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COUNTY OF SAN MATEO
Inter-Departmental Correspondence
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County Manager
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DATE:
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April 10, 2007
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BOARD MEETING DATE:
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April 24, 2007
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SPECIAL NOTICE/HEARING:
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No
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VOTE REQUIRED:
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Majority
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TO:
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Honorable Board of Supervisors
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FROM:
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John Maltbie, County Manager
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SUBJECT:
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Government Code §31658 Additional Retirement Credit
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RECOMMENDATION: Adopt a resolution implementing Government Code §31658 Additional Retirement Credit.
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VISION ALIGNMENT:
Commitment: Responsive, effective and collaborative government.
Goal(s): Government decisions are based on careful consideration of future impact, rather than temporary relief or immediate gain.
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BACKGROUND:
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If made effective by a resolution adopted by the Board of Supervisors, Government Code §31658 authorizes eligible employees with at least five years of service credit to purchase up to five additional years of SamCERA service credit (ARC time) in order to increase their retirement pensions. Section 31658 mandates that the employee must pay an amount that “at the time of commencement of purchase, in the opinion of the [retirement] board and the actuary, is sufficient to not place any additional financial burden upon the retirement system.” The collective bargaining agreements with AFSCME and SEIU provide that the County Manager is to present an update to the Board regarding the implementation of §31658 for the Board’s determination.
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Pursuant to statutory mandates, the Milliman actuarial firm provided an analysis of the financial risk and impact to the County of adopting this benefit. This analysis was made public at the Boards’ March 27, 2007 meeting. The Milliman report’s conclusion is that, “The expected cost of adopting the ARC provision is zero. That is, there is no expected increase in the County’s contribution rate or Unfunded Actuarial Accrued Liability. As with the regular actuarial valuation, the ultimate cost depends on how well actual experience matches the assumptions.”
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DISCUSSION:
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This benefit would give County employees the option to enhance their future retirement benefits at their own cost. In accordance with §31658, if the ARC benefit is adopted, SamCERA and its actuary will establish a cost methodology designed to achieve ARC purchases that will be at no cost to the County. In determining the cost of an ARC purchase, actuarial valuation assumptions, such as estimated length of service, final salary amount, mortality and rate of investment return, may be used as the basis of the calculation. The cost of the purchases will be periodically monitored by SamCERA and its actuary. If actual experience indicates that a change in the assumptions is needed, there will be adjustments to the cost methodology, along with any other recommended changes in assumptions. Based upon the Milliman report’s conclusion that the expected costs of adopting the ARC time benefit will be zero for the County, it is recommended that the Board adopt the resolution implementing Government Code §31658.
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SamCERA has indicated that if the benefit is adopted, it will not be able to enter into purchase agreements with members until July 1, 2007. Employees that retire between May 1 and June 30, 2007, will be given the opportunity to declare their intent to purchase the ARC time.
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FISCAL IMPACT:
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None
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