuations;
• Actions the City has taken to reform or manage costs associated with pension and
OPEB;
• Key City Council policies or resolutions intended to guide these issues;
• Grand Jury reports on these subjects and the City's formal responses; and
• Charts or graphs that demonstrate pension/OPEB projections over time.
It is anticipated that these improvements to the City's website will not take significant staff time
as much of the financial data changes only annually. Staff expects to start creating the
pension/OPEB web page soon after receiving Council direction with more information added
over time.
FISCAL IMPACT:
There is no direct fiscal impact of adopting a pension funding policy, however the policy itself
will guide future funding decisions and methods. Cost for the OPEB trust management and
investment services will be approximately $16,500 per year which is taken from plan investment
returns. There is no fiscal impact of accepting the Bartel Associates report on pension/OPEB
savings, though it should be noted that the report identifies almost $132 million in savings over
the next 30 years due to the reforms and cost saving techniques implemented or identified to
date. There is no fiscal impact of increasing the City's web presence outside of staff time,
SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 7
•- •
• Approve the Resolutions
• Modify Resolutions and/or direct staff to return with modifications
ATTACHMENTS:
Attachment A: Resolution adopting a pension funding policy
Attachment B: Resolution pre -funding the City's OPEB through a trust (with exhibits)
Attachment C: Bartel Associates LLC Actuarial Report
RESOLUTION NO 13556
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
SAN RAFAEL ADOPTING A PENSION FUNDING POLICY
WHEREAS, the City of San Rafael is committed to adopting best fiscal practices, in
order to fully use the knowledge, resources and experience available throughout the industry;
and
WHEREAS, Public agencies that offer defined benefit pensions to their employees
should fund the cost of those benefits in an equitable and sustainable manner; and
WHEREAS, the City desires to demonstrate accountability and transparency by
communicating all of the information necessary for assessing the City's progress toward
meeting its pension funding objectives.
NOW, THEREFORE, BE IT RESOLVED, that the City Council of the City of San Rafael
does hereby approve and adopt the following Pension Funding Policy:
Purpose: The purpose of this policy is to provide reasonable assurance that the costs of the
City's defined benefit pensions will be funded in an equitable and sustainable manner. It codifies
the City's commitment to fund these benefits based on regular actuarial valuations, and to
measure and report them in accordance with generally accepted accounting principles (GAAP).
Adhering to a funding policy that embodies these funding and accounting principles is a prudent
governance practice, and helps achieve intergenerational equity among those who financially
support the plan. It also ensures that resources are available to fulfill the City's contractual
promises to its employees, and minimizes the chance that funding of these benefits will interfere
with the City's ability to provide essential services to the public.
In order to achieve thepurpose of thispolicy, the City will take the following actions:
1. The City will use the actuarially determined contribution (ADC) provided by MCERA to serve
as the basis for its pension contributions.
2. The City supports an ADC that is calculated in a manner that fully funds the long-term costs
of promised pension benefits, while balancing the goals of
a) keeping contributions relatively stable; and
b) equitably allocating the costs over the employees' period of active service.
3. The City supports a policy of funding the full amount of the ADC each year and making the
full contribution as determined by MCERA. In the event the City is unable to fund the full amount
of the ADC in a given year with current resources (i.e., without borrowing or using reserves), the
Finance Director and City Manager will identify a reasonable period to return to full funding.
4. The City will demonstrate accountability and transparency by communicating all of the
information necessary for assessing the City's progress toward meeting its pension funding
objectives. This will be achieved, in part, by ensuring full and accurate implementation of GASB
Statement No. 68 beginning with fiscal year 2014-2015.
5. As part of the annual budget adoption process, the Finance Director and City Manager will
report to the City Council on the following:
a) most recent actuarially determined pension contribution (ADC)
b) relationship between ADC and budgeted pension contribution
c) projected ADC for next three years
d) impact of funding full ADC over the three-year planning horizon
e) any other significant issues associated with funding the defined benefit pension in a
stable and equitable manner as described in #2 above.
6.) Staff will monitor changes to and expansions of pension funding best practices, as well as
any additional guidance provided by the Government Finance Officer's Association that relate to
the funding of defined benefit pensions. Staff will return to City Council with modifications to this
policy as needed.
1, ESTHER C. BEIRNE, Clerk of the City of San Rafael, hereby certify that the foregoing
resolution was duly and regularly introduced and adopted at a regular meeting of the Council of
said City on Monday, the 17th of June 2013, by the following vote, to wit:
AYES: COUNCILMEMBERS: Colin, Connolly, Heller, McCullough & Mayor Phillips
NOES: COUNCILMEMBERS: None
ABSENT: COUNCILMEMBERS: None
ESTHER C. BEIRNE, City Clerk
RESOLUTION NO. 13557
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN RAFAEL
PROVIDING FOR: (1) ADOPTION OF THE CALIFORNIA EMPLOYERS' RETIREE
BENEFIT TRUST PROGRAM (CERBT) FOR PRE -FUNDING THE CITY'S LONG-
TERM OBLIGATION FOR PROVIDING RETIREE HEALTH BENEFITS FOR
ELIGIBLE EMPLOYEES; (2) APPROVAL OF THE ASSET TRANSFER TO THE
CERBT; AND (3) DESIGNATING THE CITY MANAGER AND FINANCE DIRECTOR
OR DESIGNEES WITH THE AUTHORITY TO REQUEST AND RECEIVE
DISBURSEMENTS FROM THE CERBT FOR PAYMENT OF FUTURE RETIREE
HEALTH BENEFIT OBLIGATIONS
WHEREAS, the City of San Rafael provides post -employment medical benefits to
eligible retirees and their eligible dependents and survivors, and
WHEREAS, the City Council wishes to establish a trust to pre -fund these benefits, and
WHEREAS, California Public Employees Retirement System (CaIPERS) has the
California Employer's Retiree Benefit Trust Program (CERBT) for pre -funding the City's long-
term obligation for retiree health benefits and staff considered several possible alternatives and
believes that the CERBT best meets the City's needs for managing this long-term liability, and
WHEREAS, the City Council intends that the CERBT qualify as a trust for purposes of
Governmental Accounting Standards Boards ("GASB") Statement 43, pursuant to paragraph 4
of GASB 43, so that amounts held under the CERBT will be treated as offsetting the unfunded
OPEB liability that must be reported on the City's financial statements under GASB 45, and
WHEREAS, the City Council further intends that contributions and transfers to, and
earnings under, the CERBT be exempt from taxes to the maximum extent permitted by law, and
WHEREAS, the City Council wishes to begin pre -funding the City's OPEB liability by
transferring the current balance in the City's 401(h) fund held by the Marin County Employees'
Retirement Association ("MCERA") estimated to be $12 million.
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of San Rafael
does resolve, declare, and determine and order the following:
SECTION 1. That the City Council hereby adopts the CERBT, substantially in the form
attached as Exhibit A:
Contributions to the trust will be irrevocable, and assets under the CERBT may
not be diverted for any purpose other than funding the City's OPER liability,
unless and until all liabilities associated with those benefits are satisfied, and
all Trust assets will be irrevocably dedicated to, and will be used for the exclusive
purpose of, providing for payments of OPEBs and for paying expenses of
administering the CERBT, and will not be available to any of the City's creditors.
SECTION 2. That the City Council directs the City Manager to sign and thus enter into
the Participation Agreement Regarding City of San Rafael Retiree Medical Trust 401(h) Account
with MCERA ("Agreement"), attached as Exhibit B, and in accordance with the terms of the
Agreement hereby authorizes and directs MCERA to transfer as soon as administratively
practicable after the City's execution of the CERBT and the Agreement, the balance from the
City's 401(h) fund to the CERBT.
SECTION 3. That the City Manager and Finance Director, or designees are authorized
to request and receive disbursements from the CERBT for payment of future retiree health
benefit obligations and to certify as to the purpose for which the disbursed funds will be used.
1, Esther C. Beirne, Clerk of the City of San Rafael, hereby certify that the foregoing
Resolution was duly and regularly introduced and adopted at a regular meeting of the City
Council of the City of San Rafael, held on Monday, the 17th of June 2013, by the following vote,
to wit:
AYES: Councilmembers: Colin, Connolly, Heller, McCullough & Mayor Phillips
NOES: Councilmembers: None
ABSENT: Councilmembers: None
Esther C. Beirne, City Clerk
77
L
AGREEMENT AND ELECTION
OF
CITY OF SAN RMIAEL
(NAME OF EMPLOYER)
WHEREAS (1) Government Code Section 22940 establishes in the State Treasury the
Annuitants' Health Care Coverage Fund for the prefunding of health care coverage for
annuitants (Prefunding Plan); and
V\IHEREAS-(2) The California Public Employees' Retirement System (CalPERS) Board
of Administration (Board) has sole and exclusive control and power over the
administration and investment of the Prefunding Plan (sometimes also referred to as
CERBT), the put -poses of which include, but are not limited to (i) receiving contributions
from participating employers and establishing separate Employer Prefunding Accounts
in the Prefunding Plan for the performance of an essential governmental function (J)
investing contributed amounts and income thereon. if any, in order to receive yield on
the funds and (iii) disbursing contributed amounts and income thereon, if any, to pay for
costs of administration of the Prefunding Plan and to pay for health care costs or other
post employment benefits in accordance with the terms of participating employers'
plans-, and
WHEREAS (3) Cf I'YOF SAN RAF,",EL . .. . ....... -- -- ---
(NAME OF EMPLOYER)
(Employer) desires to participate in the Prefunding Plan upon the terms and conditions
set by the Board and as set forth herein, and
WHEREAS (4) Employer may participate in the Prefunding Plan upon (i) approval by
the Board and (ii) filing a duly adopted and executed Agreement and Election to Prefund
Other Post Employment Benefits (Agreement) as provided in the tenriis and conditions
of the Agreement, and
WHEREAS (5) The Prefunding Plan is a trust fund that is interided to perform an
essential gover-rin-rentai functjon* within the meaning of Section 1 15 of the lnternal
Revenue Code as an agent riUltiple-eniployer plan as defined in Governmental
Accounh,ng Srandal-ds BOard ('3AB, 8) Stalke(rient 4.1 con.-sisting of an aggmeat fon of
single-ernplo/er pfar,,s ,v!th Cool ad,,n,,jn,,,:;ITa6v1-n_ and i,Ivestrnelnt functions
Exhibit A
NOW, THEREFORE, BE IT RESOLVED THAT EMPLOYER HEREBY MAKES THE
FOLLOWING REPRESENTATION AND WARRANTY AND THAT THE BOARD AND
EMPLOYER AGREE TO THE FOLLOWING TERMS AND CONDITIONS:
A. Representation and Warranty
Employer represents and warrants that it is a political subdivision of the State of
California or an entity whose income is excluded from gross income under Section 115
(1) of the Internal Revenue Code.
B. Adoption and Approval of the Agreement, Effective Date; Amendment
(1) Employer's governing body shall elect to participate in the Prefunding Plan by
adopting this Agreement and filing with the CaIPERS Board a true and correct original
or certified copy of this Agreement as follows:
Filing by mail, send to: CaIPERS
Affiliate Program Services Division
CERBT(OPEB)
P.O. Box 1494
Sacramento, CA 95812-1494
Filing in person, deliver to.
CaIPERS Mailroom
Affiliate Program Services Division
CERBT(OPEB)
400 0 Street
Sacramento. CA 95811
(2) Upon receipt of the executed Agreement, and after approval by the Board, the
Board shall fix an effective date and shall promptly notify Employer of the effective date
of the Agreement
(3) The terms of this Agreement may be amended only in writing upon the agreement
of both CaIPERS and Employer, except as othenvise provided herein. Any such
amendment or modification to this Agreement shall be adopted and executed in the
same rnanner as required for the Agi-eernent Upon receipt of the executed amendment
or m.,odification. the Board shall fix the effective -date of the amendment or modification
(4) 'Fhe Board shall institute such procedures and processes as it deems necessary to
adn-iinister the Prefuncitrig Plan, to, carry 01 -It the Purposes of this Agreen-fent and to
the tax exerript status of the Prelunding Plan Ernpicoyer agrees, to follo�yv such
procedures and Processes
2
C. Other Post.Erriployrnent Benefits (OPER) Cost Reports and Employer Contributions
(1) Employer shall provide to the Board an OPEB, cost report on the basis of the
actuarial assumptions and methods prescribed by the Board. Such report shall be for
the Board's use in financial reporting, and shall be prepared at least as often as the
minimum frequency required by GASB 43. This OPER cost report may be prepared as
an actuarial Valuation report or, if the employer is qualified under GASB 45 and 57, may
be prepared as an Alternative Measurement Method (AMM) report.
(a) Unless qualified under GASB 45 and 57 to provide an AMM report,
Employer shall provide to the Board an actuarial valuation report. Such
report shall be for the Board's use in financial reporting, and shall be
prepared at least as often as the minimum frequency required by GASB
43 and 57, and shall be:
1) prepared and signed by a Fellow or Associate of the Society of
Actuaries who is also a Member of the American Academy of
Actuaries or a person with equivalent qualifications acceptable to the
Board;
2) prepared in accordance with generally accepted actuarial practice and
GASB 43, 45 and 57; and,
3) provided to the Board prior to the Board's acceptance of contributions
for the valuation period or as otherwise required by the Board.
(b) If qualified under GASB 45 and 57, Employer may provide to the Board an
AMM report. Such report shall be for the Board's use in financial
reporting, shall be prepared at least as often as the minimum frequency
required by GASB 43 and 57, and shall be
affirmed by Employer's external auditor, or by a Fellow or Associate
of the Society of Actuaries who is also a Member of the American
Academy of Actuaries or a person with equivalent qualificalio!"is
acceptable to the Board to be consistent with the AMM process
described in GASB 45
2) prepared in accordance with GASB 43, 45, and 5T and,
provided to the Board pi' of to Boal -J'S a,,,ceptance of
contributions for the valuation period oras otherwise required by
the Board
,,2) The Board may reject
iect any OPEB cost report SLA�)[Tlitted to it but shall not
u.nreasonably do so Iri the -eveiV thait the Board defert-nines, in its sole discretion, (hat
the OPER cost reP(Drt is not suitable for use in the Bcard's finFmcial stafen')ents of if
Err'Pif yn-;- Fs3ljs tc' Pcovide a req:.iired C)PE8 cos, report the Boc -- -iay obtain a(
3 rd n
3
Employer's expense, ,:in OPEB cost report that meets the Board's financial reporting
needs, The Board may recover from Employer the cost of obtaining such OPEB cost
report by billing and collecting from Employer or by deducting the amount from
Employer's account in the Prefunding Plan,
(3) Employer shall notify the Board of the amount and time of contributions which
contributions shall be made in the manner established by the Board.
(4) Employer contributions to the Prefunding Plan may be limited to the amount
necessary to fully fund Employer's actuarial present value of total projected benefits, as
supported by the OPEB cost report acceptable to the Board. As used throughout this
document, the meaning of the term "actuarial present value of total projected benefits"
is as defined in GASB Statement No. 45. If Employer's contribution causes its assets in
the Prefunding Plan to exceed the amount required to fully fund the actuarial present
value of total projected benefits, the Board may refuse to accept the contribution,
(5) No contributions are required. If an employer elects to contribute then the
contribution amount should not be less than $5000 or the employer's annual required
contribution (ARC), whichever amount is lower Contributions can be made at any time
following the seventh day after the effective date of the Agreement provided that
Employer has first complied with the requirements of Paragraph C
D. Administration of Accounts, Investments, Allocation of Income
(1) The Board has established the Prefunding Plan as an agent plan consisting of an
aggregation of single -employer plans, with pooled administrative and investment
functions, Linder the terms of which separate accounts will be maintained for each
employer so that Employer's assets will provide benefits only Linder employer's plan
(2) All Employer contributions and assets attributable to Employer contributions shall be
separately aCCOL)ilted for in the Prefunding Plan (Employer's Prefunding ACCOU11t).
(3) Employer's Prefunding Account assets (nay be aggregated with prefunding "'iccOLlot
assets of other employers and may be co -invested by the Board in any asset classes
appropriate for a Section 115 Trust.
(4) The Board may deduct the COGtS of administration of the Prefunding
ng Plan frorn the
investment income or Employer's Prefunding Account in a manner determined by the
Board
(5) Investment income shall be allocated among employers and posted to En-iplayer s
Prefunding Account as detej-mlined by the Boarrl boll no less frequentfy than. annually
;6) I( Efl-,ployer',s assets in the Prefunciing 1- late exceed ;he amount required to Riky fund
the actuaria! present value of total projected benefits the Board in compliance with
applicable ac,ouiiing a,,,I( t I
-1 legal reqUirements may faturn, sluch excess "a Employer
4
E. Reports and Statements
(1) Employer shall submit with each contribution a contribution report in the form and
containing the information prescribed by the Board.
(2) The Board shall prepare and provide a statement of Employer's Prefunding A(',COLjnt
at least annually reflecting the balance in Employer's Prefunding Account, contributions
made during the period and incorne allocated during the period, and such other
information as the Board determines.
F Disbursements
(1) Employer may receive disbursements not to exceed the annual premium and other
costs of post employment healthcare benefits and other post employment benefits as
defined in GASB 43.
(2) Employer shall notify CaIPERS in writing in the manner specified by C@IPERS of the
persons authorized to request disbursements from the Prefunding Plan on behalf of
Employer.
(3) Employer's request for disbursement shall be in writing signed by Employer's
authorized representative, in accordance with procedures established by the Board
The Board may require that Employer certify or otherwise establish that the monies will
be used for the purposes of the Prefunding Plan
(4) Requests for disbursements that satisfy the requirements of paragraphs (2) and (3)
will be processed monthly.
(5) CalPERS shall not be liable for amounts disbursed in error if it has acted upon the
written inStrUGtiOf1 of an individual authorized by Employer to request disbursements. In
the event of any other erroneous disbursement, the extent of CalPERS' liability shall be
the acti-fai dollar amount of the disbursement plus interest at the actu,-al earnings rate
hut not less than zero,
(6) No disburserneW shall be made from the Prefunding Plan which exceeds the
balance in Employer's Prefunding Account,
G Costs of Administration
r -
Employer shall pay its share of the costs of administration of the Prefunding Plan, as
do-ten-nined by the Board
Ternninanon of �--npj,)yer Particip;.muor-; w, Prefunding, Plan
I Thi Board may Ennpioyer s p, --v-1 -ir--:i1ion in the FlrefudinFlan f
(a) Employer gives written notice to the Board of its election to terminate�
(b) The Board finds that Employer fails to satisfy the terms and cOOd|d[ms of
this Agreement or of the Board's rules or regulations,
(2) If Employer's participation in the Prefunding Plan terminates for any of the foregoing
reasons, all assets /nEmployer's PrefUndingAccount shall remain inthe P/efunding
Plan, except as otherwise provided below, and shall continue to be invested and accrue
|ncOnnaaS provided in Paragraph D.
(5) After Employer's participation in the Prefunding Plan terminates, Employer may not
make contributions to the Prefunding Plan.
(4) After Employer's participation inth8PrefundingP|antenninahae.disburSenl8ntS
from Employer's Prefunding Account may continue upon Employer's instruction or
otherwise in accordance with the terms of this Agreement.
(5) After thirty-six (36) months have elapsed from the effective date of this Agreement
orGtsuch earlier date 8Smay be approved bythe Board |nits sole discretion:
ka\ Employer may request trustee to trustee transfer ofthe assets /n
Employer's Preh4ndingAccount, Upon satisfactory showing tothe Board
that the transfer will satisfy applicable requirements ofthe Internal
Revenue Code and the Board's fiduciary duties, then the Board shall
effect the transfer within one hundred twenty (12O)days The amount to
be transferred shall bethe amount inthe Employer's PnefundingAccount
as of the disbursement date and shall include investment earnings up to
the investment earnings allocation date immediately preceding the
disbursement date, In no event shall the investment earnings allocation
date precede the transfer bymore than 12Udays
(b) E/np|oyeinlayrequest @Uksbursernentn[the assets inEmployer's
pr9fundingAccount. Upon satisfactory showing tothe Board that all of
Employer's obligations for paynnentofpost employment health care
benefits and other post ennp|oynnentbenefits and reasonable
administrative costs Ofthe Board have been satisfied, then the Board shall
effect the disbUrSennentwithin one hundred Menh/(13O"days The
anlounttobedisbursed shall be the anlouniin (he Ernp/Dyar'oPrefunding
Account. aSofthe disbursement date and ahaUinclude investment
earnings uptOthe investment ea/nmgaallocation date /rnnn8d/@he(y
preceding the diSbUr88rneotdate In no even|sh8U the investment
earnings 8UoCahOn date pr8ce(Je the d/SburSen,�eOtbymo, e than 170
d@ys
/\41e/Ennpkzil-/SA8nUC/�8b0O|n �h8 P/�hb:�m� P|�n1�nn/n�4bJS and a�such t(rne
Bt'o8G3ef6 'enm m ED)pk]�Srs Pnnn
[�fuOd�� ACCO�nL U1/S��/��entSh@<|ni'l Ile
6
(7) If, for any reason, the Board terminates the Prefunding Plan, the assets in
Employer's Prefunding Account shall be paid to Employer after retention of (i) amounts
sufficient to pay post employment health care benefits and other post employment
benefits to annuitants for current and future annuitants described by the employer's
Current substantive plan (as defined in GASB 43), and (H) amounts sufficient to pay
reasonable administrative costs of the Board.
(8) If Employer ceases to exist but Employer's Prefunding Plan continues to exist and if
no provision has been made by Employer for ongoing payments to pay post
employment health care benefits and other post employment benefits to annuitants for
current and future annuitants, the Board is authorized to and shall appoint a third party
administrator to carry Out Employer's Prefunding Plan. Any and all costs associated
with such appointment shall be paid from the assets attributable to contributions by
Employer,
(9) If Employer should breach the representation and warranty set forth in Paragraph
A., the Board shall take whatever action it deems necessary to preserve the tax-exempt
Status of the Prefunding Plan,
I. General Provisions
(1) Books and Records.
Employer shall keep accurate books and records connected with the performance of
this Agreement. Employer shall ensure that books and records Of Subcontractors,
suppliers, and other providers shall also be accurately maintained, Such books and
records shall be kept in a secure location at the Employer's office(s) and shall be
available for inspection and copying by CaIPERS and its representatives.
(2) Audit,
(a) During and for three years after the term of this Agreement, Employer
shall permit the Bureau of State Audits. CalPERS, and its authorized
representatives, and Such Consultants and specialists as needed, at all
reasonable times during normal business hours to inspect and copy. at the
expense of CalPERS books and records of Employer relating to its
performance of this Agreement.
(b) Employer shall be subject to examination and audit by the Bureau of Slate
Audits, CaIPERS, and its authorized representatives, and such
consultants and specialists as needed during the term of this Agreement
and for three years after final payment under this Agreement Any
examination or audit shall be confined to those tinlatters connected with the
P,erforrnance of this Agreement. including. but not iimited to the costs of
adIrninistening, this Agrees -rent Employer shall Cooperate fully with the
Bureau of State Audits, Ca!PERS, and its authorized representatives and
such cons . jIa,(ts and specialists as needed 117 {,connection with any
7
(3) Notice,
examination or audit. All adjustments, payments, and/or reiryibUrsernents
determined to be necessary by any examination or audit shall be made
promptly by the appropriate party.
Any notice, approval, or other communication required or permitted Linder
this Agreement will be given in the English language and will be deemed
received as follows:
Personal delivery. When personally delivered to the recipient.
Notice is effective on delivery.
2. First Class Mail, When mailed first class to the last address of the
recipient known to the party giving notice. Notice is effective three
delivery days after deposit in a United States Postal Service office
or mailbox.
Certified mail. When mailed certified mail, return receipt requested
Notice is effective on receipt, if delivery is confirmed by a return
receipt,
4. Overnight Delivery When delivered by an overnight delivery
service, charges prepaid or charged to the sender's account, Notice
is effective on delivery, if delivery is confirmed by the delivery
service.
Telex or Facsimile Transmission When sent by telex or fax to the
last telex or fax nurnber of the recipient known to the, party giving
notice. Notice is effective on receipt, provided that (i) a duplicate
copy of the notice is promptly given by first-class or certified mail or
by overnight delivery, or (ii) the receiving party delivers a written
confirmation of receipt. Any notice given by telex or fax shall be
deerned received on the next business day if it is received after
5 00 p m (recipient's time) or on a nonbusiness, day,
6 E -m,: -O transmission. When sent by e-mail using software that
provides unmodifiable proof (i) that the message was sent, (ii) that
the message w,@F, delivered to the recipient's information processing
system, and (iii) of the tirne and date the message was delivered to
the recipient along with a verifiable eiectronic record of the exact
content of the rriessage sent,
�-\ddr,�sses fo; the purpose of go/Wig nof(ce a re as shoipin ;iI Paragraoh B 0', of tats
N
(b) Any correctly addressed notice that is refused, unclaimed, or
undeliverable because of an act or omission of the party to be notified
shall be deemed effective as of the first date that said notice was refused,
unclaimed, or deemed undeliverable by the postal authorities, messenger
or overnight delivery service.
(c) Any party may change its address, telex, fax number, or e-mail address by
giving the other party notice of the change in any manner permitted by this
Agreement.
(d) All notices, requests, demands, amendments, modifications or other
communications under this Agreement shall be in writing Notice shall be
sufficient for all such purposes if personally delivered, sent by first class,
registered or certified mail, return receipt requested, delivery by courier
with receipt of delivery, facsimile transmission with written confirmation of
receipt by recipient, or e-mail delivery with verifiable and unmodifiable
proof of content and time and date of sending by sender and delivery to
recipient. Notice is effective on confirmed receipt by recipient or 3
business days after sending, whichever is sooner.
(4) Modification
This Agreement may be supplemented, amended, or modified only by the Mutual
agreement of the parties. No Supplement, amendment, or modification of this
Agreement shall be binding unless it is in writing and signed by the party to be charged.
(5) Survival
All representations, warranties, and covenants contained in this Agreement, or in ally
instrument, certificate, exhibit or other writing intended by the parties to be a part of
their Agreement shall Survive the termination of this Agreement until such time as all
an'lOUnts in Employer's Prefunding Account have been disbursed
(6) Waiver
No waiver of a breach, failure of any condition, or any right or remedy contained in or
granted by the provisions of this Agreement shall be effective unkess it is in writing and
signed by the party waiving the breach, failure right. or remedy No waiver of any
breadh failure right or remedy shall be deemed a -waiver of any other breach, failure
ILI&
t-fght oc efl-iedy wheU , i- (,),, niol, sini--, !:iar nic" al! F
ny war conslitute a contmuing
waiver unless the writing so specifies
(7) Necessary Acts, Further Assurances
The parties shall at their own coats and expense execute and deliver such further
documents and instruments and shall take such other actions as may be reasonably
required or appropriate to evidence or carry out the in -tent and purposes of this
Agreement
A majority of the Employer's Governing Body at a public meeting held on the
day of the month of June in the year 2013 authorized entering
into this Agreement.
Signature of the Presiding Officer-.
Printed Name of the Presiding Officec
Name of Governing Body
M* 10TTIRIVI M*
Name of Employer: of San Rafael
CJate June 18, 2013
BOARD OF ADMINISTRATION
CALIFORNIA PUBLIC EMPLOYEES,RETIREMENT SYSTEM
BY
RAND ANDERSON
AFFILIATE PROGRAM SERVICES DIVISION
C I I FO R N IA I` U S1 K" E M P L 0 YE LE'S rrE:i TIR EM I'E, N T S T E M
UUN 203
The effectiv;� ciatr, o
PARTICIPATION AGREEMENT
REGARDING CITY OF SAN RAFAEL RETIREE MEDICAL TRUST 401(h) ACCOUNT
This Participation Agreement regarding the City of San Rafael Retiree Medical Trust
401(h) Account ("Agreement") is entered by and between the City of San Rafael, a political
subdivision of the State of California ("CITY") and the Marin County Employees' Retirement
Association ("MCERA" and "retirement system"), a public employees retirement system
organized and existing pursuant to the County Employees Retirement Law of 1937, as amended,
California Government Code Sections 31450 et seq. ("CERL"). CITY and MCERA are
sometimes referred to herein individually as the "Party" or collectively as the "Parties."
RECITALS
WHEREAS, MCERA provides and administers a multiple employer defined benefit
pension plan for the active and retired employees of CITY, pursuant to CERL and other
applicable law;
WHEREAS, CITY presently maintains a Retiree Medical Plan ("Retiree Medical Plan")
on behalf of its retired employees and their spouses and dependents. The Retiree Medical Plan
assists career employees in maintaining health insurance coverage following their retirement
from service;
WHEREAS, CITY provides for the funding of its Retiree Medical Plan through, among
other things, a trust vehicle maintained by MCERA that is subject to favorable treatment under
the Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, in accordance with MCERA Resolution Nos. 2007-08-01 and 92/93-1,
adopted under CERL by the MCERA Board of Retirement and affirmed by the Board of
Supervisors of the County of Marin, and in accordance with the Code, MCERA makes available
to participating employers a Code Section 401(h) account (the "401(h) Account") to provide a
funding mechanism for the retiree health benefits that are established by such employers solely
for their former employees who retire under MCERA and their eligible spouses and dependents;
WHEREAS. MCERA has provided such a 401(h) Account in the form of a separate sub -
account for CITY in connection with its retiree medical benefits ("CITY's 401(h) Account");
WHEREAS, CITY wishes to (1) establish its own retiree health trust under Section 115
of the Code ("CITY's 115 retiree health trust"); (2) make the CITY responsible for paying all
retiree health benefits that its retirees are eligible for, effective on a mutually agreed upon date,
but no later than July 1, 2013; (3) relieve MCERA from any future obligations or liabilities to
pay retiree health benefits, effective on a mutually agreed upon date, but no later than July 1,
2013; (4) direct MCERA to pay any remaining funds in the CITY's 401(h) account to the
CITY's 115 retiree health trust, effective on a mutually agreed upon date, but no later than July
1. 20131 (collectively, "CITY Directives").
WHEREAS, MCERA has sought and obtained approval from the Internal Revenue
Service that permits it to comply with the CITY Directives under the Code; thus CITY may now
terminate the CITY's 401(h) Account in accordance with Government Code section 31694. 1.
subsection (g).
NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Parties hereto agree as follows:
AGREEMENT
Recitals. The foregoing recitals are true and correct and incorporated herein by
this reference.
2. Trust Account in MCERA. MCERA created on the books of the retirement
system CITY's 401(h) Account, pursuant to Article 8.6 of CERL and Section 401(h) of the
Code, for the exclusive purpose of funding the retiree health benefits provided by the CITY.
MCERA has accounted for the assets and liabilities of the CITY's 401(h) Account separate and
apart from the assets and liabilities of the retirement system, except for investment purposes as
expressly provided for in this Agreement and as authorized by the Code. Assets in the CITY's
40 1 (h) Account are not used for retirement, disability or death benefits or services related to the
provision of those benefits, or for payments to any retired CITY employees and their spouses and
dependents.
the following:
Benefits of the Retiree Medical Plan. CITY has been solely responsible for all of
A. the level and amount of benefits available to participants;
B. the eligibility and participation of retirees, spouses and dependents;
C. the health plans to be offered to participants;
D. contributions to the 401(h) Account; and
E. the level of funding of the 401(h) Account to provide benefits under the
Retiree Medical Plan.
4. Funding of the 40 1 (h) Account. CITY has been solely responsible for
contributing funds to the CITY's 401(h) Account.
Investment of Assets of the 40 1 (h) Account.
A. MCERA invests the assets in the CITY's 401(h) Account together with
the assets held in the retirement system to pay retirement, disability and death benefits, subject to
the same policies and guidelines applicable to such other assets and subject to the requirements
of the Code. MCERA accounts for investment gains and losses attributable to the 401(h)
Account and reasonably allocates such gains and losses and expenses of investment and
administration to CITY's 401(h) Account. Notwithstanding the foregoing, MCERA has no
obligation to identify specific investments held by the 401(h) Account or to unitize any of the
investment of assets of the 401(h) Account.
2
B. CITY acknowledges and agrees that MCERA's investment of assets of the
401(h) Account is and has been subject to all applicable investment policies and guidelines
established for the investment of the assets held in the retirement system to pay retirement,
disability and death benefits; and that such policies and guidelines are suitable and appropriate
for the investment of assets in the 401(h) Account.
6. Expenses of Investment and Administration; Reporting. MCERA charges CITY's
401(h) Account with all expenses of investment and administration reasonably attributable to the
401(h) Account. MCERA regularly reports to CITY the nature and amount of such charges.
CITY may directly reimburse MCERA for these expenses; MCERA may also debit the 401(h)
Account for quarterly estimated charges in advance and reconcile such charges quarterly in
arrears.
7. Interest Crediting. MCERA recognizes investment gains and losses in the CITY's
401(h) Account as they are incurred. The "adjusted beginning balance" is determined by
subtracting any outflows during the month from, and adding any inflows during the month to, the
monthly balance, prorated on the date made or received. The "time weighted rate of return" is
determined by MCERA in a manner consistent with industry standards. MCERA notifies CITY
within thirty (30) calendar days after the end of each quarter, or as soon as practicable thereafter,
as to the amount of interest so credited (or losses so debited) to the 401(h) Account.
No assets or earnings held by MCERA for retirement, disability or death benefits are
used to credit interest to or pay expenses of the 401(h) Account, and no assets or earnings held
under the 401(h) Account are used to credit interest to or pay expenses of any assets held by
MCERA to pay retirement, disability or death benefits.
8. Accounting and Auditing. MCERA accounts for the assets in the 401(h) Account
on its books and records and makes such accounting available for CITY's inspection upon
reasonable request during normal business hours. As of the end of MCERA's fiscal year,
currently each June 30, MCERA provides CITY with an annual audited financial statement
documenting the assets and liabilities and income and expenses of the 401(h) Account. All costs
incurred in providing the accounting and audited financial statements are charged to the 401(h)
Account as an administrative expense or may be paid to MCERA separately by CITY.
9. Termination of 401(h) Account. This Agreement and the 401(h) Account may be
terminated in accordance with the provisions of this Paragraph.
A. As permitted by California Government Code section 31694. 1, subsection
(g), CITY intends to terminate participation in the 401(h) Account and will direct MCERA to
transfer the funds held therein to a successor trustee that it will name.
B. CITY intends, no later than July 1, 2013 (1) to establish its CITY's 115
retiree health trust, (2) to make the CITY responsible for paying all retiree health benefits for
which its retirees are eligible; (3) to relieve MCERA from any future obligations or liabilities to
pay retiree health benefits; and (4) to direct MCERA to pay any remaining funds in the CITY's
401(h) account to the CITY's 115 retiree health trust.
3
10. Further Actions. Each Party shall take all actions and do all things, and execute,
with acknowledgement or affidavit if required, any and all documents and writings, that
reasonably may be necessary or proper to achieve the purposes and objectives of this Agreement
and the CITY's 401(h) Account.
11. Governing Law. This Agreement and its enforcement shall be governed by both
the laws of the State of California and the Code. To the extent the provisions of the Code are in
conflict with the California law when interpreting this Agreement, this Agreement shall be
interpreted in a manner that preserves the "tax -qualified" status of the 401(h) Account as
determined by MCERA.
12. Operative and Effective Dates. This Agreement shall become operative on the
full execution of this Agreement by authorized signatories of both Parties.
Dated:
2013 Dated:
CITY OF SAN RAFAEL, a political
subdivision of the state of California
By
Print Name
Its
4
2013
MARIN COUNTY EMPLOYEES'
RETIREMENT ASSOCIATION, a public
retirement system
By
Print Name
Its
BENEFITS
i
jfAT
`/ .May 24, 2013 5
BENEFITS ---�
OPEB
Bargaining Unit Monthly CapM ni Date3
SEIU Child Care Unit $543 1/1/10
Unrepresented Mid -Management Employees Retired < 12/1/01: $442
Retired> 12/1/01: Full prem 1/1/09
i
Hired > 4/l/07: $600
San Rafael Fire Chief Officer's Association $557 �I 1/1/10
San Rafael Firefighters' Association, I.A.FF., Local
$557 1/1/10
1775
San Rafael Police Association $386 1/1/10
San Rafael Police Mid -Management Association $566111/10
SEW 1021 $752 1i11/10
Public Employees Bargaining Unit (PEU) Local 1 $659 1/11/10
Unrepresented Management Employees and Council Hired < 4/1/07: Full prem
Citv Clerk and Elected Part -Time City Attorney Hired > 4/1107: $600 I/1/09
Western Council of Engineers (WCE) $752 i 1,%1/10
Employees hired on or after date receive only PEMHCA minimum (SI 15 in 2013).
llf TMay 24, 2013 6 µ
Hire Date
Formula
Elected Officials,
Unrepresented Mid
Management &
Management
Tier 1
<1/1/09
Full premium/cap
Tier 2
> 1/1/09
PEMHCA Minimum ($115/month in 2013
All Other Groups
Tier 1
<1/1/10
Ca
Tier 2
> 1/1/10
PEMHCA Minimum $115/month in 2013
jfAT
`/ .May 24, 2013 5
BENEFITS ---�
OPEB
Bargaining Unit Monthly CapM ni Date3
SEIU Child Care Unit $543 1/1/10
Unrepresented Mid -Management Employees Retired < 12/1/01: $442
Retired> 12/1/01: Full prem 1/1/09
i
Hired > 4/l/07: $600
San Rafael Fire Chief Officer's Association $557 �I 1/1/10
San Rafael Firefighters' Association, I.A.FF., Local
$557 1/1/10
1775
San Rafael Police Association $386 1/1/10
San Rafael Police Mid -Management Association $566111/10
SEW 1021 $752 1i11/10
Public Employees Bargaining Unit (PEU) Local 1 $659 1/11/10
Unrepresented Management Employees and Council Hired < 4/1/07: Full prem
Citv Clerk and Elected Part -Time City Attorney Hired > 4/1107: $600 I/1/09
Western Council of Engineers (WCE) $752 i 1,%1/10
Employees hired on or after date receive only PEMHCA minimum (SI 15 in 2013).
llf TMay 24, 2013 6 µ
PROJECTIONS
Data
0 MCERA Information
• June 30, 2003 actuarial valuation report
• June 30, 2006 actuarial valuation report
• June 30. 2011 actuarial valuation report
• EFI PEPRA Cost Analysis (dated 12/11/12)
• Tier 2 Normal Cost summary
N OPEB Information
0 June 30, 2011 GASB 45 OPEB actuarial valuation
Bj"
!/ May 24, 2013
7
PROJECTIONS
OPEB Savings
N Measured by benefits paid to retirees
0 2012 Council resolution freezing caps
(previously assumed annual 3.25% CPI increase)
N 2009 and 201 OTier 2 PEMHCA minimum benefit implemented
0 Benefits paid to retirees not affected by 40 1 (h) investments
May 24, 2013
8
M
Misc.
Safety
Total
Active Members
240
124
364
➢ Active Payroll
(in $000s)
$17,555
$14,408
$31,963
• EFI PEPRA Cost Analysis (dated 12/11/12)
• Tier 2 Normal Cost summary
N OPEB Information
0 June 30, 2011 GASB 45 OPEB actuarial valuation
Bj"
!/ May 24, 2013
7
PROJECTIONS
OPEB Savings
N Measured by benefits paid to retirees
0 2012 Council resolution freezing caps
(previously assumed annual 3.25% CPI increase)
N 2009 and 201 OTier 2 PEMHCA minimum benefit implemented
0 Benefits paid to retirees not affected by 40 1 (h) investments
May 24, 2013
8
M
PROJECTIONS
Pension Savings
0 Measured by City Normal Cost to MCERA
E Include net remaining savings/cost from benefit enhancements:
0 2003 valuation Miscellaneous benefit increase 2%(:&,58.5 to 2.7%Ca)55
(5% City payment towards employee contribution eliminated)
9 2003 valuation Police benefit increase 21/o450 to 3%455
(7% City payment towards employee contribution eliminated)
0 2006 valuation Fire benefit increase 2%oa,50 to 3%�55
(7% City payment towards employee contribution eliminated)
0 7/1/11 Tier 2 plan change
0 1/ 1 / 13 PEPRA benefit change
E 2018 increase employee contributions
• Assumes City imposes cost sharing for current members in 2018.
• Optional under PEPRA
• Approximately 0.8% for Miscellaneous, and 3% for Safety
May 24, 2013 9 1
PROJECTIONS
Methods
N Assumptions from 6/30/11 actuarial valuations:
* 3.25% annual payroll growth
* Payroll in 2011 MCERA report assumed for 2013/14
N Not included in calculations:
• Savings/cost before 2013/14 not included
• Impact of later retirement under PEPRA not included in OPEB savings projections
May 24, 2013
H
PROJECTIONS
Pension
Benefit Enhancement Cost Impact Summary 4
4 Estimates derived from 6/30/03 (Miscellaneous and Police) and 6/30/06 (Fire) actuarial valuation reports.
Estimated using 6/30/06 (Fire) actuarial valuation impact.
Primarily due to 16 to 17 year rolling amortization method, payroll changes, and investment return, estimated 2013/14
payments are 6.7%, 8.1 %, and 8.5% for Miscellaneous, Police and Fire, respectively.
May 24. 2013
PROJECTIONS
Pension
Normal Cost Summary
Normal
Cost
UAAL
Amortizations
Total
-0 Miscellaneous
3.0%
7.2%
10.2%
8 Safety
13,7%
11.0%
24.7%
• Police
2.5%'
8.2%
10.7%
• Fire
2.5%
8.4%
10.9%-
4 Estimates derived from 6/30/03 (Miscellaneous and Police) and 6/30/06 (Fire) actuarial valuation reports.
Estimated using 6/30/06 (Fire) actuarial valuation impact.
Primarily due to 16 to 17 year rolling amortization method, payroll changes, and investment return, estimated 2013/14
payments are 6.7%, 8.1 %, and 8.5% for Miscellaneous, Police and Fire, respectively.
May 24. 2013
PROJECTIONS
Pension
Normal Cost Summary
7 Estimated based on member rate for average entry age.
Normal Cost rates apply to PETRA limited pay.
Estimated based on member rate for average entry age.
4
B/'"
i' I May 24, 2013 12
Ci ty
Employee
Total
IS Miscellaneous
• Hired< 7/1/1 l
13,7%
11.0%
24.7%
• Hired 7/l/11-12/31/1210.9%
7.1 %7
18.0%
*--Hired,>-,I/I/138
8.4%
8.3%
L 16.7%
:0Safetv
• Hired < 71/1/`11
20.1%
12.0%
32.1%
• Hired 7111/11-12/31/12 i
19.3%
10.8%,
30.1%
• Hired > 1/1 1/ 13
7 Estimated based on member rate for average entry age.
Normal Cost rates apply to PETRA limited pay.
Estimated based on member rate for average entry age.
4
B/'"
i' I May 24, 2013 12
$5,000
$4,000
$3,000
$2,000
$1,000
$0
($1,000)
PROJECTIONS
Pension
Miscellaneous Savings
(in 000'x)
13/14 18119 23/24 28129 33134 38135
2003-2007 Net Benefit Enhancement =City T2 Implemented 2011
PEPRA Formula Change =PEPRA Impose T1 Cost Sharing
Cotal Net Savings
i
`/ 1 May 24, 2013
$5,000
$4,000
$3,000
$2,000
$1,000
$0
($1,000)
13
43/44
4
PROJECTIONS
_. -- --- _------- —
Pension
Safety Savings
(in 0005)
13/14 18/19 23%24 28/29 33/34 38139
2003-2007 Net Benefit Enhancement =City T2 Implemented 201 1
PEPRA Formula Change =PL --'PRA Impose T I Cost Sharing
Total Net Savings
B 1 �
%, I May 24, 2013
14
43144
PROJECTIONS
Pension
Total Savings
(in 000's)
$10,000 t--
$8,000
$6,000
$4,000
$2,000
$0
($2,000) '
13114 18/19 23/24 28/29 33/34 38139
2003-2007 Net Benefit Enhancement =City T2 Implemented 2011
PEPRA Formula Change [ PEPRA Impose T1 Cost Sharing
Total Net Savings
43/44
v3
"Y 1 May 24, 2013 15
$7,000
$6,000
$5,000
$4,000
$3.000
$2,000
$1,000
so
13114
PROJECTIONS
OPEB
Total Savings
(in 000's)
18,119 23124 28129 3 3/3 4 38!39 43/44
Cap Freeze ❑ PEMHCA Minimum T2
�VfMllav 24, 2013 16 tiv��
PROJECTIONS
Pension and OPEB
Total Savings Comparison (30 -year)
(in 000's)
Estimated based on MCERA 30 year contribution projections.
Assumes EFI projections do not include impact of Tier 2.
Bs rz°
/ I May 24, 2013
19
Total Projected
City Payments
Savings
Before
Reforms
After
Reforms
Dollar
Percent
■ Pension
$ 586,000"
$ 505,000
$ 81,000
14%
■ OPEB
151,000
100,000
51,000
34%
L■ Total W
737,000
, 605,000
132,000
18%
Estimated based on MCERA 30 year contribution projections.
Assumes EFI projections do not include impact of Tier 2.
Bs rz°
/ I May 24, 2013
19
CITY OF SAN RAFAEL
F
1 jw� �'� � � i I � i
INSTRUCTIONS: USE THIS FORM WITH EACH SUBMITTAL OF A CONTRACT, AGREEMENT,
ORDINANCE OR RESOLUTION BEFORE APPROVAL BY COUNCIL /AGENCY.
SRRA/ SRCC AGENDA ITEM No. 4.c
DATE OF MEETING: 06/17/13
FROM: Jim Schutz
a a . &9
DATE: June 7, 2013
TITLE OF DOCUMENT: REPORT AND RECOMMENDATIONS REGARDING CURRENT ACTIONS OF
THE PENSION/OPEB SUBCOMMITTEE OF THE SAN RAFAEL CITY COUNCIL
Head (§ignature)
*** *** *** --*-k* *** *** *** *** *** *** *** *** *** *** *** ***
(LOWER HALF OF FORM FOR APPROVALS ONLY)
APPROVED AS COUNCIL / AGENCY
AGENDA ITEM: jjJ
p 6k -
City Manager (signature)
APPROVED AS TO FORM:
City Attorney (signatu&) I tl