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HomeMy WebLinkAbout97.OCERS PP - Admin Meeting 05-08-2013.pdf ORANGE COUNTY a] E R****S5� EMPLOYEES RETIREMENT SYSTEM OCERS - Governance • Governed by nine member Board (and one safety member alternate) • Board has plenary authority over administration — Determining benefit eligibility — Defining compensation earnable — Setting funding policy — Investing trust assets • Plan Sponsors and employee representatives negotiate retirement benefits 0.wN.E COV '- CCEI�S Public Employees Pension Reform Act ( PEPRA) • Enacted in August 2012, effective 1- 1- 13 • Changed retirement formulas for all new employees/new members of OCERS hired as of 1- 1- 13 • Changed new employee pensionable compensation — limited to 120% of Social Security limits, excluded cash outs of leave, excluded allowances ORANGE COIL NTV CCEIZS PEPRA — Legacy Members • No change to legacy member benefit formulas or calculation inputs • Ability to impose employee payment of % the normal cost contribution as of 2018 • Clarified pensionable compensation for legacy members • No change to OCERS' treatment of pensionable compensation for legacy members 0.wN.E COV '- CCEI�S OCERS — Benefit Cost • Employers are categorized into Rate Groups, depending on benefit formulas • Sanitation District is Rate Group 3, with Public Law Library • Benefits are funded from employer/employee contributions and investment earnings — Earnings — approximately 60% — Contributions — approximately 40% ORANGE CCUNTv CCE1ZS Sanitation District Benefits • 2 . 5% @ 55 plan — All employees except SPMT Bargaining unit hired on or after 10/2010; Local 501 hired on or after 7/1/11; and OCEA on or after 8/1/11 • 1 . 64% @ 57 plan — Employees in the SPMT Bargaining unit hired on or after 10/2010; Local S01 hired on or after 7/1/11; and OCEA on or after 8/1/11 • 2 . 5% @ 67 plan ( PEPRA) — Employees hired on or after 1-1-13 unless coming from another public agency in California with public retirement system membership within 180 days ORANGE CCUN CCER,S Sanitation District — Unfunded Liability as of 12/31/11 Valuation • As of 12/31/11 valuation, District's unfunded liability - $ 169, 140, 000, 63 . 22% funded • As compared to 12/31/10 valuation - $ 134, 610,000, 66 . 98% funded — Factors contributing to increase include : • Investment losses • A change in mortality and withdrawal assumptions • Retirements occurring sooner than expected ORPNGE COS. '. C�=- Sanitation District — Benefit Cost through June 30, 2013 • Employer contribution ( 2 . 5% @ 55 plan ) - 27 .47% ( 10 . 92% normal and 16 . 55% UAAL) • Employer contribution ( 1 . 64% @ 57 plan ) - 26 . 69% ( 10 . 14% normal and 16 . 55% UAAL) • Employer contribution ( 2 . 5% @67 plan ) — 24 . 89% (8 . 34% normal and 16 . 55% UAAL) Sanitation District — Benefit Cost beginning July 1, 2013 • Employer contribution ( 2 . 5% at 55 plan ) — 31 . 95% ( 11 . 29% normal and 20 . 66% UAAL) • Employer contribution ( 1 . 64% at 57 plan ) - 30 . 77% ( 10 . 11% normal and 20 . 66 % UAAL) • Employer contribution ( 2 . 5% @67 plan ) — 29 . 36% (8 . 70% normal and 20 . 66 % UAAL) OR- CSC E PAS OCERS — Funding Policy • The Board, with system actuary, sets assumptions, amortization periods and smoothing method • The earnings assumption is 7 . 25% • It was carefully considered in 2012 and lowered from 7 . 75% to 7 . 25% • The new assumption will be used in the December 31, 2012 valuation which sets the FY ` 14/15 rates ORANGE C0UNTv CCEIZS OCERS- Funding Policy • The board is currently discussing the amortization ( payment) period for future liabilities arising from assumption changes — Considering whether to lower it from 30 to 25 years • Some stakeholders are asking the board to consider resetting the amortization period for current liabilities ( at 22 years as of 12/31/12 ) to 30 years ORANGE COu N T Y OCEIZS OCERS — Amortization Schedule • As an example of the impact of shortening the amortization schedule for future assumption changes • Reduction of earnings assumption from 7.75% to 7 . 25% had an estimated $901 .5 M cost • Impact on contribution rate as a % of payroll 30 years 2.99% 25 years 3.35%