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COUNTY OF SAN MATEO
Inter-Departmental Correspondence
Human Resources Department
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DATE:
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April 20, 2011
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BOARD MEETING DATE:
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May 10, 2011
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SPECIAL NOTICE/HEARING:
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None
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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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Donna Vaillancourt, Human Resources Director
Peter Bassett, Benefits Manager
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SUBJECT:
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Actuarial Valuation of Retirement Benefit Changes for Probation and Detention Association (PDA) Employees Hired on or after July 10, 2011
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RECOMMENDATION:
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Accept actuarial valuation of cost savings to implement retirement benefit change for Probation and Detention Association (PDA) employees hired on or after July 10, 2011.
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BACKGROUND:
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On April 12, 2011, the Board of Supervisors approved an Agreement with PDA for a new six-year contract. The agreement changes retirement benefits for new hires effective July 10, 2011.
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Government Code Section 7507 (b)(2) requires that the Board when considering changes in retirement benefits, shall secure the services of an actuary to provide a statement of the actuarial impact upon future annual costs, including normal cost and any additional accrued liability, before authorizing changes in public retirement plan benefits or other postemployment benefits.
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DISCUSSION:
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The current benefit for existing PDA members is 3%@50 (Government Code section 31664.1). Under the new PDA agreement, employees hired on or after July 10, 2011 will not receive that benefit but instead will have the option of enrolling in one of two other retirement plans: 2%@50 (Government Code 31664) or 3%@55 (Government Code section 31664.2). Members choosing the latter formula will pay an additional cost share contribution.
While the above described change constitutes a reduction in benefits for new hires, it is, nevertheless, a change in benefits triggering the requirement for an actuarial analysis. Based on a review by Milliman Inc., the actuarial impact of this benefit change is noted in the table below. Given that it is not possible to estimate which retirement plan option new hires will choose, savings for both options are provided. However, it is important to note that the difference in cost savings between the 2%@50 and 3%@55 with cost-share is actuarially very similar. In addition, new hires in PDA will pay a share of the retirement COLA cost.
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2%@50
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Y1 Savings: $21,000
Y10 Cumulative Savings: $1,818,000
Y20 Cumulative Savings: $10,912,000
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3%@55
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Y1 Savings: $23,000
Y10 Cumulative Savings: $1,971,000
Y20 Cumulative Savings: $11,853,000
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Pursuant to Government Code §7507, the actuarial certification of the cost savings to implement the retirement benefit change is being presented for your acceptance at least two weeks prior to implementation of the change
Accepting this report contributes to Shared Vision 2025 of a Prosperous Community by helping to meet current budget challenges.
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FISCAL IMPACT:
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There is no fiscal impact in accepting the actuarial valuation. The fiscal impact in making the retirement change is reflected above.
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