COUNTY OF SAN MATEO

Inter-Departmental Correspondence

Human Resources Department

DATE:

September 29, 2010

BOARD MEETING DATE:

October 19, 2010

SPECIAL NOTICE/HEARING:

None

VOTE REQUIRED:

Majority

TO:

Honorable Board of Supervisors

FROM:

Donna Vaillancourt, Human Resources Director

Peter Bassett, Benefits Manager

SUBJECT:

Agreement with Milliman Inc. for Actuarial Services

RECOMMENDATION:

Adopt a Resolution:

A) Waiving the Request for Proposal process and authorizing an agreement with Milliman, Inc. for the provision of two actuarial valuations of the County’s retiree health liability, financial statement disclosures, and periodic valuations of alternative plan designs, for the term of October 1, 2010 through September 30, 2012, in an amount not to exceed $150,000; and

B) Authorizing the Human Resources Director or her designee to execute subsequent amendments and minor modifications, in an amount not to exceed $25,000

BACKGROUND:

Since September 2005, the County has contracted with Milliman, Inc. to provide actuarial services associated with the County’s liability for retiree health and other post-employment benefits (OPEB) to comply with Governmental Accounting Standards Board (GASB) standards.

Per GASB 45, the County must conduct bi-annual actuarial valuations of the County’s retiree health liability. This includes a calculation of the County’s unfunded actuarial accrued liability (UAAL) which is the estimated long-term liability to provide retiree health coverage for current retirees as well as for current employees when they retire, and the County’s annual required contribution (ARC), or the amount of funds needed to contribute on an annual basis to cover the costs of retiree health coverage for current and future retirees. The last valuation was conducted as of January 1, 2009.

DISCUSSION:

Due to new GASB and CalPERS requirements, actuarial valuations must now follow a fiscal year calendar. To comply with this new requirement and to satisfy GASB’s bi-annual valuation requirement, next year the County will conduct one full valuation as of January 1, 2011 and a second valuation as of June 30, 2011 (using the same demographic data and assumptions from the January 1 valuation). In addition to the two valuations, the contractor will assist with completing GASB financial statement disclosures and conducting periodic valuations of alternative plan designs for union negotiation purposes.

The agreement with Milliman, Inc. is being recommended without a formal request for proposal (RFP) process as it is in the best interests of the County. Given Milliman’s knowledge and expertise around the County’s complex retiree health benefits and its role in supporting the County’s current union negotiation process, there is a strong need to continue Milliman’s actuarial services for another two years. Following the current labor negotiations process and the two valuations next year, the County will conduct a formal RFP process in 2012 for these services to coincide with the completion of this contract.

The contractor has assured compliance with the County’s Contractor Employee Jury Service Ordinance, as well as all other contract provisions that are required by County ordinance and administrative memoranda, including but not limited to insurance, hold harmless, non-discrimination and equal benefits.

County Counsel has reviewed and approved the recommended Agreement and Resolution as to form. The insurance has been reviewed and approved by Risk Management.

Approval of this Agreement contributes to Shared Vision 2025 of a Prosperous Community by providing the County with the actuarial analysis required to determine its liability associated with retiree health benefits and for financial planning purposes.

Performance Measure(s):

Measure

FY 2009-10
Actual

FY 2010-11
Projected

Actuarial valuations comply with GASB requirements

100%

100%

FISCAL IMPACT:

The total contract amount is $150,000 over two years. There are sufficient appropriations in the Non-Departmental Services’ Adopted FY 2010-11 Budget to cover this cost.